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Domini Impact Equity Fund sm

Fund Information

$48.52
Daily Price (NAV)
as of 11/17/2017
Symbol DSEFX
Daily NAV Change $-0.11 (-0.23%)

Key Documents

Overview

Investor Shares Overview

Socially and environmentally concerned investors have social, as well as financial, objectives. The Domini Impact Equity Fund seeks to meet these objectives by offering a diversified stock portfolio for long-term capital appreciation that is consistent with social and environmental priorities.

Investment Objective

The Fund seeks to provide its shareholders with long-term total return.

Investment Strategy

The Fund invests primarily in stocks of U.S. companies that meet Domini Impact Investments’ social and environmental standards.

Subject to these standards, Wellington Management Company, LLP, the Fund’s subadvisor, seeks to add value using a diversified quantitative stock selection approach, while managing risk through portfolio construction.

Shareholder Activism

The Fund also advances its social and environmental objectives through proxy voting, dialogue with corporations, and the filing of shareholder resolutions

Social and Environmental Standards

Domini evaluates the Fund’s current and potential investments against its social and environmental standards based on the businesses in which they engage, as well as on the quality of their relations with key stakeholders, including communities, customers, ecosystems, employees, investors, and suppliers.

Domini may determine that a security is eligible for investment even if a corporation’s profile reflects a mixture of positive and negative social and environmental characteristics.

Investor Profile

Who Should Invest:

  • Investors seeking long-term growth of capital.
  • Investors committed to the Fund's socially responsible investment standards.

Who Should Not Invest:

  • Investors unwilling or unable to accept moderate to significant fluctuations in share price.

Performance

Investor Shares Performance


Month-End Returns as of 10/31/17
YTD1Yr3 Yr*5 Yr*10 Yr*Since Inception (6/3/91)*
DSEFX12.47%19.47%5.53%11.94%6.07%8.42%
S&P 50016.91%23.63%10.77%15.18%7.51%9.63%

Quarter-End Returns as of 9/30/17
YTD1Yr3 Yr*5 Yr*10 Yr*Since Inception (6/3/91)*
DSEFX10.12%14.48%5.46%10.87%5.97%8.36%
S&P 50014.24%18.61%10.81%14.22%7.44%9.57%

Calendar Year Returns
DSEFXS&P 500
201611.24%11.96%
2015-7.27%1.38%
201413.97%13.69%
201332.85%32.39%
201211.33%16.00%
20110.74%2.11%
201013.69%15.06%
200935.56%26.46%
2008-37.88%-37.00%
20071.46%5.50%
200612.58%15.79%
20052.03%4.91%
20049.26%10.88%
200327.13%28.69%
2002-20.69%-22.10%
2001-12.76%-11.88%
2000-15.05%-9.11%
199922.63%21.04%
199832.99%28.58%
199736.02%33.36%
199621.84%23.07%
199535.17%37.50%
1994-0.36%1.26%
19936.54%10.08%
199212.10%7.68%

Quarterly Returns
DSEFXS&P 500
3rd Qtr 20174.48%4.48%
2nd Qtr 20170.27%3.09%
1st Qtr 20175.12%6.07%
4th Qtr 20163.95%3.82%
3rd Qtr 20167.58%3.85%
2nd Qtr 2016-1.90%2.46%
1st Qtr 20161.39%1.35%
4th Qtr 20152.30%7.04%
3rd Qtr 2015-8.33%-6.44%
2nd Qtr 2015-2.20%0.28%
1st Qtr 20151.11%0.95%
4th Qtr 20143.27%4.93%
3rd Qtr 20141.52%1.13%
2nd Qtr 20145.69%5.23%
1st Qtr 20142.86%1.81%
4th Qtr 20139.47%10.51%
3rd Qtr 20137.20%5.24%
2nd Qtr 20132.75%2.91%
1st Qtr 201310.19%10.61%

*Average annual total returns.

On 11/30/06, the Fund changed to an active management strategy. Past performance through 11/29/06 represents the former passive investment strategy, and is not indicative of future results.

Annual Expense Ratio: Gross: 1.08% / Net: 1.08%. Per current prospectus. Domini has contractually agreed to cap Investor share expenses to not exceed 1.25% until 11/30/17, subject to earlier modification by the Fund’s Board of Trustees. See prospectus for details. The Funds’ performance would have been lower had these fees not been waived.

Holdings

Ten Largest Holdings as of 10/31/17
COMPANY% OF PORTFOLIO
Apple Inc.4.1%
Alphabet Inc. Class A3.5%
Prudential Financial Inc.2.8%
Intel Corp2.8%
Mastercard Inc. A2.7%
Pepsico Inc.2.6%
Cummins Inc.2.6%
IBM Corp.2.6%
Applied Materials Inc.2.4%
Gilead Sciences Inc.2.4%
TOTAL28.6%

Sector Weightings as of 9/30/17
SECTOR% OF PORTFOLIO
Information Technology25.1%
Health Care15.1%
Financials15.1%
Consumer Discretionary12.0%
Consumer Staples9.0%
Industrials8.7%
Telecommunication Services4.2%
Real Estate3.8%
Utilities3.5%
Materials3.1%
Energy0.3%
Total100.0%

View the most recent quarterly holdings report filed with the Securities and Exchange Commission.

Characteristics

Portfolio Overview

Socially screened, mid- to large-capitalization domestic equity fund.

 

Investment Style:

Blend

Weighted Average Market Capitalization:

Large

Portfolio Statistics

  DSEFX S&P 500
Price-to-Earnings Ratio (projected) 15.2x 17.2x
Price-to-Book Ratio 2.9x 3.3x
Beta (projected) 1.00 --
R-squared (projected) 0.97 --
Market Cap Asset Weighted Avg. (Millions) $121,007 $178,608
Total Number of Holdings 98 500

All data as of 9/30/17 unless otherwise noted.

Definitions:

The Price/Earnings Ratio is a stock’s current price divided by the company’s trailing 12-month earnings per share. The Price/Book Ratio is used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. The P/E and P/B ratio of a fund is the weighted average of the price/earnings and price/book ratios of the underlying stocks in a fund’s portfolio. 

R-squared measures how a fund’s performance correlates with a benchmark index’s performance and shows what portion of it can be explained by the performance of the overall market/index. R-squared ranges from  0, meaning no correlation, to 1, meaning perfect correlation.

Beta is a measure of the volatility of a fund relative to its benchmark index. A beta greater (less) than 1 is more (less) volatile than the index.

Commentary

Investor Shares Performance Commentary

The Fund invests primarily in mid- and large-cap U.S. equities. It is managed through a two-step process designed to capitalize on the strengths of Domini Impact Investments and Wellington Management Company, the Fund’s subadvisor. Domini creates an approved list of companies based on its social, environmental and governance analysis, and Wellington seeks to add value and manage risk through a systematic and disciplined portfolio construction process. Download Commentary as a PDF.

Total Returns as of September 30, 2017

  July
2017
Aug
2017
Sep
2017
3rd Qtr
2017
YTD One
Year
Three
Year1
Five
Year1
Ten
Year1†
Since Inception
(6/3/91)1†
DSEFX 2.30% 0.24% 1.90% 4.48% 10.12% 14.48% 5.46% 10.87% 5.97% 8.36%
S&P 500 2.06% 0.31% 2.06% 4.48% 14.24% 18.61% 10.81% 14.22% 7.44% 9.57%

Market Overview

U.S. equities continued to rally for the eighth straight quarter, with the S&P 500 returning 4.48%. Ongoing controversies surrounding the White House and escalating geopolitical tensions with Russia, North Korea and Iran were not enough to derail momentum, as strong corporate earnings and generally encouraging economic data, including a solid labor market, helped lift the index to another series of record highs. Second-quarter GDP growth of 3.1% represented the strongest year-over-year growth since the third quarter of 2015, and an August rise in the Institute of Supply Management’s Non-Manufacturing Index suggested that the acceleration in growth during the first six months of the year could continue during the second half.

Despite the economy’s upward trajectory, persistently disappointing inflation has been a concern of the Federal Reserve. However, signs of firming inflation in August provided some relief and increased investor expectations for further interest rate increases and the end of this year and in 2018. In a well-telegraphed move, the Fed announced that it would begin its balance-sheet normalization program in October, stating that the process would be gradual and predictable. Meanwhile, after several failed attempts at repealing the Affordable Care Act, Congressional Republicans pivoted their efforts to tax reform, unveiling a long-awaited blueprint in September for a plan that would slash corporate taxes and reduce the number of tax brackets for individuals.

 

Fund Performance

The Fund’s Investor shares returned 4.48% for the quarter, matching the S&P 500 Index return. Security selection made a positive contribution to relative performance, with particularly strong selection in the consumer discretionary, consumer staples and industrials sectors partially offset by weaker selection in health care. Sector allocation made a negative contribution, with an underweight to energy and an overweight to consumer staples detracting from relative results.

Top Relative Contributors

Company Sector Stock Return*
Lam Research Corporation Information Technology 31.18%
Applied Materials, Inc. Information Technology 26.39%
Scripps Networks Interactive, Inc. Consumer Discretionary 26.13%
Gilead Sciences, Inc. Health Care 15.16%
Ross Stores, Inc. Consumer Discretionary 12.06%

Top Relative Detractors

Company Sector Stock Return*
Quest Diagnostics Inc. Health Care -15.42%
Chipotle Mexican Grill, Inc. Consumer Discretionary -26.15%
IBM Corp. Information Technology -4.69%
F5 Networks, Inc. Information Technology -5.18%
PepsiCo, Inc. Consumer Staples -2.86%
*Represents return for period in the Fund's Portfolio or return for the entire period if not held.
**Not held in the Portfolio.
 
The top contributor to relative performance this quarter was Lam Research Corporation, a supplier of wafer fabrication equipment and services to the semiconductor industry, which returned more than 31%. The company posted impressive results for its fiscal fourth quarter and marked its fifth consecutive year of double-digit revenue growth, driven by strong demand from customers like Samsung, Micron, SK Hynix and Intel. Another semiconductor equipment and services provider, Applied Materials, was also among the top contributors, rising more than 26%. The company, which provides manufacturing equipment, services and software to the global semiconductor, display and related industries, posted solid results for its fiscal third quarter, highlighted by record revenues that surpassed expectations. Outperformance was driven by record sales of wafer fabrication equipment for circuits used to produce LEDs, optical computer equipment and CPUs.

Lifestyle-oriented content developer Scripps Networks Interactive, which primarily produces home, food, travel and related programming for television, internet and digital platforms, was another top contributor, returning more than 26%. The stock gained on news of its long-awaited purchase by Discovery Networks, for which approval from the Department of Justice seems likely given the relatively small scale of the combined entity compared to some of its competitors.

Other top contributors this quarter included biopharmaceutical research company Gilead Sciences and discount home and apparel retailer Ross Stores, which gained more than 15% and 12%, respectively. Gilead posted better-than-expected results for the second quarter and surprised investors by increasing its full-year sales forecast for its declining HCV drug franchise thanks to marketing efforts that it says have helped the company reach new patients. The company realized strong gains after announcing a long-awaited deal to purchase clinical-stage oncology company Kite Pharma for a record $11.9 billion. Gilead believes cellular therapies like those being developed by Kite have the potential to become a cornerstone of cancer treatment, and sees the acquisition as the start of a long-term strategy to build a leading oncology platform. Meanwhile, Ross Stores bucked the trend in retail, with strong customer traffic and solid margins driving better better-than-expected second-quarter results, and raised third-quarter forecasts.

The largest detractor from relative performance this quarter was diagnostic information services company Quest Diagnostics, which declined more than 15% after the Centers for Medicare and Medicaid Services released 2018 preliminary rates for the new Clinical Laboratory Fee Schedule under the Protecting Access to Medicare Act, cutting rates to the worst-case scenario.

Chipotle Mexican Grill dropped more than 26%, as it continues to wage an uphill battle to regain its prior sales, profits and valuation levels. The company posted mixed results for the second quarter, with slightly underwhelming revenues but better-than-expected margins, while the third quarter started with a sharp drop in demand due to a new norovirus outbreak in late July.

Other significant detractors included technology companies IBM and F5 Networks, which both declined around 5%. IBM reported its 21st straight quarter of year-over-year revenue declines, as it continues to struggle to make progress on a five-year-old plan to steer the company away from legacy products like computers and operating systems, which have been a drag on growth, and toward newer technologies in services and software. Despite management stating in April that it expected key contracts in the technology services and cloud platforms segment to come through during the second quarter, segment revenues were down 5.1% year-over-year, marking the second consecutive quarter of declines for the key business unit. Enterprise application services company F5 Networks reported slowing product growth and disappointing guidance, with the weak near-term outlook prompting Wall Street analysts to cut forecasts.

Making a Difference

Domini engages in direct dialogue with corporations in our portfolios and files shareholder proposals on a broad range of social, environmental, and corporate governance issues. Shareholder activism — the practice of active ownership — lies at the heart of what we believe responsible investing is all about. Here are a few ways your investment in the Domini Funds has made a difference. For more stories, click here.

A Season of Accountability

If you sit on the board of a publicly traded company, there is only one time of year when you must face your shareholders. For most companies, that time is at the spring annual meeting. Since the 1960’s, shareholders have raised key issues of concern at these meetings, from napalm production to racial discrimination to climate change. On behalf of our fund shareholders, we have submitted more than 250 shareholder proposals over the past 22 years, ensuring that your voice is heard.

Protecting Freedom of Expression and Privacy on the Internet

Internet and telecommunications companies receive thousands of requests per year from governments around the world to censor content or divulge information about their users. Many of these requests violate international human rights principles. For the past ten years, Domini has helped to build the Global Network Initiative (GNI), an organization focused on protecting freedom of expression and privacy from improper government intrusion.

Mandatory Sustainability Reporting

In April, the Securities and Exchange Commission (SEC) issued a historic Concept Release, seeking comments on a wide range of rules that require publicly traded companies to disclose information to their investors. We were very pleased to see the inclusion of a series of questions about sustainability information among the Release’s more than 300 pages.

Positive Change at Four Companies

In addition to using social, environmental and governance standards to select our investments, each year the Domini Social Equity Fund submits shareholder proposals to corporations in its portfolio, addressing a broad range of social and environmental issues.  They send a strong message to corporate management, and can often encourage the company to speak to us about reaching an agreement.

Our Position on Fossil Fuel Owners and Producers

For many years, Domini has incorporated concerns about the environmental risks of companies owning and producing fossil fuels into our investment standards. Over time, we have gradually eliminated an increasing number of these firms from our holdings as our concerns about a variety of environmental and safety issues, including climate change, have increased.