-----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, T2AulN29oZQFaTusGVVEKYyKIefOwiqaa0ddHyugnII8NvCXrGqHiaQr/+SAj4SM EzM2A62AuxEXC6Pn/kopTQ== 0001047469-97-006076.txt : 19971126 0001047469-97-006076.hdr.sgml : 19971126 ACCESSION NUMBER: 0001047469-97-006076 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19971125 EFFECTIVENESS DATE: 19971125 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: SEC FILE NUMBER: 033-29180 FILM NUMBER: 97728211 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-05823 FILM NUMBER: 97728212 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 485BPOS As filed with the Securities and Exchange Commission on November 25, 1997. 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. 11 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 13 DOMINI SOCIAL EQUITY FUND (Exact Name of Registrant as Specified in Charter) 11 West 25th Street, New York, NY 10010 (Address of Principal Executive Offices) Registrant's Telephone Number, including Area Code: 212-352-9200 Amy L. Domini Domini Social Investments LLC 11 West 25th Street New York, NY 10010 (Name and Address of Agent for Service) Copy To Roger P. Joseph, Esq. Bingham Dana LLP 150 Federal Street Boston, Massachusetts 02110 It is proposed that this filing will become effective (check appropriate box) [X] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to paragraph (a)(i) [ ] 75 days after filing pursuant to paragraph (a)(ii) [ ] on (date) pursuant to paragraph (a)(ii) of rule 485. If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. 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 or about September 30, 1997 for Registrant's fiscal year ended July 31, 1997. Domini Social Index Portfolio has also executed this registration statement. 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 Performance Information 4 Front Cover Page; Investment * Objective and Policies 5 The Fund; Management; Manager, * Submanager, Sponsor; 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 Gains Distributions; Tax Matters 7 Purchases and Redemptions of * Shares-Purchases, Automatic Investment Plan, Individual Retirement Accounts; 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, Systematic Withdrawal Plan 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 Objective and Investment Objective, Policies Policies and Restrictions 14 * Management of the Fund and the Portfolio- Trustees of the Fund and the Portfolio, Officers 15 * Management of the Fund and the Portfolio- Trustees of the Fund and the Portfolio, Officers 16 Other Information Concerning * Shares of the Fund-Expenses Management of the Fund- Management of the Fund Administrator, Sponsor and the Portfolio- Manager and Submanager, Sponsor Purchases and Redemptions of Management of the Fund Shares-Distribution Plan and and the Portfolio- Agreement Distributor Service Organizations, Transfer Management of the Fund Agent and Custodian-Transfer and Portfolio; Transfer Agent and Custodian; Back Cover Agent, Custodian and Page Service Organizations; Independent Auditors; Back Cover Page * Management of the Fund and the Portfolio- Distributor 17 * Portfolio Transactions and Brokerage Commissions 18 Other Information Concerning Description of Shares, Shares of the Fund-Description Voting Rights and of Shares, Voting Rights and Liabilities Liabilities 19 Purchases and Redemptions of Management of the Fund Shares; Other Information and the Portfolio- Concerning Shares of the Fund- Transfer Agent, Net Asset Value Custodian and Service Organizations 20 Tax Matters Taxation 21 * Management of the Fund and the Portfolio- Distributor 22 Performance Information 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 26, 1997 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 400 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 400 Social IndexSM.
TABLE OF CONTENTS PAGE - ----------------------------------------------------------------------------------------- ----- Investment in the Fund................................................................... 2 The Fund................................................................................. 2 Expense Summary.......................................................................... 3 Financial Highlights..................................................................... 5 Performance Information.................................................................. 6 Investment Objective and Policies........................................................ 6 Management............................................................................... 12 Purchases and Redemptions of Shares...................................................... 13 Tax Matters.............................................................................. 17 Other Information Concerning Shares of the Fund.......................................... 17 Service Organizations, Transfer Agent and Custodian...................................... 21
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 manager of the Portfolio is Domini Social Investments, LLC. The investment submanager of the Portfolio is Mellon Equity Associates. The sponsor of the Fund is Domini Social Investments LLC and the distributor of the Fund 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 400 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 ("SEC") a Statement of Additional Information, dated November 26, 1997, 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 ("SAI") without charge by contacting the distributor (see back cover for address and phone number). THE SEC MAINTAINS A WEBSITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE SAI, MATERIAL INCORPORATED BY REFERENCE, AND OTHER INFORMATION REGARDING THE FUND AND THE PORTFOLIO. UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN THE PORTFOLIO. THE FUND INVESTS IN THE PORTFOLIO THROUGH A TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE "SPECIAL INFORMATION CONCERNING THE MASTER-FEEDER INVESTMENT FUND STRUCTURE" HEREIN. INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE. INVESTMENT IN THE FUND The Fund seeks to provide its shareholders with long-term total return which corresponds to the total return performance of the Domini 400 Social IndexSM, an index comprised of stocks selected according to social criteria. The Fund may be appropriate, therefore, for investors who are willing to ride out stock market fluctuations in pursuit of long-term returns. Because the Fund seeks to track, rather than exceed, the performance of a particular index, the Fund is not managed in the same way as other mutual funds. In particular, the manager generally does not judge the merits of any particular stock as an investment. Therefore, investors should not expect to achieve the potentially greater results that could be obtained by a fund that aggressively seeks growth. The value of an investment in the Fund varies from day to day, generally reflecting changes in the financial condition of the companies in which the Portfolio invests, general market conditions and political and economic factors. Stock prices can fluctuate dramatically in response to these and other factors or speculation about these factors. Over the long term, stocks have generally shown greater growth potential than other types of securities. However, when you sell your Fund shares, they may be worth more or less than what you paid for them. Potential investors should note that because the Portfolio seeks to be fully invested in the stocks comprising the Domini 400 Social IndexSM, the Fund is not a balanced investment plan. Potential investors should also note that the manager of the Portfolio, Domini Social Investments LLC, has no prior experience in managing or advising a mutual fund. You should carefully consider your investment objectives and risk tolerance before making a decision to invest in the Fund. 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" or the "Distributor") receives 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 the Distributor. The minimum initial investment is $1,000, except that the minimum initial investment for an investor investing through an automatic investment plan is $500 and 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. Domini Social Investments LLC ("DSIL") is the Portfolio's manager (the "Manager") and provides investment supervisory and administrative services to the Portfolio. Mellon Equity Associates ("Mellon Equity") is the Portfolio's investment submanager (the "Submanager"). DSIL is also the sponsor ("Sponsor") of the Fund and provides administrative services to the Fund. 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 2 "interested persons" as defined in the 1940 Act (the "Independent Trustees") of the Fund, are the same as the Independent Trustees of the Portfolio. A majority of the Fund's Trustees are not affiliated with the Manager or the Submanager. 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. Kinder, Lydenberg, Domini & Co., Inc. ("KLD"), the former investment adviser of the Portfolio and an affiliate of DSIL, determines the composition of the Domini 400 Social IndexSM (which determines the composition of the Portfolio's securities). The following persons are primarily responsible for the development and maintenance of the Domini 400 Social IndexSM: Steven D. Lydenberg, Director of Research, KLD, since 1990; and Peter D. Kinder, President, KLD, since 1988. The Submanager manages the investments of the Portfolio from day to day in accordance with the Portfolio's investment objective and policies. 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................................ 0.154%(1) 12b-1 Fees.................................................. 0.120%(2) Other Expenses -- Administrative Services and Sponsorship Fees........... 0.423%(3) -- Other Expenses......................................... 0.283% ----- Total Operating Expenses.................................... 0.980%(4)(5) ----- -----
- ------------------------ (1) Under the Management Agreement between the Portfolio and DSIL, DSIL's fee for advisory and administrative services to the Portfolio is 0.20% of the average daily net assets of the Portfolio but will be reduced to the extent necessary to keep the aggregate annual operating expenses of the Portfolio (excluding brokerage fees and commissions, interest, taxes and other extraordinary expenses) at no greater than 0.20% of the average daily net assets of the Portfolio, through October 22, 1998. If this fee reduction were not in effect, advisory and management fees for the Portfolio would be 0.20% of the average daily net assets of the Portfolio. (2) The percentage represents actual expenditures, expressed as a percentage of average daily net assets, under the Fund's Distribution Plan during the fiscal year ended July 31, 1997. The Distribution Plan permits reimbursement for expenses incurred by the Distributor of up to 0.25% of the Fund's average daily net assets. See "Other Information Concerning Shares of the Fund -- Distribution Plan and Agreement. (3) Under the Sponsorship Agreement between DSIL and the Fund, DSIL's fee for administrative and sponsorship services is 0.50% of the average daily net assets of the Fund but will be reduced to the extent necessary to keep the aggregate annual operating expenses of the Fund (including the Fund's share of the Portfolio's expenses but excluding brokerage fees and commissions, interest, 3 taxes and other extraordinary expenses) at no greater than 0.98% of the average daily net assets of the Fund through October 22, 1998. If this fee reduction were not in effect, administrative services and sponsorship fees for the Fund would be 0.50% of the average daily net assets of the Fund. (4) Other Expenses and Total Operating Expenses do not reflect either the payment to Signature by the Fund of $550,000 in connection with termination of the expense payment arrangements with Signature or other expenses incurred by the Fund in connection with the termination of such arrangements. Had such nonrecurring expenses been included, Other Expenses and Total Operating Expenses would be 0.793% and 1.49%, respectively. (5) Without the automatic fee reductions, which expire October 22, 1998, it is estimated that the aggregate annual operating expenses of the Fund (including the Fund's share of the Portfolio's expenses) would be 1.103% of the average daily net assets of the Fund assuming the same level of assets and expenses of the Fund as existed during the fiscal year ended July 31, 1997. The expense information in the expense table provided above has been restated to reflect fees currently in effect. The purpose of the expense table is to help investors understand the various costs and expenses that a shareholder will bear directly or indirectly. Without the expense payment plan, historical operating expenses expressed as a ratio of the Fund's average net assets would have been 0.84% for the fiscal year ended July 31, 1997. See "Management" and "Other Information Concerning Shares of the Fund--Expenses" for more information with respect to the expenses of the Fund and the Portfolio. EXAMPLE: A shareholder of the Fund would pay the following expenses on a $1,000 investment in the Fund, assuming (1) 5% annual return and (2) redemption at the end of: 1 year.......................................................... $ 10 3 years......................................................... $ 31 5 years......................................................... $ 54 10 years......................................................... $ 120
The Fund pays a distribution fee at an annual rate of up to 0.25% of the Fund's average daily net assets in reimbursement of, or in anticipation of, expenses incurred by the Distributor in connection with the sale of shares of the Fund. Long-term shareholders may pay more than the economic equivalent of the maximum distribution charges permitted by the National Association of Securities Dealers, Inc. The Fund may pay fees to Service Organizations (as defined below) in amounts up to an annual rate of 0.25% of the daily net asset value of shares of the Fund owned by shareholders with whom the Service Organization has a servicing relationship. See "Other Information Concerning Shares of the Fund -- Distribution Plan and Agreement" and "Service Organizations, Transfer Agent and Custodian". 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 manager and an investment submanager and invested directly in the types of securities being held by the Portfolio. 4 FINANCIAL HIGHLIGHTS The following selected data for a share outstanding for the indicated periods has been audited by KPMG Peat Marwick LLP, independent auditors, whose report thereon is incorporated by reference in the Statement of Additional Information. This information should be read in conjunction with the financial statements incorporated by reference 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, 1997, 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 ---------------------------------------------------------------- 1997 1996 1995 1994 ------------- ------------- ------------- ------------- Net asset value, beginning of period.............. $ 16.70 $ 14.85 $ 12.13 $ 12.00 ------------- ------------- ------------- ------------- Income from investment operations: Net investment income........................... 0.11 0.16 0.17 0.17 Net realized and unrealized gain (loss) on investments.................................... 8.85 1.93 2.83 0.18 ------------- ------------- ------------- ------------- Total from investment operations.................. 8.96 2.09 3.00 0.35 ------------- ------------- ------------- ------------- Less distributions and dividends: Dividends to shareholders from net investment income......................................... (0.11) (0.16) (0.20) (0.15) Distributions to shareholders from net realized gain........................................... (0.12) (0.08) (0.08) (0.07) ------------- ------------- ------------- ------------- Total distributions............................... (0.23) (0.24) (0.28) (0.22) ------------- ------------- ------------- ------------- Net asset value, end of period.................... $ 25.43 $ 16.70 $ 14.85 $ 12.13 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Ratios/supplemental data: Total return.................................... 54.01% 14.11% 25.10% 2.90% Net assets, end of period (in 000's)............ $212,310 $80,915 $54,638 $31,369 Ratio of expenses to average net assets......... 0.98%(1) 0.98%(1) 0.90%(2) 0.75%(2) Ratio of net investment income to average net assets......................................... 0.62%(1) 1.01%(1) 1.38%(2) 1.67%(2) FOR THE PERIOD AUGUST 10, 1990 TO JULY 31, 1993 1992 1991 ------------- ------------- --------------- Net asset value, beginning of period.............. $ 11.06 $ 9.95 $ 10.00 ------------- ------------- ------- Income from investment operations: Net investment income........................... 0.14 0.12 0.02 Net realized and unrealized gain (loss) on investments.................................... 0.97 1.10 (0.07) ------------- ------------- ------- Total from investment operations.................. 1.11 1.22 (0.05) ------------- ------------- ------- Less distributions and dividends: Dividends to shareholders from net investment income......................................... (0.15) (0.11) -- Distributions to shareholders from net realized gain........................................... (0.02) -- -- ------------- ------------- ------- Total distributions............................... (0.17) (0.11) -- ------------- ------------- ------- Net asset value, end of period.................... $ 12.00 $ 11.06 $ 9.95 ------------- ------------- ------- ------------- ------------- ------- Ratios/supplemental data: Total return.................................... 10.00% 12.30% (0.50)% Net assets, end of period (in 000's)............ $17,229 $ 7,174 $1,740 Ratio of expenses to average net assets......... 0.75%(2) 0.75%(2) 0.75%(3) Ratio of net investment income to average net assets......................................... 1.41%(2) 1.53%(2) 1.49%(3)
- ------------------------------ (1) Had the expense payment agreement not been in place the ratio of net investment income and expenses to average net assets for the years ended July 31, 1997 and 1996, would have been 0.76% and 0.84%, and 0.92% and 1.07%, respectively. (2) Reflects a voluntary waiver of fees by Signature and KLD due to limitations set forth in an expense payment agreement. Had Signature and KLD not waived their fees, the ratios of net investment income and expenses to average net assets for the years ended July 31, 1995, 1994 and 1993 would have been 1.13% and 1.15%, 1.39% and 1.03% and 1.26% and 0.90%, respectively. (3) Annualized. 5 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 table that follows sets forth average annual total return information for the periods indicated
7/31/97 9/30/97 ----------- ----------- 1 Year:.................................................................... 54.01% 40.16% 5 Years:................................................................... 20.01% 19.80% Commencement of Investment in the Portfolio* to date....................... 18.16% 17.46%
* The Fund commenced investment in the Portfolio on June 3, 1991. 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 Morningstar, Inc. and may compare its performance to that of the Domini 400 Social IndexSM 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-Registered Trademark-", "S&P-Registered Trademark-" and "Standard & Poor's 500-Registered Trademark-" 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 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 400 Social IndexSM (referred to herein as the "Index" or the "Domini Social Index"). There can, of course, be no assurance that the Fund will achieve its investment objective. The investment objective of the Fund may be changed without approval by the Fund's shareholders. 6 INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by investing all of its investable assets in the Portfolio, which has the same investment objective as the Fund. The Portfolio seeks to achieve its investment objective by investing substantially all of its assets in the common stocks comprising the Domini Social Index. The Portfolio will approximate the weightings of securities held by the Portfolio to the weightings of the stocks in the Index, except as described below, and will seek a correlation between the weightings of securities held by the Portfolio and the weightings of the stocks in the Index of 0.95 or better. A figure of 1.0 would indicate a perfect correlation. As of September 30, 1997, the correlation between the weightings of securities held by the Portfolio and the weightings of the stocks in the Index was .99. To the extent practicable, the Portfolio will attempt to be fully invested. The ability of the Fund to duplicate the performance of the 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 Index to the extent practicable, but this will result in brokerage expenses. SOCIAL CRITERIA -- The Domini Social Index was developed and is currently maintained by KLD. The Index is a common stock index comprised of the stocks of approximately 400 companies which meet certain social criteria. The weightings of the stocks compromising the Index are based upon market capitalization. The criteria used in developing and maintaining the Index involve the subjective judgment of KLD. KLD, based on available data, seeks to exclude the following types of companies: firms that derive more than 2% of their gross revenues from the sale of military weapons; firms that derive any revenues from the manufacture of tobacco products or alcoholic beverages; firms that derive any revenues from gambling enterprises; and firms that have an ownership share in, or operate, nuclear power plants, or participate in businesses related to the nuclear fuel cycle. KLD also considers criteria such as corporate citizenship, employee relations, environmental performance, and product-related issues when evaluating stocks for inclusion in the Index. The corporate citizenship criteria include a company's record with regard to its philanthropic activities and its community relations in general. The employee relations criteria include a company's record with regard to labor matters, workplace safety, equal employment opportunity, employee benefit programs, and meaningful participation in company profits either through stock purchase or profit sharing plans. The environmental performance criteria include a company's record with regard to fines or penalties, waste disposal, toxic emissions, efforts in waste reduction and emissions reduction, recycling, and environmentally beneficial fuels, products and services. The product-related criteria include a company's record with regard to product safety, marketing practices, and commitment to quality. The Manager intends to vote proxies of companies included in the Portfolio consistent with the social criteria used in developing and maintaining the Domini Social Index. INDEX MANAGEMENT -- The Portfolio is not managed in the traditional investment sense, since changes in the composition of its securities holdings are made in order to track the changes in the composition of securities included in the Domini Social Index. Moreover, inclusion of a stock in the Index does not imply an opinion by KLD or the Manager as to the merits of that specific stock as an investment. However, KLD and the Manager believe that enterprises which exhibit a social awareness, based on the criteria described above, should be better prepared to meet future societal needs for goods and services and may also be less likely to incur certain legal liabilities that may be incurred when a product or service is determined to be harmful, and that such enterprises should over the longer term be able to provide a positive return to investors. 7 In selecting stocks for inclusion in the Domini Social Index: 1. KLD evaluated, in accordance with the social criteria described above, each of the companies the stocks of which comprise the S&P 500. If a company whose stock was included in the S&P 500 met KLD's social criteria and met KLD's further criteria for industry diversification, financial solvency, market capitalization, and minimal portfolio turnover, it was included in the Domini Social Index. As of July 31, 1997, of the 500 companies whose stocks comprised the S&P 500, approximately 50% were included in the Index. 2. The remaining stocks comprising the Domini Social Index (I.E., those which are not included in the S&P 500) were selected based upon KLD's evaluation of the social criteria described above, as well as upon KLD's criteria for industry diversification, financial solvency, market capitalization, and minimal portfolio turnover. Because of the social criteria applied in the selection of stocks comprising the Index, industry sector weighting in the Index may vary materially from the industry weightings in other stock indices, including the S&P 500, and certain industry sectors will be excluded altogether. The component stocks of the S&P 500 are chosen by Standard & Poor's Corporation ("S&P") solely with the aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the New York Stock Exchange common stock population, taken as the assumed model for the composition of the total market. Construction of the S&P 500 by S&P proceeds from industry groups to the whole. Since some industries are characterized by companies of relatively small stock capitalization, the S&P 500 does not comprise the 500 largest companies listed on the New York Stock Exchange. Not all stocks included in the S&P 500 are listed on the New York Stock Exchange. However, the total market value of the S&P 500 as of July 31, 1997 represented 79.6% of the aggregate market value of common stocks traded on the New York Stock Exchange. Inclusion of a stock in the S&P 500 in no way implies an opinion by S&P as to its attractiveness as an investment, nor is S&P a sponsor of or otherwise affiliated with the Fund or the Portfolio. Some of the stocks included in the Domini Social Index may be stocks of foreign issuers (provided that the stocks are traded in the United States in the form of American Depositary Receipts or similar instruments the market for which is denominated in United States dollars). Securities of foreign issuers may represent a greater degree of risk (I.E., as a result of exchange rate fluctuation, tax provisions, war or expropriation) than do securities of domestic issuers. The weightings of stocks in the Domini Social Index are based on each stock's relative total market capitalization, (I.E., market price per share times the number of shares outstanding). Because of this weighting, as of July 31, 1997 approximately 43% of the Index was comprised of the 20% largest companies in the Index. KLD may exclude from the Domini Social Index stocks issued by companies which are in bankruptcy or whose bankruptcy KLD believes may be imminent. The Portfolio intends to readjust its securities holdings periodically such that those holdings will correspond, to the extent reasonably practicable, to the Domini Social Index both in terms of composition and weighting. The timing and extent of adjustments in the holdings of the Portfolio, and the extent of the correlation of the holdings of the Portfolio with the Index, will reflect the Submanager's judgment as 8 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 Fund shares. To the extent practicable, the Portfolio will seek a correlation between the weightings of securities held by the Portfolio to the weightings of the securities in the Index and will seek to match, before expenses, a correlation between the performance of the Fund and the performance of the Index of 0.95 or better. The Board of Trustees of the Portfolio will receive and review, at least quarterly, a report prepared by the Submanager comparing the performance of the Fund and the Portfolio with that of the 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 or the correlation between the performance of the Fund, before expenses, and the performance of the Index falls below 0.95, the Board of Trustees will review with the Submanager methods for increasing such correlation, such as through adjustments in securities holdings of the Portfolio. The Portfolio may invest cash reserves in short-term debt securities (I.E., securities having a remaining maturity of one year or less) issued by agencies or instrumentalities of the United States Government, bankers' acceptances, commercial paper or certificates of deposit, provided that the issuer satisfies certain social criteria. The Portfolio does not currently intend to invest in direct obligations of the United States Government. Short-term debt securities purchased by the Portfolio will be rated at least Prime-1 by Moody's Investors Service, Inc. or A-1+ or A-1 by S&P or, if not rated, determined to be of comparable quality by the Portfolio's Board of Trustees. The Portfolio's policy is to hold its assets in such securities pending readjustment of its portfolio holdings of stocks comprising the Domini Social Index and in order to meet anticipated redemption requests. Such investments are not intended to be used for defensive purposes in periods of anticipated market decline. The annual portfolio turnover rates of the Portfolio for the fiscal years ended July 31, 1996 and July 31, 1997 were 5% and 1%, respectively. The Portfolio's average brokerage commission rates paid per share for the fiscal years ended July 31, 1996 and July 31, 1997 were $0.05 and $0.05, 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 Manager, the Submanager or the Sponsor or any of their respective affiliates or any affiliate of the Fund or the Portfolio. For further discussion regarding securities trading by the Portfolio, see the Statement of Additional Information. Consistent with applicable regulatory policies, including those of the Board of 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 consisting of securities, 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 three 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 9 cash collateral. The Portfolio may pay finder's and other fees in connection with securities loans. Loans of securities involve a risk that the borrower may fail to return the securities or may fail to provide additional collateral. Although it has no current intention to do so, the Portfolio may make short sales of securities or maintain a short position, if at all times when a short position is open the Portfolio owns an equal amount of such securities, or securities convertible into such securities. SPECIAL INFORMATION CONCERNING THE MASTER FEEDER INVESTMENT FUND STRUCTURE Unlike other mutual funds which directly acquire and manage their own portfolio securities, the 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 Fund should be aware that these differences may result in differences in returns experienced by investors in the different funds that invest in the Portfolio. Such differences in returns are also present in other mutual fund structures. Information concerning other holders of interests in the Portfolio is available from the Manager at 212-352-9200. 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 10 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 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 manager and investment submanager, 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. 11 Expenses of the Portfolio with respect to investment management and administrative services, investment submanagement services and sponsorship services are described herein under "Management -- Manager, -- Submanager, and - -- Sponsor", 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 DSIL as Sponsor, but has not retained the services of an investment manager or investment submanager since the Fund seeks to achieve its investment objective by investing all of its investable assets in the Portfolio. The Portfolio has retained the services of DSIL as investment manager and Mellon Equity as investment submanager. MANAGER DSIL, a Massachusetts limited liability company, provides investment management and administrative services to the Portfolio pursuant to a Management Agreement. DSIL has been registered as an investment adviser under the Investment Advisers Act of 1940 since 1997. The services provided by the Manager consist of investment supervisory services, overall operational support and administrative services. The administrative services include the provision of general office facilities and supervising the overall administration of the Portfolio. For its services under the Management Agreement, the Manager receives from the Portfolio a fee accrued daily and paid monthly at an annual rate equal to 0.20% of the Portfolio's average daily net assets, on an annualized basis for the Portfolio's then-current fiscal year, subject to reduction. See "Expenses" for a description of this fee reduction pursuant to the Management Agreement. Prior to October 22, 1997, KLD, as the Portfolio's former investment adviser, received from the Portfolio a fee accrued daily and paid monthly at an annual rate equal to 0.025% of the Portfolio's average daily net assets, on an annualized basis for the Portfolio's then-current fiscal year. Additionally, prior to October 22, 1997, KLD received from the Portfolio a fee accrued daily and paid monthly at an annual rate equal to 0.025% of the average daily net assets of the Portfolio for its then current fiscal year for administrative services. "DominiSM" and "Domini 400 Social IndexSM" are service marks of KLD which are licensed to DSIL with the consent of Amy L. Domini. Pursuant to agreements among DSIL, Amy L. Domini, and each of the Fund and the Portfolio, the Portfolio may be required to discontinue use of these service marks if DSIL ceases to be the Manager of the Portfolio or Ms. Domini withdraws her consent, and the Fund may be required to discontinue the use of these service marks if either DSIL ceases to be the Sponsor of the Fund or Ms. Domini withdraws her consent or if either DSIL ceases to be the Manager of the Portfolio or the Fund ceases to invest all of its assets in the Portfolio. SUBMANAGER Mellon Equity provides investment submanagement services to the Portfolio on a day-to-day basis pursuant to a Submanagement Agreement with DSIL. Mellon Equity does not determine the composition of the Domini Social Index. 12 Under the Submanagement Agreement, DSIL pays Mellon Equity an investment submanagement fee equal on an annual basis to 0.10% of the average daily net assets of the Portfolio. Prior to October 22, 1997, the Portfolio paid Mellon Equity an investment management fee equal on an annual basis to 0.10% of the average daily net assets of the Portfolio. Mellon Equity is a Pennsylvania business trust founded in 1987 whose beneficial owners are Mellon Bank N.A. and MMIP, Inc (a wholly owned subsidiary of Mellon Bank Corporation ("Mellon Bank")), and with its principal offices at 500 Grant Street, Pittsburgh, PA 15258-0001. Mellon Equity has been registered as an investment adviser under the Investment Advisers Act of 1940 since 1986. Prior to 1987, the Submanager was part of the Equity Management Group of Mellon Bank's Trust and Investment Department, which managed domestic equity, tax-exempt and institutional pension assets since 1947. As of December 31, 1996, the Submanager had approximately $11.3 billion in assets under management. John R. O'Toole (a senior vice president of Mellon Equity, CFA and a member of AIMR), has been primarily responsible for the day-to-day portfolio management of the Portfolio since November 1994. He has been employed by Mellon Equity and/or Mellon Bank as a portfolio manager for over five years. SPONSOR Pursuant to a Sponsorship Agreement, DSIL provides the Fund with the administrative personnel and services necessary to operate the Fund. In addition to general administrative services and facilities for the Fund similar to those provided by DSIL to the Portfolio under the Management Agreement, DSIL answers questions from the general public and the media regarding the composition of the Domini Social Index and the securities holdings of the Portfolio. For these services and facilities, DSIL receives fees computed and paid monthly from the Fund at an annual rate equal to 0.50% of the average daily net assets of the Fund for the Fund's then-current fiscal year, subject to reduction. See "Expenses" for a description of this fee reduction pursuant to the Sponsorship Agreement. 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 in good order by the Fund provided such order is received on any day the New York Stock Exchange is open for trading (a "Fund Business Day"). The minimum initial investment in the Fund is $1,000, except that the minimum initial investment for an investor who invests through an automatic investment plan is $500 and the minimum initial investment for an IRA is $250. Except as noted below, there is a $50 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. 13 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. Payment by Check: 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 959 New York, New York 10159-0959 Payment by Wire: 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. Shares of the Fund may be purchased by exchanging securities acceptable to the Fund for shares of the Fund. The Fund will not accept a security in exchange for Fund shares unless (a) the security is consistent with the investment objective and policies of the Fund and the Portfolio, and (b) the security is deemed acceptable by the Manager and the Submanager. Securities offered in exchange for shares of the Fund will be valued in accordance with the usual valuation procedure for the Fund. See "Net Asset Value." Investors making purchases through a Service Organization should be aware that it is the responsibility of the Service Organization to transmit orders for purchases of shares by its customers to the Transfer Agent and to deliver required funds on a timely basis, in accordance with the procedures stated above. For further information on how to purchase shares of the Fund, an investor should call 1-800-762-6814. 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. The minimum initial investment for an investor investing through an automatic investment plan is $500. If an Automatic Investment Plan is selected, subsequent investments will be automatic and will continue until such time as the Fund and the 14 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 $50. 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 in good order by the Fund provided such order is received on a Fund Business Day prior to the time at which the net asset value of the Fund is determined. The proceeds of a redemption will be paid by the Fund in federal funds normally on the next Fund Business Day, but in any event within seven days if all checks in payment for the purchase of shares to be redeemed have been cleared by the Fund (which may take up to 15 days). Redemptions may be paid by the Fund by check or by wire transfer if the appropriate box on the Account Application has been completed. Instructions for wire redemptions are set forth in the Account Application. The Fund's Transfer Agent reserves the right to charge for wires. If shares to be redeemed are held in certificate form, the certificates must be mailed to the Fund at the address noted below. Do not sign the certificates and, for protection, use registered mail. 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. To protect you and the Fund against fraud, redemptions exceeding $50,000 (and for all written redemptions, regardless of amount, made within 30 days following any changes in account registration), must be signature guaranteed. You can obtain a signature guarantee from most banks, savings institutions, credit unions, broker-dealers, and other guarantors acceptable to the Fund and its transfer agent. The Fund and its transfer agent cannot accept guarantors from notaries public or organizations that do not provide reimbursement in the case of fraud. The Fund and its transfer agent may, at its option, request further documentation from corporations, executors, administrators, trustees, or guardians. In some cases the Fund may require the furnishing of additional documents. 15 Written requests should be mailed to the Fund at the following address: Domini Social Equity Fund P.O. Box 959 New York, New York 10159-0959 For overnight deliveries, please use the following address: Domini Social Equity Fund 11 W. 25th Street, 7th Floor New York, New York 10010-2001 212-352-9200 An investor may also redeem shares by telephone by calling the Transfer Agent, at 1-800-782-4165, if the appropriate box on the Account Application has been completed. The Fund, Transfer Agent and Distributor will not be liable for any loss, liability, cost or expense for acting upon telephone instructions believed to be genuine. Accordingly, shareholders will bear the risk of loss. The Fund will employ reasonable procedures to confirm that instructions communicated by telephone are genuine, including, without limitation, recording telephone instructions and/or requiring the caller to provide some form of personal identification. Failure to employ reasonable procedures may make the Fund liable for any losses due to unauthorized or fraudulent telephone instructions. The following information must be supplied by the shareholder or broker at the time a request for a telephone redemption is made: (1) the shareholder's account number; (2) the shareholder's social security number; and (3) the name and account number of the shareholder's designated securities dealer or bank. The Fund, Transfer Agent and Distributor reserve the right to refuse wire or telephone redemptions. Procedures for redeeming shares by wire or telephone may be modified or terminated at any time by the Fund or the Distributor. A Service Organization may request a wire redemption provided a Wire Authorization Form is on file with the Fund. The proceeds of a wire redemption will be sent to an account with a Service Organization designated on the appropriate form. 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. 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 16 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 as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Provided the Fund qualifies as a "regulated investment company" under the Code, and distributes all of its net investment income and realized capital gains to shareholders in accordance with the timing requirements imposed by the Code, the Fund will not be required to pay any federal income or excise taxes. The Portfolio will also not be required to pay any federal income or excise taxes. However, shareholders of the Fund normally will have to pay federal income taxes, and any state or local taxes, on distributions of net investment income and net realized capital gains from the Fund. After the end of each calendar year, each shareholder receives information, as required by the Internal Revenue Service, for tax purposes on the distributions received during that calendar year including the portion taxable as ordinary income, the portion taxable as long-term capital gains, the portion, if any, representing a return of capital (which is generally treated as a reduction in basis rather than taxable income) and the amount of dividends eligible for the corporate dividends received deduction. 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 capital gains (I.E., the excess of net long-term capital gains over net short-term capital losses) will cause any short-term capital loss realized on the disposition by a Fund's shareholder of Fund shares held for six or fewer months to be recharacterized, to the extent of those distributions, as long-term capital loss. Under the back-up withholding rules of the Code, certain shareholders may be subject to 31% withholding of federal income tax on distributions and payments made by the Fund. Generally, shareholders are subject to back-up withholding if they have not provided the Fund with a correct taxpayer identification number and certain other certifications. The 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. 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 17 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. 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 (usually 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 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% nondeductible 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 are responsible for all of their respective expenses, including the compensation of their respective Trustees who are not interested persons of the Fund or the Portfolio; governmental fees; interest charges; taxes; membership dues in the Investment Company Institute allocable to the Fund or the Portfolio; fees and expenses of independent auditors, of legal counsel and of 18 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 sponsorship fees payable to the Sponsor; all expenses of distributing and redeeming shares and servicing shareholder accounts; expenses of preparing, printing and mailing prospectuses, reports, notices, proxy statements and reports to shareholders and to governmental offices and commissions; expenses of shareholder meetings; and expenses relating to the issuance, registration and qualification of shares of the Fund and the preparation, printing and mailing of prospectuses for such purposes. Under the Sponsorship Agreement, DSIL's fee will be reduced to the extent necessary to keep the aggregate annual operating expenses of the Fund (including the Fund's share of the Portfolio's expenses but excluding brokerage fees and commissions, interest, taxes and other extraordinary expenses) at no greater than 0.98% of the average daily net assets of the Fund through October 22, 1998. 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 investment management fees payable to the Manager. Under the Management Agreement, DSIL's fee will be reduced to the extent necessary to keep the aggregate annual operating expenses of the Portfolio (excluding brokerage fees and commissions, interest, taxes and other extraordinary expenses) at no greater than 0.20% of the average daily net assets of the Portfolio through October 22, 1998. There is no assurance that DSIL will maintain the fee reductions pursuant to the Management Agreement or the Sponsorship Agreement beyond the specified date. DISTRIBUTION PLAN AND AGREEMENT The Trustees of the Fund have adopted a 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, the Distributor, as the Distributor, acts as agent of the Fund in connection with the offering of shares of the Fund pursuant to a Distribution Agreement. The Distributor, 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, the Distributor 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 the Distributor, advertising expenses and the expenses of printing and distributing prospectuses and reports used for sales purposes, expenses of preparing and printing sales literature and other distribution-related expenses. The Distributor will provide to the Trustees of the Fund a quarterly written report of amounts expended by it under the Distribution Plan and the purposes for which such expenditures were made. 19 DSIL has informed the Fund's Board of Trustees that it, or an affiliate, intends to become qualified as a broker-dealer and transfer agent within the next year. In that event, the Trustees would consider appointing DSIL, or such affiliate, the distributor and/or transfer agent for the Fund. 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 value of each 20 investor's beneficial interest in the Portfolio will be determined by multiplying the net asset value of the Portfolio by the percentage, effective for that day, which represents that investor's share of the aggregate beneficial interests in the Portfolio. Any additions or withdrawals, which are to be effected as of the close of business on that day, will then be effected. The investor's percentage of the aggregate beneficial interests in the Portfolio will then be re-computed as the percentage equal to the fraction (i) the numerator of which is the value of such investor's investment in the Portfolio as of the close of business on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the investor's investment in the Portfolio effected as of the close of business on such day, and (ii) the denominator of which is the aggregate net asset value of the Portfolio as of the close of business on such day plus or minus, as the case may be, the amount of the net additions to or withdrawals from the aggregate investments in the Portfolio by all investors in the Portfolio. The percentage so determined will then be applied to determine the value of the investor's interest in the Portfolio as of the close of business on the following Fund Business Day. SERVICE ORGANIZATIONS, TRANSFER AGENT AND CUSTODIAN SERVICE ORGANIZATIONS The Fund may also contract with various banks, trust companies (other than Mellon Equity), broker-dealers (other than the Distributor) or other financial organizations (collectively, "Service Organizations") to provide 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 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"), 11 West 25th Street, 7th Floor, New York, NY 10010, pursuant to which FSSI acts as Transfer Agent for the Fund. The Transfer Agent maintains an account for each shareholder of the Fund, 21 performs other transfer agency functions and acts as dividend disbursing agent for the Fund. Pursuant to Custodian Agreements, Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116, 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 the Portfolio and the daily net asset value of shares of the Fund. 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, Manager of the Portfolio and Sponsor of the Fund, (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, 1997. 22 [DOMINI LOGO] P.O. BOX 959 NEW YORK, NY 10159-0959 800-782-4165 HTTP://WWW.DOMINI.COM PORTFOLIO INVESTMENT MANAGER CUSTODIAN: AND FUND SPONSOR: Investors Bank & Domini Social Trust Company Investments, LLC Boston, MA 11 West 25th Street, 7th INDEPENDENT AUDITORS: Floor KPMG Peat Marwick LLP New York, NY 10010 Boston, MA PORTFOLIO INVESTMENT SUBMANAGER: LEGAL COUNSEL: Mellon Equity Associates Bingham Dana LLP Pittsburgh, PA Boston, MA DISTRIBUTOR: TRANSFER AGENT: Signature Broker-Dealer FSSI Services, Inc. New York, NY 6 St. James Avenue Boston, MA 02116 800-762-6814
- -------------------------------------------------------- DOMINI SOCIAL EQUITY FUND PROSPECTUS --------------------------------------- November 26, 1997 INVESTING FOR GOOD SM M PRINTED ON RECYCLED PAPER WITH SOY INK Cusip: 257132100 STATEMENT OF ADDITIONAL INFORMATION November 26, 1997 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 15 7. Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8. Portfolio Transactions and Brokerage Commissions. . . . . . . . . . . . . 17 9. Description of Shares, Voting Rights and Liabilities . . . . . . . . . . 19 10. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 20 DOMINI SOCIAL EQUITY FUND 11 West 25th Street, New York, New York 10010 (800) 782-4165 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 26, 1997, 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. Domini Social Investments LLC ("DSIL") the Fund's sponsor (the "Sponsor"), 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 Broker-Dealer Services, Inc. ("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 and the minimum initial investment for investors who invest through an automatic investment plan is $500. 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. DSIL is the Portfolio's investment manager (the "Manager"). Mellon Equity Associates ("Mellon Equity") is the Portfolio's investment submanager (the "Submanager"). Kinder, Lydenberg, Domini & Co., Inc. ("KLD") determines the composition of the Domini 400 Social IndexSM. The Submanager manages the investments of the Portfolio from day to day in accordance with the Portfolio's investment objective and policies. "DominiSM" and "Domini 400 Social IndexSM" are service marks of KLD. 2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS INVESTMENT OBJECTIVE The investment objective of the Fund is to provide its shareholders with long-term total return (reflecting both dividend and price performance of the Fund) which corresponds to the performance of the Domini 400 Social IndexSM (referred to herein as the "Index" or the "Domini Social Index"). There can, of course, be no assurance that the Fund will achieve its investment objective. The investment objective of the Fund may be changed without approval by the Fund's shareholders. INVESTMENT POLICIES The Fund seeks to achieve its investment objective by investing all 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 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. 2 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 Index, industry sector weighting in the Index may vary materially from the industry weightings in other stock indices, including the S&P 500. With respect to stocks of foreign issuers, 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 three business days; (3) the Portfolio will receive any interest or dividends paid on the securities loaned; and (4) the aggregate market value of securities loaned will not at any time exceed 30% of the total assets of the Portfolio. The Portfolio will earn income for lending its securities either in the form of fees received from the borrower of the securities or in connection with the investment of cash collateral in short-term money market instruments. Loans of securities involve a risk that the borrower may fail to return the securities or may fail to provide additional collateral. In connection with lending securities, the Portfolio may pay reasonable finders, administrative and custodial fees. No such fees will be paid to any person if it or any of its affiliates is affiliated with the Portfolio, the Manager or the Submanager. Although the Portfolio reserves the right to lend its securities, it has no current intention of doing so in the foreseeable future. RISK FACTORS INVOLVED IN OPTION CONTRACTS: Although it has no current intention to do so, the Portfolio may in the future enter into certain transactions in stock options for the purpose of hedging against possible increases in the value of securities which are expected to be purchased by the Portfolio or possible declines 3 in the value of securities which are expected to be sold by the Portfolio. Generally, the Portfolio would only enter into such transactions on a short-term basis pending readjustment of its holdings of underlying stocks. The purchase of an option on an equity security provides the holder with the right, but not the obligation, to purchase the underlying security, in the case of a call option, or to sell the underlying security, in the case of a put option, for a fixed price at any time up to a stated expiration date. The holder is required to pay a non-refundable premium, which represents the purchase price of the option. The holder of an option can lose the entire amount of the premium, plus related transaction costs, but not more. Upon exercise of the option, the holder is required to pay the purchase price of the underlying security in the case of a call option, or deliver the security in return for the purchase price in the case of a put option. Prior to exercise or expiration, an option position may be terminated only by entering into a closing purchase or sale transaction. This requires a secondary market on the exchange on which the position was originally established. While the Portfolio would establish an option position only if there appears to be a liquid secondary market therefor, there can be no assurance that such a market will exist for any particular option contract at any specific time. In that event, it may not be possible to close out a position held by the Portfolio, and the Portfolio could be required to purchase or sell the instrument underlying an option, make or receive a cash settlement or meet ongoing variation margin requirements. The inability to close out option positions also could have an adverse impact on the Portfolio's ability effectively to hedge its portfolio. Each exchange on which option contracts are traded has established a number of limitations governing the maximum number of positions which may be held by a trader, whether acting alone or in concert with others. The Manager does not believe that these trading and position limits would have an adverse impact on the possible use of hedging strategies by the Portfolio. ------------ The approval of the Fund and of the other investors in the Portfolio is not required to change the investment objective or any of the non-fundamental investment policies discussed above, including those concerning security transactions. INVESTMENT RESTRICTIONS The 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 voting securities" 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, 4 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); (2) purchase any security or evidence of interest therein on margin, except that either the Fund or the Portfolio may obtain such short-term credit as may be necessary for the clearance of purchases and sales of securities and except that either the Fund or the Portfolio may make deposits of initial deposit and variation margin in connection with the purchase, ownership, holding or sale of options; (3) write any put or call option or any combination thereof, provided that this shall not prevent (i) the purchase, ownership, holding or sale of warrants where the grantor of the warrants is the issuer of the underlying securities, or (ii) the purchase, ownership, holding or sale of options on securities; (4) underwrite securities issued by other persons, except that the Fund may invest all or any portion of its assets in the Portfolio and except insofar as either the Fund or the Portfolio may technically be deemed an underwriter under the 1933 Act in selling a security; (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; 5 (9) issue any senior security (as that term is defined in the 1940 Act) if such issuance is specifically prohibited by the 1940 Act or the rules and regulations promulgated thereunder, except as appropriate to evidence a debt incurred without violating paragraph (1) above; (10) as to 75% of its assets, purchase securities of any issuer if such purchase at the time thereof would cause more than 5% of the Portfolio's or the Fund's, as applicable, assets (taken at market value) to be invested in the securities of such issuer (other than securities or obligations issued or guaranteed by the United States or any agency or instrumentality of the United States), except that for purposes of this restriction the issuer of an option shall not be deemed to be the issuer of the security or securities underlying such contract and except that the Fund may invest all or any portion of its assets in the Portfolio; or (11) invest more than 25% of its assets in any one industry unless the stocks in a single industry were to comprise more than 25% of the Domini Social Index, in which case the Portfolio or the Fund, as applicable, will invest more than 25% of its assets in that industry, and except that the Fund may invest all of its assets in the Portfolio. NON-FUNDAMENTAL RESTRICTIONS: In order to comply with certain federal statutes and regulatory policies, neither the Fund nor the Portfolio will as a matter of operating policy: (i) purchase the securities of any registered investment company (except for the Fund's investment in the Portfolio) if such purchase at the time thereof would cause more than 10% of the total assets of the Fund or the Portfolio, respectively (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 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; or 6 (ii) purchase puts, calls, straddles, spreads and any combination thereof if the value of its aggregate investment in such securities will exceed 5% of the Fund's or the Portfolio's total assets at the time of such purchase. Restrictions (i) and (ii) 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. 7 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. 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. 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 Index weighted in accordance with the weightings of the stocks comprising the Index. Performance information with respect to the 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, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day). This determination of net asset value of shares of the Fund is made once during each such day as of the close of the NYSE by dividing the value of the Fund's net assets (i.e., the value of its investment in the Portfolio and any other assets less its liabilities, including expenses payable or accrued) by the number of shares outstanding at the time the determination is made. Purchases and redemptions will be effected at the time of determination of net asset value next following the receipt of any purchase or redemption order deemed to be in good order. See "Purchases and Redemptions of Shares" in the Prospectus. The value of the Portfolio's net assets (i.e., the value of its securities and other assets less its liabilities, 8 including expenses payable or accrued) is determined at the same time and on the same day as the Fund determines its net asset value per share. The net asset value of the Fund's investment in the Portfolio is equal to the Fund's pro rata share of the total investment of the Fund and of other investors in the Portfolio less the Fund's pro rata share of the Portfolio's liabilities. Equity securities held by the Portfolio are valued at the last sale price on the exchange on which they are primarily traded or on the NASDAQ system for unlisted national market issues, or at the last quoted bid price for securities in which there were no sales during the day or for unlisted securities not reported on the NASDAQ system. If the Portfolio purchases option contracts, such option contracts which are traded on commodities or securities exchanges are normally valued at the settlement price on the exchange on which they are traded. Short-term obligations with remaining maturities of less than sixty days are valued at amortized cost, which constitutes fair value as determined by the Board of Trustees of the Portfolio. Portfolio securities (other than short-term obligations with remaining maturities of less than sixty days) for which there are no such quotations or valuations are valued at fair value as determined in good faith by or at the direction of the Portfolio's Board of Trustees. A determination of value used in calculating net asset value must be a fair value determination made in good faith utilizing procedures approved by the Portfolio's Board of Trustees. While no single standard for determining fair value exists, as a general rule, the current fair value of a security would appear to be the amount which the Portfolio could expect to receive upon its current sale. Some, but not necessarily all, of the general factors which may be considered in determining fair value include: (i) the fundamental analytical data relating to the investment; (ii) the nature and duration of restrictions on disposition of the securities; and (iii) an evaluation of the forces which influence the market in which these securities are purchased and sold. Without limiting or including all of the specific factors which may be considered in determining fair value, some of the specific factors include: type of security, financial statements of the issuer, cost at date of purchase, size of holding, discount from market value, value of unrestricted securities of the same class at the time of purchase, special reports prepared by analysts, information as to any transactions or offers with respect to the security, existence of merger proposals or tender offers affecting the security, price and extent of public trading in similar securities of the issuer or comparable companies, and other relevant matters. 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 officer is 11 West 25th Street, New York, New York 10010. TRUSTEES OF THE FUND AND THE PORTFOLIO EMILY W. CARD -- 1223 Wilshire Boulevard, No. 334, Santa Monica, California 90403; Attorney; President, The Card Group, Inc; Trustee, Domini Institutional Trust. Her date of birth is May 8, 1942. AMY L. DOMINI* -- 230 Congress Street, Boston, Massachusetts 02110; Chair, President and Trustee of the Fund, Portfolio and Domini Institutional Trust; Manager of DSI; Officer of Kinder, Lydenberg, Domini & Co., Inc.; Private Trustee, Loring, Wolcott & Coolidge; Trustee, Episcopal Church Pension Fund; Former Member, Governing Board, Interfaith Center on Corporate Responsibility, Former Trustee, National Association Community Loan Funds. Her date of birth is January 15, 1950. 9 ALLEN M. MAYES -- P.O. Box 21222, Beaumont, Texas 77720; Trustee, Domini Institutional Trust; Retired Senior Associate General Secretary of the General Board of Pensions of the United Methodist Church, Director of Ministerial Services, Texas Annual Conference, The United Methodist Church; Former Member of the Board of Directors of Investor Responsibility Research Center; Member of Board of Trustees of Wiley College. His date of birth is September 20, 1920. WILLIAM C. OSBORN -- 115 Buckminster Road, Brookline, Massachusetts 02146; Manager, Venture Investment Management Company LLC; Trustee, Domini Institutional Trust; Vice President and General Manager, TravElectric Services Corp (prior to 1995); President, Environmental Technologies [Packaging] (prior to 1993); Director, Evergreen Solar, Inc; Director, Conservation Services Group. His date of birth is July 7, 1944. KAREN PAUL -- 4050 Park Avenue, Miami, Florida 33133; Associate Dean and Professor of Business Environment, Florida International University; Trustee, Domini Institutional Trust. Her date of birth is September 23, 1944. TIMOTHY SMITH -- 475 Riverside Drive, New York, New York 10115; Executive Director, Interfaith Center on Corporate Responsibility; Trustee, Calvert New Africa Fund; Trustee, Domini Institutional Trust. His date of birth is September 15, 1943. FREDERICK C. WILLIAMSON -- Five Roger Williams Green, Providence, Rhode Island 02904; Treasurer and Trustee, RIGHA (charitable foundation supporting health care needs); Chairman, Rhode Island Historical Preservation and Heritage Commission; Trustee, National Parks and Conservation Commission; Trustee, Domini Institutional Trust. His date of birth is September 20, 1914. Beginning with the current fiscal year, each Trustee receives an annual retainer for serving as a Trustee of the Fund, the Portfolio and the Domini Institutional Trust of $4,000, and in addition, receives $500 for attendance at each joint meeting of the Boards of the Fund, the Portfolio and the Domini Institutional Trust (reduced to $250 in the event that a Trustee participates at an in-person meeting by telephone), such retainer and fees in no event to exceed in the aggregate $6,000 per year. In addition, each Trustee receives reimbursement for reasonable expenses incurred in attending meetings. The compensation paid to the Trustees for the fiscal year ended July 31, 1997 is set forth below. The Trustees may hold various other directorships unrelated to the Fund or Portfolio.
PENSION OR RETIREMENT BENEFITS TOTAL AGGREGATE ACCRUED AS COMPENSATION COMPENSATION PART OF FROM THE FROM THE FUND ANNUAL BENEFITS FUND, PORTFOLIO AND FUND EXPENSES UPON RETIREMENT DOMINI INSTITUTIONAL TRUST Amy L. Domini*, None None None None Chair, President and Trustee Emily W. Card, $1,600 None None $1,805 Trustee Karen Paul, $1,800 None None $2,005 Trustee William C. Osborn, $1,800 None None $2,005 Trustee Allen M. Mayes, None None None $2,400 Trustee Timothy Smith, $55 None None $2,455 Trustee Frederick C. Williamson, Sr., $55 None None $2,455 Trustee
OFFICERS PETER D. KINDER* -- Vice President of the Fund and the Portfolio; President of Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social Investments LLC (since 1997). 10 STEVEN D. LYDENBERG* -- Vice President of the Fund and the Portfolio; Director of Research of Kinder, Lydenberg, Domini & Co., Inc.; Member, Domini Social Investments LLC (since 1997). DAVID P. WIEDER* -- Vice President of the Fund and the Portfolio (since 1997); Chief Executive Officer and Member, Domini Social Investments LLC (since 1997); President of Fundamental Shareholder Services, Inc.; Vice-President of investment companies within Fundamental Family of Funds (1989-1997); Vice-President of Fundamental Portfolio Advisors (1991-1997). SIGWARD M. MOSER* -- Vice President of the Fund and the Portfolio (since 1997); President of Communications House International, Inc.; Director of Financial Communications Society; President and Member, Domini Social Investments LLC (since 1997). CAROLE M. LAIBLE* -- Secretary and Treasurer of the Fund and the Portfolio (since 1997); Financial Compliance Officer of Domini Social Investments LLC (since 1997); Financial Compliance Officer, Fundamental Shareholder Services, Inc. (1994-1997); Financial Compliance Officer and Secretary of investment companies within Fundamental Family of Funds (1994-1997); General Service Manager, McGladrey & Pullen LLP (certified public accountants) prior to 1994. As of November 20, 1997, all Trustees and officers of the Fund and the Portfolio as a group owned less than 1% of the Fund's outstanding shares. 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. 101 Montgomery Street, San Francisco, CA 94104 (as a nominee on behalf of its customers), 2,808,900.843 shares (27.2%); WEA Tax Sheltered Annuity Trust, 45 Nob Hill Road, Madison, WI 53713, 783,570.940 shares (7.6%) (the Fund has no knowledge as to the beneficial ownership of these shares). 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 Trustees who are not "interested persons" (the "Disinterested Trustees") of the Fund as defined by the 1940 Act are the same as the Disinterested Trustees of the Portfolio. A majority of the Disinterested Trustees have adopted written procedures reasonably appropriate to deal with potential conflicts of interest arising from the fact that the same individuals are Trustees of the Fund and the Portfolio, up to and including creating a separate board of Trustees. Any conflict of interest between the Fund and the Portfolio will be resolved by the Trustees in accordance with their fiduciary obligations and in accordance with the 1940 Act. 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. MANAGER AND SUBMANAGER DSIL provides advice to the Portfolio pursuant to a Management Agreement (the "Management Agreement"). The services provided by the Manager consist of furnishing continuously an investment program for the Portfolio. DSIL will have authority to determine from time to time what securities are purchased, sold or exchanged, and what portion of assets of the Portfolio is held uninvested. DSIL will also perform such administrative and management tasks as may from time to time be reasonably requested, including: (i) maintaining office facilities and furnishing clerical services necessary for maintaining the organization of the Portfolio and for performing administrative and management functions; (ii) supervising the overall administration of the Portfolio, including negotiation of contracts and fees with and monitoring of performance 11 and billings of the Portfolio's transfer agent, shareholder servicing agents, custodian and other independent contractors or agents; (iii) overseeing (with the advice of Portfolio's counsel) the preparation of and, if applicable, filing all documents required for compliance by the Portfolio with applicable laws and regulations, including registration statements, prospectuses and statements of additional information, semi-annual and annual reports to shareholders, proxy statements and tax returns; (iv) preparing agendas and supporting documents for and minutes of meetings of Trustees, committees of Trustees and shareholders; and (v) arranging for maintenance of the books and records of the Portfolio. The Manager furnishes at its own expense all facilities and personnel necessary in connection with providing these services. The Management Agreement will continue in effect if such continuance is specifically approved at least annually by the Portfolio's Board of Trustees or by a majority of the outstanding voting securities of the Portfolio at a meeting called for the purpose of voting on the Management Agreement (with the vote of each investor in the Portfolio being in proportion to the amount of its 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. DSIL may employ, at its own expense, or may request that the Portfolio employ (subject to the requirements of the 1940 Act) one or more subadvisers or submanagers, subject to DSIL's supervision. The Management 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 outstanding voting securities in the Portfolio (with the vote of each investor in the Portfolio being in proportion to the amount of its investment) or by a vote of a majority of its Board of Trustees, or by the Manager, and will automatically terminate in the event of its assignment. The Management Agreement provides that neither the Manager nor its personnel shall be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in its services to the Portfolio, except for wilful misfeasance, bad faith or gross negligence or reckless disregard of its or their obligations and duties under the Management Agreement. The Fund's Prospectus contains a description of fees payable to the Manager for services under the Management Agreement. DSIL is a newly formed Massachusetts limited liability company with offices at 11 West 25th Street, 7th Floor, New York, New York 10010, and is registered as an investment adviser under the Investment Advisers Act of 1940 (the "Advisers Act"). The names of the principal owners of DSIL, their relationship to the Fund and their percentage ownership of DSIL follows: Amy L. Domini, Chairman of the Board and President of the Fund, is the Manager and principal executive officer of DSIL and a 21.55% owner of DSIL. Ms. Domini is also Chief Executive Officer, Secretary, Treasurer and 51% owner of KLD which licenses the Domini Social Index to DSIL. Peter D. Kinder, Vice President of the Fund, is a 21.25% owner of DSIL. Mr. Kinder is also President and 19% owner of KLD. Sigward M. Moser, Vice President of the Fund, is a 21.25% owner of DSIL. David P. Wieder, Vice President of the Fund is a 21.25% owner of DSIL. Mr. Wieder is also President and an owner of Fundamental Shareholder Services, Inc. ("FSSI"), a registered transfer agent which has served as the Fund's transfer agent since 1995. Mellon Equity manages the assets of the Portfolio pursuant to an Investment Submanagement Agreement (the "Submanagement Agreement"). The Submanager furnishes at its own expense all services, facilities and personnel necessary in connection with managing the Portfolio's investments and effecting securities transactions for the Portfolio. The Submanagement Agreement will continue in effect if such continuance is specifically approved at least annually by the Portfolio's Board of Trustees or by a majority vote of the outstanding voting securities in the Portfolio at a meeting called for the purpose of voting on the Submanagement Agreement (with the vote of each being in proportion to the amount of its investment), and, 12 in either case, by a majority of the Portfolio's Trustees who are not parties to the Submanagement Agreement or interested persons of any such party at a meeting called for the purpose of voting on the Submanagement Agreement. The Submanagement Agreement provides that the Submanager may render services to others. The Submanagement Agreement is terminable without penalty upon not more than 60 days' nor less than 30 days' written notice by the Portfolio when authorized either by majority vote of the outstanding voting securities in the 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 with the consent of the Trustees and may be terminated by the Submanager on not less than 90 days' written notice to the Manager and the Trustees, and will automatically terminate in the event of its assignment. The Submanagement Agreement provides that the Submanager shall not 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 Submanagement Agreement. Mellon Equity is a Pennsylvania business trust founded in 1987, which is beneficially owned by Mellon Bank, N.A. (99% beneficial interest) and MMIP (1% beneficial interest), a wholly owned subsidiary of Mellon Bank Corporation ("Mellon Bank"). Mellon Equity is a professional investment counseling firm that provides investment management services to the equity and balanced pension, public fund, and profit-sharing investment management markets, and is a registered investment adviser under the Advisers Act. Mellon Bank's predecessor organization managed domestic equity, tax-exempt and institutional pension accounts since 1947. The address of Mellon Equity and each of the principal executive officers and directors of Mellon Equity is 500 Grant Street, Suite 3700, Pittsburgh, Pennsylvania 15258. The Fund's Prospectus contains a description of fees payable to the Submanager for services under the Submanagement Agreement. Prior to October 22, 1997, pursuant to an investment advisory agreement (the "KLD Advisory Agreement"), KLD served as investment adviser to the Portfolio and furnished continuously an investment program by determining the stocks to be included in the Index. Additionally, prior to October 22, 1997, pursuant to a management agreement (the "Mellon Equity Management Agreement"), Mellon Equity served as investment manager and managed the assets of the Portfolio on a daily basis. Prior to November 21, 1994, pursuant to an investment management agreement (the "State Street Management Agreement"), State Street Bank and Trust Company served as investment manager to the Portfolio. Prior to October 22, 1997, pursuant to a sponsorship agreement (the "KLD Sponsorship Agreement"), KLD furnished administrative services for the Portfolio. Prior to October 22, 1997, pursuant to an administrative services agreement (the "Signature Administration Agreement"), Signature served as the administrator of the Portfolio. Prior to October 22, 1997, the aggregate investment management and administration fees under the prior agreements with respect to the Portfolio were equal to 0.15% of the Portfolio's average daily net assets for its then current fiscal year. For the fiscal year ended July 31, 1997, the Portfolio incurred $46,528 in advisory fees pursuant to the KLD Advisory Agreement, $46,528 in administration fees pursuant to the KLD Sponsorship Agreement and $182,885 in management fees pursuant to the Mellon Equity Management Agreement. For the fiscal year ended July 31, 1996, the Portfolio incurred $38,150 in advisory fees pursuant to the KLD Advisory Agreement, $38,150 in aggregate administration fees pursuant to the Signature Administration Agreement and the KLD Sponsorship Agreement, and $128,901 in management fees pursuant to the Mellon Equity Management Agreement. For the fiscal year ended July 31, 1995, KLD waived all of its fees payable pursuant to the KLD Advisory Agreement, Signature waived all of its fees payable pursuant to the Signature Administration Agreement and the Portfolio incurred $10,180 in management fees pursuant to the State 13 Street Management Agreement and $29,409 in management fees pursuant to the Mellon Equity Management Agreement. SPONSOR Pursuant to a Sponsorship Agreement, DSIL provides the Fund with oversight, administrative and management services. DSIL provides the Fund with general office facilities and supervises the overall administration of the Fund, 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; the preparation and filing of all documents required for compliance by the Fund with applicable laws and regulations, including registration statements, prospectuses and statements of additional information, semi-annual and annual reports to shareholders, proxy statements and tax returns; preparing agendas and supporting documents for and minutes of meetings of Trustees, committees of Trustees and shareholders; maintaining telephone coverage to respond to shareholder inquiries; answering questions from the general public, the media and investors in the Fund regarding the securities holdings of the Portfolio, limits on investment and the Fund's proxy voting philosophy and shareholder activism philosophy; and arranging for the maintenance of books and records of the Fund. The Sponsor provides persons satisfactory to the Board of Trustees of the Fund to serve as officers of the Fund. Such officers, as well as certain other employees and Trustees of the Fund, may be directors, officers or employees of the Sponsor or its affiliates. The Fund's Prospectus contains a description of the fees payable to DSIL by the Fund, as Sponsor of the Fund under the Sponsorship Agreement. Prior to October 22, 1997, Signature served as administrator. For the fiscal year ended July 31, 1995, Signature voluntarily waived all of its administrative services fees from the Fund. For the fiscal years ended July 31, 1996 and 1997, the Fund incurred $73,423 and $156,868, respectively, in administrative fees. The Sponsorship Agreement with the Fund provides that DSI may render administrative services to others. The Sponsorship Agreement with the Fund also provides that neither the Sponsor 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 Sponsorship Agreement. 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 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, 1995, 1996 and 1997, the Fund accrued $36,641, $183,558, and $153,295, respectively, in distribution fees. For the fiscal year ended July 31, 1997, payments pursuant to the Distribution Plan were used for advertising ($56,707), printing and mailing of prospectuses to other than current shareholders ($5,968), compensation to dealers ($42,970), compensation to sales personnel ($29,283), and marketing consulting ($14,656). In addition, $3,711 was paid to service organizations for maintaining shareholder accounts and records. The Distribution Plan will continue in effect indefinitely if such continuance is specifically approved at 14 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 materially amended 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. TRANSFER AGENT, CUSTODIAN AND SERVICE ORGANIZATIONS The Fund has entered into a Transfer Agency Agreement with FSSI pursuant to which FSSI acts as the transfer agent for the Fund. Mr. David P. Wieder, Vice President of the Fund and a principal of DSIL, the Manager of the Portfolio and Sponsor of the Fund, is a 60% owner of, and President of FSSI. For its services to the Fund as transfer agent, FSSI receives compensation on a per account basis plus out-of-pocket expenses. 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 the Distributor) or other financial organizations to provide services for the Fund, such as maintaining shareholder accounts and records. For the fiscal year ended July 31, 1995, the Fund did not accrue any service organization fees. For the fiscal years ended July 31, 1996 and 1997, the Fund accrued $12,526 and $3,711, respectively, in service organization fees. For additional information, see "Service Organizations, Transfer Agent and Custodian--Service Organizations" in the Prospectus. 6. INDEPENDENT AUDITORS KPMG Peat Marwick LLP, 99 High Street, Boston, MA 02110, 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 as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Provided the Fund qualifies as a "regulated investment company" under the Code, and distributes all of its net investment income and net realized capital gains to shareholders in accordance with the timing requirements imposed by the Code, the Fund will not be required to pay any federal income or excise taxes although the Fund's foreign-source income may be subject to foreign withholding 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 15 taxable income and would be required to pay Massachusetts income and excise taxes. Additionally, Fund distributions would generally be taxable as ordinary dividend income to the shareholders. It is assumed that, (1) the Portfolio will be treated for federal income tax purposes as a partnership and (2) for purposes of determining whether the Fund satisfies the income and diversification requirements to maintain its status as a regulated investment company, the Fund, as an investor in the Portfolio, will be deemed to own a proportionate share of the Portfolio's assets and will be deemed to be entitled to the Portfolio's income or loss attributable to that share. The Portfolio has advised the Fund that it intends to conduct its operations so as to enable its investors, including the Fund, to satisfy those requirements. Shareholders of the Fund normally will have to pay federal income taxes, and any state or local taxes, on distributions of net investment income and net realized capital gains from the Fund. Dividends from ordinary income and any distributions from net short-term capital gains are taxable to shareholders as ordinary income for federal income tax purposes, whether the distributions are paid in cash or reinvested in additional shares. A portion of the Fund's distributions from net investment income is normally eligible for the corporate dividends received if the recipient otherwise qualifies for that deduction with respect to its holding of Fund shares. Availability of the deduction for a particular corporate shareholder is subject to certain limitations, and deducted amounts may be subject to the alternative minimum tax and result in certain basis adjustments. Distributions of net capital gains (i.e., the excess of net long-term capital gains over net short-term capital losses), whether paid in cash or reinvested in additional shares, are taxable to shareholders as long-term capital gains for federal income tax purposes without regard to the length of time the shareholders have held their shares. 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. Special tax considerations apply with respect to foreign investments of the Fund. Foreign exchange gains and losses realized by the Fund will generally be treated as ordinary income and losses. Investment income received by the Fund from foreign securities may be subject to foreign income taxes withheld at the source; the Fund does not expect to be able to pass through to shareholders foreign tax credits with respect to such foreign taxes. The United States has entered into tax treaties with many foreign countries that may entitle the Fund to a reduced rate of tax or an exemption from tax on such income; the Fund intends to qualify for treaty reduced rates where available. It is not possible, however, to determine the Fund's effective rate of foreign tax in advance since the amount of the Fund's assets to be invested within various countries is not known. 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 16 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 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 Submanager and who is appointed and supervised by its senior officers. Changes in the Portfolio's investments are reviewed by its Board of Trustees. The portfolio manager of the Portfolio may serve other clients of the Submanager in a similar capacity. The Portfolio's primary consideration in placing securities transactions with broker-dealers for execution is to obtain and maintain the availability of execution at the most favorable prices and in the most effective manner possible. The Submanager attempts to achieve this result by selecting broker-dealers to execute transactions on behalf of the Portfolio and other clients of the Submanager on the basis of their professional capability, the value and quality of their brokerage services, and the level of their brokerage commissions. In the case of securities traded in the over-the-counter market (where no stated commissions are paid but the prices include a dealer's markup or markdown), the Submanager normally seeks to deal directly with the primary market makers, unless in its opinion, best execution is available elsewhere. In the case of securities purchased from underwriters, the cost of such securities generally includes a fixed underwriting commission or concession. From time to time, soliciting dealer fees are available to the Submanager on the tender of the Portfolio's securities in so-called tender or exchange offers. Such soliciting dealer fees are in effect recaptured for the Portfolio by the Submanager. At present no other recapture arrangements are in effect. Consistent with the foregoing primary consideration, the Conduct Rules of the National Association of Securities Dealers, Inc. and such other policies as the Trustees of the Portfolio may determine, the Submanager may consider sales of shares of the Fund and of securities of other investors in the Portfolio as a factor in the selection of broker-dealers to execute the Portfolio's securities transactions. Under the Submanagement Agreement and as permitted by Section 28(e) of the Securities Exchange Act of 1934, the Submanager may cause the Portfolio to pay a broker-dealer acting on an agency basis which provides brokerage and research services to the Submanager or the Manager an amount of commission for effecting a securities transaction for the Portfolio in excess of the amount other broker- dealers would have charged for the transaction if the Submanager determines in good faith that the greater commission is reasonable in relation to the value of the brokerage and research services provided by the 17 executing broker-dealer viewed in terms of either a particular transaction or the Submanager's or the Manager's overall responsibilities to the Portfolio or to its other clients. Not all of such services are useful or of value in advising the Portfolio. The term "brokerage and research services" includes advice as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or of purchasers or sellers of securities; furnishing analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts; and effecting securities transactions and performing functions incidental thereto such as clearance and settlement. However, because of the Portfolio's policy of investing in accordance with the Domini Social Index, the Submanager and the Manager currently intend to make only a limited use of such brokerage and research services. Although commissions paid on every transaction will, in the judgment of the Submanager, be reasonable in relation to the value of the brokerage services provided, commissions exceeding those which another broker might charge may be paid to broker-dealers who were selected to execute transactions on behalf of the Portfolio and the Submanager's or the Manager's other clients, in part for providing advice as to the availability of securities or of purchasers or sellers of securities and services in effecting securities transactions and performing functions incidental thereto such as clearance and settlement. Certain broker-dealers may be willing to furnish statistical, research and other factual information or services to the Submanager or the Manager for no consideration other than brokerage or underwriting commissions. The Submanager and the Manager attempt to evaluate the quality of research provided by brokers. The Submanager and the Manager sometimes use evaluations resulting from this effort as a consideration in the selection of brokers to execute portfolio transactions. However, neither the Submanager nor the Manager is able to quantify the amount of commissions which are paid as a result of such research because a substantial number of transactions are effected through brokers which provide research but which are selected principally because of their execution capabilities. The fees that the Portfolio pays to the Submanager and the Manager will not be reduced as a consequence of the Portfolio's receipt of brokerage and research services. To the extent the Portfolio's securities transactions are used to obtain brokerage and research services, the brokerage commissions paid by the Portfolio will exceed those that might otherwise be paid for such portfolio transactions and research, by an amount which cannot be presently determined. Such services may be useful and of value to the Submanager or the Manager in serving both the Portfolio and other clients and, conversely, such services obtained by the placement of brokerage business of other clients may be useful to the Submanager or the Manager in carrying out its obligations to the Portfolio. While such services are not expected to reduce the expenses of the Submanager or the Manager, the Submanager or the Manager would, through use of the services, avoid the additional expenses which would be incurred if it should attempt to develop comparable information through its own staff. For the fiscal years ended July 31, 1995,1996 and 1997, respectively, the Portfolio paid brokerage commissions of $15,222, $45,017 and $101,639, respectively. In certain instances there may be securities which are suitable for the Portfolio as well as for one or more of the Submanager's or the Manager's other clients. Investment decisions for the Portfolio and for the Submanager's or the Manager's other clients are made with a view to achieving their respective investment objectives. It may develop that a particular security is bought or sold for only one client even though it might be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more clients are selling that same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients 18 are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security as far as the Portfolio is concerned. However, it is believed that the ability of the Portfolio to participate in volume transactions will produce better executions for the Portfolio. 9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES The Fund's Declaration of Trust permits the Fund's Board of Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) and to divide or combine the shares into a greater or lesser number of shares without thereby changing the proportionate beneficial interests in the Fund. Each share represents an equal proportionate interest in the Fund with each other share. Upon liquidation or dissolution of the Fund, the Fund's shareholders are entitled to share pro rata in the Fund's net assets available for distribution to its shareholders. The Fund reserves the right to create and issue a number of series of shares, in which case the shares of each series would participate equally in the earnings, dividends and assets of the particular series (except for any differences among classes of shares of a series). Shares of each series would be entitled to vote separately to approve advisory agreements or changes in investment policy, but shares of all series may vote together in the election or selection of Trustees, principal underwriters and accountants for the Fund. Upon liquidation or dissolution of the Fund, the shareholders of each series would be entitled to share pro rata in the net assets of their respective series available for distribution to shareholders. Shareholders are entitled to one vote for each share held. Shareholders in the Fund do not have cumulative voting rights, and shareholders owning more than 50% of the outstanding shares of the Fund may elect all of the Trustees of the Fund if they choose to do so and in such event the other shareholders in the Fund would not be able to elect any Trustee. The Fund is not required to hold annual meetings of shareholders but the Fund will hold special meetings of shareholders when in the judgment of the Fund's Trustees it is necessary or desirable to submit matters for a shareholder vote. No material amendment may be made to the Fund's Declaration of Trust without the affirmative vote of the holders of a majority of its outstanding shares. Shares have no preference, preemptive, conversion or similar rights. Shares, when issued, are fully paid and non-assessable, except as set forth below. The Fund may enter into a merger or consolidation, or sell all or substantially all of its assets, if approved by the vote of the holders of two-thirds of its outstanding shares, except that if the Trustees of the Fund recommend such sale of assets, the approval by vote of the holders of a majority of the Fund's outstanding shares will be sufficient. The Fund may also be terminated upon liquidation and distribution of its assets, if approved by the vote of the holders of two-thirds of its outstanding shares. If not so terminated, the Fund will continue indefinitely. Stock certificates are issued only upon the written request of a shareholder. The Fund is an entity of the type commonly known as a "Massachusetts business trust". Under Massachusetts law, shareholders of such a business trust may, under certain circumstances, be held personally liable as partners for its obligations and liabilities. However, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of the Fund and provides for indemnification and reimbursement of expenses out of Fund property for any shareholder held personally liable for the obligations of the Fund. The Declaration of Trust also provides that the Fund shall maintain appropriate insurance (for example, fidelity bonding and errors and omissions insurance) 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. 19 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 faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. Each investor in the Portfolio, including the Fund, may add to or reduce its investment in the Portfolio on each Fund Business Day. At the close of each such business day, the value of each investor's interest in the Portfolio will be determined by multiplying the net asset value of the Portfolio by the percentage representing that investor's share of the aggregate beneficial interests in the Portfolio effective for that day. Any additions or withdrawals, which are to be effected as of the close of business on that day, will then be effected. The investor's percentage of the aggregate beneficial interests in the Portfolio will then be re-computed as the percentage equal to the fraction (i) the numerator of which is the value of such investor's investment in the Portfolio as of the close of business on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the investor's investment in the Portfolio effected as of the close of business on such day, and (ii) the denominator of which is the aggregate net asset value of the Portfolio as of the close of business on such day plus or minus, as the case may be, the amount of the net additions to or withdrawals from the aggregate investments in the Portfolio by all investors in the Portfolio. The percentage so determined will then be applied to determine the value of the investor's interest in the Portfolio as of the close of business on the following Fund Business Day. 10. FINANCIAL STATEMENTS The audited financial statements of the Fund and the Portfolio (Statement of Assets and Liabilities at July 31, 1997, Statement of Operations for the year ended July 31, 1997, Statement of Changes in Net Assets for each of the years in the two-year period ended July 31, 1997, Financial Highlights for each of the years in the five-year period ended July 31, 1997, Notes to Financial Statements and Independent Auditors' Report), each of which is included in the Annual Report to Shareholders of the Fund which has been filed with the Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder, are hereby incorporated by reference into this Statement of Additional Information and have been so incorporated in reliance upon the reports of KPMG Peat Marwick LLP, independent auditors, on behalf of the Fund and the Portfolio. A copy of such report will be provided, without charge, to each person receiving this Statement of Additional Information upon request by calling (800) 782-4165. 20 DSI195E PART C Item 24. Financial Statements and Exhibits (a) Financial Statements Financial Statements Included In Part A: Financial Highlights for the period from August 10, 1990 (commencement of operations) to July 31, 1991 and for the years ended July 31, 1992, 1993, 1994, 1995, 1996 and 1997. Financial Statements Incorporated by Reference In Part B: For the Registrant: Statement of Assets and Liabilities at July 31, 1997 Statement of Operations for the year ended July 31, 1997 Statements of Changes in Net Assets for the years ended July 31, 1997 and 1996 Financial Highlights for the years ended July 31, 1993, 1994, 1995, 1996 and 1997. Notes to Financial Statements at July 31, 1997 For Domini Social Index Portfolio: Portfolio of Investments at July 31, 1997 Statement of Assets and Liabilities at July 31, 1997 Statement of Operations for the year ended July 31, 1997 Statement of Changes in Net Assets for the years ended July 31, 1997 and 1996 Financial Highlights for the years ended July 31, 1993, 1994, 1995, 1996 and 1997. Notes to Financial Statements at July 31, 1997 (b) Exhibits 1(a). Amended and Restated Declaration of Trust of the Registrant.5 1(b). Cerfiticate and Amendment No. 2 to Declaration of Trust of the Registrant.8 2. By-Laws of the Registrant, as amended October 6, 1997.8 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. ("SBDS"), 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). Sponsorship Agreement between the Registrant and DSIL, as sponsor.8 11. Consents of KPMG Peat Marwick LLP, independent auditors for the Registrant and Domini Social Index Portfolio.8 13. Copies of investment representation letters from initial shareholders.1 15. Distribution Plan of the Registrant.1 16. Schedule for Calculation of Performance Quotations.2 18. Powers of Attorney.8 27. Financial Data Schedule.8 C-1 1 Incorporated by reference from Pre-Effective Amendment No. 2 to Registrant's Registration Statement (the "Registration Statement") as filed with the Securities and Exchange Commission (the "SEC") on June 7, 1989. 2 Incorporated by reference from Post-Effective Amendment ("PEA") No. 1 to the Registration Statement as filed with the SEC on December 2, 1991. 3 Incorporated by reference from PEA No. 2 to the Registration Statement as filed with the SEC on November 16, 1992. 4 Incorporated by reference from PEA No. 4 to the Registration Statement as filed with the SEC on September 16, 1993. 5 Incorporated by reference from PEA No. 7 to the Registration Statement as filed with the SEC on November 22, 1995. 6 Incorporated by reference from PEA No. 9 to the Registration Statement as filed with the SEC on November 27, 1996. 7 Incorporated by reference from PEA No. 10 to the Registration Statement as filed with the SEC on September 26, 1997. 8 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 October 31, 1997: 7,140 Item 27. Indemnification Reference is hereby made to (a) Article V of the Registrant's Declaration of Trust, filed as an exhibit hereto; (b) Section 4 of the Distribution Agreement by and between the Registrant and SBDS, filed as an exhibit hereto; 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, as amended (the "1940 Act"). Item 28. Business and Other Connections of Investment Adviser Not applicable. Item 29. Principal Underwriters (a) SBDS is the distributor for the Registrant. SBDS and its affiliates serve as the distributor for other registered investment companies. (b) The information required by this Item 29 with respect to each director or officer of SBDS is incorporated herein by reference from Schedule A of Form BD (File No. 8-41134) as filed C-2 by SBDS pursuant to the Securities Exchange Act of 1934. (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: Name: Address: Domini Social Investments LLC 11 W. 25th Street (administrator) New York, NY 10010 Signature Broker-Dealer Services, Inc. 6 St. James Avenue (distributor) Boston, MA 02116 Investors Bank & Trust Company 200 Clarendon Street (custodian) Boston, MA 02116 Fundamental Shareholder Services, Inc. 11 W. 25th Street (transfer agent) New York, NY 10010 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 "1933 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 SEC such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a 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 1933 Act and will be governed by the final adjudication of such issue. (b) The Registrant undertakes to comply with Section 16(c) of the 1940 Act as though such provisions of the 1940 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 C-3 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 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 20th day of November, 1997. DOMINI SOCIAL INDEX PORTFOLIO By: /s/ Amy L. Domini ------------------------------------ Amy L. Domini President of Domini Social Index Portfolio This Post-Effective Amendment to the Registration Statement on Form N-1A of Domini Social Equity Fund has been signed below by the following persons in the capacities indicated below on November 20, 1997. Signature Title --------- ----- /s/ Amy L. Domini - ----------------------------------- Amy L. Domini President (Principal Executive Officer) and Trustee of Domini Social Index Portfolio Carole M. Laible* - ----------------------------------- Carole M. Laible Treasurer (Principal Accounting and Financial Officer) of Domini Social Index Portfolio Emily W. Card* - ----------------------------------- Emily W. Card Trustee of Domini Social Index Portfolio Allen M. Mayes* - ----------------------------------- Allen M. Mayes Trustee of Domini Social Index Portfolio William C. Osborn* - ----------------------------------- William C. Osborn Trustee of Domini Social Index Portfolio Karen Paul* - ----------------------------------- Karen Paul Trustee of Domini Social Index Portfolio Timothy H. Smith* - ----------------------------------- Timothy H. Smith Trustee of Domini Social Index Portfolio Frederick C. Williamson, Sr.* - ----------------------------------- Frederick C. Williamson, Sr. Trustee of Domini Social Index Portfolio *By: /s/ Amy L. Domini ------------------------------- Amy L. Domini Executed by Amy L. Domini on behalf of those indicated pursuant to Powers of Attorney. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that this Post-Effective Amendment to its Registration Statement on Form N-1A meets all of the requirements for effectiveness pursuant to Rule 485(b) under the Securities Act of 1933 and that the Registrant has duly caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston and Commonwealth of Massachusetts on the 20th day of November, 1997. DOMINI SOCIAL EQUITY FUND By: /s/ Amy L. Domini ------------------------------------- Amy L. Domini President Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated below on November 20, 1997. Signature Title --------- ----- /s/ Amy L. Domini - ----------------------------------- Amy L. Domini President (Principal Executive Officer) and Trustee of Domini Social Equity Fund Carole M. Laible* - ----------------------------------- Carole M. Laible Treasurer (Principal Accounting and Financial Officer) of Domini Social Equity Fund Emily W. Card* - ----------------------------------- Emily W. Card Trustee of Domini Social Equity Fund Allen M. Mayes* - ----------------------------------- Allen M. Mayes Trustee of Domini Social Equity Fund William C. Osborn* - ----------------------------------- William C. Osborn Trustee of Domini Social Equity Fund Karen Paul* - ----------------------------------- Karen Paul Trustee of Domini Social Equity Fund Timothy H. Smith* - ----------------------------------- Timothy H. Smith Trustee of Domini Social Equity Fund Frederick C. Williamson, Sr.* - ----------------------------------- Frederick C. Williamson, Sr. Trustee of Domini Social Equity Fund *By: /s/ Amy L. Domini ------------------------------- Amy L. Domini Executed by Amy L. Domini on behalf of those indicated pursuant to Powers of Attorney. INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION OF EXHIBIT EX-27 Financial Data Schedule EX-99.B1(b) Certificate and Amendment No. 2 to Declaration of Trust of the Registrant. EX-99.B2 By-Laws of the Registrant, as amended October 6, 1997. EX-99.B9(b) Sponsorship Agreement between the Registrant and DSIL, as sponsor. EX-99.B11 Consent of KPMG Peat Marwick LLP, independent auditors for the Registrant. EX-99.B18 Powers of Attorney. EX-27 2 EXHIBIT 27 (FDS)
6 This schedule contains summary financial information extracted from annual report dated July 31, 1997 of Domini Social Equity Fund and is qualified in its entirety by reference to such report. 1 DOMINI SOCIAL EQUITY FUND YEAR JUL-31-1997 JUL-31-1997 138,809,921 213,589,722 476,356 0 0 214,066,078 0 0 1,756,486 1,756,486 0 137,170,473 8,349,302 4,844,260 133,474 0 225,844 0 74,779,801 212,309,592 0 0 1,724,923 1,256,840 793,666 313,391 57,365,930 58,472,987 0 734,467 665,632 0 4,298,608 850,791 57,225 131,394,371 74,275 578,085 0 0 0 0 1,256,840 128,639,382 16.70 0.11 8.85 0.11 0.12 0 25.43 0.98 0 0
EX-99.B1(B) 3 EXHIBIT 99.B1(B) CERTIFICATE AND AMENDMENT NO 2 TO DECLARATION OF TRUST OF DOMINI SOCIAL EQUITY TRUST The undersigned, being at least a majority of the Trustees of Domini Social Equity Fund, a Massachusetts business trust (the "Trust"), in accordance with Article IX, Section 9.3(a) of the Trust's Amended and Restated Declaration of Trust dated as of March 1, 1990 (the "Declaration") and pursuant to Article IX, Section 9.3(e) of the Declaration, hereby certify that the following amendment to the Declaration was adopted unanimously by the Trustees of the Trust at a meeting held on June 30, 1997 and duly consented to by the holders of a majority of the Shares (as defined in the Declaration) of the Trust. Capitalized terms in the restated sections have the respective meanings afforded them in the Declaration. Section 2.2 of Article II of the Declaration is restated in its entirety as follows: 2.2. TERM OF OFFICE OF TRUSTEES. A Trustee may be elected either by the Shareholders or, as provided in this Declaration and subject to the limitations of the 1940 Act, by the Trustees. Subject to the provisions of Section 16(a) of the 1940 Act, a Trustee shall hold office during the lifetime of this Trust and until its termination as hereinafter provided or until the election and qualification of his or her successor; 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 from time to time by at least two thirds of the Trustees shall, automatically and without action of such Trustees 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 6.8 of Article IV of the Declaration is restated in its entirety as follows: SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote only (i) for the election and 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 or class 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 or class 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 beneficial owners 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. IN WITNESS WHEREOF, the undersigned have executed this certificate and amendment to the Declaration as of the 22nd day of October, 1997. This instrument may be executed by the Trustees on separate counterparts and shall be effective when signed by a majority of the Trustees. /s/ Emily W. Card /s/ Karen Paul - ----------------------------------- ---------------------------------------- Emily W. Card Karen Paul /s/ Amy L. Domini /s/ Timothy Smith - ----------------------------------- ---------------------------------------- Amy L. Domini Timothy Smith /s/ Allen M. Mayes /s/ Frederick C. Williamson, Sr. - ----------------------------------- ---------------------------------------- Allen M. Mayes Frederick C. Williamson, Sr. /s/ William C. Osborn - ----------------------------------- William C. Osborn EX-99.B2 4 EXHIBIT 99.B2 BY-LAWS ADOPTED 10/6/97 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. ACTION. The Shareholders shall take action by the affirmative vote of the holders of a majority, except in the case of the election of Trustees which shall only require a plurality, of the Shares present and entitled to vote at a meeting of Shareholders at which a quorum is present, except as may be otherwise required by the 1940 Act, or the Declaration of Trust. SECTION 5. PROXY REPRESENTATION AND VOTING. 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. The placing of a Shareholder's name on a proxy pursuant to telephonic or electronically transmitted instructions obtained pursuant to procedures which are reasonably designed to verify that such instructions have been authorized by such Shareholder, shall constitute execution of such proxy by or on behalf of such Shareholder. Pursuant to a vote of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or one or more officers of the Trust or such others persons as the Trustees shall designate. 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 fractions. 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 votes shall not be received in respect of such Share. Any copy, facsimile telecommunication or other reliable reproduction of a proxy may be substituted for or used in lieu of the original proxy for any and all purposes for which the original proxy could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original proxy. 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 2 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. Unless otherwise specifically limited by their terms, proxies shall entitle the holder thereof to vote at any adjournment of a meeting. SECTION 6. 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 7. 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. 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 3 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. 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. 4 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. 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 5 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 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. 6 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. 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; 7 (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. 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 8 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. 9 EX-99.B9(B) 5 EX-99.B9(B) SPONSORSHIP AGREEMENT SPONSORSHIP AGREEMENT, dated as of October 22, 1997, by and between Domini Social Equity Fund, a Massachusetts business trust (the "Trust"), and Domini Social Investments LLC, a Massachusetts limited liability company ("DSI" or the "Sponsor"). W I T N E S S E T H: WHEREAS, the Trust is engaged in business as an open-end investment company registered under the Investment Company Act of 1940, as amended, and consists of one or more series; and WHEREAS, the Trust desires to enter into this Agreement with respect to its current and future series; and WHEREAS, the Trust wishes to engage DSI to provide certain oversight, administrative and management services, and DSI is willing to provide such oversight, administrative and management services to the Trust on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties hereto as herein set forth, the parties covenant and agree as follows: 1. DUTIES OF THE SPONSOR. Subject to the direction and control of the Board of Trustees of the Trust, the Sponsor shall perform such oversight, administrative and management services as may from time to time be reasonably requested by the Trust, which shall include without limitation: (a) maintaining office facilities (which may be in the office of DSI or an affiliate) and furnishing clerical services necessary for maintaining the organization of the Trust and for performing the oversight, administrative and management functions herein set forth; (b) arranging, if desired by the Trust, for directors, officers or employees of the Sponsor to serve as Trustees, officers or agents of the Trust if duly elected or appointed to such positions and subject to their individual consent and to any limitations imposed by law; (c) supervising the overall administration of the Trust, including the updating of corporate organizational documents, and the negotiation of contracts and fees with and the monitoring and coordinating of performance and billings of the Trust's transfer agent, shareholder servicing agents (if any), custodian, administrator, subadministrator (if any) and other independent contractors or agents; (d) overseeing (with advice of the Trust's counsel) the preparation of and, if applicable, filing all documents required for compliance by the Trust with applicable laws and regulations (including state "blue sky" laws and regulations), including registration statements on Form N-1A, prospectuses and statements of additional information, or similar forms, as applicable, semi-annual and annual reports to shareholders and proxy statements, and reviewing tax returns; (e) preparation of agendas and supporting documents for and minutes of meetings of Trustees, committees of Trustees and preparation of notices, proxy statements and minutes of meetings of shareholders; (f) arranging for maintenance of books and records of the Trust; (g) maintaining telephone coverage to respond to shareholder inquiries regarding matters to which this Agreement pertains to which the transfer agent is unable to respond; (h) providing reports and assistance regarding each series' compliance with securities and tax laws and each series' investment objectives; (i) arranging for dissemination of yield and other performance information to newspapers and tracking services; (j) arranging for and preparing annual renewals for fidelity bond and errors and omissions insurance coverage; (k) developing a budget for the Trust, establishing the rate of expense accruals and arranging for the payment of all fixed and management expenses; and (l) answering questions from the general public, the media and investors in the Trust regarding (i) the securities holdings of the Trust; (ii) any limits in which the Trust invests; (iii) the social investment philosophy of the Trust; and (iv) the proxy voting philosophy and shareholder activism philosophy of the Trust. Notwithstanding the foregoing, the Sponsor shall not be deemed to have assumed, pursuant to this Agreement, any duties with respect to, and shall not be responsible for, the management of the Trust's assets or the rendering of investment advice and supervision with respect thereto or the distribution of shares of any series, nor shall the Sponsor be deemed to have assumed or have any responsibility with respect to functions specifically assumed by any transfer agent, custodian, fund accounting pricing agent or shareholder servicing agent of the Trust. 2. ALLOCATION OF CHARGES AND EXPENSES. DSI shall pay the entire salaries and wages of all of the Trust's Trustees, officers and agents who devote part or all of their time to the affairs of DSI or its affiliates, and the wages and salaries of such persons shall not be deemed to be expenses incurred by the Trust for purposes of this Section 2. The Trust shall pay all of its operating expenses, including but not limited to fees due the Sponsor under this Agreement, compensation of Trustees not affiliated with the Sponsor, governmental fees, including but not limited to Securities and Exchange Commission fees and state "blue sky" fees; interest charges; taxes and related charges; membership dues of the Trust in the Investment Company Institute and other professional or industry associations; fees and expenses of the Trust's independent auditors and accountants, of legal counsel and any transfer agent, distributor, shareholder servicing agent, recordkeeper, registrar or dividend disbursing agent of the Trust; expenses of distributing, issuing and redeeming shares and servicing shareholder accounts; expenses of preparing, printing and mailing prospectuses and statements of additional information, reports, notices, proxy statements and reports to shareholders and governmental officers and commissions; expenses connected with the execution, recording and settlement of portfolio security transactions; insurance premiums; fees and expenses of the Trust's custodian for all services to the Trust, including safekeeping of funds and securities and maintaining required books and accounts; expenses of calculating the net asset value of shares of the Trust; expenses of shareholder meetings; and expenses relating to the issuance, registration and qualification of shares of any series of the Trust. 3. COMPENSATION OF THE SPONSOR. For the services to be rendered and facilities to be provided by the Sponsor hereunder, the Trust shall pay DSI a fee accrued daily and payable monthly at an annual rate equal to 0.50% of the Trust's average daily net assets for the Trust's then current fiscal year; provided, however, for a period of one year from the date of this -2- Agreement, the fee payable to DSI shall be the lesser of (i) 0.50% of the Trust's average daily net assets for the Trust's then-current fiscal year and (ii) the percentage obtained by deducting from 0.98%, the Trust's annual operating expenses, including the Trust's allocable share of the operating expenses of the Domini Social Index Portfolio but excluding amounts payable under this Agreement and brokerage fees and commissions, interest, taxes and any other extraordinary expenses of the Trust, expressed as a percentage of the Trust's average daily net assets. If DSI serves as the Sponsor for less than the whole of any period specified in this Section 3, the compensation to DSI, as Sponsor, shall be prorated. For purposes of computing the fees payable to the Sponsor hereunder, the value of the Trust's net assets shall be computed in the manner specified in the Trust's then-current prospectus and statement of additional information. 4. LIMITATION OF LIABILITY OF THE SPONSOR. The Sponsor shall not be liable for any error of judgment or mistake of law or for any act or omission in the oversight, administration or management of the Trust or the performance of its duties hereunder, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of the reckless disregard of its obligations and duties hereunder. As used in this Section 4, the term "Sponsor" shall include DSI and/or any of its affiliates and the directors, officers and employees of DSI and/or any of its affiliates. 5. ACTIVITIES OF THE SPONSOR. The services of the Sponsor to the Trust are not to be deemed to be exclusive, DSI being free to render oversight, administrative and/or other services to other parties. It is understood that Trustees, officers and shareholders of the Trust are or may become interested in the Sponsor and/or any of its affiliates as directors, officers, employees or otherwise and that directors, officers and employees of the Sponsor and/or any of its affiliates are or may become similarly interested in the Trust and that the Sponsor and/or any of its affiliates may be or become interested in the Trust as a shareholder or otherwise. 6. DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This Agreement shall become effective as of the day and year first above written and shall govern the relations between the parties hereto thereafter, unless terminated as set forth in this Section 6. This Agreement may not be altered or amended, except by an instrument in writing and executed by both parties. This Agreement may be terminated at any time, without the payment of any penalty, with respect to any series or the Trust, by the Board of Trustees of the Trust, or by the Sponsor, in each case on not less than 60 days' written notice to the other party. 7. SUBCONTRACTING BY DSI. DSI may subcontract for the performance of some or all of DSI's obligations hereunder with any one or more persons; provided, however, that DSI shall not enter into any such subcontract unless the Trustees of the Trust shall have found the subcontracting party to be qualified to perform the obligations sought to be subcontracted; and provided, further, that, unless the Trust otherwise expressly agrees in writing, DSI shall be as -3- fully responsible to the Trust for the acts and omissions of any subcontractor as it would be for its own acts or omissions. 8. SEVERABILITY. If any provision of this Agreement shall become or shall be found to be invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 9. NOTICE. Any notices under this Agreement shall be in writing addressed and delivered personally, by telecopy or mailed postage-paid to the other party at such address as such other party may designate in accordance with this Section 9 for the receipt of such notice. Until further notice to the other party, it is agreed that the address of the Trust shall be 11 West 25th Street, 7th Floor, New York, New York 10010, and the address of DSI shall be 11 West 25th Street, 7th Floor, New York, New York 10010. 10. MISCELLANEOUS. Each party agrees to perform such further actions and execute such further documents as are necessary to effectuate the purposes hereof. This Agreement shall be construed and enforced and interpreted in accordance with and governed by the laws of the Commonwealth of Massachusetts without reference to principles of conflicts of law. The captions in this Agreement are included for convenience only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. 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. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered in their names and on their behalf by the undersigned, thereunto duly authorized, all as of the day and year first above written. The undersigned Trustee of the Trust has executed this Agreement not individually but as a Trustee under the Trust's Declaration of Trust, dated June 7, 1989, as amended, and the obligations of this Agreement are not binding upon any of the Trustees or shareholders of the Trust individually but bind only the Trust estate. DOMINI SOCIAL EQUITY FUND By /s/ Amy L. Domini ------------------------------------- Amy L. Domini Trustee DOMINI SOCIAL INVESTMENTS LLC -4- By /s/ Amy L. Domini ------------------------------------- Amy L. Domini Manager -5- EX-11 6 EX-11 EXHIBIT B11 CONSENT OF INDEPENDENT AUDITORS The Board of Trustees Domini Social Equity Fund We consent to the use of our report dated September 19, 1997, incorporated herein by reference and to the references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the prospectus and "INDEPENDENT AUDITORS" and "FINANCIAL STATEMENTS" in the statement of additional information included herein. KPMG Peat Marwick LLP Boston Massachusetts November 25, 1997 EXHIBIT B11 CONSENT OF INDEPENDENT AUDITORS The Board of Trustees Domini Social Index Portfolio We consent to the use of our report, dated August 22, 1997, incorporated herein by reference and to the references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the prospectus and "INDEPENDENT AUDITORS" and "FINANCIAL STATEMENTS" in the statement of additional information included herein. KPMG Peat Marwick LLP Boston Massachusetts November 25, 1997 EX-99.B18 7 EX-99.B18 POWER OF ATTORNEY The undersigned hereby constitutes and appoints Amy L. Domini, Peter D. Kinder, and Steven D. Lyndenberg and each of them, with full powers of substitution as her true and lawful attorneys and agents to execute in her name and on her behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as her own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 19th day of November, 1997. /s/ Carole M. Laible ---------------------------------------- Carole M. Laible POWER OF ATTORNEY The undersigned hereby constitutes and appoints Amy L. Domini, Peter D. Kinder, Steven D. Lyndenberg, John R. Elder, Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of substitution as her true and lawful attorneys and agents to execute in her name and on her behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as her own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 22nd day of October, 1997. /s/ Emily W. Card ---------------------------------------- Emily W. Card POWER OF ATTORNEY The undersigned hereby constitutes and appoints Peter D. Kinder, Steven D. Lyndenberg, John R. Elder, Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of substitution as her true and lawful attorneys and agents to execute in her name and on her behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as her own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 22nd day of October, 1997. /s/ Amy L. Domini ---------------------------------------- Amy L. Domini POWER OF ATTORNEY The undersigned hereby constitutes and appoints Amy L. Domini, Peter D. Kinder, Steven D. Lyndenberg, John R. Elder, Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of substitution as his true and lawful attorneys and agents to execute in his name and on his behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as his own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 22nd day of October, 1997. /s/ Allen M. Mayes ---------------------------------------- Allen M. Mayes POWER OF ATTORNEY The undersigned hereby constitutes and appoints Amy L. Domini, Peter D. Kinder, Steven D. Lyndenberg, John R. Elder, Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of substitution as his true and lawful attorneys and agents to execute in his name and on his behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as his own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 22nd day of October, 1997. /s/ William C. Osborn ---------------------------------------- William C. Osborn POWER OF ATTORNEY The undersigned hereby constitutes and appoints Amy L. Domini, Peter D. Kinder, Steven D. Lyndenberg, John R. Elder, Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of substitution as her true and lawful attorneys and agents to execute in her name and on her behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as her own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 22nd day of October, 1997. /s/ Karen Paul ---------------------------------------- Karen Paul POWER OF ATTORNEY The undersigned hereby constitutes and appoints Amy L. Domini, Peter D. Kinder, Steven D. Lyndenberg, John R. Elder, Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of substitution as his true and lawful attorneys and agents to execute in his name and on his behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as his own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 22nd day of October, 1997. /s/ Timothy Smith ---------------------------------------- Timothy Smith POWER OF ATTORNEY The undersigned hereby constitutes and appoints Amy L. Domini, Peter D. Kinder, Steven D. Lyndenberg, John R. Elder, Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of substitution as his true and lawful attorneys and agents to execute in his name and on his behalf in any and all capacities the Registration Statements on Form N-1A, and any and all amendments thereto, filed by Domini Social Equity Fund, Domini Institutional Trust, DEVCAP Trust, and Green Century Funds (each, a "Trust"), or the Registration Statement(s), and any and all amendments thereto, filed by any other investor (collectively with each Trust, the "Investors") in Domini Social Index Portfolio (the "Portfolio") (insofar as each of the Investors invests all its assets in the Portfolio), with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and/or the Securities Act of 1933, as amended, and any and all instruments which such attorneys and agents, or any of them, deem necessary or advisable to enable any of the Investors or the Portfolio, as applicable, to comply with such Acts, the rules, regulations and requirements of the Securities and Exchange Commission, and the securities or Blue Sky laws of any state or other jurisdiction, and the undersigned hereby ratifies and confirms as his own act and deed any and all acts that such attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. Any one of such attorneys and agents have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the 22nd day of October, 1997. /s/ Frederick C. Williamson, Sr. ---------------------------------------- Frederick C. Williamson, Sr. -----END PRIVACY-ENHANCED MESSAGE-----