As filed with the Securities and Exchange Commission on November 25, 1998
Securities Act Registration No. 33-94668
Investment Company Registration No. 811-9070
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Post-Effective Amendment No. 4 [x] |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 6 |X|
(Check appropriate box or boxes) [x]
DEVCAP TRUST
(a Massachusetts Business Trust)
(Exact Name of Registrant as Specified in Charter)
209 West Fayette St.
Baltimore, Maryland 21201-3443
(Address of principal executive offices)
(800) 371-2655
Registrant's telephone number, including area code
Nancy Paxton
209 West Fayette St.
Baltimore, Maryland 21201-3443
(Name and Address of Agent for Service)
Copy to:
Beth R. Kramer, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, N.Y. 10019-5820
It is proposed that this filing will become effective: (check appropriate box)
[x] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a
new effective date for a previously filed
post-effective amendment
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, the
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933, as amended. Registrant has filed the Rule 24f- 2 Notice
for its fiscal year ended July 31, 1998 on October 29, 1998.
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<PAGE>
DEVCAP TRUST
DEVCAP SHARED RETURN FUND
Cross Reference Sheet
Pursuant to Rule 495(a)
Part A
Location in Prospectus
----------------------
Item 1. Cover Page............................. Cover Page
Item 2. Synopsis............................... Summary; Fee Table
Item 3. Condensed Financial Information........ Financial Highlights
Item 4. General Description of Registrant...... Cover Page; The Fund;
Charitable Contribution
Program; Investment Objective;
Investment Policies and Risk
Factors and Special
Considerations
Item 5. Management of the Fund................. The Fund; Management; Manager,
Submanager and Administrator,
Service Organizations,
Transfer Agent and Custodian;
Back Cover Page; Other
Information Concerning Shares
of the Fund
Item 5A. Management's Discussion of
Fund Performance....................... Not Applicable
Item 6. Capital Stock and Other Securities..... Purchases and Redemptions of
Shares; Other Information
Concerning Shares of the Fund;
Service Organizations,
Transfer Agent and Custodian;
Tax Matters
Item 7. Purchase of Securities Being Offered... Purchases and Redemptions of
Shares; Other Information
Concerning Shares of the Fund;
Service Organizations;
Transfer Agent and Custodian
Item 8. Redemption or Repurchase............... Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings.............. Not Applicable
<PAGE>
Part B
Location in Statement of
Additional Information
------------------------
Item 10. Cover Page............................. Cover Page
Item 11. Table of Contents...................... Table of Contents
Item 12. General Information and History ....... The Trust
Item 13. Investment Objective and Policies...... Investment Objective, Policies
and Restrictions; Portfolio
Transactions and Brokerage
Commissions
Item 14. Management of the Trust................ Management of the Trust, the
Fund and the Portfolio
Item 15. Control Persons and Principal Holders
of Securities.......................... Management of the Trust, and
the Portfolio
Item 16. Investment Advisory and other Services. Management of the Trust and
the Portfolio; Distribution
Plan
Item 17. Brokerage Allocation and
Other Practices........................ Portfolio Transactions and
Brokerage Commissions
Item 18. Capital Stock and Other Securities..... Shares of the Portfolio,
Voting Rights and Liabilities
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered............... Shares of the Portfolio;
Determination of Net Asset
Value; Valuation of Portfolio
Securities
Item 20. Tax Status............................. Taxation
Item 21. Underwriters........................... Management of the Trust and
the Portfolio; Distribution
Plan
Item 22. Calculation of Performance Data........ Performance Information
Item 23. Financial Statements................... Financial Statements
Part C Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this
Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A.
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<PAGE>
PROSPECTUS
November 25, 1998
DEVCAP SHARED RETURN FUND
The DEVCAP Shared Return Fund (the "Fund") has two primary objectives:
(i) an investment objective, to provide its shareholders with long-term total
return which corresponds to the total return performance of the Domini 400
Social Index(sm) an index comprised of stocks selected based upon socially
responsible criteria; and (ii)a charitable objective, to enable each shareholder
of the Fund to make a donation of a portion of that shareholder's annual
contribution basis to finance the economic development of underprivileged people
in developing countries. The Fund is a separate series of shares of DEVCAP
Trust, which is organized as a business trust under the laws of the Commonwealth
of Massachusetts. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Domini Social Index Portfolio (the
"Portfolio"), a diversified open-end management investment company having the
same investment objective as the Fund. The Portfolio invests in the common
stocks included in the Domini 400 Social Index(sm) ("Domini Social Index" or
"DSI").
The Fund seeks to achieve its charitable objective by providing for the
tax-deductible donation of a portion of each shareholder's annual contribution
basis in the Fund to further the charitable purposes of the Development Capital
Fund ("DEVCAP Non-Profit"). DEVCAP NonProfit is a non-profit charitable
corporation that functions as a joint venture of non-profit organizations and is
dedicated to supporting micro-enterprise and other economic development programs
in developing countries in an effort to improve the welfare of underprivileged
persons in those countries. See "Charitable Contribution Program" herein for
more detailed information. In general, investors will not incur net tax
liability as a result of providing for donations of a portion of their annual
contribution basis in the Fund. See "Tax Matters-Tax Deductibility of Charitable
Contributions" herein for more detailed information.
Table of Contents Page
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INVESTMENT IN THE FUND......................................................2
THE FUND....................................................................3
EXPENSE SUMMARY.............................................................4
FINANCIAL HIGHLIGHTS........................................................5
CHARITABLE CONTRIBUTION PROGRAM.............................................6
DEVCAP NON-PROFIT...........................................................8
PERFORMANCE INFORMATION.....................................................8
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS.............................9
MANAGEMENT.................................................................14
PURCHASES AND REDEMPTIONS OF SHARES........................................15
TAX MATTERS................................................................19
OTHER INFORMATION CONCERNING SHARES OF THE FUND............................20
SERVICE ORGANIZATIONS, TRANSFER AGENT AND CUSTODIAN........................23
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
The investment manager of the Portfolio is Domini Social Investments
LLC ("DSIL" or the "Manager"), a company founded by the principals of the former
investment adviser and sponsor of the Portfolio, Kinder, Lydenberg, Domini &
Co., Inc. ("KLD"). The investment submanager of the Portfolio is Mellon Equity
Associates. The sponsor of the Fund is DEVCAP Non-Profit and the distributor of
the Fund is CBIS Financial Services, Inc., a subsidiary of Christian Brothers
Financial Services, Inc., (the "Distributor"). The administrator of the Fund, is
Sunstone Financial Group, Inc. ("Sunstone"). SHARES OF THE FUND ARE NOT DEPOSITS
OR OBLIGATIONS OF OR GUARANTEED BY, ANY BANK OR THE U.S. GOVERNMENT. THE SHARES
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER STATE
OR GOVERNMENTAL AGENCY.
"Domini(sm)" and "Domini 400 Social Index(sm)" are service marks of Kinder,
Lydenberg, Domini & Co., Inc.
This Prospectus sets forth concisely the information concerning the
Fund that a prospective investor ought to know before investing. The Fund has
filed with the Securities and Exchange Commission a Statement of Additional
Information, dated November 25, 1998, as amended from time to time, which
contains more detailed information about the Fund and is incorporated into this
Prospectus by reference. An investor may obtain a copy of the Statement of
Additional Information without charge by contacting the Fund at (800) 371-2655.
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The Fund invests in the
Portfolio through a master-feeder investment fund structure. See "Special
Information Concerning Master-Feeder Investment Fund Structure" on page 12.
Investors should read this Prospectus and retain it for future reference.
INVESTMENT IN THE FUND
The Fund seeks to provide its shareholders with long-term total return
which corresponds to the total return performance of the Domini Social Index, an
index comprised of stocks selected according to social criteria. The Fund may be
appropriate, therefore, for investors who are willing to ride out stock market
fluctuations in pursuit of long-term returns. Because the Fund seeks to track,
rather than exceed, the performance of a particular index, the Fund is not
managed in the same way as other mutual funds. In particular, the Manager
generally does not judge the merits of any particular stock as an investment,
therefore, investors should not expect to achieve the potentially greater
results that could be obtained by a fund that aggressively seeks growth.
The value of an investment in the Fund varies from day to day,
generally reflecting changes in the financial condition of the companies in
which the Portfolio invests, general market conditions and political and
economic factors. Stock prices can fluctuate dramatically in response to these
and other factors or speculation about these factors. Over the long term, stocks
have generally shown greater growth potential than other types of securities.
However, when you sell your Fund shares, they may be worth more or less than
what you paid for them.
Potential investors should note that because the Portfolio seeks to be
fully invested in the stocks comprising the Domini Social Index, the Fund is not
a balanced investment plan. Potential investors should also note that the
Manager of the Portfolio, DSIL, has limited experience in managing or advising a
mutual fund. You should carefully consider your investment objectives and risk
tolerance before making a decision to invest in the Fund.
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<PAGE>
THE FUND
DEVCAP Trust (the "Trust") was organized as a business trust under the
laws of the Commonwealth of Massachusetts, with the Fund established as a
separate series of the Trust, on June 29, 1995. The Fund is a no-load
diversified open-end management investment company. Although shares of the Fund
are sold without a sales load, the Distributor may receive a distribution fee
from the Fund pursuant to a Distribution Plan adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Trust offers to buy back (redeem) shares of the Fund from its shareholders at
any time at net asset value.
Shares of the Fund are sold continuously by the Distributor. The
minimum initial investment is $1,000, except that the minimum initial investment
when selecting the Automatic Investment Plan is $500 and the minimum initial
investment when selecting the Individual Retirement Account is $250. An investor
should obtain from the Distributor, and should read in conjunction with this
Prospectus, the materials describing the procedures under which Fund shares may
be purchased and redeemed. See "Purchases and Redemptions" herein.
The Fund seeks to achieve its investment objective by investing the
proceeds from the sales of its shares in the Portfolio, which has the same
investment objective as the Fund and which invests all of its assets in stocks
included in the Domini Social Index. There can be no assurance that the Fund or
the Portfolio will be able to achieve their investment objective. It should be
noted that the limitation of the Portfolio's investments to stocks included in
the Domini Social Index will tend to limit the availability of investment
opportunities to the Fund compared to other investment companies that have a
comparable investment objective to that of the Fund. See "Investment Objective,
Policies and Risk Factors" herein.
Proceeds from the sale of shares of the Fund are invested in the
Portfolio which then purchases securities in accordance with its investment
objective and policies. DSIL, a company founded by the principals of the former
investment adviser and sponsor of the Portfolio, is the Portfolio's manager and
provides administrative services to the Portfolio. CBIS Financial Services, Inc.
is the distributor of the Fund. Mellon Equity Associates ("Mellon Equity") is
the Portfolio's investment submanager (the "Submanager"). DEVCAP Non-Profit is
the sponsor ("Sponsor") of the Fund. Sunstone Financial Group, Inc., the
administrator of the Fund (the "Administrator"), supervises the overall
administration of the Fund. The Boards of Trustees of the Trust and the
Portfolio provide broad supervision over the affairs of the Fund and the
Portfolio, respectively. The Trustees who are not "interested persons" of the
Trust as defined in the 1940 Act (the "Independent Trustees") are separate and
independent from the Independent Trustees of the Portfolio. For further
information about the Trustees of the Trust and the Portfolio, see "Management
of the Trust and the Portfolio" in the Statement of Additional Information. A
majority of the Fund's Trustees are not affiliated with the Manager.
KLD, the former investment adviser and sponsor of the Portfolio (as
well as an affiliate of DSIL), determines the composition of the Domini 400
Social Index(sm). The following persons are primarily responsible for the
development and maintenance of the Domini 400 Social Index(sm) (which determines
the composition of the Portfolio's securities): Steven D. Lydenberg, Director of
Research, KLD, since 1990 and Peter D. Kinder, President, KLD, since 1988. The
Submanager manages the investments of the Portfolio from day to day in
accordance with the Portfolio's investment objective and policies.
DEVCAP Non-Profit provides no investment advisory, management or other
investment support services to the Fund or the Portfolio. DEVCAP Non-Profit
provides certain marketing, shareholder and administrative support services to
the Fund pursuant to a Sponsorship Agreement.
-3-
<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of estimated expenses
relating to purchases and sales of shares of the Fund, and the aggregate annual
operating expenses for the Fund and the Portfolio, as a percentage of average
net assets of the Fund, and (ii) an example illustrating the dollar cost of such
estimated expenses on a $1,000 investment in the Fund.
Shareholder Transaction Expenses 0%
Annual Operating Expenses
Advisory and Management Fees(1) 0.19%
12b-1 Fees(2) 0.25%
Other Expenses:
Administrative Services Fees 0.18%
Other Operating Expenses
(after expense reimbursement)(1)(3) 1.13%
-----
1.31%
Total Operating Expenses (after expense reimbursement)(3) 1.75%
=====
(1) Under the Management Agreement between the Portfolio and DSIL, DSIL's fee
for advisory and administrative services to the Portfolio is 0.20% of the
average daily net assets. Currently, DSIL is waiving its fee to the extent
necessary to keep the aggregate annual operating expenses of the Portfolio
(excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses) at no greater than 0.20% of the average daily net assets
of the Portfolio. This expense waiver is voluntary and may be reduced or
terminated at any time.
(2) The percentage represents maximum possible expenditures, expressed as a
percentage of average daily net assets, under the Fund's Distribution Plan
during the fiscal year ended July 31, 1998. The Distribution Plan permits
reimbursement for expenses incurred by the Distributor of up to 0.25% of the
Fund's average daily net assets. See "Other Information Concerning Shares of the
Fund--Distribution Plan and Agreement."
(3) Under a Sponsorship Agreement between DEVCAP Non-Profit and the Fund, DEVCAP
Non-Profit is obligated to reimburse the Fund to the extent necessary to limit
the aggregate annual operating expenses of the Fund (including the Fund's share
of the Portfolio's expenses but excluding brokerage fees and commissions,
interest, taxes and other extraordinary expenses) to no greater than 1.75% of
the average daily net assets of the Fund through November 30, 1998. Effective
December 1, 1998, DEVCAP Non-Profit will discontinue its expense reimbursement
arrangement with the Fund given that average daily net assets and expenses of
the Fund currently approximate an expense ratio of 1.75% of average daily net
assets. See "Other Information Concerning Shares of the Fund" herein.
The purpose of the expense table provided below is to assist investors
in understanding the various costs and expenses that a shareholder will bear
directly or indirectly. The expense information in the Expense Table provided
below has been restated to reflect fees currently in effect. For more
information with respect to the expenses of the Fund and the Portfolio, see
"Management" herein.
Example:
A shareholder of the Fund would pay the following expenses on a $1,000
investment in the Fund, assuming (1) 5% annual return and (2) redemption at the
end of:
1 year $ 18
3 years $ 56
5 years $ 96
10 years $208
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<PAGE>
The "Example" set forth above is hypothetical and should not be
considered a representation of past or future expenses of the Fund. Actual
expenses and returns may be more or less than those shown.
The Trust pays a distribution fee at an annual rate of up to 0.25% of
the Fund's average daily net assets in reimbursement of, or in anticipation of,
expenses incurred by the Distributor in connection with the sale of shares of
the Fund. Long-term shareholders may pay more than the economic equivalent of
the maximum distribution charges permitted by the National Association of
Securities Dealers, Inc. The Trust may pay fees to Service Organizations at an
annual rate in amounts up to 0.25% of the daily net asset value of shares of the
Fund owned by shareholders with whom the Service Organization has a servicing
relationship. The Trust does not currently intend to enter into agreements with
and pay fees to Service Organizations with respect to the Fund, but it may do so
in the future. See "Distribution Plan and Agreement" and "Service Organizations,
Transfer Agent and Custodian".
The Trust's Trustees believe that the aggregate per share expenses of
the Fund and the Portfolio will be less than or approximately equal to the
expenses which the Fund would incur if it retained the services of an investment
adviser and an investment manager and invested directly in the types of
securities being held by the Portfolio. See "Other Information Concerning Shares
of the Fund Expenses" herein for further discussion of Fund and Portfolio
expenses.
FINANCIAL HIGHLIGHTS
The following table presents financial highlights for the Fund. The information
represents selected data for a single share outstanding for each of the
indicated periods for the Fund which has been audited by KPMG Peat Marwick LLP,
the Fund's independent auditors, whose report thereon appears in the Fund's
Annual Report which is incorporated by reference in the Fund's Statement of
Additional Information.
<TABLE>
<CAPTION>
Period from
October 19, 1995
(commencement of
For a share outstanding for Year ended Year ended investment operations)
the period: July 31, 1998 July 31, 1997 to 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(1) ...................... 20.84% 51.57% 7.10%(5)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Period from
October 19, 1995
(commencement of
For a share outstanding for Year ended Year ended investment operations)
the period: July 31, 1998 July 31, 1997 to July 31, 1996
------------- ------------- ---------------------
<S> <C> <C> <C>
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
income to average net
assets(2) ...................... (0.51)% (0.21)% (0.54)%(3)
Portfolio turnover(4) ........... 5% 1% 5%
Average commission rate ......... $ 0.0402 $ 0.0512 $ 0.0496
paid per share(4)
- -----------
(1) Investors may donate a portion of their return to DEVCAP Non-Profit
pursuant to this Fund's charitable contribution program.
(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)
(3) Annualized.
(4) Portfolio turnover rate and average commission rate per share of the
underlying Portfolio. For the periods ended July 31, 1998 and 1997 and
1996, ratios represent Portfolio activity for the entire periods then
ended.
(5) Not annualized.
</TABLE>
CHARITABLE CONTRIBUTION PROGRAM
The Fund is designed to enable an investor to share with charity,
specifically with DEVCAP Non-Profit, on an annual basis the return on his or her
investment in the Fund. When a shareholder makes an initial purchase of shares
of the Fund, the shareholder must also declare an intention to make an annual
donation to DEVCAP Non-Profit of ten percent, twenty-five percent, fifty
percent, seventy-five percent or all of the annual contribution basis
(calculated as indicated below) derived from the shareholder's investment in the
Fund. Each year, DEVCAP Non-Profit will direct the shareholder's donation to
non-profit organizations (primarily Catholic Relief Services, Inc.) working to
improve the welfare of underprivileged persons in developing countries through
grants or loans for micro-enterprises and other economic development programs.
After the initial purchase of shares and contribution election, a
shareholder may elect to contribute to DEVCAP Non-Profit a different portion of
the shareholder's annual contribution basis, so long as the shareholder elects
to contribute ten percent, twenty-five percent, fifty percent, seventy-five
percent or all of the shareholder's annual contribution basis. Alternatively, a
shareholder may elect at year's end not to contribute any portion of the
shareholder's annual contribution basis. On or about the third week of November,
the Fund will mail a notice to each shareholder of record indicating the dollar
amount of the shareholder's estimated contribution for that year, based on the
shareholder's then-current contribution election and the shareholder's estimated
annual contribution basis on that date. To change a shareholder's contribution
election, the shareholder must notify the Fund in writing or by telephone on or
before the second Friday of that December, at the Fund's address for these
purposes: DEVCAP Shared Return Fund, P.O. Box 2152, Milwaukee, WI 53201- 2152.
The telephone number for these purposes is (800) 371-2655, Option 3. By the end
of the following January, the Fund will mail a notice to each shareholder of
record indicating the dollar amount of the shareholder's actual contribution for
the previous year. This
-6-
<PAGE>
contribution will be made by deducting shares in the Fund whose fair market
value is equal to the shareholder's annual contribution. The fair market value
of the Fund share donation will generally be tax deductible, as explained in
more detail under "Tax Matters" herein.
A shareholder's contribution (if any) will consist of a percentage
(which must be ten percent, twenty-five percent, fifty percent, seventy-five
percent or all) of the shareholder's annual contribution basis derived from the
shareholder's investment in the Fund. A shareholder's annual contribution basis
is the change in value of that particular shareholder's account between (a)
January 1 or the date of the shareholder's initial investment and (b) the second
Friday of each December, adjusted for redemptions, distributions and purchases.
The shareholder's annual contribution will be calculated by the Fund's transfer
agent on or about the second Friday of each December with the following formula:
Account value at Year-End Calculation Date (including reinvested
distributions, if any)
PLUS
Shareholder redemptions during the year, if any
PLUS
Cash distributions from the Fund during the year, if any
MINUS
Shareholder purchases during the year, if any
MINUS
Account value at (a) beginning of year or (b) date of initial investment
EQUALS SHAREHOLDER'S ANNUAL CONTRIBUTION BASIS
The shareholder's annual contribution is calculated by multiplying the
shareholder's annual contribution basis by the shareholder's contribution
election of 10%, 25%, 50%, 75% or 100%.
On or before the second Friday of each December, a shareholder's annual
contribution basis will be finalized using the above formula. If a shareholder's
annual contribution basis has been zero, or if a shareholder's account has been
closed before the end of the year, or if the specified percentage has been
reduced to zero after proper notice to the Fund, no contribution will result. A
shareholder may still make a contribution by using the convenient donation form
provided by DEVCAP Non-Profit for that purpose.
Note that, notwithstanding the above formula, if a shareholder
liquidates his or her total investment in the Fund before the year-end
calculation date, the shareholder's annual contribution will be deemed to be
zero. The method of calculation of the shareholder's annual contribution
combined with the shareholder's contribution election could result in a complete
redemption of the shareholder's end of year account.
In general, shareholders participating in the Charitable Contribution
Program will not incur a net tax liability from their charitable contribution to
DEVCAP Non-Profit. The Board of Trustees believes no tax liability arises due to
donation of shares in the Fund to DEVCAP Non-Profit and that an investor will be
permitted to take an itemized tax deduction for the fair market value of the
donation so long as the investor has held the shares for more than 12 months on
the date of the donation. However, certain taxpayers may be subject to limits on
itemized deductions or charitable deductions on their U.S. or state tax returns.
Shareholders are advised to consult with their tax advisers with respect to the
particular tax consequences to them of an investment in the Fund and
participation in the Charitable Contribution Program. Shareholders that do not
itemize deductions on their Federal tax returns will not receive a Federal
deduction for donations to DEVCAP Non-Profit.
Shareholders desiring to make a contribution to DEVCAP Non-Profit outside the
Charitable
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<PAGE>
Contribution Program, either in cash or in kind (i.e., by donating shares of the
Fund or other non-cash assets), should contact DEVCAP Non-Profit directly at
800-371-2655.
DEVCAP NON-PROFIT
DEVCAP Non-Profit is a non-profit, tax-exempt 501(c)(3) corporation
that functions as a joint venture of non-profit organizations. DEVCAP Non-Profit
was created to support a class of existing charities, each of which is dedicated
to improving the welfare of underprivileged people in developing countries by
supporting micro-enterprise and other economic development programs.
Micro-enterprise development programs assist underprivileged people by providing
direct financing and technical support for their business enterprises, which
support would be unavailable through normal business channels. Contributions
made pursuant to the Charitable Contribution Program are generally allocated by
agreement among the member organizations of DEVCAP Non-Profit listed below.
The member organizations of DEVCAP Non-Profit pursue their shared
development objectives in different ways:
(i) Catholic Relief Services ("CRS"), founded by the Catholic Bishops
of the United States, funds a "village banking" program which provides
financial services to approximately 150,000 underprivileged people in
24 countries throughout the world;
(ii) Seed Capital Development Fund ("SCDF") invests in and lends funds
to a network of finance companies located in developing countries that
specialize in micro-enterprise lending programs.
DEVCAP Non-Profit was formed in 1992 in order to provide fund-raising
and other support to member organizations and other non-profits engaged in
international economic development for the world's poor. The money generated by
the Fund will be used as direct grants or loans to DEVCAP Non-Profit member
organizations in support of their programs. CRS provides the operational funding
for DEVCAP Non-Profit and receives all the donations generated by the Fund's
charitable contribution program up to and including the annual operating expense
reimbursement made by DEVCAP Non-Profit to the Fund. At the election of DEVCAP
Non-Profit's Board of Directors, the money generated from the Fund may also be
used to support the programs of non-member organizations.
In addition to its primary fund-raising activities, DEVCAP Non-Profit
also plans to promote cooperation among micro-enterprise development agencies
and organizations, and to provide information and support for micro-enterprise
development around the world. These activities could include educational
campaigns, research programs, and implementation of other financial programs to
aid in the development of micro-enterprises.
DEVCAP Non-Profit is independent of the Manager, Submanager,
Distributor, Administrator and all other service providers of the Fund. While
DEVCAP Non-Profit personnel will encourage donations through the Fund and DEVCAP
Non-Profit itself incurs costs in these efforts, DEVCAP Non-Profit and DEVCAP
Non-Profit personnel receive no compensation from the Fund or the Portfolio.
Neither DEVCAP Non-Profit nor DEVCAP Non-Profit member organizations provide any
investment advisory, management or other investment support services to the Fund
or the Portfolio. DEVCAP Non-Profit does provide marketing, administrative and
shareholder support services to the Fund.
For more information regarding DEVCAP Non-Profit or its member
organizations, please contact DEVCAP Non-Profit directly at 800-371-2655.
PERFORMANCE INFORMATION
Performance information concerning the Fund may from time to time be
used in advertisements, shareholder reports or other communications to
shareholders. The Trust may provide period and average annualized "total rates
of return" with respect to the Fund. The "total rate of return" of the Fund
refers to the change in the value of an investment in a Fund over a stated
period based on any change in net asset value per share and includes the value
of any shares purchasable with any dividends or capital gain distributions
declared during such period.
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Historical total return information for any period or portion thereof
prior to the establishment of the Fund will be that of the Portfolio, adjusted
to assume that all charges, expenses and fees of the Fund which are presently in
effect were deducted during such periods.
The table that follows sets forth average annual total return information for
the periods indicated:(1)
7/31/98
-------
1 Year 20.84%
5 Years 21.11%
Commencement of Investment Operations of Portfolio* to date 17.38%
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* Domini Social Index Portfolio commenced investing in the Domini Social Index
on June 3, 1991.
(1) Actual return to investor would be less due to charitable contribution.
From time to time the Trust may also quote fund rankings from various
sources, such as Lipper Analytical Services, Inc., and may compare its
performance to that of the Domini Social Index and various other unmanaged
securities indices, such as the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500")and the Dow Jones Industrial Average. "Standard & Poor(R)",
"S&P(R)" and "Standard & Poor's 500(R)" are trademarks of McGraw Hill Companies.
See the Statement of Additional Information for further information
concerning the calculation of total rate of return quotations. Since the Fund's
total rate of return quotations are based on historical earnings and since such
rates of return fluctuate over time, such quotations should not be considered as
an indication or representation of the future performance of the Fund.
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
Investment Objective. The investment objective of the Fund is to
provide its shareholders with long-term total return (reflecting both dividend
and price performance of the Fund) which corresponds to the total return
performance of the Domini 400 Social Index(sm) (sometimes referred to herein as
the "Index" or the "Domini Social Index"). There can, of course, be no assurance
that the Fund will achieve its investment objective. The investment objective of
the Fund may be changed without approval by the Fund's shareholders.
Investment Policies. The Fund seeks to achieve its investment objective
by investing all of its investable assets in the Portfolio, which has the same
investment objective as the Fund. The Portfolio seeks to achieve its investment
objective by investing substantially all of its assets in the common stocks
comprising the Domini Social Index. The Portfolio will approximate the
weightings of securities held by the Portfolio to the weightings of the stocks
in the Index, except as described below, and will seek a correlation between the
weightings of securities held by the Portfolio and the weightings of the stocks
in the Index of 0.95 or better. A figure of 1.0 would indicate a perfect
correlation. As of July 31, 1998, the correlation between the weightings of
securities held by the Portfolio and the weightings of the stocks in the Index
was 99%. To the extent practicable, the Portfolio will attempt to be fully
invested. The ability of the Fund to duplicate the performance of the Domini
Social Index by investing in the Portfolio will depend to some extent on the
size and timing of cash flows into and out of the Fund and the Portfolio as well
as the Fund's and the Portfolio's expenses. Adjustments in the securities
holdings of the Portfolio to accommodate cash flows will track the Domini Social
Index to the extent practicable, but this will result in brokerage expenses.
Social Criteria. The Domini Social Index was developed and is currently
maintained by KLD. The Index is a common stock index comprised of the stocks of
approximately 400 companies which meet certain social criteria. The weightings
of the stocks comprising the Index are based upon market capitalization. The
criteria used in developing and maintaining the Index involve the subjective
judgment of KLD. KLD, based on available data, seeks to
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exclude the following types of companies: firms that derive more than 2% of
their gross revenues from the sale of military weapons; firms that derive any
revenues from the manufacture of tobacco products or alcoholic beverages; firms
that derive any revenues from gambling enterprises; and firms that have an
ownership share in, or operate, nuclear power plants, or participate in
businesses related to the nuclear fuel cycle. The KLD also considers criteria
such as corporate citizenship, employee relations, environmental performance,
and product-related issues when evaluating stocks for inclusion in the Index.
The corporate citizenship criteria include a company's record with regard to its
philanthropic activities and its community relations in general. The employee
relations criteria include a company's record with regard to labor matters,
workplace safety, equal employment opportunity, employee benefit programs, and
meaningful participation in company profits either through stock purchase or
profit sharing plans. The environmental performance criteria include a company's
record with regard to fines or penalties, waste disposal, toxic emissions
efforts in waste reduction and emissions reduction, recycling, and
environmentally beneficial fuels, products and services. The product-related
criteria include a company's record with regard to product safety, marketing
practices and commitment to quality.
The Manager intends to vote proxies of companies included in the
Portfolio consistent with the social criteria used in developing and maintaining
the Index.
Index Management. The Portfolio is not managed in the traditional
investment sense, since changes in the composition of its securities holdings
are made in order to track the changes in the composition of securities included
in the Domini Social Index. Moreover, inclusion of a stock in the Index does not
imply an opinion by the Manager as to the merits of that specific stock as an
investment. However, KLD and the Manager believe that enterprises which exhibit
a social awareness, based on the criteria described above, should be better
prepared to meet future societal needs for goods and services and may also be
less likely to incur certain legal liabilities that may be incurred when a
product or service is determined to be harmful, and that such enterprises should
over the longer term be able to provide a positive return to investors.
In selecting stocks for inclusion in the Domini Social Index:
1. KLD evaluated, in accordance with the social criteria described
above, each of the companies the stocks of which comprise the S&P 500. If a
company whose stock was included in the S&P 500 met KLD's social criteria and
met KLD's further criteria for industry diversification, financial solvency,
market capitalization, and minimal portfolio turnover, it was included in the
Domini Social Index. As of July 31, 1998, of the 500 companies whose stocks
comprised the S&P 500, approximately 49% were included in the Index.
2. The remaining stocks comprising the Domini Social Index (i.e., those
which are not included in the S&P 500) were selected based upon KLD's evaluation
of the social criteria described above, as well as upon KLD's criteria for
industry diversification, financial solvency, market capitalization, and minimal
portfolio turnover. Because of the social criteria applied in the selection of
stocks comprising the Domini Social Index, industry sector weighting in the
Index may vary materially from the industry weightings in other stock indices,
including the S&P 500, and certain industry sectors will be excluded altogether.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P proceeds
from industry groups to the whole. Since some industries are characterized by
companies of relatively small stock capitalization, the S&P 500 does not
comprise the 500 largest companies listed on the New York Stock Exchange. Not
all stocks included in the S&P 500 are listed on the New York Stock Exchange.
However, the total market value of the S&P 500 as of July 31, 1998 represented
83% of the aggregate market value of common stocks traded on the New York Stock
Exchange.
Inclusion of a stock in the S&P 500 Index in no way implies an opinion
by S&P as to its attractiveness as an investment, nor is S&P a sponsor of or
otherwise affiliated with the Fund or the Portfolio.
Some of the stocks included in the Domini Social Index may be stocks of
foreign issuers (provided that the stocks are traded in the United States in the
form of American Depositary
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Receipts or similar instruments the market for which is denominated in United
States dollars). Securities of foreign issuers may represent a greater degree of
risk (i.e., as a result of exchange rate fluctuation, tax provisions, war or
expropriation) than do securities of domestic issuers.
The weightings of stocks in the Domini Social Index are based on each
stock's relative total market capitalization (i.e., market price per share times
the number of shares outstanding). Because of this weighting, as of July 31,
1998 approximately 45% of the Domini Social Index comprised the 20 largest
companies in the Domini Social Index.
KLD may exclude from the Domini Social Index stocks issued by companies
which are in bankruptcy or whose bankruptcy KLD believes may be imminent.
The Portfolio intends to readjust its securities holdings periodically
such that those holdings will correspond, to the extent reasonably practicable,
to the Domini Social Index both in terms of composition and weighting. The
timing and extent of adjustments in the holdings of the Portfolio, and the
extent of the correlation of the holdings of the Portfolio with the Domini
Social Index, will reflect the Submanager's judgment as to the appropriate
balance between the goal of correlating the holdings of the Portfolio with the
composition of the Domini Social Index, and the goals of minimizing transaction
costs and keeping sufficient reserves available for anticipated redemptions of
Fund shares. To the extent practicable, the Portfolio will seek a correlation
between the weightings of securities held by the Portfolio to the weightings of
the securities in the Domini Social Index and will seek to match, before
expenses, a correlation between the performance of the Fund and the performance
of the Domini Social Index of 0.95 or better. The Board of Trustees of the Fund
will receive and review, at least quarterly, a report prepared by the Submanager
comparing the performance of the Fund and the Portfolio with that of the Domini
Social Index, and comparing the composition and weighting of the Portfolio's
holdings with those of the Domini Social Index, and will consider what action,
if any, should be taken in the event of a significant variation between the
performance of the Fund or the Portfolio, as the Index, or between the
composition and weighting of the Portfolio's securities holdings with those of
the stocks comprising the Domini Social Index. If the correlation between the
weightings of securities held by the Portfolio and the weightings of the stocks
in the Domini Social Index or the correlation between the performance of the
Fund, before expenses, and the performance of the Domini Social Index falls
below 0.95, the Board of Trustees will review with the Submanager methods for
increasing such correlation, such as through adjustments in securities holdings
of the Portfolio.
The Portfolio may invest cash reserves in short-term debt securities
(i.e., securities having a remaining maturity of one year or less) issued by
agencies or instrumentalities of the United States Government, bankers'
acceptances, commercial paper or certificates of deposit, provided that the
issuer satisfies KLD's social criteria. The Portfolio does not currently intend
to invest in direct obligations of the United States Government. Short- term
debt securities purchased by the Portfolio will be rated at least Prime-1 by
Moody's Investors Service, Inc. or A-1+ or A-1 by S&P or, if not rated,
determined to be of comparable quality by the Portfolio's Board of Trustees. The
Portfolio's policy is to hold its assets in such securities pending readjustment
of its portfolio holdings of stocks comprising the Domini Social Index and in
order to meet anticipated redemption requests. Such investments are not intended
to be used for defensive purposes in periods of anticipated market decline.
The annual portfolio turnover rates of the Portfolio for the fiscal
years ended July 31, 1996, July 31, 1997, and July 31, 1998 were 5%, 1%, and 5%
respectively. The Portfolio's average brokerage commission rates paid per share
for the fiscal years ended July 31, 1996, July 31, 1997 and July 31, 1998 were
$0.0496, $0.0512, and $0.0402 respectively.
The Portfolio's primary consideration in placing securities
transactions with broker-dealers is to seek the best price and execution. The
Portfolio may pay higher commission rates than the lowest available when the
Manager or Submanager believes it is reasonable to do so in light of the value
of the brokerage research services provided by the broker effecting the
transaction. Neither the Portfolio nor the Fund will engage in brokerage
transactions with the Manager, the Submanager or the Sponsor or any of their
respective affiliates or any affiliate of the Fund or the Portfolio. For further
discussion regarding securities trading by the Portfolio, see the Statement of
Additional Information.
Consistent with applicable regulatory policies, including those of the
Board of
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Governors of the Federal Reserve System and the Securities and Exchange
Commission, the Portfolio may make loans of its securities to member banks of
the Federal Reserve System and to broker-dealers. Such loans would be required
to be secured continuously by collateral and cash or cash equivalents maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. The Portfolio would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During the existence of
a loan, the Portfolio would continue to collect the equivalent of the dividends
paid by the issuer on the securities loaned and would also receive interest on
investment of cash collateral. The Portfolio may pay finder's and other fees in
connection with securities loans. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to provide additional
collateral.
Although it has no current intention to do so, the Portfolio may make
short sales of securities or maintain a short position, if at all times when a
short position is open the Portfolio owns an equal amount of such securities, or
securities convertible into such securities.
Special Information Concerning the Master-Feeder Investment Fund Structure
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Trust seeks to achieve the investment objective of the
Fund by investing all of the investable assets of the Fund in the Portfolio, a
separate registered investment company. The Portfolio has the same investment
objective and policies as the Fund. In addition to selling a beneficial interest
to the Fund, the Portfolio may sell beneficial interests to other mutual funds
or institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions as the Fund and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from the Manager at (212) 352-9290.
The investment objective of the Fund may be changed without the
approval of the Fund's shareholders, but not without written notice thereof to
shareholders thirty days prior to implementing the change. If there were a
change in the Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then-current
financial positions and needs. The investment objective of the Portfolio may
also be changed without the approval of the investors in the Portfolio, but not
without written notice thereof to the investors in the Portfolio (and notice by
the Fund to its shareholders) 30 days prior to implementing the change. There
can, of course, be no assurance that the investment objective of either the Fund
or the Portfolio will be achieved. See "Investment Restrictions" in the
Statement of Additional Information for a description of the fundamental
policies of the Fund and the Portfolio that cannot be changed without approval
by the holders of a "majority of the outstanding voting securities" (as defined
in the 1940 Act) of the Fund and the Portfolio, respectively. Except as stated
otherwise, all investment objectives, policies, strategies and restrictions
described herein and in the Statement of Additional Information are
non-fundamental.
Smaller funds investing in the Portfolio may be materially affected by
the actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk.
However, this possibility exists as well for traditionally structured funds
which have large or institutional investors. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the operations
of the Portfolio.
The Trustees of the Fund have adopted the following policy with respect
to voting shares of the Portfolio: Whenever the Fund is requested to vote on a
matter pertaining to the Portfolio, the Trustees of the Fund will, in their
discretion and in accordance with applicable law, either seek instructions from
shareholders of the Fund and vote the shares
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in accordance with such instructions, or vote the shares held by the Fund in the
Portfolio in the same proportion as the vote of all other holders of the shares
in the Portfolio. Whenever the Trustees determine to seek the instructions of
the Fund shareholders, the Fund will hold a meeting of its shareholders and, at
the meeting of investors in the Portfolio, the Fund will cast all of its votes
at the Portfolio level in the same proportion as the votes of the Fund's
shareholders. Shares of the Fund for which no voting instructions have been
received will be voted by the Trustees in the same proportion as the shares for
which it receives voting instructions.
Certain changes in the Portfolio's investment objective, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Trust may withdraw the investment of the Fund from the Portfolio at
any time, if the Board of Trustees of the Trust determines that it is in the
best interests of the Fund to do so. Upon any such withdrawal, the Board of
Trustees would consider what action might be taken, including the investment of
all the assets of the Fund in another pooled investment entity having the same
investment objective as the Fund or the retention of an investment adviser to
manage the Fund's assets in accordance with the investment policies described
above with respect to the Portfolio.
For descriptions of the investment objective, policies and restrictions
of the Portfolio, see "Investment Objective, Policies and Risk Factors" herein
and "Investment Objective, Policies and Restrictions" in the Statement of
Additional Information. For descriptions of the management of the Portfolio, see
"Management" herein and "Management of the Trust and the Portfolio" in the
Statement of Additional Information. For descriptions of the expenses of the
Portfolio, see "Management" and "Other Information Concerning Shares of the Fund
Expenses" below.
---------
As a matter of fundamental policy, the Fund will invest all of its
investable assets (either directly or through the Portfolio) in one or more of:
(i) stocks comprising an index of securities selected applying social criteria,
which initially will be the Domini Social Index, (ii) short-term debt securities
of issuers which meet social criteria, (iii) cash, and (iv) options on equity
securities. This fundamental policy cannot be changed without the approval of
the holders of a majority of the Fund's shares (which, as used in this
Prospectus, means the lesser of (a) more than 50% of the outstanding shares of
the Fund, or (b) 67% or more of the outstanding shares of the Fund present at a
meeting at which holders of more than 50% of the Fund's outstanding shares are
represented in person or by proxy). Except for this fundamental policy, investor
approval is not required to change the Fund's or the Portfolio's investment
objective or any of the non-fundamental investment policies described above.
The Statement of Additional Information includes a discussion of other
investment policies and a listing of specific investment restrictions which
govern the Portfolio's and the Fund's investment policies. Certain of the
investment restrictions listed in the Statement of Additional Information may
not be changed by the Portfolio without the approval of the Fund and the other
investors in the Portfolio or by the Fund without the approval of the
shareholders of the Fund. If a percentage or rating restriction on investment or
utilization of assets is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
Portfolio's total assets or the value of the Portfolio's securities or a later
change in the rating of a security held by the Portfolio will not be considered
a violation of policy.
Expenses of the Portfolio with respect to investment management and
administrative services, investment submanagement services and sponsoring
services are described herein under "Management--Manager, Submanager, and
Sponsor," respectively.
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MANAGEMENT
The Boards of Trustees of the Trust and the Portfolio provide broad
supervision over the affairs of the Fund and the Portfolio, respectively. The
Trust has retained the services of Sunstone as administrator of the Fund, but
has not retained the services of an investment adviser or investment manager
since the Fund seeks to achieve its investment objective by investing all its
investable assets in the Portfolio. The Portfolio has retained the services of
DSIL as investment manager and Mellon Equity as investment submanager.
Manager
DSIL, a Massachusetts limited liability company, provides investment
management and administrative services to the Portfolio pursuant to a Management
Agreement. DSIL has been registered as an investment adviser under the
Investment Advisers Act of 1940 since 1997. The services provided by the Manager
consist of investment supervisory services, overall operational support and
administrative services. The administrative services include the provision of
general office facilities and supervising the overall administration of the
Portfolio. For its services under the Management Agreement, the Manager receives
from the Portfolio a fee accrued daily and paid monthly at an annual rate equal
to 0.20% of the Portfolio's average daily net assets, on an annualized basis for
the Portfolio's then-current fiscal year. Currently, DSIL is waiving its fee to
the extent necessary to keep aggregate operating expenses of the Portfolio
(excluding brokerage fees and commissions, interest, taxes and other
extraordinary expenses) at no greater than .20% of the average daily net assets
of the Portfolio. This expense waiver is voluntary and may be reduced or
terminated at any time.
Prior to October 22, 1997, KLD, as the Portfolio's former investment
adviser, received from the Portfolio a fee accrued daily and paid monthly at an
annual rate equal to 0.025% of the Portfolio's average daily net assets, on an
annualized basis for the Portfolio's then-current fiscal year. Additionally,
prior to October 22, 1997, KLD also served as sponsor of the Portfolio and
provided the Portfolio with administrative personnel and services necessary to
operate the Portfolio. For these services and facilities, 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 its then-current fiscal
year. KLD continues to determine and monitor the composition of the Domini
Social Index (which determines the composition of the Portfolio's securities),
and provides other services relating to socially responsible investments
pursuant to a license agreement between DSIL and KLD. See "Investment Objective,
Policies, and Risk Factors." The following persons are primarily responsible for
the development and maintenance of the Domini Social Index: Steven D. Lydenberg,
Director of Research, KLD, since 1990; and Peter D. Kinder, President, KLD since
1988.
The entering into of the Management Agreement and the Submanagement
Agreement (discussed below), and the termination of the investment advisory and
sponsorship agreements were part of a restructuring by the Portfolio effective
October 22, 1997 which was designed to provide a more centralized management
structure for the Portfolio. Additional information regarding the service
providers for the Portfolio prior to October 22, 1997 is provided in the
Statement of Additional Information. See "EXPENSE SUMMARY" for additional
information.
"Domini(sm)" and "Domini 400 Social Index(sm)" are service marks of KLD
which are licensed to DSIL with the consent of Amy L. Domini. Pursuant to
agreements among DSIL, Amy L. Domini, and each of the Fund and the Portfolio,
the Portfolio may be required to discontinue use of these service marks if DSIL
ceases to be the Manager of the Portfolio or Ms. Domini withdraws her consent,
and the Fund may be required to discontinue the use of these service marks if
either DSIL ceases to be the Manager of the Fund or Ms. Domini withdraws her
consent or if either DSIL ceases to be the Manager of the Portfolio or the Fund
ceases to invest all of its assets in the Portfolio.
Submanager
Mellon Equity Associates ("Mellon Equity") provides investment
submanagement services to the Portfolio on a day-to-day basis pursuant to a
Submanagement Agreement with DSIL (the "Submanagement Agreement") effective
October 22, 1997. Mellon Equity's services as submanager include determining
what securities shall be purchased, sold or exchanged to track the composition
of the Index. Mellon Equity does not determine the composition of the Domini
Social Index.
Under the Submanagement Agreement, DSIL pays Mellon Equity an
investment submanagement fee at an annual rate equal to 0.10% of the Portfolio's
average daily net assets. Prior to
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October 22, 1997, Mellon Equity served as the Investment Manager of the
Portfolio. For its services, the Portfolio paid Mellon Equity an investment
management fee equal on an annual basis to 0.10% of the daily net assets of the
Portfolio.
Mellon Equity is a Pennsylvania business trust founded in 1987 whose
beneficial owners are Mellon Bank N.A. and MMIP, Inc. (a wholly owned subsidiary
of Mellon Bank Corporation ("Mellon Bank")). Mellon Equity has been registered
as an investment adviser under the 1940 Act since 1986. Prior to 1987, the
Submanager was part of the Equity Management Group of Mellon Bank's Trust and
Investment Department, which managed domestic equity, tax-exempt and
institutional pension assets since 1947. The Portfolio is team managed and John
R. O'Toole (a senior vice president of Mellon Equity, CFA and a member of AIMR),
is the team leader. He has been actively involved in the Portfolio management of
the Portfolio since November 1994. He has been employed by Mellon Equity and/or
Mellon Bank as a portfolio manager for over 5 years. Ms. Jocelin Reed (a vice
president of Mellon Equity, CFA and member of AIMR has has been primarily
responsible for the day-to-day portfolio management of the Portfolio since
November 1996. As of September 30, 1998 the Submanager had approximately $21.8
billion in assets under management.
Mellon Equity believes that performance of investment management
services for the Portfolio will not violate the Glass-Steagall Act or other
applicable banking laws or regulations. However, future statutory or regulatory
changes, as well as future judicial or administrative decisions and
interpretations of present and future statutes and regulations, could prevent
Mellon Equity from continuing to perform such services for the Portfolio. If
Mellon Equity were prohibited from acting as investment manager to the
Portfolio, it is expected that the Trustees would recommend to shareholders
approval of a new investment management agreement with another qualified
investment manager selected by the Trustees, or that the Trustees would
recommend other appropriate action.
Administrator
Pursuant to an Administrative Services Agreement, Sunstone Financial
Group, Inc.("Sunstone") provides the Trust with general office facilities and
supervises the overall administration of the Trust, including, among other
responsibilities, the negotiation of contracts and fees with, and the monitoring
of performance and billings of, the independent contractors and agents of the
Trust; the preparation and filing of all documents required for compliance by
the Trust with applicable laws and regulations; and arranging for the
maintenance of books and records of the Trust. Sunstone provides persons
satisfactory to the Board of Trustees of the Trust to serve as officers of the
Trust. Such officers, as well as certain other employees and Trustees of the
Trust, may be directors, officers or employees of Sunstone or its affiliates.
For these services and facilities, Sunstone receives fees computed and paid
monthly from the Trust at an annual rate equal to 0.175%. Sunstone, and its
affiliates provide administration, transfer agent and/or distribution services
to 19 fund families representing over $15 billion in assets.
Sponsor
Pursuant to a Sponsorship Agreement, DEVCAP Non-Profit provides the
Fund with certain marketing, shareholder and administrative support services and
is entitled to the proceeds of the Fund's charitable contribution program.
Pursuant to a Sponsorship Agreement, dated November 4, 1997, DEVCAP Non-Profit
reimburses the Fund's expenses to the extent necessary to limit the aggregate
annual operating expenses of the Fund (including the Fund's share of the
Portfolio's expenses but excluding brokerage fees and commissions, interest,
taxes and other extraordinary expenses) to no greater than 1.75% of the average
daily net assets of the Fund through November 30, 1998. Effective December 1,
1998, DEVCAP Non-Profit will discontinue its expense reimbursement arrangement
with the Fund relating to marketing, shareholder and administrative support
services. In return for providing certain marketing, shareholder and
administrative support services to the Fund pursuant to a Sponsorship Agreement
effective December 1, 1998, DEVCAP Non-Profit receives the proceeds from the
charitable contribution program of the Fund for its microenterprise activities.
PURCHASES AND REDEMPTIONS OF SHARES
Purchases
Shares of the Fund may be purchased without a sales load at the net
asset value next determined after an order for shares is received and accepted
by the Fund provided such order
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is received and accepted on any day the New York Stock Exchange is open for
trading (a "Fund Business Day"). The minimum initial investment in the Fund is
$1,000, except that the minimum initial investment when selecting the Automatic
Investment Plan is $500 and the minimum initial investment for an IRA is $250.
Except as noted below, there is no minimum on additional investments.
The Fund reserves the right to cease offering its shares for sale at
any time or to reject any order for the purchase of its shares.
For each shareholder of record, the Fund establishes an open account to
which all shares purchased are credited together with any dividends and capital
gain distributions which are paid in additional shares. See "Dividends and
Capital Gain Distributions" herein.
The Trust has a policy of not issuing share certificates.
Shares may be purchased directly from the Fund or through Service
Organizations (see "Service Organizations" below) by clients of those Service
Organizations. If an investor purchases shares through a Service Organization,
the Service Organization must promptly transmit such order to the Fund so that
the order receives the net asset value next determined following receipt of the
order. Service Organizations may impose minimum customer account and other
requirements in addition to those imposed by the Fund. Investors wishing to
purchase shares through a Service Organization should contact that organization
directly for appropriate instructions. Other investors may purchase Fund shares
in the manner described below.
Investors desiring to purchase shares of the Fund by mail should complete an
Account Application and mail the Application and a check (in U.S. dollars),
payable to "DEVCAP Shared Return Fund," to the Fund at the following address:
DEVCAP Shared Return Fund
P.O. Box 2152
Milwaukee, WI 53201-2152
An investor desiring to purchase shares by a wire transfer of funds
should request its bank to transmit immediately available funds. The information
transmitted with the funds must include the investor's name and address and a
statement indicating whether a new account is being established by such wire
transfer or whether such wire transfer is being made by a shareholder with an
account with the Fund. If the initial purchase by an investor is by a wire
transfer of funds, an account number will be assigned to such investor and an
Account Application must subsequently be completed and mailed to the Fund. Bank
wires for the purchase of shares should be sent to:
UMB Bank NA
ABA# 101000695 For Credit to: DEVCAP Trust A/C#
987-096-4139 For further credit to:
Include Shareholder Name, Address, and Social
Security Number (if purchase is for a New Account) or
Account Number (if shareholder account is existing).
Shares of the Fund may be purchased by exchanging securities acceptable
to the Trust for shares of the Fund. The Trust will not accept a security in
exchange for Fund shares unless (a) the security is consistent with the
investment objectives and policies of the Fund and the Portfolio, and (b) the
security is deemed acceptable by the Manager and the Submanager. Securities
offered in exchange for shares of the Fund will be valued in accordance with the
usual valuation procedure for the Fund. See "Net Asset Value."
Investors making purchases through a Service Organization should be
aware that it is the responsibility of the Service Organization to transmit
orders for purchases of shares by its customers to the Transfer Agent and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
When investing in the Fund by check, the Fund reserves the right to
cancel the purchase if a check does not clear the bank. The Fund will charge the
investor's account a $20 service fee and the investor will be responsible for
any losses for fees imposed by the investor's bank and any losses that may
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be incurred by the Fund as a result of the canceled purchase. If the investor is
already a shareholder in the Fund, the Fund may redeem shares in the account(s)
to cover any such losses due to fluctuations in share price.
For further information on how to purchase shares of the Fund, an
investor should contact the Fund (see back cover for address and phone number).
Automatic Investment Plan
The Trust offers a plan for regularly investing specified dollar
amounts ($25.00 minimum in monthly, quarterly, semi-annual or annual intervals)
in the Fund. The minimum investment for an investor investing through an
automatic investment plan is $500. If the Automatic Investment Plan is selected,
subsequent investments will be automatic and will continue until such time as
the Fund and the investor's bank are notified to discontinue further
investments. Due to the varying procedures to prepare, process and to forward
the bank withdrawal information to the Fund, there may be a delay between the
time of the bank withdrawal and the time the money reaches the Fund. The
investment in the Fund will be made at the public offering price per share
determined on the day that both the check and bank withdrawal data are received
in the form required by the Fund. Further information about the plan and form
may be obtained from the Fund at the telephone number listed on the back cover
of the Prospectus.
Individual Retirement Accounts
Shares of the Fund may be used as a funding medium for an Individual
Retirement Account ("IRA"). An IRA plan approved by the Internal Revenue Service
is available from the Fund naming Investors Bank & Trust Company as custodian.
The minimum initial investment for an IRA is $250; there is no minimum for
subsequent investments. IRAs are available to individuals under age 70 1/2 who
receive compensation or earned income during the year. An IRA contribution by an
individual who participates, or whose spouse participates, in a tax-qualified or
Government-approved retirement plan may not be deductible depending upon various
factors, including the individual's income. Individuals may also establish an
IRA to receive a "rollover" distribution from another IRA or a qualified plan.
Tax advice should be obtained before planning a rollover.
IRA accounts and the Fund's charitable contribution program. As
described above under the section header "Charitable Contribution Program,"
while shares equal to the value of a shareholder's charitable contribution
amount are usually donated automatically pursuant to the shareholder's
charitable contribution instructions, shares may not be donated in this way from
an IRA account without incurring certain tax liabilities associated with early
withdrawals from IRA accounts. Therefore, for IRA accounts only, shareholders
will be requested to remit their charitable contribution from a source other
than their IRA account. By January 31 of each year, the Fund will mail a notice
to each IRA shareholder indicating the shareholder's charitable contribution
amount for the previous year. Each shareholder will then be requested to make a
contribution to DEVCAP Non-Profit equal in value to his or her charitable
contribution amount payable by check or credit card. For more information
regarding how the Fund calculates a shareholder's annual charitable contribution
amount, see "Charitable Contribution Program" above.
Redemptions
A shareholder may redeem all or any portion of the shares in its
account at any time at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to the Fund. Redemptions
will therefore be effected on the same day the redemption order is received by
the Fund provided such order is received in good order prior to the close of the
Fund Business Day. In addition to the procedures discussed in this section,
redemption of shares of an investor may also occur as described under
"Charitable Contribution Program" herein. The proceeds of a redemption will be
paid by the Fund in federal funds normally on the next Fund Business Day, but in
any event within seven days if all checks in payment for the purchase of shares
to be redeemed have been cleared by the Fund (which may take up to 15 days).
Redemptions may be paid by the Fund by check or by wire transfer if the
appropriate box on the Account Application has been completed. Instructions for
wire redemptions are set forth in the Account Application.
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Redemptions may be made by letter to the Fund specifying the dollar
amount or number of shares to be redeemed and the account number. The letter
must be signed in exactly the same way the account is registered and, with
respect to redemptions in excess of $10,000, the signatures must be guaranteed
by a member firm of the New York, American, Boston, Midwest, Philadelphia or
Pacific Stock Exchange or by a commercial bank (not a savings bank) which is a
member of the Federal Deposit Insurance Corporation. In some cases the Fund may
require the furnishing of additional documents.
Written redemption requests should be mailed to the Fund at the
following address:
DEVCAP Shared Return Fund
P.O. Box 2152
Milwaukee, WI 53201-2152
For overnight deliveries, please use the following address:
DEVCAP Shared Return Fund
c/o Sunstone Financial Group
207 East Buffalo St.
Suite 315
Milwaukee, WI 53202
An investor may also redeem shares by telephone by calling the Transfer
Agent, at (800) 371-2655, if the appropriate box on the Account Application has
been completed. The Fund, Transfer Agent and Distributor will not be liable for
any loss, liability, cost or expense for acting upon telephone instructions
believed to be genuine. Accordingly, shareholders will bear the risk of loss.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including, without limitation, recording
telephone instructions and/or requiring the caller to provide some form of
personal identification. Failure to employ reasonable procedures may make the
Fund liable for any losses due to unauthorized or fraudulent telephone
instructions. The following information must be supplied by the shareholder or
broker at the time a request for a telephone redemption is made: (1) the
shareholder's account number; (2) the shareholder's social security number; and
(3) the name and account number of the shareholder's designated securities
dealer or bank.
The Fund, Transfer Agent and Distributor reserve the right to refuse
wire or telephone redemptions. Procedures for redeeming shares by wire or
telephone may be modified or terminated at any time by the Fund or the
Distributor. A Service Organization may request a wire redemption provided a
Wire Authorization Form is on file with the Fund. The proceeds of a wire
redemption will be sent to an account with a Service Organization designated on
the appropriate form. Proceeds of wire redemptions will be transferred within
seven days after receipt of the request.
The Fund reserves the right to redeem involuntarily on at least 30
days' notice the balance in a shareholder's account having a current value of
less than $250, but not if an account falls below $250 due to a change in the
market value of the Fund's shares.
A signature guarantee protects shareholders and the Fund against
fraudulent transactions by unauthorized persons. Signature guarantees are
required for redemption requests over $10,000 and are also required for any
redemption made within 15 days of a change of address by telephone, or if the
proceeds of redemption (regardless of amount) are to be sent to a person other
than the registered holder and/or to an address other than the address of
record. Transfers of shares also require signature guarantees. Signature
guarantees may be obtained from any commercial bank or trust company in the
United States a member of the New York Stock Exchange and some savings and loan
associations. A notary public is not acceptable.
Redemption proceeds can be sent by wire or electronic funds transfer to
the investor's preauthorized bank account. There is a $10.00 fee for wire
redemption which will be deducted from your proceeds. Payment may be delayed for
up to seven business days on redemption requests for recent purchases made by
check in order to ensure that the check has cleared.
The value of shares redeemed may be more or less than the shareholder's
cost, depending
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<PAGE>
on the Fund's performance during the period the shareholder owned its shares.
Redemptions of shares are taxable events on which the shareholder may recognize
a gain or a loss.
The right of any shareholder or DEVCAP Non-Profit to receive payment
with respect to any redemption may be suspended or the payment of the redemption
proceeds postponed during any period in which the New York Stock Exchange is
closed (other than weekends or holidays) or trading on such exchange is
restricted, or, to the extent otherwise permitted by the 1940 Act, if an
emergency exists.
TAX MATTERS
Fund Taxation
Each year the Fund has qualified and intends to continue to qualify as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Provided the Fund qualifies as a "regulated
investment company" under the Code, and distributes all of its net investment
income and realized capital gains to shareholders in accordance with the timing
requirements imposed by the Code, the Fund will not be required to pay any
federal income or excise taxes. The Portfolio will also not be required to pay
any federal income or excise taxes. However, shareholders of the Fund normally
will have to pay federal income taxes, and any state or local taxes, on
distributions of net investment income and net realized capital gains from the
Fund. At the end of each calendar year, each shareholder will receive
information for tax purposes on the distributions received during that calendar
year including the portion taxable as ordinary income, the portion taxable as
capital gains, the portion, if any, representing a return of capital (which
generally is free of current taxes but results in a basis reduction) and the
amount of dividends eligible for the dividends-received deduction for
corporations.
Distributions of net long-term capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) will cause any
short-term capital loss realized on the disposition by a Fund's shareholder of
Fund shares held for six or fewer months to be recharacterized, to the extent of
those distributions, as long-term capital loss. Under the back-up withholding
rules of the Code, certain shareholders may be subject to 31% withholding of
federal income tax on distributions and payments made by the Fund. Generally,
shareholders are subject to back-up withholding if they have not provided the
Fund with a correct taxpayer identification number and certain other
certifications.
The Trust is organized as a Massachusetts business trust and, under
current law, is not liable for any income or franchise tax in the Commonwealth
of Massachusetts as long as the Fund qualifies as a regulated investment company
under the Code.
The foregoing discussion is intended for general information only. A
prospective shareholder should consult with its own tax advisor as to the tax
consequences of an investment in the Fund including the status of distributions
from the Fund under applicable state or local law.
Tax Deductibility of Charitable Contributions
The Charitable Contribution Program of the Fund (the "Program") has
been designed so that individual investors utilizing the cash method of
accounting who donate to DEVCAP NonProfit through the Program will be entitled
to a tax deduction equal to the fair market value of the Fund shares donated in
the taxable year in which the donation is made. Under the Program, the
charitable donation will be made on or about the Second Friday of each December,
thus tracking the taxable year for most individual investors in the Fund. The
Fund will provide investors with the documentation needed to substantiate this
tax deduction. See "Charitable Contribution Program" herein.
The tax effect of the donation for a particular investor of the Fund
may vary according to the individual circumstances of that investor. For
example, the Code sets an upper limit on the dollar amount of tax deductions
that can be taken by individual taxpayers for charitable donations in a given
year. In view of the foregoing, as well as the possibility of other tax
consequences of the donation to particular investors, potential purchasers of
the Fund should consult their own tax advisors in determining the federal,
state, local and other tax consequences of purchasing shares of the Fund and
participating in the Program.
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Each of DEVCAP Non-Profit's member organizations is recognized by the
United States Internal Revenue Service (the "IRS") as a tax-exempt, section
501(c)(3)organization under the Code and that none of the member organizations
are "private foundations" within the meaning of the Code. In addition, on
October 18, 1995, DEVCAP Non-Profit received from the IRS recognition as a
tax-exempt "supporting organization," a category of exemption available under
sections 501(c)(3) and 509(a)(3) of the Code for organizations, like DEVCAP
Non-Profit, that are engaged solely in activities designed to support other
tax-exempt charitable organizations. In the case of DEVCAP Non-Profit, these
supported organizations are the DEVCAP Non-Profit member organizations and other
charities that are engaged in micro-enterprise and other economic development
programs for underprivileged people in developing countries.
The Program (as described above) has been structured so that investors
are provided an opportunity to donate to DEVCAP Non-Profit each year. The Fund
has been structured this way in order to allow the contributions made through
the Program to be tax deductible donations made to non-profit organizations
under existing interpretations of section 170(c) of the Code. Investors should
recognize, however, that neither the Fund nor DEVCAP Non-Profit are tax
advisers, that existing law and interpretations thereof may be modified, and
that no ruling has been sought from the IRS confirming the tax deductible nature
of Program contributions. Nevertheless, the IRS has been informed of the details
of the Program in DEVCAP Non-Profit's filing for recognition as a section
501(c)(3) organization, and the Fund believes that the granting of tax-exempt
status to DEVCAP Non-Profit represents approval of DEVCAP Non-Profit's
activities, including the Program, and confirmation that the donations are tax
deductible.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
Net Asset Value
The Trust determines the net asset value of the shares of the Fund on
each Fund Business Day. This determination is made once during each such day as
of the close of regular trading of the New York Stock Exchange by deducting the
amount of the Fund's liabilities from the value of its assets and dividing the
difference by the number of shares of the Fund outstanding.
Since the Fund will invest all of its assets in the Portfolio, the
value of the Fund's assets will be equal to the value of its beneficial interest
in the Portfolio. The net asset value of the Portfolio is determined as of the
close of regular business on the New York Stock Exchange on each day on which
such Exchange is open for trading, by deducting the amount of the Portfolio's
liabilities from the value of its assets. At the close of each such business
day, the value of the Fund's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents the Fund's share of the
aggregate beneficial interests in the Portfolio. See "Description of Shares,
Voting Rights and Liabilities" below.
Equity securities held by the Portfolio are valued at the last sale
price on the exchange on which they are primarily traded or on the NASDAQ system
for unlisted national market issues, or at the last quoted bid price for
securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. If the Portfolio purchases option
contracts, such option contracts which are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Short-term obligations with remaining maturities of less than
sixty days are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees of the Portfolio. Portfolio securities
(other than short-term obligations with remaining maturities of less than sixty
days) for which there are no such quotations or valuations are valued at fair
value as determined in good faith by or at the direction of the Portfolio's
Board of Trustees.
Dividends and Capital Gain Distributions
Substantially all of the Fund's net income from dividends and interest
is paid to the Fund's shareholders annually as a dividend, usually in December.
For this purpose, the Fund's "net income from dividends and interest" consists
of all income from dividends and interest
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accrued on the assets of the Fund (i.e., the Fund's share of the Portfolio's net
income from dividends and interest), less all actual and accrued expenses of the
Fund determined in accordance with generally accepted accounting principles.
The Fund also declares a long-term capital gain distribution to its
shareholders on an annual basis, usually in December, if the Fund's share of the
Portfolio's profits during the year from the sale of securities held for longer
than the applicable long-term capital gains holding period exceeds the Fund's
share of the Portfolio's losses during such year from the sale of securities
together with the Fund's share of the Portfolio's net capital losses carried
forward from prior years (to the extent not used to offset short-term capital
gains). The Fund's share of the Portfolio's net short-term capital gains
realized during each fiscal year will also be distributed at that time.
The Fund will also make additional distributions to its shareholders to
the extent necessary to avoid application of the 4% non-deductible excise tax on
certain undistributed income and net capital gains of mutual funds.
A shareholder of the Fund may receive dividends and capital gain
distributions in cash or additional shares of the Fund.
Expenses
The Fund and the Portfolio each are responsible for all of their
respective expenses, including the compensation of their respective Trustees who
are not interested persons of the Fund or the Portfolio; governmental fees,
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund or the Portfolio; fees and expenses of independent
auditors, of legal counsel and of any transfer agent, custodian, registrar or
dividend disbursing agent of the Fund or the Portfolio; insurance premiums; and
expenses of calculating the net asset value of the Portfolio and of shares of
the Fund.
The Fund will also pay all expenses of distributing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses, reports, notices, proxy statements and reports to
shareholders and to governmental offices and commissions; expenses of
shareholder meetings; and expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes.
The Portfolio will also pay the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including safekeeping
of funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to governmental offices and
commissions; expenses of meetings of investors; and the advisory fees payable to
the Adviser, the investment management fees payable to the Manager.
Under the Management Agreement, DSIL's fee was reduced to the extent
necessary to keep the aggregate annual operating expenses of the Portfolio
(excluding brokerage fees and commission, interest, taxes and other
extraordinary expenses) at no greater than 0.20% of the average daily net assets
of the Portfolio through October 22, 1998. Currently, DSIL is continuing with
the expense reduction agreement as stated in the Management Agreement. However,
this reduction is voluntary and may be reduced or terminated at any time.
Pursuant to a sponsorship agreement between the Portfolio and DSIL,
DSIL pays the ordinary operating expenses of the Portfolio, except the
sponsorship fee, and excluding brokerage fees and commissions, interest, taxes
and other extraordinary expenses. KLD has entered into an expense payment
agreement with Signature pursuant to which Signature provides this expense
payment service to the Portfolio and pursuant to which Signature has agreed to
pay all of the operating expenses of the Portfolio until December 31, 1999.
Under this arrangement, Signature receives an expense payment fee from KLD,
computed and paid monthly at an annual rate equal to 0.175% of the Portfolio's
average daily net assets for its then-current fiscal year.
DEVCAP Non-Profit has agreed that it will reimburse the Fund through
November 30, 1998, to the extent necessary to maintain the Fund's total
operating expenses (which includes expenses of the Fund and the Portfolio) at
the annual rate of 1.75% of the Fund's average daily net assets. DEVCAP
Non-Profit will discontinue its expense reimbursement with the Fund effective
December 1, 1998. (See "Management-Sponsor")
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Distribution Plan and Agreement
The Trustees of the Trust have adopted a Distribution Plan (the
"Distribution Plan") with respect to the Fund in accordance with Rule 12b-1
under the 1940 Act after having concluded that there is a reasonable likelihood
that the Distribution Plan will benefit the Fund and its shareholders. As
contemplated by the Distribution Plan, the Distributor acts as agent of the Fund
in connection with the offering of shares of the Fund pursuant to a Distribution
Agreement. The Distributor acts as the principal underwriter of shares of the
Fund and bears the compensation of personnel necessary to provide such services
and all costs of travel, office expenses (including rent and overhead) and
equipment.
CBIS Financial Services, Inc. replaced Signature as the Distributor
November 26, 1997.
Under the Distribution Plan, the Distributor may receive a fee from the
Trust at an annual rate not to exceed 0.25% of the Fund's average daily net
assets in anticipation of, or as reimbursement for, costs and expenses incurred
in connection with the sale of shares of the Fund, such as payments to
broker-dealers who advise shareholders regarding the purchase, sale or retention
of shares of the Fund, payments to employees of the Distributor, advertising
expenses and the expenses of printing and distributing prospectuses and reports
used for sales purposes, expenses of preparing and printing sales literature and
other distribution-related expenses. The Distributor will provide to the
Trustees of the Trust a quarterly written report of amounts expended by it under
the Distribution Plan and the purposes for which such expenditures were made.
No payments under the Distribution Plan are made to Service
Organizations, although Service Organizations may receive fees from the Trust
for their services. See "Service Organizations" below.
Description of Shares, Voting Rights and Liabilities
The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest (par value
$0.01 per share) and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
in the Trust. The Fund is presently the only series of the Trust. However, the
Trust reserves the right to create and issue additional series of shares, in
which case the shares of each series would participate equally in the dividends
and assets of the particular series. The Trust may establish additional classes
of any series of shares. For example, the Fund may offer another class of shares
that has lower annual distribution fees or shareholder servicing fees. Prior to
offering another class of shares, the Fund would either issue a new Prospectus
and Statement of Additional Information or amend this Prospectus and the
Statement of Additional Information to reflect such issuance.
Each share of the Fund represents an equal proportionate interest in
the Fund with each other share. Shares have no preference, preemptive,
conversion or similar rights. Shares when issued are fully paid and
nonassessable, except as set forth below. Shareholders are entitled to one vote
for each share held on matters on which they are entitled to vote. The Trust is
not required to and has no current intention of holding annual meetings of
shareholders, although the Trust will hold special meetings of Fund shareholders
when, in the judgment of the Trustees of the Trust, it is necessary or desirable
to submit matters for a shareholder vote. Shares of each series are entitled to
vote separately to approve amendments to the Distribution Plan or changes in
fundamental investment policies or restrictions, but shares of all series will
vote together in the election or selection of Trustees and accountants for the
Trust. If holders of 10% or more of the Trust's outstanding shares so request, a
meeting of the Trust shareholders will be called for the purpose of voting on
the removal of a Trustee or Trustees. The Trust will assist in shareholder
communications as required by Section 16(c) of the 1940 Act.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
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The Portfolio is organized as a trust under the laws of the State of
New York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (i.e., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trust's Trustees
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund's investing in the Portfolio. Whenever the Fund is requested
to vote on a fundamental policy of the Portfolio, the Fund will hold a meeting
of its shareholders and will cast its vote as instructed by its shareholders.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each Fund Business Day. At the close
of each such business day, the value of each investor's beneficial interest in
the Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected as of the close of business
on that day, will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be re-computed as the percentage
equal to the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of business on such day plus or
minus, as the case may be, the amount of any additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of business on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of business on the
following Fund Business Day.
SERVICE ORGANIZATIONS, TRANSFER AGENT AND CUSTODIAN
Service Organizations
The Fund may also contract with various banks, trust companies (other
than Mellon Equity), broker-dealers (other than the Distributor) or other
financial organizations (collectively, "Service Organizations") to provide
administrative services for the Fund, such as maintaining shareholder accounts
and records. The Fund may pay fees to Service Organizations (which may vary
depending upon the services provided) in amounts up to an annual rate of 0.25%
of the daily net asset value of shares of the Fund owned by shareholders with
whom the Service Organization has a servicing relationship.
Some Service Organizations may impose additional or different
conditions on their clients such as requiring their clients to invest more than
the minimum initial investment specified by the Fund or charging a direct fee
for servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Fund. Each Service Organization
has agreed to transmit to its clients a schedule of any such fees. Shareholders
using Service Organizations are urged to consult them regarding any such fees or
conditions.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or a part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Fund and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
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Transfer Agent and Custodian
The Trust has entered into a Transfer Agency and Service Agreement with
Sunstone Investor Services, LLC. ("SIS") (to be reorganized effective January 1,
1999 as Sunstone Financial Group) and the Portfolio has entered into a Transfer
Agency Agreement with Investors Bank & Trust Company ("IBT"), pursuant to which
Sunstone and IBT act as Transfer Agent for the Fund and the Portfolio,
respectively. For its services, Sunstone will receive such compensation as may
from time to time be agreed upon by Sunstone and the Fund, subject to an annual
minimum fee of $20,000. Each Transfer Agent maintains an account for each
shareholder of the Fund or the Portfolio, respectively, performs other transfer
agency functions and acts as dividend disbursing agent for the Fund and the
Portfolio, respectively. Pursuant to Custodian Agreements, IBT acts as the
custodian of the Fund's assets, (i.e., cash and the Fund's interest in the
Portfolio) and as the custodian of the Portfolio's assets (the "Custodian"). The
Custodian's responsibilities include safeguarding and controlling the
Portfolio's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest on the Portfolio's
investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of shares of the Portfolio. Securities held by the Portfolio may be
deposited into certain securities depositories. The Custodian does not determine
the investment policies of the Portfolio or decide which securities the
Portfolio will buy or sell. The Portfolio may, however, invest in securities of
the Custodian and may deal with the Custodian as principal in securities
transactions. For their services, Sunstone and IBT will receive such
compensation as may from time to time be agreed upon by each of them and the
Fund or the Portfolio.
Year 2000
The Fund is in the process of monitoring its systems to achieve Year
2000 readiness. This endeavor is being monitored by the Sponsor. The Sponsor has
developed clearly defined and documented plans that have been implemented to
minimize the risk of significant negative impact on the operations of the Fund.
These monitoring plans include the following activities: (1) perform an
inventory of the Fund's information technology and non-information technology
systems; (2) assess which items in the inventory may expose the Fund to business
interruptions due to Year 2000 issues; (3) test systems for Year 2000 readiness;
(4) reprogram or replace systems that are not Year 2000 ready; and (5) return
the systems to operation. The Sponsor expects to complete the forgoing
monitoring activities for all critical business systems relevant to the Fund by
the end of the second calendar quarter in 1999. Accordingly, the Fund has no
contingency plans because any open Year 2000 issues may be addressed in 1999.
---------
The Fund's Statement of Additional Information contains more detailed
information about the Fund and the Portfolio, including information related to
(i) investment policies and restrictions of the Fund and the Portfolio, (ii) the
Trustees, officers, investment adviser, investment manager, sponsor and
administrator of the Fund and the Portfolio, (iii) portfolio transactions, (iv)
the Fund's shares, including rights and liabilities of shareholders, (v)
additional performance information, including the method used to calculate total
rate of return quotations of the Fund, (vi) determination of the net asset value
of shares of the Fund, and (vii) the audited financial statements of the Fund
and the Portfolio as of and for the year ended July 31, 1998.
-24-
<PAGE>
ACCOUNT REGISTRATION INFORMATION
1. Individual
- ---------------------------------- ------------------------------
First M.I. Last
- ---------------------------------- ------------------------------
Social Security Number Date of Birth
2. Joint Tenant
- ---------------------------------- ------------------------------
First M.I. Last
- ---------------------------------- ------------------------------
Social Security Number Date of Birth
3. Gift/Transfer to a Minor (UGMA/UTMA)
Minor________________________________________________________________
Last M.I. First
- ------------------------------
Minor's Social Security Number
Custodian___________________________________ ______________________
First M.I. Last
Minor State of Residence Date of Birth
4. Trust Name______________________________ ______________________
Date of Trust
5. Organization____________________________ ______________________
Tax Identification No.
Type of Organization Corporation Association
Partnership Other________________
_____________________________________________
Signature of Joint Owner/Trustee If Any
_____________________________________________ ______________________
Print Name (and title if applicable) Date
Trusts: Please include date of trust and attach copies of first and last pages
of the trust agreement as well as any pages indicating which signatures are
required to execute transactions.
Corporations: Please attach a certified copy of your corporate resolution or
call 800-371-2655 for alternative form.
ADDRESS
- --------------------------------------------------------------------------
Number and Street
- --------------------------------------------------------------------------
City State Zip
-25-
- NOT PART OF PROSPECTUS -
<PAGE>
______________________ __________________ _______________
Country of Citizenship Business Telephone Home Telephone
Citizenship of Owner, Minor or Trust Beneficiary:
U.S. Citizen Resident Alien Non-Resident
Alien -- Country of Residence_________________
Citizenship of Joint Owner:
U.S. Citizen Resident Alien Non-Resident
Alien -- Country of Residence_________________
INITIAL INVESTMENT (Minimum initial investment - $1,000)
Please establish an account with the enclosed check payable to DEVCAP Shared
Return Fund, in the amount of $________________
DIVIDEND & CAPITAL GAIN DISTRIBUTION
Check one box: (If no box is checked, we will reinvest all distributions.)
Reinvest all dividends and capital gains in my account
Pay all dividends and capital gains to me by check
CHARITABLE CONTRIBUTION
to Development Capital Fund, a non-profit charitable corporation, or its member
organizations.
Please specify percentage of total annual return to be contributed
10% 25% 50% 75% 100%
AUTOMATIC INVESTMENT PLAN (Minimum Initial Investment $500)
1. This service lets you invest automatically from your bank account
2. Please sure to allow three weeks for the plan to begin
3. To establish this feature, complete the information below and staple a
voided check from your bank account to the application. One common name
must appear on your DEVCAP and bank accounts.
I have read the terms and conditions of the Automatic Investment Plan set forth
in the Prospectus
Dollar Amount: (Minimum $25)__________________________
Frequency (deductions made on or about the 15th of the month)
Monthly Quarterly Semi-annually Annually
REDEMPTION SERVICE
You automatically have the ability to make redemptions by telephone.
I (we) hereby authorize Sunstone Investor Services, LLC or Sunstone Financial
Group, ("Sunstone") to act upon instructions received by telephone to have
amounts withdrawn from my (our) account in the DEVCAP Shared Return Fund and
wired to my (our) account below.
I (we) hereby ratify any such instructions and agree that neither the DEVCAP
Shared Return Fund or Sunstone will be liable for any loss, liability, cost or
expense for acting upon instructions in accordance with procedures set forth in
the Prospectus.
YES [ ] NO [ ] "YES" will be assumed if neither box is checked
-26-
- NOT PART OF PROSPECTUS -
<PAGE>
Please attach a voided check for wire feature
- --------------------------------------------------------------------------------
Bank Name Account Name
- --------------------------------------------------------------------------------
Account Number Bank ABA Number
- --------------------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------------------
City State Zip
8
SIGNATURE
Each owner must sign this section.
By signing this application, I certify that
* I have received and read the prospectus for the fund in which I am
investing and I agree to the terms of the prospectus. I have the authority
and legal capacity to purchase mutual fund shares, am of legal age and
believe each investment is suitable for me
* I understand the fund is not a bank, and fund shares are not backed or
guaranteed by any bank or insured by the FDIC.
* I understand that, for joint accounts, "I" refers to all account owners,
and each of the account owners agrees that any account owner has authority
to act on the account without notice to the other account owners. Sunstone
in its sole discretion, and for its protection, may require the written
consent of all account owners prior to acting upon the instructions of any
account owner.
* If I am a U.S. Citizen or Resident Alien, as I have indicated above, I
certify under penalties of perjury that (1) the Social Security (taxpayer
identification number) provided above is correct, and (2) I am not subject
to IRS backup withholding because (a) I am exempt from backup withholding,
or (b) I have not been notified by the IRS that I am subject to backup
withholding, or (c) I have been notified by the IRS that I am no longer
subject to backup withholding. (Please cross out item 2 if it does not
apply to you.)
* If I am a Non-Resident Alien, as I have indicated above, I certify under
penalties of perjury that I am not a U.S. Citizen or Resident Alien, and
that I am an "exempt foreign person" as defined under IRS regulations.
- ---------------------------------- ----------------------------
Signature of Owner/TTEE/Custodian Date (month, day, year)
- ---------------------------------- ----------------------------
Signature of Joint Owner/TTEE if any Date (month, day, year)
MAIL COMPLETED APPLICATION TO:
DEVCAP Shared Return Fund
P.O. Box 2152
Milwaukee, WI 53201-2152
-27-
- NOT PART OF PROSPECTUS -
<PAGE>
DEVCAP Shared Return Fund
209 West Fayette Street
Baltimore, Maryland 21201
(800) 371-2655
Portfolio Investment Manager:
Domini Social Investments LLC
11 West 25th Street
New York, NY 10010
Portfolio Investment Submanager:
Mellon Equity Associates
500 Grant Street
Suite 3700
Pittsburgh, PA 15258-0001
Administrator:
Sunstone Financial Group, Inc.
207 East Buffalo Street
Suite 400
Milwaukee, Wisconsin 53202
(414) 271-5885
Distributor:
CBIS Financial Services, Inc.
915 Harger Road
Oak Brook, Illinois 60521-1476
Custodian:
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
Independent Auditors:
KPMG Peat Marwick LLP
99 High Street
Boston, MA 02110
Legal Counsel:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Transfer Agent:
Sunstone Financial Group, Inc.
207 East Buffalo St.
Milwaukee, WI 53201-2152
(800) 371-2655
-28-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 25, 1998
DEVCAP SHARED RETURN FUND
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE TRUST..............................................................1
2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS........................2
Investment Objective..................................................2
Investment Policies...................................................2
Loans of Securities...................................................3
Risk Factors Involved in Option Contracts.............................3
Investment Restrictions...............................................4
Non-Fundamental Restrictions..........................................5
Percentage Restrictions...............................................6
3. PERFORMANCE INFORMATION................................................6
4. DETERMINATION OF NET ASSET VALUE;
VALUATION OF PORTFOLIO SECURITIES......................................7
5. MANAGEMENT OF THE TRUST AND THE PORTFOLIO..............................8
Trustees of the Trust.................................................8
Trustees of the Portfolio.............................................8
Officers of the Fund..................................................9
Officers of the Portfolio.............................................9
Fund Trustees........................................................10
Portfolio Trustees...................................................11
Manager and Submanager...............................................11
Administrator........................................................14
Sponsor of the Portfolio.............................................15
Distribution Plan....................................................15
Distributor..........................................................16
Transfer Agent, Custodian and Service Organizations..................16
Expenses.............................................................16
6. INDEPENDENT AUDITORS..................................................16
7. TAXATION..............................................................16
8. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS......................18
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES..................20
10. FINANCIAL STATEMENTS.................................................21
DEVCAP TRUST
209 West Fayette St.
Baltimore, MD 21201-3443
(800) 371-2655
<PAGE>
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Prospectus dated November 25, 1998, as amended from time to time, for DEVCAP
Shared Return Fund. This Statement of Additional Information should be read in
conjunction with the Prospectus, a copy of which may be obtained by an investor
without charge by contacting the Fund at (800) 371-2655.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus and should be read only in conjunction
with such prospectus.
1. THE TRUST
DEVCAP Trust (the "Trust") was organized as a business trust under the
laws of the Commonwealth of Massachusetts, with DEVCAP Shared Return Fund (the
"Fund") established as a separate series of the Trust, on June 29, 1995. The
Fund is a no-load diversified open-end management investment company. The Trust
offers to buy back (redeem) shares of the Fund from its shareholders at any time
at net asset value. References in this Statement of Additional Information to
the "Prospectus" are to the current Prospectus of the Fund, as amended or
supplemented from time to time.
Sunstone Financial Group, Inc. ("Sunstone"), the Fund's administrator
(the "Administrator"), supervises the overall administration of the Fund. The
Board of Trustees provides broad supervision over the affairs of the Fund.
Shares of the Fund are continuously sold by CBIS Financial Services,
Inc., a subsidiary of Christian Brothers Investment Services, Inc., the Fund's
distributor ("CBIS" or "Distributor"). The minimum initial investment is $1,000,
except that the minimum initial investment when selecting the Automatic
Investment Plan is $500 and the minimum initial investment when selecting the
Individual Retirement Account is $250. An investor should obtain from the
Distributor, and should read in conjunction with the Prospectus, the materials
describing the procedures under which Fund shares may be purchased and redeemed.
The Trust seeks to achieve the investment objective of the Fund by
investing all of the Fund's investable assets in the Domini Social Index
Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Fund. Domini Social
Investments LLC ("DSIL") is the Portfolio's investment manager (the "Manager").
The sponsor of the Fund is Development Capital Fund ("DEVCAP Non-Profit" or the
"Sponsor"). Mellon Equity Associates ("Mellon Equity") is the Portfolio's
investment submanager (the "Submanager"). The Distributor of the Fund is CBIS.
Kinder, Lydenberg, Domini & Co., Inc. ("KLD") determines the composition of the
Domini 400 Social Index(SM) ("Domini Social Index" or "DSI"). The Manager
manages the investments of the Portfolio from day to day in accordance with the
Portfolio's investment objective and policies. "Domini(SM)" and "Domini 400
Social Index(SM)" are service marks of KLD.
<PAGE>
2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Investment Objective
The investment objective of the Fund is to provide its shareholders
with long-term total return (reflecting both dividend and price performance of
the Fund) which corresponds to the performance of the Domini 400 Social IndexSM.
There can, of course, be no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may be changed without approval
by the Fund's shareholders.
Investment Policies
The Trust seeks to achieve the investment objective of the Fund by
investing all of the Fund's investable assets in the Portfolio, which has the
same investment objective as the Fund. The Trust may withdraw the Fund's
investment in the Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interests of the Fund to do so. Upon any such
withdrawal, the Board of Trustees would consider what action might be taken,
including the investment of all the investable assets of the Fund in another
pooled investment entity having the same investment objective as the Fund, or
the retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies described below with respect to the Portfolio. The
approval of the Fund's shareholders would not be required to change any of the
Fund's investment policies.
The following supplements the information concerning the Portfolio's
investment policies contained in the Prospectus and should only be read in
conjunction therewith.
A company which is not included in the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") may be included in the Domini Social Index
primarily in order to afford representation to an industrial sector which would
otherwise be under-represented in this index. Because of the social criteria
applied in the selection of stocks comprising the Domini Social Index, industry
sector weighting in the Domini Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500.
The Portfolio does not purchase securities which the Portfolio
believes, at the time of purchase, will be subject to exchange controls or
foreign withholding taxes; however, there can be no assurance that such laws may
not become applicable to certain of the Portfolio's investments. In the event
unforeseen exchange controls or foreign withholding taxes are imposed with
respect to any of the Portfolio's investments, the effect may be to reduce the
income received by the Portfolio on such investments.
Although neither the Fund nor the Portfolio has any current intention
to do so, the Fund and the Portfolio may invest in securities which may be
resold pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"1933 Act").
It is a fundamental policy of the Portfolio and the Fund that neither
the Portfolio nor the Fund may invest more than 25% of the total assets of the
Portfolio or the Fund, respectively, in any one industry, although the Fund will
invest all of its assets in the Portfolio, and the Portfolio may and would
invest more than 25% of its assets in an industry if stocks in that industry
were to comprise more than 25% of the Domini Social Index. Based on the current
composition of this index, this is considered highly unlikely. If the Portfolio
were to concentrate its investments in a single industry, the Portfolio and the
Fund would be more susceptible to any single economic, political or regulatory
occurrence than would be another investment company which was not so
concentrated.
-2-
<PAGE>
Loans of Securities
The Portfolio may lend its securities to brokers, dealers and financial
institutions, provided that (1) the loan is secured continuously by collateral,
consisting of U.S. Government securities or cash or letters of credit, which is
marked to the market daily to ensure that each loan is fully collateralized at
all times; (2) the Portfolio may at any time call the loan and obtain the return
of the securities loaned within three business days; (3) the Portfolio will
receive any interest or dividends paid on the securities loaned; and (4) the
aggregate market value of securities loaned will not at any time exceed 30% of
the total assets of the Portfolio.
The Portfolio will earn income for lending its securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.
In connection with lending securities, the Portfolio may pay reasonable
finders, administrative and custodial fees. No such fees will be paid to any
person if it or any of its affiliates is affiliated with the Portfolio, the
Manager or the Submanager.
Although the Portfolio reserves the right to lend its securities, it
has no current intention of doing so in the foreseeable future.
Risk Factors Involved in Option Contracts
Although it has no current intention to do so, the Portfolio may in the
future enter into certain transactions in stock options for the purpose of
hedging against possible increases in the value of securities which are expected
to be purchased by the Portfolio or possible declines in the value of securities
which are expected to be sold by the Portfolio. Generally, the Portfolio would
only enter into such transactions on a short-term basis pending readjustment of
its holdings of underlying stocks.
The purchase of an option on an equity security provides the holder
with the right, but not the obligation, to purchase the underlying security, in
the case of a call option, or to sell the underlying security, in the case of a
put option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire amount
of the premium, plus related transaction costs, but not more. Upon exercise of
the option, the holder is required to pay the purchase price of the underlying
security in the case of a call option, or deliver the security in return for the
purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated
only by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Portfolio would establish an option position only if
there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a position
held by the Portfolio, and the Portfolio could be required to purchase or sell
the instrument underlying an option, make or receive a cash settlement or meet
ongoing variation margin requirements. The inability to close out option
positions also could have an adverse impact on the Portfolio's ability
effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a
number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Manager
does not believe that these trading and position limits would have an adverse
impact on the possible use of hedging strategies by the Portfolio.
-3-
<PAGE>
The approval of the Fund and of the other investors in the Portfolio is
not required to change the investment objective or any of the non-fundamental
investment policies discussed above, including those concerning security
transactions.
Investment Restrictions
The Trust (on behalf of the Fund) and the Portfolio have each adopted
the following policies which may not be changed without approval by holders of a
"majority of the outstanding shares" of the Fund or the Portfolio, respectively,
which as used in this Statement of Additional Information means the vote of the
lesser of (i) 67% or more of the outstanding "voting securities" of the Fund or
the Portfolio, respectively, present at a meeting, if the holders of more than
50% of the outstanding "voting securities" of the Fund or the Portfolio,
respectively, are present or represented by proxy, or (ii) more than 50% of the
outstanding "voting securities" of the Fund or the Portfolio, respectively. The
term "voting securities" as used in this paragraph has the same meaning as in
the Investment Company Act of 1940, as amended (the "1940 Act").
Except as described below, whenever the Trust is requested to vote on a
change in the investment restrictions of the Portfolio, the Trust will hold a
meeting of the shareholders of the Fund and will cast its vote proportionately
as instructed by the Fund's shareholders. However, subject to applicable
statutory and regulatory requirements, the Trust would not request a vote of
shareholders of the Fund with respect to (a) any proposal relating to the
Portfolio, which proposal, if made with respect to the Fund, would not require
the vote of the shareholders of the Fund, or (b) any proposal with respect to
the Portfolio that is identical in all material respects to a proposal that has
previously been approved by shareholders of the Fund. Any proposal submitted to
holders in the Portfolio, and that is not required to be voted on by
shareholders of the Fund, would, nevertheless, be voted on by the Trustees of
the Trust.
Neither the Fund nor the Portfolio may:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes either the Fund or the Portfolio may borrow an amount not
to exceed 1/3 of the current value of the net assets of the Fund or the
Portfolio, respectively, including the amount borrowed (moreover, neither the
Fund nor the Portfolio may purchase any securities at any time at which
borrowings exceed 5% of the total assets of the Fund or the Portfolio,
respectively, taken in each case at market value) (it is intended that the
Portfolio would borrow money only from banks and only to accommodate requests
for the withdrawal of all or a portion of a beneficial interest in the Portfolio
while effecting an orderly liquidation of securities);
(2) purchase any security or evidence of interest therein on margin,
except that either the Fund or the Portfolio may obtain such short-term credit
as may be necessary for the clearance of purchases and sales of securities and
except that either the Fund or the Portfolio may make deposits of initial
deposit and variation margin in connection with the purchase, ownership, holding
or sale of options;
(3) write any put or call option or any combination thereof, provided
that this shall not prevent (i) the purchase, ownership, holding or sale of
warrants where the grantor of the warrants is the issuer of the underlying
securities, or (ii) the purchase, ownership, holding or sale of options on
securities;
(4) underwrite securities issued by other persons, except that the Fund
may invest all or any portion of its assets in the Portfolio and except insofar
as either the Fund or the Portfolio may technically be deemed an underwriter
under the 1933 Act in selling a security;
-4-
<PAGE>
(5) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio and provided that any such
loans not exceed 30% of its total assets (taken in each case at market value),
or (b) through the use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of its net assets will be
invested in repurchase agreements maturing in more than seven days; for
additional related restrictions, see paragraph (6) immediately following;
(6) invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days and other than securities which may be resold pursuant to Rule
144A under the 1933 Act if the Board of Trustees determines that a liquid market
exists for such securities) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that the Fund may invest
all or any portion of its assets in the Portfolio;
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts in
the ordinary course of business (the Fund and Portfolio reserve the freedom of
action to hold and to sell real estate acquired as a result of the ownership of
securities by the Fund or the Portfolio);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open the Fund or the Portfolio, as
applicable, owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short, and unless not more than 5% of the Fund's or the Portfolio's, as
applicable, net assets (taken in each case at market value) is held as
collateral for such sales at any one time;
(9) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating paragraph (1) above;
(10) as to 75% of its assets, purchase securities of any issuer if such
purchase at the time thereof would cause more than 5% of the Portfolio's or the
Fund's, as applicable, assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States or any agency or instrumentality of the United
States), except that for purposes of this restriction the issuer of an option
shall not be deemed to be the issuer of the security or securities underlying
such contract and except that the Fund may invest all or any portion of its
assets in the Portfolio; or
(11) invest more than 25% of its assets in any one industry unless the
stocks in a single industry were to comprise more than 25% of the Domini Social
Index, in which case the Portfolio or the Fund, as applicable, will invest more
than 25% of its assets in that industry, and except that the Fund may invest all
of its assets in the Portfolio.
Non-Fundamental Restrictions
In order to comply with certain federal statutes and regulatory
policies, neither the Fund nor the Portfolio will as a matter of operating
policy:
-5-
<PAGE>
purchase puts, calls, straddles, spreads and any combination
thereof if the value of its aggregate investment in such
securities will exceed 5% of the Fund's or the Portfolio's
total assets at the time of such purchase.
restriction is not fundamental and may be changed with respect to the
Fund by the Fund without approval by the Fund's shareholders or with respect to
the Portfolio by the Portfolio without the approval of the Fund or its other
investors. The Fund will comply with the state securities laws and regulations
of all states in which it is registered.
Percentage Restrictions
If a percentage restriction or rating restriction on investment or
utilization of assets set forth above or referred to in the Prospectus is
adhered to at the time an investment is made or assets are so utilized, a later
change in percentage resulting from changes in the value of the securities held
by the Fund or the Portfolio or a later change in the rating of a security held
by the Fund or the Portfolio will not be considered a violation of policy;
provided that if at any time the ratio of borrowings of the Fund to the net
asset value of the Fund exceeds the ratio permitted by Section 18(f) of the 1940
Act, the Fund will take the corrective action required by Section 18(f).
3. PERFORMANCE INFORMATION
The Trust will calculate the Fund's total rate of return for any period
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains declared during such period
with respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share (i.e., net asset value) on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate of
return quotation will be calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.
Total rate of return information with respect to the Domini Social
Index 400SM will be computed in the same fashion as set forth above with respect
to the Fund, except that for purposes of this computation an investment will be
assumed to have been made in a portfolio consisting of all of the stocks
comprising the Domini Social Index 400SM weighted in accordance with the
weightings of the stocks comprising this index. Performance information with
respect to the Domini Social Index 400SM will not take into account brokerage
commission and other transaction costs which will be incurred by the Portfolio.
Historical performance information for any period or portion thereof prior to
the establishment of the Fund will be that of the Portfolio, adjusted to assume
that all charges, expenses and fees of the Fund which are presently in effect
were deducted during such periods, as permitted by applicable SEC staff
interpretations. The table that follows sets forth historical average annual
total return information for the periods indicated:
-6-
<PAGE>
7/31/98
-------
1 Year 20.84%
5 Years 21.11%
Commencement of Investment 17.38%
operations of Portfolio*
to date
* Domini Social Index Portfolio commenced investing in the DSI on June 3, 1991.
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF PORTFOLIO SECURITIES
The net asset value of each share of the Fund is determined each day on
which the NYSE is open for trading ("Fund Business Day"). (As of the date of
this Statement of Additional Information, the NYSE is open for trading every
weekday except for the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day). This determination of net asset value
of shares of the Fund is made once during each such day as of the close of the
NYSE by dividing the value of the Fund's net assets (i.e., the value of its
investment in the Portfolio and any other assets less its liabilities, including
expenses payable or accrued) by the number of shares outstanding at the time the
determination is made. Purchases and redemptions will be effected at the time of
determination of net asset value next following the receipt of any purchase or
redemption order deemed to be in good order.
See "Purchases and Redemptions of Shares" in the Prospectus.
The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same day as the Fund
determines its net asset value per share. The net asset value of the Fund's
investment in the Portfolio is equal to the Fund's pro rata share of the total
investment of the Fund and of other investors in the Portfolio less the Fund's
pro rata share of the Portfolio's liabilities. Equity securities held by the
Portfolio are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues, or
at the last quoted bid price for securities in which there were no sales during
the day or for unlisted securities not reported on the NASDAQ system. If the
Portfolio purchases option contracts, such option contracts which are traded on
commodities or securities exchanges are normally valued at the settlement price
on the exchange on which they are traded. Short-term obligations with remaining
maturities of less than sixty days are valued at amortized cost, which
constitutes fair value as determined by the Board of Trustees of the Portfolio.
Portfolio securities (other than short-term obligations with remaining
maturities of less than sixty days) for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Portfolio's Board of Trustees.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by the
Portfolio's Board of Trustees. While no single standard for determining fair
value exists, as a general rule, the current fair value of a security would
appear to be the amount which the Portfolio could expect to receive upon its
current sale. Some, but not necessarily all, of the general factors which may be
considered in determining fair value include: (i) the fundamental analytical
data relating to the investment; (ii) the nature and duration of restrictions on
disposition of the securities; and (iii) an evaluation of the forces which
influence the market in which these securities are purchased and sold. Without
limiting or including all of the specific factors which may be considered in
determining fair value, some of the specific factors include: type of security,
financial statements of the issuer, cost at date of purchase, size of holding,
discount from market value, value of unrestricted securities of the same class
at the time of purchase, special reports prepared by analysts, information as to
any transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the security, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
-7-
<PAGE>
Interest income on short-term obligations held by the Portfolio is
determined on the basis of interest accrued less amortization of premium.
5. MANAGEMENT OF THE TRUST AND THE PORTFOLIO
The Trustees and officers of the Trust and the Portfolio and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees and
officers who are "interested persons" (as defined in the 1940 Act) of the Trust
or the Portfolio, as applicable. Unless otherwise indicated below, the address
of the Trust is DEVCAP Shared Return Fund, 207 East Buffalo Street, Milwaukee,
Wisconsin 53202.
Trustees of the Trust
STEPHEN D. CASHIN (41) -- Trustee of the Trust; Currently Managing
Director of Modern Africa Fund Managers LLC, Vice President (Corporate Finance),
Equator Bank (from 1993 to March, 1997); Vice President (East Africa
Representative), Equator Bank (prior to 1993).
GILBERT H. CRAWFORD* (41) -- Trustee of the Trust; Alternate Director,
PROFUND (since September, 1995); President of Development Capital Fund
(November, 1992 to June 1997); Executive Director, Seed Capital Development
Fund, Ltd. (since September, 1991); Assistant Project Director, Africa Venture
Capital Project-Harvey & Company.
DONALD CARCIERI (56) -- Trustee of the Trust; President and Chief
Executive Officer, Cookson America, Inc. (1986-1996); Director, Catholic Relief
Services Corporate Leadership Council (since 1996).
Trustees of the Portfolio
EMILY W. CARD (56) -- 1158 26th Street, No. 334, Santa Monica,
California 90403; Attorney; President, The Card Group, Inc.; Trustee, Domini
Institutional Trust.
AMY L. DOMINI* (48) -- 230 Congress Street, Boston, Massachusetts
02110; Chair, President and Trustee of the Portfolio, the Domini Social Equity
Fund, and the Domini Institutional Trust; Managing Principal of DSI; Officer of
Kinder, Lydenberg, Domini & Co., Inc.; Private Trustee, Loring, Wolcott &
Coolidge (since 1987); Trustee, Episcopal Church Pension Fund; Former Member,
Governing Board, Interfaith Center on Corporate Responsibility; Former Trustee,
National Association Community Loan Funds.
ALLEN M. MAYES (78) -- P.O. Box 21222, Beaumont, Texas 77720; Trustee,
Domini Institutional Trust; Retired Senior Associate General Secretary of the
General Board of Pensions of the United Methodist Church (Since 1982); Director
of Ministerial Services, Texas Annual Conference, The United Methodist Church;
Former Member of the Board of Directors of Investor Responsibility Research
Center; Member of Board of Trustees of Wiley College (Since 1969).
WILLIAM C. OSBORN (54) -- 115 Buckminster Rd., Brookline, MA 02146;
Principal, Venture Investment Management Company LLC (since 1996); Trustee,
Domini Institutional Trust; Vice President and General Manager, TravElectric
Services Corp. (from 1993 to 1995); President, Environmental Technologies
Packaging (prior to 1993); Director, Evergreen Solar, Inc. (since 1996);
Director, Conservation Services Group (since 1992).
KAREN PAUL (54) -- 4050 Park Avenue, Miami, Florida 33133; Associate
Dean and Professor of Business Environment, Florida International University;
Partner, Trinity Industrial Technology (since 1995); Director, Center for
Management in the Americas (since 1997); and Co-Director, Center for Global
Business (since 1998); Trustee Domini Institutional Trust.
-8-
<PAGE>
TIMOTHY SMITH (55) -- 475 Riverside Drive, New York, New York 10115;
Executive Director, Interfaith Center on Corporate Responsibility (since 1974);
Trustee, Calvert New Africa Fund (since 1994); Trustee, Domini Institutional
Trust.
FREDERICK C. WILLIAMSON (84) -- 5 Roger Williams Green, Providence,
Rhode Island 02904; Treasurer and Trustee, RIGHA (charitable foundation
supporting healthcare needs) (since 1990); Chairman, Rhode Island Historical
Preservation and Heritage Commission (since 1995); Trustee, National Parks and
Conservation Commission (since 1986); Trustee, National Park Trust (since 1991);
Trustee, Domini Institutional Trust.
Officers of the Fund
JOSEPH ST. CLAIR -- President of the Trust (since September 1997);
President of Development Capital Fund (since June 1997); Director of Development
Capital Fund (since December 1994); Director of Internal Audit, Catholic Relief
Services (since May 1993); Departmental Vice-President, Alex. Brown Incorporated
(prior to 1993).
NANCY E. PAXTON -- Secretary of the Trust (since October 1997); Vice
President of Sales, Development Capital Fund (since April 1996); Assistant
Secretary, Development Capital Fund (since May 1996); Project Officer,
Foundation for International Community Assistance (from Feb. 1995 to April
1996); Investment Consultant, Dean Witter (from Jan. 1994 to 1995). Completed
MIM degree, American Graduate School of International Management, Thunderbird
(from June 1992 to January 1994).
JAMES R. ARNOLD -- Assistant Secretary of the Trust (since December
1997); Senior Administrative Services Manager, Sunstone Financial Group, Inc.
(since January, 1997); Secretary and Treasurer, The Primary Trend Fund, Inc.
(since September, 1986) and The Primary Income Funds, Inc. (since September,
1989); Vice President, Arnold Investment Counsel, Inc. (prior to January, 1997);
MARIANN MURPHY -- Assistant Treasurer of the Trust (since November
1998); DEVCAP Marketing Manager, Catholic Relief Services (since 1996); Finance
Administrator for the Sub-Saharan Africa Region, Catholic Relief Services (from
1993-1996).
Officers of the Portfolio
PETER D. KINDER -- Vice President of the Portfolio; President of
Kinder, Lydenberg, Domini & Co., Inc., (since 1998). Member, Domini Social
Investments, LLC (since 1997). Mr. Kinder is married to Ms. Domini.
CAROLE M. LAIBLE -- Secretary and Treasurer of the Portfolio (since
1997); Financial Compliance Officer of Domini Social Investments LLC (since
1997); Financial Compliance Officer, Fundamental Shareholder Services, Inc.
(from 1994-1997); Financial Compliance Officer and Secretary of investment
companies within Fundamental Family of Funds (1994-1997); General Service
Manager, McGladrey & Pullen LLP (certified public accountants) prior to 1994.
STEVEN D. LYDENBERG -- Vice President of the Portfolio; Director of
Research of Kinder, Lydenberg, Domini & Co., Inc.(since 1990); Member, Domini
Social Investments, LLC (since 1997).
SIGWARD M. MOSER -- Vice President of the Portfolio (since 1997);
President of Communications House International, Inc.; Director of Financial
Communications Society; Managing Principal, Domini Social Investments LLC (since
1997).
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<PAGE>
DAVID P. WIEDER -- Vice President of the Portfolio (since 1997);
Managing Principal, Domini Social Investments LLC (since 1997); President of
Fundamental Shareholder Services, Inc.
The Trustees who are not "interested persons" (the "Disinterested
Trustees") of the Trust as defined by the 1940 Act are separate from the
Disinterested Trustees of the Portfolio. Any conflict of interest between the
Trust and the Portfolio will be resolved by the Trustees of the Trust and the
Portfolio in accordance with their fiduciary obligations and in accordance with
the 1940 Act.
As of October 31, 1998, the following persons owned of record and
beneficially the percentage of outstanding shares of beneficial interest of the
Fund indicated next to their names: Catholic Relief Services -60.88%, Sisters of
Mercy of the Americas - 1.51%, and Seton Enablement Fund - 1.13%. As of the same
date, the officers and Trustees of the Trust and the Portfolio as a group owned
less than 1% of the Fund's outstanding shares.
The Trustees of the Trust receive no compensation for serving as
trustees of the Trust. The Trustees of the Portfolio are paid annual fees as
follows for serving as trustees of the Portfolio. The Trustees of the Trust and
the Portfolio are reimbursed for expenses incurred in connection with service as
a trustee. The following tables provide information related to compensation and
benefits paid to the Trustees of the Fund and the Portfolio for the fiscal year
ended July 31, 1998.
Fund Trustees
<TABLE>
<CAPTION>
Estimated
Aggregate Compensation
Compensation Pension or
from the Trust Estimated Total Retirement
and the Portfolio from the Trust Benefits Estimated
For the Fiscal for the Fiscal Accrued as Part Annual Benefits
Year Ended Year Ended of upon
July 31, 1998 July 31, 1998 Fund Expenses Retirement
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Stephen D. Cashin, Trustee None None None None
Gilbert H. Crawford, Trustee None None None None
Donald Carcieri, Trustee None None None None
Caroline Williams, Trustee1/ None None None None
- --------
1/ Ms. Williams resigned as a Trustee effective November 5, 1997.
</TABLE>
-10-
<PAGE>
Portfolio Trustees
<TABLE>
<CAPTION>
Total
Compensation
from the
Aggregate Trust and the
from the Pension or Portfolio Paid to
Portfolio Compensation Retirement Trustees for the
for the Fiscal Benefits Accrued Estimated Fiscal
Year Ended as Part of Annual Benefits Year Ended
July 31, 1998 Fund Expenses upon Retirement July 31, 1998
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Amy L. Domini, None None None None
Chair, President and
Trustee
Emily Card, $1,000 None None $1,000
Trustee
Karen Paul, $1,000 None None $1,000
President and Trustee
William C. Osborn, $1,000 None None $1,000
Trustee
Allen M. Mayes, $1,000 None None $1,000
Trustee
Timothy Smith, $1,000 None None $1,000
Trustee
Frederick C. Williamson, $1,000 None None $1,000
Trustee
</TABLE>
MANAGER AND SUBMANAGER
DSIL provides advice to the Portfolio pursuant to a Management
Agreement (the "Management Agreement"). The services provided by the Manager
consist of furnishing continuously an investment program for the Portfolio. DSIL
will have authority to determine from time to time what securities are
purchased, sold or exchanged, and what portion of assets of the Portfolio are
held uninvested. DSIL will also perform such administrative and management tasks
as may from time to time be reasonably requested, including: (i) maintaining
office facilities and furnishing clerical services necessary for maintaining the
organization of the Portfolio and for performing administrative and management
functions; (ii) supervising the overall administration of the Portfolio,
including negotiation of contracts and fees with and monitoring of performance
and billings of the Portfolio's transfer agent, shareholder servicing agents,
custodian and other independent contractors or agents; (iii) overseeing (with
the advice of Portfolio's counsel) the preparation of and, if applicable, filing
all documents required for compliance by the Portfolio with applicable laws and
regulations, including registration statements, prospectuses and statements of
additional information, semi-annual and annual reports to shareholders, proxy
statements and tax returns; (iv) preparing agendas and supporting documents for
and minutes of meetings of Trustees, committees of Trustees and shareholders;
and (v) arranging for maintenance of the books and records of the Portfolio. The
Manager furnishes at its own expense all facilities and personnel
-11-
<PAGE>
necessary in connection with providing these services. The Management Agreement
will continue in effect if such continuance is specifically approved at least
annually by the Portfolio's Board of Trustees or by a majority vote of the
outstanding voting securities of the Portfolio at a meeting called for the
purpose of voting on the Management Agreement (with the vote of each investor in
the Portfolio being in proportion to the amount of their investment), and, in
either case, by a majority of the Portfolio's Trustees who are not parties to
the Management Agreement or interested persons of any such party at a meeting
called for the purpose of voting on the Management Agreement.
The Management Agreement provides that the Manager may render services
to others and may permit other investment companies in addition to the Portfolio
to use the name "Domini " or "Domini 400 Social Index " in their names. DSIL may
employ, at its own expense or may request that the Portfolio employ (subject to
the requirements of the 1940 Act) one or more subadvisors or submanagers,
subject to DSIL's supervision. Pursuant to an agreement with the Portfolio, if
DSIL ceases to be the Manager of the Portfolio, the Portfolio will be required
to discontinue the use of such service marks. The Management Agreement provides
that it shall remain in force until October 22, 1999, on which date it will
terminate unless its continuance after October 22, 1999 is specifically approved
at least annually (i) by the vote of a majority of the Trustees of the Portfolio
who are not " interested persons" of the Portfolio or of DSIL at a meeting
specifically called for the purpose of voting on such approval, and (ii) by the
Board of Trustees of the Portfolio or by vote of a majority of the outstanding
voting securities of the Portfolio. The Management Agreement also provides that
it may be terminated without penalty on not more than 60 days' nor less than 30
days' written notice by the Portfolio when authorized either by majority vote of
the Fund and of the other investors in the Portfolio (with the vote of each in
the Portfolio being in proportion to the amount of its investment) or by a vote
of a majority of its Board of Trustees, or by the Manager, and will
automatically terminate in the event of its assignment. The Management Agreement
provides that neither the Manager nor its personnel shall be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services to the Portfolio, except
for willful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Management Agreement.
The Fund's Prospectus contains a description of fees payable to the
Manager for services under the Management Agreement.
DSIL is a Massachusetts limited liability company with offices at 11
West 25th Street, 7th Floor, New York, New York 10010, and is registered as an
investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act"). The names of the principal owners of DSIL, their relationship to the
Portfolio and their percentage ownership of DSIL follows: Amy L. Domini,
Chairman of the Board and President of the Portfolio, is the Manager and
principal executive officer of DSIL and a 21.55% owner of DSIL. Ms. Domini is
also Chief Executive Officer, Secretary, Treasurer and 51% owner of KLD which
licenses the Domini Social Index to DSIL. Peter D. Kinder, Vice President of the
Portfolio, is a 21.25% owner of DSIL. Mr. Kinder is also President and 19% owner
of KLD. Sigward M. Moser, Vice President of the Portfolio, is a 21.25% owner of
DSIL. David P. Wieder, Vice President of the Portfolio is a 21.25% owner of
DSIL. Mr. Wieder is also President and an owner of Fundamental Shareholder
Services, Inc. ("FSSI"), a registered transfer agent which served as the
Portfolio's transfer agent from 1995 to July, 1998.
Prior to October 22, 1997, pursuant to an investment advisory agreement
(the "KLD Advisory Agreement"), KLD served as investment adviser to the
Portfolio and furnished continuously an investment program by determining the
stocks to be included in the Index. KLD furnished at its own expense all
facilities and personnel necessary in connection with providing these services.
For its services under its investment advisory agreement with the Portfolio, KLD
was entitled to receive from the Portfolio a fee accrued daily and paid monthly
at an annual rate equal to 0.025% of the Portfolio's average daily net assets.
For the fiscal years ending July 31, 1996, 1997, and 1998, KLD received advisory
fees of $38,150, $46,528, and $17,385 respectively.
-12-
<PAGE>
Additionally, prior to October 22, 1997, KLD also served as sponsor of
the Portfolio. Pursuant to a sponsorship agreement (the "KLD Sponsorship
Agreement"), dated November 6, 1996, KLD was responsible for the ordinary
operating expenses of the Portfolio (other than brokerage fees and commissions,
interest, taxes, and extraordinary expenses) and furnished administrative
services to the Portfolio. For these services and facilities, KLD received fees
from the Portfolio at an annual rate of 0.20% of the average daily net assets of
the portfolio for the portfolio's then-current fiscal year. KLD continues to
determine and monitor the composition of the DSI and provide other services
relating to socially responsible investments pursuant to a license agreement
between DSIL and KLD. The KLD Sponsorship Agreement was terminated as of October
22, 1997.
Prior to November 6, 1996, pursuant to an administrative services
agreement (the "Signature Administration Agreement"), Signature served as the
administrator of the Portfolio. For these services, Signature received fees
computed daily and paid monthly from the Portfolio of 0.025% of the average
daily net assets of the Portfolio. For the fiscal years ended July 31, 1996,
1997, and 1998, the Portfolio incurred $38,150, $46,528, and $17,385
respectively, in aggregate administration fees pursuant to the Signature
Administration Agreement and the KLD Sponsorship Agreement. The Signature
Administration Agreement was terminated effective October 22, 1997.
Pursuant to a management agreement (the "Mellon Equity Management
Agreement"), Mellon Equity served as investment manager and managed the assets
of the Portfolio on a daily basis. Prior to October 22, 1997, the aggregate
investment management and administration fees under the prior agreements with
respect to the Portfolio were equal to 0.15% of the Portfolio's average daily
net assets for its then current fiscal year.
For the fiscal year ended July 31, 1998, the Portfolio incurred
$182,885 in management fees pursuant to the Mellon Equity Management Agreement.
For the fiscal years ended July 31, 1996 and 1997, the Portfolio incurred
$128,901 and $182,885 respectively, in management fees pursuant to the Mellon
Equity Management Agreement.
Mellon Equity manages the assets of the Portfolio pursuant to the
Investment Submanagement Agreement (the "Submanagement Agreement"). The
Submanager furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and effecting
securities transactions for the Portfolio. The Submanagement Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Portfolio's Board of Trustees or by a majority of the
outstanding voting securities in the Portfolio at a meeting called for the
purpose of voting on the Submanagement Agreement (with the vote of each investor
in the Portfolio being in proportion to the amount of its investment), and, in
either case, by a majority of the Portfolio's Trustees who are not parties to
the Submanagement Agreement or interested persons of any such party at a meeting
called for the purpose of voting on the Submanagement Agreement.
The Submanagement Agreement provides that the Submanager may render
services to others. The Submanagement Agreement is terminable without penalty
upon not more than 60 days' nor less than 30 days' written notice by the
Portfolio when authorized either by majority of the outstanding voting
securities in the Portfolio (with the vote of each investor in the Portfolio
being in proportion to the amount of its investment) or by a vote of the
majority of its Board of Trustees, or by the Manager, with the consent of the
Trustees and may be terminated by the Submanager on not less than 90 days'
written notice to the Manager and the Trustees, and will automatically terminate
in the event of its assignment.
Mellon Equity is a Pennsylvania business trust founded in 1987, which
is beneficially owned by Mellon Bank, N.A. (99% beneficial interest) and MMIP
(1% beneficial interest), a wholly owned subsidiary of Mellon Bank Corporation
("Mellon Bank"). Mellon Equity is a professional investment counseling firm that
provides investment management services to the equity and balanced pension,
public fund, and profit-sharing investment management markets, and is a
registered investment adviser
-13-
<PAGE>
under the Advisers Act. Mellon Bank's predecessor organization managed domestic
equity, tax-exempt and institutional pension accounts since 1947. The address of
Mellon Equity and each of the principal executive officers and directors of
Mellon Equity is 500 Grant Street, Suite 3700, Pittsburgh, Pennsylvania 15258.
The Submanagement Agreement provides that neither the Submanager shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in its services to the
Portfolio, except for willful misfeasance, bad faith or gross negligence or
reckless disregard for its or their obligations and duties under the Management
Agreement.
The Fund's Prospectus contains a description of fees payable to the
Submanager for services under the Submanagement Agreement.
Administrator
Pursuant to an Administrative Services Agreement, Sunstone provides the
Trust with general office facilities and supervises the overall administration
of the Trust, including, among other responsibilities, the negotiation of
contracts and fees with, and the monitoring of performance and billings of, the
independent contractors and agents of the Trust; the preparation and filing of
all documents required for compliance by the Trust with applicable laws and
regulations; and arranging for the maintenance of books and records of the
Trust. The Administrator provides persons satisfactory to the Board of Trustees
of the Trust to serve as officers of the Trust. Such officers, as well as
certain other employees and Trustees of the Trust, may be directors, officers or
employees of the Administrator or its affiliates.
The Administrative Services Agreement with the Trust provides that
Sunstone may render administrative services to others. The Administrative
Services Agreement with the Trust also provides that neither the Administrator
nor its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration or management of the Trust, except
for willful misfeasance, bad faith or gross negligence in the performance of its
or their duties or by reason of reckless disregard of its or their obligations
and duties under the Trust's Administrative Services Agreement.
The Administrative Services Agreement with respect to the Portfolio
provides that DSIL may render administrative services to others. The
Administrative Services Agreement with respect to the Portfolio may be
terminated without penalty by either the Portfolio or DSIL on not less than 60
days' written notice. The Administrative Services Agreement with DSIL also
provides that neither DSIL, as the Portfolio's Administrator, nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Portfolio, except for
willful misfeasance, bad faith or gross negligence in the performance of its or
their duties or by reason of reckless disregard of its or their obligations and
duties under the Administrative Services Agreement.
The Fund's Prospectus contains a description of the fees payable to the
Administrator by the Trust (on behalf of the Fund), or payable to the Portfolio
Administrator by DSIL, as the case may be, under the Administrative Services
Agreements. For the fiscal years ended July 31, 1996, 1997 and 1998, the
Portfolio's Administrator received $38,150 and $17,192 and $17,385 respectively,
in administrative fees.
-14-
<PAGE>
Sponsor of the Portfolio
Prior to October 22, 1997, KLD served as sponsor of the Portfolio.
Pursuant to a sponsorship agreement dated November 6, 1996 KLD was responsible
for the ordinary operating expenses of the Portfolio (other than brokerage fees,
commissions, interest, taxes and extraordinary expenses) and provided the
Portfolio with administrative personnel and services necessary to operate the
Portfolio. For these services and facilities, KLD received from the Portfolio a
fee accrued daily and paid monthly at an annual rate equal to 0.20% of the
average daily net assets of the Portfolio for its then-current fiscal year. KLD
continues to determine and monitor the composition of the Domini Social Index
(which determines the composition of the Portfolio's securities), and provides
other services relating to socially responsible investments pursuant to a
license agreement between DSIL and KLD. See "Investment Objectives, Policies,
and Risk Factors" in the Prospectus.
The Trust's Trustees believe that the aggregate per share expenses of
the Fund and the Portfolio will be less than or approximately equal to the
expenses which the Fund would incur if it retained the services of an investment
adviser and an investment manager and invested directly in the types of
securities being held by the Portfolio. See "Other Information Concerning Shares
of the Fund Expenses" herein for further discussion of Fund and Portfolio
expenses.
Distribution Plan
The Trust has adopted a Distribution Plan which provides that the Trust
may pay the Distributor a fee not to exceed 0.25% per annum of the Fund's
average daily net assets in anticipation of, or as reimbursement for, expenses
incurred in connection with the sale of shares of the Fund, such as payments to
broker-dealers who advise shareholders regarding the purchase, sale or retention
of shares of the Fund, payments to employees of the Distributor, advertising
expenses and the expenses of printing and distributing prospectuses and reports
used for sales purposes, expenses of preparing and printing sales literature and
other distribution-related expenses.
The Distribution Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Trust's Trustees and a majority of the Trust's Trustees who are
not "interested persons of the Trust" and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any agreement
related to such Plan ("Qualified Trustees"). The Distributor will provide to the
Trustees of the Trust a quarterly written report of amounts expended by it under
the Distribution Plan and the purposes for which such expenditures were made.
The Distribution Plan further provides that the selection and nomination of the
Trust's Qualified Trustees shall be committed to the discretion of the
disinterested Trustees of the Trust. The Distribution Plan may be terminated at
any time by a vote of a majority of the Trust's Qualified Trustees or by a vote
of the shareholders of the Fund. The Distribution Plan may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of shareholders and may not be materially amended in any case without a
vote of the majority of both the Trust's Trustees and the Trust's Qualified
Trustees. The Distributor will preserve copies of any plan, agreement or report
made pursuant to the Distribution Plan for a period of not less than six (6)
years from the date of the Distribution Plan, and for the first two (2) years
the Distributor will preserve such copies in an easily accessible place.
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<PAGE>
Distributor
The Trust has entered into a Distribution Agreement with CBIS. For the
fiscal year ending July 31, 1998, the Trust has reimbursed CBIS $13,498. Under
the Distribution Agreement, the Distributor acts as the agent of the Trust in
connection with the offering of shares of the Fund. For the period October 19,
1995 (commencement of operations) to July 31, 1996 and the year ended July 31,
1997, the Fund did not accrue or pay any distribution fees to Signature.
Transfer Agent, Custodian and Service Organizations
The Trust has entered into a Transfer Agency Agreement with Sunstone
Investor Services, LLC ("SIS") (to be reorganized effective January 1, 1999 as
Sunstone Financial Group) pursuant to which SIS acts as transfer agent for the
Fund. The Trust has entered into a Custodian Agreement with Investors Bank &
Trust Company ("IBT") pursuant to which IBT acts as custodian for the Fund. The
Portfolio has also entered into a Transfer Agency Agreement with FSSI pursuant
to which FSSI acts as transfer agent for the Portfolio. Mr. David P. Wieder,
Vice President and a principal of DSIL, the Manager and Sponsor of the
Portfolio, is an owner of, and President of FSSI. The Portfolio has entered into
a Custodian Agreement with IBT pursuant to which IBT acts as custodian for the
Portfolio. For additional information, see "Transfer Agent and Custodian" in the
Prospectus.
The Fund may from time to time enter into agreements with various
banks, trust companies (other than Mellon Equity), broker-dealers (other than
CBIS) or other financial organizations to provide administrative services for
the Fund, such as maintaining shareholder accounts and records. For the period
from October 19, 1995 (commencement of operations) to July 31, 1998, the Fund
did not accrue any service organization fees. For additional information, see
"Purchases and Redemptions of Shares --Service Organizations" in the Prospectus.
Expenses
Pursuant to a Sponsorship Agreement, dated November 4, 1997, DEVCAP
Nonprofit will reimburse the Fund through November 30, 1998 to the extent
necessary to maintain the Fund's total operating expenses (which includes the
Fund's share of the Portfolio's expenses but excludes brokerage fees and
commissions, interest, taxes, and other extraordinary expenses) at an annual
rate of 1.75% of the Fund's average daily net assets. Effective December 1,
1998, DEVCAP Nonprofit will discontinue its expense reimbursement arrangement
with the Fund and enter into a Sponsorship Agreement with the Fund relating to
marketing, shareholder and administrative support services. In return for
providing certain marketing, shareholder and administrative support services to
the Fund pursuant to the Sponsorship Agreement, DEVCAP Non-Profit receives the
proceeds from the charitable contribution program of the Fund for its
microenterprise activities.
6. INDEPENDENT AUDITORS
KPMG Peat Marwick LLP are the independent auditors for the Trust and
the Portfolio, providing audit services, tax return preparation, and assists
with the review of filings with the Securities and Exchange Commission.
7. TAXATION
Each year the Fund has qualified and intends to continue to qualify as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Provided the Fund qualifies as a "regulated
investment company" under the Code, and distributes all of its net investment
income and net realized capital gains to shareholders in accordance with the
timing
-16-
<PAGE>
requirements imposed by the Code, the Fund will not be required to pay any
federal income or excise taxes and will not be required to pay Massachusetts
income or excise taxes. If the Fund should fail to qualify as a "regulated
investment company" in any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and would be required to pay
Massachusetts income and excise taxes. Additionally, Fund distributions would
generally be taxable as ordinary dividend income to the shareholders.
It is assumed that, (1) the Portfolio will be treated for federal
income tax purposes as a partnership and (2) for purposes of determining whether
the Fund satisfies the income and diversification requirements to maintain its
status as a regulated investment company, the Fund, as an investor in the
Portfolio, will be deemed to own a proportionate share of the Portfolio's assets
and will be deemed to be entitled to the Portfolio's income or loss attributable
to that share. The Portfolio has advised the Fund that it intends to conduct its
operations so as to enable its investors, including the Fund, to satisfy those
requirements.
Shareholders of the Fund normally will have to pay federal income
taxes, and any state or local taxes, on distributions of net investment income
and net realized capital gains from the Fund. Dividends from ordinary income and
any distributions from net short-term capital gains are taxable to shareholders
as ordinary income for federal income tax purposes, whether the distributions
are made in cash or in additional shares. A portion of the Fund's distributions
from net investment income is normally eligible for the corporate dividends
received deduction if the recipient otherwise qualifies for that deduction with
respect to its holding of Fund shares. Availability of the deduction for a
particular corporate shareholder is subject to certain limitations, and deducted
amounts may be subject to the alternative minimum tax and result in certain
basis adjustments. Distributions of net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses), whether made in
cash or in additional shares, are taxable to shareholders as long-term capital
gains for federal income tax purposes without regard to the length of time the
shareholders have held their shares.
Amounts not distributed on a timely basis in accordance with the
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of the excise tax, the Fund must, and intends to,
distribute during each calendar year substantially all of its ordinary income
for that year and substantially all of its capital gain in excess of its capital
losses for that year, plus any undistributed ordinary income and capital gains
from previous years. Any Fund dividend that is declared in October, November, or
December of any calendar year, that is payable to shareholders of record in such
a month, and that is paid the following January will be treated as if received
by the shareholders on December 31 of the year in which the divided is declared.
The Fund will notify shareholders regarding the federal tax status of its
distributions after the end of each calendar year.
Any Fund distribution will have the effect of reducing the per share
net asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of
shares of the Fund by a shareholder that holds such shares as a capital asset
will be treated as long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales.
The maximum tax rate for individual taxpayers on net long-term capital
gains (i.e., the excess of net long-term capital gain over net short-term
capital loss) is lowered to 20% for most assets held for more than 12 months at
the time of disposition. A lower rate of 18% will apply after December 31,
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<PAGE>
2000 for assets held for more than 5 years. However, the 18% rate applies only
to assets acquired after December 31, 2000 unless the taxpayer elects to treat
an asset held prior to such date as sold for fair market value on January 1,
2001. In the case of individuals whose ordinary income is taxed at a 15% rate,
the 20% rate for assets held for more than 12 months is reduced to 10% and the
10% rate for assets held for more than 5 years is reduced to 8%.
The Trust anticipates that the Portfolio will be treated as a
partnership for federal income tax purposes. As such, the Portfolio is not
subject to federal income taxation. Instead, the Fund must take into account, in
computing its federal income tax liability, its share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether it has received any cash distributions from the Portfolio. Withdrawals
by the Fund from the Portfolio generally will not result in the Fund recognizing
any gain or loss for federal income tax purposes, except that (1) gain will be
recognized to the extent that any cash distributed exceeds the basis of the
Fund's interest in the Portfolio prior to the distribution, (2) income or gain
will be realized if the withdrawal is in liquidation of the Fund's entire
interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, and (3) loss will be recognized if
the distribution is in liquidation of that entire interest and consists solely
of cash and/or unrealized receivables. The basis of the Fund's interest in the
Portfolio generally equals the amount of cash and the basis of any property that
the Fund invests in the Portfolio, increased by the Fund's share of income from
the Portfolio and decreased by the Fund's share of losses from the Portfolio and
the amount of any cash distributions and the basis of any property distributed
from the Portfolio.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. The investment by the Fund in the Portfolio does
not cause the Fund to be liable for any income or franchise tax in the State of
New York.
Fund shareholders may be subject to state and local taxes on Fund
distributions to them. Shareholders are advised to consult with their tax
advisers with respect to the particular tax consequences.
8. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Submanager and who is
appointed and supervised by its senior officers. Changes in the Portfolio's
investments are reviewed by its Board of Trustees. The portfolio manager of the
Portfolio may serve other clients of the Submanager in a similar capacity.
The Portfolio's primary consideration in placing securities
transactions with broker-dealers for execution is to obtain and maintain the
availability of execution at the most favorable prices and in the most effective
manner possible. The Submanager attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Submanager on the basis of their professional capability, the
value and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Submanager normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Submanager on the tender of
the Portfolio's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Portfolio by the
Submanager. At present no other recapture arrangements are in effect. Consistent
with the foregoing primary consideration, the Conduct Rules of the National
Association of Securities Dealers, Inc. and such other policies as the Trustees
of the Portfolio may determine, the Submanager may consider sales
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<PAGE>
of shares of the Fund and of securities of other investors in the Portfolio as a
factor in the selection of broker-dealers to execute the Portfolio's securities
transactions.
Under the Submanagement Agreement and as permitted by Section 28(e) of
the Securities Exchange Act of 1934, the Submanager may cause the Portfolio to
pay a broker-dealer acting on an agency basis which provides brokerage and
research services to the Submanager or the Manager an amount of commission for
effecting a securities transaction for the Portfolio in excess of the amount
other broker- dealers would have charged for the transaction if the Submanager
determines in good faith that the greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of either a particular transaction or the
Submanager's or the Manager's overall responsibilities to the Portfolio or to
its other clients. Not all of such services are useful or of value in advising
the Portfolio.
The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Portfolio's policy of investing in accordance with the Domini Social Index, the
Submanager and the Manager currently intend to make only a limited use of such
brokerage and research services.
Although commissions paid on every transaction will, in the judgment of
the Submanager, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the Submanager's or the Manager's other clients, in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to the Submanager or the Manager for no
consideration other than brokerage or underwriting commissions.
The Submanager and the Manager attempt to evaluate the quality of
research provided by brokers. The Submanager and the Manager sometimes use
evaluations resulting from this effort as a consideration in the selection of
brokers to execute portfolio transactions. However, neither the Submanager nor
the Manager is able to quantify the amount of commissions which are paid as a
result of such research because a substantial number of transactions are
effected through brokers which provide research but which are selected
principally because of their execution capabilities.
The fees that the Portfolio pays to the Submanager and the Manager will
not be reduced as a consequence of the Portfolio's receipt of brokerage and
research services. To the extent the Portfolio's securities transactions are
used to obtain brokerage and research services, the brokerage commissions paid
by the Portfolio will exceed those that might otherwise be paid for such
portfolio transactions and research, by an amount which cannot be presently
determined. Such services may be useful and of value to the Submanager or the
Manager in serving both the Portfolio and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients may be
useful to the Submanager or the Manager in carrying out its obligations to the
Portfolio. While such services are not expected to reduce the expenses of the
Submanager or the Manager, the Submanager or the Manager would, through use of
the services, avoid the additional expenses which would be incurred if it should
attempt to develop comparable information through its own staff. For the fiscal
years ended July 31, 1996 , 1997 and 1998, respectively, the Portfolio paid
brokerage commissions of $45,017, $101,337, and $175,344 respectively.
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<PAGE>
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Submanager's or the Manager's other
clients. Investment decisions for the Portfolio and for the Submanager's or the
Manager's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the
Portfolio is concerned. However, it is believed that the ability of the
Portfolio to participate in volume transactions will produce better executions
for the Portfolio.
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Fund's Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
(without par value) and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
in the Fund. Each share represents an equal proportionate interest in the Fund
with each other share. Upon liquidation or dissolution of the Fund, the Fund's
shareholders are entitled to share pro rata in the Fund's net assets available
for distribution to its shareholders. The Fund reserves the right to create and
issue a number of series of shares, in which case the shares of each series
would participate equally in the earnings, dividends and assets of the
particular series (except for any differences among classes of shares of a
series). Shares of each series would be entitled to vote separately to approve
advisory agreements or changes in investment policy, but shares of all series
may vote together in the election or selection of Trustees, principal
underwriters and accountants for the Fund. Upon liquidation or dissolution of
the Fund, the shareholders of each series would be entitled to share pro rata in
the net assets of their respective series available for distribution to
shareholders.
Shareholders are entitled to one vote for each share held. Shareholders
in the Fund do not have cumulative voting rights, and shareholders owning more
than 50% of the outstanding shares of the Fund may elect all of the Trustees of
the Fund if they choose to do so and in such event the other shareholders in the
Fund would not be able to elect any Trustee. The Fund is not required to hold
annual meetings of shareholders but the Fund will hold special meetings of
shareholders when in the judgment of the Fund's Trustees it is necessary or
desirable to submit matters for a shareholder vote. No material amendment may be
made to the Fund's Declaration of Trust without the affirmative vote of the
holders of a majority of its outstanding shares. Shares have no preference,
preemptive, conversion or similar rights. Shares, when issued, are fully paid
and non-assessable, except as set forth below. The Fund may enter into a merger
or consolidation, or sell all or substantially all of its assets, if approved by
the vote of the holders of two-thirds of its outstanding shares, except that if
the Trustees of the Fund recommend such sale of assets, the approval by vote of
the holders of a majority of the Fund's outstanding shares will be sufficient.
The Fund may also be terminated upon liquidation and distribution of its assets,
if approved by the vote of the holders of two-thirds of its outstanding shares.
If not so terminated, the Fund will continue indefinitely. Stock certificates
are issued only upon the written request of a shareholder.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides for indemnification and reimbursement of expenses out of Fund
property for any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that the Fund shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance)
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<PAGE>
for the protection of the Fund, its shareholders, Trustees, officers, employees
and agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and the Fund
itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the Fund
are not binding upon the Trustees individually but only upon the property of the
Fund and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Fund protects a Trustee against any liability
to which he or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each Fund Business Day. At the close
of each such business day, the value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage representing that investor's share of the aggregate beneficial
interests in the Portfolio effective for that day. Any additions or withdrawals,
which are to be effected as of the close of business on that day, will then be
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio will then be re-computed as the percentage equal to the fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the close of business on such day plus or minus, as the case may
be, the amount of any additions to or withdrawals from the investor's investment
in the Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of the close of business on the following Fund Business Day.
10. FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio as of, and for
the year ended, July 31, 1998 have been filed as part of the Fund's annual
report with the Securities and Exchange Commission pursuant to Section 30b of
the 1940 Act and Rule 30b2-1 thereunder, and are hereby incorporated herein by
reference from such annual report. A copy of such report will be provided,
without charge, to each person receiving this Statement of Additional
Information.
-21-
<PAGE>
PART C
OTHER INFORMATION
DEVCAP TRUST
ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements Included in Part A:
(i) Financial Highlights (Per Share Date and Ratios/Supplemental Data)
(ii) Annual Report to Shareholders is incorporated by reference.
Financial Statements Included in Part B:
For the Registrant:
Statement of Assets and Liabilities, July 31, 1998
Statement of Operations for the year ended July 31, 1998
Statements of Changes in Net Assets for the periods indicated
Financial Highlights for the periods indicated
Notes to Financial Statements, year ended July 31, 1998
Independent Auditors Report, September 15, 1998
For the Domini Social Index Portfolio:
Portfolio of Investments, July 31, 1998
Statement of Assets and Liabilities, July 31, 1998
Statement of Operations for the year ended July 31, 1998
Statement of Changes in Net Assets for the periods indicated
Financial Highlights for the periods indicated
Notes to Financial Statements, July 31, 1998
Independent Auditors' Report, August 24, 1998
(b) Exhibits
1. Amended and Restated Declaration of Trust.(3)
2. By-Laws.(3)
4. Specimen of certificate representing ownership of Registrant's shares
of beneficial interest.(1)
6. Distribution Agreement between Registrant and Signature Broker-Dealer
Services, Inc. ("SBDS").(1)
6.1. Distribution Agreement between Registrant and CBIS Financial
Services, Inc. ("CBIS").(5)
8. Custodian Contract between Registrant and Investors
Bank & Trust Company.(1)
9(a). Administrative Services Agreement between Registrant and SBDS.(4)
9(a).1. Administration Agreement between Registrant and Sunstone Financial
Group, Inc. ("Sunstone").(5)
9(b). Form of Transfer Agency and Services Agreement between Registrant and
Fundamental Shareholder Services, Inc.(2)
9(b).1. Transfer Agency Agreement between Registrant and Sunstone Investor
Services, LLC ("SIS").(5)
10. Opinion and Consent of Counsel.(2)
11. Consent of Independent Auditors.(4)
11.1. Consent of Independent Auditors.(5)
11.2. Consent of Independent Auditors with respect to Domini Social Index
Portfolio (5)
<PAGE>
13. Investment representation letters of initial shareholders.(2)
15. Distribution and Services Plan of the Registrant.(1)
16. Schedule for Computation of Performance Quotations.(1)
17. Financial Data Schedule.(4)
17.1. Financial Data Schedule.(5)
18. Powers of Attorney.(4)
- ---------------
1 Incorporated herein by reference from Pre-Effective Amendment No. 1 to
Registrant's registration statement on Form N-1A (File Nos. 33-94668 and
811- 9070)(the "Registration Statement), as filed with the Securities and
Exchange Commission (the "SEC") on September 8, 1995.
2 Incorporated herein by reference from Pre-Effective Amendment No. 2 to the
Registration Statement, as filed with the SEC on October 11, 1995.
3 Incorporated herein by reference from Post-Effective Amendment
("Post-Effective Amendment") No. 1 to the Registration Statement, as filed
with the SEC on March 28, 1996.
4 Incorporated herein by reference from Post-Effective Amendment No. 3, as
filed with the SEC on October 16, 1997.
5 Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 25. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust
and Article 4 of Registrant's Distribution Agreement.
The Registrant, its Trustees and officers are insured against certain
expenses in connection with the defense of claims, demands, actions, suits, or
proceedings and certain liabilities that might be imposed as a result of such
actions, suits or proceedings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
directors, trustees, officers and controlling persons of the Registrant and its
principal underwriter pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, trustee, officer, or controlling person of the Registrant
and its principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
trustee, officer or controlling person or principal underwriter in connection
with the shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) CBIS is the distributor (the "Distributor") for the shares of the
Registrant. CBIS does not serve as the principal underwriter or placement agent
for other registered investment companies.
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<PAGE>
(b) The following are the directors and officers of the Distributor.
The principal business address of these individuals is 915 Harger Road, Oak
Brook, Illinois 60521-1476, unless otherwise noted.
Brother Michael W. O'Hern, President, Secretary, Treasurer
and sole director.
Neal J. Berkowitz, Finance and Operations Principal.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), and the rules thereunder will be maintained at the offices of:
Sunstone, 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202
(records relating to its functions as principal underwriter and administrator).
Investors Bank & Trust Company: 89 South Street, Boston, Massachusetts 02111
(records relating to its functions as custodian).
Sunstone Investor Services, LLC: 207 East Buffalo Street, Suite 400, Milwaukee,
Wisconsin 53202 (records relating to its functions as transfer agent).
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is contained
in the latest annual report to shareholders, the Registrant shall furnish each
person to whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of the Amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Baltimore, and State of Maryland on the 24th day
of November, 1998.
DEVCAP TRUST
By /S/JOSEPH N. ST. CLAIR
-----------------------
President
Pursuant to the requirements of the 1933 Act, the Registrant Statement
on Form N-1A of DEVCAP Trust has been signed below by the following persons in
the capacities indicated on November 24, 1998.
SIGNATURE TITLE
/S/JOSEPH N. ST. CLAIR President (Principal Executive Officer)
- ----------------------
JOSEPH N. ST. CLAIR
/S/MARIANN MURPHY Assistant Treasurer, principal financial
- ---------------------- officer and principal accounting officer
MARIANN MURPHY
/S/GILBERT H. CRAWFORD Trustee
- ----------------------
GILBERT H. CRAWFORD
/S/STEPHEN D. CASHIN Trustee
- ----------------------
STEPHEN D. CASHIN
/S/DONALD CARCIERI Trustee
- ----------------------
DONALD CARCIERI
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<PAGE>
DEVCAP TRUST
DEVCAP Shared Return Fund
EXHIBIT INDEX
TO
POST-EFFECTIVE AMENDMENT NO. 4
TO
REGISTRATION STATEMENT
ON FORM N-1A
Page Number
In Sequential
Numbering
Exhibit No. Description of Document System
- ----------- ----------------------- -------------
6.1. Distribution Agreement between DEVCAP Trust
and CBIS Financial Services
9(a).1. Administration Agreement between DEVCAP Trust
and Sunstone Financial Group, Inc.
9(b).1. Transfer Agency Agreement between DEVCAP Trust
and Sunstone Investors Services, LLC
11.1. Consent of Independent Auditors
11.2. Consent of Independent Auditors with respect to Domini
Social Index Portfolio
17.1. Financial Data Schedule
EXHIBIT 6.1
Distribution Agreement between DEVCAP Trust and CBIS Financial Services
DEVCAP TRUST
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
November 25, 1997
CBIS Financial Services, Inc.
675 3rd Avenue
31st Floor
New York, NY 10017-5704
DISTRIBUTION AGREEMENT
----------------------
Dear Ladies and Gentlemen:
This is to confirm that, in consideration of the agreement hereinafter
contained, DEVCAP Trust (hereinafter called the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts and engaged in the
business of an open-end management investment company, has agreed that you shall
be, for the period of this agreement, the principal underwriter (as such term is
defined in Section 2(a)(29) of the Investment Company Act of 1940, as amended
(the "1940 Act")) and distributor of (a) shares of each series of the Trust set
forth on Schedule 1 hereto, as such Schedule may be revised from time to time
(each, a "Series") or (b) if no Series are set forth on such Schedule, shares of
the Trust. For the purposes of this agreement the term "Shares" shall mean the
authorized shares of the relevant Series, if any, and otherwise shall mean the
Trust's authorized shares. Accordingly, the Trust hereby agrees with you as
follows:
I. REGISTRATION AND SALE OF ADDITIONAL SHARES
The Trust will from time to time use its best efforts to register under
the Securities Act of 1933, as amended (the "1933 Act") and the 1940
Act, such number of Shares not already so registered as you may
reasonably be expected to sell on behalf of the Trust. The Trust will
take such action as may be necessary from time to time to qualify
Shares so registered for sale by you or the Trust in any states
mutually agreeable to you and the Trust, and to maintain such
qualification. This Agreement relates to the issue and sale of Shares
that are duly authorized and registered and available for sale by the
Trust, including redeemed or repurchased Shares if and to the extent
that they may be legally sold and if, but only if, the Trust sees fit
to sell them.
<PAGE>
II. SALE AND REPURCHASE OF SHARES
Subject to the provisions of paragraphs IV and VI hereof and to such
minimum purchase requirements as may from time to time be currently
indicated in the Trust's applicable prospectus or statement of
additional information, you are authorized to sell, as agent on behalf
of the Trust, Shares authorized for issue and registered under the 1933
Act. You may also purchase as principal Shares at net value for resale
to the public or qualified retail dealers with whom you may enter into
dealer agreements. Such sales will be made by you on behalf of the
Trust by accepting unconditional orders to purchase Shares placed with
you by Investors and such purchases will be made by you only after
acceptance by you of such orders. The sales price to the public of
Shares shall be the public offering price as defined in paragraph V
hereof. You shall receive and may retain all or any portion of the
sales load imposed on sales of Shares and not reallowed to dealers. You
are authorized to purchase Shares of the Trust presented to it by
dealers at the price determined in accordance with, and in the manner
set forth in, the Trust's applicable prospectus.
III. SOLICITATION OF ORDERS
(A) The Representatives will use their respective best efforts
(but only in states in which you may lawfully do so) to obtain
from investors unconditional orders for Shares authorized for
issue by the Trust and registered under the 1933 Act, provided
that you may in your discretion refuse to accept orders of
Shares from any particular applicant. "Representative" shall
mean any individual who is a registered representative of CBIS
Financial Services, Inc. whose primary responsibility is the
offer and sale of Shares of the Trust. The parties hereto
agree that as of the date hereof there shall be no more than
one Representative. During the term of this Agreement, the
number and identity of the Representatives shall be as
mutually agreed in writing from time to time by the parties
hereto.
(B) In consideration for the services to be rendered by the
Distributor under this Agreement, the Trust agrees to pay the
Distributor an annual fee of up to $10,000, such fee to be
payable quarterly in advance, no later than the first business
day of each calendar quarter during the term of this
Agreement. The specific amount of such fee shall be as agreed
from time to time by the parties hereto. Such fee shall be
prorated for any partial calendar quarter during the term of
the Agreement.
IV. SALE OF SHARES BY THE TRUST
Unless you are otherwise notified by the Trust, any right granted to
you to accept orders for Shares or to make sales on behalf of the Trust
or to purchase Shares for resale will not apply to (i) Shares issued in
connection with the merger or consolidation of any other
-2-
<PAGE>
investment company with the Trust or its acquisition, by purchase or
otherwise, of all or substantially all of the assets of any investment
company or substantially all the outstanding Shares of any such company
and (ii) Shares that may be offered by the Trust to shareholders of the
Trust by virtue of their being such shareholders.
V. PUBLIC OFFERING PRICE
All Shares sold to investors by you will be sold at the public offering
price. The public offering price for all accepted subscriptions will be
(i) the net asset value per Share, next determined, in the manner
provided in the Trust's registration statements as from time to time in
effect under the 1933 Act and the 1940 Act, after the order is accepted
by you plus (ii) the applicable sales charge, if any.
VI. SUSPENSION OF SALES
If and whenever the determination of net asset value is suspended and
until such suspension be terminated, no further order for Shares shall
be accepted by you except unconditional orders placed with you before
you had knowledge of the suspension. In addition, the Trust reserves
the right to suspend sales and your authority to accept orders for
Shares on behalf of the Trust if, in the judgment of a majority of the
Board of Trustees or a majority of the Executive Committee of such
Board, if such body exists, it is in the best interests of the Trust to
do so, such suspension to continue for such period as may be determined
by such majority; and in that event, no Shares will be sold by you on
behalf of the Trust while such suspension remains in effect except for
Shares necessary to cover unconditional orders accepted by you before
you had knowledge of the suspension.
VII. EXPENSES
A. The Trust will pay (or will enter into arrangements providing
that parties other than you will pay) all fees and expenses:
(1) in connection with the preparation, setting in type
and filing of any registration statement (including a
prospectus and statement of additional information)
under the 1933 Act or the 1940 Act, or both, and any
amendments or supplements thereto that may be made
from time to time;
(2) in connection with the registration and qualification
of Shares for sale in the various jurisdictions in
which the Trust shall determine it advisable to
qualify such Shares for sale (including registering
the Trust as a broker or dealer or any officer of the
Trust or other person as agent or salesman of the
Trust in any such jurisdictions);
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(3) of preparing, setting in type, printing and mailing
any notice, proxy statement, report, prospectus or
other communication to shareholders of the Trust in
their capacity as such or prepared for your use in
connection with the offering of shares to the public;
(4) of preparing, setting in type, printing and mailing
prospectuses annually, and any supplements thereto,
to existing shareholders;
(5) of preparing, setting in type, printing and mailing
any other literature used by you in connection with
the offering of Shares to the public;
(6) of advertising in connection with the offering of
Shares to the public;
(7) in connection with the issue and transfer of Shares
resulting from the acceptance by you of orders to
purchase Shares placed with you by investors,
including the expenses of printing and mailing
confirmations of such purchase orders and the
expenses of printing and mailing a prospectus
included with the confirmation of such orders;
(8) of any issue taxes or any initial transfer taxes;
(9) of WATS (or equivalent) telephone lines used by
investors or shareholders who request information
relating to the Trust;
(10) of wiring funds in payment of Share purchases or in
satisfaction of redemption or repurchase requests,
unless such expenses are paid for by the investor or
shareholder who initiates the transaction;
(11) of the cost of printing and postage of business reply
envelopes sent to Trust shareholders or prospective
investors;
(12) of one or more CRT terminals connected with the
computer facilities of the transfer agent;
(13) permitted to be paid or assumed by the Trust pursuant
to a plan (the "12b-1 Plan") (attached as Exhibit 1
hereto and incorporated by reference), adopted by the
Trust in conformity with the requirements of Rule
12b-1 under the 1940 Act ("Rule 12b-1") or any
successor rule, notwithstanding any other provision
to the contrary herein; and
(14) of the expense of setting in type, printing and
postage of the periodic newsletter to shareholders.
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The Trust will perform (or will enter into an arrangement
providing that parties other than you will perform) each of
the tasks set forth in this Section VII(A).
B. You shall pay or arrange for the payment of all fees and
expenses:
(1) incurred in connection with your registration as a
broker or dealer or the registration or qualification
of your officers, partners, trustees, agents or
representatives and the Representatives under Federal
and state laws; and
(2) the compensation paid to the Representatives.
The parties agree that initially and until mutually agreed in
writing by the parties hereto, there shall be no expenses that
shall be borne both by and allocated between CBIS Financial
Services and the Trust. Except as expressly set forth in
Section VII(B), none of the expenses incurred by the
Representatives in connection with the offer and sale of
Shares of the Trust shall be borne by you. Any expenses which
are to be allocated between you and the Trust shall be
allocated pursuant to reasonable procedures or formulae
mutually agreed upon from time to time, which procedures or
formulae shall to the extent practicable reflect studies of
relevant empirical data.
VIII. CONFORMITY WITH LAW
You agree that in selling Shares you will duly conform in all respects
with the laws of the United States and any state in which Shares may be
offered for sale by you pursuant to this Agreement and to the rules and
regulations of the National Association of Securities Dealers, Inc., of
which you are a member. The Trust shall afford the Distributor the
opportunity to review and approve advertising materials related to the
Trust prior to their use.
IX. INDEPENDENT CONTRACTOR
You shall be an independent contractor and neither you nor any of your
officers or employees is or shall be an employee of the Trust in the
performance of your duties hereunder. You shall be responsible for your
own conduct and the employment, control and conduct of your agents and
employees and for injury to such agents or employees or to others
through your agents or employees. You assume full responsibility for
your agents and employees under applicable statutes and agree to pay
all employee taxes thereunder provided however, that is it understood
and agreed that each Representative will be an independent contractor,
and not an employee of, CBIS Financial Services, Inc. "Representative"
shall mean any individual who is a registered representative of CBIS
Financial Services, Inc. whose primary responsibility is the offer and
sale of Shares of the Trust. The parties hereto agree that as of the
date hereof there shall be no more than one Representative. During the
term of this Agreement, the number and identity of the
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Representatives shall be as mutually agreed in writing from time to
time by the parties hereto.
X. INDEMNIFICATION
You agree to indemnify and hold harmless the Trust and each of its
Trustees and officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act, against any and all
losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) to which the Trust or such
Trustees, officers, or controlling persons may become subject under the
1933 Act, under any other statute, at common law or otherwise, arising
out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by you or any of your employees or
representatives, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement (including a prospectus or statement of additional
information) covering Shares or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statement
therein not misleading if such statement or omission was made in
reliance upon information furnished in writing to the Trust by you for
inclusion in such documents, or (iii) may be incurred or arise by
reason of your acting as the Trust's agent instead of purchasing and
reselling Shares as principal in distributing Shares to the public;
provided, however, that in no case (i) is your indemnity in favor of a
Trustee or officer or any other person deemed to protect such Trustee
or officer or other person against any liability to which any such
person would otherwise be subject by reason of wilful misfeasance, bad
faith, or gross negligence in the performance of his duties or by
reason of his reckless disregard of obligations and duties under this
Agreement or (ii) are you to be liable under your indemnity agreement
contained in this paragraph with respect to any claim made against the
Trust or any person indemnified unless the Trust or such person, as the
case may be, shall have notified you in writing within a reasonable
time after the summons or other first legal process giving information
of the nature of the claims shall have been served upon the Trust or
upon such person (or after the Trust or such person shall have received
notice of such service on any designated agent), but failure to notify
you of any such claim shall not relieve you from any liability which
you may have to the Trust or any person against whom such action is
brought otherwise than on account of your indemnity agreement contained
in this paragraph. You shall be entitled to participate, at your own
expense, in the defense, or, if you so elect, to assume the defense of
any suit brought to enforce any such liability, but if you elect to
assume the defense, such defense shall be conducted by counsel chosen
by you and satisfactory to the Trust, to its officers and Trustees, or
to any controlling person or persons, defendant or defendants in the
suit. In the event that you elect to assume the defense of any such
suit and retain such counsel, the Trust, such officers and Trustees or
controlling person or persons, defendant or defendants in the suit
shall bear the fees and expenses of any additional counsel retained by
them, but, in case you do not elect to assume the defense of any such
suit, you will reimburse the Trust, such officers and Trustees or
controlling person or persons,
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<PAGE>
defendant or defendants in such suit for the reasonable fees and
expenses of any counsel retained by them. You agree promptly to notify
the Trust of the commencement of any litigation or proceedings against
it in connection with the issue and sale of any of Shares.
The Trust agrees to indemnify and hold harmless you and each of your
partners and officers and each person, if any, who controls you within
the meaning of Section 15 of the 1933 Act, against any and all losses,
claims, damages, liabilities or litigation (including reasonable legal
and other expenses) to which you or such partners, officers or
controlling person may become subject under the 1933 Act, under any
other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any other statute, or common law or
otherwise, arising out of the acquisition of any Shares by any person
which (i) may be based upon any wrongful act by the Trust or any of its
employees or representatives, or the Representatives or (ii) may be
based upon any untrue statement or alleged untrue statement of a
material fact contained in a registration statement (including a
prospectus or statement of additional information) covering Shares or
any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon information furnished
in writing to you by the Trust for inclusion in such documents;
provided, however, that in no case (i) is the Trust's indemnity in
favor of a partner or officer or any other person deemed to protect
such partner or officer or other person against any liability to which
any such person would otherwise be subject by reason of wilful
misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of obligations and duties
under this Agreement or (ii) is the Trust to be liable under its
indemnity agreement contained in this paragraph with respect to any
claims made against you or any such partner, officer or controlling
person unless you or such partner, officer or controlling person, as
the case may be, shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon you
or upon such partner, officer or controlling person (or after you or
such partner, officer or controlling person shall have received notice
of such service on any designated agent), but failure to notify the
Trust of any such claim shall not relieve it from any liability which
it may have to the person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph.
The Trust will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought
to enforce any such liability, but if the Trust elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
satisfactory to you, your partners, officers or controlling person or
persons, defendant or defendants in the suit. In the event that the
Trust elects to assume the defense of any such suit and retain such
counsel, you, your partners, officers or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse you
or such partners, officers or controlling person or persons, defendant
or defendants in the suit, for the reasonable
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fees and expenses of any counsel retained by them. The Trust agrees
promptly to notify you of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in connection
with the issuance or sale of any Shares.
XI. AUTHORIZED REPRESENTATIONS
The Trust is not authorized to give any information or to make any
representations on behalf of you other than the information and
representations contained in a registration statement (including a
prospectus or statement of additional information) covering Shares, as
such registration statement and prospectus may be amended or
supplemented from time to time.
You are not authorized to give any information or to make any
representations on behalf of the Trust or in connection with the sale
of Shares other than the information and representations contained in a
registration statement (including a prospectus or statement of
additional information) covering Shares, as such registration statement
may be amended or supplemented from time to time. No person other than
you is authorized to act as principal underwriter (as such term is
defined in the 1940 Act) for the Trust.
XII. REPRESENTATIONS BY DISTRIBUTOR
You represent that you are a broker-dealer in good standing registered
with the Securities and Exchange Commission under Section 15 of the
Securities and Exchange Act of 1934, as amended (the "1934 Act") and
with all state securities commissioners in such states in which such
registration is required due to your duties under this Agreement. In
your capacity as distributor of the Shares, all activities by you and
your directors, officers, agents, and employees shall comply in all
material respects with all applicable laws, rules and regulations,
including without limitation, the 1940 Act, all rules and regulations
promulgated by the Securities and Exchange Commission thereunder and
all rules and regulations adopted by any securities association
registered under the 1934 Act.
You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. and will remain a member in
good standing for the duration of this agreement.
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XIII. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall remain in effect until November 25, 1998 and from
year to year thereafter, but only so long as such continuance is
specifically approved at least annually by the vote of a majority of
the Trustees who are not interested person of you or of the Trust and
have no direct or indirect financial interest in the operation of the
12b-1 Plan or in this or any other agreement related to the 12b-1 Plan
(the "12b-1 Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and by vote of the Board of
Trustees or of a majority of the outstanding voting securities of the
Trust. This Agreement may, on 60 days' written notice, be terminated at
any time without the payment of any penalty, by a majority of the 12b-1
Trustees, by a vote of a majority of the outstanding voting securities
of the Trust, or by you. This Agreement will automatically terminate in
the event of its assignment. In interpreting the provisions of this
paragraph XIII, the definitions contained in Section 2(a) of the 1940
Act (particularly the definitions of "interested person", "assignment"
and "majority of the outstanding voting securities"), as modified by
any applicable order of the Securities and Exchange Commission, shall
be applied.
XIV. AMENDMENT OF THE AGREEMENT
No provisions of this agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or
termination is sought and approved by a majority of the 12b-1 Trustees.
If the Trust should at any time deem it necessary or advisable in the
best interests of the Trust that any amendment of this Agreement be
made in order to comply with the recommendations or requirements of the
Securities and Exchange Commission or other governmental authority or
to obtain any advantage under state or federal tax laws and should
notify you of the form of such amendment, and the reasons therefor, and
if you should decline to assent to such amendment, the Trust may
terminate this Agreement forthwith. If you should at any time request
that a change be made in the Trust's Agreement and Declaration of Trust
or By-laws or in its methods of doing business, in order to comply with
any requirements of federal law or regulations of the Securities and
Exchange Commission or of a national securities association of which
you are or may be a member relating to the sale of units or the Trust,
and the Trust should not make such necessary change within a reasonable
time, you may terminate this Agreement forthwith.
XV. GOVERNING LAW
This Agreement shall be governed and construed in accordance with the
laws of the State of Massachusetts.
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XVI. MISCELLANEOUS
You shall have no other duties in connection with the offer and sale of
the shares than those expressly set forth in this Agreement. The
captions in this Agreement are included for convenience of reference
only and in no way define or default any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The name
DEVCAP Trust is the designation of the Trustees for the time being
under an Agreement and Declaration of Trust dated September 15, 1995,
as amended from time to time, and all persons dealing with the Trust
must look solely to the property of the Trust for enforcement of any
claims against the Trust as neither the Trustees, officers, agents or
shareholders assume any personal liability for obligations entered into
on behalf of the Trust. No series of the Trust shall be liable for any
claims against any other series of the Trust.
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If you are in agreement with the foregoing, please sign the form of acceptance
in the accompanying counterpart of this letter and return such counterpart to
the Trust, whereupon this letter shall become a binding contract.
Very truly yours,
DEVCAP TRUST
By: /s/ Joseph N. St. Clair
-----------------------
Joseph N. St. Clair
As Trustee pursuant to an Agreement and
Declaration of Trust on file with the
Secretary of The Commonwealth of
Massachusetts and not individually.
The foregoing Agreement is
hereby accepted as of the date
hereof.
CBIS FINANCIAL SERVICES, INC.
By: /s/ Brother Michael W. O'Hern
-----------------------------
Brother Michael W. O'Hern
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SCHEDULE 1
Name of Series
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DEVCAP Shared Return Fund
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EXHIBIT 1
Distribution and Service Plan
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EXHIBIT 9(a).1
Administration Agreement between DEVCAP Trust and
Sunstone Financial Group, Inc.
<PAGE>
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 4th day of November, 1997, by and
between DEVCAP Trust, a Massachusetts business trust (the "Trust"), and Sunstone
Financial Group, Inc., a Wisconsin corporation (the "Administrator").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "Act") and is authorized to
issue shares of beneficial ownership (the "Shares") in separate series with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Trust and the Administrator desire to enter into an
agreement pursuant to which the Administrator shall provide administration
services to such investment portfolios of the Trust as are listed on Schedule A
hereto and any additional investment portfolios the Trust and Administrator may
agree upon and include on Schedule A as such Schedule may be amended from time
to time (such investment portfolios and any additional investment portfolios are
individually referred to as a "Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment
The Trust hereby appoints the Administrator as administrator of the Funds
for the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees to render the services herein set forth, for
the compensation herein provided.
2. Services as Administrator
(a) Subject to the direction and control of the Trust's Board of Trustees
and utilizing information provided by the Trust and its agents, the
Administrator will: (1) provide office space, facilities, equipment and
personnel to carry out its services hereunder; (2) compile data for and prepare
with respect to the Funds timely Notices to the Securities and Exchange
Commission (the "Commission") required pursuant to Rule 24f-2 under the Act and
Semi-Annual Reports on Form N-SAR; (3) prepare the financial statements for the
Annual and Semi-Annual Reports required pursuant to Section 30(d) under the Act;
(4) assist the Trust's legal counsel in the preparation of the Registration
Statement for the Trust (on Form N-1A or any replacement therefor) and any
amendments thereto; (5) determine and periodically monitor each Fund's income
and expense accruals and cause all appropriate expenses to be paid from Trust
assets on proper authorization from the Trust; (6) assist in the acquisition of
the Trust's fidelity bond required by the Act, monitor the amount of the bond
and make the necessary Commission filings related thereto; (7) from time to time
as the Administrator deems appropriate, check each Fund's
<PAGE>
compliance with the policies and limitations of each Fund relating to the
portfolio investments as set forth in the Prospectus and Statement of Additional
Information and monitor each Fund's status as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (but these
functions shall not relieve the Trust's investment adviser and sub-advisers, if
any, of their primary day-to-day responsibility for assuring such compliance);
(8) maintain, and/or coordinate with the other service providers the maintenance
of, the accounts, books and other documents required pursuant to Rule 31a-1(a)
and (b) under the Act; (9) prepare and/or file documents with the states
necessary to maintain the Funds' securities registration in the states and in
the amounts identified by the Funds; (10) develop with legal counsel and
secretary of the Trust an agenda for each board meeting and, if requested by the
Trustees, attend board meetings and prepare minutes; (11) coordinate preparation
of other matters required to be reported to the board, including, without
limitation, details of Rule 12b-1 payments, codes of ethics compliance and
broker commissions; (12) prepare Form 1099s for directors and other fund
vendors; (13) calculate dividend and capital gains distributions subject to
review and approval by the Trust and its independent accountants; and (14)
generally assist in the Trust's administrative operations as mutually agreed to
by the parties. The duties of the Administrator shall be confined to those
expressly set forth herein, and no implied duties are assumed by or may be
asserted against the Administrator hereunder.
(b) The Trustees of the Trust shall cause the officers, adviser,
distributor, if any, legal counsel, independent accountants, custodian and
transfer agent for the Funds to cooperate with the Administrator and to provide
the Administrator, upon request, with such information, documents and advice
relating to the Funds and the Trust as is within the possession or knowledge of
such persons, in order to enable the Administrator to perform its duties
hereunder. In connection with its duties hereunder, the Administrator shall be
entitled to rely, and shall be held harmless by the Trust when acting in
reliance, upon the instruction, advice, information or any documents relating to
the Funds provided to the Administrator by an Authorized Person. Authorized
Person means any officer of the Fund and any other person duly authorized by the
Fund's Board of Directors to give oral and written instructions on behalf of the
Fund and listed on the Authorized Persons Appendix attached hereto and made a
part hereof or any amendment thereto as may be received by Sunstone. An
Authorized Person's scope of authority may be limited by the Fund by setting
forth limitation in the Authorized Person's Appendix. The Administrator shall be
entitled to rely on any document which it reasonably believes to be genuine and
to have been signed or presented by the proper party. Fees charged by such
persons shall be an expense of the Trust. The Administrator shall not be held to
have notice of any change of authority of any Authorized Person until receipt of
written notice thereof from the Trust.
(c) In compliance with the requirements of Rule 31a-3 under the Act, the
Administrator hereby agrees that all records that it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to the Trust
any of such records upon the Trust's request. Subject to the terms of Section 6,
the Administrator further agrees to preserve for the periods prescribed by Rule
31a-2 under the Act the records described in (a) above which are maintained by
the Administrator for the Trust.
(d) The Trust's Board of Trustees and the Funds' investment adviser have
and retain primary responsibility for all compliance matters relating to the
Funds including but not limited to compliance with the Investment Company Act of
1940, as amended, the Internal Revenue Code of 1986, as amended, and the
policies and limitations of each Fund relating to their portfolio investments as
set forth in the
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Prospectus and Statement of Additional Information. Sunstone's monitoring and
other functions hereunder shall not relieve the Board and the investment adviser
of their primary day-to-day responsibility for assuring such compliance.
3. Fees; Delegation; Expenses
(a) In consideration of the services rendered pursuant to this Agreement,
the Trust will pay the Administrator a fee, computed daily and payable monthly,
as provided in Schedule B hereto, plus out-of-pocket expenses. Out-of-pocket
expenses include, but are not limited to, travel, lodging and meals in
connection with travel on behalf of the Trust, programming and related expenses
(previously incurred or to be incurred by Administrator) in connection with
providing electronic transmission of data between the Administrator and the
Funds' other service providers, brokers, dealers and depositories, fees and
expenses of pricing services, and photocopying, postage, proof reading and
overnight delivery expenses. Fees shall be paid by each Fund at a rate that
would aggregate at least the applicable minimum fee for each Fund.
(b) For the purpose of determining fees payable to the Administrator, net
asset value shall be computed in accordance with the Trust's Prospectuses and
resolutions of the Trust's Board of Trustees. The fee for the period from the
day of the month this Agreement is entered into until the end of that month
shall be pro-rated according to the proportion which such period bears to the
full monthly period. Upon any termination of this Agreement before the end of
any month, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. Should the Trust be
liquidated, merged with or acquired by another fund or investment company, any
accrued fees shall be immediately payable. Such fee as is attributable to each
Fund shall be a separate charge to each Fund and shall be the several (and not
joint or joint and several) obligation of each such Fund.
(c) The Administrator will bear all expenses in connection with the
performance of its services under this Agreement except as otherwise provided
herein. Other costs and expenses to be incurred in the operation of the Funds,
including, but not limited to: taxes; interest; brokerage fees and commissions,
if any; salaries, fees and expenses of officers and Trustees; Commission fees
and state Blue Sky fees; advisory fees; charges of custodians, transfer agents,
dividend disbursing and accounting services agents; security pricing services;
insurance premiums; outside auditing and legal expenses; costs of organization
and maintenance of corporate existence; typesetting, printing, proofing and
mailing of prospectuses, statements of additional information, supplements,
notices and proxy materials for regulatory purposes and for distribution to
current shareholders; typesetting, printing, proofing and mailing and other
costs of shareholder reports; expenses incidental to holding meetings of the
Fund's shareholders and Trustees; and any extraordinary expenses; will be borne
by the Funds or their investment adviser. Expenses incurred for distribution of
fund shares, including the typesetting, printing, proofing and mailing of
prospectuses for persons who are not shareholders of the Trust, will be borne by
the Trust or its investment adviser, except for such expenses permitted to be
paid by the Trust under a distribution plan adopted in accordance with
applicable laws.
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4. Proprietary and Confidential Information
The Administrator agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records relative
to the Funds and prior, present or potential shareholders of the Trust (and
clients of said shareholders), and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld, except that the Administrator may
disclose such information where the Administrator may be exposed to civil or
criminal proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, when subject to governmental or
regulatory audit or investigation, or when so requested by the Trust. Records
and information which have become known to the public through no wrongful act of
the Administrator or any of its employees, agents or representatives shall not
be subject to this paragraph.
5. Limitation of Liability
(a) The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Furthermore, the Administrator shall not be
liable for any action taken or omitted to be taken in accordance with
instructions received by the Administrator from an Authorized Person.
(b) The Administrator assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, errors, failures, delay or any other
loss whatsoever caused by events beyond its reasonable control. The
Administrator will, however, take all reasonable steps to minimize service
interruptions for any period that such interruption continues beyond the
Administrator's control.
6. Term
(a) This Agreement shall become effective as with respect to each Fund
listed on Schedule A hereof as of the date hereof and, with respect to each Fund
not in existence on that date, on the date an amendment to Schedule A to this
Agreement relating to that Fund is executed. This Agreement shall continue in
effect with respect to each Fund for a period of one year from the date hereof.
Thereafter, if not terminated as provided herein, this Agreement shall continue
automatically in effect as to each Fund for successive annual periods.
(b) This Agreement may be terminated at any time with respect to any one
or more particular Funds without penalty (i) upon mutual consent of the parties,
or (ii) by either party upon not less than sixty (60) days' written notice to
the other party (which notice may be waived by the party entitled to the
notice). The terms of this Agreement shall not be waived, altered, modified,
amended or supplemented in any manner whatsoever except by a written instrument
signed by the Administrator and the Trust.
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(c) Notwithstanding anything herein to the contrary, upon the termination
of this Agreement or the liquidation of a Fund or the Trust, the Administrator
shall deliver the records of the Fund(s) and/or Trust as the case may be to the
Trust or person(s) designated by the Trust and thereafter the Trust or its
designee shall be solely responsible for preserving the records for the periods
required by all applicable laws, rules and regulations. In addition, in the
event of termination of this Agreement, or the proposed liquidation or merger of
the Trust or a Fund(s), and the Trust requests the Administrator to provide
services in connection therewith, the Administrator shall provide such services
and be entitled to such compensation as the parties may mutually agree.
7. Non-Exclusivity
The services of the Administrator rendered to the Trust are not deemed to
be exclusive. The Administrator may render such services and any other services
to others, including other investment companies. The Trust recognizes that from
time to time directors, officers and employees of the Administrator may serve as
trustees, directors, officers and employees of other entities (including other
investment companies) and that the Administrator or its affiliates may enter
into investment advisory, transfer agency, distribution, marketing or other
agreements with such other entities.
8. Governing Law; Invalidity
This Agreement shall be governed by Wisconsin law (except as to Section 9
hereof which shall be construed in accordance with Massachusetts law). To the
extent that the applicable laws of the State of Wisconsin, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control, and nothing herein shall be construed in a manner
inconsistent with the Act or any rule or order of the Commission thereunder. Any
provision of this Agreement which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9. Miscellaneous
This Agreement is executed by or on behalf of the Trust with respect to
each of the Funds and the obligations hereunder are not binding upon any of the
Trustees, officers or shareholders of the Trust individually but are binding
only upon the Funds to which such obligations pertain and the assets and
property of such Funds. The Trust's Certificate of Trust is on file with the
Secretary of State of Massachusetts.
5
<PAGE>
10. Backup Facilities
Sunstone shall maintain a disaster recovery plan and procedures including
provisions for emergency use of electronic data processing equipment, which is
reasonable in light of the services to be provided. Sunstone shall, at no
additional expense to the Fund take reasonable steps to minimize service
interruptions. Sunstone shall have no liability with respect to the loss of data
or service interruptions caused by equipment failure, provided it maintains such
plans and procedures.
11. Notices
Any notice required or to be permitted to be given by either party to the
other shall be in writing and shall be deemed to have been given when sent by
registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Administrator shall be sent to Sunstone Financial Group,
Inc., 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202, Attention Miriam
M. Allison, and notice to the Trust shall be sent to 209 West Fayette St.,
Baltimore, MD, 21201-3403, Attention: President, DEVCAP Trust.
12. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
DEVCAP TRUST
(the "Trust")
By: /s/ Joseph N. St. Clair
------------------------
Joseph N. St. Clair
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By: /s/ Miriam Alison
-----------------------
Miriam Alison
President
6
<PAGE>
Schedule A
to the
Administration Agreement
by and between
DEVCAP Trust
and
Sunstone Financial Group, Inc.
Name of Funds
DEVCAP Shared Return Fund
7
<PAGE>
Schedule B
to the
Administration Agreement
by and between
DEVCAP Trust
and
Sunstone Financial Group, Inc.
<TABLE>
<CAPTION>
Minimum
Fund Name Average Net Assets Annual Fees Annual Fee
- --------- ------------------ ----------- ----------
<S> <C> <C> <C>
DEVCAP Up to $50 Million 15.0 basis points $25,000 Year 1
Shared Return Fund $50 Million to $100 Million 8.0 basis points $30,000 Year 2
$100 Million to $150 Million 5.0 basis points $40,000 Year 3
Over $150 Million 3.0 basis points
</TABLE>
In the event additional funds are added to this agreement, the parties shall
determine the fees applicable to such additional fund(s) which fees shall be
reflected in an amended and restated Schedule B to this Agreement. The above fee
schedule will be applied on a per portfolio basis in the event that additional
funds are subject to this agreement. The minimum annual fee is subject to an
automatic annual escalation of 6% after three years. Sunstone will notify the
Trust of each such escalation but no amendment of this Schedule B shall be
required. Fees shall be paid for each Fund at a rate that would aggregate at
least the applicable minimum fee for each Fund. The Trust shall also
pay/reimburse the Administrator's out-of-pocket expenses as described in the
Agreement. The foregoing fee schedule assumes a single class of shares for each
Fund.
8
<PAGE>
DEVCAP SHARED RETURN FUND
Authorized Persons Appendix
Mr. Joseph N. St. Clair
President
DEVCAP Shared Return Fund
209 W. Fayette Street
Baltimore, MD 21201
(410) 234-3176
Ms. Nancy E. Paxton
Secretary
DEVCAP Shared Return Fund
209 W. Fayette Street
Baltimore, MD 21201
(410) 468-3922
9
EXHIBIT 9(b).1
Transfer Agency Agreement between DEVCAP Trust
and Sunstone Investors Services, LLC
<PAGE>
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 3rd day of August, 1998, by and between
DEVCAP Trust, a Massachusetts business trust (the "Trust"), and Sunstone
Investor Services, LLC, a Wisconsin limited liability company ("Sunstone").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "Act") and is authorized to
issue shares of beneficial interests (the "Shares") in separate series with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Trust and Sunstone desire to enter into an agreement
pursuant to which Sunstone shall provide certain transfer agency services to
such investment portfolios of the Trust as are listed on Schedule A hereto and
any additional investment portfolios the Trust and Sunstone may agree upon and
include on Schedule A as such Schedule may be amended from time to time (such
investment portfolios and any additional investment portfolios are individually
referred to as a "Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
ARTICLE I
APPOINTMENT OF TRANSFER AGENT
A. Appointment.
1. The Trust hereby appoints Sunstone as transfer agent of the
Shares of the Funds during the period of this Agreement, and Sunstone hereby
accepts such appointment as transfer agent and dividend disbursing agent and
agrees to perform the duties thereof as hereinafter set forth.
2. Sunstone shall perform the transfer agent and dividend
disbursing agent services described on Schedule B hereto. To the extent that the
Trust requests Sunstone to perform any additional services, Sunstone and the
Trust shall mutually agree as to the services to be accomplished, the manner of
accomplishment and the compensation to which Sunstone shall be entitled with
respect thereto.
3. Sunstone may, in its discretion, appoint in writing other
parties qualified to perform transfer agency services reasonably acceptable to
the Trust (individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that unless the Trust shall enter into a written agreement with such
Sub-transfer Agent, the Sub-transfer Agent shall be the agent of Sunstone and
not the agent of
<PAGE>
the Trust and, in such event Sunstone shall be fully responsible for the acts or
omissions of such Sub-transfer Agent and shall not be relieved of any of its
responsibilities hereunder by the appointment of such Sub-transfer Agent.
4. Sunstone shall have no duties or responsibilities whatsoever
hereunder except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against Sunstone.
B. Documents/Records.
1. In connection with such appointment, the Trust shall deliver or
cause to be delivered to Sunstone the following documents:
a) A copy of the Declaration of Trust and By-laws of the
Trust and all amendments thereto, and a copy of the resolutions of the Board of
Trustees of the Trust appointing Sunstone and authorizing the execution of this
Transfer Agency Agreement on behalf of the Funds, each certified by the
Secretary of the Trust;
b) A certificate signed by the President and Secretary of
the Trust specifying: the number of authorized Shares and the number of such
authorized Shares issued and currently outstanding, if any; the names and
specimen signatures of the officers of the Trust authorized to provide oral
instructions and to sign written instructions and requests on behalf of the
Trust (hereinafter referred to as "Authorized Persons") and to change the
persons authorized to provide such instructions from time to time, it being
understood Sunstone shall not be held to have notice of any change in the
authority of any Authorized Person until receipt of written notice thereof from
the Trust; and
c) Copies of the Trust's Registration Statement, as amended
to date, and the most recently filed Post-Effective Amendment thereto, filed by
the Trust with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "1933 Act"), and under the 1940 Act.
2. The Trust agrees to deliver or to cause to be delivered to
Sunstone in Milwaukee, Wisconsin, at the Trust's expense, all of its shareholder
account records relating to the Funds in a format acceptable to Sunstone and all
such other documents, records and information as Sunstone may reasonably request
in order for Sunstone to perform its services hereunder.
ARTICLE II
COMPENSATION & EXPENSES
A. Compensation. In consideration for its services hereunder as transfer
agent and dividend disbursing agent, each Fund will pay to Sunstone such
compensation as provided in Schedule C.
2
<PAGE>
B. Expenses. The Trust on behalf of each Fund also agrees to promptly
reimburse Sunstone for all out-of-pocket expenses or disbursements incurred by
Sunstone in connection with the performance of services under this Agreement
including, but not limited to, expenses for postage, express delivery services,
freight charges, envelopes, checks, drafts, forms (continuous or otherwise),
specially requested reports and statements, bank account service fees and
charges, telephone calls, telegraphs, stationery supplies, outside printing and
mailing firms, magnetic tapes, reels or cartridges (if sent to a Fund or to a
third party at a Fund's request) and magnetic tape handling charges, on-site and
off-site record storage, media for storage of records (e.g., microfilm,
microfiche, optical platters, computer tapes and disks), computer equipment
installed at a Fund's request at a Fund's or a third party's premises,
telecommunications equipment, telephone/telecommunication lines between the
Trust and its agents, on one hand, and Sunstone on the other, proxy soliciting,
processing and/or tabulating costs, transmission of statement data for remote
printing or processing, and transaction fees to the extent any of the foregoing
are paid by Sunstone. Sunstone reserves the right to charge the Trust for second
site back-up computer facilities subject to adequate notice.
C. Payment Procedures.
1. Amounts due hereunder shall be due and paid by the respective
Fund on or before the thirtieth (30th) day after the date of the statement
therefor (the "Due Date"). Service fees are billed monthly, and out-of-pocket
expenses are billed as incurred (unless prepayment is requested by Sunstone). If
requested by Sunstone, postage and other out-of-pocket expenses are payable in
advance, and in the event requested, postage is due at least seven days prior to
the anticipated mail date. In the event Sunstone requests advance payment,
Sunstone shall not be obligated to incur such expenses or perform the related
service(s) until payment is received. Sunstone may, at its option, arrange to
have various service providers submit invoices directly to the Funds for payment
of out-of-pocket expenses reimbursable hereunder. The Trust is aware that its
failure to pay all amounts in a timely fashion so that they will be received by
Sunstone on or before the Due Date will give rise to costs to Sunstone not
contemplated by this Agreement, including but not limited to carrying,
processing and accounting charges. Accordingly, in the event that any amounts
due hereunder are not received by Sunstone by the Due Date, the Trust shall pay
a late charge equal to one and one-half percent (1.5%) per month or the maximum
amount permitted by law, whichever is less. In addition, the Trust shall pay all
costs of collection, including reasonable attorney's fees and court costs, of
Sunstone. The parties hereby agree that such late charge represents a fair and
reasonable computation of the costs incurred by reason of late payment or
payment of amounts not properly due. Acceptance of such late charge shall in no
event constitute a waiver of a Fund's breach or prevent Sunstone from exercising
any other rights and remedies available to it.
3
<PAGE>
ARTICLE III
PROCESSING AND PROCEDURES
A. Issuance, Redemption and Transfer of Shares
1. Sunstone acknowledges that it has received a copy of each
Fund's Prospectus (as hereinafter defined), which Prospectus describes how sales
and redemptions of shares of each Fund shall be made and Sunstone agrees to
accept purchase orders and redemption requests with respect to Fund shares on
each Fund Business Day in accordance with such Prospectus. "Fund Business Day"
shall be deemed to be each day on which the New York Stock Exchange is open for
trading, and "Prospectus" shall mean the last Fund prospectus actually received
by Sunstone from the Fund with respect to which the Fund has indicated a
registration statement under the 1933 Act has become effective, including the
Statement of Additional Information, incorporated by reference therein.
2. On each Fund Business Day Sunstone shall, as of the time at
which the net asset value of each Fund is computed, issue to and redeem from the
accounts specified in a purchase order or redemption request in proper form and
accepted by the Trust, which in accordance with the Prospectus is effective on
such day, the appropriate number of full and fractional Shares based on the net
asset value per Share of the respective Fund specified in an advice received on
such Fund Business Day from or on behalf of the Fund.
3. Upon the issuance of any Shares in accordance with this
Agreement, Sunstone shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
4. Sunstone shall not be required to issue any Shares after it has
received from an Authorized Person or from an appropriate federal or state
authority written notification that the sale of Shares has been suspended or
discontinued, and Sunstone shall be entitled to rely upon such written
notification.
5. Upon receipt of a redemption request and monies paid to it by
the Custodian in connection with a redemption of Shares, Sunstone shall cancel
the redeemed Shares and after making appropriate deduction for any withholding
of taxes required of it by applicable federal law, make payment in accordance
with the Fund's redemption and payment procedures described in the Prospectus.
6. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph, Shares will be transferred or redeemed upon presentation to Sunstone
of instructions endorsed for exchange, transfer or redemption, accompanied by
such documents as the Trust and Sunstone deem necessary to evidence the
authority of the person making such transfer or redemption, and bearing
satisfactory evidence of the payment of stock transfer taxes. Sunstone reserves
the right to refuse to transfer or redeem Shares until it is satisfied that the
instructions are valid and genuine. Sunstone also reserves the right to refuse
to transfer or redeem Shares until it is satisfied
4
<PAGE>
that the requested transfer or redemption is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers or
redemptions which Sunstone, in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no reasonable basis to any claims adverse to
such transfer or redemption. Sunstone will require instructions to be
accompanied by a guarantee of signature by an "Eligible Guarantor Institution"
as that term is defined by SEC Rule 17Ad-15, to the extent required in the
Trust's Prospectus. Sunstone may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and shall
not be responsible for any act done or omitted by it in good faith in reliance
upon such laws.
(b) Notwithstanding the foregoing or any other provision
contained in this Agreement to the contrary, Sunstone shall be fully protected
by each Fund in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, exchange or transfer of Shares
whenever Sunstone reasonably believes that requiring the same would be
inconsistent with the transfer and redemption procedures as described in the
Prospectus.
7. Notwithstanding any provision contained in this Agreement to
the contrary, Sunstone shall not be required or expected to require, as a
condition to any transfer or redemption of any Shares pursuant to an electronic
data transmission, any documents to evidence the authority of the person
requesting the transfer or redemption and/or the payment of any stock transfer
taxes, and shall be fully protected in acting in accordance with the applicable
provisions of this Article.
8. In connection with each purchase and each redemption of Shares,
Sunstone shall send such statements as are prescribed by the Federal securities
laws applicable to transfer agents or as described in the Prospectus. It is
understood that certificates representing Shares will not be offered by the
Trust or be available to investors.
9. Procedures for effecting purchase, redemption or transfer
transactions accepted from investors by telephone or other methods shall be
established by mutual agreement between the Trust and Sunstone and consistent
with the terms of the Prospectus, and Sunstone shall be fully protected by the
Trust in following such procedures. Sunstone upon notice to the Trust may
establish such additional procedures, rules and regulations governing the
purchase, redemption or transfer of Shares, as it may deem advisable and
consistent with the Prospectus and such rules and regulations generally adopted
by mutual fund transfer agents. Sunstone shall not be liable, and shall be held
harmless by the Trust, for its actions or omissions that are consistent with the
foregoing procedures.
10. Prior to the effective date of any increase or decrease in the
total number of Shares authorized to be issued, or the issuance of any
additional Shares of a Fund pursuant to stock dividends, stock splits,
recapitalizations, capital adjustments or similar transactions, the Trust agrees
to deliver to Sunstone such documents, certificates, reports and legal opinions
as Sunstone may reasonably request.
5
<PAGE>
B. Dividends and Distributions.
1. The Trust shall furnish to Sunstone a copy of a resolution of
its Board of Directors, certified by an Authorized Person, either (i) setting
forth the date of the declaration of a dividend or distribution, the date of
accrual or payment, as the case may be, thereof, the record date as of which
shareholders entitled to payment, or accrual, as the case may be, shall be
determined, the amount per Share of such dividend or distribution, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable to Sunstone on such payment date, or (ii)
authorizing the declaration of dividends and distributions on a daily or other
periodic basis and authorizing Sunstone to rely on a certificate of an
Authorized Person setting forth the information described in subsection (i) of
this paragraph.
2. In connection with a reinvestment of a dividend or distribution
of Shares of a Fund, Sunstone shall as of each Fund Business Day as specified in
a certificate or resolution described in paragraph 1, issue Shares of the Fund
based on the net asset value per Share of such Fund specified in an advice
received from or on behalf of the Fund on such Fund Business Day.
3. Upon the mail date specified in such certificate or resolution,
as the case may be, the Trust shall, in the case of a cash dividend or
distribution, cause the Custodian to deposit in an account in the name of
Sunstone on behalf of and as agent for a Fund, an amount of cash, if any,
sufficient for Sunstone to make the payment, as of the mail date, specified in
such Certificate or resolution, as the case may be, to the Shareholders who were
of record on the record date. Sunstone will, upon receipt of any such cash, make
payment of such cash dividends or distributions to the shareholders of record as
of the record date. This will include preparation and mailing of checks to
shareholders of record. Sunstone shall not be liable for any improper payments
made in accordance with a certificate or resolution described in the preceding
paragraph. If Sunstone shall not receive from the Custodian sufficient cash to
make payments of any cash dividend or distribution to all shareholders of the
Fund as of the record date, Sunstone shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to Sunstone.
4. It is understood that Sunstone in its capacity as transfer
agent and dividend disbursing agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions due
to the shareholders pursuant to the terms of this Agreement. It is further
understood that Sunstone shall file with the Internal Revenue Service and
shareholders such appropriate federal tax forms concerning the payment of
dividend and capital gain distributions.
C. Records.
1. Sunstone shall keep such records as are specified in Schedule D
hereto in the form and manner, and for such period, as it may deem advisable but
not inconsistent with the rules and regulations of appropriate government
authorities, in particular Rules 31a-2 and 31a-3
6
<PAGE>
under the 1940 Act. Sunstone may deliver to the Trust from time to time at
Sunstone's discretion, for safekeeping or disposition by the Trust in accordance
with law, such records, papers and documents accumulated in the execution of its
duties as such transfer agent, as Sunstone may deem expedient, other than those
which Sunstone is itself required to maintain pursuant to applicable laws and
regulations. The Trust shall assume all responsibility for any failure
thereafter to produce any record, paper, canceled Share certificate, or other
document so returned, if and when required. To the extent required by Section 31
of the 1940 Act and the rules and regulations thereunder, the records specified
in Schedule D hereto maintained by Sunstone, which have not been previously
delivered to the Trust pursuant to the foregoing provisions of this paragraph,
shall be considered to be the property of the Trust, shall be made available
upon request for inspection by the officers, employees, and auditors of the
Trust, and shall be delivered to the Trust promptly upon request and in any
event upon the date of termination of this Agreement, in the form and manner
kept by Sunstone on such date of termination or such earlier date as may be
requested by the Trust.
2. Sunstone agrees to keep all records and other information
relative to the Trust, the Funds and their shareholders confidential. In case of
any requests or demands for the inspection of the shareholder records of a Fund,
Sunstone will endeavor to notify the Fund promptly and to secure instructions
from an Authorized Person as to such inspection. Sunstone reserves the right,
however, to exhibit the shareholder records to any person whenever it believes
there is a reasonable likelihood that Sunstone will be held liable for the
failure to exhibit the shareholder records to such person; provided, however,
that in connection with any such disclosure Sunstone shall promptly notify the
Trust that such disclosure has been made or is to be made. Notwithstanding the
foregoing, Sunstone may disclose information when requested by a shareholder
concerning an account as to which such shareholder claims a legal or beneficial
interest or when requested by the Trust, the shareholder or the dealer of record
as to such account.
ARTICLE IV
CONCERNING THE TRUST
A. Representations. The Trust represents and warrants to Sunstone that:
(a) It is a business trust duly organized and existing under the
laws of the State of Massachusetts, it is empowered under applicable laws and by
its Declaration of Trust and ByLaws to enter into and perform this Agreement,
and all requisite proceedings have been taken to authorize it to enter into and
perform this Agreement.
(b) It is an investment company registered under the 1940 Act.
(c) A registration statement under the 1933 Act with respect to
the Shares is effective. The Trust shall notify Sunstone if such registration
statement or any state securities registrations have been terminated, lapse or a
stop order has been entered with respect to the Shares.
7
<PAGE>
B. Covenants.
1. The Trust will provide to Sunstone copies of all amendments to
its Declaration of Trust and By-laws made after the date of this Agreement. If
requested by Sunstone, each copy of the Declaration of Trust and By-laws of the
Trust and copies of all amendments thereto shall be certified by the Secretary
of the Trust.
2. The Trust shall deliver to Sunstone the Fund's currently
effective Prospectus and, for purposes of this Agreement, Sunstone shall not be
deemed to have notice of any information contained in such Prospectus until a
reasonable time after it is actually received by Sunstone.
3. All requisite steps will be taken by the Trust from time to
time when and as necessary to register the Trust's shares for sale in all states
in which the Trust's shares shall at the time be offered for sale and require
registration. If at any time the Trust receives notice of any stop order or
other proceeding in any such state affecting such registration or the sale of
Trust shares, or of any stop order or other proceeding under the federal
securities laws affecting the sale of Trust shares, the Trust will give prompt
notice thereof to Sunstone.
4. The Trust will comply with all applicable requirements of the
1933 Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, blue
sky laws, and any other applicable laws, rules and regulations.
5. The Trust agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of Sunstone
hereunder, it shall advise Sunstone of such proposed change at least 30 days
prior to the intended date of the same, and shall proceed with such change only
if it shall have received the written consent of Sunstone thereto, which shall
not be unreasonably withheld.
ARTICLE V
CONCERNING THE TRANSFER AGENT
A. Representations. Sunstone represents and warrants to the Trust that:
(a) It is a limited liability company duly organized and existing
under the laws of the State of Wisconsin, is empowered under applicable law and
by its Articles of Organization and Operating Agreement to enter into and
perform this Agreement, and all requisite proceedings have been taken to
authorize it to enter into and perform this Agreement.
(b) It is duly registered as a transfer agent under Section 17A of
the Securities Exchange Act of 1934, as amended, to the extent required.
8
<PAGE>
B. Limitation of Liability; Indemnification.
1. Sunstone shall use reasonable care and act in good faith in
providing services under this Agreement, but shall not be liable for any loss or
damage, including counsel fees, resulting from its actions or omissions to act
or otherwise, in the absence of its bad faith, willful misfeasance, gross
negligence or reckless disregard of its duties under this Agreement. Sunstone
shall not be liable in acting upon any writing or document reasonably believed
by it to have been signed or made by an Authorized Person or verbal instructions
which the individual receiving the instructions on behalf of Sunstone reasonably
believes to have been given by an Authorized Person, and Sunstone shall not be
held to have any notice of any change of authority of any person until receipt
of written notice thereof from a Fund or such person.
The Trust on behalf of the Funds agrees to indemnify and hold
harmless Sunstone, and its present and former employees, agents, members and
officers from and against any and all claims, demands, actions and suits,
whether groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses relating to Sunstone's actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reliance on information, records, instructions (oral or written) or requests
given or made to Sunstone by the Trust, its officers, directors, agents or
representatives; provided that this indemnification shall not apply to actions
or omissions of Sunstone in cases of its own willful misfeasance or gross
negligence, and further provided that prior to confessing any claim against it
which may be the subject of this indemnification, Sunstone shall give the Funds
written notice of and reasonable opportunity to defend against said claim in its
own name or in the name of Sunstone. The indemnity and defense provisions
provided hereunder shall indefinitely survive the termination of this Agreement.
3. Sunstone shall maintain a disaster recovery plan and procedures
including provisions for emergency use of electronic data processing equipment,
which is reasonable in light of the services to be provided. Sunstone shall, at
no additional expense to the Fund take reasonable steps to minimize service
interruptions. Sunstone shall have no liability with respect to the loss of data
or service interruptions caused by equipment failure or event s beyond its
reasonable control, provided it maintains such plans and procedures.
4. In no event and under no circumstances shall either party to
this Agreement be liable to anyone, including, without limitation to the other
party, for consequential or punitive damages for any act or failure to act under
any provision of this Agreement even if advised of the possibility thereof.
5. Notwithstanding any of the provisions of this Agreement to the
contrary, Sunstone shall be under no duty or obligation under this Agreement to
inquire into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of a Fund,
as the case may be, to request such sale or issuance;
9
<PAGE>
(b) The legality of a transfer of Shares, or of a redemption
of any Shares, the propriety of the amount to be paid therefor, or the authority
of a Fund, as the case may be, to request such transfer or redemption;
The legality of the declaration of any dividend by a Fund,
or the legality of the issue of any Shares in payment of any stock dividend, or
the legality of any recapitalization or readjustment of Shares.
Year 2000 Compliance
Sunstone represents that its proprietary systems will be Year 2000
compliant in all material respects with regard to the services to be provided
herein and shall monitor the Year 2000 compliance status of its software
vendors.
ARTICLE VI
TERM
1. This Agreement shall remain in full force and effect until
August 3, 1999, and thereafter shall automatically extend for additional,
successive twelve (12) month terms unless earlier terminated as provided below.
2. Either of the parties hereto may terminate this Agreement at
any time by giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than sixty (60) days after the date of
receipt of such notice. In the event such notice is given by a Fund, it shall be
accompanied by a copy of a resolution of the Board of Trustees of the Trust,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating the successor transfer agent or transfer agents.
In the event such notice is given by Sunstone, the Fund shall on or before the
termination date, deliver to Sunstone a copy of a resolution of its Board of
Trustees certified by the Secretary or any Assistant Secretary designating a
successor transfer agent or transfer agents. In the absence of such designation
by the Fund, the Fund shall upon the date specified in the notice of termination
of this Agreement and delivery of the records maintained hereunder, be deemed to
be its own transfer agent and Sunstone shall thereby be relieved of all duties
and responsibilities pursuant to this Agreement. Fees and out-of-pocket expenses
incurred by Sunstone, but unpaid by a Fund upon such termination, shall be
immediately due and payable upon and notwithstanding such termination.
3. In the event this Agreement is terminated as provided herein,
Sunstone, upon the written request of the Trust, shall deliver the records of
the Trust to the Trust or its successor transfer agent in the form maintained by
Sunstone. The Trust shall be responsible to Sunstone for all out-of-pocket
expenses and for the reasonable costs and expenses associated with the
preparation and delivery of such media, including: (a) any custom programming
requested by the Trust in connection with the preparation of such media; (b)
transportation of forms and other materials used in connection with the
processing of Fund transactions by Sunstone; and (c)
10
<PAGE>
transportation of records and files in the possession of Sunstone. Sunstone
shall not reduce the level of service provided to the Trust following notice of
termination by the Trust.
ARTICLE VII
MISCELLANEOUS
A. Notices. Any notice required or to be permitted to be given by either
party to the other shall be in writing and shall be deemed to have been given
when sent by registered or certified mail, postage prepaid, return receipt
requested, as follows: Notice to Sunstone shall be sent to Sunstone Investor
Services, LLC, 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202,
Attention Miriam M. Allison, and notice to the Trust shall be sent to 209 West
Fayette St., Baltimore, MD, 21201-3403, Attention: President, DEVCAP Trust.
B. Amendments/Assignments.
1. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the formality of
this Agreement.
2. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns. This Agreement
shall not be assignable by either party without the written consent of the other
party except that Sunstone may assign this Agreement to an affiliate with
advance written notice to the Trust.
C. Wisconsin Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin (except as to paragraph D
hereof which shall be construed in accordance with Massachusetts law). If any
part, term or provision of this Agreement is determined by the courts or any
regulatory authority having jurisdiction over the issue to be illegal, in
conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
D. Miscellaneous. This Agreement is executed by or on behalf of the Trust
with respect to each of the Funds and the obligations hereunder are not binding
upon any of the Trustees, officers or shareholders of the Trust individually but
are binding only upon the Funds to which such obligations pertain and the assets
and property of such Funds. The Trust's Certificate of Trust is on file with the
Secretary of State of Massachusetts.
E. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
F. Prior Transfer Agent(s). Sunstone will endeavor to assist in resolving
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the
11
<PAGE>
Trust. Any such inquiries or errors which cannot be expediently resolved by
Sunstone will be referred to the Trust.
G. Non-Exclusive; Other Agreements. The services of Sunstone hereunder
are not deemed exclusive and Sunstone shall be free to render similar services
to others. Except as specifically provided herein, this Agreement does not in
any way affect any other agreements entered into among the parties hereto and
any actions taken or omitted by any party hereunder shall not affect any rights
or obligations of any other party hereunder.
H. Captions. The captions in the Agreement are included for convenience
of reference only, and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
SUNSTONE INVESTOR SERVICES LLC DEVCAP TRUST
By: /s/ Miriam Alison By: /s/ Joseph N. St. Clair
------------------------------- --------------------------------
Miriam Alison Joseph N. St. Clair
------------------------------ --------------------------------
(Name) (Name)
------------------------------ --------------------------------
(Title) (Title)
------------------------------ --------------------------------
(Date Signed) (Date Signed)
12
<PAGE>
Schedule A
to the
Transfer Agent Agreement
by and between
DEVCAP Trust
and
Sunstone Investor Services LLC
Name of Funds
DEVCAP Shared Return Fund
13
<PAGE>
Schedule B
to the
Transfer Agent Agreement
by and between
DEVCAP Trust and
Sunstone Investor Services LLC
SERVICES
[ ] Maintenance of shareholder accounts
X Maintain records for each shareholder account;
X Scan account documents for electronic storage;
X Record changes to shareholder account information;
X Maintain account documentation files for each shareholder; and
X Establish and maintain retirement plan accounts.
[ ] Shareholder servicing and shareholder transactions
X Respond to written and telephone (recorded lines) inquiries from
shareholders for information about their accounts;
X Process shareholder purchase and redemption orders, including those
of automatic investment and systematic withdrawal plans;
X Set up account information, including address, dividend options,
taxpayer identification numbers and wire instructions;
X Issue transaction confirmations;
X Process transfers and exchanges;
X Process dividend payments by check, wire or ACH or purchase new
shares through dividend reinvestment; and
X Issue customer statements.
[ ] Compliance reporting and proxy processing
X Provide required reports to the Securities and Exchange Commission,
the National Association of Securities Dealers and the states in
which each fund is registered;
X Prepare and distribute to the Internal Revenue Service required
Internal Revenue Service forms 1099, 1042, 5498 and 945 relating to
earned income and capital gains;
X Issue tax withholding reports to the Internal Revenue Service; and
14
<PAGE>
X Mail, process and tabulate proxies.
[ ] Dealer/load processing (if applicable)
X Provide dealer access through NSCC's FundSERV;
X Calculate fees due under 12b-1 plans for distribution and marketing
expenses; and
X Issue periodic statements for broker/dealers and interested
parties.
[ ] Telephone service representatives on-line access
X Respond to shareholder or dealer inquiries related to:
o Account registration;
o Share balances;
o Account options;
o Dividend and capital gain distribution status;
o Withholding status;
o Transaction dates and types;
o Shares traded;
o External account number;
o Address;
o Customer or account type;
o Dealer, branch and rep information;
o Dollars available/not available in the account;
o Shares purchased/redeemed today;
o Dividend accrual, current dividend period; and
o Market value of shares.
Standard reports
Shareholder applications (weekly)
X Shareholder base analysis (monthly)
15
<PAGE>
X New account listing (weekly)
X Purchases, redemptions, exchanges (monthly)
X Servicing summary (quarterly)
X Rule 12b-1 reports (quarterly)
Other Service Features
In addition to the standard features listed above, Sunstone's system offers
additional features to meet specialized needs.
[ ] Specialized needs
X 12b-1 fee calculations
X Multiple account look-up options
X Cross-fund account queries
X Cross-account queries
X Consolidated statements
X Duplicate statements to third parties
X Cross-fund dividend reinvestment
X Fund-level processing options
X Correspondence system capabilities
16
<PAGE>
Schedule C
to the
Transfer Agent Agreement
by and between
DEVCAP Trust and
and
Sunstone Investor Services LLC
FEE SCHEDULE
Base fees
Annual
Shareholder
Account Fee Minimum Annual Fee
Type of Fund Open/Closed Per Fund
- ------------ ----------- --------
Equity,
Fixed Income
and Balanced $17.00/$3.00 $20,000
The base fee assumes a single class of shares, availability of automatic
investment plans and systematic withdrawal plans, quarterly or less frequent
dividend distributions for equity funds, monthly dividends on fixed income and
money market funds, annual capital gains distributions, and includes all
standard reports.
Additional fees to be added to base fee
Type of Service Annual Minimum Annual
--------------- ------ --------------
Multiple class --- 25% of base fee
Front-end load $1.50 $2,000
12b-1 plan $1.00 $1,000
17
<PAGE>
One-time set-up fees
New funds set up (per fund) $2,000
NSCC Fund/SERV and Networking set-up (per fund group) 2,500
Remote access set-up (per location) 500
Voice Response Unit (VRU) set-up 2,000
Account maintenance and processing fees
(per occurrence)
Omnibus account transaction $2.50
Certificate issuance $4.00
Locating lost shareholders $8.00
NAV Error Reprocessing Charges $750 + $1.00/transaction
Conversion from prior transfer agent $5,000
Preliminary estimate. Subject to change based on our review
of prior transfer agent's documentation and records.
Charitable contribution processing fee
Base fee per processing run $2,000
Per letter charge $1.00
Out-of-pocket expenses
Per statement confirmation and check processing $0.25
Per tax form processing $0.15
Per label printing for proxy or marketing purposes $0.05
Production of ad hoc reports starting at $100
Bulk mailings/insert handling charge
1 insert $0.06
2 - 3 inserts $0.08
4 or more inserts as quoted
Bank account service fees and any other bank charges at cost
Statement paper, check stock, envelopes, tax forms at cost
Postage and express delivery charges at cost
Telephone and long distance charges at cost
Fax charges at cost
P.O. box rental at cost
800-phone number at cost
Inventory and records storage at cost
Fund/SERV charges at cost
Monthly remote access user charges
18
<PAGE>
First user and password $250
Additional users and passwords (each) $100
Remote access line charge at cost
Additional fees
(which may be passed on to shareholders)
Outgoing wire fee varies by bank
Account transcripts older than 2 years $5.00
(per year, per fund)
Non-sufficient funds varies by bank
IRA/SEP/SIMPLE/403(b) processing
Annual maintenance or custodial fee (per account) $15.00
Account termination (transfer or rollover) $15.00
Internet Service Fees
Additional fees apply for providing internet-related services, including
internet links to daily NAV; creation and maintenance of database extracts
(to transmit shareholder data to website provider); and/or other services.
Custom programming
Additional fees may apply for special programming to meet your servicing
requirements or to create custom reports.
19
<PAGE>
Schedule D
to the
Transfer Agent Agreement
by and between
DEVCAP Trust
and
Sunstone Investor Services LLC
RECORDS MAINTAINED BY SUNSTONE
Account applications
Canceled certificates plus stock powers and supporting documents
Checks including check registers, reconciliation records, any adjustment records
and tax withholding documentation
Indemnity bonds for replacement of lost or missing stock certificates and checks
Liquidation, redemption, withdrawal and transfer requests including stock
powers, signature guarantees and any supporting documentation
Shareholder correspondence
Shareholder transaction records
Share transaction history of the Funds
20
Exhibit 11.1
Consent of Independent Auditors
<PAGE>
Consent of Independent Auditors
The Board of Directors
DEVCAP Shared Return Fund:
We consent to the use of our reports for the DEVCAP Shared Returned Fund, dated
September 15, 1998, incorporated herein by reference, and to the references to
our firm under the headings "Financial Highlights" in the Prospectus and
"Independent Auditors" and "Financial Statements" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 25, 1998
Exhibit 11.2
Consent of Independent Auditors with respect to
Domini Social Index Portfolio
<PAGE>
Consent of Independent Auditors
The Board of Directors
Domini Social Index Portfolio:
We consent to the use of our reports for the Domini Social Index Portfolio,
dated August 24, 1998, incorporated herein by reference, and to the references
to our firm under the headings "Financial Highlights" in the Prospectus and
"Independent Auditors" and "Financial Statements" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 25, 1998
EXHIBIT 17.1
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the DEVCAP
Trust Registration Statement for the fiscal year ended July 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000948119
<NAME> DEVCAP TRUST
<SERIES>
<NUMBER> 1
<NAME> DEVCAP SHARED RETURN FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 8,726,672
<INVESTMENTS-AT-VALUE> 10,602,004
<RECEIVABLES> 69,614
<ASSETS-OTHER> 36,972
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,708,590
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,733
<TOTAL-LIABILITIES> 11,733
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,758,535
<SHARES-COMMON-STOCK> 546,424
<SHARES-COMMON-PRIOR> 328,314
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 62,990
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,875,332
<NET-ASSETS> 10,696,857
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 72,727
<EXPENSES-NET> 108,234
<NET-INVESTMENT-INCOME> (35,507)
<REALIZED-GAINS-CURRENT> 71,154
<APPREC-INCREASE-CURRENT> 1,244,866
<NET-CHANGE-FROM-OPS> 1,280,513
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 5,944
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 242,295
<NUMBER-OF-SHARES-REDEEMED> 24,537
<SHARES-REINVESTED> 352
<NET-CHANGE-IN-ASSETS> 5,371,292
<ACCUMULATED-NII-PRIOR> (4,475)
<ACCUMULATED-GAINS-PRIOR> 4,804
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 178,918
<AVERAGE-NET-ASSETS> 6,995,295
<PER-SHARE-NAV-BEGIN> 16.22
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 3.44
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.58
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
