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Domini Impact Equity Fund sm

Fund Information

$45.00
Daily Price (NAV)
as of 03/28/2017
Symbol DSEFX
Daily NAV Change $0.28 (0.63%)

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 2/28/17
YTD1Yr3 Yr*5 Yr*10 Yr*Since Inception (6/3/91)*
DSEFX5.54%23.76%6.63%10.22%6.09%8.38%
S&P 5005.94%24.98%10.63%14.01%7.62%9.47%

Quarter-End Returns as of 12/31/16
YTD1Yr3 Yr*5 Yr*10 Yr*Since Inception (6/3/91)*
DSEFX11.24%11.24%5.54%11.70%5.46%8.20%
S&P 50011.96%11.96%8.87%14.66%6.95%9.29%

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
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: 1.14% / Net: 1.14%. 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 2/28/17
COMPANY% OF PORTFOLIO
Amazon.com Inc.3.2%
Prudential Financial Inc.3.1%
Alphabet Inc.2.8%
Pepsico Inc.2.8%
Consolidated Edison Inc.2.8%
Cummins Inc.2.7%
PACCAR Inc.2.5%
Sysco Corp.2.5%
Applied Materials Inc.2.4%
Gilead Sciences Inc.2.4%
TOTAL27.1%

Sector Weightings as of 12/31/16
SECTOR% OF PORTFOLIO
Information Technology23.1%
Financials16.0%
Consumer Discretionary13.9%
Health Care13.1%
Industrials9.3%
Consumer Staples9.1%
Telecommunication Services4.5%
Materials3.7%
Utilities3.3%
Real Estate3.0%
Energy1.1%
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) 14.3 16.6
Price-to-Book Ratio 2.7 3.1
Beta (projected) 1.02 --
R-squared (projected) 0.97 --
Market Cap Asset Weighted Avg. (Millions) $79,666 $150,158
Total Number of Holdings 90 500

All data as of 12/31/16 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 December 31, 2016

  Oct
2016
Nov
2016
Dec
2016
4th Qtr
2016
YTD One
Year
Three
Year1
Five
Year1
Ten
Year1†
Since Inception
(6/3/91)1†
DSEFX -2.13% 4.87% 1.29% 3.95% 11.24% 11.24% 5.54% 11.70% 5.46% 8.20%
S&P 500 -1.82% 3.70% 1.98% 3.82% 11.96% 11.96% 8.87% 14.66% 6.95% 9.29%

Market Overview

The bull market endured during the final quarter of 2016, despite the uncertainty created by the unexpected results of the presidential election. The S&P 500 rose 3.8% to post its fifth straight quarter of gains and end the year up 12.0%. The general perception in the months and weeks leading up to the election was that markets preferred a Clinton victory. Nevertheless, post-election, U.S. equities continued to gain and the S&P 500 hit a series of highs during November and December. The market consensus is that the incoming administration can be expected to reduce regulatory restrictions and increase financial stimulus, including cutting corporate taxes and boosting infrastructure spending. Protectionary trade policies are expected to drive a stronger U.S. dollar and higher inflation. Overall, these assumptions helped to drive U.S. equities higher during the quarter, although there was a pronounced dispersion across sectors.
 
In December, the Fed helped to reaffirm investor confidence in the health of the economy with a more hawkish stance, implementing its first rate hike in a year and shifting its view from two additional rates hikes next year to three. Meanwhile, economic data continued to encourage. Third-quarter GDP growth revised upward to 3.5%, the strongest economic expansion in two years, driven by increases in household purchases, capital expenditures, and government spending. The housing market also continued to display healthy trends, with homebuilder confidence rising to an 11-year high and existing home sales reaching their highest level since 2007. The jobless rate, meanwhile, dropped to 4.6%, its lowest rate since 2007.
 

Fund Performance

The Fund’s Investor shares returned 3.95% for the quarter, outperforming the S&P 500 Index return of 3.82%. Security selection was the largest driver of outperformance, with strong selection in the materials, industrials, information technology, and real estate sectors compensating for weaker selection in the health care and consumer discretionary sectors. A positive contribution from an overweight to financials, which was the Index’s top performing sector for the quarter, was mostly offset by a detriment from security selection within the sector.
 
A number of financial stocks were among the Fund’s top contributors to relative performance this quarter. Financials, particularly banks and insurers, realized large gains following the US election on expectations for rising interest rates, lower taxes, and less regulation. Global life insurer Prudential Financial was the largest contributor, returning 28.3% following strong operating results and a solid management outlook. Disability insurer Unum Group also rallied, gaining 25.1% following great third-quarter results driven by strong revenue growth at its U.S.-based segment. Management continues to steadily increase prices in order to compensate for low interest rates. Regional banking group Fifth Third Bancorp, Cincinnati’s largest locally based bank, was also among the top contributors, rising 32.5%., after undertaking a profit improvement plan in September.
 
While financials slightly helped relative performance, several S&P 500 banks that the Fund did not hold were among the largest individual detractors. Neither JPMorgan Chase nor Bank of America, two of the nation’s largest banking groups and core index holdings, are approved for investment by the Domini Funds. Those stocks returned 30.5% and 41.7%, respectively, this quarter.
     
Outside of financials, other top contributors included steel producer and metal recycler Steel Dynamics, a non-benchmark holding which returned 42.9%, and Alaska Air Group, owner of Alaska Airlines and Horizon Air, which returned 35.2%. Steel Dynamics expects steady automotive steel consumption and higher steel demand due to large infrastructure projects, while Alaska Air appears to be well positioned for growth after finalizing its acquisition of Virgin America in December.
 
At the other end of the spectrum, the largest detractor from relative performance was medical equipment company, Edwards Lifesciences, which fell 22.3%. The company, which is focused on technologies that treat structural heart disease and critically ill patients, dropped after reporting disappointing third-quarter sales, driven by weakness outside the U.S. Management expected fourth-quarter sales to be at the lower end of guidance due to unfavorable currency movements and weakness in its surgical valve business. Other significant detractors included biotechnology company Gilead Sciences, which declined almost 9% amid a steady decline in sales for its hepatitis C drugs, and online retailer Amazon.com, which declined more than 10% after reporting disappointing third-quarter profit—impacted by a sharp rise in shipping costs—and revising down its revenue forecast for the key end-of-year period.

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.