Bingham McCutchen LLP
150 Federal Street
Boston, MA 02110
May 17, 2005
VIA EDGAR
Division of Investment Management
Securities and Exchange Commission
901 E Street, N.W.
Washington, D.C. 20004
Attn.: Ms. Patricia Williams
Re: Domini Social Investment Trust
File Nos. 33-29180 and 811-05823
Dear Ms. Williams:
This letter is in response to your comments made during a call with me on
May 12, 2005 regarding the Proxy Statement for the Domini Social Bond Fund (the
"Fund"). Your comments and the Fund's responses are set forth below.
1. PART 3. THE PROPOSALS. INVESTMENT ADVISORY FEES. The third paragraph of
this section provides that, if the shareholders approve of the submanagement
agreement, Domini Social Investments LLC (the "Manager") will pay Seix Advisers
(the "Submanager") the amount that would have been payable had the new
submanagement agreement been in effect during the interim period. You asked
whether this arrangement is permitted under Rule 15a-4(b)(1)(i) of the 1940 Act.
RESPONSE: The Fund believes that the terms of the submanagement agreement
that are in effect prior to shareholder approval of the agreement comply with
the requirements of Rule 15a-4(b)(1)(i).
Rule 15a-4(b)(1)(i) of the 1940 Act provides that, in the case of the
termination of a previous advisory contract by the Board of Trustees, the
compensation to be received under an interim advisory contract cannot be greater
than the compensation that would have been payable under the previous advisory
contract. The submanagement agreement between the Manager and the Submanager
provides that for the period from March 1, 2005 (the date of the agreement) to
but not including July 29, 2005 (the 150th day after the date of the agreement)
or, if earlier, the date on which the agreement is approved by the shareholders
of the Fund, the Manager will pay to the Submanager, out of the management fee
it receives from the Fund, a subadvisory fee at an annual rate equal to 0.20% of
the average daily net assets of the Fund. As required under Rule 15a-4(b)(1)(i),
this compensation is no greater than what was paid to the previous submanager
under the submanagement agreement that had been approved by a majority of the
Fund's outstanding voting securities.
As disclosed in the proxy statement, the Submanager proposes to provide
services to the Fund on a different fee schedule than what was in place with the
previous submanager. Under the terms of the submanagement agreement, the
different fee schedule only goes into effect from and after the date of the
shareholders' approval of such agreement. Likewise, the Manager (and not the
Fund) has agreed to pay the Submanager the amount that would have been payable
had the new submanagement agreement been in effect during the interim period,
but only if the submanagement agreement is approved by the Fund's shareholders.
The payment of such amount by the Manager is included in the submanagement
agreement that the shareholders are being asked to approve. Disclosure regarding
such payment is included in the proxy statement so that Fund shareholders are
able to consider such payment in deciding whether to approve the submanagement
agreement. The Fund does not believe that the payment of this amount by the
Manager, after the approval of such payment by the shareholders of the Fund,
violates Rule 15a-4(b)(1)(i) of the 1940 Act.
2. PART 3. THE PROPOSALS. THE EVALUATION BY THE BOARD OF TRUSTEES. You
referred to Item 22(c)(11) of Schedule 14A and ask that the Fund describe with
more specificity the factors considered by the Trustees in approving of the new
submanagement agreement.
RESPONSE: The discussion of the Board of Trustees' evaluation of the new
submanagement agreement has been revised as requested. Please see the attached
changed pages.
3. PART 4. INFORMATION REGARDING THE FUND. ANNUAL REPORT. You asked that the
paragraph regarding the availability of the annual and semi-annual reports be
presented in bold.
RESPONSE: The paragraph will be presented in bold. Please see the attached.
We hope that this letter addresses your comments with respect to the Proxy
Statement. If you should have any further questions, please do not hesitate to
contact me at 617-951-8760.
Sincerely,
/s/ Toby R. Serkin
Toby R. Serkin
Attachments
cc: Carole M. Laible
Roger P. Joseph
[COMMENT 2]
THE EVALUATION BY THE BOARD OF TRUSTEES
The Board of Trustees of the Fund terminated the ShoreBank Submanagement
Agreement and approved the Seix Advisors Submanagement Agreement at a meeting
held on January 28, 2005.
Before terminating the ShoreBank Submanagement Agreement, the Board of
Trustees of the Fund reviewed with Domini its recommendation that ShoreBank be
terminated as the submanager of the Fund. Domini reviewed ShoreBank's fees in
comparison to the fee rates proposed by Seix Advisors. Domini also reviewed the
services that ShoreBank provided to the Fund in comparison to the services
proposed to be provided by Seix Advisors. The Board considered Domini's long and
collegial relationship with ShoreBank. However, the Fund was ShoreBank's only
mutual fund client, and as assets grew, Domini and ShoreBank came to the mutual
recognition that the Fund's shareholders would be best served by an investment
adviser managing other mutual funds.
The Board of Trustees then reviewed Domini's procedure for selecting a new
submanager for the Fund. The Board of Trustees noted that Domini had conducted
an extensive due diligence process with respect to seven candidates for the
submanager position. This due diligence process involved a review of extensive
questionnaires completed by submanager candidates, a review of publicly
available filings and disciplinary records of each candidate, and in-person
meetings to evaluate the quality of services and capability of each candidate.
This due diligence process resulted in Domini's recommendation of Seix Advisors
as submanager to the Domini Social Bond Fund. The Board of Trustees concluded
that Domini had reviewed a sufficient pool of potential submanager candidates
and had conducted an adequate due diligence process.
The Board of Trustees then met with a representative of Seix Advisors. The
Trustees considered information with respect to Seix Advisors and whether the
Seix Advisors Submanagement Agreement was in the best interests of the Fund and
its shareholders. The Trustees considered the nature and quality of services
expected to be provided by Seix Advisors. They noted that Seix Advisors had over
$23 billion in fixed-income assets under management and reviewed a list of
representative clients. The Trustees also reviewed and discussed information
regarding Seix Advisors' knowledge and experience in managing fixed-income
portfolios. The Trustees noted that the senior portfolio manager who would be
responsible for the management of the Fund had over 23 years of experience in
the investment management field, and that there was an experienced team of
investment management professionals supporting the senior portfolio manager. The
Trustees noted that there had been nearly no portfolio manager turnover at Seix
Advisors since the inception of the firm. In evaluating Seix Advisors' ability
to provide services to the Fund, the Trustees considered additional information
as to Seix Advisors' business organization, financial resources, personnel,
technology systems, and other matters. The Trustees concluded that Seix Advisors
had the capability to provide solid and consistent investment management
services with an experienced and dedicated team of management professionals.
The Trustees also reviewed the investment performance of Seix Advisors'
investment-grade fixed-income composite and compared this investment performance
with that of the Fund's benchmark index. The Trustees considered that the
returns of the composite were higher than the returns of both the Fund and the
Fund's benchmark, the Lehman Brothers Intermediate Aggregate Index (LBIA), for
the years ended December 31, 2003 and 2004. The Trustees also noted that the
average annual total returns of the composite compared favorably with those of
the Fund and the LBIA for the one and two year periods ending December 31, 2004.
The Trustees considered that the performance of the composite slightly lagged
the performance of the Fund and the LBIA for the years ended December 31, 2002
and 2001 but determined that the amount of such underperformance was not
significant. The Trustees also compared the performance of the Seix Advisors'
composite with the performance information provided by the other investment
managers considered by Domini and determined that the composite's performance
was consistent with the performance of the other candidates. The Trustees
concluded that the investment performance of the Seix Advisors' composite was
consistent and reasonable in relation to the historic performance of the Fund
and the Fund's benchmark index. The Trustees also considered Seix Advisors'
trading capabilities and reviewed its systems for executing the Fund's trades
with broker-dealers. Although performance was a factor considered in the
selection of a submanager, past performance is not indicative of future results,
and performance over the benchmark and peers cannot be guaranteed.
The Trustees also reviewed the investment management fees proposed by Seix
Advisors. The Trustees compared the investment management fees proposed by Seix
Advisors with those proposed by other investment managers and the fees charged
by ShoreBank. They noted that the fees proposed by Seix Advisors as well as the
fees proposed by the other investment managers were higher than the fees paid to
ShoreBank. The Trustees noted that, because as manager, Domini pays the
submanager, Domini would bear the higher investment management fees charged by
Seix Advisors. The Trustees also considered that the fees proposed by Seix
Advisers generally were either lower than those proposed by other investment
managers or contained a more favorable breakpoint schedule than those proposed
by other managers. They considered carefully the few instances where the fees
proposed by other investment managers were slightly lower than those proposed by
Seix Advisors, and determined, based on the nature and quality of the services
to be provided by Seix Advisors, that the fees proposed by Seix Advisors were
reasonable in relation to the other proposals received. The Trustees noted that
they would consider the profits realized by Seix Advisors and its affiliates in
providing services to the Fund when they considered whether to approve the
continuance of the agreement.
The Trustees reviewed the compliance policies and procedures of Seix
Advisors as well as biographical information about the Chief Compliance Officer
of Trusco and supporting compliance department personnel. They noted that Seix
Advisors had a clean disciplinary record and had systems in place in order to
identify potential compliance issues. In particular, they noted that Seix
Advisors had an automated guideline compliance system in place that would assist
in preventing violations of the Fund's investment objectives and policies.
In addition, the Trustees reviewed Seix Advisors' social profile, including
its experience with managing socially screened accounts, the diversity of its
management team and employees, and its commitment to community development. The
Trustees noted that Seix Advisors managed approximately $5 billion in assets for
clients with a variety of social standards. The Trustees considered that Seix
Advisors was founded by a Hispanic female, Christina Seix, and that the firm
demonstrated a commitment to diversity in its workforce. The Trustees also
reviewed SunTrust's activities in community-focused lending.
Based upon its review, the Board of Trustees concluded the following:
o Seix Advisors had demonstrated the ability to manage socially screened
accounts, trade efficiently, and provide the information and analyses
needed by Domini.
o The terms of the Seix Advisors Submanagement Agreement were
reasonable, fair, and in the best interests of the Fund and its
shareholders.
o The fees provided in the Seix Advisors Submanagement Agreement were
fair and reasonable in light of the usual and customary charges made
for services of the same nature and quality.
Accordingly, after consideration of the above factors, and such other
factors and information as it deemed relevant, the Board of Trustees terminated
the ShoreBank Submanagement Agreement and approved the Seix Advisors
Submanagement Agreement. The Seix Advisors Submanagement Agreement went into
effect on March 1, 2005.
[COMMENT 3]
PART 4. INFORMATION REGARDING THE FUND.
ANNUAL REPORT
EACH OF THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED JULY 31, 2004,
INCLUDING AUDITED FINANCIAL STATEMENTS, AND THE FUND'S SEMI-ANNUAL REPORT FOR
THE PERIOD ENDED JANUARY 31, 2005 HAS PREVIOUSLY BEEN SENT TO SHAREHOLDERS. BOTH
REPORTS ARE AVAILABLE WITHOUT CHARGE BY WRITTEN REQUEST TO DOMINI SOCIAL
INVESTMENTS, P.O. BOX 9785, PROVIDENCE, RI 02940-9785, BY CALLING DOMINI AT
1-800-582-6757, OR BY DOWNLOADING THE REPORTS FROM OUR WEBSITE AT
WWW.DOMINI.COM.
ADDITIONAL INFORMATION
The Fund is a series of Domini Social Investment Trust (the "Trust"), a
diversified, open-end registered investment company organized as a Massachusetts
business trust under a Second Amended and Restated Declaration of Trust dated as
of May 15, 2001. The Fund was designated as a separate series of the Trust on
January 20, 2000. The mailing address of the Trust is 536 Broadway, 7th Floor,
New York, New York 10012.
The Fund's distributor is DSIL Investment Services LLC, 536 Broadway, 7th
Floor, New York, New York 10012. PFPC Inc. acts as transfer agent and dividend
disbursing agent for the Fund. The principal business address of PFPC Inc. is
4400 Computer Drive, Westborough, Massachusetts 01581. Investors Bank & Trust
Company ("IBT") acts as the custodian for the Fund. IBT's principal business
address is 200 Clarendon Street, Boston, Massachusetts 02116.
To keep the Fund's costs as low as possible, and to conserve paper usage,
we attempt to eliminate duplicate mailings to the same address where practical.
When two or more Fund shareholders have the same last name and address, only one
proxy statement is being sent to that address unless the Fund has received
contrary instructions from one or more of those shareholders. If your household
is receiving separate mailings that you feel are unnecessary, or if you want us
to send separate mailings in the future, please send a written request to the
Trust at the mailing address provided above or call Domini at 1-800-582-6757. If
you want to receive a separate copy of this proxy statement, one will be
delivered to you promptly upon such written or oral request.
SUBMISSION OF CERTAIN PROPOSALS
The Trust is a Massachusetts business trust and as such is not required to
hold annual meetings of shareholders, although special meetings may be called
for the Fund, for purposes such as electing Trustees or removing Trustees,
changing fundamental policies, or approving an advisory contract. Shareholder
proposals to be presented at any subsequent meeting of shareholders must be
received by the Trust at the Trust's office within a reasonable time before the
proxy solicitation is made.