-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PZt3oPvNhtX4G/6ADTnw62xRjmjIb/9Zda5fg1JbL+twQkc9gO96k4/sixiRhEYT 6GMfYjBhg2LnAFUHiyQj5Q== 0000922326-95-000055.txt : 19951124 0000922326-95-000055.hdr.sgml : 19951124 ACCESSION NUMBER: 0000922326-95-000055 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19951122 EFFECTIVENESS DATE: 19951128 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOMINI SOCIAL EQUITY FUND CENTRAL INDEX KEY: 0000851680 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 043081258 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-29180 FILM NUMBER: 95595679 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05823 FILM NUMBER: 95595680 BUSINESS ADDRESS: STREET 1: 6 ST JAMES AVE STREET 2: SIGNATURE BROKER DEALER SERVICES INC CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6174230800 FORMER COMPANY: FORMER CONFORMED NAME: DOMINI SOCIAL INDEX TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DOMINI SOCIAL INDEX FUND DATE OF NAME CHANGE: 19900624 485BPOS 1 PEA NO. 7 DOMINI SOCIAL EQUITY FUND As filed with the Securities and Exchange Commission on November 22, 1995 Registration Nos. 33-29180, 811-5823 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 POST-EFFECTIVE AMENDMENT NO. 7 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 9 DOMINI SOCIAL EQUITY FUND (Exact Name of Registrant as Specified in Charter) 6 St. James Avenue, Boston, Massachusetts 02116 (Address of Principal Executive Offices) Registrant's Telephone Number, including Area Code: 617-423-0800 Philip W. Coolidge, Esq. Signature Broker-Dealer Services, Inc. 6 St. James Avenue Boston, Massachusetts 02116 (Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on November 28, 1995 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. Registrant has registered an indefinite number of its shares of beneficial interest (without par value) pursuant to Rule 24f-2 under the Investment Company Act of 1940. Registrant filed the Notice required by Rule 24f-2 on September 22, 1995 for Registrant's fiscal year ended July 31, 1995. Domini Social Index Portfolio has also executed this registration statement. DSI201.EDG
DOMINI SOCIAL EQUITY FUND CROSS REFERENCE SHEET (As required by Rule 495) Item Number Statement of Additional Form N-1A, Part A Prospectus Caption Information Caption 1 Front Cover Page * 2 Expense Summary * 3 Financial Highlights; * Performance Information 4 Front Cover Page; Investment * Objective and Policies 5 The Fund; Management; * Adviser, Manager, Administrator; Service Organizations, Transfer Agent and Custodian; Back Cover Page; Other Information Concerning Shares of the Fund-Expenses 5A Not Applicable 6 Other Information Concerning Shares * of the Fund-Description of Shares, Voting Rights and Liabilities; Service Organizations, Transfer Agent and Custodian; Other Information Concerning Shares of the Fund-Dividends and Capital Gain Distributions; Tax Matters 7 Purchases and Redemptions of Shares; * Purchases; Other Information Concerning Shares of the Fund, Net Asset Value, Distribution Plan and Agreement; Service Organizations, Transfer Agent and Custodian; 8 Purchases and Redemptions of Shares- * Redemptions 9 Not Applicable * Item Number Statement of Additional Form N-1A, Part B Prospectus Caption Information Caption 10 * Front Cover Page 11 * Front Cover Page 12 * The Fund 13 Investment Objectives and Investment Objectives, Policies Policies and Restrictions 14 * Management of the Fund and Portfolio-Trustees, Officers 15 * Management of the Fund and Portfolio-Trustees, Officers 16 Other Information Concerning Management of the Fund Shares of the Fund-Expenses and the Portfolio- Administrator Management of the Fund- Management of the Fund Administrator and the Portfolio- Administrator Purchases and Redemptions of Management of the Fund and Shares-Distribution Plan the Portfolio- and Agreement Distributor Service Organizations, Transfer Management of the Fund and Agent and Custodian- Portfolio-Administrative Transfer Agent and Custodian; Services Plan; Transfer Back Cover Page Agent, Custodian and Service Organizations; Independent Auditors; Back Cover Page * Management of the Fund and the Portfolio- Distributor 17 * Investment Objectives, Policies and Restrictions-Security Transactions 18 Other Information Concerning Description of Shares- Shares of the Fund- Voting Rights and Description of Shares, Liabilities Voting Rights and Liabilities 19 Purchases and Redemptions of Not Applicable Shares Other Information Concerning Determination of Net Asset Shares of the Fund-Net Value Asset Value; Purchases and Redemptions of Shares 20 Tax Matters Taxation 21 * Management of the Fund and the Portfolio- Distributor * Management of the Fund and the Portfolio- Distributor * Not Applicable 22 * Performance Information 23 * Financial Statements
Form N-1A, Part C Information required to be included in Part C is set forth under the appropriately numbered item in Part C of this registration statement. PROSPECTUS November 28, 1995 DOMINI SOCIAL EQUITY FUND The investment objective of the Domini Social Equity Fund (the "Fund") is to provide its shareholders with long-term total return which corresponds to the total return performance of the Domini Social IndexSM, an index comprised of stocks selected according to social criteria. 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 Social IndexSM. TABLE OF CONTENTS PAGE The Fund............................................................. Expense Summary...................................................... Financial Highlights................................................. Performance Information.............................................. Investment Objective and Policies.................................... Management .......................................................... Purchases and Redemptions of Shares.................................. Tax Matters.......................................................... Other Information Concerning Shares of the Fund...................... Service Organizations, Transfer Agent and Custodian.................. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The investment adviser of the Portfolio is Kinder, Lydenberg, Domini & Co., Inc. The investment manager of the Portfolio is Mellon Equity Associates. The administrator and distributor of the Fund, and the administrator of the Portfolio, is Signature Broker-Dealer Services, Inc. INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK, AND THE SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL, STATE OR OTHER GOVERNMENTAL AGENCY. "DominiSM" and "Domini Social IndexSM" 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 28, 1995 as amended from time to time, which contains more detailed information about the Fund and is incorporated into this Prospectus by reference. An investor may obtain a copy of the Statement of Additional Information without charge by contacting the Distributor (see back cover for address and phone number). UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN THE PORTFOLIO. THE FUND INVESTS IN THE PORTFOLIO THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) INVESTMENT FUND STRUCTURE. "HUB AND SPOKE(R) " IS A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE "SPECIAL INFORMATION CONCERNING THE HUB AND SPOKE(R) STRUCTURE" HEREIN. INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE. THE FUND Domini Social Equity Fund (the "Fund") is a no-load, diversified, open-end management investment company which was organized as a business trust under the laws of the Commonwealth of Massachusetts on June 7, 1989. Although shares of the Fund are sold without a sales load, Signature Broker-Dealer Services, Inc. ("Signature") may receive a distribution fee from the Fund pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund offers to buy back (redeem) its shares from its shareholders at any time at net asset value. Shares of the Fund are sold continuously by Signature, the Fund's distributor (the "Distributor"). The minimum initial investment is $1,000, except that the minimum initial investment for an Individual Retirement Account ("IRA") 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 of Shares" 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. Kinder, Lydenberg, Domini & Co., Inc. ("KLD") is the Portfolio's investment adviser (the "Adviser"). Mellon Equity Associates ("Mellon Equity") is the Portfolio's investment manager (the "Manager"). Signature, the administrator of the Fund (the "Administrator") and of the Portfolio (the "Portfolio Administrator"), supervises the overall administration of the Fund and of the Portfolio. The Boards of Trustees of the Fund and of the Portfolio provide broad supervision over the affairs of the Fund and of the Portfolio, respectively. The Trustees who are not "interested persons" of the Fund 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 Fund and the Portfolio, see "Management of the Fund and the Portfolio" in the Statement of Additional Information. A majority of the Fund's Trustees are not affiliated with the Adviser. The Adviser determines the composition of the Domini Social Index. The following persons are primarily responsible for the development and maintenance of the Domini Social Index (which determines the composition of the Portfolio's securities) : Steven D. Lydenberg, Director of Research, KLD, since 1990 ; and Peter D. Kinder, President, KLD, since 1988. The Manager manages the investments of the Portfolio from day to day in accordance with the Portfolio's investment objective and policies. The Fund is obligated to pay a fee to the Administrator at an annual rate equal to 0.15% of the Fund's average daily net assets, and the Fund may pay a fee to the Distributor up to an annual rate equal to 0.25% of the Fund's average daily net assets, in each case calculated on an annualized basis for the Fund's then-current fiscal year. The Portfolio is obligated to pay a fee to the Adviser at an annual rate equal to 0.05% of the Portfolio's average daily net assets and a fee to the Portfolio Administrator at an annual rate equal to 0.05% of the Portfolio's average daily net assets, in each case on an annualized basis for the Portfolio's then-current fiscal year. The Portfolio is obligated to pay a fee to the Manager equal on an annual basis to the following percentages of the Portfolio's average daily net assets for its then-current fiscal year: 0.10% of assets up to $50 million; 0.30% of assets between $50 million and 2 $100 million; 0.20% of assets between $100 million and $500 million; and 0.15% of assets over $500 million. See "Management - Manager" herein for more detailed information on the fees of the Manager. The Fund and the Portfolio must also pay all of their respective other expenses. EXPENSE SUMMARY The following table provides (i) a summary of 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 expenses on a $1,000 investment in the Fund. SHAREHOLDER TRANSACTION EXPENSES.............................. 0% ANNUAL OPERATING EXPENSES: Advisory and Management Fees.......................... 0.25% 12b-1 Fees............................................ 0% Other Expenses - Administrative Services Fees...................... 0.20% - Expense Payment Fees.............................. 0.53% Total Operating Expenses.............................. 0.98% 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: 3 1 year............................................. $10 3 years............................................ $31 5 years............................................ $54 10 years........................................... $120 The purpose of the expense table provided above is to help investors understand the various costs and expenses that a shareholder will bear directly or indirectly. Pursuant to expense payment arrangements between Signature and each of the Fund and the Portfolio , Signature pays all of the operating expenses of the Fund and the Portfolio , including the advisory, management and administrative services fees. Under these arrangements, Signature receives expense payment fees (i) from the Fund, at an annual rate equal to 0.48% of the Fund's average daily net assets for its then-current fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of the Portfolio's average daily net assets for its then-current fiscal year. As a result, the aggregate annual operating expenses (including amortization of organization expenses) of the Fund and the Portfolio will not exceed 0.98% of the average daily net assets of the Fund. All of the advisory, management and administrative services fees shown above are paid through the expense payment arrangements. After the expense payment arrangements terminate on December 31, 1999, the dollar-based expenses of the Fund and the Portfolio will each be paid directly. For more information with respect to the expenses of the Fund and the Portfolio , see "Management" herein. The Fund may pay 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 Fund may pay fees to Service Organizations (as defined below) in amounts up to an annual rate of 0.25% 4 of the daily net asset value of shares of the Fund owned by shareholders with whom the Service Organization has a servicing relationship. The Fund does not currently intend to enter into agreements with and pay fees to Service Organizations, but it may do so in the future. See "Other Information Concerning Shares of the Fund - Distribution Plan and Agreement" and "Service Organizations, Transfer Agent and Custodian" herein. 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 Fund'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 selected data for a share outstanding for the indicated periods have been audited by KPMG Peat Marwick LLP, independent certified public accountants, whose reports thereon appear in the Statement of Additional Information. This information should be read in conjunction with the financial statements included in the Statement of Additional Information. The Fund's Annual Report includes a discussion of those factors, strategies and techniques that materially affected the Fund's performance during the fiscal year ended July 31, 1995, as well as certain related information. A copy of the Annual Report will be made available without charge upon request.
FOR THE FISCAL YEARS ENDED JULY 31 For the Period August 10, 1990 1995 1994 1993 1992 TO JULY 31, 1991 ---- ---- ---- ---- ---------------- Net Asset Value, beginning of period.............. $12.13 $12.00 $11.06 $9.95 $10.00 Income from investment operations: Net investment income........... 0.172 0.175 0.137 0.117 0.018 Net realized and unrealized gain (loss) on investments...... 2.825 0.178(a) 0.968 1.106 (0.068)(a) 5 Total from investment operations.......... 2.997 0.353 1.105 1.223 (0.050) Less distributions: Dividends to shareholders from net investment income........... (0.195) (0.150) (0.150) (0.113) - Dividends to shareholders from realized capital gains.... (0.082) (0.073) (0.015) - - Total distributions.... (0.277) (0.223) (0.165) (0.113) - Net asset value, end of period....... $14.85 $12.13 $12.00 $11.06 $9.95 Total return........... 25.10% 2.90% 10.00% 12.30% (0.50)% Ratios/supplemental data: Net assets, end of period (in 000's)....... $54,638 $31,369 $17,229 $7,174 $1,740 Ratio of expenses to average net assets(c)........ 0.90% 0.75% 0.75% 0.75% 0.75%(b) Ratio of net investment income to average net assets(c)........ 1.38% 1.67% 1.41% 1.53% 1.49%(b)
- ----------- (a) After effect of transaction in capital stock. (b) Annualized. (c) Includes the Fund's share of Domini Social Index Portfolio's expenses as well as a waiver of fees and payment of expenses by the Administrator. Without the limitations set forth in the expense payment arrangements and fee waivers in effect during the indicated periods, the ratios of net investment income and expenses to average net assets for the fiscal years ended July 31, 1995, 1994, 1993, 1992, and the period ended July 31, 1991 would have been 1.13% and 1.15%, 1.39% and 1.03%, 1.26% and 0.90%, 6 1.53% and 0.75%, and 1.49% and 0.75%, respectively. For more information with respect to the expense payment arrangements, see "Other Information Concerning Shares of the Fund-Expenses" herein. PERFORMANCE INFORMATION Performance information concerning the Fund may from time to time be used in advertisements, shareholder reports or other communications to shareholders. The Fund 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 gains distributions declared during such period. Period total rates of return may be annualized. An annualized total rate of return is a compounded total rate of return which assumes that the period total rate of return is generated over a 52-week period, and that all dividends and capital gains distributions are reinvested. An annualized total rate of return will be slightly higher than a period total rate of return if the period is shorter than one year, because of the effect of compounding. The Fund may provide "yield" quotations with respect to the Fund. The "yield" of the Fund refers to the income generated by an investment in the Fund over a 30-day or one-month period (which period shall be stated in any advertisement or communications with a shareholder). This income is then "annualized", that is, the amount of income generated by the investment over the period is assumed to be generated over a 52-week period and is shown as a percentage of investment. A "yield" quotation, unlike a total rate of return quotation, does not reflect changes in net asset value. From time to time the Fund 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 Standard & Poor's Corporation. See the Statement of Additional Information for further information concerning the calculation of yield and any total rate of return quotations. Since the Fund's yield and total rate of return quotations are based on historical earnings and since such yield and rates of return fluctuate over the time, such quotations should not be considered as an indication or representation of the future performance of the Fund. INVESTMENT OBJECTIVE AND POLICIES INVESTMENT OBJECTIVE - The investment objective of the Fund is to provide its shareholders with long-term total return (reflecting both dividend and price performance of the Fund) which corresponds to the total return performance of the Domini Social Index (sometimes referred to herein as the "Index"). There can, of course, be no assurance that the Fund will achieve its investment objective. The investment objective of the Fund may be changed without approval by the Fund's shareholders. 7 INVESTMENT POLICIES - The Fund seeks to achieve its investment objective by investing all of its investable assets in the Portfolio, which has the same investment objective as the Fund. The Portfolio seeks to achieve its investment objective by investing in the common stocks comprising the Domini Social Index. The Portfolio will approximate the weightings of securities held by the Portfolio to the weightings of the stocks in the Index, except as described below, and will seek a correlation between the weightings of securities held by the Portfolio and the weightings of the stocks in the Index of 0.95 or better. A figure of 1.0 would indicate a perfect correlation. As of September 30, 1995, the correlation between the weightings of securities held by the Portfolio and the weightings of the stocks in the Index was 0.99. To the extent practicable, the Portfolio will attempt to be fully invested. The ability of the Fund to duplicate the performance of the Domini Social Index by investing in the Portfolio will depend to some extent on the size and timing of cash flows into and out of the Fund and the Portfolio as well as the Fund's and the Portfolio's expenses. Adjustments in the securities holdings of the Portfolio to accommodate cash flows will track the Domini Social Index to the extent practicable, but this will result in brokerage expenses. SOCIAL CRITERIA - The Domini Social Index is a common stock index developed and maintained by the Adviser comprised of the common 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 Domini Social Index involve subjective judgment by the Adviser. The Adviser seeks to exclude companies which, based on data available to the Adviser, derive more than 2% of their gross revenues from the sale of military weapons; derive any revenues from the manufacture of tobacco products or alcoholic beverages; derive any revenues from gambling enterprises; or own directly or operate nuclear power plants or participate in businesses related to the nuclear fuel cycle. In evaluating stocks for inclusion in the Index, the Adviser considers criteria such as environmental performance, particularly in taking positive initiatives in environmental matters; its employee relations; its corporate citizenship; and the quality of a company's products and its attitudes with regard to consumer issues. Environmental performance includes a company's record on waste disposal, toxic emissions, fines or penalties, and efforts in waste and emissions reductions, recycling, and the use of environmentally beneficial fuels. Corporate citizenship includes a company's record on philanthropic activities and its interaction with the communities it affects. Employee relations includes a company's record with regard to labor matters, its commitment to work place safety and to equal employment opportunity (reflected, for example, in the number of women and minorities in executive positions), the breadth, quality and innovation of its employee benefit programs, and its commitment to provide employees with a meaningful participation in company profits either through stock purchase or profit sharing plans. The Adviser intends to vote proxies of companies included in the Portfolio consistent with the social criteria used in developing and maintaining the Index. INDEX MANAGEMENT - The Portfolio is not managed in the traditional investment sense, since changes in the composition of its securities holdings are made in order to track the changes in the composition of securities included in the Index. Moreover, inclusion of a stock in the Domini Social Index does not imply an opinion by the Adviser as to the merits of that specific stock as an investment. However, the Adviser believes that enterprises which exhibit a social awareness, based on the criteria described above, should be better prepared to meet future societal needs for goods and services and may 8 also be less likely to incur certain legal liabilities that may be incurred when a product or service is determined to be harmful, and that such enterprises should over the longer term be able to provide a positive return to investors. In selecting stocks for inclusion in the Index: 1. The Adviser evaluated, in accordance with the social criteria described above, each of the companies the stocks of which comprise the S&P 500. If a company whose stock was included in the S&P 500 met the Adviser's social criteria and met the Adviser's further criteria for industry diversification, financial solvency, market capitalization, and minimal portfolio turnover, it was included in the Domini Social Index. As of September 30, 1995, of the 500 companies whose stocks comprised the S&P 500, approximately 51% were included in the Index. 2. The remaining stocks comprising the Domini Social Index (I.E., those which are not included in the S&P 500) were selected based upon the Adviser's evaluation of the social criteria described above, as well as upon the Adviser's criteria for industry diversification, financial solvency, market capitalization, and minimal portfolio turnover. Because of the social criteria applied in the selection of stocks comprising the Domini Social Index, industry sector weighting in the Domini Social Index may vary materially from the industry weightings in other stock indices, including the S&P 500, and certain industry sectors will be excluded altogether. The component stocks of the S&P 500 are chosen by Standard & Poor's Corporation ("S&P") solely with the aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the New York Stock Exchange common stock population, taken as the assumed model for the composition of the total market. Construction of the S&P 500 by S&P proceeds from industry groups to the whole. 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 September 30, 1995 represented 76% 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 IndexSM may be stocks of foreign issuers (provided that the stocks are traded in the United States in the form of American Depositary Receipts or similar instruments the market for which is denominated in United States dollars). Securities of foreign issuers may represent a greater degree of risk (I.E., as a result of exchange rate fluctuation, tax provisions, war or expropriation) than do securities of domestic issuers. The weightings of stocks in the Domini Social Index are based on each stock's relative total market capitalization, (I.E., market price per share times the number of shares outstanding). Because of this weighting, as of September 30, 1995 approximately 38% of the Domini Social Index was comprised of the 20 largest companies in that Index. 9 The Adviser may exclude from the Domini Social Index stocks issued by companies which are in bankruptcy or whose bankruptcy the Adviser believes may be imminent. The Portfolio intends to readjust its securities holdings periodically such that those holdings will correspond, to the extent reasonably practicable, to the Domini Social Index both in terms of composition and weighting. The timing and extent of adjustments in the holdings of the Portfolio, and the extent of the correlation of the holdings of the Portfolio with the Domini Social Index, will reflect the Manager's judgment as to the appropriate balance between the goal of correlating the holdings of the Portfolio with the composition of the Index, and the goals of minimizing transaction costs and keeping sufficient reserves available for anticipated redemptions of shares. To the extent practicable, the Portfolio will seek a correlation between the weightings of securities held by the Portfolio to the weightings of the securities in the Index of 0.95 or better. Subject to the goal of achieving a 0.95 or better correlation between the weightings of the securities held by the Portfolio and the weightings of the securities in the Index, the Manager may slightly overweight and/or underweight certain holdings of the Portfolio compared to the Index in an effort to enhance the performance of the Portfolio to help offset the expenses of the Portfolio and the Fund and the effect of the size and timing of cash flows into and out of the Portfolio and the Fund. There can be no assurances, of course, that such portfolio enhancement strategies will be successful, and the performance of the Portfolio may as a result be worse than if such strategies were not undertaken. The Board of Trustees of the Portfolio will receive and review, at least quarterly, a report prepared by the Manager comparing the performance of the Fund and the Portfolio with that of the Index, and comparing the composition and weighting of the Portfolio's holdings with those of the Index, and will consider what action, if any, should be taken in the event of a significant variation between the performance of the Fund or the Portfolio, as the case may be, and that of the Index, or between the composition and weighting of the Portfolio's securities holdings with those of the stocks comprising the Index. If the correlation between the weightings of securities held by the Portfolio and the weightings of the stocks in the Index falls below 0.95, the Board of Trustees will review with the Manager methods for increasing such correlation, such as through adjustments in securities holdings of the Portfolio. The Portfolio may invest cash reserves in short-term debt securities (I.E., securities having a remaining maturity of one year or less) issued by agencies or instrumentalities of the United States Government, bankers' acceptances, commercial paper or certificates of deposit, provided that the issuer satisfies the Adviser's social criteria. The Portfolio does not currently intend to invest in direct obligations of the United States Government. Short-term debt securities purchased by the Portfolio will be rated at least Prime-1 by Moody's Investors Service, Inc. or A-1+ or A-1 by S&P or, if not rated, determined to be of comparable quality by the Portfolio's Board of Trustees. The Portfolio's policy is to hold its 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. Frequent changes in the Portfolio's holdings may result from the policy of attempting to correlate the Portfolio's securities holdings with the composition of the Index, and the frequency of such changes will increase as the rate and volume of purchases and redemptions of shares of the Portfolio increases. 10 The annual portfolio turnover rates of the Portfolio for the fiscal years ended July 31, 1994 and July 31, 1995 were 8% and 6%, respectively. The Portfolio's primary consideration in placing securities transactions with broker-dealers for execution is to obtain, and maintain the availability of, execution at the most favorable prices and in the most effective manner possible. Neither the Portfolio nor the Fund will engage in brokerage transactions with the Adviser, the Manager or the Administrator or any of their respective affiliates or any affiliate of the Fund or the Portfolio. For further discussion regarding securities trading by the Portfolio, see the Statement of Additional Information. Consistent with applicable regulatory policies, including those of the Board of Governors of the Federal Reserve System and the Securities and Exchange Commission, the Portfolio may make loans of its securities to member banks of the Federal Reserve System and to broker-dealers. Such loans would be required to be secured continuously by collateral and cash or cash equivalents maintained on a current basis at an amount at least equal to the market value of the securities loaned. The Portfolio would have the right to call a loan and obtain the securities loaned at any time on five days' notice. During the existence of a loan, the Portfolio would continue to collect the equivalent of the dividends paid by the issuer on the securities loaned and would also receive interest on investment of cash collateral. The Portfolio may pay finder's and other fees in connection with securities loans. Loans of securities involve a risk that the borrower may fail to return the securities or may fail to provide additional collateral. Although it has no current intention to do so, the Portfolio may make short sales of securities or maintain a short position, if at all times when a short position is open the Portfolio owns an equal amount of such securities, or securities convertible into such securities. SPECIAL INFORMATION CONCERNING THE HUB AND SPOKE(R) STRUCTURE The Fund and the Portfolio are utilizing certain proprietary rights, know-how and financial services referred to as Hub and Spoke(R) from Signature Financial Group, Inc. ("Signature Financial"), of which the Administrator is a wholly owned subsidiary. Hub and Spoke(R) is a registered service mark of Signature Financial. Unlike other mutual funds which directly acquire and manage their own portfolio securities, the Fund seeks to achieve its investment objective by investing all of its investable assets in the Portfolio, a separate registered investment company with the same investment objective 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. Therefore, investors in the 11 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 Administrator at (617) 423-0800. The Hub and Spoke investment fund structure has been developed relatively recently, so shareholders should carefully consider this investment approach. The investment objective of the Fund may be changed without the approval of the Fund's shareholders, but not without written notice thereof to shareholders thirty days prior to implementing the change. If there were a change in the Fund's investment objective, shareholders should consider whether the Fund remains an appropriate investment in light of their then-current financial positions and needs. The investment objective of the Portfolio may also be changed without the approval of the investors in the Portfolio, but not without written notice thereof to the investors in the Portfolio (and notice by the Fund to its shareholders) 30 days prior to implementing the change. There can, of course, be no assurance that the investment objective of either the Fund or the Portfolio will be achieved. See "Investment Restrictions" in the Statement of Additional Information for a description of the fundamental policies of the Fund and of 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 or the Portfolio, respectively. Except as stated otherwise, all investment guidelines, policies 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. Subject to exceptions that are not inconsistent with applicable rules or policies of the Securities and Exchange Commission, whenever the Fund is requested to vote on matters pertaining to the Portfolio , the Fund will hold a meeting of shareholders of the Fund and will cast all of its votes in the same proportion as the votes of the Fund's shareholders. Fund shareholders who do not vote will not affect the Fund's votes at the Portfolio meeting. The percentage of the Fund's votes representing Fund shareholders not voting will be voted by the Trustees of the Fund in the same proportion as the Fund shareholders who do, in fact, vote. Certain changes in the Portfolio's investment objective, policies or restrictions may require the Fund to withdraw its interest in the Portfolio. Any such withdrawal could result in a distribution "in kind" of portfolio securities (as opposed to a cash distribution from the Portfolio). If securities are distributed, the Fund could incur brokerage, tax or other charges in converting the securities to cash. In addition, the distribution in kind may result in a less diversified portfolio of investments or adversely affect the liquidity of the Fund. Notwithstanding the above, there are other means for meeting shareholder redemption requests, such as borrowing. The Fund may withdraw its investment from the Portfolio at any time, if the Board of Trustees of the Fund 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 12 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. In the event the Trustees of the Fund were unable to find a substitute investment company in which to invest the Fund's assets and were unable to secure directly the services of an investment adviser and investment manager, the Trustees will seek to determine the best course of action. For more information about the Portfolio's policies, management and expenses see "Investment Objective and Policies," "Management," and "Other Information Concerning Shares of the Fund - Expenses." For information about the Portfolio's investment restrictions see the Statement of Additional Information. ----------- 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 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 advisory services, investment management services and administration services are described herein under "Management - Adviser, - Manager and - Administrator," respectively. MANAGEMENT The Boards of Trustees of the Fund and the Portfolio provide broad supervision over the affairs of the Fund and the Portfolio, respectively. The Fund has retained the services of Signature as administrator, 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 of its investable assets in the Portfolio. The 13 Portfolio has retained the services of Signature as administrator, KLD as investment adviser, and Mellon Equity as investment manager. ADVISER KLD provides advice to the Portfolio pursuant to an Investment Advisory Agreement (the "Advisory Agreement"). The services provided by the Adviser consist of determining the stocks to be included in the Index and evaluating, in accordance with the Adviser's social criteria, debt securities which may be purchased by the Portfolio. For its services under the Advisory Agreement, the Adviser receives from the Portfolio a fee accrued daily and paid monthly at an annual rate equal to 0.05% of the Portfolio's average daily net assets, on an annualized basis for the Portfolio's then-current fiscal year. Amy Lee Domini is a principal executive officer of KLD. Ms. Domini is a Chartered Financial Analyst and has been in the investment field for twenty years. She has co-authored three books on social investing, ETHICAL INVESTING (Addison-Wesley, 1986), INVESTING FOR GOOD (Herbert Collins, 1993) and THE SOCIAL INVESTMENT ALMANAC (Henry Holt Reference Books, 1992), and is currently a trustee of Loring, Wolcott & Coolidge, a firm of private trustees. Ms. Domini serves on the Governing Board of the Interfaith Center on Corporate Responsibility and is a former member of the Board of the National Association of Community Development Loan Funds. She is a member of both the Committee on Trust Funds and the Church Pension Fund at the Episcopal Church (USA). Ms. Domini has worked to promote both shareholder activism and community development investing which, in combination with the integration of social criteria into investment decisions, in her view serve to encourage the business community to accept more responsibility for its impact on society. Peter D. Kinder, president of KLD, received his training as a lawyer and has practiced in both the public and private sectors with a particular emphasis on administrative law. He co-authored LAW AND BUSINESS (McGraw-Hill, 1990 [3d ed.]), ETHICAL INVESTING (Addison-Wesley, 1986), INVESTING FOR GOOD (Herbert Collins, 1993) and THE SOCIAL INVESTMENT ALMANAC (Henry Holt Reference Books, 1992). As a member of the Board of the Social Investment Forum, Mr. Kinder participated in the Forum's CERES Project which developed the Valdez Principles proposing environmental standards to be adopted by U.S. corporations. Steven D. Lydenberg, Director of Research of KLD, has been active in social research for nineteen years. For twelve years he served the Council on Economic Priorities, ultimately as Director of Corporate Accountability Research. From 1987 to 1989, Mr. Lydenberg was an investment associate with Franklin Research and Development, where he edited Franklin's newsletter, INVESTING FOR A BETTER WORLD. Mr. Lydenberg has authored numerous publications on issues of corporate social responsibility, including RATING AMERICA'S CORPORATE CONSCIENCE (Addison-Wesley, 1986) and THE SOCIAL INVESTMENT ALMANAC (Henry Holt Reference Books, 1992), as well as co- authored INVESTING FOR GOOD (Herbert Collins, 1993). He is a Chartered Financial Analyst. "DominiSM" and "Domini Social IndexSM" are service marks of KLD. Pursuant to agreements with the Fund and the Portfolio, the Portfolio will be required to discontinue use of such 14 service marks if KLD ceases to be the investment adviser of the Portfolio, and the Fund will be required to discontinue the use of such service marks if either KLD ceases to be the investment adviser of the Portfolio or the Fund ceases to invest all of its assets in the Portfolio. MANAGER Mellon Equity manages the Portfolio on a day-to-day basis pursuant to an Investment Management Agreement (the "Management Agreement"). Mellon Equity does not determine the composition of the Domini Social Index. Prior to November 21, 1994, the investment manager of the Portfolio was State Street Bank and Trust Company (the "Former Manager"). For the fiscal year ended July 31, 1994, the Former Manager voluntarily waived a portion of its management fees and was paid investment management fees equal to 0.07% of the average daily net assets of the Portfolio. On October 5, 1994 the Portfolio notified the Former Manager of its intent to terminate the investment management agreement between the Portfolio and the Former Manager (the "Former Agreement"). The Board of Trustees of the Portfolio authorized the Portfolio to enter into a new investment management agreement (the "Management Agreement") with Mellon Equity, pursuant to which Mellon Equity assumed responsibilities for the management of the Portfolio's assets on November 21, 1994. Except for the investment management fee to be paid thereunder, the terms and conditions of the Management Agreement are not substantially different from the terms and conditions of the Former Agreement. Under the Management Agreement, the Portfolio will pay Mellon Equity an investment management fee equal on an annual basis to the following percentages of the Portfolio's average daily net assets for its then-current fiscal year: 0.10% of assets up to $50 million; 0.30% of assets between $50 million and $100 million; 0.20% of assets between $100 million and $500 million; and 0.15% of assets over $500 million. Mellon Equity is a Pennsylvania business trust whose sole beneficiary is MBC Investments Corporation, a wholly-owned subsidiary of Mellon Bank Corporation. Mellon Equity has been registered as an investment adviser under the Investment Advisers Act of 1940 since 1986. Prior to 1987, the Manager was part of the Equity Management Group of Mellon Bank Corporation's Trust and Investment Department, which has managed pension assets since 1947. As of September 30, 1995, the Manager had approximately $7.6 billion in assets under management. 15 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 Administrative Services Agreements, Signature provides the Fund and the Portfolio with general office facilities and supervises the overall administration of the Fund and the Portfolio, 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 Fund or the Portfolio; the preparation and filing of all documents required for compliance by the Fund or the Portfolio with applicable laws and regulations; and arranging for the maintenance of books and records of the Fund and the Portfolio. Signature provides persons satisfactory to the Board of Trustees of the Fund or the Portfolio to serve as officers of the Fund or the Portfolio. Such officers, as well as certain other employees and Trustees of the Fund or the Portfolio, may be directors, officers or employees of Signature or its affiliates. For these services and facilities, Signature receives fees computed and paid monthly from the Fund at an annual rate equal to 0.15% of the average daily net assets of the Fund, and from the Portfolio at an annual rate equal to 0.05% of the average daily net assets of the Portfolio, in each case on an annualized basis for the Fund's or the Portfolio's then-current fiscal year. Signature is a wholly-owned subsidiary of Signature Financial Group, Inc. Pursuant to a Sub-Administrative Services Agreement between Signature and KLD, KLD serves as Sub-Administrator of the Fund. In such capacity, KLD performs certain administrative services requested by the Administrator, including assisting personnel of the Administrator in answering questions from the general public, the media and investors in the Fund regarding the securities holdings of the Portfolio. For these services, KLD receives from the Administrator such compensation as they may agree on from time to time. PURCHASES AND REDEMPTIONS OF SHARES PURCHASES Shares of the Fund may be purchased without a sales load at the net asset value next determined after an order for shares is received and accepted by the Fund provided such order is received and accepted prior to the close of the New York Stock Exchange on any day the New York Stock Exchange is open for trading (a "Fund Business Day"). 16 The minimum initial investment in the Fund is $1,000, except that the minimum initial investment for an IRA is $250. 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 gains distributions which are paid in additional shares. See "Other Information Concerning Shares of the Fund - Dividends and Capital Gains Distributions". Although most shareholders elect not to receive share certificates, certificates for full shares can be obtained on specific written request to the Fund. No certificates are issued for fractional shares. Shares may be purchased directly from the Distributor or through Service Organizations (see "Service Organizations" below) by clients of those Service Organizations. If an investor purchases shares through a Service Organization, the Service Organization must promptly transmit such order to the Fund so that the order receives the net asset value next determined following receipt of the order. Service Organizations may impose minimum customer account and other requirements in addition to those imposed by the Fund. Investors wishing to purchase shares through a Service Organization should contact that organization directly for appropriate instructions. Other investors may purchase Fund shares in the manner described below. Investors desiring to purchase shares of the Fund by mail should complete an Account Application and mail the Application and a check (in U.S. dollars), payable to "Domini Social Equity Fund," to the Fund at the following address: Domini Social Equity Fund P.O. Box 117 New York, New York 10274-0117 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. For purchases by wire transfer, please call Fundamental Shareholder Services, Inc., the Fund's transfer agent (the "Transfer Agent"), at 1-800-782-4165 to obtain wire transfer instructions. 17 Investors making purchases through a Service Organization should be aware that it is the responsibility of the Service Organization to transmit orders for purchases of shares by its customers to the Transfer Agent and to deliver required funds on a timely basis, in accordance with the procedures stated above. For further information on how to purchase shares of the Fund, an investor should contact the Distributor (see back cover for address and phone number). AUTOMATIC INVESTMENT PLAN The Fund offers a plan for regularly investing specified dollar amounts ($25.00 minimum in monthly, quarterly, semi-annual or annual intervals) in the Fund. If an 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 Transfer Agent or the Distributor at the telephone numbers 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 Internal Revenue Service-approved IRA plan is available from the Distributor naming Investors Bank & Trust Company as custodian. The minimum initial investment for an IRA is $250; the minimum subsequent investment is $100. IRAs are available to individuals who receive compensation or earned income and their spouses whether or not they are active participants in a tax-qualified or Government-approved retirement plan. 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 also may establish an IRA to receive a "rollover" contribution of distributions from another IRA or a qualified plan. Tax advice should be obtained before planning a rollover. REDEMPTIONS A shareholder may redeem all or any portion of the shares in its account at any time at the net asset value next determined after a redemption request in proper form is furnished by the shareholder to the Fund. Redemptions will therefore be effected on the same day the redemption order is received by the Fund provided such order is received and accepted prior to the close of the Fund Business Day. The proceeds of a redemption will be paid by the Fund in federal funds normally on the next Fund 18 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 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 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. An investor may redeem shares in any amount by written or telephonic request. Written requests should be mailed to the Fund at the following address: Domini Social Equity Fund P.O. Box 117 New York, New York 10274-0117 An investor may redeem shares by wire or telephone if the appropriate box on the Account Application has been completed. Redemptions may be paid by the Fund by check or by wire transfer. Instructions for wire redemptions are set forth in the Account Application. If shares to be redeemed are held in certificate form, the certificates must be mailed to the Fund at the address noted above. Do not sign the certificates and, for protection, use registered mail. 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. 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. 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. The Fund reserves the right to restrict or terminate wire redemption privileges. Proceeds of wire redemptions will be transferred within seven days after receipt of the request. 19 The value of shares redeemed may be more or less than the shareholder's cost, depending on the Fund's performance during the period the shareholder owned its shares. Redemptions of shares are taxable events on which the shareholder may recognize a gain or a loss. The right of any shareholder 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. SYSTEMATIC WITHDRAWAL PLAN Any shareholder who owns shares of the Fund with an aggregate value of $10,000 or more may establish a Systematic Withdrawal Plan under which he or she redeems at net asset value the number of full and fractional shares which will produce the monthly, quarterly, semi-annual or annual payments specified (minimum $50.00 per payment). Depending on the amounts withdrawn, systematic withdrawals may deplete the investor's principal. Investors contemplating participation in this Plan should consult their tax advisers. No additional charge to the shareholder is made for this service. TAX MATTERS Each year the Fund intends to qualify and elect to be treated as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code") . Provided the Fund meets all income, distribution and diversification requirements of 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 the dividends and any realized net capital gains distributions they receive from the Fund. At the end of each calendar year, each shareholder receives information for tax purposes on the dividends and any realized net capital gains 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. Dividends and distributions to shareholders will be treated in the same manner for federal income tax purposes whether received in cash or reinvested in additional shares of the Fund. 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. 20 The Fund 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 it 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. OTHER INFORMATION CONCERNING SHARES OF THE FUND NET ASSET VALUE The Fund determines the net asset value of each of its shares on each Fund Business Day. This determination is made once during each such day as of the close of regular trading on 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. A share's net asset value is effective for orders received by the Distributor prior to the close of the Fund Business Day on which such net asset value is determined. 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 trading on the New York Stock Exchange on each Fund Business Day, by deducting the amount of the Portfolio's liabilities from the value of its assets. At the close of each such Fund 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 GAINS DISTRIBUTIONS Substantially all of the Fund's net income from dividends and interest is paid to the Fund's shareholders semi-annually (in the months of June and December) as a dividend. For this purpose, the Fund's "net income from dividends and interest" consists of all income from dividends and interest accrued on the assets of the Fund (I.E., the Fund's share of the Portfolio's net income from dividends and 21 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 gains distribution to its shareholders on an annual basis, usually in December, if the Fund's share of the Portfolio's profits during the year from the sale of securities held for longer than the applicable long-term capital gains holding period exceeds the Fund's share of the Portfolio's losses during such year from the sale of securities together with the Fund's share of the Portfolio's net capital losses carried forward from prior years (to the extent not used to offset short-term capital gains). The Fund's share of the Portfolio's net short-term capital gains realized during each fiscal year will also be distributed at that time. The Fund will also make additional distributions to its shareholders to the extent necessary to avoid application of the 4% non-deductible excise tax created by the Tax Reform Act of 1986 on certain undistributed income and net capital gains of mutual funds. A shareholder of the Fund may elect to receive dividends and capital gains distributions in either cash or additional shares. Unless otherwise specified in writing by a shareholder, all dividends and capital gains distributions will be reinvested in additional shares. EXPENSES The Fund and the Portfolio each pay all of their respective expenses, including the compensation of their respective Trustees who are not affiliated with the Administrator or the Adviser; 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 fees under its Administrative Services Plan; 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 under the Advisory Agreement, the management fees payable to the Manager under the Management Agreement and the administrative fees payable to the Portfolio Administrator. Pursuant to expense payment arrangements between Signature and each of the Fund and the Portfolio 22 effective January 1, 1995, Signature has agreed to pay all of the operating expenses of the Fund and the Portfolio . The arrangements will terminate on December 31, 1999 unless sooner terminated by mutual agreement of the parties. Under these arrangements Signature receives expense payment fees computed and paid monthly (i) from the Fund, at an annual rate equal to 0.48% of the Fund's average daily net assets for its then-current fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of the Portfolio's average daily net assets for its then-current fiscal year. See "Management of the Fund and the Portfolio" in the Statement of Additional Information for more information regarding expense payment arrangements . DISTRIBUTION PLAN AND AGREEMENT The Trustees of the Fund have adopted a Distribution Plan (the "Distribution Plan") in accordance with Rule 12b-1 under the 1940 Act after having concluded that there is a reasonable likelihood that the Distribution Plan will benefit the Fund and its shareholders. As contemplated by the Distribution Plan, Signature, as the Distributor, acts as agent of the Fund in connection with the offering of shares of the Fund pursuant to a Distribution Agreement. Signature, as 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. Under the Distribution Plan, Signature may receive a fee from the Fund at an annual rate not to exceed 0.25% of the Fund's average daily net assets in anticipation of, or as reimbursement for, costs and expenses incurred in connection with the sale of shares of the Fund, such as payments to broker-dealers who advise shareholders regarding the purchase, sale or retention of shares of the Fund, payments to employees of Signature, advertising expenses and the expenses of printing and distributing prospectuses and reports used for sales purposes, expenses of preparing and printing sales literature and other distribution-related expenses. Signature will provide to the Trustees of the Fund 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 the Service Organizations, although Service Organizations may receive payments under the Administrative Services Plan. (See "Service Organizations" below.) 23 DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES The Fund's Declaration of Trust permits the 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. Shares have no pre-emptive or conversion rights. Shares when issued are fully paid and non-assessable, except as set forth below. Shareholders are entitled to one vote for each share held. 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 Trustees it is necessary or desirable to submit matters for a shareholder vote. Upon liquidation of the Fund, shareholders would be entitled to share pro rata in the net assets of the Fund available for distribution to shareholders. Shareholders have under certain circumstances the right to communicate with other shareholders in connection with requesting a meeting of shareholders for the purpose of removing one or more Trustees. Shareholders also have under certain circumstances the right to remove one or more Trustees without a meeting. The Fund reserves the right to create and issue any 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 differences among any classes of shares of any series). Currently, the Fund has only one series of shares, all of which are of the same class. The Fund 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. 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. 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 Fund itself was unable to meet its obligations. The Portfolio, in which all of the investable assets of the Fund are invested, 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 Fund's Trustees believe that neither the Fund nor its shareholders will be adversely affected by reason of the Fund's investing in the Portfolio. In addition, 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 Fund Business Day, the 24 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 ADMINISTRATIVE SERVICES PLAN The Fund has adopted an Administrative Services Plan (the "Administrative Plan") which provides that the Fund may obtain the services of an administrator, shareholder servicing organizations, a transfer agent and a custodian and may enter into agreements providing for the payment of fees for such services. See "Management - Administrator" above and "Service Organizations" and "Transfer Agent and Custodian" below. The Portfolio has also adopted an Administrative Services Plan which provides that the Portfolio may obtain the services of an administrator, a transfer agent and a custodian, and may enter into agreements providing for the payment of fees for such services. SERVICE ORGANIZATIONS The Fund may also contract with various banks, trust companies (other than Mellon Equity), broker-dealers (other than Signature) or other financial organizations (collectively, "Service Organizations") to provide administrative services for the Fund, such as maintaining shareholder accounts and records. The Fund may pay fees to Service Organizations (which may vary depending upon the services provided) in amounts up to an annual rate of 0.25% of the daily net asset value of the 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 Fund does not currently intend to enter into agreements with and pay fees to Service Organizations, but it may do so in the future. 25 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. TRANSFER AGENT AND CUSTODIAN The Fund has entered into a Transfer Agency Agreement with Fundamental Shareholder Services, Inc. ("FSSI"), pursuant to which FSSI acts as Transfer Agent for the Fund . The Transfer Agent maintains an account for each shareholder of the Fund , performs other transfer agency functions and acts as dividend disbursing agent for the Fund . Pursuant to Custodian Agreements, Investors Bank & Trust Company ("IBT") acts as the custodian of the Fund's assets (I.E., cash and the Fund's interest in the Portfolio) and as the custodian of the Portfolio's assets (the "Custodian"). The Custodian's responsibilities include safeguarding and controlling the Portfolio's cash and securities, handling the receipt and delivery of securities, determining income and collecting interest on the Portfolio's investments, maintaining books of original entry for portfolio and fund accounting and other required books and accounts, and calculating the daily net asset value of shares of the Portfolio. Securities held by the Portfolio may be deposited into certain securities depositaries. The Custodian does not determine the investment policies of the Portfolio or decide which securities the Portfolio will buy or sell. The Portfolio may, however, invest in securities of the Custodian and may deal with the Custodian as principal in securities transactions. IBT also serves as transfer agent for the Portfolio. For their services, FSSI and IBT will receive such compensation as may from time to time be agreed upon by each of them and the Fund or the Portfolio. ----------- The Fund's Statement of Additional Information contains more detailed information about the Fund and the Portfolio, including information related to (i) investment policies and restrictions of the Fund and the Portfolio, (ii) the Trustees, officers, investment adviser, investment manager and administrator of the Fund and the Portfolio, (iii) portfolio transactions, (iv) the Fund's shares, including rights and liabilities of shareholders, (v) additional performance information, including the method used to calculate yield and total rate of return quotations of the Fund , (vi) determination of the net asset value of shares of the Fund, and (vii) the audited financial statements of the Fund and the Portfolio at July 31, 1995. 26 DOMINI SOCIAL EQUITY FUND 6 St. James Avenue Boston, MA 02116 DOMINI SOCIAL EQUITY FUND - ---------------------- PROSPECTUS November 28, 1995 - ---------------------- PORTFOLIO INVESTMENT CUSTODIAN: ADVISER: Investors Bank & Kinder, Lydenberg, Trust Company Domini & Co., Inc. 89 South Street 129 Mt. Auburn Street Boston, MA 02111 Cambridge, MA 02138 (617) 547-7479 PORTFOLIO INVESTMENT AUDITORS: MANAGER: KPMG Peat Marwick LLP Mellon Equity 99 High Street Associates Boston, MA 02110 500 Grant Street Suite 3700 LEGAL COUNSEL: Pittsburgh, PA Bingham, Dana & Gould 15258-0001 150 Federal Street Boston, MA 02110 ADMINISTRATOR AND DISTRIBUTOR: TRANSFER AGENT: Signature Broker-Dealer Fundamental Shareholder Services, Inc. Services, Inc. 6 St. James Avenue 90 Washington Street Boston, MA 02116 New York, NY 10006 (800) 762-6814 (800) 782-4165 Investing for Good Printed on Recycled Paper DSI196A DSI195 STATEMENT OF ADDITIONAL INFORMATION November 28, 1995 DOMINI SOCIAL EQUITY FUND Table of Contents Page 1. The Fund ............................................................. 2 2. Investment Objective, Policies and Restrictions ...................... 2 3. Performance Information .............................................. 9 4. Determination of Net Asset Value; Valuation of Portfolio Securities .. 10 5. Management of the Fund and the Portfolio ............................. 11 6. Independent Auditors ................................................. 21 7. Taxation...............................................................21 8. Portfolio Transactions and Brokerage Commissions.......................23 9. Description of Shares, Voting Rights and Liabilities...................25 10.Financial Statements ..................................................27 DOMINI SOCIAL EQUITY FUND 6 St. James Avenue, Boston, Massachusetts 02116 (800) 762-6814 This Statement of Additional Information sets forth information which may be of interest to investors but which is not necessarily included in the Fund's Prospectus dated November 28, 1995, as amended from time to time. This Statement of Additional Information should be read in conjunction with the Prospectus, a copy of which may be obtained by an investor without charge by contacting Signature Broker-Dealer Services, Inc., the Fund's distributor , at (800) 762-6814. 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 FUND Domini Social Equity Fund (the "Fund") is a no-load diversified open-end management investment company which was organized as a business trust under the laws of the Commonwealth of Massachusetts on June 7, 1989. The Fund offers to buy back (redeem) its shares from its shareholders at any time at net asset value. References in this Statement of Additional Information to the "Prospectus" are to the current Prospectus of the Fund, as amended or supplemented from time to time. Signature Broker-Dealer Services, Inc. ("Signature"), the Fund's administrator (the "Administrator"), supervises the overall administration of the Fund. The Board of Trustees provides broad supervision over the affairs of the Fund. Shares of the Fund are continuously sold by Signature, the Fund's distributor (the "Distributor"). The minimum initial investment is $1,000, except that the minimum initial investment for an 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 Fund seeks to achieve its investment objective by investing all its assets in the Domini Social Index Portfolio (the "Portfolio"), a diversified open-end management investment company having the same investment objective as the Fund. Kinder, Lydenberg, Domini & Co., Inc. ("KLD") is the Portfolio's investment adviser (the "Adviser"). Mellon Equity Associates ("Mellon Equity") is the Portfolio's investment manager (the "Manager"). The Adviser determines the composition of the Domini Social IndexSM. The Manager manages the investments of the Portfolio from day to day in accordance with the Portfolio's investment objective and policies. "DominiSM" and "Domini Social IndexSM" are service marks of Kinder, Lydenberg, Domini & Co., Inc. 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 Social Index (sometimes referred to herein as the "Index"). There can, of course, be no assurance that the Fund will achieve its investment objective. The investment objective of the Fund may be changed without approval by the Fund's shareholders. Investment Policies The Fund seeks to achieve its investment objective by investing all its assets in the Portfolio, which has the same investment objective as the Fund. The Fund may withdraw its investment in the Portfolio at any time if the Board of Trustees of the Fund 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 2 as the Fund, or the retaining of an investment adviser to manage the Fund's assets in accordance with the investment policies described below with respect to the Portfolio. The approval of the Fund's shareholders would not be required to change any of the Fund's investment policies. The following supplements the information concerning the Portfolio's investment policies contained in the Prospectus and should only be read in conjunction therewith. A company which is not included in the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") may be included in the Domini Social Index primarily in order to afford representation to an industrial sector which would otherwise be under-represented in the Index. Because of the social criteria applied in the selection of stocks comprising the Domini Social Index, industry sector weighting in the Domini Social Index may vary materially from the industry weightings in other stock indices, including the S&P 500. The Portfolio does not purchase securities which the Portfolio believes, at the time of purchase, will be subject to exchange controls or foreign withholding taxes; however, there can be no assurance that such laws may not become applicable to certain of the Portfolio's investments. In the event unforeseen exchange controls or foreign withholding taxes are imposed with respect to any of the Portfolio's investments, the effect may be to reduce the income received by the Portfolio on such investments. Although neither the Fund nor the Portfolio has any current intention to do so, the Fund and the Portfolio may invest in securities which may be resold pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act"). It is a fundamental policy of the Portfolio and the Fund that neither the Portfolio nor the Fund may invest more than 25% of the total assets of the Portfolio or the Fund, respectively, in any one industry, although the Fund will invest all of its assets in the Portfolio, and the Portfolio may and would invest more than 25% of its assets in an industry if stocks in that industry were to comprise more than 25% of the Domini Social Index. Based on the current composition of the Index, this is considered highly unlikely. If the Portfolio were to concentrate its investments in a single industry, the Portfolio and the Fund would be more susceptible to any single economic, political or regulatory occurrence than would be another investment company which was not so concentrated. Loans of Securities: The Portfolio may lend its securities to brokers, dealers and financial institutions, provided that (1) the loan is secured continuously by collateral, consisting of U.S. Government securities or cash or letters of credit, which is marked to the market daily to ensure that each loan is fully collateralized at all times; (2) the Portfolio may at any time call the loan and obtain the return of the securities loaned within five 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. 3 The Portfolio will earn income for lending its securities because cash collateral pursuant to these loans will be invested in short-term money market instruments. Loans of securities involve a risk that the borrower may fail to return the securities or may fail to provide additional collateral. In connection with lending securities, the Portfolio may pay reasonable finders, administrative and custodial fees. No such fees will be paid to any person if it or any of its affiliates is affiliated with the Portfolio, the Adviser or the Manager. Although the Portfolio reserves the right to lend its securities, it has no current intention of doing so in the foreseeable future. Risk Factors Involved in Option Contracts: Although it has no current intention to do so, the Portfolio may in the future enter into certain transactions in stock options for the purpose of hedging against possible increases in the value of securities which are expected to be purchased by the Portfolio or possible declines in the value of securities which are expected to be sold by the Portfolio. Generally, the Portfolio would only enter into such transactions on a short-term basis pending readjustment of its holdings of underlying stocks. The purchase of an option on an equity security provides the holder with the right, but not the obligation, to purchase the underlying security, in the case of a call option, or to sell the underlying security, in the case of a put option, for a fixed price at any time up to a stated expiration date. The holder is required to pay a non-refundable premium, which represents the purchase price of the option. The holder of an option can lose the entire amount of the premium, plus related transaction costs, but not more. Upon exercise of the option, the holder is required to pay the purchase price of the underlying security in the case of a call option, or deliver the security in return for the purchase price in the case of a put option. Prior to exercise or expiration, an option position may be terminated only by entering into a closing purchase or sale transaction. This requires a secondary market on the exchange on which the position was originally established. While the Portfolio would establish an option position only if there appears to be a liquid secondary market therefor, there can be no assurance that such a market will exist for any particular option contract at any specific time. In that event, it may not be possible to close out a position held by the Portfolio, and the Portfolio could be required to purchase or sell the instrument underlying an option, make or receive a cash settlement or meet ongoing variation margin requirements. The inability to close out option positions also could have an adverse impact on the Portfolio's ability effectively to hedge its portfolio. Each exchange on which option contracts are traded has established a number of limitations governing the maximum number of positions which may be held by a trader, whether acting alone or in concert with others. The Adviser does not believe that these trading and position limits would have an adverse impact on the possible use of hedging strategies by the Portfolio. 4 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 investment policies discussed above, including those concerning security transactions. Investment Restrictions 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 Fund is requested to vote on a change in the investment restrictions of the Portfolio, the Fund will hold a meeting of its shareholders and will cast its vote proportionately as instructed by its shareholders. However, subject to applicable statutory and regulatory requirements, the Fund would not request a vote of its shareholders 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 Fund. Neither the Fund nor the Portfolio may: (1) borrow money, except that as a temporary measure for extraordinary or emergency purposes either the Fund or the Portfolio may borrow an amount not to exceed 1/3 of the current value of the net assets of the Fund or the Portfolio, respectively, including the amount borrowed (moreover, neither the Fund nor the Portfolio may purchase any securities at any time at which borrowings exceed 5% of the total assets of the Fund or the Portfolio, respectively, taken in each case at market value) (it is intended that the Portfolio would borrow money only from banks and only to accommodate requests for the withdrawal of all or a portion of a beneficial interest in the Portfolio while effecting an orderly liquidation of securities); for additional related restrictions, see clause (i) under the caption "Non-Fundamental State and Federal Restrictions" below; (2) purchase any security or evidence of interest therein on margin, except that either the Fund or the Portfolio may obtain such short-term credit as may be necessary for the clearance of purchases and sales of securities and except that either the Fund or the Portfolio may make deposits of initial deposit and 5 variation margin in connection with the purchase, ownership, holding or sale of options; (3) write any put or call option or any combination thereof, provided that this shall not prevent (i) the purchase, ownership, holding or sale of warrants where the grantor of the warrants is the issuer of the underlying securities, or (ii) the purchase, ownership, holding or sale of options on securities; (4) underwrite securities issued by other persons, except that the Fund may invest all or any portion of its assets in the Portfolio and except insofar as either the Fund or the Portfolio may technically be deemed an underwriter under the 1933 Act in selling a security; (5) make loans to other persons except (a) through the lending of securities held by either the Fund or the Portfolio and provided that any such loans not exceed 30% of its total assets (taken in each case at market value), or (b) through the use of repurchase agreements or the purchase of short-term obligations and provided that not more than 10% of its net assets will be invested in repurchase agreements maturing in more than seven days; for additional related restrictions, see paragraph (6) immediately following; (6) invest in securities which are subject to legal or contractual restrictions on resale (other than repurchase agreements maturing in not more than seven days and other than securities which may be resold pursuant to Rule 144A under the 1933 Act if the Board of Trustees determines that a liquid market exists for such securities) if, as a result thereof, more than 10% of its net assets (taken at market value) would be so invested (including repurchase agreements maturing in more than seven days), except that the Fund may invest all or any portion of its assets in the Portfolio; (7) purchase or sell real estate (including limited partnership interests but excluding securities secured by real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts in the ordinary course of business (the Fund and Portfolio reserve the freedom of action to hold and to sell real estate acquired as a result of the ownership of securities by the Fund or the Portfolio); (8) make short sales of securities or maintain a short position, unless at all times when a short position is open the Fund or the Portfolio, as applicable, owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short, and unless not more than 5% of the Fund's or the Portfolio's, as applicable, net assets (taken in each case at market value) is held as collateral for such sales at any one time (it is the present intention of the Portfolio and the Fund to make such sales only for the purpose of deferring realization of gain or loss for federal income tax purposes); (9) issue any senior security (as that term is defined in the 1940 Act) if such issuance is specifically prohibited by the 1940 Act or the rules and 6 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 State and Federal Restrictions: In order to comply with certain state and federal statutes and regulatory policies, neither the Fund nor the Portfolio will as a matter of operating policy: (i) borrow money for any purpose in excess of 10% of the total assets of the Fund or the Portfolio, respectively (taken in each case at cost) (moreover, neither the Fund nor the Portfolio will purchase any securities at any time at which borrowings exceed 5% of its total assets (taken at market value)), (ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of the net assets of the Fund or the Portfolio, respectively (taken in each case at market value), provided that collateral arrangements with respect to options, including deposits of initial deposit and variation margin, are not considered a pledge of assets for purposes of this restriction, (iii) sell any security which it does not own unless by virtue of its ownership of other securities it has at the time of sale a right to obtain securities, without payment of further consideration, equivalent in kind and amount to the securities sold, and provided that if such right is conditional the sale is made upon the same conditions, (iv) invest for the purpose of exercising control or management, except that all of the assets of the Fund may be invested in the Portfolio, (v) purchase securities issued by any registered investment company, except that the Fund may invest all its assets in the Portfolio and except by purchase in the open market where no commission or profit to a sponsor or dealer results from such purchase other than the customary broker's commission, or except when such purchase, though not made in the open market, is part of a plan of merger or consolidation; provided, however, that (except for the Fund's investment in the Portfolio) the Fund and the Portfolio will not purchase the securities of any registered investment company if such purchase at the time thereof would cause more than 10% of the total assets of the Fund or the Portfolio, respectively 7 (taken at the greater of cost or market value) to be invested in the securities of such issuers or would cause more than 3% of the outstanding voting securities of any such issuer to be held by the Fund or the Portfolio, respectively ; and provided, further, that (except for the Fund's investment in the Portfolio) the Fund and the Portfolio shall not purchase securities issued by any open-end investment company, (vi) invest more than 10% of the net assets of the Fund or the Portfolio, respectively (taken at the greater of cost or market value), in securities (excluding Rule 144A securities) that are restricted as to resale under the 1933 Act, (vii) invest more than 15% of the net assets of the Fund or the Portfolio, respectively (taken at the greater of cost or market value), (a) in securities that are restricted as to resale by the 1933 Act (including Rule 144A securities), and (b) in securities that are issued by issuers which (including the period of operation of any predecessor company or unconditional guarantor of such issuer) have been in operation less than three years, provided, however, that no more than 5% of the net assets of the Fund or the Portfolio, respectively, are invested in securities issued by issuers which (including predecessors) have been in operation less than three years, (viii) purchase puts, calls, straddles, spreads and any combination thereof if the value of its aggregate investment in such securities will exceed 5% of the Funds or the Portfolio's total assets at the time of such purchase, (ix) purchase securities of any issuer if such purchase at the time thereof would cause it to hold more than 10% of any class of securities of such issuer, for which purposes all indebtedness of an issuer shall be deemed a single class and all preferred stock of an issuer shall be deemed a single class, except that option contracts shall not be subject to this restriction, and except that the Fund may invest all or any portion of its assets in the Portfolio, (x) purchase or retain any securities issued by an issuer any of whose officers, directors, trustees or security holders is an officer or Trustee of the Fund or the Portfolio, as the case may be, or is an officer or director of the Adviser or the Manager, if after the purchase of the securities of such issuer by the Fund or the Portfolio, as the case may be, one or more of such persons owns beneficially more than 1/2 of 1% of the shares or securities, or both, all taken at market value, of such issuer, and such persons owning more than 1/2 of 1% of such shares or securities together own beneficially more than 5% of such shares or securities, or both, all taken at market value, except that the Fund may invest all or any portion of its assets in the Portfolio, (xi) invest more than 5% of the Fund's or the Portfolio's net assets in warrants (valued at the lower of cost or market), but not more than 2% of the 8 Fund's or the Portfolio's net assets may be invested in warrants not listed on the New York Stock Exchange Inc. ("NYSE") or the American Stock Exchange, or (xii) make short sales of securities or maintain a short position, unless at all times when a short position is open , the Fund or the Portfolio owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue and equal in amount to the securities sold short, and unless not more than 10% of the Fund's or the Portfolio's, respectively, net assets (taken at market value) is represented by such securities, or securities convertible into or exchangeable for such securities, at any one time (neither the Fund nor the Portfolio has any current intention to engage in short selling). Restrictions (i) through (xii) are not fundamental and may be changed with respect to the Fund by the 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. The Portfolio will comply with the applicable investment limitations found in the state securities laws and regulations of all states in which the Fund is registered. Percentage Restrictions: If a percentage restriction or rating restriction on investment or utilization of assets set forth above or referred to in the Prospectus is adhered to at the time an investment is made or assets are so utilized, a later change in percentage resulting from changes in the value of the securities held by the Fund or the Portfolio or a later change in the rating of a security held by the Fund or the Portfolio will not be considered a violation of policy; provided that if at any time the ratio of borrowings of the Fund or the Portfolio to the net asset value of the Fund or the Portfolio, respectively, exceeds the ratio permitted by Section 18(f) of the 1940 Act, the Fund or the Portfolio as the case may be, will take the corrective action required by Section 18(f). 3. PERFORMANCE INFORMATION The Fund will calculate its 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. 9 Any current "yield" quotation of the Fund shall consist of an annualized historical yield, carried at least to the nearest hundredth of one percent, based on a thirty calendar day period and shall be calculated by (a) raising to the sixth power the sum of 1 plus the quotient obtained by dividing the Fund's net investment income earned during the period by the product of the average daily number of shares outstanding during the period that were entitled to receive dividends and the maximum offering price per share on the last day of the period, (b) subtracting 1 from the result, and (c) multiplying the result by 2. The Fund's total rate of return for the fiscal year ended July 31, 1995 was 25.11%. The Fund's annualized total rate of return for the fiscal periods since inception (August 10, 1990) through July 31, 1995 was 9.68%. Total rate of return and yield information with respect to the Domini Social Index will be computed in the same fashion as set forth above with respect to the Fund, except that for purposes of this computation an investment will be assumed to have been made in a portfolio consisting of all of the stocks comprising the Domini Social Index weighted in accordance with the weightings of the stocks comprising the Index. Performance information with respect to the Domini Social Index will not take into account brokerage commission and other transaction costs which will be incurred by the Portfolio. 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, 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 10 exchanges are normally valued at the settlement price on the exchange on which they are traded. Short-term obligations with remaining maturities of less than sixty days are valued at amortized cost, which constitutes fair value as determined by the Board of Trustees of the Portfolio. Portfolio securities (other than short-term obligations with remaining maturities of less than sixty days) for which there are no such quotations or valuations are valued at fair value as determined in good faith by or at the direction of the Portfolio's Board of Trustees. A determination of value used in calculating net asset value must be a fair value determination made in good faith utilizing procedures approved by the Portfolio's Board of Trustees. While no single standard for determining fair value exists, as a general rule, the current fair value of a security would appear to be the amount which the Portfolio could expect to receive upon its current sale. Some, but not necessarily all, of the general factors which may be considered in determining fair value include: (i) the fundamental analytical data relating to the investment; (ii) the nature and duration of restrictions on disposition of the securities; and (iii) an evaluation of the forces which influence the market in which these securities are purchased and sold. Without limiting or including all of the specific factors which may be considered in determining fair value, some of the specific factors include: type of security, financial statements of the issuer, cost at date of purchase, size of holding, discount from market value, value of unrestricted securities of the same class at the time of purchase, special reports prepared by analysts, information as to any transactions or offers with respect to the security, existence of merger proposals or tender offers affecting the security, price and extent of public trading in similar securities of the issuer or comparable companies, and other relevant matters. Interest income on short-term obligations held by the Portfolio is determined on the basis of interest accrued less amortization of premium. 5. MANAGEMENT OF THE FUND AND THE PORTFOLIO The Trustees and officers of the Fund 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 that those Trustees and officers are "interested persons" (as defined in the 1940 Act) of the Fund. Unless otherwise indicated below, the address of each Trustee and officer is 6 St. James Avenue, Boston, Massachusetts 02116. Trustees of the Fund AMY LEE DOMINI* -- Chair and Trustee of the Fund; Trustee of the Portfolio; Officer of Kinder, Lydenberg, Domini & Co., Inc.; Trustee, Loring, Wolcott & Coolidge (since 1987). PHILIP W. COOLIDGE* -- President and Trustee of the Fund; Chairman, Chief Executive Officer and President, Signature Financial Group, Inc. (since December, 1988) and Signature Broker-Dealer Services, Inc. (since April, 1989). 11 WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02146; Trustee of the Fund; President, Environmental Packaging Technologies (since 1990); Vice President, BMW Technologies, Inc. (from 1986 to 1990); Director, Logos Corporation (from 1988 to 1990); Director, Gold Hill Computers (from 1989 to 1990). KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Trustee of the Fund; Professor of Business Environment, Florida International University (since August, 1991); Associate Professor of Management, Rochester Institute of Technology (from 1980 to 1991); Peace Fellow, Bunting Institute (from 1987 to 1988). EMILY WATTS CARD -- 2730 Wilshire Boulevard, Suite 618, Santa Monica, California 90403; Trustee of the Fund; Attorney (since 1989); President, The Card Group, Inc.; Director, Women in Film; Director, Investor's Circle; Director, Newcomb College Alumnae Board; Director, University of Southern California Think Tank Board. Trustees of the Portfolio AMY LEE DOMINI* -- Chair and Trustee of the Portfolio; Officer of Kinder, Lydenberg, Domini & Co., Inc.; Trustee, Loring, Wolcott & Coolidge (since 1987). PHILIP W. COOLIDGE* -- President and Trustee of the Portfolio; Chairman, Chief Executive Officer and President, Signature Financial Group, Inc. (since December, 1988) and Signature Broker-Dealer Services, Inc. (since April, 1989). ALLEN M. MAYES -- 7985 Willow Creek Drive, Beaumont, Texas 77707; Trustee of the Portfolio; Senior Associate General Secretary of the General Board of Pensions of the United Methodist Church (since May, 1982); Member of the Board of Directors of Investor Responsibility Research Center (since January, 1989); Member of Board of Trustees of Wiley College (since November, 1969). TIMOTHY SMITH -- 475 Riverside Drive, New York, New York 10115; Trustee of the Portfolio; Executive Director of the Interfaith Center on Corporate Responsibility (since 1974). FREDERICK C. WILLIAMSON -- 5 Roger Williams Green, Providence, Rhode Island 02904; Trustee of the Portfolio; Rhode Island State Historic Preservation Officer (since 1969); Trustee, National Park Trust, (since April 1992); Trustee, National Parks and Conservation Association (since 1986); Chairman, Governor's Advisory Committee on Home Heating; Corporation Board, Harvard Community Health Plan; President Emeritus, National Conference of State Historic Preservation Officers; Trustee Emeritus, National Trust for Historic Preservation; Treasurer and Past Chairman, R.I. Black Heritage Society. Each Trustee is paid an annual fee as follows for serving as Trustee of the Fund and/or Portfolio and is reimbursed for expenses incurred in connection with service as a Trustee. The compensation paid to the Trustees for the fiscal year ended July 31, 1995 is set forth below. The Trustees may hold various other directorships unrelated to the Fund or Portfolio. 12 Fund Trustees
PENSION OR RETIREMENT TOTAL BENEFITS COMPENSATION AGGREGATE ACCRUED AS FROM THE COMPENSATION PART OF FUND FROM THE FUND ANNUAL BENEFITS AND THE FUND EXPENSES UPON RETIREMENT PORTFOLIO Amy Lee Domini*, Chair and None None None None Trustee Philip E. Coolidge*, President None None None None and Trustee William C. Osborn, Trustee $1,200 None None $1,200 Karen Paul, Trustee $1,200 None None $1,200 Emily Watts Card, Trustee $1,200 None None $1,200
Portfolio Trustees
PENSION OR RETIREMENT BENEFITS TOTAL AGGREGATE ACCRUED AS COMPENSATION COMPENSATION PART OF FROM THE FROM THE PORTFOLIO ANNUAL BENEFITS FUND AND THE PORTFOLIO EXPENSES UPON RETIREMENT PORTFOLIO Amy L. Domini*, Chair and None None None None Trustee Philip W. Coolidge*, President None None None None and Trustee Allen M. Mayes, Trustee $1,200 None None $1,200 Timothy Smith, Trustee $1,200 None None $1,200 Frederick C. Williamson, $1,200 None None $1,200 Trustee
Officers PETER D. KINDER -- Vice President of the Fund and the Portfolio; Officer of Kinder, Lydenberg, Domini & Co., Inc. (since March, 1988). STEVEN D. LYDENBERG -- Vice President of the Fund and the Portfolio; Director of Research of Kinder, Lydenberg, Domini & Co., Inc. (since January, 1990); Investment Associate, Franklin Research and Development (from 1987 to 1989). JOHN R. ELDER -- Treasurer of the Fund and the Portfolio; Vice President, SFG (since April, 1995); Treasurer, Phoenix Family of Mutual Funds (prior to April, 1995); Audit Manager, Price Waterhouse (prior to 1983). 13 THOMAS M. LENZ -- Secretary of the Fund and the Portfolio; Vice President and Associate General Counsel, Signature Financial Group, Inc. (since November, 1989); Assistant Secretary, Signature Broker-Dealer Services, Inc. (since February, 1991). DAVID G. DANIELSON--Assistant Treasurer of the Fund and the Portfolio; Assistant Manager, Signature Financial Group, Inc. (since May 1991); Graduate Student, Northeastern University (from April 1990 to March 1991). LINDA T. GIBSON -- Assistant Secretary of the Fund and the Portfolio; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc. (since June, 1991); Assistant Secretary, Signature Broker-Dealer Services, Inc. (since November, 1992); law student, Boston University School of Law (prior to May, 1992). JAMES S. LELKO--Assistant Treasurer of the Fund and the Portfolio; Assistant Manager, Signature Financial Group, Inc. (since January 1993); Senior Tax Compliance Accountant, Putnam Companies (since prior to December 1992). MOLLY S. MUGLER -- Assistant Secretary of the Fund and the Portfolio; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc. (since December, 1988); Assistant Secretary, Signature Broker-Dealer Services, Inc. (since April, 1989). BARBARA M. O'DETTE -- Assistant Treasurer of the Fund and the Portfolio; Assistant Treasurer, Signature Financial Group, Inc. (since December, 1988) and Signature Broker-Dealer Services, Inc. (since April, 1989). ANDRES E. SALDANA -- Assistant Secretary of the Fund and the Portfolio; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc. (since November, 1992); Assistant Secretary, Signature Broker-Dealer Services, Inc. (since September, 1993); Attorney, Ropes & Gray (September, 1990 to November, 1992) . DANIEL E. SHEA--Assistant Treasurer of the Fund and the Portfolio; Assistant Manager of Fund Administration, Signature Financial Group, Inc., since November 1993; Supervisor and Senior Technical Advisor, Putnam Investments, since prior to 1990. 14 Messrs. Coolidge, Elder, Lenz, Danielson, Lelko, Saldana and Shea and Mss. Gibson, Mugler and O'Dette also hold similar positions for other investment companies for which Signature or an affiliate serves as the principal underwriter. Each officer of the Fund holds the same position with the Portfolio. The Trustees who are not "interested persons" (the "Disinterested Trustees") of the Fund as defined by the 1940 Act are separate from the Disinterested Trustees of the Portfolio. Any conflict of interest between the Fund and the Portfolio will be resolved by the Trustees of the Fund and the Portfolio in accordance with their fiduciary obligations and in accordance with the 1940 Act. As of October 29, 1995 all Trustees and officers of the Fund and the Portfolio as a group owned less than 1% of the Fund's outstanding shares including shares owned by Signature of which Mr. Coolidge is Chief Executive Officer and Director. As of the same date, the following shareholders of record owned 5% or more of the outstanding shares of the Fund: Charles Schwab & Co., Inc. (as a nominee on behalf of its customers), 1,260,874 shares (30.69%) (the Fund has no knowledge as to the beneficial ownership of these shares); Home Missioners of America, 246,586 shares (6.00%). The Fund has no knowledge of any other owners of record or beneficial owners of 5% or more of the outstanding shares of the Fund. Shareholders owning 25% or more of the outstanding shares of the Fund may take actions without the approval of any other investor in the Fund. The Fund's Declaration of Trust provides that it will indemnify its Trustees and officers (the "Indemnified Parties") against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Fund, unless, as to liability to the Fund or its shareholders, it is finally adjudicated that the Indemnified Parties engaged in wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in their offices, or unless with respect to any other matter it is finally adjudicated that the Indemnified Parties did not act in good faith in the reasonable belief that their actions were in the best interests of the Fund. In case of settlement, such indemnification will not be provided unless it has been determined by a court or other body approving the settlement or other disposition, or by a reasonable determination, based upon a review of readily available facts, by vote of a majority of disinterested Trustees or in a written opinion of independent counsel, that such Indemnified Parties have not engaged in wilful misfeasance, bad faith, gross negligence or reckless disregard of their duties. Adviser and Manager KLD provides advice to the Portfolio pursuant to an Investment Advisory Agreement (the "Advisory Agreement"). The services provided by the Adviser consist of determination of the stocks to be included in the Index and evaluating, in accordance with the Adviser's social criteria, debt securities which may be purchased by the Portfolio. The Adviser furnishes at its own expense all facilities and personnel necessary in connection with providing these 15 services. The Advisory Agreement will continue in effect if such continuance is specifically approved at least annually by the Portfolio's Board of Trustees or by a majority vote of the Fund and of the other investors in the Portfolio at a meeting called for the purpose of voting on the Advisory Agreement (with the vote of each being in proportion to the amount of their investment), and, in either case, by a majority of the Portfolio's Trustees who are not parties to the Advisory Agreement or interested persons of any such party at a meeting called for the purpose of voting on the Advisory Agreement. The Advisory Agreement provides that the Adviser may render services to others and may permit other investment companies in addition to the Portfolio and the Fund to use the name "DominiSM" or "Domini Social IndexSM" in their names. Pursuant to agreements with the Fund and the Portfolio, if KLD ceases to be the investment adviser of the Portfolio, the Portfolio will be required to discontinue the use of such service marks, and if either KLD ceases to be the investment adviser of the Portfolio or the Fund ceases to invest all of its assets in the Portfolio, the Fund will be required to discontinue the use of such service marks. The Advisory Agreement is terminable without penalty on not more than 60 days' nor less than 30 days' written notice by the Portfolio when authorized either by majority vote of the Fund and of the other investors in the Portfolio (with the vote of each being in proportion to the amount of their investment) or by a vote of a majority of its Board of Trustees, or by the Adviser, and will automatically terminate in the event of its assignment. The Advisory Agreement provides that neither the Adviser nor its personnel shall be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in its services to the Portfolio, except for wilful misfeasance, bad faith or gross negligence or reckless disregard of its or their obligations and duties under the Advisory Agreement. The Fund's Prospectus contains a description of fees payable to the Adviser for services under the Advisory Agreement. For the fiscal years ended July 31, 1993 , 1994 and 1995, the Adviser voluntarily waived all of its advisory fees. Mellon Equity manages the assets of the Portfolio pursuant to an Investment Management Agreement (the "Management Agreement"). The Manager furnishes at its own expense all services, facilities and personnel necessary in connection with managing the Portfolio's investments and effecting securities transactions for the Portfolio. The Management Agreement will continue in effect if such continuance is specifically approved at least annually by the Portfolio's Board of Trustees or by a majority vote of the Fund and of the other investors in the Portfolio at a meeting called for the purpose of voting on the Management Agreement (with the vote of each 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. The Management Agreement is terminable without penalty upon not more than 60 days' nor less than 30 days' written notice by the Portfolio when authorized either by majority vote of the Fund and of the other investors in the 16 Portfolio (with the vote of each being in proportion to the amount of their investment) or by a vote of the majority of its Board of Trustees, or by the Manager, and will automatically terminate in the event of its assignment. The Management Agreement provides that neither the Manager nor its personnel shall be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in its services to the Portfolio, except for wilful misfeasance, bad faith or gross negligence or reckless disregard for its or their obligations and duties under the Management Agreement. The Fund's Prospectus contains a description of fees payable to the Manager for services under the Management Agreement. Prior to November 21, 1994, State Street Bank and Trust Company (the "Former Manager") served as investment manager to the Portfolio. For the fiscal year ended July 31, 1993, the Former Manager voluntarily waived all of its management fees. For the fiscal year ended July 31, 1994, the Portfolio incurred $16,986 in management fees to the Former Manager. For the period August 1, 1994 through November 20, 1994, the Portfolio incurred $10,180 in management fees to the Former Manager. For the period November 21, 1994 through July 31, 1995, the Portfolio incurred $29,409 in management fees to the Manager. Administrator Pursuant to Administrative Services Agreements, Signature provides the Fund and the Portfolio with general office facilities and supervises the overall administration of the Fund and the Portfolio, 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 Fund or the Portfolio; the preparation and filing of all documents required for compliance by the Fund and the Portfolio with applicable laws and regulations; and arranging for the maintenance of books and records of the Fund and the Portfolio. The Administrator provides persons satisfactory to the Board of Trustees of the Fund or the Portfolio to serve as officers of the Fund or the Portfolio. Such officers, as well as certain other employees and Trustees of the Fund or the Portfolio, may be directors, officers or employees of the Administrator or its affiliates. Pursuant to a Sub-Administrative Services Agreement between Signature and KLD, KLD serves as Sub-Administrator of the Fund. In such capacity, KLD performs certain administrative services requested by the Administrator, including assisting personnel of the Administrator in answering questions from the general public, the media and investors in the Fund regarding the securities holdings of the Portfolio. For these services, KLD receives from the Administrator such compensation as they may agree on from time to time. The Fund's Prospectus contains a description of the fees payable to the Administrator by the Fund or payable to Signature, as the administrator of the Portfolio (the "Portfolio Administrator") by the Portfolio, as the case may be, under the Administrative Services Agreements. For the fiscal years ended July 31, 1993 , 1994 and 1995, the Administrator voluntarily waived all of its administrative services fees from the Fund. For the same periods, the 17 Portfolio Administrator voluntarily waived all of its administrative services fees from the Portfolio. The Administrative Services Agreement with the Fund provides that Signature may render administrative services to others. The Administrative Services Agreement with the Fund 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 Fund, except for wilful misfeasance, bad faith or gross negligence in the performance of its or their duties or by reason of reckless disregard of its or their obligations and duties under the Fund's Administrative Services Agreement. The Administrator has agreed to reimburse the Fund for its operating expenses (exclusive of interest, taxes, brokerage, and extraordinary expenses) which in any year exceed the limits prescribed by any state in which the Fund's shares are qualified for sale. The Fund may elect not to qualify its shares for sale in every state. The Fund believes that currently the most restrictive expense ratio limitation imposed by any state is 2.5% of the first $30 million of the Fund's average net assets for its then-current fiscal year, 2% of the next $70 million of such assets, and 1.5% of such assets in excess of $100 million. For the purpose of this obligation to reimburse expenses, the Fund's annual expenses are estimated and accrued daily, and any appropriate estimated payments will be made by the Administrator. Subject to the obligation of the Administrator to reimburse the Fund for its excess expenses as described above, the Fund has, under its Administrative Services Agreement, confirmed its obligation for payment of all its other expenses. See "Other Information Concerning Shares of the Fund -- Expenses" in the Fund's Prospectus. The Administrative Services Agreement with the Portfolio provides that Signature may render administrative services to others. The Administrative Services Agreement with the Portfolio terminates automatically if it is assigned and may be terminated without penalty by majority vote of the Fund and of the other investors in the Portfolio (with the vote of each being in proportion to the amount of their investment) or by either party on not more than 60 days' nor less than 30 days' written notice. The Administrative Services Agreement with the Portfolio also provides that neither Signature, as the Portfolio's Administrator, nor its personnel shall be liable for any error of judgment or mistake of law or for any act or omission in the administration or management of the Portfolio, except for wilful misfeasance, bad faith or gross negligence in the performance of its or their duties or by reason of reckless disregard of its or their obligations and duties under the Portfolio's Administrative Services Agreement. Signature is a wholly-owned subsidiary of Signature Financial Group, Inc. Distributor The Fund has adopted a Distribution Plan which provides that 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 as reimbursement for, expenses incurred in connection with the sale of shares of the Fund, such as payments to 18 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. For the fiscal years ended July 31, 1993 , 1994 and 1995, the Fund did not accrue any distribution fees. No payments under the Distribution Plan will be made to Service Organizations, although Service Organizations may receive payments under the Administrative Services Plan referred to below. The Distribution Plan will continue in effect indefinitely if such continuance is specifically approved at least annually by a vote of both a majority of the Fund's Trustees and a majority of the Fund's Trustees who are not "interested persons of the Fund" 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 Fund 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 Fund's Qualified Trustees shall be committed to the discretion of the disinterested Trustees of the Fund. The Distribution Plan may be terminated at any time by a vote of a majority of the Fund'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 Fund's Trustees and the Fund's Qualified Trustees. The Distributor will preserve copies of any plan, agreement or report made pursuant to the Distribution Plan for a period of not less than six (6) years from the date of the Distribution Plan, and for the first two (2) years the Distributor will preserve such copies in an easily accessible place. The Fund has entered into a Distribution Agreement with the Distributor. Under the Distribution Agreement, the Distributor acts as the agent of the Fund in connection with the offering of shares of the Fund. Administrative Services Plans; Transfer Agent, Custodian and Service Organizations The Fund has adopted an Administrative Services Plan (the "Administrative Plan") which provides that the Fund may obtain the services of an administrator, one or more service organizations, a transfer agent and a custodian, and may enter into agreements providing for the payment of fees for such services. The Administrative Plan will continue in effect indefinitely if such continuance is specifically approved at least annually by a vote of both a majority of the Fund's Trustees and a majority of the Fund's Trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Administrative Plan or in any agreement related to such Plan ("Qualified Trustees"). The Administrative Plan requires that the Fund shall provide to the Fund's Board of Trustees and the Fund's Board of Trustees shall review, at least quarterly, a written report of the amounts expended (and the purposes therefor) under the Administrative Plan. The Administrative Plan may be terminated at any time by a vote of a majority of the Fund's Qualified 19 Trustees or by a majority vote of the Fund's shareholders. The Administrative Plan may not be amended to increase materially the amount of permitted expenses thereunder without the approval of a majority of the Fund's shareholders and may not be materially amended in any case without a vote of the majority of both the Fund's Trustees and the Fund's Qualified Trustees. The Fund has entered into a Transfer Agency Agreement with Fundamental Shareholder Services, Inc. ("FSSI") pursuant to which FSSI acts as the transfer agent for the Fund. The Fund 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 entered into a Transfer Agency Agreement with IBT pursuant to which IBT acts as transfer agent for the Portfolio. The Portfolio has entered into a Custodian Agreement with IBT pursuant to which IBT acts as custodian for the Portfolio. For additional information, see "Transfer Agent and Custodian" in the Prospectus. The Fund may from time to time enter into agreements with various banks, trust companies (other than Mellon Equity), broker-dealers (other than Signature) or other financial organizations to provide administrative services for the Fund, such as maintaining shareholder accounts and records. For the fiscal years ended July 31, 1993 , 1994 and 1995, the Fund did not accrue any service organization fees. For additional information, see "Service Organizations, Transfer Agent and Custodian--Service Organizations" in the Prospectus. The Portfolio has also adopted an Administrative Services Plan (the "Portfolio Administrative Plan") which provides that the Portfolio may obtain the services of an administrator, a transfer agent and a custodian, and may enter into agreements providing for the payment of fees for such services. The Portfolio Administrative Plan will continue in effect indefinitely if such continuance is specifically approved at least annually by a vote of both a majority of the Portfolio's Trustees and a majority of the Portfolio's Trustees who are not "interested persons" of the Portfolio and who have no direct or indirect financial interest in the operation of the Portfolio Administrative Plan or in any agreement related to such Plan ("Qualified Trustees"). The Portfolio Administrative Plan requires that the Portfolio shall provide to the Portfolio's Board of Trustees and the Portfolio's Board of Trustees shall review, at least quarterly, a written report of the amounts expended (and the purposes therefor) under the Portfolio Administrative Plan. The Portfolio Administrative Plan may be terminated at any time by a vote of a majority of the Portfolio's Qualified Trustees or by a majority vote of the investors in the Portfolio (with the vote of each being in proportion to the amount of their investment). The Portfolio Administrative Plan may not be amended to increase materially the amount of permitted expenses thereunder without the approval of a majority of the investors in the Portfolio (with the vote of each being in proportion to the amount of their investment) and may not be materially amended in any case without a vote of the majority of both the Portfolio's Trustees and the Portfolio's Qualified Trustees. 20 Expenses Pursuant to expense payment arrangements between Signature and each of the Fund and the Portfolio effective January 1, 1995, Signature has agreed to pay all of the operating expenses of the Fund and the Portfolio. The arrangements will terminate on December 31, 1999 unless sooner terminated by mutual agreement of the parties. Under these arrangements, Signature receives expense payment fees computed and paid monthly (i) from the Fund, at an annual rate equal to 0.48% of the Fund's average daily net assets for its then-current fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of the Portfolio's average daily net assets for its then-current fiscal year. Prior to January 1, 1995, the Fund and the Portfolio each had entered into expense reimbursement agreements (the "Prior Agreements") with Signature pursuant to which the aggregate annual operating expenses (including amortization of an organization expenses) of the Fund and the Portfolio would not exceed 0.98% of the Fund's average daily net assets for its then-current fiscal year. Under the Prior Agreements, Signature agreed to pay the expenses of the Fund and the Portfolio (except for fees payable under each of the Administrative Services Agreements, the Distribution Agreement, the Management Agreement, the Advisory Agreement and expenses related to the organization of the Fund and the Portfolio) until April 30, 2000, all subject to reimbursement by the Fund or the Portfolio, as the case may be. 6. INDEPENDENT AUDITORS KPMG Peat Marwick LLP are the independent auditors for the Fund and for the Portfolio, providing audit services, tax return preparation, and assistance and consultation with respect to the preparation of filings with the Securities and Exchange Commission. 7. TAXATION Each year the Fund intends to qualify and elect to be treated as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), by meeting all applicable requirements of Subchapter M, including requirements (applied through the Fund's proportionate interest in the Portfolio) as to the nature of the Fund's gross income, the amount of Fund distributions and the composition and holding period of the Fund's portfolio assets. Because the Fund intends to distribute all of its net investment income and net realized capital gains to shareholders in accordance with the timing requirements imposed by the Code, it is not expected that the Fund will be required to pay any federal 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 Fund distributions would generally be taxable as ordinary dividend income to the shareholders. Under interpretations of the Internal Revenue Service, (1) the Portfolio will be treated for federal income tax purposes as a partnership and (2) for 21 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 will have to pay federal income taxes and any state or local income taxes on the dividends and capital gain distributions they receive 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 ordinary income dividends is normally eligible for the dividends received deduction for corporations if the recipient otherwise qualifies for that deduction with respect to its holding of Fund shares. Availability of the deduction for a particular 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 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. 22 The Fund 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 to them of an investment in the Fund. 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 Manager and who is appointed and supervised by its senior officers. Changes in the Portfolio's investments are reviewed by its Board of Trustees. The portfolio manager of the Portfolio may serve other clients of the Manager in a similar capacity. The Portfolio's primary consideration in placing securities transactions with broker-dealers for execution is to obtain and maintain the availability of execution at the most favorable prices and in the most effective manner possible. The Manager attempts to achieve this result by selecting broker-dealers to execute transactions on behalf of the Portfolio and other clients of the Manager on the basis of their professional capability, the value and quality of their brokerage services, and the level of their brokerage commissions. In the case of securities traded in the over-the-counter market (where no stated commissions are paid but the prices include a dealer's markup or markdown), the Manager normally seeks to deal directly with the primary market makers, unless in its opinion, best execution is available elsewhere. In the case of securities purchased from underwriters, the cost of such securities generally includes a 23 fixed underwriting commission or concession. From time to time, soliciting dealer fees are available to the Manager on the tender of the Portfolio's securities in so-called tender or exchange offers. Such soliciting dealer fees are in effect recaptured for the Portfolio by the Manager. At present no other recapture arrangements are in effect. Consistent with the foregoing primary consideration, the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and such other policies as the Trustees of the Portfolio may determine, the Manager may consider sales of shares of the Fund and of securities of other investors in the Portfolio as a factor in the selection of broker-dealers to execute the Portfolio's securities transactions. Under the Management Agreement and as permitted by Section 28(e) of the Securities Exchange Act of 1934, the Manager may cause the Portfolio to pay a broker-dealer acting on an agency basis which provides brokerage and research services to the Manager or the Adviser an amount of commission for effecting a securities transaction for the Portfolio in excess of the amount other broker-dealers would have charged for the transaction if the Manager determines in good faith that the greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of either a particular transaction or the Manager's or the Adviser's overall responsibilities to the Portfolio or to its other clients. Not all of such services are useful or of value in advising the Portfolio. The term "brokerage and research services" includes advice as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or of purchasers or sellers of securities; furnishing analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts; and effecting securities transactions and performing functions incidental thereto such as clearance and settlement. However, because of the Portfolio's policy of investing in accordance with the Domini Social Index, the Manager and the Adviser currently intend to make only a limited use of such brokerage and research services. Although commissions paid on every transaction will, in the judgment of the Manager, be reasonable in relation to the value of the brokerage services provided, commissions exceeding those which another broker might charge may be paid to broker-dealers who were selected to execute transactions on behalf of the Portfolio and the Manager's or the Adviser's other clients, in part for providing advice as to the availability of securities or of purchasers or sellers of securities and services in effecting securities transactions and performing functions incidental thereto such as clearance and settlement. Certain broker-dealers may be willing to furnish statistical, research and other factual information or services to the Manager or the Adviser for no consideration other than brokerage or underwriting commissions. The Manager and the Adviser attempt to evaluate the quality of research provided by brokers. The Manager and the Adviser sometimes use evaluations resulting from this effort as a consideration in the selection of brokers to execute portfolio transactions. However, neither the Manager nor the Adviser is able to quantify the amount of commissions which are paid as a result of such research because a substantial number of transactions are effected through 24 brokers which provide research but which are selected principally because of their execution capabilities. The fees that the Portfolio pays to the Manager and the Adviser will not be reduced as a consequence of the Portfolio's receipt of brokerage and research services. To the extent the Portfolio's securities transactions are used to obtain brokerage and research services, the brokerage commissions paid by the Portfolio will exceed those that might otherwise be paid for such portfolio transactions and research, by an amount which cannot be presently determined. Such services may be useful and of value to the Manager or the Adviser in serving both the Portfolio and other clients and, conversely, such services obtained by the placement of brokerage business of other clients may be useful to the Manager or the Adviser in carrying out its obligations to the Portfolio. While such services are not expected to reduce the expenses of the Manager or the Adviser, the Manager or the Adviser would, through use of the services, avoid the additional expenses which would be incurred if it should attempt to develop comparable information through its own staff. For the fiscal years ended July 31, 1993 , 1994 and 1995, the Portfolio paid brokerage commissions of $8,000 , $13,000 and $15,222, respectively. In certain instances there may be securities which are suitable for the Portfolio as well as for one or more of the Manager's or the Adviser's other clients. Investment decisions for the Portfolio and for the Manager's or the Adviser's other clients are made with a view to achieving their respective investment objectives. It may develop that a particular security is bought or sold for only one client even though it might be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more clients are selling that same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security as far as the Portfolio is concerned. However, it is believed that the ability of the Portfolio to participate in volume transactions will produce better executions for the Portfolio. 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, 25 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) 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 wilful misfeasance, bad 26 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 Financial statements of the Fund and the Portfolio as of July 31, 1995 included herein have been so included in reliance upon the report of KPMG Peat Marwick LLP, independent auditors, as experts in accounting and auditing. DSI195 27 DOMINI SOCIAL INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JULY 31, 1995 (SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE - -------------------------------- ---------- ----------- COMMON STOCKS -- 97.9% APPAREL -- 0.9% Brown Group Inc............ 400 $ 9,950 Hartmarx Corp*............. 600 3,675 Lands' End Inc............. 800 12,300 Liz Claiborne, Inc......... 2,000 45,750 Nike Inc. (Class B)........ 1,900 171,713 Oshkosh B' Gosh, Inc....... 300 5,100 Phillips-Van Heusen Corp...................... 600 9,450 Reebok International Ltd....................... 2,200 78,925 Russell Corp............... 1,000 28,250 Stride Rite Corp........... 1,200 13,350 VF Corp.................... 1,600 88,400 ----------- 466,863 ----------- COMMERCIAL PRODUCTS & SERVICES -- 1.9% Autodesk Inc............... 1,200 54,300 Cintas Corp................ 1,200 45,000 Deluxe Corp................ 2,000 64,250 Donnelley, R.R. & Sons Co........................ 3,900 145,762 Harland (J.H.) Co.......... 900 19,912 HON Industries Inc......... 800 21,800 Kelly Services (Class A)... 975 26,568 Miller, (Herman) Inc....... 800 19,200 Moore Corp., Ltd........... 2,400 52,800 National Service Industries, Inc........... 1,300 38,350 New England Business Service Inc............... 300 6,412 Pitney Bowes Inc........... 3,800 152,475 Standard Register Co. ..... 700 14,962 Wallace Computer Services, Inc....................... 500 29,188 Xerox Corp................. 2,700 321,634 ----------- 1,012,613 ----------- CONSTRUCTION -- 0.3% Centex Corp................ 900 25,200 Fleetwood Enterprises Inc....................... 1,300 26,813 Graco Inc.................. 200 5,800 Kaufman & Broad Home Corp...................... 800 11,500 Rouse Co................... 1,200 25,200 Sherwin-Williams Co. ...... 2,200 80,300 TJ International Inc....... 400 8,350 ----------- 183,163 ----------- ISSUER SHARES VALUE - -------------------------------- ---------- ----------- CONSUMER PRODUCTS & SERVICES -- 0.2% Avery Dennison Corp........ 1,400 $ 56,175 C C H Inc.................. 700 14,875 ISCO Inc. ................. 200 2,050 Tennant Co................. 200 5,000 Zurn Industries Inc........ 200 4,375 ----------- 82,475 ----------- ENERGY -- 4.0% Amoco Corp................. 12,600 847,350 Anadarko Petroleum Corp.... 1,600 68,000 Apache Corp................ 1,900 52,013 Atlantic Richfield Co...... 4,100 472,525 Consolidated Natural Gas Co. ...................... 2,400 90,000 ENERGEN Corp............... 300 6,600 Enron Corp................. 6,550 227,612 Helmerich & Payne Inc...... 600 17,250 Louisiana Land & Exploration Co. .......... 900 35,775 Oryx Energy Co.*........... 2,600 37,375 Pennzoil Co. .............. 1,300 60,938 Rowan Companies Inc.*...... 1,800 13,050 Santa Fe Energy Resources Inc.*..................... 2,500 23,438 Sun Company................ 3,000 88,125 Williams Companies Inc. (The)..................... 2,800 103,600 ----------- 2,143,651 ----------- FINANCIAL -- 10.6% Ahmanson (H.F.) & Co....... 3,000 67,125 American Express Co. ...... 12,700 488,950 Banc One Corporation....... 10,223 324,587 Bank of Boston Corp........ 2,850 123,619 BankAmerica Corp........... 9,600 518,400 Bankers Trust (N.Y.) Corp...................... 2,000 129,000 Barnett Banks Inc.......... 2,500 138,750 Beneficial Corp............ 1,400 66,325 Block (H. & R.), Inc....... 2,800 105,000 Cincinnati Financial Corp...................... 1,305 70,470 CoreStates Financial Corp...................... 3,700 135,050 Dime Bancorp Inc.*......... 2,600 27,625 Edwards (A.G.), Inc........ 1,525 37,362 Federal National Mortgage Association............... 6,900 646,013 Fifth Third Bancorp........ 1,700 96,900
DOMINI SOCIAL INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED JULY 31, 1995 (SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE - -------------------------------- ---------- ----------- FINANCIAL -- CONTINUED First Chicago Corp......... 2,300 $ 139,725 First Fed Financial Corp.*.................... 200 3,000 First Fidelity Bancorporation............ 2,050 129,150 Golden West Financial Corp...................... 1,500 70,125 Great Western Financial Corp...................... 3,600 76,950 Household International Inc....................... 2,500 131,250 Mellon Bank Corp........... 3,750 150,469 Merrill Lynch & Co., Inc....................... 4,550 252,525 Morgan (J.P.) & Co., Inc....................... 4,700 343,687 NBD Bancorp Inc............ 4,100 139,400 Norwest Corp............... 8,400 237,300 PNC Bank Corp.............. 5,800 142,825 Piper Jaffray Inc.......... 300 5,063 ReliaStar Financial Corp...................... 900 34,312 Shawmut National Corp...... 3,350 103,431 Student Loan Marketing Association............... 1,950 105,056 SunTrust Banks, Inc........ 3,000 181,125 Transamerica Corp.......... 1,750 108,281 Value Line Inc............. 300 8,925 Vermont Financial Services Corp...................... 100 2,750 Wachovia Corp.............. 4,400 167,750 Wells Fargo & Co........... 1,250 227,969 Wesco Financial Corp....... 150 19,350 ----------- 5,755,594 ----------- FOOD & BEVERAGES -- 10.2% Archer-Daniels-Midland Co........................ 13,425 221,512 Ben & Jerry's (Class A)*... 100 1,400 CPC International Inc...... 3,800 234,650 Campbell Soup Co........... 6,450 301,537 Coca-Cola Company.......... 32,400 2,134,350 Fleming Cos., Inc.......... 1,200 31,650 General Mills, Inc......... 4,150 216,837 Heinz (H.J.) Company....... 6,200 268,926 Hershey Foods Corp......... 2,300 132,537 Kellogg Co................. 5,600 402,501 PepsiCo, Inc............... 20,200 946,833 Quaker Oats Co............. 3,500 121,625 Ralston Purina Group....... 2,550 136,425 Smucker (J.M.) Co. (Class A)........................ 1,000 21,875 Super Valu Inc............. 1,900 58,425 Sysco Corp................. 4,700 146,288 TCBY Enterprises, Inc...... 500 2,938 Tootsie Roll Industries, Inc....................... 618 22,254 ISSUER SHARES VALUE - -------------------------------- ---------- ----------- FOOD & BEVERAGES -- CONTINUED Wrigley, (Wm.) Jr. Co...... 3,000 $ 133,500 ----------- 5,536,063 ----------- HEALTHCARE -- 8.0% Acuson Corp.*.............. 1,000 11,500 Allergan Inc............... 1,700 51,425 Alza Corp.*................ 2,400 61,800 Angelica Corp.............. 300 7,575 Apogee Enterprises, Inc.... 300 5,194 Becton Dickinson & Company................... 1,800 105,975 Bergen Brunswig Corp. (Class A)................. 945 20,436 Biomet Inc.*............... 2,900 44,225 Community Psychiatric Centers*.................. 1,000 12,750 Forest Laboratories, Inc.*..................... 1,250 55,468 Humana Inc.*............... 4,000 77,500 Johnson & Johnson.......... 16,500 1,183,867 Manor Care Inc............. 1,550 50,181 Medtronic Inc.............. 2,900 237,800 Merck & Co., Inc........... 31,600 1,631,350 Mylan Laboratories Inc..... 2,200 66,275 Schering-Plough Corp....... 9,600 446,400 St. Jude Medical Inc....... 1,100 60,225 Stryker Corp............... 1,200 52,500 Sunrise Medical Inc.*...... 600 16,425 United American Healthcare*............... 200 3,550 US Health Care Inc......... 4,300 135,988 ----------- 4,338,409 ----------- HOUSEHOLD GOODS -- 4.8% Alberto Culver Co. (Class B)........................ 700 21,175 Avon Products, Inc......... 1,700 115,600 Bassett Furniture Industries, Inc........... 300 7,500 Church & Dwight Co., Inc....................... 400 8,400 Clorox Co.................. 1,400 91,875 Colgate-Palmolive Co....... 3,700 259,000 Handleman Co............... 700 7,262 Harman International Industries, Inc. ......... 600 23,625 Hasbro Inc................. 2,150 66,919 Leggett & Platt Inc........ 1,050 48,694 Mattel, Inc................ 5,669 160,149 Maytag Corp................ 2,900 47,488 Newell Co.................. 4,200 106,575
DOMINI SOCIAL INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED JULY 31, 1995 (SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE - -------------------------------- ---------- ----------- HOUSEHOLD GOODS -- CONTINUED Oneida, Ltd................ 200 $ 3,000 Procter & Gamble Co. ...... 17,600 1,212,200 Rubbermaid Inc............. 4,100 121,975 Shaw Industries............ 3,400 57,375 Snap-On Tools Corp......... 1,000 41,750 Springs Industries, Inc. (Class A)................. 600 23,550 Stanhome, Inc.............. 400 12,850 Stanley Works (The)........ 1,200 47,550 Thomas Industries.......... 200 3,525 Whirlpool Corp............. 1,900 109,725 Zenith Electronics Corp.*.................... 1,600 14,000 ----------- 2,611,762 ----------- INSURANCE -- 6.0% Aetna Life & Casualty Co........................ 2,900 179,438 Alexander & Alexander Services Inc. ............ 1,100 25,300 Allstate Corp.............. 1 20 American General Corp...... 5,200 189,150 American International Group, Inc................ 12,100 907,541 Chubb Corp................. 2,200 184,800 CIGNA Corp................. 1,900 153,188 GEICO Corp................. 1,700 94,775 General Re Corp............ 2,100 278,513 Hartford Steam Boiler...... 600 26,700 Jefferson-Pilot Corp....... 1,300 72,637 Lincoln National Corp...... 2,400 98,700 Marsh & McLennan Companies, Inc....................... 1,900 150,100 Providian Corp............. 2,500 89,688 SAFECO Corp................ 1,600 93,600 St. Paul Companies......... 2,100 102,375 Torchmark Corp............. 1,800 69,300 Travelers Corp............. 8,209 388,859 UNUM Corp.................. 1,900 91,912 USF&G Corp................. 2,600 42,900 USLIFECorp................. 500 20,875 ----------- 3,260,371 ----------- MANUFACTURING -- 1.6% Applied Materials, Inc.*... 2,300 237,800 Briggs & Stratton Corp..... 800 26,700 Cincinnati Milacron Inc.... 900 28,125 Clarcor Inc................ 300 6,937 ISSUER SHARES VALUE - -------------------------------- ---------- ----------- MANUFACTURING -- CONTINUED Dionex Corp.*.............. 200 9,625 Fastenal Co................ 1,200 $ 40,200 Goulds Pumps, Inc.......... 600 13,200 Hunt Manufacturing Co...... 400 5,600 Illinois Tool Works Inc.... 2,850 168,150 James River Corp. of Virginia.................. 2,000 66,750 Lawson Products, Inc. ..... 300 8,063 Millipore Corp............. 1,200 41,400 Modine Manufacturing Co.... 800 25,000 Nordson Corp............... 500 27,875 Thermo Electron Corp....... 2,250 96,188 Watts Industries Inc. (Class A)................. 1,000 23,250 Wellman Inc................ 1,000 26,875 ----------- 851,738 ----------- MEDIA -- 7.6% BET Holdings Inc. (Class B)*....................... 400 7,100 CBS, Inc................... 1,600 124,200 Capital Cities/ABC, Inc.... 3,900 455,325 Comcast Corp. (Class A).... 5,900 119,475 Disney (Walt) Company (The)..................... 13,300 779,716 Dow Jones & Co. Inc........ 2,600 92,300 Frontier Corp.............. 2,300 61,813 Gannett Co., Inc........... 3,700 202,575 King World Productions Inc.*..................... 900 37,688 Knight-Ridder Inc.......... 1,250 70,312 Lee Enterprises Inc........ 500 18,875 McGraw-Hill Inc............ 1,300 99,937 Media General Inc. (Class A)........................ 600 20,400 Meredith Corp.............. 600 17,250 New York Times Co. (The) (Class A)................. 2,500 63,750 Nynex Corp................. 10,800 445,500 SBC Communications......... 15,500 745,937 Scholastic Inc.*........... 500 32,875 Tele-Communications, Inc. (Class A)*................ 16,400 410,000 Times Mirror Co. (Class A)........................ 3,100 89,125 Turner Broadcasting System Inc. (Class A)............ 2,200 47,850 Viacom, Inc.*.............. 1,800 91,575 Washington Post Co. (The) (Class B)................. 300 81,300 ----------- 4,114,878 -----------
DOMINI SOCIAL INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED JULY 31, 1995 (SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE - -------------------------------- ---------- ----------- MISCELLANEOUS -- 2.0% Alco Standard Corp......... 1,350 $ 109,856 Allwaste, Inc.*............ 1,200 6,750 American Greetings Corp. (Class A)................. 2,050 62,013 Avnet, Inc................. 1,000 52,000 Bemis Co., Inc............. 1,400 39,725 CPI Corp................... 400 8,700 Cross, A.T. Co. (Class A)........................ 500 7,875 DeVRY INC.*................ 400 9,100 Fedders Corp............... 750 5,063 Fuller (H.B.) Co........... 500 17,625 General Signal Corp........ 1,250 46,094 Groundwater Technology, Inc.*..................... 200 2,650 Harcourt General Inc....... 1,900 85,500 Hillenbrand Industries Inc....................... 1,700 50,575 Ionics Inc.*............... 400 15,250 Jostens Inc................ 1,400 31,850 KENETECH Corp.*............ 900 10,800 Marriott International Inc....................... 3,100 112,375 National Education Corp.*.................... 600 3,225 Omnicom Group, Inc......... 1,000 60,375 Polaroid Corporation....... 1,150 49,306 Premier Industrial Corp.... 2,350 58,162 Sealed Air Corp.*.......... 500 25,375 Service Corp. International............. 2,350 80,194 Sonoco Products Co......... 2,205 56,228 Toro Co. (The)............. 300 8,587 Whitman Corp............... 2,600 50,700 ----------- 1,065,953 ----------- RESOURCE DEVELOPMENT -- 3.2% Air Products & Chemicals, Inc....................... 2,900 162,400 Aluminum Co. of America.... 4,600 261,625 ARCO Chemical Co........... 2,450 117,600 Battle Mountain Gold Co. ...................... 1,800 17,100 Betz Laboratories, Inc..... 700 31,588 Cabot Corp................. 1,200 67,650 Calgon Carbon Corp......... 1,200 14,250 Consolidated Papers Inc.... 1,100 65,313 Cyprus Amax Minerals Co. .. 2,600 72,475 Echo Bay Mines Ltd......... 3,000 27,562 Inland Steel Industries Inc....................... 1,200 34,500 Mead Corp.................. 1,400 82,425 Morton International Inc....................... 3,900 117,000 Nalco Chemical Co.......... 1,650 58,781 ISSUER SHARES VALUE - -------------------------------- ---------- ----------- RESOURCE DEVELOPMENT -- CONTINUED Nucor Corp................. 2,300 $ 123,625 Praxair Inc. .............. 3,700 103,600 Scott Paper Company........ 3,800 174,325 Sigma-Aldrich Corporation............... 1,300 65,325 Westvaco Corp.............. 1,800 81,450 Worthington Industries, Inc....................... 2,250 46,969 ----------- 1,725,563 ----------- RETAIL -- 11.6% Albertson's, Inc........... 6,400 190,400 American Stores Co......... 3,800 111,625 Bob Evans Farms, Inc....... 1,200 23,400 Charming Shoppes Inc. ..... 2,000 9,750 Circuit City Stores Inc.... 2,500 92,813 Claire's Stores Inc. ...... 500 10,000 Dayton-Hudson Corp. ....... 1,800 136,125 Dillard Department Stores.................... 2,900 89,900 Dollar General Corp. ...... 1,656 55,898 Egghead Inc.*.............. 300 3,938 Gap, Inc. (The)............ 3,800 132,525 Giant Food Inc. (Class A)........................ 1,400 42,700 Gibson Greetings Inc....... 500 7,375 Great Atlantic & Pacific Tea Co., Inc.............. 1,200 33,450 Hannaford Brothers Co...... 1,300 34,938 Hechinger Co. (Class A).... 800 5,300 Home Depot, Inc. (The)..... 12,033 528,030 Huffy Corp................. 300 3,750 International Dairy Queen, Inc. (Class A)*........... 600 12,600 K-Mart Corp................ 11,400 179,550 Kroger Company*............ 2,800 87,150 Lillian Vernon Corp........ 200 3,700 Limited, Inc. (The)........ 8,950 183,475 Longs Drug Stores, Inc..... 500 18,312 Lowe's Companies, Inc...... 4,000 147,500 Luby's Cafeterias, Inc..... 500 9,875 May Department Stores Co... 6,300 273,263 McDonald's Corp............ 17,800 687,608 Melville Corp.............. 2,650 95,400 Mercantile Stores Co., Inc....................... 1,000 46,625 Morrison Restaurants Inc....................... 750 17,531 Nordstrom Inc.............. 2,100 84,525 Penney, J.C. Co., Inc...... 5,950 287,831 Pep Boys - Manny, Moe & Jack...................... 1,450 40,781 Petrie Stores Corp. ....... 1,200 8,400
DOMINI SOCIAL INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED JULY 31, 1995 (SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE - -------------------------------- ---------- ----------- RETAIL -- CONTINUED Price/Costco Inc.*......... 4,765 $ 85,472 Ryan's Family Steak Houses, Inc.*..................... 1,300 9,100 Sears Roebuck & Co......... 9,900 322,987 Skyline Corp............... 200 3,350 Specs Music Inc.*.......... 200 700 TJX Companies Inc. (The)... 2,000 29,250 Tandy Corp................. 1,900 112,813 Toys 'R' Us, Inc.*......... 6,950 194,600 Wal-Mart Stores, Inc....... 58,800 1,565,550 Walgreen Co................ 3,200 165,600 Whole Foods Market*........ 300 4,575 Woolworth (F.W.) Co........ 3,500 54,688 ----------- 6,244,728 ----------- TECHNOLOGIES -- 14.9% Advanced Micro Devices, Inc.*..................... 2,650 86,456 Amdahl Corp.*.............. 3,000 29,813 American Power Conversion Corp.*.................... 2,400 45,000 Analog Devices, Inc.*...... 1,850 67,062 Apple Computer, Inc........ 3,200 144,000 Automatic Data Processing, Inc....................... 3,700 236,800 Baldor Electric Co......... 400 13,050 Borland International, Inc.*..................... 600 7,500 Cisco Systems, Inc.*....... 7,000 390,250 Compaq Computer Corp.*..... 6,700 340,025 Computer Assoc. International Inc......... 4,100 300,837 Cooper Industries Inc. .... 2,900 108,388 DSC Communications Corp.*.. 3,050 163,937 Digital Equipment Corp.*... 3,800 145,825 Grainger, (W.W.) Inc. ..... 1,300 76,213 Hewlett-Packard Co......... 13,100 1,020,163 Hubbell Inc. (Class B)..... 830 48,762 Intel Corp................. 21,300 1,384,563 International Business Machines Inc.............. 15,000 1,633,125 MCI Communications Corp.... 17,200 412,800 Micron Technology, Inc..... 5,300 331,229 Novell Inc.*............... 9,300 168,562 Perkin-Elmer Corp.......... 1,100 37,262 Quarterdeck Corp.*......... 400 5,875 Raychem Corp............... 1,200 45,600 ISSUER SHARES VALUE - -------------------------------- ---------- ----------- TECHNOLOGIES -- CONTINUED Shared Medical Systems Corp...................... 600 $ 24,975 Solectron Corp.*........... 1,200 43,650 Sprint Corp................ 8,900 304,825 Stratus Computer Inc.*..... 700 18,200 Sun Microsystems Inc.*..... 2,400 115,500 Tandem Computers Inc.*..... 2,900 38,063 Tektronix, Inc............. 850 40,906 Tellabs, Inc.*............. 2,300 102,350 Thomas & Betts Corp........ 500 33,813 Xilinx Inc.*............... 600 71,925 ----------- 8,037,304 ----------- TRANSPORTATION -- 2.5% AMR Corp.*................. 2,000 150,000 Airborne Freight Corp...... 400 8,550 Alaska Air Group, Inc.*.... 300 5,775 CSX Corp................... 2,700 226,463 Conrail Inc................ 2,100 129,675 Consolidated Freightways, Inc....................... 1,100 26,263 Delta Air Lines, Inc....... 1,300 103,025 Federal Express Corp.*..... 1,450 97,875 GATX Corp.................. 600 30,225 Norfolk Southern Corp...... 3,400 246,925 Roadway Services........... 1,100 55,550 Ryder System, Inc.......... 1,950 48,506 Santa Fe Pacific Corp...... 2,656 75,696 Southwest Airlines Inc..... 3,800 109,250 UAL Corp.*................. 350 52,281 Yellow Corp................ 600 9,075 ----------- 1,375,134 ----------- UTILITIES -- 7.0% American Water Works Co., Inc....................... 900 27,563 Ameritech Corp............. 14,100 682,087 Atlanta Gas & Light Co. ... 700 24,500 Bell Atlantic Corp......... 11,200 641,200 BellSouth Corp............. 12,700 860,425 Brooklyn Union Gas Company (The)..................... 1,250 30,469 California Energy Co., Inc.*..................... 1,200 22,950 Citizens Utilities Co. (Class A)*................ 5,695 64,074 Connecticut Energy Corp.... 200 3,900 Eastern Enterprises........ 500 15,125
DOMINI SOCIAL INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED JULY 31, 1995 (SHOWING PERCENTAGE OF INVESTMENTS TO NET ASSETS) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE - -------------------------------- ---------- ----------- UTILITIES -- CONTINUED El Paso Natural Gas Co..... 1,000 $ 25,375 Equitable Resources Inc.... 800 22,200 Idaho Power Co............. 1,000 24,250 LG & E Energy Corp......... 900 34,762 MCN Corp. ................. 1,700 32,300 NICOR Inc. ................ 1,200 30,450 Noram Energy Corp.......... 3,400 23,375 Northwestern Public Service Co. ...................... 200 5,200 Oklahoma Gas & Electric Co........................ 1,000 34,000 ONEOK Inc.................. 700 16,275 Pacific Enterprises........ 2,200 53,075 Pacific Telesis Group...... 10,800 305,100 Peoples Energy Corp........ 900 23,625 Potomac Electric Power Co........................ 2,800 58,100 Public Service Co. of Colorado.................. 1,600 50,600 Southern New England Telecom................... 1550 53,087 Telephone & Data Systems... 1,500 58,125 US West Inc................ 11,900 510,213 Washington Gas Light Co.... 1,200 21,900 ----------- 3,754,305 ----------- VEHICLE COMPONENTS -- 0.6% Cooper Tire & Rubber Co.... 2,150 55,363 Cummins Engine Co., Inc.... 1,150 48,300 Dana Corp.................. 2,600 76,700 Federal-Mogul Corp. ....... 800 17,100 Genuine Parts.............. 3,200 120,800 SPX Corp................... 200 2,875 ISSUER SHARES VALUE - -------------------------------- ---------- ----------- VEHICLE COMPONENTS -- CONTINUED Smith, A.O................. 400 $ 10,900 Spartan Motors Inc.*....... 300 3,038 Worldway Corp.*............ 200 2,175 ----------- 337,251 ----------- Total Common Stocks (Cost $43,200,668)....................... 52,897,818 ----------- PREFERRED STOCK -- 0.6% FEDERAL SPONSORED CREDIT -- 0.6% Federal Home Loan Mortgage Corp...................... 4,600 301,300 ----------- Total Preferred Stock (Cost 239,422)........................... 301,300 ----------- TOTAL INVESTMENTS -- 98.5% (COST, $43,440,090)(A)................. 53,199,118 OTHER ASSETS, LESS LIABILITIES -- 1.5%................................... 803,670 ----------- NET ASSETS -- 100.0%.................... $54,002,788 ----------- -----------
- ------------ *Non-income producing security. (a)The aggregate cost for federal income tax purposes is $43,453,725, the aggregate gross unrealized appreciation is $10,474,465, and the aggregate gross unrealized depreciation is $729,072, resulting in net unrealized appreciation of $9,745,393. See Notes to Financial Statements DOMINI SOCIAL INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1995 - -------------------------------------------------------------------------------- ASSETS: Investments at value (Cost $43,440,090) (Note 1).......................... $53,199,118 Cash...................................................................... 813,520 Dividends receivable...................................................... 99,082 Deferred organization expenses (Note 1)................................... 8,657 ----------- Total Assets.......................................................... 54,120,377 ----------- LIABILITIES: Expenses payable (Note 2)................................................. 21,045 Payable for securities purchased.......................................... 96,544 ----------- Total Liabilities..................................................... 117,589 ----------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS...................... $54,002,788 ----------- ----------- NET ASSETS CONSIST OF: Paid-in capital........................................................... $54,002,788 ----------- -----------
See Notes to Financial Statements DOMINI SOCIAL INDEX PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1995 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends.................................................................. $ 902,936 EXPENSES (NOTES 1 AND 2): Investment management fee...................................... $ 39,589 Investment advisory fee........................................ 19,795 Administration fee............................................. 19,795 Expense reimbursement fee...................................... 118,532 Amortization of organization expenses.......................... 10,359 ---------- Total Expenses............................................. 208,070 Less: Waiver of expenses....................................... (39,590) ---------- Net Expenses........................................................... 168,480 ---------- NET INVESTMENT INCOME.......................................................... 734,456 NET REALIZED GAIN ON INVESTMENTS (NOTE 3): Proceeds from sales............................................ 2,483,407 Cost of securities sold........................................ 2,077,980 ---------- Net realized gain on investments....................................... 405,427 NET UNREALIZED APPRECIATION OF INVESTMENTS: Beginning of year.............................................. 1,029,594 End of year.................................................... 9,759,028 ---------- Net change in unrealized appreciation.................................. 8,729,434 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $9,869,317 ---------- ----------
See Notes to Financial Statements DOMINI SOCIAL INDEX PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED JULY 31,1995 JULY 31, 1994 -------------- -------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income....................................................... $ 734,456 $ 545,816 Net realized gain on investments............................................ 405,427 207,560 Net change in unrealized appreciation....................................... 8,729,434 (216,317) -------------- -------------- Net Increase in Net Assets Resulting from Operations.................... 9,869,317 537,059 -------------- -------------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions................................................................... 14,888,452 14,967,462 Reductions.................................................................. (2,076,641) (1,377,702) -------------- -------------- Net increase in Net Assets from Transactions in Investors' Beneficial Interests................................................... 12,811,811 13,589,760 -------------- -------------- Total Increase in Net Assets........................................ 22,681,128 14,126,819 NET ASSETS: Beginning of year........................................................... 31,321,660 17,194,841 -------------- -------------- End of year................................................................. $ 54,002,788 $ 31,321,660 -------------- -------------- -------------- --------------
- ------------------------------------------------------------------------------------------- FOR THE PERIOD AUGUST 10, YEAR ENDED 1990*** ---------------------------------------------------------- TO JULY 31, JULY 31, 1995 JULY 31, 1994 JULY 31, 1993 JULY 31, 1992 1991 ------------- ------------- ------------- ------------- --------------- FINANCIAL HIGHLIGHTS: Net investment income to average net assets*........ 1.85% 2.13% 1.88% 1.99% 1.85%** Expenses to average net assets*........ 0.43% 0.29% 0.29% 0.29% 0.29%** Portfolio turnover rate............... 6% 8% 4% 3% --
- -------------------------------------------------------------------------------- *Reflects a voluntary waiver of fees by the Administrator and Adviser. Due to the limitations set forth in the expense payment arrangements, had the Administrator and Adviser not waived their fees, the ratios of net investment income and expenses to average net assets as stated would not have changed for the periods ended July 31, 1993, 1992 and 1991. For the years ended July 31, 1995 and 1994, the ratios of net investment income and expenses to average net assets would have been 1.75% and 0.53% and 2.00% and 0.42%, respectively. (See Note 2.) **Annualized. ***Commencement of operations. See Notes to Financial Statements DOMINI SOCIAL INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JULY 31, 1995 - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES. Domini Social Index Portfolio (the "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 Portfolio intends to correlate its investment portfolio as closely as is practicable with the Domini Social Index (the "Index"), which is a common stock index developed and maintained by Kinder, Lydenberg, Domini & Co., Inc. ("KLD"), the Portfolio's Adviser. The Declaration of Trust permits the Trustees to issue an unlimited number of beneficial interests in the Portfolio. The Portfolio commenced operations upon effectiveness on August 10, 1990 and began investment operations on June 3, 1991. The following is a summary of the significant accounting policies of the Portfolio: A. VALUATION OF INVESTMENTS. The Portfolio values securities at the last reported sale price, or at the last reported bid price if no sales are reported. B. DIVIDEND INCOME. Dividend income is recorded on the ex-dividend date. C. FEDERAL TAXES. The Portfolio's policy is to comply with the applicable provisions of the Internal Revenue Code. Accordingly, no provision for Federal taxes is necessary. D. DEFERRED ORGANIZATION EXPENSE. Expenses incurred by the Portfolio in connection with its organization are being amortized by the Portfolio on a straight-line basis over a five-year period. E. OTHER. Investment transactions are accounted for on the trade date. Gains and losses are determined on the basis of identified cost. 2. TRANSACTIONS WITH AFFILIATES. A. INVESTMENT ADVISORY FEES. The Portfolio has retained KLD as the Investment Adviser of the Portfolio. The services provided by KLD consist of the determination of the stocks to be included in the Index and evaluating, in accordance with KLD's criteria, debt securities which may be purchased by the Portfolio. For its services under the Investment Advisory Agreement, KLD receives from the Portfolio a fee accrued daily at an annual rate equal to 0.05% of the Portfolio's average daily net assets. For the year ended July 31, 1995, KLD voluntarily waived all of its fees. B. INVESTMENT MANAGEMENT FEES. For the period August 1, 1994 through November 20, 1994, the Portfolio retained State Street Bank and Trust Company ("State Street") as the Investment Manager of the Portfolio. State Street did not determine the composition of the Index. For its services under the prior Management Agreement, State Street received from the Portfolio a fee accrued daily at an annual rate equal to 0.10% of the Portfolio's average daily net assets. For the period August 1, 1994 through November 20, 1994, the Portfolio accrued and paid investment management fees of $10,180 to State Street. On October 5, 1994, the Board of Trustees of the Portfolio voted to terminate the investment management agreement between the Portfolio and State Street. Termination was effective as of November 21, 1994, at which time Mellon Equity Associates ("MEA") assumed responsibility for the management of the Portfolio's assets. MEA does not determine the composition of the Index. Under the new Management Agreement, the Portfolio pays MEA an investment management fee equal on an annual basis to the following percentages of the Portfolio's average daily net assets for its then-current fiscal year: 0.10% of assets up to $50 million; 0.30% of assets between $50 million and $100 million; 0.20% of assets between $100 million and $500 million; and 0.15% of assets over $500 million. For the period November 21, 1994 through July 31, 1995, the Portfolio accrued and paid investment management fees of $29,409 to MEA. C. EXPENSE PAYMENT AGREEMENTS. Pursuant to expense payment arrangements between Signature and each of the Fund and the Portfolio effective January 1, 1995, Signature has agreed to pay all of the operating expenses of the Fund and the Portfolio, including the advisory and management fees of the Portfolio and the administration fees of the Fund and the Portfolio. Under these arrangements, Signature receives expense payment fees (i) from the Fund, at an annual rate equal to 0.48% of the Fund's average daily net assets for its then-current fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of the Portfolio's average daily net assets for its then-current fiscal year. As a result, the aggregate annual operating expenses (including amortization of organization expenses) of the Fund and the Portfolio will not exceed 0.98% of the average daily net assets of the Fund. After the expense payment arrangements terminate on December 31, 1999, the dollar-based expenses of the Fund and the Portfolio will each be paid directly. Prior to January 1, 1995, the Fund and the Portfolio each had entered into expense reimbursement agreements (the "Prior Agreements") with Signature pursuant to which the aggregate annual operating expenses (including amortization of an organization expenses) of the Fund and the Portfolio would not exceed 0.98% of the Fund's average daily net assets for its then-current fiscal year. Under the Prior Agreements, Signature agreed to pay the expenses of the Fund and the Portfolio (except for fees payable under each of the Administrative Services Agreements, the Distribution Agreement, the Management Agreement, the Advisory Agreement and expenses related to the organization of the Fund and the Portfolio) until April 30, 2000, all subject to reimbursement by the Fund or the Portfolio, as the case may be. For the year ended July 31, 1995, Signature incurred approximately $90,542 in expenses on behalf of the Portfolio. D. REIMBURSEMENT OF EXPENSES. The Administrator has agreed to pay certain expenses of the Domini Social Equity Fund (the "Fund"), formerly the Domini Social Index Trust, and the Portfolio subject to reimbursement. To accomplish such reimbursement, the Administrator may either receive an expense reimbursement fee from the Fund and the DOMINI SOCIAL INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1995 - -------------------------------------------------------------------------------- Portfolio or may reimburse the Fund and the Portfolio directly for expenses incurred such that after such reimbursement the aggregate expenses of the Fund and the Portfolio will not exceed 0.98% of the average daily net assets of the Fund. For the period August 1, 1994 through December 31, 1994, the aggregate expenses of the Fund and the Portfolio were limited to 0.75% of the average daily net assets of the Fund. The expense reimbursement fee agreement will terminate on the earlier of April 30, 2000, or the date on which the cumulative reimbursement fee equals the cumulative payments of such reimbursable expenses made by the Administrator. For the year ended July 31, 1995, the Administrator incurred approximately $90,542 in expenses on behalf of the Portfolio. 3. INVESTMENT TRANSACTIONS. Purchase and sales of investments, other than U.S. Government securities and short-term obligations, aggregated $15,541,954 and $2,483,407, respectively. INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Trustees and Shareholders Domini Social Index Portfolio: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Domini Social Index Portfolio as of July 31, 1995, and the related statement of operations for the year then ended, 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 four-year period then ended and for the period from August 10, 1990 (commencement of operations) to July 31, 1991. 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, 1995 by correspondence with the custodian. 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 the Domini Social Index Portfolio as of July 31, 1995, the results of its operations for the year then ended, the 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 four-year period then ended and for the period from August 10, 1990 to July 31, 1991, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Boston, Massachusetts August 25, 1995 DOMINI SOCIAL EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1995 - -------------------------------------------------------------------------------- ASSETS: Investment in Domini Social Index Portfolio, at value (Note 1)............ $54,002,631 Receivable for fund shares sold........................................... 669,071 Deferred organization expenses (Note 1)................................... 13,108 ----------- Total Assets.......................................................... 54,684,810 ----------- LIABILITIES: Expenses payable (Note 2)................................................. 45,326 Payable for fund shares redeemed.......................................... 1,948 ----------- Total Liabilities..................................................... 47,274 ----------- NET ASSETS.................................................................... $54,637,536 ----------- ----------- NET ASSETS CONSIST OF: Paid-in capital........................................................... $44,591,383 Undistributed net investment income....................................... 39,069 Accumulated net realized gain on investment............................... 248,952 Net unrealized appreciation of investment................................. 9,758,132 ----------- NET ASSETS.................................................................... $54,637,536 ----------- ----------- NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($54,637,536/3,679,740 SHARES)................... $ 14.85 ----------- -----------
See Notes to Financial Statements DOMINI SOCIAL EQUITY FUND STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1995 - -------------------------------------------------------------------------------- INVESTMENT INCOME FROM PORTFOLIO: Investment income from Portfolio............................................ $ 902,930 Expenses from Portfolio..................................................... (168,479) ---------- Net Income from Portfolio............................................... 734,451 EXPENSES (NOTES 1 AND 2): Administration fee............................................... $ 59,401 Expense reimbursement fee........................................ 171,355 Amortization of organization expenses............................ 15,720 --------- Total Expenses............................................... 246,476 Less: Waiver of expenses......................................... (59,401) --------- Net Expenses............................................................ 187,075 ---------- NET INVESTMENT INCOME........................................................... 547,376 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO: Net realized gain from Portfolio............................................ 405,386 Net change in unrealized appreciation from Porfolio......................... 8,728,561 ---------- Net realized and unrealized gain from Portfolio............................. 9,133,947 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $9,681,323 ---------- ----------
See Notes to Financial Statements DOMINI SOCIAL EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED JULY 31, 1995 JULY 31, 1994 -------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income........................................................ $ 547,376 $ 428,371 Net realized gain from Portfolio............................................. 405,386 207,559 Net change in unrealized appreciation from Portfolio......................... 8,728,561 (216,316) -------------- -------------- Net Increase in Net Assets from Operations................................. 9,681,323 419,614 -------------- -------------- FROM DISTRIBUTIONS AND DIVIDENDS: Dividends to shareholders from net investment income......................... (596,572) (353,164) Distributions to shareholders from net realized gain......................... (224,400) (156,122) -------------- -------------- Net Decrease in Net Assets from Distributions and Dividends................ (820,972) (509,286) -------------- -------------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares................................................ 18,000,269 17,262,648 Net asset value of shares issued in reinvestment of dividends and distributions............................................................... 607,013 343,281 Payments for shares redeemed................................................. (4,199,386) (3,375,659) -------------- -------------- Net Increase in Net Assets from Capital Share Transactions................. 14,407,896 14,230,270 -------------- -------------- Total Increase in Net Assets............................................. 23,268,247 14,140,598 NET ASSETS: Beginning of year............................................................ 31,369,289 17,228,691 -------------- -------------- End of year (including undistributed net investment income of $39,069 and $88,265, respectively)...................................................... $ 54,637,536 $ 31,369,289 -------------- -------------- -------------- -------------- OTHER INFORMATION: SHARE TRANSACTIONS: Sold......................................................................... 1,368,854 1,397,442 Issued in reinvestment of dividends and distributions........................ 47,501 28,145 Redeemed..................................................................... (322,273) (276,162) -------------- -------------- Net increase................................................................. 1,094,082 1,149,425 -------------- -------------- -------------- --------------
See Notes to Financial Statements DOMINI SOCIAL EQUITY FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
YEAR ENDED FOR THE PERIOD ---------------------------------------------------------- AUGUST 10, 1990 JULY 31, 1995 JULY 31, 1994 JULY 31, 1993 JULY 31, 1992 TO JULY 31, 1991 ------------- ------------- ------------- ------------- ---------------- Net Asset Value, beginning of period..... $12.13 $12.00 $11.06 $ 9.95 $10.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment income................ 0.172 0.175 0.137 0.117 0.018 Net realized and unrealized gain (loss) on investments............... 2.825 0.178* 0.968 1.106 (0.068)* ------ ------ ------ ------ ------ Total income from investment operations.............................. 2.997 0.353 1.105 1.223 (0.050) ------ ------ ------ ------ ------ Less distributions and dividends: Dividends to shareholders from net investment income................... (0.195) (0.150) (0.150) (0.113) -- Distributions to shareholders from net realized gain................... (0.082) (0.073) (0.015) -- -- ------ ------ ------ ------ ------ Total distributions...................... (0.277) (0.223) (0.165) (0.113) -- ------ ------ ------ ------ ------ Net asset value, end of period........... $14.85 $12.13 $12.00 $11.06 $ 9.95 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Ratios/supplemental data Total return......................... 25.10% 2.90% 10.00% 12.30% (0.50)% Net assets, end of period (in 000's).............................. $54,638 $31,369 $17,229 $7,174 $1,740 Ratio of expenses to average net assets***........................... 0.90 % 0.75 % 0.75 % 0.75 % 0.75 %** Ratio of net investment income to average net assets***............... 1.38 % 1.67 % 1.41 % 1.53 % 1.49 %**
- -------------------------------------------------------------------------------- *After effect of transaction in capital stock. **Annualized. ***Includes the Fund's share of Domini Social Index Portfolio's expenses as well as a waiver of fees and payment of expenses by the Administrator. Without the limitations set forth in the expense payment arrangements and fee waivers in effect during the indicated periods, the ratios of net investment income and expenses to average net assets for the years ended July 31, 1995, 1994, 1993, 1992 and the period ended July 31, 1991 would have been 1.13% and 1.15%, 1.39% and 1.03%, 1.26% and 0.90%, 1.53% and 0.75%, and 1.49% and 0.75%, respectively. (See Note 2.) See Notes to Financial Statements DOMINI SOCIAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS JULY 31, 1995 - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES. Domini Social Equity Fund (the "Fund"), formerly the Domini Social Index Trust is a Massachusetts business trust registered under the Investment Company Act of 1940 (the "Act"), as an open-end management investment company. 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 (99.9997% at July 31, 1995). The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund commenced operations upon effectiveness on August 10, 1990 and began investment operations on June 3, 1991. The following is a summary of the significant accounting policies of the Fund: A. VALUATION OF INVESTMENTS. Valuation of securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. B. INVESTMENT INCOME AND DIVIDENDS TO SHAREHOLDERS. The Fund earns income daily, net of Portfolio expenses, on its investment in the Portfolio. Dividends to shareholders are declared and paid semiannually from net investment income. Distributions to shareholders of realized capital gains, if any, are made annually. C. FEDERAL TAXES. The Fund's policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income, including net realized gains, if any, within the prescribed time periods. Accordingly, no provision for federal income or excise tax is necessary. D. DEFERRED ORGANIZATION EXPENSES. Organizational costs are being amortized on a straight-line basis over a five-year period. The amount paid by the Fund on any redemption of the Fund's initial shares will be reduced by the pro rata portion of any unamortized organization expenses which the number of the initial shares redeemed bears to the total number of initial shares outstanding immediately prior to such redemption. To the extent that the proceeds of the redemptions are less than such pro rata portion of any unamortized organization expenses, Signature Broker-Dealer Services, Inc. ("Signature"), the Administrator and Distributor of the Fund, has agreed to reimburse the Fund for such difference. E. OTHER. All net investment income of the Portfolio is allocated pro rata among the Fund and the other investors in the Portfolio. 2. TRANSACTIONS WITH AFFILIATES. A. ADMINISTRATION. The Fund has retained Signature to serve as Administrator and Distributor. Signature provides administrative services necessary for the operations of the Fund, furnishes office space and facilities required for conducting the business of the Fund and pays the compensation of the Fund's officers and Trustee affiliated with Signature. For its services under the Administrative Services Agreement, Signature receives from the Fund a fee accrued daily at an annual rate equal to 0.15% of the Fund's average daily net assets. The Portfolio has entered into a similar agreement with Signature at a rate of 0.05%. For the year ended July 31, 1995, Signature voluntarily waived all of its fees. B. DISTRIBUTION. The Trustees have adopted a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Signature acts as agent of the Fund and principal underwriter of shares of the Fund pursuant to the Plan. Under the Plan, Signature may receive a fee from the Fund 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. For the year ended July 31, 1995, Signature received no fees from the Fund pursuant to the Plan. C. EXPENSE PAYMENT ARRANGEMENTS. Pursuant to expense payment arrangements between Signature and each of the Fund and the Portfolio effective January 1, 1995, Signature has agreed to pay all of the operating expenses of the Fund and the Portfolio, including the advisory and management fees of the Portfolio and the administration fees of the Fund and the Portfolio. Under these arrangements, Signature receives expense payment fees (i) from the Fund, at an annual rate equal to 0.48% of the Fund's average daily net assets for its then-current fiscal year, and (ii) from the Portfolio, at an annual rate equal to 0.50% of the Portfolio's average daily net assets for its then-current fiscal year. As a result, the aggregate annual operating expenses (including amortization of organization expenses) of the Fund and the Portfolio will not exceed 0.98% of the average daily net assets of the Fund. After the expense payment arrangements terminate on December 31, 1999, the dollar-based expenses of the Fund and the Portfolio will each be paid directly. Prior to January 1, 1995, the Fund and the Portfolio each had entered into expense reimbursement agreements (the "Prior Agreements") with Signature pursuant to which the aggregate annual operating expenses (including amortization of an organization expenses) of the Fund and the Portfolio would not exceed 0.98% of the Fund's average daily net assets for its then-current fiscal year. Under the Prior Agreements, Signature agreed to pay the expenses of the Fund and the Portfolio (except for fees payable under each of the Administrative Services Agreements, the Distribution Agreement, the Management Agreement, the Advisory Agreement and expenses related to the organization of the Fund and the Portfolio) until April 30, 2000, all subject to reimbursement by the Fund or the Portfolio, as the case may be. For the year ended July 31, 1995, Signature incurred approximately $183,778 in expenses on behalf of the Fund. 3. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's investment in the Portfolio aggregated $14,888,452 and $2,076,641, respectively. INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Trustees and Shareholders Domini Social Equity Fund: We have audited the accompanying statement of assets and liabilities of the Domini Social Equity Fund as of July 31, 1995, and the related statement of operations for the year then ended, 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 four-year period then ended and for the period from August 10, 1990 (commencement of operations) to July 31, 1991. These financial statements and financial highlights 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 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 the investment owned as of July 31, 1995 by correspondence with the custodian. 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 the Domini Social Equity Fund as of July 31, 1995, the results of its operations for the year then ended, the changes in its 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 four-year period then ended and for the period from August 10, 1990 to July 31, 1991, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Boston, Massachusetts August 25, 1995 PART C Item 24. Financial Statements and Exhibits (a) Financial Statements Financial Statements Included In Part A: Financial Highlights Financial Statements Included In Part B: For the Registrant: Statement of Assets and Liabilities at July 31, 1995 Statement of Operations at July 31, 1995 Statements of Changes in Net Assets for the fiscal years ended July 31, 1995 and July 31, 1994 Financial Highlights Notes to Financial Statements at July 31, 1995 Report of Independent Auditors For Domini Social Index Portfolio: Portfolio Investments at July 31, 1995 Statement of Assets and Liabilities at July 31, 1995 Statement of Operations at July 31, 1995 Statement of Changes in Net Assets for the fiscal years ended July 31, 1995 and July 31, 1994 Financial Highlights Notes to Financial Statements at July 31, 1995 Report of Independent Auditors (b) Exhibits 1. Amended and Restated Declaration of Trust of the Registrant.5 2. By-Laws of the Registrant.5 4. Specimen of certificate representing ownership of the Registrant's Shares of Beneficial Interest.3 6. Distribution Agreement between the Registrant and Signature Broker- Dealer Services, Inc., as distributor.1 8. Custodian Agreement between the Registrant and Investors Bank & Trust Company, as custodian.1 9(a) Form of Transfer Agency Agreement between the Registrant and Fundamental Shareholder Services, Inc.5 9(b) Administrative Services Agreement between the Registrant and Signature Broker-Dealer Services, Inc., as administrator.1 9(c) Copy of Administrative Services Plan of the Registrant.1 10. Not applicable. 11. Consent of KPMG Peat Marwick LLP, independent auditors for the Registrant.5 13. Copies of investment representation letters from initial shareholders.1 15. Distribution Plan of the Registrant.1 16. Performance Calculations.2 17. Financial Data Schedule.5 18. Powers of Attorney.2,4 1 Incorporated by reference from Pre-Effective Amendment No. 2 to this Registration Statement as filed with the Securities and Exchange Commission on June 7, 1989. 2 Incorporated by reference from Post-Effective Amendment No. 1 to this Registration Statement as filed with the Securities and Exchange Commission on December 2, 1991. 3 Incorporated by reference from Post-Effective Amendment No. 2 to this Registration Statement as filed with the Securities and Exchange Commission on November 16, 1992. 4 Incorporated by reference from Post-Effective Amendment No. 4 to this Registration Statement as filed with the Securities and Exchange Commission on September 16, 1993. 5 Filed herewith. Item 25. Persons Controlled by or under Common Control with Registrant Not applicable. Item 26. Number of Holders of Securities Title of Class: Shares of Beneficial Interest (without par value). Number of Record Holders as of November 1, 1995: 1,963. Item 27. Indemnification Reference is hereby made to (a) Article V of the Registrant's Declaration of Trust, filed as an Exhibit herewith; (b) Section 4 of the Distribution Agreement by and between the Registrant and Signature Broker- Dealer Services, Inc., filed as an Exhibit herewith; and (c) the undertaking of the Registrant regarding indemnification set forth in Item 32 below. The Trustees and officers of the Registrant and the personnel of the Registrant's administrator and distributor are insured under an errors and omissions liability insurance policy. The Registrant and its officers are also insured under the fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940. Item 28. Business and Other Connections of Investment Adviser Not applicable. Item 29. Principal Underwriters (a) Signature Broker-Dealer Services, Inc. ("Signature"), the Registrant's Distributor, is also the distributor for Fund, a series investment company consisting of seven separate funds, Community Bankers Mutual Fund, Inc., a series investment company consisting of three separate funds, First Funds of America, a series investment company consisting of five separate funds, First Cash Funds of America, a series investment company consisting of four separate funds, BT Investment Funds, a series investment company consisting of nine separate funds, BT Institutional Funds, a series investment company consisting of five separate funds, BT Pyramid Funds, a series investment company consisting of four separate funds, Yankee Funds, a series investment company consisting of ten separate funds, Hyperion Government Mortgage Trust, a series investment company consisting of two separate funds, Hyperion Government Mortgage Trust II, a series investment company consisting of two separate funds, Advisors International Fund, The Flex-funds, a series investment company consisting of five separate funds, The Flex-funds II, and Green Century Funds, a series investment company consisting of two separate funds. (b) The following are the directors and officers of Signature. The principal business address of each of these persons is 6 St. James Avenue, Boston, Massachusetts unless otherwise noted. Philip W. Coolidge: President, Chief Executive Officer and Director of Signature. President and Trustee of Registrant. Linwood C. Downs: Treasurer of Signature. Linda T. Gibson: Assistant Secretary of Signature. Thomas M. Lenz: Assistant Secretary of Signature. Secretary of Registrant. Molly S. Mugler: Assistant Secretary of Signature. Assistant Secretary of Registrant. Barbara M. O'Dette: Assistant Treasurer of Signature. Assistant Treasurer of Registrant. Beth A. Remy: Assistant Treasurer of Signature. Andres E. Saldana: Assistant Secretary of Signature. Assistant Secretary of Registrant. Julie J. Wyetzner: Product Management Officer of Signature. Kate B.M. Bolsover: Director of Signature; Signature Financial Group (Europe), Ltd., 49 St. James's Street, London SW1A 1JT. Robert G. Davidoff: Director of Signature; CMNY Capital, L.P., 135 East 57th Street, New York, NY 10022. Leeds Hackett: Director of Signature; Hackett Associates Limited, 1260 Avenue of the Americas, 12th Floor, New York, NY 10020 Laurence B. Levine: Director of Signature; Blair Corporation, 250 Royal Palm Way, Palm Beach, FL 33480 Donald S. Chadwick: Director of Signature; 4609 Bayard Street, Apartment 411, Pittsburgh, PA 15213. (c) Not applicable. Item 30. Location of Accounts and Records The accounts and records of the Registrant are located, in whole or in part, at the offices of the Registrant and at the following locations: Signature Broker-Dealer Services, Inc. (administrator and distributor): 6 St. James Avenue, Boston, MA 02116. Investors Bank & Trust Company (custodian): P.O. Box 1537, Boston, MA 02205. Fundamental Shareholder Services, Inc. (transfer agent): 90 Washington Street, New York, NY 10006. Item 31. Management Services Not applicable. Item 32. Undertakings (a) The Registrant's Declaration of Trust mandates indemnification by the Registrant of its Trustees, officers and certain others under certain conditions. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to Trustees, officers and controlling persons of the Registrant, pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 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 Trustee of officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person of the Registrant in connection with the securities 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 of whether or not such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The Registrant undertakes to comply with Section 16(c) of the Investment Company Act of 1940 (the "Act") as though such provisions of the Act were applicable to the Registrant except that the request referred to in the third full paragraph thereof may only be made by shareholders who hold in the aggregate at least 10% of the outstanding shares of the Registrant, regardless of the net asset value or value of shares held by such requesting shareholders. (c) 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. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the registrant certifies that it meets all of the requirements for effectiveness of this registration statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized in the City of Boston, and Commonwealth of Massachusetts on the 21st day of November, 1995. DOMINI SOCIAL EQUITY FUND By: /s/ PHILIP W. COOLIDGE PHILIP W. COOLIDGE, President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities indicated on November 21, 1995. Signature, Title /S/ PHILIP W. COOLIDGE PHILIP W. COOLIDGE President and Trustee /S/ JOHN R. ELDER JOHN R. ELDER Treasurer, Principal Financial Officer and Principal Accounting Officer EMILY WATTS CARD* EMILY WATTS CARD Trustee AMY L. DOMINI* AMY L. DOMINI Trustee KAREN PAUL* KAREN PAUL Trustee WILLIAM C. OSBORN* WILLIAM C. OSBORN Trustee *By /S/ PHILIP W. COOLIDGE PHILIP W. COOLIDGE *Pursuant to powers of attorney previously filed. SIGNATURES Domini Social Index Portfolio has duly caused this Post-Effective Amendment to the Registration Statement on Form N-1A (File No. 33-29180) of Domini Social Equity Fund to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, and Commonwealth of Massachusetts on the 21st day of November, 1995. DOMINI SOCIAL INDEX PORTFOLIO By: /S/ PHILIP W. COOLIDGE PHILIP W. COOLIDGE, President This Post-Effective Amendment to the Registration Statement on Form N-1A (File No. 33-29180) of Domini Social Equity Fund has been signed below by the following persons in the capacities indicated on November 25, 1995. Signature, Title /S/ PHILIP W. COOLIDGE PHILIP W. COOLIDGE President and Trustee of Domini Social Index Portfolio /S/ JOHN R. ELDER JOHN R. ELDER Treasurer, Principal Financial Officer and Principal Accounting Officer of Domini Social Index Portfolio AMY L. DOMINI* AMY L. DOMINI Trustee of Domini Social Index Portfolio ALLEN M. MAYES* ALLEN M. MAYES Trustee of Domini Social Index Portfolio FREDERICK C. WILLIAMSON* FREDERICK C. WILLIAMSON Trustee of Domini Social Index Portfolio TIMOTHY SMITH* TIMOTHY SMITH Trustee of Domini Social Index Portfolio *By /S/ PHILIP W. COOLIDGE PHILIP W. COOLIDGE *Pursuant to powers of attorney previously filed. INDEX TO EXHIBITS Exhibit No. Description of Exhibit 1. Amended and Restated Declaration of Trust of the Registrant. 2. By-Laws of the Registrant. 9(a) Form of Transfer Agency Agreement between the Registrant and Fundamental Shareholder Services, Inc. 11. Consent of KPMG Peat Marwick LLP, independent auditors for the Registrant. 17. Financial Data Schedule. EX-99.B1 2 DECLARATION OF TRUST OF REGISTRANT DSI197 (DOMDECTR) DOMINI SOCIAL INDEX TRUST (formerly Domini Social Index Fund) AMENDED AND RESTATED DECLARATION OF TRUST Dated as of March 1, 1990
TABLE OF CONTENTS PAGE ARTICLE I--NAME AND DEFINITIONS 1 Section 1.1 Name 1 Section 1.2 Definitions 1 ARTICLE II--TRUSTEES 3 Section 2.1 Number of Trustees 3 Section 2.2 Term of Office of Trustees 3 Section 2.3 Resignation and Appointment of Trustees 3 Section 2.4 Vacancies 4 Section 2.5 Delegation of Power to Other Trustees 4 ARTICLE III--POWERS OF TRUSTEES 4 Section 3.1 General 4 Section 3.2 Investments 5 Section 3.3 Legal Title 6 Section 3.4 Issuance and Repurchase of Securities 6 Section 3.5 Borrowing Money; Lending Trust Property 6 Section 3.6 Delegation; Committees 6 Section 3.7 Collection and Payment 6 Section 3.8 Expenses 7 Section 3.9 Manner of Acting; By-Laws 7 Section 3.10 Miscellaneous Powers 7 Section 3.11 Principal Transactions 7 Section 3.12 Trustees and Officers as Shareholders 8 ARTICLE IV--INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS 8 Section 4.1 Investment Adviser 8 Section 4.2 Distributor 9 Section 4.3 Administrator 9 Section 4.4 Transfer Agent and Shareholder Servicing Agents 9 Section 4.5 Parties to Contract 9 ARTICLE V--LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS 10 Section 5.1 No Personal Liability of Shareholders, Trustees, etc. 10 Section 5.2 Non-Liability of Trustees, etc. 10 Section 5.3 Mandatory Indemnification 11 Section 5.4 No Bond Required of Trustees 12 Section 5.5 No Duty of Investigation; Notice in Trust Instruments, etc. 12 Section 5.6 Reliance on Experts, etc. 13 i ARTICLE VI--SHARES OF BENEFICIAL INTEREST 13 Section 6.1 Beneficial Interest 13 Section 6.2 Rights of Shareholders 13 Section 6.3 Trust Only 13 Section 6.4 Issuance of Shares 14 Section 6.5 Register of Shares 14 Section 6.6 Transfer of Shares 14 Section 6.7 Notices 15 Section 6.8 Voting Powers 15 Section 6.9 Series Designation 15 ARTICLE VII--REDEMPTIONS 18 Section 7.1 Redemptions 18 Section 7.2 Suspension of Right of Redemption 18 Section 7.3 Redemption of Shares; Disclosure of Holding 18 Section 7.4 Redemptions of Accounts of Less than Minimum Amount 19 ARTICLE VIII--DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS 19 ARTICLE IX--DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC. 19 Section 9.1 Duration 19 Section 9.2 Termination of Trust 20 Section 9.3 Amendment Procedure 20 Section 9.4 Merger, Consolidation and Sale of Assets 22 Section 9.5 Incorporation, Reorganization 22 Section 9.6 Incorporation or Reorganization of Series 22 ARTICLE X--REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS 23 ARTICLE XI--MISCELLANEOUS 23 Section 11.1 Filing 23 Section 11.2 Governing Law 23 Section 11.3 Counterparts 23 Section 11.4 Reliance by Third Parties 23 Section 11.5 Provisions in Conflict with Law or Regulations 24 Section 11.6 Principal Office 24 ii
DSI197 (DOMDECTR) AMENDED AND RESTATED DECLARATION OF TRUST OF DOMINI SOCIAL INDEX TRUST Dated as of March 1, 1990 WHEREAS, the Trustees have previously established a trust through a Declaration of Trust dated June 7, 1989 for the investment and reinvestment of funds contributed thereto; and WHEREAS, no shares having ever been issued pursuant to such Declaration of Trust, the Trustees hereby amend and restate such Declaration of Trust; and WHEREAS, the Trustees desire that the beneficial interest in the trust assets be divided into transferable Shares of Beneficial Interest (without par value) ("Shares") issued in one or more series as hereinafter provided; and NOW THEREFORE, the Trustees hereby declare that all money and property contributed to the trust established hereunder shall be held and managed in trust for the benefit of holders, from time to time, of the Shares issued hereunder and subject to the provisions hereof. ARTICLE I NAME AND DEFINITIONS SECTION 1.1. NAME. The name of the trust is hereby amended to be "Domini Social Index Trust". SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following terms have the following respective meanings: (a) "ADMINISTRATOR" means a party furnishing services to the Trust pursuant to any contract described in Section 4.3 hereof. (b) "BY-LAWS" means the By-laws referred to in Section 3.9 hereof, as from time to time amended. (c) "COMMISSION" has the meaning given that term in the l940 Act. (d) "CUSTODIAN" means a party employed by the Trust to furnish services as described in Article X of the By-Laws. 2 (e) "DECLARATION" means this Declaration of Trust as amended from time to time. Reference in this Declaration of Trust to "DECLARATION", "HEREOF", "HEREIN", and "HEREUNDER" shall be deemed to refer to this Declaration rather than the article or section in which such words appear. (f) "DISTRIBUTOR" means a party furnishing services to the Trust pursuant to any contract described in Section 4.2 hereof. (g) "INTERESTED PERSON" has the meaning given that term in the l940 Act. (h) "INVESTMENT ADVISER" means a party furnishing services to the Trust pursuant to any contract described in Section 4.1 hereof. (i) "MAJORITY SHAREHOLDER VOTE" has the same meaning as the phrase "vote of a majority of the outstanding voting securities" as defined in the l940 Act, except that such term may be used herein with respect to the Shares of the Trust as a whole or the Shares of any particular series, as the context may require. (j) "1940 ACT" means the Investment Company Act of 1940 and the Rules and Regulations thereunder, as amended from time to time. (k) "PERSON" means and includes individuals, corporations, partnerships, trusts, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof, whether domestic or foreign. (l) "SHAREHOLDER" means a record owner of outstanding Shares. (m) "SHARES" means the Shares of Beneficial Interest into which the beneficial interest in the Trust shall be divided from time to time or, when used in relation to any particular series of Shares established by the Trustees pursuant to Section 6.9 hereof, equal proportionate transferable units into which such series of Shares shall be divided from time to time. The term "Shares" includes fractions of Shares as well as whole Shares. (n) "SHAREHOLDER SERVICING AGENT" means a party furnishing services to the Trust pursuant to any shareholder servicing contract described in Section 4.4 hereof. (o) "TRANSFER AGENT" means a party furnishing services to the Trust pursuant to any transfer agency contract described in Section 4.4 hereof. (p) "TRUST" means the trust created hereby. (q) "TRUST PROPERTY" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust or the Trustees, including, without limitation, any and all property allocated or belonging to any series of Shares pursuant to Section 6.9 hereof. (r) "TRUSTEES" means the persons who have signed the Declaration, so long as they shall continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly elected or appointed, qualified 3 and serving as Trustees in accordance with the provisions hereof, and reference herein to a Trustee or the Trustees shall refer to such person or persons in their capacity as trustees hereunder. ARTICLE II TRUSTEES SECTION 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by a majority of the Trustees, provided, however, that the number of Trustees shall in no event be less than three nor more than 15. SECTION 2.2. TERM OF OFFICE OF TRUSTEES. Subject to the provisions of Section l6(a) of the l940 Act, the Trustees shall hold office during the lifetime of this Trust and until its termination as hereinafter provided; except that (a) any Trustee may resign his trust (without need for prior or subsequent accounting) by an instrument in writing signed by him and delivered to the other Trustees, which shall take effect upon such delivery or upon such later date as is specified therein; (b) any Trustee may be removed with cause, at any time by written instrument signed by at least two-thirds of the remaining Trustees, specifying the date when such removal shall become effective; (c) any Trustee who has attained a mandatory retirement age established pursuant to any written policy adopted form time to time by at least two thirds of the Trustees shall, automatically and without action of such Trustee or the remaining Trustees, be deemed to have retired in accordance with the terms of such policy, effective as of the date determined in accordance with such policy; (d) any Trustee who has become incapacitated by illness or injury as determined by a majority of the other Trustees, may be retired by written instrument signed by a majority of the other Trustees, specifying the date of his retirement; and (e) a Trustee may be removed at any meeting of Shareholders by a vote of two thirds of the outstanding Shares of each series. For purposes of the foregoing clause (b), the term "cause" shall include, but not be limited to, failure to comply with such written policies as may from time to time be adopted by at least two thirds of the Trustees with respect to the conduct of Trustees and attendance at meetings. Upon the resignation, retirement or removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust Property held in the name of the resigning, retiring or removed Trustee. Upon the incapacity or death of any Trustee, his legal representative shall execute and deliver on his behalf such documents as the remaining Trustees shall require as provided in the preceding sentence. SECTION 2.3. RESIGNATION AND APPOINTMENT OF TRUSTEES. In case of the declination, death, resignation, retirement, removal or inability of any of the Trustees, or in case a vacancy shall, by reason of an increase in number, or for any other reason, exist, the remaining Trustees shall fill such vacancy by appointing such other individual as they in their discretion shall see fit. Such appointment shall be evidenced by a written instrument signed by a majority of the Trustees in office. Any such appointment shall not become effective, however, until the person named in the written instrument of appointment shall have accepted in writing such appointment and agreed in writing to be bound by 4 the terms of the Declaration. Within twelve months of such appointment, the Trustees shall cause notice of such appointment to be mailed to each Shareholder at his address as recorded on the books of the Trustees. An appointment of a Trustee may be made by the Trustees then in office and notice thereof mailed to Shareholders as aforesaid in anticipation of a vacancy to occur by reason of retirement, resignation or increase in number of Trustees effective at a later date, provided that said appointment shall become effective only at or after the effective date of said retirement, resignation or increase in number of Trustees. The power of appointment is subject to the provisions of Section 16 (a) of the 1940 Act. SECTION 2.4. VACANCIES. The death, declination, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided in Section 2.3, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by the Declaration. A written instrument certifying the existence of such vacancy signed by a majority of the Trustees shall be conclusive evidence of the existence of such vacancy. SECTION 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by power of attorney, delegate his power for a period not exceeding six months at any one time to any other Trustee or Trustees; provided that in no case shall fewer than two Trustees personally exercise the powers granted to the Trustees under the Declaration except as herein otherwise expressly provided. ARTICLE III POWERS OF TRUSTEES SECTION 3.1. GENERAL. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by the Declaration. The Trustees shall have power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the Commonwealth of Massachusetts, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies or instrumentalities of the United States of America and of foreign governments, and to do all such other things and execute all such instruments as the Trustees deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of the Declaration, the presumption shall be in favor of a grant of power to the Trustees. The enumeration of any specific power herein shall not be construed as limiting the aforesaid power. Such powers of the Trustees may be exercised without order of or resort to any court. 5 SECTION 3.2. INVESTMENTS. (a) The Trustees shall have the power: (i) to conduct, operate and carry on the business of an investment company; (ii) to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend or otherwise deal in or dispose of U.S. and foreign currencies, any form of gold or other precious metal, commodity contracts, any form of option contract, contracts for the future acquisition or delivery of fixed income or other securities, shares of, or any other interest in, any investment company as defined in the Investment Company Act of 1940, and securities of every nature and kind, including, without limitation, all types of bonds, debentures, stocks, negotiable or non-negotiable instruments, obligations, evidences of indebtedness, certificates of deposit or indebtedness, commercial paper, repurchase agreements, bankers' acceptances, and other securities of any kind, issued, created, guaranteed or sponsored by any and all Persons, including, without limitation, (A) states, territories and possessions of the United States and the District of Columbia and any political subdivision, agency or instrumentality of any such Person, (B) the U.S. Government, any foreign government, any political subdivision or any agency or instrumentality of the U.S. Government, any foreign government or any political subdivision of the U.S. Government or any foreign government, (C) any international instrumentality, (D) any bank or savings institution, or (E) any corporation, trust, partnership or other organization organized under the laws of the United States or of any state, territory or possession thereof, or under any foreign law; or in "when issued" contracts for any such securities, to retain Trust assets in cash and from time to time to change the securities or obligations in which the assets of the Trust are invested; and to exercise any and all rights, powers and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons to exercise any of said rights, powers and privileges in respect of any of said investments; and (iii) to carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary, proper or desirable for the accomplishment of any purpose or the attainment of any object or the furtherance of any power hereinbefore set forth, and to do every other act or thing incidental or appurtenant to or connected with the aforesaid purposes, objects or powers. (b) The Trustees shall not be limited to investing in securities or obligations maturing before the possible termination of the Trust, nor shall the 6 Trustees be limited by any law limiting the investments which may be made by fiduciaries. (c) Notwithstanding any other provision of this Declaration to the contrary, the Trustees shall have the power in their discretion without any requirement of approval by shareholders to either invest all or a portion of the Trust Property, or sell all or a portion of the Trust Property and invest the proceeds of such sales, in another investment company that is registered under the 1940 Act. SECTION 3.3. LEGAL TITLE. Legal title to all Trust Property shall be vested in the Trustees as joint tenants except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person or nominee, on such terms as the Trustees may determine. The right, title and interest of the Trustees in the Trust Property shall vest automatically in each Person who may hereafter become a Trustee. Upon the resignation, removal or death of a Trustee, such Trustee shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall have the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9 hereof, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds of the Trust or other Trust Property whether capital or surplus or otherwise, to the full extent now or hereafter permitted by the laws of the Commonwealth of Massachusetts governing business corporations. SECTION 3.5. BORROWING MONEY; LENDING TRUST PROPERTY. The Trustees shall have power to borrow money or otherwise obtain credit and to secure the same by mortgaging, pledging or otherwise subjecting as security the Trust Property, to endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other Person and to lend Trust Property. SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient. SECTION 3.7. COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the Trustees shall have power to collect all property due to the Trust; to pay all claims, including taxes, against the Trust Property; to prosecute, defend, compromise or abandon any claims relating to the Trust Property; to foreclose any security interest securing any obligations, by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments. 7 SECTION 3.8. EXPENSES. Subject to Section 6.9 hereof, the Trustees shall have the power to incur and pay any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of the Declaration, and to pay reasonable compensation from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. SECTION 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided herein or in the By-Laws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of Trustees at which a quorum is present, including any meeting held by means of a conference telephone circuit or similar communications equipment by means of which all persons participating in the meeting can hear each other, or by written consents of a majority of the Trustees. The Trustees may adopt By-Laws not inconsistent with this Declaration to provide for the conduct of the business of the Trust and may amend or repeal such By-Laws to the extent such power is not reserved to the Shareholders. SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power to: (a) employ or contract with such Persons as the Trustees may deem desirable for the transaction of the business of the Trust; (b) enter into joint ventures, partnerships and any other combinations or associations; (c) remove Trustees or fill vacancies in or add to their number, elect and remove such officers and appoint and terminate such agents or employees as they consider appropriate, and appoint from their own number, and terminate, any one or more committees which may exercise some or all of the power and authority of the Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust Property, insurance policies insuring the Shareholders, the Administrator, Trustees, officers, employees, agents, the Investment Adviser, the Distributor, selected dealers or independent contractors of the Trust against all claims arising by reason of holding any such position or by reason of any action taken or omitted by any such Person in such capacity, whether or not constituting negligence, or whether or not the Trust would have the power to indemnify such Person against such liability; (e) establish pension, profit-sharing, Share purchase, and other retirement, incentive and benefit plans for any Trustees, officers, employees or agents of the Trust; (f) to the extent permitted by law, indemnify any person with whom the Trust has dealings, including any Investment Adviser, Administrator, Custodian, Distributor, Transfer Agent, Shareholder Servicing Agent and any dealer, to such extent as the Trustees shall determine; (g) guarantee indebtedness or contractual obligations of others; (h) determine and change the fiscal year of the Trust and the method by which its accounts shall be kept; and (i) adopt a seal for the Trust, provided, that the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust. SECTION 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted by the 1940 Act, or any order of exemption issued by the Commission, the Trustees shall not, on behalf of the Trust, buy any securities (other than Shares) from or sell any securities (other than Shares) to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any Investment Adviser, Administrator, Shareholder Servicing Agent, Custodian, Distributor or Transfer Agent or with any Interested Person of such Person; but 8 the Trust may, upon customary terms, employ any such Person, or firm or company in which such Person is an Interested Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing agent or custodian. SECTION 3.12. TRUSTEES AND OFFICERS AS SHAREHOLDERS. Except as hereinafter provided, no officer, Trustee or Member of the Advisory Board of the Trust, and no member, partner, officer, director or trustee of the Investment Adviser, Administrator or of the Distributor, and no Investment Adviser, Administrator or Distributor of the Trust, shall take long or short positions in the securities issued by the Trust. The foregoing provision shall not prevent: (a) The Distributor from purchasing Shares from the Trust if such purchases are limited (except for reasonable allowances for clerical errors, delays and errors of transmission and cancellation of orders) to purchases for the purpose of filling orders for Shares received by the Distributor and provided that orders to purchase from the Trust are entered with the Trust or the Custodian promptly upon receipt by the Distributor of purchase orders for Shares, unless the Distributor is otherwise instructed by its customer; (b) The Distributor from purchasing Shares as agent for the account of the Trust; (c) The purchase from the Trust or from the Distributor of Shares by any officer, Trustee or member of the Advisory Board of the Trust or by any member, partner, officer, director or trustee of the Investment Adviser or of the Distributor at a price not lower than the net asset value of the Shares at the moment of such purchase, provided that any such sales are only to be made pursuant to a uniform offer described in the current prospectus or statement of additional information for the Shares being purchased; or (d) The Investment Adviser, the Distributor, the Administrator, or any of their officers, partners, directors or trustees from purchasing Shares prior to the effective date of the Trust's Registration Statement under the Securities Act of l933, as amended, relating to the Shares. ARTICLE IV INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS SECTION 4.1. INVESTMENT ADVISER. Subject to a Majority Shareholder Vote of the Shares of each series affected thereby, the Trustees may in their discretion from time to time enter into one or more investment advisory or management contracts whereby the other party to each such contract shall undertake to furnish the Trust such management, investment advisory, statistical and research facilities and services, promotional activities, and such other facilities and services, if any, with respect to one or more series of Shares, as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any provision of the Declaration, the Trustees may delegate to the Investment Adviser authority (subject to such general or specific 9 instructions as the Trustees may from time to time adopt) to effect purchases, sales, loans or exchanges of assets of the Trust on behalf of the Trustees or may authorize any officer, employee or Trustee to effect such purchases, sales, loans or exchanges pursuant to recommendations of the Investment Adviser (and all without further action by the Trustees). Any of such purchases, sales, loans or exchanges shall be deemed to have been authorized by all the Trustees. Such services may be provided by one or more Persons. SECTION 4.2. DISTRIBUTOR. The Trustees may in their discretion from time to time enter into one or more distribution contracts providing for the sale of Shares whereby the Trust may either agree to sell the Shares to the other party to any such contract or appoint any such other party its sales agent for such Shares. In either case, any such contract shall be on such terms and conditions as the Trustees may in their discretion determine, provided that such terms and conditions are not inconsistent with the provisions of the Declaration or the By-Laws; and such contract may also provide for the repurchase or sale of Shares by such other party as principal or as agent of the Trust and may provide that such other party may enter into selected dealer agreements with registered securities dealers to further the purpose of the distribution or repurchase of the Shares. Such services may be provided by one or more Persons. SECTION 4.3. ADMINISTRATOR. The Trustees may in their discretion from time to time enter into one or more administrative services contracts whereby the other party to each such contract shall undertake to furnish such administrative services to the Trust as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine, provided that such terms and conditions are not inconsistent with the provisions of this Declaration or the By-Laws. Such services may be provided by one or more Persons. SECTION 4.4. TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS. The Trustees may in their discretion from time to time enter into one or more transfer agency and shareholder servicing contracts whereby the other party to each such contract shall undertake to furnish such transfer agency and/or shareholder services to the Trust or to shareholders of the Trust as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine, provided that such terms and conditions are not inconsistent with the provisions of this Declaration or the By-Laws. Such services may be provided by one or more Persons. Except as otherwise provided in the applicable shareholder servicing contract, a Shareholder Servicing Agent shall be deemed to be the record owner of outstanding Shares beneficially owned by customers of such Shareholder Servicing Agent for whom it is acting pursuant to such shareholder servicing contract. SECTION 4.5. PARTIES TO CONTRACT. Any contract of the character described in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV or any Custodian contract as described in Article X of the By-Laws may be entered into with any Person, although one or more of the Trustees or officers of the Trust may be an officer, partner, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by 10 reason of the existence of any such relationship; nor shall any Person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of any such contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was not inconsistent with the provisions of this Article IV or the By-Laws. The same Person may be the other party to contracts entered into pursuant to Sections 4.1, 4.2, 4.3 and 4.4 above or any Custodian contract as described in Article X of the By-Laws, and any individual may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts mentioned in this Section 4.5. ARTICLE V LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No Shareholder shall be subject to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall be subject to any personal liability whatsoever to any Person, other than the Trust or its Shareholders, in connection with Trust Property or the affairs of the Trust, save only that arising from bad faith, wilful misfeasance, gross negligence or reckless disregard for his duty to such Person; and all such Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is made a party to any suit or proceeding to enforce any such liability, he shall not, on account thereof, be held to any personal liability. The Trust shall indemnify and hold each Shareholder harmless from and against all claims and liabilities to which such Shareholder may become subject by reason of his being or having been a Shareholder, and shall reimburse such Shareholder for all legal and other expenses reasonably incurred by him in connection with any such claim or liability. The rights accruing to a Shareholder under this Section 5.1 shall not exclude any other right to which such Shareholder may be lawfully entitled, nor shall anything herein contained restrict the right of the Trust to indemnify or reimburse a Shareholder in any appropriate situation even though not specifically provided herein. Notwithstanding any other provision of this Declaration to the contrary, no Trust Property shall be used to indemnify or reimburse any Shareholder of any Shares of any series other than Trust Property allocated or belonging to that series. SECTION 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer, employee or agent of the Trust shall be liable to the Trust or to any Shareholder, Trustee, officer, employee, or agent thereof for any action or failure to act (including without limitation the failure to compel in any way any former or acting Trustee to redress any breach of trust) except for his own bad faith, wilful misfeasance, gross negligence or reckless disregard of his duties. SECTION 5.3. MANDATORY INDEMNIFICATION. (a) Subject to the exceptions and limitations contained in paragraph (b) below: 11 (i) every person who is or has been a Trustee or officer of the Trust shall be indemnified by the Trust against all liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof; (ii) the words "claim", "action", "suit", or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal, administrative or other, including appeals), actual or threatened; and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. (b) No indemnification shall be provided hereunder to a Trustee or officer: (i) against any liability to the Trust or the Shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he engaged in wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (ii) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; or (iii) in the event of a settlement involving a payment by a Trustee or officer or other disposition not involving a final adjudication as provided in paragraph (b) (i) or (b) (ii) above resulting in a payment by a Trustee or officer, unless there has been either a determination that such Trustee or officer did not engage in wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other disposition or by a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that he did not engage in such conduct: (A) by vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or (B) by written opinion of independent legal counsel. (c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Trustee or officer may now or hereafter be entitled, shall continue as to a Person who has ceased to be such a Trustee or officer and shall inure to the benefit of the heirs, executors and administrators of such Person. Nothing contained herein shall affect any rights to indemnification to which personnel other than Trustees and officers may be entitled by contract or otherwise under law. (d) Expenses of preparation and presentation of a defense to any claim, action, suit, or proceeding of the character described in paragraph (a) of this 12 Section 5.3 shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 5.3, provided that either: (i) such undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or (ii) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or an independent legal counsel in a written opinion, shall determine, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification. As used in this Section 5.3 a "Disinterested Trustee" is one (i) who is not an "Interested Person" of the Trust (including anyone who has been exempted from being an "Interested Person" by any rule, regulation or order of the Commission), and (ii) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or had been pending. SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated to give any bond or other security for the performance of any of his duties hereunder. SECTION 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No purchaser, lender, Shareholder Servicing Agent, Transfer Agent or other Person dealing with the Trustees or any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, instrument, certificate, Share, other security of the Trust or undertaking, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively presumed to have been executed or done by the executors thereof only in their capacity as Trustees under the Declaration or in their capacity as officers, employees or agents of the Trust. Every written obligation, contract, instrument, certificate, Share, other security of the Trust or undertaking made or issued by the Trustees shall recite that the same is executed or made by them not individually, but as Trustees under the Declaration, and that the obligations of any such instrument are not binding upon any of the Trustees or Shareholders individually, but bind only the trust estate, and may contain any further recital which they or he may deem appropriate, but the omission of such recital shall not operate to bind any of the Trustees or Shareholders individually. The Trustees shall at all times maintain insurance for the protection of the Trust Property, Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible tort liability, and such other insurance as the Trustees in their sole judgment shall deem advisable. 13 SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee of the Trust shall, in the performance of his duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of its officers or employees or by the Investment Adviser, the Distributor, Transfer Agent, any Shareholder Servicing Agent, selected dealers, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee. ARTICLE VI SHARES OF BENEFICIAL INTEREST SECTION 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries hereunder may be divided into transferable Shares, which may be divided into one or more series as provided in Section 6.9 hereof. Each such series shall have such class or classes of Shares as the Trustees may from time to time determine. The number of Shares authorized hereunder is unlimited. All Shares issued hereunder including, without limitation, Shares issued in connection with a dividend in Shares or a split of Shares, shall be fully paid and non-assessable. SECTION 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property of every description and the right to conduct any business hereinbefore described are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than the beneficial interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust nor can they be called upon to assume any losses of the Trust or suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall be personal property giving only the rights specifically set forth in the Declaration. The Shares shall not entitle the holder to preference, pre-emptive, appraisal, conversion or exchange rights, except as the Trustees may determine with respect to any series of Shares. SECTION 6.3. TRUST ONLY. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and the Shareholders. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal relationship other than a trust. Nothing in the Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association. 14 SECTION 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may, from time to time without vote of the Shareholders, issue Shares, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and type of consideration, including cash or property, and on such terms as the Trustees may deem best, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection, with the assumption of liabilities) and businesses. In connection with any issuance of Shares, the Trustees may issue fractional Shares. The Trustees may from time to time divide or combine the Shares of any series into a greater or lesser number without thereby changing their proportionate beneficial interests in Trust Property allocated or belonging to such series. Contributions to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000ths of a Share or integral multiples thereof. SECTION 6.5. REGISTER OF SHARES. A register or registers shall be kept at the principal office of the Trust or at an office of the Transfer Agent or any one or more Shareholder Servicing Agents which register or registers, taken together, shall contain the names and addresses of the Shareholders and the number of Shares held by them respectively and a record of all transfers thereof. Such register or registers shall be conclusive as to who are the holders of the Shares and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein or in the By-Laws provided, until he has given his address to the Transfer Agent, the Shareholder Servicing Agent which is the agent of record for such Shareholder, or such other officer or agent of the Trustees as shall keep the said register for entry thereon. It is not contemplated that certificates will be issued for the Shares; however, the Trustees, in their discretion, may authorize the issuance of Share certificates and promulgate appropriate rules and regulations as to their use. SECTION 6.6. TRANSFER OF SHARES. Shares shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized in writing, upon delivery to the Trustees, the Transfer Agent or the Shareholder Servicing Agent which is the agent of record for such Shareholder, of a duly executed instrument of transfer, together with any certificate or certificates (if issued) for such Shares and such evidence of the genuineness of each such execution and authorization and of other matters as may reasonably be required. Upon such delivery the transfer shall be recorded on the register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor any Transfer Agent, Shareholder Servicing Agent or registrar nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer. Any person becoming entitled to any Shares in consequence of the death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation of law, shall be recorded on the register of Shares as the holder of such Shares upon production of the proper evidence thereof to the Trustees, the Transfer Agent or the Shareholder Servicing Agent which is the agent of record for such Shareholder; but until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereunder and neither the 15 Trustees nor any Transfer Agent, Shareholder Servicing Agent or registrar nor any officer or agent of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or other operation of law. SECTION 6.7. NOTICES. Any and all notices to which any Shareholder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the register of the Trust. SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii) with respect to any investment advisory or management contract as provided in Section 4.1 hereof, (iii) with respect to termination of the Trust as provided in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to the extent and as provided in Section 9.3 hereof, (v) with respect to any merger, consolidation or sale of assets as provided in Sections 9.4 and 9.6 hereof, (vi) with respect to incorporation of the Trust or any series to the extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, and (viii) with respect to such additional matters relating to the Trust as may be required by the Declaration, the By-Laws or any registration of the Trust with the Commission (or any successor agency) or any state, or as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote, except that Shares held in the treasury of the Trust shall not be voted. Shares shall be voted by individual series on any matter submitted to a vote of the Shareholders of the Trust except as provided in Section 6.9(g) hereof. There shall be no cumulative voting in the election of Trustees. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, the Declaration or the By-Laws to be taken by Shareholders. At any meeting of Shareholders of the Trust or of any series of the Trust, a Shareholder Servicing Agent may vote any shares as to which such Shareholder Servicing Agent is the agent of record and which are not otherwise represented in person or by proxy at the meeting, proportionately in accordance with the votes cast by holders of all shares otherwise represented at the meeting in person or by proxy as to which such Shareholder Servicing Agent is the agent of record. Any shares so voted by a Shareholder Servicing Agent will be deemed represented at the meeting for quorum purposes. The By-Laws may include further provisions for Shareholder votes and meetings and related matters. SECTION 6.9. SERIES DESIGNATION. As set forth in Appendix I hereto, the Trustees have authorized the division of Shares into series, as designated and established pursuant to the provisions of Appendix I and this Section 6.9. The Trustees, in their discretion, may authorize the division of Shares into one or more additional series, and the different series shall be established and designated, and the variations in the relative rights, privileges and preferences as between the different series shall be fixed and determined by the Trustees upon and subject to the following provisions: 16 (a) All Shares shall be identical except that there may be such variations as shall be fixed and determined by the Trustees between different series as to purchase price, right of redemption and the price, terms and manner of redemption, and special and relative rights as to dividends and on liquidation. (b) The number of authorized Shares and the number of Shares of each series that may be issued shall be unlimited. The Trustees may classify or reclassify any unissued Shares or any Shares previously issued and reacquired of any series into one or more series that may be established and designated from time to time. The Trustees may hold as treasury shares (of the same or some other series), reissue for such consideration and on such terms as they may determine, or cancel any Shares of any series reacquired by the Trust at their discretion from time to time. (c) All consideration received by the Trust for the issuance or sale of Shares of a particular series, together with all assets in which such consideration is invested or reinvested, all income and earnings thereon, profits therefrom, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to that series for all purposes, subject only to the rights of creditors of such series, and shall be so recorded upon the books of account of the Trust. In the event that there are any assets, income, earnings, profits, proceeds, funds or payments which are not readily identifiable as belonging to any particular series, the Trustees shall allocate them to and among any one or more of the series established and designated from time to time in such manner and on such basis as the Trustees, in their sole discretion, deem fair and equitable. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all series for all purposes. No Shareholder of any particular series shall have any claim on or right to any assets allocated or belonging to any other series of Shares. (d) The assets belonging to each particular series shall be charged with the liabilities of the Trust in respect of that series and all expenses, costs, charges and reserves attributable to that series, and any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular series shall be allocated and charged by the Trustees to and among any one or more of the series established and designated from time to time in such manner and on such basis as the Trustees, in their sole discretion, deem fair and equitable. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Shareholders of all series for all purposes. The Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders. Under no circumstances shall the assets allocated or belonging to any particular series be charged with liabilities, expenses, costs, charges or reserves attributable to any other series. All Persons who have extended credit which has been allocated to a particular series, or who have a claim or contract which has been allocated to any particular series, shall look only to the assets of that particular series for payment of such credit, claim or contract. 17 (e) The power of the Trustees to invest and reinvest the Trust Property allocated or belonging to any particular series shall be governed by Section 3.2 hereof unless otherwise provided in the instrument of the Trustees establishing such series which is hereinafter described. (f) Each Share of a series shall represent a beneficial interest in the net assets allocated or belonging to such series only, and such interest shall not extend to the assets of the Trust generally. Dividends and distributions on Shares of a particular series may be paid with such frequency as the Trustees may determine, which may be monthly or otherwise, pursuant to a standing vote or votes adopted only once or with such frequency as the Trustees may determine, to the Shareholders of that series only, from such of the income and capital gains, accrued or realized, from the assets belonging to that series, as the Trustees may determine, after providing for actual and accrued liabilities belonging to that series. All dividends and distributions on Shares of a particular series shall be distributed PRO RATA to the Shareholders of that series in proportion to the number of Shares of that series held by such Shareholders at the date and time of record established for the payment of such dividends or distributions. Shares of any particular series of the Trust may be redeemed solely out of Trust Property allocated or belonging to that series. Upon liquidation or termination of a series of the Trust, Shareholders of such series shall be entitled to receive a PRO RATA share of the net assets of such series only. (g) Notwithstanding any provision hereof to the contrary, on any matter submitted to a vote of the Shareholders of the Trust, all Shares then entitled to vote shall be voted by individual series, except that (i) when required by the l940 Act to be voted in the aggregate, Shares shall not be voted by individual series, and (ii) when the Trustees have determined that the matter affects only the interests of Shareholders of one or more series, only Shareholders of such series shall be entitled to vote thereon. (h) The establishment and designation of any series of Shares shall be effective upon the execution by a majority of the Trustees of an instrument setting forth such establishment and designation and the relative rights and preferences of such series, or as otherwise provided in such instrument. At any time that there are no Shares outstanding of any particular series previously established and designated, the Trustees may by an instrument executed by a majority of their number abolish that series and the establishment and designation thereof. Each instrument referred to in this paragraph shall have the status of an amendment to this Declaration. (i) Notwithstanding anything in this Declaration to the contrary, the Trustees may, in their discretion, authorize the division of Shares of any series into Shares of one or more classes or subseries of such series. All Shares of a class or a subseries shall be identical with each other and with the Shares of each other class or subseries of the same series except for such variations between classes or subseries as may be approved by the Board of Trustees and be permitted under the 1940 Act or pursuant to any exemptive order issued by the Commission. 18 ARTICLE VII REDEMPTIONS SECTION 7.L REDEMPTIONS. In case any Shareholder at any time desires to dispose of his Shares, he may deposit his certificate or certificates therefor, duly endorsed in blank or accompanied by an instrument of transfer executed in blank, or if the Shares are not represented by any certificate, a written request or other such form of request as the Trustees may from time to time authorize, at the office of the Transfer Agent, the Shareholder Servicing Agent which is the agent of record for such Shareholder, or at the office of any bank or trust company, either in or outside of the Commonwealth of Massachusetts, which is a member of the Federal Reserve System and which the said Transfer Agent or the said Shareholder Servicing Agent has designated in writing for that purpose, together with an irrevocable offer in writing in a form acceptable to the Trustees to sell the Shares represented thereby to the Trust at the net asset value per Share thereof, next determined after such deposit as provided in Section 8.1 hereof. Payment for said Shares shall be made to the Shareholder within seven days after the date on which the deposit is made, unless (i) the date of payment is postponed pursuant to Section 7.2 hereof, or (ii) the receipt, or verification of receipt, of the purchase price for the Shares to be redeemed is delayed, in either of which events payment may be delayed beyond seven days. SECTION 7.2 SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a suspension of the right of redemption or postpone the date of payment of the redemption proceeds for the whole or any part of any period (i) during which the New York Stock Exchange is closed other than customary week-end and holiday closings, (ii) during which trading on the New York Stock Exchange is restricted, (iii) during which an emergency exists as a result of which disposal by the Trust of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Trust fairly to determine the value of its net assets, or (iv) during which the Commission for the protection of Shareholders by order permits the suspension of the right of redemption or postponement of the date of payment of the redemption proceeds; provided that applicable rules and regulations of the Commission shall govern as to whether the conditions prescribed in (ii), (iii) or (iv) exist. Such suspension shall take effect at such time as the Trust shall specify but not later than the close of business on the business day next following the declaration of suspension, and thereafter there shall be no right of redemption or payment of the redemption proceeds until the Trust shall declare the suspension at an end, except that the suspension shall terminate in any event on the first day on which said stock exchange shall have reopened or the period specified in (ii) or (iii) shall have expired (as to which, in the absence of an official ruling by the Commission, the determination of the Trust shall be conclusive). In the case of a suspension of the right of redemption, a Shareholder may either withdraw his request for redemption or receive payment based on the net asset value existing after the termination of the suspension. SECTION 7.3. REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the Trustees shall, at any time and in good faith, be of the opinion that direct or indirect ownership of Shares has or may become concentrated in any Person to an extent which would disqualify the Trust, or any series of the Trust, as a regulated investment company under the Internal Revenue Code of l986, as amended (the 19 "Code"), then the Trustees shall have the power by lot or other means deemed equitable by them (i) to call for redemption by any such Person a number of Shares of the Trust, or such series of the Trust, sufficient to maintain or bring the direct or indirect ownership of Shares of the Trust, or such series of the Trust, into conformity with the requirements for such qualification, and (ii) to refuse to transfer or issue Shares of the Trust, or such series of the Trust, to any Person whose acquisition of the Shares of the Trust, or such series of the Trust, would result in such disqualification. The redemption shall be effected at the redemption price and in the manner provided in Section 7.l hereof. The Shareholders of the Trust shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares of the Trust as the Trustees deem necessary to comply with the provisions of the Code, or to comply with the requirements of any other authority. Upon the failure of a Shareholder to disclose such information and to comply with such demand of the Trustees, the Trust shall have the power to redeem such Shares at a redemption price determined in accordance with Section 7.1 hereof. SECTION 7.4 REDEMPTIONS OF ACCOUNTS OF LESS THAN MINIMUM AMOUNT. The Trustees shall have the power, and any Shareholder Servicing Agent with whom the Trust has so agreed (or a subcontractor of such Shareholder Servicing Agent) shall have the power, at any time to redeem Shares of any Shareholder at a redemption price determined in accordance with Section 7.l hereof if at such time the aggregate net asset value of the Shares owned by such Shareholder is less than a minimum amount as determined from time to time and disclosed in a prospectus of the Trust or in the Shareholder Servicing Agent's (or sub- contractor's) agreement with its customer. A Shareholder shall be notified that the aggregate value of his Shares is less than such minimum amount and allowed 60 days to make an additional investment before redemption is processed. ARTICLE VIII DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS The Trustees, in their absolute discretion, may prescribe and shall set forth in the By-Laws or in a duly adopted vote or votes of the Trustees such bases and times for determining the per Share net asset value of the Shares or net income, or the declaration and payment of dividends and distributions, as they may deem necessary or desirable. ARTICLE IX DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC. SECTION 9.1. DURATION. The Trust shall continue without limitation of time but subject to the provisions of this Article IX. SECTION 9.2. TERMINATION OF TRUST. (a) The Trust may be terminated (i) by a Majority Shareholder Vote of its Shareholders, or (ii) by the Trustees by written notice to the Shareholders. Any series of the Trust may be terminated 20 (i) by a Majority Shareholder Vote of the Shareholders of that series, or (ii) by the Trustees by written notice to the Shareholders of that series. Upon the termination of the Trust or any series of the Trust: (i) The Trust or series of the Trust shall carry on no business except for the purpose of winding up its affairs; (ii) The Trustees shall proceed to wind up the affairs of the Trust or series of the Trust and all the powers of the Trustees under this Declaration shall continue until the affairs of the Trust or series of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect the assets of the Trust or series of the Trust, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Trust Property of the Trust or series of the Trust to one or more Persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay the liabilities of the Trust or series of the Trust, and to do all other acts appropriate to liquidate the business of the Trust or series of the Trust; provided, that any sale, conveyance, assignment, exchange, transfer or other disposition of all or substantially all of the Trust Property of the Trust or series of the Trust shall require Shareholder approval in accordance with Section 9.4 or 9.6 hereof, respectively; and (iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property of the Trust or series of the Trust, in cash or in kind or partly in cash and partly in kind, among the Shareholders of the Trust or series of the Trust according to their respective rights. (b) After termination of the Trust or series of the Trust and distribution to the Shareholders of the Trust or series of the Trust as herein provided, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination, and the Trustees shall thereupon be discharged from all further liabilities and duties hereunder with respect to the Trust or series of the Trust, and the rights and interests of all Shareholders of the Trust or series of the Trust shall thereupon cease. SECTION 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended by a Majority Shareholder Vote of the Shareholders or by any instrument in writing, without a meeting, signed by a majority of the Trustees and consented to by the holders of not less than a majority of the Shares of the Trust. The Trustees may also amend this Declaration without the vote or consent of Shareholders to designate series in accordance with Section 6.9 hereof, to change the name of the Trust, to supply any omission, to cure, correct or supplement any ambiguous, defective or inconsistent provision hereof, or to conform this Declaration to the requirements of applicable federal laws or regulations or the requirements of the regulated investment company provisions of the Internal Revenue Code of l986, as amended, or to (i) change the state or other jurisdiction designated herein as the state or other jurisdiction whose laws shall be the governing law hereof, (ii) effect such changes herein as the 21 Trustees find to be necessary or appropriate (A) to permit the filing of this Declaration under the laws of such state or other jurisdiction applicable to trusts or voluntary associations, (B) to permit the Trust to elect to be treated as a "regulated investment company" under the applicable provisions of the Internal Revenue Code of 1986, as amended, or (C) to permit the transfer of shares (or to permit the transfer of any other beneficial interests or shares in the Trust, however denominated), and (iii) in conjunction with any amendment contemplated by the foregoing clause (i) or the foregoing clause (ii) to make any and all such further changes or modifications to this Declaration as the Trustees find to be necessary or appropriate, any finding of the Trustees referred to in the foregoing clause (ii) or clause (iii) to be conclusively evidenced by the execution of any such amendment by a majority of the Trustees, but the Trustees shall not be liable for failing so to do. (b) No amendment which the Trustees have determined would affect the rights, privileges or interests of holders of a particular series of Shares, but not the rights, privileges or interests of holders of all series of Shares generally, and which would otherwise require a Majority Shareholder Vote under paragraph (a) of this Section 9.3, may be made except with the vote or consent by a Majority Shareholder Vote of Shareholders of such series. (c) Notwithstanding any other provision of this Declaration to the contrary, the Trustees shall have the power in their discretion without any requirement of approval by shareholders to either invest all or a portion of the Trust Property, or sell all or a portion of the Trust Property and invest the proceeds of such sales, in another investment company that is registered under the 1940 Act. (d) Notwithstanding any other provision hereof, no amendment may be made under this Section 9.3 which would change any rights with respect to the Shares, or any series of Shares, by reducing the amount payable thereon upon liquidation of the Trust or by diminishing or eliminating any voting rights pertaining thereto, except with the Majority Shareholder Vote of the Shares or that series of Shares. Nothing contained in this Declaration shall permit the amendment of this Declaration to impair the exemption from personal liability of the Shareholders, Trustees, officers, employees and agents of the Trust or to permit assessments upon Shareholders. (e) A certificate signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Shareholders or by the Trustees as aforesaid, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust. (f) Notwithstanding any other provision hereof, until such time as a Registration Statement under the Securities Act of 1933, as amended, covering the first public offering of Shares of the Trust shall have become effective, this Declaration may be amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees. SECTION 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust 22 Property (or all or substantially all of the Trust Property allocated or belonging to a particular series of the Trust) including its good will, upon such terms and conditions and for such consideration when and as authorized at any meeting of Shareholders called for such purpose by the vote of the holders of two-thirds of the outstanding Shares of all series of the Trust voting as a single class, or of the affected series of the Trust, as the case may be, or by an instrument or instruments in writing without a meeting, consented to by the vote of the holders of two-thirds of the outstanding Shares of all series of the Trust voting as a single class, or of the affected series of the Trust, as the case may be; provided, however, that if such merger, consolidation, sale, lease or exchange is recommended by the Trustees, the vote or written consent by Majority Shareholder Vote shall be sufficient authorization; and any such merger, consolidation, sale, lease or exchange shall be deemed for all purposes to have been accomplished under and pursuant to the statutes of the Commonwealth of Massachusetts. Nothing contained herein shall be construed as requiring approval of Shareholders for any sale of assets in the ordinary course of the business of the Trust. SECTION 9.5. INCORPORATION, REORGANIZATION. With the approval of the holders of a majority of the Shares outstanding and entitled to vote, the Trustees may cause to be organized or assist in organizing a corporation or corporations under the laws of any jurisdiction, or any other trust, unit investment trust, partnership, association or other organization to take over all of the Trust Property or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, convey and transfer the Trust Property to any such corporation, trust, partnership, association or organization in exchange for the shares or securities thereof or otherwise, and to lend money to, subscribe for the shares or securities of, and enter into any contracts with any such corporation, trust, partnership, association or organization in which the Trust holds or is about to acquire shares or any other interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or consolidation between the Trust or any successor thereto and any such corporation, trust, partnership, association or other organization if and to the extent permitted by law. Nothing contained in this Section 9.5 shall be construed as requiring approval of Shareholders for the Trustees to organize or assist in organizing one or more corporations, trusts, partnerships, associations or other organizations and selling, conveying or transferring a portion of the Trust Property to such organization or entities. SECTION 9.6. INCORPORATION OR REORGANIZATION OF SERIES. With the approval of a Majority Shareholder Vote of any series, the Trustees may sell, lease or exchange all of the Trust Property allocated or belonging to that series, or cause to be organized or assist in organizing a corporation or corporations under the laws of any other jurisdiction, or any other trust, unit investment trust, partnership, association or other organization, to take over all of the Trust Property allocated or belonging to that series and to sell, convey and transfer such Trust Property to any such corporation, trust, unit investment trust, partnership, association, or other organization in exchange for the shares or securities thereof or otherwise. 23 ARTICLE X REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS The Trustees shall at least semi-annually submit to the Shareholders a written financial report of the transactions of the Trust, including financial statements which shall at least annually be certified by independent public accountants. ARTICLE XI MISCELLANEOUS SECTION 11.1. FILING. This Declaration and any amendment hereto shall be filed in the office of the Secretary of the Commonwealth of Massachusetts and in such other place or places as may be required under the laws of the Commonwealth of Massachusetts and may also be filed or recorded in such other places as the Trustees deem appropriate. Each amendment so filed shall state or be accompanied by a certificate signed and acknowledged by a Trustee stating that such action was duly taken in the manner provided herein, and unless such amendment or such certificate sets forth some later time for the effectiveness of such amendment, such amendment shall be effective upon its filing. A restated Declaration, integrating into a single instrument all of the provisions of the Declaration which are then in effect and operative, may be executed from time to time by a majority of the Trustees and shall, upon filing with the Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of this original Declaration and the various amendments thereto. SECTION 11.2. GOVERNING LAW. This Declaration is executed by the Trustees and delivered in the Commonwealth of Massachusetts and with reference to the laws thereof, and the rights of all parties and the validity and construction of every provision hereof shall be subject to and construed according to the laws of said Commonwealth. SECTION 11.3. COUNTERPARTS. This Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. SECTION 11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an individual who, according to the records of the Trust, is a Trustee hereunder certifying to: (i) the number or identity of Trustees or Shareholders, (ii) the due authorization of the execution of any instrument or writing, (iii) the form of any vote passed at a meeting of Trustees or Shareholders, (iv) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration, (v) the form of any By-Laws adopted by or the identity of any officers elected by the Trustees, or (vi) the existence of any fact or facts which in any manner relates to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any Person dealing with the Trustees and their successors. SECTION 11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any such provision is in conflict 24 with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code of l986, as amended, or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration; provided however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination. (b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of the Declaration in any jurisdiction. SECTION 11.6. PRINCIPAL OFFICE. The principal office of the Trust is 6 St. James Avenue, 9th Floor, Boston, Massachusetts, 02116. IN WITNESS WHEREOF, the undersigned have executed this instrument as of this 1st day of March, 1990. /S/ MOLLY S. MUGLER Molly S. Mugler as Trustee and not individually 6 St. James Avenue Boston, Massachusetts /S/ PHILIP W. COOLIDGE Philip W. Coolidge as Trustee and not individually 6 St. James Avenue Boston, Massachusetts /S/ GAIL E. MCHUGH Gail E. McHugh as Trustee and not individually 6 St. James Avenue Boston, Massachusetts 25 COMMONWEALTH OF MASSACHUSETTS SUFFOLK, SS. March 1, 1990 Then personally appeared the above-named Molly S. Mugler, Philip W. Coolidge and Gail E. McHugh, who severally acknowledged the foregoing instrument to be their free act and deed. Before me, /S/ MARK PIETKIEWICZ Notary Public My commission expires: January 27, 1997 26 Appendix I DOMINI SOCIAL INDEX TRUST Establishment and Designation of Series of Shares of Beneficial Interest (without par value) Pursuant to Section 6.9 of the Amended and Restated Declaration of Trust, dated as of March 1, 1990 (the "Declaration of Trust"), of the Domini Social Index Trust (the "Trust"), the Trustees of the Trust hereby establish and designate one series of Shares (as defined in the Declaration of Trust) (the "Fund") to have the following special and relative rights: 1. The Fund shall be designated as follows: Domini Social Index Trust 2. The Fund shall be authorized to hold cash, invest in securities, instruments and other properties and use investment techniques as from time to time described in the Trust's then currently effective registration statement under the Securities Act of 1933 to the extent pertaining to the offering of Shares of such Fund. Each Share of the Fund shall be redeemable, shall be entitled to one vote (or fraction thereof in respect of a fractional share) on matters on which Shares of the Fund shall be entitled to vote, shall represent a PRO RATA beneficial interest in the assets allocated or belonging to the Fund, and shall be entitled to receive its PRO RATA share of the net assets of the Fund upon liquidation of the Fund, all as provided in Section 6.9 of the Declaration of Trust. The proceeds of sales of Shares of the Fund, together with any income and gain thereon, less any diminution or expenses thereof, shall irrevocably belong to the Fund, unless otherwise required by law. 3. Shareholders of the Fund shall vote separately as a class on any matter to the extent required by, and any matter shall be deemed to have been effectively acted upon with respect to such Fund as provided in, Rule 18f-2, as from time to time in effect, under the Investment Company Act of 1940, as amended, or any successor rule, and by the Declaration of Trust. 4. The assets and liabilities of the Trust shall be allocated among the Fund as set forth in Section 6.9 of the Declaration of Trust. 5. Subject to the provisions of Section 6.9 and Article IX of the Declaration of Trust, the Trustees (including any successor Trustees) shall have the right at any time and from time to time to reallocate assets and expenses or to change the designation of the Fund now or hereafter created, or to otherwise change the special and relative rights of the Fund. Appendix I DOMINI SOCIAL EQUITY FUND (formerly Domini Social Index Trust) AMENDMENT NO. 1 TO AMENDED AND RESTATED DECLARATION OF TRUST AND AMENDED AND RESTATED ESTABLISHMENT AND DESIGNATION OF SERIES OF SHARES OF BENEFICIAL INTEREST (WITHOUT PAR VALUE) Dated as of July 19, 1993 The undersigned, being the Trustees of Domini Social Index Trust, a Massachusetts business trust (the "Trust"), acting pursuant to Article IX, Section 9.3 of the Amended and Restated Declaration of Trust dated as of March 1, 1990 (the "Declaration"), hereby amend the Declaration as follows in order to change the name of the Trust as follows: SECTION 1.1. NAME. The name of the trust is changed to "Domini Social Equity Fund". Pursuant to Article IX, Section 9.3 and Article VI, Section 6.9 of the Declaration, the Trustees of the Trust hereby redesignate the Trust's initial series of Shares (as defined in the Declaration), Domini Social Index Trust (the "Fund"), in order to change the Fund's name as follows: 1. The Fund shall be redesignated as follows: Domini Social Equity Fund and shall have the following special and relative rights: 2. The Fund shall be authorized to hold cash, invest in securities, instruments and other properties and use investment techniques as from time to time described in the Trust's then currently effective registration statement under the Securities Act of 1933 to the extent pertaining to the offering of Shares of the Fund. Each Share of the Fund shall be redeemable, shall be entitled to one vote (or fraction thereof in respect of a fractional share) on matters on which Shares of the Fund shall be entitled to vote, shall represent a PRO RATA beneficial interest in the assets allocated or belonging to the Fund, and shall be entitled to receive its PRO RATA share of the net assets of the Fund upon liquidation of the Fund, all as provided in Section 6.9 of the Declaration. The proceeds of sales of Shares of the Fund, together with any income and gain thereon, less any diminution or expenses thereof, shall irrevocably belong to the Fund, unless otherwise required by law. 3. Shareholders of the Fund shall vote separately as a class on any matter to the extent required by, and any matter shall be deemed to have been effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as from time to time in effect, under the Investment Company Act of 1940, as amended, or any successor rule, and by the Declaration. 2 4. The assets and liabilities of the Trust shall be allocated to the Fund as set forth in Section 6.9 of the Declaration. 5. Subject to the provisions of Section 6.9 and Article IX of the Declaration, the Trustees (including any successor Trustees) shall have the right at any time and from time to time to create additional series, to reallocate assets and expenses, to change the designation of the Fund or any other series created hereafter, or otherwise to change the special and relative rights of the Fund or any such other series. IN WITNESS WHEREOF, the undersigned have as of the year and day first written above executed this Amendment to the Declaration. This instrument may be executed by the Trustees on separate counterparts but shall be effective only when signed by a majority of the Trustees. /S/ AMY L. DOMINI Amy L. Domini As Trustee and not Individually /S/ PHILIP W. COOLIDGE Philip W. Coolidge As Trustee and not Individually /S/ BADI G. FOSTER Badi G. Foster As Trustee and not Individually /S/ KAREN PAUL Karen Paul As Trustee and not Individually /S/ WILLIAM C. OSBORN William C. Osborn As Trustee and not Individually /S/ EMILY W. CARD Emily W. Card As Trustee and not Individually DSI197 (DSI99) EX-99.B2 3 BY-LAWS OF REGISTRANT BY-LAWS OF DOMINI SOCIAL EQUITY FUND (formerly, DOMINI SOCIAL INDEX TRUST) ARTICLE I DEFINITIONS The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES", "TRANSFER AGENT", "TRUST", "TRUST PROPERTY" and "TRUSTEES" have the respective meanings given them in the Declaration of Trust of Domini Social Equity Fund (formerly, Domini Social Index Trust) dated June 7, 1989 as amended and restated March 1, 1990. ARTICLE II OFFICES SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the principal office of the Trust in the Commonwealth of Massachusetts shall be in the City of Boston, County of Suffolk. SECTION 2. OTHER OFFICES. The Trust may have offices in such other places without as well as within the Commonwealth as the Trustees may from time to time determine. ARTICLE III SHAREHOLDERS SECTION 1. MEETINGS. A meeting of Shareholders may be called at any time by a majority of the Trustees and shall be called by any Trustee upon written request, which shall specify the purpose or purposes for which such meeting is to be called, of Shareholders holding in the aggregate not less than 10% of the outstanding Shares entitled to vote on the matters specified in such written request. Any such meeting shall be held within or without the Commonwealth of Massachusetts on such day and at such time as the Trustees shall designate. The holders of a majority of outstanding Shares entitled to vote present in person or by proxy shall constitute a quorum at any meeting of the Shareholders. In the absence of a quorum, a majority of outstanding Shares entitled to vote present in person or by proxy may adjourn the meeting from time to time until a quorum shall be present. SECTION 2. NOTICE OF MEETINGS Notice of all meetings of Shareholders, stating the time, place and purposes of the meeting, shall be given by the Trustees by mail to each Shareholder entitled to vote at such meeting at his address as recorded on the register of the Trust, mailed at least 10 days and not more than 60 days before the meeting. Only the business stated in the notice of the meeting shall be considered at such meeting. Any adjourned meeting may be held as adjourned without further notice. No notice need be given to any Shareholder who shall have failed to inform the Trust of his current address or if a written waiver of notice, executed before or after the meeting by the Shareholder or his attorney thereunto authorized, is filed with the records of the meeting. SECTION 3. RECORD DATE. For the purpose of determining the Shareholders who are entitled to notice of and to vote at any meeting, or to participate in any distribution, or for the purpose of any other action, the Trustees may from time to time close the transfer books for such period, not exceeding 30 days, as the Trustees may determine; or without closing the transfer books the Trustees may fix a date not more than 60 days prior to the date of any meeting of Shareholders or distribution or other action as a record date for the determination of the persons to be treated as Shareholders of record for such purpose. SECTION 4. PROXIES. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a vote of a majority of the Trustees, proxies may be solicited in the name of the Trust or one or more Trustees or officers of the Trust. Only Shareholders of record shall be entitled to vote. Each full Share shall be entitled to one vote and fractional Shares shall be entitled to a vote of such fraction. When any Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such Share, such Share may be voted by such guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. SECTION 5. INSPECTION OF RECORDS. The records of the Trust shall be open to inspection by Shareholders to the same extent as is permitted shareholders of a Massachusetts business corporation. SECTION 6. ACTION WITHOUT MEETING. Any action which may be taken by Shareholders may be taken without a meeting if a majority of Shareholders entitled to vote on the matter (or such larger proportion thereof as shall be required by law, the Declaration or these By-Laws for approval of such matter) consent to the action in writing and the written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. 2 ARTICLE IV TRUSTEES SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion provide for regular or stated meetings of the Trustees. Notice of regular or stated meetings need not be given. Meetings of the Trustees other than regular or stated meetings shall be held whenever called by the Chairman or by any Trustee. Notice of the time and place of each meeting other than regular or stated meetings shall be given by the Secretary or an Assistant Secretary or by the officer or Trustee calling the meeting and shall be mailed to each Trustee at least two days before the meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his business address, or personally delivered to him at least one day before the meeting. Notice of a meeting need not be given to any Trustee if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice need not specify the purpose of any meeting. The Trustees may meet by means of a telephone conference circuit or similar communications equipment by means of which all persons participating in the meeting can hear each other, which telephone conference meeting shall be deemed to have been held at a place designated by the Trustees at the meeting. Participation in a telephone conference meeting shall constitute presence in person at such meeting. Any action required or permitted to be taken at any meeting of the Trustees may be taken by the Trustees without a meeting if all the Trustees consent to the action in writing and the written consents are filed with the records of the Trustees' meetings. Such consents shall be treated as a vote for all purposes. SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees present in person at any regular or special meeting of the Trustees shall constitute a quorum for the transaction of business at such meeting and (except as otherwise required by law, the Declaration or these By-Laws) the act of a majority of the Trustees present at any such meeting, at which a quorum is present, shall be the act of the Trustees. In the absence of a quorum, a majority of the Trustees present may adjourn the meeting from time to time until a quorum shall be present. Notice of an adjourned meeting need not be given. SECTION 3. ATTENDANCE BY TRUSTEES. A Trustee who fails, during any fiscal year of the Trust, to attend at least 75% of the meetings of the Board, or who fails to attend at least 75% of the meetings of each Committee of the Board of which such Trustee is a member, unless such failure was the result of an illness or incapacity which, as determined by the Board, is not likely to materially interfere with the future performance of the duties of such Trustee, shall be subject to removal for cause by vote of two-thirds of the remaining Trustees. The foregoing shall not be construed to limit in any way the authority of the Board with respect to removal of Trustees. 3 ARTICLE V COMMITTEES AND ADVISORY BOARD SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a majority of all the Trustees may elect from their own number an Executive Committee to consist of not less than three Trustees to hold office at the pleasure of the Trustees. While the Trustees are not in session, the Executive Committee shall have the power to conduct the current and ordinary business of the Trust, including the purchase and sale of securities and the designation of securities to be delivered upon redemption of Shares of the Trust, and such other powers of the Trustees as the Trustees may, from time to time, delegate to the Executive Committee except those powers which by law, the Declaration or these By-Laws the Trustees are prohibited from so delegating. The Trustees may also elect from their own number other Committees from time to time, the number composing such Committees, the powers conferred upon the same (subject to the same limitations as with respect to the Executive Committee) and the term of membership on such Committees to be determined by the Trustees. The Trustees may designate a chairman of any such Committee. In the absence of such designation a Committee may elect its own chairman. SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may (i) provide for stated meetings of any Committee, (ii) specify the manner of calling and notice required for special meetings of any Committee, (iii) specify the number of members of a Committee required to constitute a quorum and the number of members of a Committee required to exercise specified powers delegated to such Committee, (iv) authorize the making of decisions to exercise specified powers by written assent of the requisite number of members of a Committee without a meeting, and (v) authorize the members of a Committee to meet by means of a telephone conference circuit. Each Committee shall keep regular minutes of its meetings and records of decisions taken without a meeting and cause them to be recorded in a book designated for that purpose and kept in the office of the Trust. SECTION 3. ADVISORY BOARD. The Trustees may appoint an Advisory Board to consist in the first instance of not less than three members. Members of such Advisory Board shall not be Trustees or officers and need not be Shareholders. A member of such Advisory Board shall hold office for such period as the Trustees may by vote provide and may resign therefrom by a written instrument signed by him which shall take effect upon its delivery to the Trustees. The Advisory Board shall have no legal powers and shall not perform the functions of Trustees in any manner, such Advisory Board being intended merely to act in an advisory capacity. Such Advisory Board shall meet at such times and upon such notice as the Trustees may by vote provide. SECTION 4. CHAIRMAN. The Trustees may, by a majority vote of all the Trustees, elect from their own number a Chairman, to hold office until his successor shall have been duly elected and qualified. The Chairman shall not hold any other office. The Chairman may be, but need not be, a Shareholder. The Chairman shall preside at all meetings of the Trustees and shall have such other duties as from time to time may be assigned to him by the Trustees. ARTICLE VI OFFICERS SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a President, a Treasurer and a Secretary, each of whom shall be elected by the Trustees. The Trustees may elect or appoint such other officers or agents as the business of the Trust may require, including one or more Vice Presidents, one or more Assistant Treasurers, and one or more Assistant Secretaries. The Trustees may delegate to any officer or committee the power to appoint any subordinate officers or agents. 4 SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise provided by law, the Declaration or these By-Laws, the President, the Treasurer and the Secretary shall hold office until his respective successor shall have been duly elected and qualified, and all other officers shall hold office at the pleasure of the Trustees. The Secretary and Treasurer may be the same person. A Vice President and the Treasurer or a Vice President and the Secretary may be the same person, but the offices of Vice President, Secretary and Treasurer shall not be held by the same person. The President shall not hold any other office. Except as above provided, any two offices may be held by the same person. Any officer may be, but does not need be, a Trustee or Shareholder. SECTION 3. REMOVAL. The Trustees, at any regular or special meeting of the Trustees, may remove any officer with or without cause by a vote of a majority of the Trustees. Any officer or agent appointed by any officer or committee may be removed with or without cause by such appointing officer or committee. SECTION 4. POWERS AND DUTIES OF THE PRESIDENT. The President, unless a Chairman is so elected by the Trustees, shall be the principal executive officer of the Trust. Subject to the control of the Trustees and any committee of the Trustees, the President shall at all times exercise a general supervision and direction over the affairs of the Trust. The President shall have the power to employ attorneys and counsel for the Trust and to employ such subordinate officers, agents, clerks and employees as he may find necessary to transact the business of the Trust. The President shall also have the power to grant, issue, execute or sign such powers of attorney, proxies or other documents as may be deemed advisable or necessary in the furtherance of the interests of the Trust. The President shall have such other powers and duties as, from time to time, may be conferred upon or assigned to him by the Trustees. SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or disability of the President, the Vice President or, if there are more than one Vice President, any Vice President designated by the Trustees shall perform all the duties and may exercise any of the powers of the President, subject to the control of the Trustees. Each Vice President shall perform such other duties as may be assigned to him from time to time by the Trustees or the President. SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the principal financial and accounting officer of the Trust. The Treasurer shall deliver all funds of the Trust which may come into his hands to such custodian as the Trustees may employ pursuant to Article X hereof. The Treasurer shall render a statement of condition of the finances of the Trust to the Trustees as often as they shall require the same and shall in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Trustees. The Treasurer shall give a bond for the faithful discharge of his duties, if required to do so by the Trustees, in such sum and with such surety or sureties as the Trustees shall require. SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep the minutes of all meetings of the Shareholders in proper books provided for that purpose; shall keep the minutes of all meetings of the Trustees; shall have custody of the seal of the Trust; and shall have charge of the Share transfer 5 books, lists and records unless the same are in the charge of the Transfer Agent. The Secretary shall attend to the giving and serving of all notices by the Trust in accordance with the provisions of these By-Laws and as required by law; and subject to these By-Laws, shall in general perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Trustees. SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or disability of the Treasurer, any Assistant Treasurer designated by the Trustees shall perform all the duties, and may exercise any of the powers, of the Treasurer. Each Assistant Treasurer shall perform such other duties as from time to time may be assigned to him by the Trustees. Each Assistant Treasurer shall give a bond for the faithful discharge of his duties, if required to do so by the Trustees, in such sum and with such surety or sureties as the Trustees shall require. SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence or disability of the Secretary, any Assistant Secretary designated by the Trustees shall perform all of the duties, and may exercise any of the powers, of the Secretary. Each Assistant Secretary shall perform such other duties as from time to time may be assigned to him by the Trustees. SECTION 10. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF THE ADVISORY BOARD. Subject to any applicable law or provision of the Declaration, the compensation of the officers and Trustees and members of the Advisory Board shall be fixed from time to time by the Trustees or, in the case of officers, by any committee of officers upon whom such power may be conferred by the Trustees. No officer shall be prevented from receiving such compensation as such officer by reason of the fact that he is also a Trustee. ARTICLE VII FISCAL YEAR The fiscal year of the Trust shall be that annual period as designated by the Trustees of the Trust. ARTICLE VIII SEAL The Trustees shall adopt a seal which shall be in such form and shall have such inscription thereon as the Trustees may from time to time prescribe. 6 ARTICLE IX WAIVERS OF NOTICE Whenever any notice is required to be given by law, the Declaration or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. A notice shall be deemed to have been telegraphed, cabled or wirelessed for the purposes of these By-Laws when it has been delivered to a representative of any telegraph, cable or wireless company with instruction that it be telegraphed, cabled or wirelessed. Any notice shall be deemed to be given at the time when the same shall be mailed, telegraphed, cabled or wirelessed. ARTICLE X CUSTODIAN SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times employ a bank or trust company having a capital, surplus and undivided profits of at least $5,000,000 as custodian with authority as its agent, but subject to such restrictions, limitations and other requirements, if any, as may be contained in the Declaration, these By-Laws and the 1940 Act: (i) to hold the securities owned by the Trust and deliver the same upon written order; (ii) to receive and receipt for any monies due to the Trust and deposit the same in its own banking department or elsewhere as the Trustees may direct; (iii) to disburse such funds upon orders or vouchers; (iv) if authorized by the Trustees, to keep the books and accounts of the Trust and furnish clerical and accounting services; and (v) if authorized by the Trustees, to compute the net income of the Trust and the net asset value of Shares; all upon such basis of compensation as may be agreed upon between the Trustees and the custodian. The Trustees may also authorize the custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the custodian and upon such terms and conditions as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in every case such sub-custodian shall be a bank or trust company organized under the laws of the United States or one of the states thereof and having capital, surplus and undivided profits of at least $5,000,000. SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, or with such other person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust or its custodian. 7 SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to accept written receipts or other written evidences indicating purchases of securities held in book-entry form in the Federal Reserve System in accordance with regulations promulgated by the Board of Governors of the Federal Reserve System and the local Federal Reserve Banks in lieu of receipt of certificates representing such securities. SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The following provisions shall apply to the employment of a custodian pursuant to this Article X and to any contract entered into with the custodian so employed: (a) The Trustees shall cause to be delivered to the custodian all securities owned by the Trust or to which it may become entitled, and shall order the same to be delivered by the custodian only upon completion of a sale, exchange, transfer, pledge, or other disposition thereof, and upon receipt by the custodian of the consideration therefor or a certificate of deposit or a receipt of an issuer or of its Transfer Agent, all as the Trustees may generally or from time to time require or approve, or to a successor custodian; and the Trustees shall cause all funds owned by the Trust or to which it may become entitled to be paid to the custodian, and shall order the same disbursed only for investment against delivery of the securities acquired, or in payment of expenses, including management compensation, and liabilities of the Trust, including distributions to Shareholders, or to a successor custodian; provided, however, that nothing herein shall prevent delivery of securities for examination to the broker purchasing the same in accord with the "street delivery" custom whereby such securities are delivered to such broker in exchange for a delivery receipt exchanged on the same day for an uncertified check of such broker to be presented on the same day for certification. (b) In case of the resignation, removal or inability to serve of any such custodian, the Trust shall promptly appoint another bank or trust company meeting the requirements of this Article X as successor custodian. The agreement with the custodian shall provide that the retiring custodian shall, upon receipt of notice of such appointment, deliver all Trust Property in its possession to and only to such successor, and that pending appointment of a successor custodian, or a vote of the Shareholders to function without a custodian, the custodian shall not deliver any Trust Property to the Trust, but may deliver all or any part of the Trust Property to a bank or trust company doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus and undivided profits (as shown in its last published report) of at least $5,000,000; provided that arrangements are made for the Trust Property to be held under terms similar to those on which they were held by the retiring custodian. ARTICLE XI AMENDMENTS These By-Laws, or any of them, may be altered, amended or repealed, or new By-Laws may be adopted (a) by the Shareholders by a Majority Shareholder Vote, or (b) by the Trustees, provided, however, that no By-Law may be amended, adopted or repealed by the Trustees if such amendment, adoption or repeal requires, pursuant to law, the Declaration or these By-Laws, a vote of the Shareholders. DSI198 EX-99.B9 4 FORM OF TRANSFER AGENCY AND SERVICE AGREEMENT TRANSFER AGENCY AND SERVICE AGREEMENT AGREEMENT effective as of the _____ day of ____________, 1995 by and between DOMINI SOCIAL EQUITY FUND, a Massachusetts business trust (the "Company"), and FUNDAMENTAL SHAREHOLDER SERVICES, INC., a New York Corporation ("FSSI"). WITNESSETH: WHEREAS, the Company desires to appoint FSSI as its transfer agent, dividend disbursing agent and agent in connection with certain other activities, and FSSI desires to accept such appointment; WHEREAS, FSSI is duly registered as a transfer agent as provided in Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "1934 Act"); WHEREAS, the Company is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; WHEREAS, the Company currently offers shares in one portfolio ("series"), with one class of shares. o Domini Social Equity Fund (such series, together with all other series subsequently established by the Company and made subject to this Agreement in accordance with Article 17, being herein referred to as the "Fund(s)"); NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the Company and FSSI agree as follows: ARTICLE 1. Terms of Appointment; Duties of FSSI 1.01 Subject to the terms and conditions set forth in this Agreement, the Company on behalf of the Funds, hereby employs and appoints FSSI to act as, and FSSI agrees to act as, transfer agent for each of the Fund(s)' authorized and issued shares of beneficial interest ("Shares"), dividend disbursing agent and agent in connection with any accumulation, open- account or similar plans provided to the shareholders of the Company ("Shareholders") and set out in the currently effective prospectus and statement of additional information, as each may be amended from time to time (the "Prospectus") of the Fund(s), including without limitation any periodic investment plan or periodic withdrawal program. 1.02 FSSI agrees that it will perform the following services: (a) In connection with procedures established from time to time by agreement between the Company and FSSI, FSSI shall: 1 (i) Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation therefor to the custodian of the Fund(s) appointed by the Board of Trustees of the Company (the "Custodian"); (ii) Pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account; (iii) Receive for acceptance, redemption requests and redemption directions and deliver the appropriate documentation therefor to the Custodian; (iv) At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholders; (v) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions; (vi)Prepare and transmit payments for dividends and distributions declared by the Company on behalf of a Fund; and (vii) Create and maintain all necessary records including those specified in Article 10 hereof, in accordance with all applicable laws, rules and regulations, including but not limited to records required by Section 31(a) of the Investment Company Act of 1940, as amended (the "1940 Act"), and those records pertaining to the various functions performed by it hereunder. All records shall be available for inspection and use by the Company. Where applicable, such records shall be maintained by FSSI for the periods and in the places required by Rule 31a-2 under the 1940 Act. (viii) Make available during regular business hours all records and other data created and maintained pursuant to this Agreement for reasonable audit and inspection by the Company, or any person retained by the Company. Upon reasonable notice by the Company, FSSI shall make available during regular business hours its facilities and premises employed in connection with the performance of its duties under this Agreement for reasonable visitation by the Company, or any person retained by the Company. (ix) At the expense of the Company, FSSI shall maintain an adequate supply of blank Share certificates for each Fund providing for the issuance of certificates to meet FSSI's requirements therefor. Such Share certificates shall be properly signed by facsimile. The Company agrees that, notwithstanding the death, resignation, or removal of any officer of the Company whose signature appears on such certificates, FSSI may continue to countersign certificates which bear such signatures until otherwise directed by the Company. Share certificates may be issued and accounted for entirely by FSSI and do not require a third party registrar or other endorsing party. 2 (x) Issue replacement Share certificates in lieu of certificates which have been lost, stolen, mutilated or destroyed, without any further action by the Board of Trustees or any officer of the Company, upon receipt by FSSI of properly executed affidavits and lost certificate bonds, in form satisfactory to FSSI, with the Company and FSSI as obligees under the bond. At the discretion of FSSI, and at its sole risk, FSSI may issue replacement certificates without requiring the affidavits and lost certificate bonds described above and FSSI agrees to indemnify the Company against any and all losses or claims which may arise by reason of the issuance of such new certificates in the place of the ones allegedly lost, stolen or destroyed. (xi) Record the issuance of Shares of the Fund(s) and maintain, pursuant to Rule 17Ad-10(e) under the 1934 Act, a record of the total number of Shares of each Fund which are authorized, based upon data provided to it by the Company, and issued and outstanding. FSSI shall also provide the Company on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issuance or sale of such Shares, which functions shall be the sole responsibility of the Company. (b) In addition to and not in lieu of the services set forth in the above paragraph (a) or in any Schedule hereto, FSSI shall: (i) perform all of the customary services of a transfer agent, dividend disbursing agent and, as relevant, agent in connection with accumulation, open-account or similar plans (including without limitation any periodic withdrawal program); including but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, coordinating the mailing, receiving and tabulating of proxies, coordinating the mailing of Shareholder reports (semi-annually) and prospectuses (annually) to current Shareholders, withholding taxes on all accounts, including nonresident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required by federal authorities with respect to dividends and distributions for all Shareholders for all purchases and redemptions of Shares and other Shareholder correspondence, preparing and mailing activity statements for Shareholders, and providing Shareholder account information; and (ii) provide a system or reports which will enable the Company to monitor the total number of Shares of each Fund sold in each State. The Company shall identify to FSSI in writing those transaction types to be treated as exempt from blue sky reporting. The responsibility of FSSI for a Fund's blue sky state registration status is solely limited to the initial establishment of transaction types subject to blue sky compliance by the Company and the reporting of such transactions to the Company as provided above. (c) Additionally, FSSI shall utilize a system to identify all Share transactions which involve purchase and redemption orders that are processed at a time other than the time of the computation of net asset value per Share next computed after receipt of such orders, and shall compute the net effect upon the Fund(s) of such transactions so identified on a daily and cumulative basis. (d) FSSI may also provide such additional services and functions not specifically 3 described herein as may be mutually agreed upon between FSSI and the Company and set forth in writing. Procedures applicable to certain of these services may be established from time to time by agreement between the Company and FSSI. ARTICLE 2. Sale of Company Shares 2.01 Whenever the Company shall sell or cause to be sold any Shares of a Fund, the Company shall deliver or cause to be delivered to FSSI a document duly specifying: (i) the name of the Fund whose Shares were sold; (ii) the number of Shares sold, trade date, and price; (iii) the amount of money to be delivered to the Custodian for the sale of such Shares and specifically allocated to such Fund; and (iv) in the case of a new account, a new account application or sufficient information to establish an account. 2.02 FSSI will, upon receipt by it of a check or other payment identified by it as an investment in Shares of one of the Funds and drawn or endorsed to FSSI as agent for, or identified as being for the account of, one of the Funds, promptly deposit such check or other payment to the appropriate account and make the appropriate postings necessary to reflect the investment. FSSI will notify the Company, or its designee, and the Custodian of all purchases and related account adjustments. 2.03 Under procedures as established by mutual agreement between the Company and FSSI, FSSI shall issue to the purchaser or his or her authorized agent such Shares, computed to the nearest three decimal places, as the purchaser is entitled to receive, based on the appropriate net asset value of the Fund's Shares, determined in accordance with the prospectus and applicable Federal law or regulation. In issuing Shares to a purchaser or his or her authorized agent, FSSI shall be entitled to rely upon the latest directions, if any, previously received by FSSI from the purchaser or his authorized agent concerning the delivery of such Shares. 2.04 FSSI shall not be required to issue any Shares of any Fund where it has received a written instruction from the Company or written notification from any appropriate federal or state authority that the sale of the Shares of the Fund(s) in question has been suspended or discontinued, and FSSI shall be entitled to rely upon such written instructions or written notification. 2.05 Upon the issuance of any Shares of any Fund(s) in accordance with the foregoing provisions of this Section, FSSI shall not be responsible for the payment of any original issue or other taxes, if any, required to be paid by the Company in connection with such issuance. 2.06 FSSI may establish such additional rules and regulations governing the transfer or registration of Shares as it may deem advisable and consistent with such rules and regulations generally adopted by transfer agents, or with the written consent of the Company, any other rules and regulations. ARTICLE 3. Returned Checks 4 3.01 In the event that any check or other order for the transfer of money is returned unpaid for any reason, FSSI will take such steps as FSSI may, in its discretion, deem appropriate to protect the Company from financial loss or as the Company or its designee may instruct. Provided that the standard procedures, as agreed upon from time to time between the Company and FSSI, are adhered to by FSSI, FSSI shall not be liable for any loss suffered by a Fund as a result of returned or unpaid purchase or redemption transactions. Legal or other expenses incurred to collect amounts owed to a Fund as a consequence of returned or unpaid purchase or redemption transactions shall be an expense of that Fund. ARTICLE 4. Redemptions 4.01 Shares of any Fund may be redeemed in accordance with the procedures set forth in the Prospectus of that Fund and FSSI will duly process all redemption requests. ARTICLE 5. Transfers and Exchanges 5.01 FSSI is authorized to review and process transfers of Shares of each Fund, exchanges between Funds on the records of the Funds maintained by FSSI, and exchanges between the Funds and any other entity as may be permitted by the Prospectus of the Fund. If Shares to be transferred are represented by outstanding certificates, FSSI will, upon surrender to it of the certificates in proper form for transfer, and upon cancellation thereof, countersign and issue new certificates for a like number of Shares and deliver the same. If the Shares to be transferred are not represented by outstanding certificates, FSSI will, upon an order therefor by or on behalf of the registered holder thereof in proper form, credit the same to the transferee on its books. If Shares are to be exchanged for Shares of another Fund, FSSI will process such exchange in the same manner as a redemption and sale of Shares, except that it may in its discretion waive requirements for information and documentation. ARTICLE 6. Right to Seek Assurances 6.01 FSSI reserves the right to refuse to transfer or redeem Shares until it is satisfied 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 FSSI, in its judgment, deems improper or unauthorized, or until it is satisfied that there is no basis for any claims adverse to such transfer or redemption. FSSI may, in effecting transfers, rely upon the Uniform Commercial Code, as the same may be amended from time to time, which in the opinion of legal counsel for the Company or of its own legal counsel protect it in not requiring certain documents in connection with the transfer or redemption of Shares of any Fund, and the Company shall indemnify FSSI for any act or omission by it in reliance upon such law or opinion of legal counsel of the Company or of its own counsel. ARTICLE 7. Distributions 7.01 The Company will promptly notify FSSI of the declaration of any dividend or distribution. The Company shall furnish to FSSI a resolution of the Board of Trustees of the 5 Company certified by the Secretary (a "Certificate"): (i) authorizing the declaration of dividends on a specified basis and authorizing FSSI to rely on oral instructions or a Certificate specifying the date and the total amount payable on the payment date; or (ii) setting forth the date of the declaration of any dividend or distribution by a Fund, the date of payment thereof, the record date as of which Shareholders entitled to payment shall be determined, and the amount payable per share to the Shareholders of record as of that date and the total amount payable on the payment date. 7.02 The Company or FSSI, on behalf of the Company, shall instruct the Custodian to place in a dividend disbursing account funds equal to the cash amount of any dividend or distribution to be paid out. FSSI will calculate, prepare and mail checks to (at the address as it appears on the records of FSSI), or (where appropriate) credit such dividend or distribution to the account of, Fund Shareholders, and maintain and safeguard all underlying records. 7.03 FSSI will replace lost checks at its discretion and in conformity with regular business practices. 7.04 FSSI will maintain all records necessary to reflect the crediting of dividends which are reinvested in Shares of the Fund, including without limitation daily dividends. 7.05 FSSI shall not be liable for any improper payments made in accordance with a resolution of the Board of Trustees of the Company. 7.06 If FSSI shall not receive from the Custodian sufficient cash to make payment to all Shareholders of the Fund as of the record date, FSSI shall, upon notifying the Company, withhold payment to all Shareholders of record as of the record date until sufficient cash is provided to FSSI. ARTICLE 8. Other Duties 8.01 In addition to the duties expressly provided for herein, FSSI shall perform such other duties and functions and shall be paid such amounts therefor as may from time to time be agreed to in writing. ARTICLE 9. Taxes 9.01 It is understood that FSSI shall file such information returns concerning the payment of dividends and capital gain distributions and tax withholding with the proper federal, state and local authorities as are required by law to be filed by the Company and shall withhold such sums as are required to be withheld by applicable law. ARTICLE 10. Books and Records 10.01 FSSI shall maintain confidential records showing for each Shareholder's account the following: (i) names, addresses and tax identification numbers; (ii) numbers of Shares 6 held; (iii) historical information (as available from prior transfer agents) regarding the account of each Shareholder, including dividends paid and date and price of all transactions in a Shareholder's account; (iv) any stop or restraining order placed against a Shareholder's account; (v) information with respect to withholdings; (vi) any capital gain or dividend reinvestment order, plan application, dividend address and correspondence relating to the current maintenance of a Shareholder's account; (vii) certificate numbers and denominations for any Shareholders holding certificates; (viii) any information required in order for FSSI to perform the calculations contemplated or required by this Agreement; and (ix) such other information and data as may be required by applicable law. 10.02 Any records required to be maintained by Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed in Rule 31a-2 under the 1940 Act. Such records may be inspected by the Company at reasonable times. FSSI may, at its option at any time, and shall forthwith upon the Company's demand, turn over to the Company and cease to retain in FSSI's files, records and documents created and maintained by FSSI in performance of its service of for its protection. At the end of such retention periods, such documents will either be turned over to the Company, or destroyed in accordance with the Company's authorization. 10.03 Procedures applicable to the services to be performed hereunder may be established from time to time by agreement between the Company and FSSI. FSSI shall have the right to utilize any shareholder accounting and recordkeeping system which, in its opinion, qualifies to perform any services to be performed hereunder. FSSI shall keep records relating to the services performed hereunder, in the form and manner as it may deem advisable. ARTICLE 11. Fees and Expenses 11.01 For performance by FSSI pursuant to this Agreement, the Company agrees to pay FSSI an annual maintenance fee for each Shareholder ledger as set out in the initial fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 11.02 below may be changed from time to time subject to mutual agreement between the Company and FSSI. 11.02 In addition to the fee paid under Section 11.01 above, the Company agrees to reimburse FSSI for out-of-pocket expenses or advances incurred by FSSI for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by FSSI at the request or with the consent of the Company including, without limitation, any equipment, supplies, or services specifically ordered by the Company or required by the Company to be purchased, will be reimbursed by the Fund(s). 11.03 The Company agrees to pay all fees and reimbursable expenses within 30 days following the mailing of the respective billing notice. Postage for mailing dividends, proxies, Fund reports and other mailings to all shareholder accounts shall be advanced to FSSI by the Company at least seven days prior to the mailing date of such material. 7 ARTICLE 12. Representations and Warranties of FSSI FSSI represents and warrants to the Company that: 12.01 It is a corporation duly organized and existing and in good standing under the laws of the State of New York. 12.02 It is empowered under applicable laws and by its charter and by-laws to enter into and perform this Agreement. 12.03 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 12.04 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. ARTICLE 13. Representations and Warranties of the Company The Company represents and warrants to FSSI that: 13.01 It is a business trust duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts. 13.02 It is empowered under applicable laws and by its charter documents and by-laws to enter into and perform this Agreement. 13.03 All proceedings required by said charter documents and by-laws have been taken to authorize it to enter into and perform this Agreement. 13.04 It is an open-end investment company registered under the 1940 Act. 13.05 A registration statement on Form N-1A (including a prospectus and statement of additional information) under the Securities Act of 1933 and the 1940 Act is currently effective and will remain effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Funds being offered for sale. 13.06 When Shares are hereafter issued in accordance with the terms of the Prospectus, such Shares shall be validly issued, fully paid and nonassessable by the Fund(s). ARTICLE 14. Indemnification 14.01 Except as set forth in subparagraph (f) hereof, FSSI shall not be responsible for, and the Company shall indemnify and hold FSSI harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to: 8 (a) All actions taken or omitted to be taken by FSSI or its agents or subcontractors in good faith in reliance on or use by FSSI or its agents or subcontractors of information, records and documents which (i) are received by FSSI or its agents or subcontractors from or on behalf of the Company, (ii) have been prepared and/or maintained by the Company or any other person or firm on behalf of the Company, and (iii) were received by FSSI or its agents or subcontractors from a prior transfer agent. (b) Any action taken or omitted to be taken by FSSI in connection with its appointment in good faith in reliance upon any law, act, regulation or interpretation of the same even though the same may thereafter have been altered, changed, amended or repealed. (c) The Company's refusal or failure to comply with the terms of this Agreement, or which arise out of the Company's lack of good faith, negligence or willful misconduct or which arise out of the breach of any representation or warranty of the Company hereunder. (d) The reliance on, or the carrying out by FSSI or its agents or subcontractors of any instructions or requests, whether written or oral, of the Company. (e) The offer or sale of Shares by the Company in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. (f) In addition to any other limitation provided herein, or by law, indemnification under this Agreement shall not apply to actions or omissions of FSSI or its directors, officers, employees, agents or subcontractors in cases of its own gross negligence, willful misconduct, bad faith, reckless disregard of its duties or their own duties hereunder, knowing violation of law or fraud. 14.02 FSSI shall indemnify and hold the Fund(s) harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributed to any action or failure or omission to act by FSSI as a result of FSSI's lack of good faith, negligence, willful misconduct, knowing violation of law or fraud. 14.03 At any time FSSI may apply to any officer of the Company for instructions, and may consult with legal counsel for the Company with respect to any matter arising in connection with the services to be performed by FSSI under this Agreement, and FSSI and its agents or subcontractors shall not be liable and shall be indemnified by the Company for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel except for a knowing violation of law. FSSI, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Company, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents 9 provided to FSSI or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Company, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Company. FSSI, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of officers of the Company, and one proper countersignature of any former transfer agent or registrar, or of a co-transfer agent or co-registrar. 14.04 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, interruption of electrical power or other utilities, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable to the other for any damages resulting from such failure to perform or otherwise from such causes. 14.05 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any act or failure to act hereunder as contemplated by this Agreement. 14.06 In order that the indemnification provisions contained in this Article 14 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking the indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent, which consent shall not be unreasonably withheld. ARTICLE 15. Covenants of the Company and FSSI 15.01 The Company shall promptly furnish to FSSI the following: (a) A certified copy of the resolution of the Trustees of the Company authorizing the appointment of FSSI and the execution and delivery of this Agreement. (b) A copy of the charter documents and by-laws of the Company and all amendments thereto. (c) Copies of each resolution of the Trustees of the Company designating authorized persons to give instructions to FSSI, and a Certificate providing specimen signatures for such authorized persons. (d) Certificates as to any change of any Officer or Trustee of the Company. (e) If applicable a specimen of the certificate representing Shares in each Fund of the Company in the form approved by the Trustees, with a Certificate as to such approval. 10 (f) Specimens of all new certificates representing Shares, accompanied by the Trustees' resolutions approving such forms. (g) All account application forms and other documents relating to Shareholder accounts or relating to any plan, program or service offered by the Company. (h) A list of all Shareholders of the Fund(s) with the name, address and tax identification number of each Shareholder, and the number of Shares of the Fund(s) held by each, certificate numbers and denominations (if any certificates have been issued), a list of any accounts against which stops have been placed, together with the reasons for said stops, and the number of Shares redeemed by the Fund(s). (i) An opinion of counsel for the Company with respect to the validity of the issuance of the Shares and the status of the Shares under the Securities Act of 1933. (j) A copy of the Company's registration statement on Form N-1A as amended and declared effective by the Securities and Exchange Commission and all post-effective amendments thereto. (k) Such other certificates, documents or opinions as may mutually be deemed necessary or appropriate for FSSI in the proper performance of its duties. 15.02 FSSI hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Company for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. 15.03 FSSI shall keep records relating to the services performed hereunder, in the form and manner as it may deem acceptable. To the extent required by Section 31 of the 1940 Act and the Rules thereunder, FSSI agrees that all such records prepared or maintained by FSSI relating to the services to be performed by FSSI hereunder are the confidential property of the Company and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered to the Company on and in accordance with its request. 15.04 FSSI and the Company agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation of or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. 15.05 In case of any requests or demands for the inspection of the Shareholder records of the Company, FSSI shall notify the Company and endeavor to secure instructions from an authorized officer of the Company as to such inspection. FSSI reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person. 11 ARTICLE 16. Term of Agreement 16.01 This Agreement shall become effective on the date hereof (the "Effective Date") and shall continue in effect for 24 months from the Effective Date (the "Initial Term") and from year to year thereafter with respect to each Fund, provided that subsequent to the Initial Term, this Agreement may be terminated by either party at any time without payment of any penalty upon 90 days written notice to the other. In the event such notice is given by the Company, it shall be accompanied by a resolution of the Board of Trustees, certified by the Secretary, electing to terminate this Agreement and designating a successor transfer agent. 16.02 Should the Company exercise its right to terminate, the Company must notify FSSI in writing via registered mail. All out-of-pocket and ancillary expenses associated with the movement of records, data, and material will be borne by the Company. Additionally, FSSI reserves the right to withhold records, data, or other material pending receipt of any fees, charges or reimbursements due from the Company. ARTICLE 17. Additional Funds 17.01 In the event that the Company establishes one or more series of Shares in addition to the initial series with respect to which it desires to have FSSI render services as transfer agent under the terms hereof, it shall so notify FSSI in writing, and if FSSI agrees in writing to provide such services, such series of Shares shall become a Fund hereunder. ARTICLE 18. Assignment 18.01 Except as provided in Section 18.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. 18.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 18.03 FSSI may, without further consent on the part of the Company, subcontract for the performance of any of the services to be provided hereunder to third parties, including any affiliate of FSSI, provided that FSSI shall remain liable hereunder for any acts or omissions of any subcontractor as if performed by FSSI. ARTICLE 19. Amendment 19.01 This Agreement may be amended or modified by a written agreement executed by both parties. ARTICLE 20. New York Law to Apply 12 20.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of New York. ARTICLE 21. Merger of Agreement and Severability 21.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. 21.02 In the event any provision of this Agreement shall be held unenforceable or invalid for any reason, the remainder of this Agreement shall remain in full force and effect. 21.03 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. 21.04 The Company agrees that prior to effecting any change in the Prospectus which would increase or alter the duties and obligations of FSSI hereunder, it shall advise FSSI of such proposed change at least 60 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 FSSI thereto. 21.05 Neither party shall have any duties or responsibilities whatsoever 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 any party. ARTICLE 22. Notices 22.01 Any notice or other instrument in writing authorized or required by this Agreement to be given to either party hereto will be sufficiently given if addressed to such party and mailed or delivered to it at its office at the address set forth below: For the Company: Domini Social Equity Fund 6 St. James Avenue, Suite 900 Boston, MA 02116 Attn: President For FSSI: FUNDAMENTAL SHAREHOLDER SERVICES, INC. 90 Washington Street, 19th Floor New York, New York 10006 Attn: President 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf under their seals by and through their duly authorized officers, as of the day and the year first above written. DOMINI SOCIAL EQUITY FUND - --------------------------------------- Name: Date Title: FUNDAMENTAL SHAREHOLDER SERVICES, INC. - --------------------------------------- Name: David P. Wieder Date Title: President DSI206 14 EX-99.B11 5 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS We consent to the use of our reports dated August 25, 1995 on the Domini Social Equity Fund and Domini Social Index Portfolio included herein and to the reference to our firm under the captions "FINANCIAL HIGHLIGHTS" in the prospectus and "INDEPENDENT AUDITORS" and "FINANCIAL STATEMENTS" in the statement of additional information. KPMG Peat Marwick LLP Boston, Massachusetts November 20, 1995 EX-27 6 FINANCIAL DATA SCHEDULE
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE ANNUAL REPORT DATED JULY 31, 1995 FOR THE DOMINI SOCIAL EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT 0000851680 THE DOMINI SOCIAL EQUITY FUND 12-MOS JUL-31-1995 AUG-01-1994 JUL-31-1995 44,243,626 54,002,631 669,071 13,108 0 54,684,810 0 0 47,274 47,274 0 44,590,469 3,679,740 2,585,658 39,069 0 248,993 0 9,759,005 54,637,536 0 902,930 0 187,075 547,376 405,386 8,728,561 9,681,323 0 596,572 224,400 0 1,368,854 322,273 47,501 23,268,247 88,265 67,966 0 0 0 0 414,955 39,600,379 12.13 0.172 2.825 0.195 0.082 0 14.85 0.90 0 0
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