<PAGE>
DEVCAP SHARED RETURN FUND
DRAFT ANNUAL REPORT
- -------------------------------------------------------------------------------
FOR THE YEAR ENDED JULY 31, 1999
- -------------------------------------------------------------------------------
DEVCAP Shared Return Fund (DEVCAP) commenced operation in October 1995 as a
Socially Responsible Mutual Fund that invests in a Portfolio that is consis-
tent with the Domini Social Index. DEVCAP has tracked the S&P 500 (R) Index
through investments in 400 securities, which were selected to conform to a
positive social agenda.
DEVCAP investment results are only part of our story. The investors in
DEVCAP have shared their gains and earnings from a socially screened portfolio
of established businesses with the less fortunate people of the world by sup-
porting small enterprise development programs of Catholic Relief Services. The
DEVCAP investors use the successful performance of our US economy to encourage
self-sufficiency in the developing world by giving the needy a chance to help
themselves.
- -------------------------------------------------------------------------------
PRESIDENT'S LETTER TO INVESTORS
- -------------------------------------------------------------------------------
September 23, 1999
Dear Investor,
Your investment in the DEVCAP Shared Return Fund for the year ended July 31,
1999, produced results that tracked the strong performance of the S&P 500 (R)
Index. As an investor in our index fund, you have benefited from the positive
performance of the US equities market.
Today we are faced with a US equities market that continues to grow but at a
somewhat slower pace. Consumer confidence may have lessened this year as the
Federal Reserve raised interest rates and then cautioned us to expect
additional increases if the rate of inflation rises. In spite of concerns
about inflation that would be fueled by increased earnings, higher employment
and a higher rate of consumer spending, the rate of inflation remains
moderate.
The US economy is still strong. The effects of new technology and the
success of those technology-based businesses founded in computer hardware,
software and communications continue to foster success. The most formidable of
these technology winners are well represented in our socially screened
portfolio. Microsoft is the largest single holding of our portfolio
representing 7.4% of the total value on July 31, 1999. As a capitalization
based index, when companies succeed and grow relative to the market while
continuing to pass our social screens, they become larger relative to our
total holdings. The indexing process rewards the winners by retaining our
holdings and taking additional positions in them over time.
Our index fund seeks to reward investors who favor longer-term positions.
Turnover should be relatively low and we should remain in a nearly fully in-
vested position in normal operations.
The content and application of our social screens are likely to be critical
determinants of your satisfaction with DEVCAP in the immediate future. We are
responding to those of you who have asked that we modify our social screens to
address the Life Ethics considerations of abortion and contraceptives. We be-
lieve that if we applied these screens to the current portfolio, only a few
companies would be eliminated from our index. We have learned that Domini can
not modify the currently offered screens.
We believe that the addition of Life Ethics issues to the Fund's social
screen is of sufficient importance that we will be recommending to sharehold-
ers
<PAGE>
changes in the Fund's investment structure. We will be contacting you further
before finally deciding whether and how to implement the Life Ethics screens.
As we move forward in a volatile stock market, we remain committed to provid-
ing a socially responsible indexed mutual fund. We believe that the screening
process can be effective and that we can invest in a way that is consistent
with our beliefs without materially diminishing our returns over the long term.
We also remain fully committed to the belief that we can provide a channel for
distributing opportunity to the poor who want to work and succeed through their
own initiatives. We remain committed to enhancing opportunities for the working
poor and making the most of all our resources.
Sincerely,
/s/ Joseph N. St. Clair
------------------------
Joseph N. St. Clair
President
<PAGE>
COMPARISON OF $10,000 INVESTMENT IN THE
DEVCAP SHARED RETURN FUND(1) AND S&P 500(2)
S&P DEVCAP
06/30/91 10000.00 10000.00
07/31/91 10466.00 10498.53
10/30/91 10676.29 10556.57
01/31/92 11205.80 11205.11
04/30/92 11458.52 11177.12
07/31/92 11805.90 11678.43
10/31/92 11741.28 11912.80
01/31/93 12393.02 12693.70
04/30/93 12516.21 12397.75
07/31/93 12837.36 12720.76
10/31/93 13494.98 13334.55
01/31/94 13988.49 13597.40
04/30/94 13181.28 12839.45
07/31/94 13497.89 12964.12
10/31/94 14015.45 13401.20
01/31/95 14060.13 13487.83
04/30/95 15483.09 14646.36
07/31/95 17022.99 16072.30
10/31/95 17721.69 16697.44
01/31/96 19497.84 17998.76
04/30/96 20160.15 18556.47
07/31/96 19841.33 18100.17
10/31/96 21991.27 20043.69
01/31/97 24634.56 22562.85
04/30/97 25227.57 23239.40
07/31/97 30188.80 27433.99
10/31/97 29055.93 26317.69
01/31/98 31267.38 28850.25
04/30/98 35593.97 32354.95
07/31/98 36012.51 33150.70
10/31/98 35444.68 32624.10
01/31/99 41421.82 39606.49
07/31/99 43287.65 40113.90
(1) The DEVCAP Shared Return Fund performance prior to October 19, 1995
(commencement of investment operations) is the investment return of the
Domini Social Index Portfolio adjusted for the expenses of the Fund.
(2) The S&P 500 is an unmanaged index used to portray the pattern of common
stock movement based on the average performance of 500 widely held common
stocks and does not pay expenses.
(3) The Portfolio began investing in the stocks comprising the Domini 400
Social Index on June 3, 1991. The above chart begins on June 30, 1991.
The performance information in this chart represents past performance and is
not a guarantee of future results. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
3
<PAGE>
Company Highlights
As we near the end of the century that brought us the rise of the modern
corporation, we thought we would take a moment to note some surprising and re-
markable changes that have taken place in the last few years. One of the most
exciting aspects of socially responsible investing is watching major corpora-
tions begin, little by little, to adopt the concepts we have been advocating
for so long, and to surprise us with new innovations on old ideas.
This year, we profile a few companies in our portfolio that have instituted
practices, or undergone changes, that were unheard of ten years ago. We have
chosen to highlight a small group of companies in the following areas: Diver-
sity, the Environment, and Employee Involvement. For variety, we decided not
to discuss any company in more than one issue area. However, because progress
in these areas can be an indication of strong, forward-looking management,
several of these companies have impressive stories to tell in all three areas.
We are pleased to present these recent developments, and hope they are an
indication of greater things to come. We hope you will find this information
as exciting as we do.
DIVERSITY
A commitment to diversity is more than just a commitment to basic fairness.
We believe that a corporation's commitment to diversity can be an important
component of a well-managed company. As the world gets smaller and smaller,
and the markets open up to serve a more diverse group of people, some firms
are beginning to realize that they can benefit from the guidance, and leader-
ship, of those individuals who have been underrepresented and often excluded--
women and minorities.
The following companies have taken some dramatic steps to promote women and
minorities to positions of power within their ranks. Although these companies
represent a small minority of U.S. corporations, their examples demonstrate
what an active commitment to diversity can accomplish.
Hewlett-Packard Company. Ten years ago, few would have predicted that one of
the largest best known companies in the world would, in effect, be run by wom-
en. With a market-capitalization of over $106 billion, Hewlett-Packard is rec-
ognized as one of the best-managed companies in the world. In June 1999, a
woman, Carleton S. Fiorina, was named President and CEO of the company. In ad-
dition, in October 1998 Ann Livermore was appointed head of the company's new
unit, Enterprise Computing Solutions Organization, with responsibility for
one-third of the company's revenues. A woman also serves as vice president and
general manager of the company's LaserJet Solutions Group, which accounted for
approximately 20% of the firm's 1997 revenues. The general manager of the
company's medical products group is also a woman. In FY 1998, women accounted
for 28% of officials and managers, and minorities accounted for 15%.
Such remarkable developments do not come about by accident--they result from
focused programs that help promote and recruit women and minorities, and an
atmosphere that encourages women and minorities to stay and grow within the
company. This is one reason why good performance in this area can be an indi-
cation of solid management.
Not surprisingly, Hewlett-Packard has a number of progressive policies in
place to support working mothers. In 1998, for the eleventh year, Working
Mother magazine included the firm on its list of the 100 best workplaces for
working mothers. Among other generous benefits, employees are given up to 52
weeks of leave for childbirth, 40 weeks more than the federally required 12
unpaid weeks. In an initiative formed with the local school district, Hewlett-
Packard has an on-site elementary school at its Santa Rosa, California facili-
ty. Alternative work schedules include flextime (used by over 50% of the
4
<PAGE>
employees), compressed workweeks, job sharing, and telecommuting.
Hewlett-Packard has made a substantial effort to purchase goods and services
from minority- and women-owned firms, and has been rated among the 50 compa-
nies with the best reputation for employing and accommodating the disabled.
The company also extends health and relocation benefits to domestic partners
of its U.S. employees, including gays and lesbians.
American Express Company, one of the world's most influential financial
services corporations, recently announced that in 2001, an African-American,
Kenneth I. Chenault, will be promoted to the position of CEO. Mr. Chenault is
currently President and Chief Operating Officer of the firm.
The company links management compensation to an employee's ability to meet
diversity goals, to integrate diversity considerations into business func-
tions, and to address diversity concerns raised by an annual employee survey.
In August 1998, Fortune magazine included American Express on its listing of
the 50 best companies for Asians, Blacks, and Hispanics. At that time, the
company reported that 17% of its managers were minorities. In 1998, for the
ninth year, Working Mother magazine included American Express on its list of
the 100 best workplaces for working mothers. American Express also extends
health care and other benefits to same-sex partners of its gay and lesbian em-
ployees.
Maytag Corporation provided another indication of the recent progress made
by minorities in mainstream American business, when in May 1999, it appointed
Lloyd D. Ward, an African-American, to CEO. He was promoted to the position of
President and Chief Operating Officer in February 1998 after serving as Execu-
tive Vice President and President of Maytag Appliances.
Fannie Mae provides liquidity to home mortgage markets by buying mortgages
from lending institutions and issuing mortgage-backed securities, thereby cre-
ating a secondary market for these mortgages. In 1968, Congress established
Fannie Mae as a privately managed company. Prior to that, it was part of the
predecessor to the Department of Housing and Urban Development.
On January 1, 1999, Franklin D. Raines, an African-American, became CEO and
chair of the board of directors at the company. Mr. Raines had served as vice
chair of the company until leaving in September 1996 to serve as the White
House budget director. There are two women and two minorities (including Mr.
Raines) among the company's seven senior line executives. The company reported
that, as of December 1997, 43% of its officers and directors were women and
21.5% were minorities.
The company incorporates diversity issues into its calculations for execu-
tive incentive pay, and provides diversity training to all employees. Diver-
sity issues are integrated into all aspects of its in-house training and de-
velopment courses. The company has a standing diversity council and an office
of diversity, and a mentoring program that provides support for the advance-
ment of women and minorities.
In 1998 Gay Financial Weekly praised Fannie Mae's policies towards gays and
lesbians, stating that the company had "gone above and beyond all others in
corporate America to ensure equal treatment for its gay and lesbian employ-
ees." The company extends benefits, including health insurance, to opposite-
and same-sex domestic partners, and is also a frequent contributor to AIDS-re-
lated organizations.
Golden West Financial is the only major publicly traded U.S. Company we are
aware of that has more women on its board of directors than men (five of
nine). Three of these women are minorities. Marion O. Sandler is co-CEO, along
with Herbert M. Sandler, her husband. Golden West Financial is a
5
<PAGE>
savings and loan holding company, primarily involved in financing residential
mortgage loans.
THE ENVIRONMENT
Global companies have an increasingly significant impact on our ever-shrink-
ing planet. If we are to survive, our corporations, upon whom so many of us
depend for food, clothing and shelter, must learn to reinvent themselves to
serve a growing population, without exhausting what remains of our natural re-
sources.
A handful of companies have begun to take modest steps in that direction.
Unusual and exciting things are happening at companies like Interface, Xerox
and Herman Miller. Also, new, innovative technology companies like Catalytica
are surfacing, whose primary mission is to produce environmentally beneficial
technologies. We hope that the efforts of these pioneers will encourage their
competitors to raise the bar even higher.
Interface, Inc. When Ray Anderson discusses Interface's impact on the natu-
ral world, he speaks of his personal awakening to the current state of the en-
vironment, which hit him like a "spear in the chest." Strong words from the
CEO and founder of the largest manufacturer of industrial carpet tile in the
world. He describes himself as a relatively recent convert to the environmen-
tal movement, having built a successful international corporation without con-
cern for its impact on the environment, except that it act within the limits
of the law. Since then, he has prompted his company to become a leader in in-
dustrial ecology through a corporate-wide cultural and operational shift.
Ray Anderson has made his company an environmental leader by completely re-
thinking the structure of the company's manufacturing processes, and envi-
sioning it anew for the 21st century. Interface's ambitious goal is to no
longer be a net "taker" from the earth. Mr. Anderson believes that this goal
is not only necessary for earth's survival, but is necessary to ensure that
the company will be able to continue to compete in the 21st century.
Interface is a resource-intensive company whose largest divisions are petro-
leum-dependent. In late 1994, Interface began a long-range program designed to
achieve greater resource efficiency and ecological sustainability through
closed-loop recycling, the use of benign sources of energy for production
processes, and the elimination of wasted raw materials and energy from all op-
erations. The company is beginning to push the boundaries of what
"sustainability" means, through the use of solar energy and a host of innova-
tions to increase efficiency and eventually produce a closed-loop system.
In January 1995, the company initiated a worldwide war-on-waste program. The
program utilizes teams consisting of a multidisciplinary group of employees
who identify and eliminate waste from a process or product. Any employee can
join or form a team for any reason. The company applies a zero-based defini-
tion: "Waste" equals any measurable cost that goes into manufacturing a prod-
uct, but that does not result in identifiable value to the customer. All sys-
tem input is considered to be waste until proven otherwise. The company re-
ports that in FY 1995 and FY 1996, it saved $25 million eliminating such
waste, and expected to eliminate $75 million more by the end of FY 1998.
One of Mr. Anderson's great insights is that people have no interest in pur-
chasing carpet. They would rather have the benefits that carpet offers, with-
out having to worry about the costs of ownership, such as cleaning it and re-
placing it every few years as it wears out. Interface therefore leases a car-
peting service to its customers that it calls the "Evergreen Lease." Interface
is responsible for servicing the carpet and replacing worn tiles. Generally,
only 20% of an office's carpet shows 80% of the wear. By replacing only the
worn sections, this service reduces the consumption of carpeting material by
80%. The customer benefits by having a carpet that always looks new, and In-
terface is able to take used carpet
6
<PAGE>
tiles that would otherwise end up in a landfill, and recycle and re-use them.
This concept is not only cost-effective, but also provides clear environmental
benefits.
The company installed its first solar unit for a fabric plant in North Caro-
lina in 1997, and installed another solar array at its Bentley Mills carpet
production facility in California early this year. In 1997 Interface intro-
duced a carpet product called Terratex that is made entirely from 100% recy-
cled polyester fiber.
Xerox Corporation established a goal in 1994 to create waste-free products
within waste-free factories and waste-free offices. This initiative targets
nine areas, including air emissions, solid and hazardous wastes, water
emissions, energy conservation, and use of post-consumer materials. The com-
pany uses product design, reduced packaging, and the management of manufactur-
ing processes to reach these goals. Its already extensive quality programs are
tied to these company-wide environmental goals.
In 1992 Xerox introduced copiers with recyclable cartridges. At Xerox's ex-
pense, customers can mail back used cartridges, and the company will re-use or
recycle them. In 1996 customers returned nearly 65% of all cartridges. At the
company's toner plant in Webster, New York, approximately 7 million pounds of
toner have been reprocessed. Plants in the Netherlands and Oklahoma City have
also recycled approximately 90% of toner found to be out of specification. The
company's copier toner manufacturing process utilizes recycled raw materials
such as plastic milk and water jug containers. Since 1995, through its Toner
Container Return program, the company has reused or recycled approximately 2
million toner containers.
The company has a comprehensive annual environmental report that details a
variety of company-wide efforts to improve its impact on the environment. The
publication reports thoroughly and publicly on the following: environmental
benchmarks and goals, progress towards meeting goals, emissions data, regula-
tory problems, remediation liabilities, environmental challenges they face,
internal communications systems, environmental policies and practices outside
the U.S., and health and safety data.
Catalytica, Inc., a recent addition to our portfolio, was formed by a former
chemical engineer at Exxon who believed that there was not enough work being
done to increase the environmental efficiency of chemical reactions.
Catalytica focuses its research and development primarily on catalysts with
environmental benefits (Catalysts are substances introduced into a chemical
reaction to control or affect the resulting product).
Natural gas is a cleaner burning fossil fuel than oil or coal. As a fossil
fuel, however, it produces carbon dioxide, which is the primary contributor to
global warming. Environmentalists often portray natural gas as an interim fuel
on the road toward fossil-fuel alternatives. Catalytica's XONON catalytic sys-
tem helps to smooth that transition by dramatically reducing NOx, carbon mon-
oxide, and unburned hydrocarbon emissions from natural gas turbines. NOx is
one of the six greenhouse gases contributing to global warming that were
targeted for reductions in the Kyoto treaty on climate change. Among other ap-
plications, this technology will be used for both new and installed General
Electric turbines, as well as part of a system to generate electricity for the
city of Santa Clara, California.
Catalytica is also developing a number of innovative manufacturing tech-
niques for the pharmaceutical industry that are designed to increase the
efficiency of chemical reactions and reduce the generation of hazardous waste
in the manufacture of drugs.
Herman Miller, Inc. designs and manufactures furniture and furniture systems
for offices and health care facilities. It is one of those companies that do
many things well, with strengths in diversity, employee relations, the envi-
ronment and product quality and innovation. In 1999 Fortune magazine ranked
the
7
<PAGE>
company third for corporate responsibility and environment in its annual sur-
vey of America's Most Admired Companies. In 1998 the company celebrated its
75th year in operation.
Herman Miller is a substantial user of recycled materials in its manufactur-
ing processes. Its own recycling activities include the use of fabric scraps
for insulation in packaging, the re-use of waste powder paint in its furniture
coating process, and the production of a 100% recyclable office chair manufac-
tured with as much as 70% recycled content. Much of the company's unused pro-
duction scraps are resold to auto, leather, and carpet makers.
Through the company's participation in the Environmental Protection Agency's
Wastewi$e program, the company has reduced its volume of transport packaging
of finished goods by 50%, eliminating the use of 500,000 pounds of wood pal-
lets and 982,800 pounds of corrugated boxes. The Wastewi$e program is a volun-
tary EPA partnership whereby companies set environmental goals in three areas:
waste prevention, buying or manufacturing of recycled products, and recycling
collection.
The company has undertaken notable energy conservation projects. At its
cogeneration plant the company burns its non-plastic, non-toxic waste to power
the central plant's heat and air-conditioning and to provide 10% of its elec-
tricity. The company owns a new building that uses passive solar energy design
methods to manage the heat gain in the plant.
Since 1990 Herman Miller reported that it has used only tropical woods that
come from sustained-yield forests. It has phased out use of Brazilian rosewood
and Honduran mahogany under this policy, although it continues to use mahogany
from other sources. For several decades the company has had a policy that all
facilities must allocate 50% of their land to green spaces.
The company helped to establish the Green Building Fund, a nonprofit philan-
thropic arm of the U.S. Green Building Foundation. The foundation works to
minimize the impact of new buildings on the environment and on workers.
EMPLOYEE INVOLVEMENT
Since the early 1980s, a new breed of corporate manager has arisen at cer-
tain companies, advocating increased employee involvement. Under their guid-
ance, new initiatives are pushing decision-making down the corporate ladder,
removing layers of supervisory management, creating self-directed work teams,
implementing financial rewards tied to quality improvement and cost savings,
offering stock options to most or all employees, job skills development, cross
training, and quality instruction. At some of these firms, accompanying this
empowerment of workers is an increased sharing of financial information and a
deliberate effort to educate employees about how their business is run.
We believe that the shift to a more actively involved workforce that is tak-
ing place at a number of pioneering companies is an important advance for em-
ployee relations that recognizes the worth and dignity of the individual em-
ployee at the same time that it may help position companies to compete more
effectively in the global marketplace. We look forward to the day when these
practices become more widely established.
The computer industry has been particularly aggressive and innovative in
this area. The tremendous growth of the industry, particularly in California,
has seen the granting of stock options to most or all employees become virtu-
ally the norm. Among the many such software firms in our portfolio that have
made granting stock options to all employees standard operating procedure are
3Com, Cisco Systems, Novell, and Tellabs.
3Com Corporation manufactures and markets networking products for both local
area and wide area networks, including switches, hubs, remote access systems,
routers, network management software,
8
<PAGE>
network interface cards, modems, and handheld connected organizers.
As of May 1998, 3Com had 12,920 employees. All employees receive stock op-
tions when they join the firm. A typical employee might receive approximately
1,000 options. All employees are eligible to participate in a stock-based Em-
ployee Incentive Plan. Employees can be awarded additional stock option grants
based upon their contributions to the company. This is done as part of the an-
nual salary review. In addition, the company has a twice-yearly cash profit
sharing plan (3Reward) available to all employees. In the second half of 1997,
employees received a payout equal to 9.9% of their salary. In the first half
of 1997, the payout was equal to 3.6% of employee salaries. The company's goal
is to distribute approximately 8% of profits under this plan.
The company has stated that it practices open-book management and generally
involves employees in management decision-making processes.
The company's 3Bonus program provides a variety of financial rewards for ex-
ceptional work. In a given year, 25% to 30% of its employees receive awards
that can include stock options, cash bonuses (up to 25% of monthly base pay),
or gifts (weekend trips, for example). Each year, 3Com devotes the equivalent
of 4% of its spending on employees' salaries to the 3Bonus program. All em-
ployees are eligible for rewards.
In January 1999, 3Com was included on Fortune magazine's list "The 100 Best
Companies to Work for in America." The list was compiled by Robert Levering
and Milton Moskowitz, authors of the 1984 and 1993 books of the same title.
Symantec Corporation, a software marketer and developer, has two innovative
programs whereby group managers distribute bonuses. Under the A++ Award pro-
gram, each manager is given an annual budget of approximately $500 per group
member. The manager then makes a series of quarterly cash awards to employees
whose work has exemplified the values of the firm. Any employee can nominate
another employee at the firm for this award, which can total as much as
$3,000. The company's Star Award seeks to reward individuals who have helped
in the work of cross-functional teams and departments other than their own.
All executive staff members have a pool of stock from which they may make
awards in blocks of 100 shares. The company also offers stock options and
profit-sharing.
Tellabs, Inc. manufactures and markets voice and data networking products
for the telecommunications industry.
As of January 1999, all of the company's approximately 4,980 employees par-
ticipated in either a bonus plan or a cash profit sharing plan. In July 1996,
the company started a Global Option Program under which all full time employ-
ees were granted 400 options plus 20 options for each year of service. Shares
awarded through the program vest immediately. In October 1998, the company
made another grant to all full-time employees of 200 options.
Tellabs also has a program under which it awards common stock to full time
employees. Awards are made based on the number of continuous years of service.
Employees with five years of service receive 10 shares, those with 15 years of
service receive 25 shares, and those with 20 years of service receive 50
shares.
The company promotes participation through training and education for man-
agement and non-management employees.
Union Pacific Resources Group engages in the exploration for and production
of natural gas, natural gas liquids, and crude oil. The company derived the
majority of its FY 1998 revenues from natural gas or natural gas liquids, fu-
els with substantial environmental advantages over oil and coal.
In 1996, as part of a systematic program to change the culture of the corpo-
ration after its spin-off
9
<PAGE>
from Union Pacific Corporation, the company established a group of 45 employ-
ees, dubbed Change Agents, assigned the task of developing systems to create a
new culture. Among the company initiatives as part of this program were the
implementation of a job performance evaluation procedure incorporating feed-
back from peers as well as supervisors, a new job classification system, and
the creation of an Employee Development Center. The company offers its employ-
ees 40 hours of professional training per year, as well as profit-sharing and
stock options.
Apogee Enterprises, Inc. engineers, designs, and installs curtain-wall and
window systems for commercial and institutional buildings and automobiles. The
company also fabricates finished glass products and provides coating services
to buildings for strength and energy efficiency.
Apogee's highly decentralized management structure has encouraged its em-
ployees to identify strongly with the company. Managers at all levels have ex-
tensive decision-making powers, including hiring, work scheduling, and inven-
tory control. Managers are rewarded for achieving financial, as well as per-
sonal goals (such as developing computer skills, learning a foreign language,
etc.). The company rarely resorts to layoffs, even during economic downturns.
The company has an open-book policy and shares monthly profit-and-loss
statements with its employees. At some of its facilities, the company shares
more detailed financial information. Its Viracon glass fabrication plants
share line-by-line operating results each month with all managers, including
first-line supervisors. Each quarter all Viracon employees review their
plant's financial results.
10
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Domini Social Index Portfolio, at value (Note 1) $15,046,292
Receivable from affiliate (Note 2) 6,861
Deferred organization expenses (Note 1) 13,537
Prepaid expenses 13,069
-----------
Total Assets 15,079,759
-----------
LIABILITIES:
Accrued expenses 33,427
-----------
NET ASSETS $15,046,332
===========
NET ASSETS CONSIST OF:
Paid-in capital $10,846,299
Accumulated net realized gain from Portfolio 120,603
Net unrealized appreciation from Portfolio 4,079,430
-----------
NET ASSETS $15,046,332
===========
SHARES OUTSTANDING 640,828
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE $ 23.48
===========
</TABLE>
See Notes to Financial Statements
11
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENT OF OPERATIONS
Year ended July 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO:
Investment income from Portfolio $ 130,510
Expenses from Portfolio (24,732)
----------
Net investment income from Portfolio 105,778
EXPENSES (Notes 1 and 2):
Professional fees $78,829
Transfer agent fees 53,414
Administration fees 27,807
Registration fees 16,736
Printing 15,862
Amortization of organization expenses (Note 1) 11,098
Fund accounting fees 9,281
Insurance 7,978
-------
Total Expenses 221,005
----------
NET INVESTMENT LOSS (115,227)
----------
NET REALIZED AND UNREALIZED GAIN FROM PORTFOLIO
Net realized gain from Portfolio 219,391
Net change in unrealized appreciation from Portfolio 2,204,098
----------
Net realized and unrealized gain from Portfolio 2,423,489
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,308,262
==========
</TABLE>
See Notes to Financial Statements
12
<PAGE>
DEVCAP SHARED RETURN FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
------------------------
July 31, July 31,
1999 1998
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment loss $ (115,227) $ (35,507)
Net realized gain from Portfolio 219,391 71,154
Net change in unrealized appreciation from
Portfolio 2,204,098 1,244,866
----------- -----------
Net increase in net assets resulting from
operations 2,308,262 1,280,513
----------- -----------
Distributions to shareholders from net realized gain (111,246) (5,944)
----------- -----------
Capital Share Transactions:
Proceeds from sales of shares 2,649,040 4,505,896
Net asset value of shares issued in reinvestment of
distributions 107,930 5,700
Payments for shares redeemed (271,633) (204,899)
Payment for shares redeemed for DEVCAP Non-Profit
(Note 3) (332,878) (209,974)
----------- -----------
Net increase in net assets from capital share
transactions 2,152,459 4,096,723
----------- -----------
Total increase in net assets 4,349,475 5,371,292
NET ASSETS:
Beginning of period 10,696,857 5,325,565
----------- -----------
End of period $15,046,332 $10,696,857
=========== ===========
Undistributed net investment income, end of period $ 0 $ 0
=========== ===========
OTHER INFORMATION:
Share Transactions:
Sold 119,601 242,295
Redeemed (13,762) (11,527)
Reinvested 4,947 352
Withdrawal of charitable contributions (Note 3) (16,382) (13,010)
----------- -----------
Net increase 94,404 218,110
=========== ===========
</TABLE>
See Notes to Financial Statements
13
<PAGE>
DEVCAP SHARED RETURN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
October 19, 1995
(commencement
For the year ended of operations)
----------------------------------------- to
July 31, 1999 July 31, 1998 July 31, 1997 July 31, 1996
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value,
beginning of period $ 19.58 $ 16.22 $10.71 $10.00
------- ------- ------ ------
Income from investment
operations:
Net investment loss (0.18) (0.06) (0.03) (0.02)
Net realized and
unrealized gain on
investments 4.28 3.44 5.55 0.73
------- ------- ------ ------
Total income from
investment operations 4.10 3.38 5.52 0.71
------- ------- ------ ------
Less distributions from
net realized gain (0.20) (0.02) (0.01) --
------- ------- ------ ------
Net Asset Value, end of
period $ 23.48 $ 19.58 $16.22 $10.71
======= ======= ====== ======
Ratios/supplemental data
Total return 21.03 % 20.84 % 51.57 % 7.10 %/1/
Net Assets, end of
period (in 000's) $15,046 $10,697 $5,326 $ 643
Ratio of expenses to
average net assets/2/ 1.97 % 1.75 % 1.75 % 2.50 %/3/
Ratio of net investment
loss to average net
assets/2/ (0.92)% (0.51)% (0.21)% (0.54)%/3/
Portfolio turnover/4/ 8 % 5 % 1 % 5 %/1/
- --------
/1/ Not annualized
/2/ Reflects the Fund's proportionate share of the Portfolio's expenses as well
as reimbursements by agents of the Fund. If the reimbursements had not been
in place, the ratios of expenses and net investment income to average net
assets would have been as follows:
Ratio of expenses to
average net assets 1.97 % 2.76 % 5.93 % 26.30 %/3/
Ratio of net investment
loss to average net
assets (0.92)% (1.52)% (4.39)% (24.34)%/3/
</TABLE>
/3/ Annualized.
/4/ Represents portfolio turnover for the Index Portfolio.
See Notes to Financial Statements
14
<PAGE>
DEVCAP SHARED RETURN FUND
NOTES TO FINANCIAL STATEMENTS
For the year ended July 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. DEVCAP Shared Return Fund
(the "Fund") is a series of DEVCAP Trust which is registered as an open-end
management investment company under the Investment Company Act of 1940 (the
"Act").
The Fund invests substantially all of its assets in the Domini Social Index
Portfolio (the "Portfolio"), an open-end, diversified management investment
company having the same investment objective as the Fund. The value of such
investment reflects the Fund's proportionate interest in the net assets of the
Portfolio (approximately 1.12% at July 31, 1999). The financial statements of
the Portfolio are included elsewhere in this report and should be read in con-
junction with the Fund's financial statements. The Fund became effective on
September 13, 1995, and commenced investment operations on October 19, 1995.
The presentation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sures of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Ac-
tual results could differ from those estimates. The following is a summary of
the Fund's significant accounting policies.
A. Valuation of Investments. Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. Investment Income and Dividends to Shareholders. The Fund earns income
daily, net of Portfolio expenses, on its investment in the Portfolio. Divi-
dends to shareholders are declared and paid annually from net investment in-
come. Distributions to shareholders of net realized capital gains, if any, are
made annually. The amount and character of income and net realized gains to be
distributed are determined in accordance with federal income tax rules and
regulations, which may differ from generally accepted accounting principles.
These differences are attributable to permanent book and tax accounting dif-
ferences. At July 31, 1999 a reclassification was recorded to increase accumu-
lated net investment income by $115,227, decrease accumulated realized gain by
$50,532 and decrease paid-in capital by $64,695.
C. Federal Taxes. The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to dis-
tribute substantially all of its taxable income, including net realized gains,
if any, within the prescribed time periods. Accordingly, no provision for fed-
eral income or excise tax is necessary.
D. Deferred Organization Expenses. Organization costs are being amortized on
a straight-line basis over a five-year period. The amount paid by the Fund on
any redemption of the Fund's initial shares will be reduced by the pro rata
portion of any unamortized organization expenses which the number of the ini-
tial shares redeemed bears to the total number of initial shares outstanding
immediately prior to such redemption. To the extent that the proceeds of the
redemptions are less than such pro rata portion of any unamortized organiza-
tion expenses, Development Capital Fund ("DEVCAP Non-Profit"), the Fund's
sponsor, has agreed to reimburse the Fund for such difference.
E. Other. All net investment income and realized and unrealized gains and
losses of the Portfolio are allocated pro rata among the Fund and other in-
vestors in the Portfolio.
15
<PAGE>
DEVCAP SHARED RETURN FUND
NOTES TO FINANCIAL STATEMENTS--Continued
Year ended July 31, 1999
2. TRANSACTIONS WITH AFFILIATES.
A. Distribution. The Trust has adopted a Distribution Plan (the "Plan") in
accordance with Rule 12b-1 under the Act. CBIS Financial Services, Inc.
("CBIS") acts as agent of the Fund and principal underwriter of shares of the
Fund ("Distributor") pursuant to the Plan. Under the Plan, the Fund may pay
the Distributor a fee not to exceed 0.25% per annum of the Fund's average
daily net assets in anticipation of, or in reimbursement for, expenses in-
curred in connection with the sale of shares of the Fund.
Such expenses include payments to broker-dealers who advise shareholders re-
garding the purchase, sale or retention of shares of the Fund, payments to em-
ployees of the Distributor, advertising used for sales purposes, expenses of
preparing and printing sales literature and other distribution-related ex-
penses. No expenses were incurred by the Fund in connection with the Plan for
the year ended July 31, 1999.
B. Reimbursement of Expenses. DEVCAP Non-Profit had agreed to reimburse the
Fund to the extent necessary to maintain the Fund's total operating expenses
(which include expenses of the Fund and Portfolio) at an annual rate of 1.75%
of the Fund's average daily net assets. This agreement expired November 30,
1998.
3. CHARITABLE CONTRIBUTIONS. Shareholders contributed approximately $341,000
and $210,000 to DEVCAP Non-Profit in December 1998 and 1997, respectively, as
described in the Fund's prospectus. Upon a shareholder's initial investment in
the Fund, the shareholder may choose to make an annual donation to DEVCAP Non-
Profit of ten percent, twenty-five percent, fifty percent, seventy-five per-
cent, or all of the Annual Contribution Basis, as defined in the Fund's regis-
tration statement, derived from the shareholder's investment in the Fund.
DEVCAP Non-Profit will direct these shareholder donations to non-profit orga-
nizations (primarily Catholic Relief Services) working to improve the welfare
of underprivileged persons in developing countries.
4. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment
in the Portfolio aggregated $2,749,230 and $604,511, respectively, for the
year ended July 31, 1999. Approximately $333,000 of these reductions were the
withdrawal of the charitable contributions to DEVCAP Non-Profit.
5. TAX INFORMATION--UNAUDITED. The federal tax status of distributions made to
shareholders on December 23, 1998 was as follows:
<TABLE>
<CAPTION>
20%
Net Short-Term Long-Term
Investment Capital Capital
Income Gains Gains
---------- ---------- ---------
<S> <C> <C> <C>
Shared Return Fund.............................. $0 $0 $111,246
</TABLE>
For the year ended July 31, 1999, the Shared Return Fund did not pay any divi-
dends from net investment income or short-term gains that would qualify for
the 70% dividends received reduction available to corporate shareholders.
16
<PAGE>
Independent Auditors' Report
The Board of Trustees
DEVCAP Trust:
We have audited the accompanying statement of assets and liabilities of
DEVCAP Shared Return Fund, a series of DEVCAP Trust as of July 31, 1999, and
the related statement of operations for the year then ended, and the state-
ments of changes in net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the three-
year period then ended and the period from October 19, 1995 (commencement of
operations) to July 31, 1996. These financial statements and financial high-
lights are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the over-
all financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
DEVCAP Shared Return Fund as of July 31, 1999, the results of its operations
for the year then ended, changes in its net assets for each of the years in
the two-year period then ended, and financial highlights for each of the years
in the three-year period then ended and the period from October 19, 1995 to
July 31, 1996, in conformity with generally accepted accounting principles.
[KPMG LLP LOGO APPEARS HERE]
Boston, Massachusetts
September 16, 1999
17
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Basic Materials--1.3%
Air Products & Chemicals, Inc. ........................... 52,300 $ 1,748,781
Alcoa, Inc................................................ 84,600 5,065,425
Battle Mountain Gold Company (b).......................... 48,100 93,194
Bemis Company, Inc........................................ 12,000 444,000
Cabot Corporation......................................... 14,600 350,400
Calgon Carbon Corporation................................. 8,100 54,675
Caraustar Industries, Inc................................. 5,200 129,350
Catalytica, Incorporated (b).............................. 5,800 72,500
Consolidated Papers, Inc. ................................ 20,700 589,950
Cyprus Amax Minerals Company.............................. 19,700 258,563
Echo Bay Mines Ltd.(b).................................... 25,000 32,811
Ecolab Inc................................................ 29,700 1,265,963
Fuller (H.B.) Company..................................... 3,100 215,450
IMCO Recycling Inc........................................ 3,100 54,056
Mead Corporation.......................................... 22,900 938,900
Minerals Technologies Inc. ............................... 4,800 257,400
Nalco Chemical Company.................................... 15,100 776,706
Nucor Corporation......................................... 19,950 967,575
Praxair, Inc. ............................................ 35,800 1,651,275
Ryerson Tull, Inc. ....................................... 6,400 136,800
Sigma-Aldrich Corporation................................. 23,100 776,738
Sonoco Products Company................................... 23,345 625,938
Westvaco Corporation...................................... 22,900 674,119
Worthington Industries, Inc............................... 20,400 298,350
------------
17,478,919
------------
Business & Professional Services--0.1%
Avery Dennison Corporation................................ 26,000 1,595,750
Dionex Corporation (b).................................... 4,900 211,619
Isco, Inc. (b)............................................ 800 4,750
Wellman, Inc.............................................. 7,000 113,312
------------
1,925,431
------------
Capital Goods--2.0%
Baldor Electric Company................................... 7,500 136,406
Case Corporation.......................................... 17,000 809,625
Cooper Industries, Inc.................................... 21,300 1,168,836
Cross (A.T.) Company (b).................................. 2,300 11,500
Crown Cork & Seal Company, Inc............................ 28,000 820,750
Cummins Engine Company, Inc............................... 9,700 627,469
Deere & Company........................................... 53,000 2,027,250
Emerson Electric Co....................................... 99,600 5,944,875
Graco Inc................................................. 4,675 144,341
Granite Construction Incorporated......................... 6,050 153,141
HON Industries, Inc....................................... 13,600 316,200
Hubbell Incorporated...................................... 14,460 596,475
Hunt Corporation.......................................... 1,600 14,200
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Capital Goods--continued
Illinois Tool Works Inc................................... 57,100 $ 4,243,244
Ionics, Inc. (b).......................................... 3,400 115,175
Lawson Products, Inc...................................... 2,300 54,625
Leggett & Platt, Inc...................................... 45,000 1,153,125
Milacron Inc.............................................. 7,800 133,575
Herman Miller, Inc. ...................................... 17,800 467,250
Molex Incorporated........................................ 35,137 1,227,599
Moore Corporation......................................... 19,400 161,263
National Service Industries, Inc.......................... 9,000 317,810
New England Business Service, Inc......................... 2,900 83,194
Pitney Bowes Inc.......................................... 61,500 3,912,938
Raychem Corporation....................................... 17,700 674,813
Smith (A.O.) Corporation.................................. 4,900 142,713
Standard Register Company................................. 6,200 180,188
Thomas & Betts Corporation................................ 12,600 570,150
Thomas Industries Inc..................................... 3,300 69,094
------------
26,277,824
------------
Consumer Cyclicals--12.0%
American Greetings Corporation............................ 15,000 440,625
Angelica Corporation...................................... 1,300 16,656
Apogee Enterprises, Inc. ................................. 5,600 55,300
AutoZone, Inc. (b)........................................ 34,200 844,312
Bandag, Incorporated...................................... 4,900 164,456
Banta Corporation......................................... 6,050 148,981
Bassett Furniture Industries.............................. 2,400 59,400
Black & Decker Corporation................................ 19,900 1,149,225
Block (H&R), Inc. ........................................ 22,100 1,207,212
Brown Shoe Company, Inc................................... 3,800 75,762
Centex Corporation........................................ 13,600 458,150
Champion Enterprises, Inc. (b)............................ 10,600 145,087
Charming Shoppes, Inc. (b)................................ 20,500 137,094
Circuit City Stores, Inc. ................................ 45,800 2,164,050
Cintas Corporation........................................ 25,200 1,615,950
Claire's Stores, Inc...................................... 11,100 263,625
Cooper Tire and Rubber Company............................ 16,600 373,500
Costco Companies Inc. (b)................................. 50,115 3,746,096
Dana Corporation.......................................... 37,600 1,569,800
Dayton Hudson Corporation................................. 101,300 6,552,844
Delphi Automotive Systems Corporation..................... 128,700 2,316,600
DeVry Inc. (b)............................................ 15,200 315,400
Dillard, Inc.............................................. 24,500 754,906
Dollar General Corporation................................ 50,201 1,327,189
Dow Jones & Company....................................... 20,700 1,032,412
Egghead.com, Inc. (b)..................................... 6,800 59,075
Enesco Group, Inc. ....................................... 3,400 72,675
</TABLE>
18
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Consumer Cyclicals--continued
Fedders Corporation....................................... 6,400 $ 42,000
Federal-Mogul Corporation................................. 16,100 780,850
Fleetwood Enterprises, Inc. .............................. 7,700 177,581
Gap, Inc. (The)........................................... 196,687 9,195,117
Genuine Parts Company..................................... 40,600 1,261,137
Gibson Greetings, Inc. (b)................................ 2,300 11,500
Handleman Company (b)..................................... 6,600 73,837
Harcourt General.......................................... 16,300 756,931
Harland (John H.) Company................................. 6,500 130,812
Harman International Industries, Inc...................... 3,930 172,920
Hartmarx Corporation (b).................................. 5,500 24,063
Hasbro, Inc. ............................................. 44,725 1,162,850
Hillenbrand Industries, Inc............................... 14,800 665,075
Home Depot, Inc. ......................................... 339,098 21,638,691
Huffy Corporation......................................... 2,500 28,125
IMS Health Incorporated................................... 72,300 2,015,363
Interface, Inc............................................ 11,000 98,313
Jostens, Inc.............................................. 7,400 149,850
Kmart Corporation (b)..................................... 112,900 1,637,050
Kaufman & Broad Home Corporation.......................... 10,500 218,531
Kelly Services, Inc. ..................................... 7,975 245,730
Lands' End, Inc. (b)...................................... 6,700 303,594
Lee Enterprises, Inc. .................................... 9,700 295,244
Lillian Vernon Corporation................................ 1,500 21,375
Limited, Inc. (The)....................................... 49,600 2,266,100
Liz Claiborne, Inc. ...................................... 14,000 543,375
Lowe's Companies, Inc. ................................... 84,700 4,467,925
Marriott International, Inc. ............................. 56,900 1,995,056
Mattel, Inc............................................... 95,085 2,234,498
May Department Stores Company............................. 77,300 2,990,544
Maytag Corporation........................................ 20,200 1,406,425
McGraw-Hill Companies, Inc................................ 45,100 2,294,463
Media General, Inc........................................ 5,900 300,163
Men's Wearhouse, Inc. (b)................................. 8,800 218,900
Meredith Corporation...................................... 11,900 427,656
Modine Manufacturing Company.............................. 6,500 208,203
New York Times Company.................................... 40,100 1,576,431
Nordstrom, Inc............................................ 32,000 1,006,000
Omnicom Group Inc......................................... 40,800 2,891,700
Oshkosh B'Gosh, Inc....................................... 3,800 64,600
Penney (J.C.) Company, Inc................................ 60,100 2,629,375
Pep Boys--Manny, Moe & Jack............................... 11,700 194,513
Phillips-Van Heusen Corporation........................... 5,700 48,450
Reebok International Ltd. (b)............................. 12,300 149,138
Rouse Company (The)....................................... 15,800 384,138
Russell Corporation....................................... 7,300 140,069
SPX Corporation (b)....................................... 6,915 587,775
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Consumer Cyclicals--continued
Scholastic Corporation (b).............................. 3,600 $ 160,650
Sears, Roebuck and Co................................... 86,800 3,515,400
Service Corporation International....................... 62,300 989,013
Shaw Industries, Inc. (b)............................... 32,300 680,319
Sherwin-Williams Company (The).......................... 38,300 1,034,100
Skyline Corporation..................................... 1,900 57,594
Snap-on Incorporated.................................... 15,050 526,750
Springs Industries, Inc................................. 4,000 159,000
Stanley Works (The)..................................... 20,300 567,131
Staples, Inc. (b)....................................... 106,100 3,063,638
Stride Rite Corporation................................. 9,700 88,513
TJ International, Inc................................... 3,300 102,300
TJX Companies, Inc...................................... 73,300 2,423,481
Tandy Corporation....................................... 44,100 2,262,881
Tennant Company......................................... 1,700 58,225
Timberland Company (The) (b)............................ 2,400 195,150
Times Mirror Company.................................... 16,500 994,125
Toro Company............................................ 2,700 95,850
Toys 'R' Us, Inc. (b)................................... 55,920 908,700
VF Corporation.......................................... 27,000 1,066,500
Venator Group, Inc. (b)................................. 30,100 316,050
Wal-Mart Stores, Inc.................................... 1,018,600 43,035,850
Washington Post Company................................. 2,300 1,299,500
Whirlpool Corporation................................... 17,200 1,233,025
------------
162,032,163
------------
Consumer Staples--15.8%
Alberto-Culver Company.................................. 12,500 319,531
Albertson's, Inc........................................ 95,900 4,765,031
Avon Products, Inc...................................... 59,600 2,711,800
Ben & Jerry's Homemade, Inc. (b)........................ 1,200 25,200
Bergen Brunswig Corporation............................. 30,736 491,776
Bestfoods............................................... 63,800 3,110,250
Bob Evans Farms, Inc.................................... 9,000 190,407
CVS Corporation......................................... 89,500 4,452,625
Campbell Soup Company................................... 99,500 4,378,000
Church & Dwight Co., Inc................................ 4,300 188,931
Clorox Company.......................................... 26,900 3,012,800
Coca-Cola Company....................................... 564,800 34,064,500
Colgate-Palmolive Company............................... 133,800 6,606,375
Comcast Corporation..................................... 169,500 6,525,750
Darden Restaurants, Inc. ............................... 29,800 650,012
Deluxe Corporation...................................... 17,900 671,250
Disney, Walt Company (The) (b).......................... 471,300 13,019,662
Donnelley (R.R.) & Sons Company......................... 29,500 1,032,500
Fleming Companies, Inc. ................................ 8,000 96,500
Fort James Corporation.................................. 50,400 1,839,600
</TABLE>
19
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Consumer Staples--continued
General Mills Incorporated................................ 34,800 $ 2,881,875
Gillette Company.......................................... 253,900 11,123,994
Great Atlantic & Pacific Tea Company, Inc................. 8,500 293,781
Hannaford Bros. Co. ...................................... 9,700 554,719
Heinz (H.J.) Company...................................... 82,000 3,864,250
Hershey Foods Corporation................................. 31,900 1,850,200
Kellogg Company........................................... 92,400 3,216,675
Kimberly-Clark Corporation................................ 121,864 7,433,704
King World Productions, Inc. (b).......................... 16,200 564,975
Kroger Co. (b)............................................ 189,100 4,975,694
Longs Drug Stores Corporation............................. 8,600 296,162
Luby's, Inc............................................... 4,600 68,137
McDonald's Corporation.................................... 310,800 12,956,475
MediaOne Group, Inc. (b).................................. 138,600 10,031,175
Nature's Sunshine Products, Inc. 3,800 35,625
Newell Rubbermaid Inc..................................... 64,378 2,784,348
Odwalla, Inc. (b)......................................... 500 3,500
Oneida Ltd................................................ 3,500 91,000
PepsiCo, Inc.............................................. 338,100 13,228,162
Procter & Gamble Company.................................. 304,100 27,521,050
Quaker Oats Company....................................... 30,800 2,096,325
Ralston Purina Company.................................... 74,200 2,221,362
Ruby Tuesday, Inc......................................... 6,600 138,600
Ryan's Family Steakhouse, Inc. (b)........................ 8,400 89,775
Smucker (J.M.) Company.................................... 6,500 157,219
Starbucks Corporation (b)................................. 40,900 950,925
SUPERVALU Inc............................................. 27,300 621,075
SYSCO Corporation......................................... 75,400 2,464,638
TCBY Enterprises, Inc. ................................... 4,100 23,063
Tootsie Roll Industries, Inc.............................. 7,420 256,918
Tupperware Corporation.................................... 12,600 297,675
Viacom, Inc. (b).......................................... 32,100 1,346,194
Walgreen Company.......................................... 229,200 6,489,225
Wendy's International, Inc. .............................. 28,200 819,563
Whitman Corporation....................................... 20,400 388,875
Whole Foods Market, Inc. (b).............................. 5,700 250,800
Wild Oats Markets, Inc. (b)............................... 2,700 98,213
Wrigley (Wm.) Jr. Company................................. 26,500 2,111,719
------------
212,750,165
------------
Financial Services--15.8%
Aetna, Inc. .............................................. 32,170 2,637,940
American Express Company.................................. 103,100 13,583,425
American General Corporation.............................. 57,462 4,446,122
American International Group, Inc. ....................... 283,550 32,927,244
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Financial Services--continued
Bank One Corporation...................................... 270,285 $ 14,747,425
BankBoston Corporation.................................... 67,700 3,177,669
CIGNA Corporation......................................... 46,600 4,109,537
Capital One Financial Corporation......................... 45,000 2,086,875
Chittenden Corporation.................................... 6,061 168,950
Chubb Corporation......................................... 40,300 2,410,444
Cincinnati Financial Corporation.......................... 37,385 1,406,611
Dime Bancorp, Inc. ....................................... 24,800 499,100
Edwards (A.G.), Inc. ..................................... 20,987 579,765
Freddie Mac............................................... 159,100 9,128,362
Fannie Mae................................................ 234,600 16,187,400
Fifth Third Bancorp....................................... 61,525 4,002,970
First Tennessee National Corporation...................... 29,400 1,076,775
Firstar Corporation....................................... 152,000 3,961,500
FirstFed Financial Corp. (b).............................. 4,000 64,000
Golden West Financial..................................... 12,700 1,218,406
HSB Group, Inc. .......................................... 6,350 258,365
Household International, Inc. ............................ 109,346 4,695,044
Jefferson-Pilot Corporation............................... 24,050 1,757,153
Lincoln National Corporation.............................. 45,700 2,285,000
MBIA Inc. ................................................ 22,700 1,299,575
MBNA Corporation.......................................... 182,950 5,214,075
MGIC Investment Corporation............................... 24,800 1,222,950
Marsh & McLennan Companies, Inc. ......................... 60,050 4,563,800
Mellon Bank Corporation................................... 118,900 4,012,875
Merrill Lynch & Co., Inc. ................................ 84,200 5,730,863
Morgan (J.P.) & Co. Incorporated.......................... 40,600 5,191,725
PNC Bank Corp. ........................................... 69,300 3,664,238
Providian Financial Corporation........................... 32,600 2,966,600
ReliaStar Financial Corp. ................................ 20,300 921,113
SLM Holding Corporation................................... 37,300 1,697,150
SAFECO Corporation........................................ 31,200 1,187,550
St. Paul Companies, Inc. (The)............................ 51,564 1,604,930
Schwab (Charles) Corporation.............................. 186,900 8,235,281
SunTrust Banks, Inc. ..................................... 73,600 4,747,200
Synovus Financial Corp. .................................. 62,050 1,136,291
Torchmark Corporation..................................... 30,100 989,538
U.S. Bancorp.............................................. 165,900 5,163,638
UnumProvident Corp. ...................................... 54,500 2,820,375
Value Line, Inc. ......................................... 2,100 83,738
Wachovia Corporation...................................... 46,200 3,606,488
Washington Mutual, Inc. .................................. 135,702 4,656,275
Wells Fargo & Company..................................... 378,300 14,753,700
Wesco Financial Corporation............................... 1,600 491,200
------------
213,377,250
------------
</TABLE>
20
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Healthcare--8.2%
Acuson Corporation........................................ 5,800 $ 101,137
ADAC Laboratories (b)..................................... 3,600 25,425
Allergan, Inc. ........................................... 15,100 1,426,950
ALZA Corporation (b)...................................... 23,100 1,123,237
Becton Dickinson and Company.............................. 56,600 1,552,962
Biomet, Inc............................................... 25,700 934,838
Boston Scientific Corporation (b)......................... 90,200 3,658,738
Forest Laboratories, Inc. (b)............................. 18,900 968,625
Guidant Corporation (b)................................... 69,200 4,052,525
Humana Inc. (b)........................................... 38,400 417,600
Johnson & Johnson......................................... 307,900 28,365,288
Mallinckrodt Inc.......................................... 16,300 552,163
McKesson HBOC, Inc........................................ 63,220 1,963,771
Medtronic, Inc............................................ 133,700 9,634,756
Merck & Co., Inc.......................................... 540,300 36,571,556
Mylan Laboratories, Inc................................... 28,700 652,925
Oxford Health Plans, Inc. (b)............................. 17,800 318,175
St. Jude Medical, Inc. (b)................................ 19,300 717,719
Schering-Plough Corporation............................... 336,900 16,508,100
Stryker Corporation (b)................................... 22,000 1,342,000
Sunrise Medical Inc. (b).................................. 3,500 23,188
United American Healthcare Corporation (b)................ 800 1,000
------------
110,912,678
------------
Industrial, Construction & Housing--0.6%
American Power Conversion (b)............................. 43,200 896,400
Ault Incorporated (b)..................................... 500 2,750
Brady Corporation......................................... 4,700 164,500
CLARCOR Inc............................................... 5,250 103,358
Fastenal Company.......................................... 8,700 514,388
Hutchinson Technology Incorporated (b).................... 5,100 134,194
Merix Corporation (b)..................................... 600 4,725
Millipore Corporation..................................... 10,100 411,575
Nordson Corporation....................................... 3,700 212,750
Osmonics, Inc. (b)........................................ 2,100 21,263
Sealed Air Corporation (b)................................ 19,100 1,227,175
Solectron Corporation (b)................................. 57,500 3,705,156
Spartan Motors, Inc....................................... 1,700 10,625
Watts Industries, Inc..................................... 5,600 100,100
------------
7,508,959
------------
Natural Resources--0.8%
Anadarko Petroleum Corporation............................ 27,200 1,038,700
Apache Corporation........................................ 25,200 1,069,425
Atlantic Richfield Company................................ 73,700 6,637,606
Helmerich & Payne, Inc.................................... 11,000 281,188
PennzEnergy Company....................................... 10,700 175,881
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Natural Resources--continued
Rowan Companies, Inc. (b)............................ 18,500 $ 348,031
Santa Fe Snyder Corporation (b)...................... 37,100 343,175
Sunoco, Inc.......................................... 20,700 631,350
------------
10,525,356
------------
Printing, Publishing & Telecommunications--3.8%
AT&T Corp............................................ 728,377 37,830,081
Citizens Utilities Company (b)....................... 59,467 706,171
Frontier Corporation................................. 39,500 2,189,781
Sprint Corporation................................... 198,000 10,234,125
------------
50,960,158
------------
Technology--29.6%
Adaptec, Inc. (b).................................... 23,600 917,450
Advanced Micro Devices, Inc. (b)..................... 32,600 560,313
Analog Devices, Inc. (b)............................. 36,600 1,578,375
Apple Computer, Inc. (b)............................. 36,300 2,021,456
Applied Materials, Inc. (b).......................... 85,400 6,143,462
Arrow Electronics, Inc. (b).......................... 21,000 447,562
Autodesk, Inc........................................ 13,100 347,150
Automatic Data Processing, Inc....................... 141,574 5,671,808
Avnet, Inc........................................... 7,700 377,300
BMC Software, Inc. (b)............................... 53,700 2,893,087
CPI Corp............................................. 2,000 67,375
Ceridian Corporation (b)............................. 32,500 910,000
Cisco Systems, Inc. (b).............................. 731,100 45,419,587
Compaq Computer Corporation.......................... 389,088 9,338,112
Computer Associates International, Inc............... 122,800 5,633,450
Compuware Corporation (b)............................ 83,800 2,325,450
Dell Computer Corporation (b)........................ 580,500 23,727,937
EMC Corporation (b).................................. 231,700 14,032,331
Gerber Scientific Inc................................ 4,700 113,094
Grainger (W.W.), Inc................................. 21,300 1,006,425
Hewlett-Packard Company.............................. 232,300 24,318,906
Ikon Office Solutions, Inc........................... 33,100 436,506
Inprise Corporation (b).............................. 10,400 45,826
Intel Corporation.................................... 759,400 52,398,600
LSI Logic Corporation (b)............................ 32,700 1,645,218
Lucent Technologies, Inc............................. 695,800 45,270,487
Microsoft Corporation................................ 1,168,200 100,246,163
Micron Technology, Inc. (b).......................... 57,100 3,547,338
National Semiconductor Corporation (b)............... 37,900 938,025
Novell, Inc. (b)..................................... 76,600 1,972,450
PE Corp-PE Biosystems Group (b)...................... 5,650 149,725
PeopleSoft, Inc. (b)................................. 55,100 750,738
Polaroid Corporation................................. 9,600 220,800
QRS Corporation (b).................................. 2,700 146,138
</TABLE>
21
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Technology--continued
Scientific-Atlanta, Inc................................... 17,100 $ 624,150
Shared Medical Systems Corporation........................ 5,900 353,263
Sun Microsystems, Inc. (b)................................ 177,100 12,020,663
Symantec Corporation (b).................................. 12,100 366,025
Tektronix, Inc............................................ 10,200 323,213
Tellabs, Inc. (b)......................................... 89,600 5,516,000
Texas Instruments Incorporated............................ 89,700 12,916,800
3Com Corporation (b)...................................... 82,600 1,992,725
Xilinx, Inc. (b).......................................... 33,000 2,058,375
Xerox Corporation......................................... 151,400 7,380,750
------------
399,170,608
------------
Transportation--1.1%
AMR Corporation........................................... 40,200 2,607,975
Airborne Freight Corporation.............................. 10,700 266,831
Alaska Air Group, Inc. (b)................................ 5,800 257,375
Consolidated Freightways
Corporation (b).......................................... 4,700 49,644
Delta Air Lines, Inc. .................................... 32,000 1,908,000
FDX Holding Corporation (b)............................... 67,800 3,038,288
GATX Corporation.......................................... 11,300 450,587
Norfolk Southern Corporation.............................. 86,600 2,533,050
Roadway Express, Inc...................................... 4,300 93,794
Ryder System, Inc. ....................................... 15,700 369,931
Southwest Airlines Co..................................... 114,775 2,123,338
UAL Corporation (b)....................................... 11,900 754,906
Yellow Corporation (b).................................... 5,400 92,475
------------
14,546,194
------------
Utilities--8.8%
AGL Resources Inc......................................... 12,600 237,825
American Water Works, Inc................................. 21,400 640,662
Ameritech Corporation..................................... 251,500 18,422,375
Aquarion Company.......................................... 2,250 78,750
Bell Atlantic Corporation................................. 355,322 22,651,777
BellSouth Corporation..................................... 433,500 20,808,000
Cleco Corporation......................................... 4,700 150,988
Cascade Natural Gas Corporation........................... 2,000 35,875
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Utilities--continued
Connecticut Energy Corporation........................ 2,200 $ 84,150
Consolidated Natural Gas Company...................... 21,800 1,365,225
Eastern Enterprises................................... 5,000 194,687
El Paso Energy Corporation............................ 27,800 995,587
Energen Corporation................................... 6,200 116,250
Enron Corp. .......................................... 80,700 6,874,631
Equitable Resources, Inc. ............................ 7,600 281,675
IDACORP Inc........................................... 8,200 253,687
KeySpan Corporation................................... 32,700 907,425
LG&E Energy Corp...................................... 29,700 642,263
MCN Energy Group, Inc. ............................... 18,300 390,019
New Century Energies, Inc............................. 25,900 898,406
NICOR Inc............................................. 10,400 401,700
Northwest Natural Gas Company......................... 5,200 137,150
Northwestern Corporation.............................. 4,800 120,000
OGE Energy Corp....................................... 17,800 421,638
Peoples Energy Corporation............................ 7,900 290,819
Potomac Electric Power Company........................ 27,100 777,431
Questar Corporation................................... 18,100 340,506
SBC Communications Inc................................ 449,458 25,703,380
Sonat Inc............................................. 25,200 886,725
Telephone and Data Systems, Inc....................... 13,700 1,018,938
Union Pacific Resources Group, Inc.................... 56,800 1,011,750
U S West, Inc......................................... 114,941 6,587,556
Washington Gas Light Company.......................... 10,100 281,538
Williams Companies, Inc............................... 98,700 4,151,641
--------------
118,161,029
--------------
Total Investments (a)--99.9%.................................. $1,345,626,734
Other Assets, less liabilities--0.1%.......................... 1,778,047
--------------
NET ASSETS--100.0%............................................ $1,347,404,781
==============
</TABLE>
- -------
(a) The aggregate cost for book and federal income tax purposes is
$1,006,703,336, the aggregate gross unrealized appreciation is
$357,620,142, and the aggregate gross unrealized depreciation is
$18,696,744, resulting in net unrealized appreciation of $338,923,398.
(b) Non-income producing security.
22
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $1,006,703,336) $1,345,626,734
Cash 7,020,013
Receivable for securities sold 1,738,780
Dividends receivable 1,282,406
--------------
Total assets 1,355,667,933
--------------
LIABILITIES:
Payable for securities purchased 8,037,683
Accrued expenses (Note 2) 225,469
--------------
Total liabilities 8,263,152
--------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $1,347,404,781
==============
</TABLE>
STATEMENT OF OPERATIONS
Year ended July 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of
$440) $ 9,845,270
------------
EXPENSES:
Management fee (Note 2) 1,901,529
Professional fees 65,407
Custody fees (Note 3) 367,440
Trustee fees 5,000
Miscellaneous 2,356
------------
Total expenses 2,341,732
Fees paid indirectly (345,517)
Expenses paid and fee waived by manager (109,912)
------------
Net expenses 1,886,303
------------
NET INVESTMENT INCOME 7,958,967
NET REALIZED GAIN ON INVESTMENTS
Proceeds from sales $ 86,482,202
Cost of securities sold 70,606,930
------------
Net realized gain on investments 15,875,272
NET CHANGES IN UNREALIZED APPRECIATION OF IN-
VESTMENTS
Beginning of year $175,720,768
End of year 338,923,398
------------
Net change in unrealized appreciation 163,202,630
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERA-
TIONS $187,036,869
============
</TABLE>
See Notes to Financial Statements
23
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 1999 July 31, 1998
-------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 7,958,967 $ 4,628,319
Net realized gain on investments 15,875,272 4,836,426
Net change in unrealized appreciation of in-
vestments 163,202,630 84,559,360
-------------- ------------
Net Increase in Net Assets Resulting from Oper-
ations 187,036,869 94,024,105
-------------- ------------
Transactions in Investors' Beneficial Interest:
Additions 531,746,685 267,044,708
Reductions (13,614,408) (11,192,148)
-------------- ------------
Net Increase in Net Assets from Transactions in
Investors' Beneficial Interests 518,132,277 255,852,560
-------------- ------------
Total Increase in Net Assets 705,169,146 349,876,665
NET ASSETS:
Beginning of year 642,235,635 292,358,970
-------------- ------------
End of year $1,347,404,781 $642,235,635
============== ============
</TABLE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Assets (000's) $1,347,405 $642,236 $292,359 $100,401 $54,003
Ratio of net investment
income to average net
assets 0.84%(/1/) 1.05%(/2/) 1.34% 1.48%(/4/) 1.85%(/5/)
Ratio of expenses to av-
erage net assets 0.24%(/1/)(/3/) 0.24%(/2/)(/3/) 0.29%(/3/) 0.59%(/3/)(/4/) 0.43%(/5/)
Portfolio turnover rate 8% 5% 1% 5% 6%
</TABLE>
- --------
(/1/)Reflects a voluntary expense reimbursement and fee waiver of 0.01% by the
Manager. Had the manager not waived their fee and reimbursed expenses,
the annualized ratios of net investment income and expense to average net
assets for the year ended July 31, 1999 would have been 0.83% and 0.25%,
respectively.
(/2/)Reflects a waiver of 0.01% of fees by the Manager due to limitations set
forth in the Management Agreement. Had the Manager not waived their fees,
the ratios of net investment income and expenses to average net assets
for the year ended July 31, 1998 would have been 1.04% and 0.25%,
respectively.
(/3/)Ratio of expenses to average net assets for the years ended July 31,
1999, 1998, 1997 and 1996 include indirectly paid expenses. Excluding
indirectly paid expenses, the expense ratios would have been 0.20%,
0.20%, 0.25% and 0.50% for the years ended July 31, 1999, 1998, 1997 and
1996, respectively.
(/4/)Had the Expense Payment Agreement and Sponsor Arrangement not been in
place, the ratios of net investment income and expense for the years
ended July 31, 1996 would have been 1.14% and 0.85% respectively.
(/5/)Reflects a voluntary waiver of fees by the Administrator and Adviser due
to the limitations set forth in the Expense Reimbursement Agreement. Had
the Administrator and Adviser not waived their fees, the ratios of net
investment income and expenses to average net assets for the year ended
July 31, 1995 would have been 1.75% and 0.53% respectively.
See Notes to Financial Statements
24
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO/July 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Domini Social Index Portfolio (the "Index Portfolio") is registered under
the Investment Company Act of 1940 (the "Act") as a no-load, diversified,
open-end management investment company which was organized as a trust under
the laws of the State of New York on June 7, 1989. The Index Portfolio intends
to correlate its investment portfolio as closely as is practicable with the
Domini 400 Social Index (the "Index"), which is a common stock index developed
and maintained by Kinder, Lydenberg, Domini & Co., Inc. ("KLD"). The Declara-
tion of Trust permits the Trustees to issue an unlimited number of beneficial
interests in the Index Portfolio. The Index Portfolio commenced operations
upon effectiveness on August 10, 1990 and began investment operations on June
3, 1991.
The preparation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sure of contingent assets and liabilities at the date of the financial state-
ments and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of the Index Portfolio's significant accounting policies.
(A) Valuation of Investments: The Index Portfolio values securities at the
last reported sale price, or at the last reported bid price if no sales are
reported.
(B) Dividend Income: Dividend income is reported on the ex-dividend date.
(C) Federal Taxes: The Index Portfolio will be treated as a partnership for
U.S. federal income tax purposes and is therefore not subject to U.S. federal
income tax. As such, each investor in the Index Portfolio will be taxed on its
share of the Index Portfolio's ordinary income and capital gains. It is in-
tended that the Portfolio will be managed in such a way that an investor will
be able to satisfy the requirements of the Internal Revenue Code applicable to
regulated investment companies.
(D) Other: Investment transactions are accounted for on the trade date.
Gains and losses are determined on the basis of identified cost.
2. Transactions With Affiliates
(A) Manager. Domini Social Investments LLC ("DSIL" or the "Manager") is reg-
istered as an investment adviser under the Investment Advisers Act of 1940.
The services provided by the Manager consist of investment supervisory servic-
es, overall operational support and administrative services. The administra-
tive services include the provision of general office facilities and supervis-
ing the overall administration of the Index Portfolio. For its services under
the Management Agreement, the Manager receives from the Index Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.20%. Currently,
DSIL is waiving its fee to the extent necessary to keep aggregate annual oper-
ating expenses of the Index Portfolio (excluding brokerage fees and commis-
sions, interest, taxes and other extraordinary expenses) at no greater than
0.20% of the average daily net assets of the Index Portfolio. This fee waiver
is voluntary and may be reduced or terminated at any time.
(B) Submanager. Mellon Equity provides investment submanagement services to
the Index Portfolio on a day-to-day basis pursuant to a Submanagement Agree-
ment with DSIL. Mellon Equity does not determine the composition of the Domini
Social Index. Under the Submanagement Agreement, DSIL pays Mellon Equity an
investment submanagement fee equal, on an annual basis, to 0.10% of the aver-
age daily net assets of the Portfolio.
25
<PAGE>
DOMINI SOCIAL INDEX PORTFOLIO/July 31, 1999
NOTES TO FINANCIAL STATEMENTS--Continued
3. Investment Transactions
Cost of purchases and sales of investments, other than U.S. Government secu-
rities and short-term obligations, for the year ended July 31, 1999 aggregated
$609,803,880 and $86,482,202, respectively. Custody fees of the Portfolio were
reduced by $345,517 which was compensation for uninvested cash left on deposit
with the custodian.
26
<PAGE>
[KPMG LOGO APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors
Domini Social Index Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Domini Social Index Portfolio as of
July 31, 1999, the related statement of operations for the year then ended, and
the statements of changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Domini Social Index Portfolio as of July 31, 1999, the results of its
operations for the year then ended, changes in its net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
[KPMG LLP LOGO APPEARS HERE]
Boston, Massachusetts
August 25, 1999
27
<PAGE>
[RECYCLE LOGO APPEARS HERE]
Printed using Soy Inks
DEVCAP
Shared Return Fund
Changing the Way the World Works
ANNUAL REPORT
JULY 31, 1999
[LOGO OF DEVCAP APPEARS HERE]
