Domini International Social Equity Fund

As of 10/31/16. The Fund's Investor Share Class was rated against 282 and 233 U.S. domiciled Foreign Large Value funds for the last 3 and 5 years, respectively, based on risk-adjusted return. Past performance is no guarantee of future results. View more complete rating and risk information.
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Domini Impact International Equity Fund SM

Fund Information

$7.22
Daily Price (NAV)
as of 12/02/2016
Symbol DOMIX
Daily NAV Change $0.00 (0.00%)

Overview

Investor Shares Overview

The Domini Impact International Equity Fund helps you access a world of investment opportunity, while using your investment dollars to encourage corporate responsibility. Investments in companies across Europe, the Asia-Pacific region, and throughout the rest of the world let you take advantage of broad international diversification with the convenience of one mutual fund.

Investment Objective

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

Investment Strategy

The Fund invests primarily in stocks of companies in Europe, the Asia-Pacific region, and throughout the rest of the world 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.  

Management

Investment Advisor and Sponsor: Domini Impact Investments LLC.

Subadvisor: Wellington Management Company LLP.

Shareholder Activism

The Fund seeks to use its position as a shareholder to raise issues of social and environmental performance with corporate management.

Social and Environmental Standards

Domini evaluates the Fund’s 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 10/31/16
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX3.36%-1.26%1.30%8.00%NA0.58%
MSCI EAFE0.12%-2.74%-0.86%5.48%NA1.20%
Quarter-End Returns as of 9/30/16
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX4.05%6.47%2.81%10.18%NA0.65%
MSCI EAFE2.20%7.06%0.93%7.88%NA1.42%

Calendar Year Returns
DOMIXMSCI EAFE
20151.76%-0.39%
2014-3.27%-4.48%
201325.77%23.29%
201222.53%17.90%
2011-13.45%-11.73%
201011.25%8.21%
200928.68%32.45%
2008-46.65%-43.06%
20072.22%11.62%

Quarterly Returns
DOMIXMSCI EAFE
3rd Qtr 20166.52%6.50%
2nd Qtr 2016-3.51%-1.19%
1st Qtr 20161.24%-2.88%
4th Qtr 20152.33%4.75%
3rd Qtr 2015-7.59%-10.19%
2nd Qtr 20151.68%0.84%
1st Qtr 20155.83%5.00%
4th Qtr 2014-1.46%-3.53%
3rd Qtr 2014-4.76%-5.83%
2nd Qtr 20142.69%4.34%
1st Qtr 20140.37%0.77%
4th Qtr 20136.11%5.75%
3rd Qtr 201311.29% 11.61%
2nd Qtr 2013-0.86% -0.73%
1st Qtr 20137.42%5.23%

*Average annual total returns.

Annual Expense Ratio: Gross: 1.52% / Net: 1.52%. Per current prospectus. Domini has contractually agreed to cap Investor share expenses to not exceed 1.60% 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 10/31/16
COMPANY% OF PORTFOLIO
Nissan Motor Co. Ltd.2.4%
Central Japan Railway Co.2.0%
Allianz SE2.0%
Vodafone Group plc1.9%
Compagnie de Saint Gobain1.9%
ING Groep NV1.9%
Norsk Hydro ASA1.8%
AXA SA1.8%
Compass Group plc1.8%
Vestas Wind Systems A/S1.8%
TOTAL19.3%

Sector Weightings as of 9/30/16
SECTOR% OF PORTFOLIO
Financials17.1%
Industrials15.6%
Consumer Discretionary14.4%
Consumer Staples10.4%
Health Care9.5%
Real Estate8.8%
Information Technology7.9%
Materials6.3%
Telecommunication Services6.2%
Energy2.5%
Utilities1.3%
Total100.0%
Country Diversification as of 9/30/16
COUNTRY% OF PORTFOLIO
Japan21.6%
United Kingdom14.8%
France12.3%
Germany7.5%
Australia6.9%
Switzerland6.4%
Netherlands5.2%
Sweden4.1%
Denmark2.5%
Hong Kong2.5%
Norway2.3%
South Korea1.8%
Brazil1.7%
Taiwan1.5%
Spain1.4%
Other7.4%
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 international equity fund.

 

Investment Style:

Blend

Weighted Average Market Capitalization:

Large

Portfolio Statistics

  DOMIX MSCI EAFE*
Price-to-Earnings Ratio (projected) 12.7 13.6
Price-to-Book Ratio 1.2 1.5
Beta (projected) 1.02 --
R-squared (projected) 0.98 --
Total Number of Holdings 165 --

All data as of 9/30/16.

*The Morgan Stanley Capital International Europe, Australasia and Far East Index (MSCI EAFE) is an unmanaged index of common stocks. Investors cannot invest directly in an index.

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- to large-cap equities across Europe, the Asia-Pacific region, and throughout the rest of the world. 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 using a diversified stock selection approach, while managing risk through a systematic and disciplined portfolio construction process. Download Commentary as a PDF.

Total Returns as of September 30, 2016

  July
2016
Aug
2016
Sep
2016
3rd Qtr
2016
YTD One
Year
Three
Year1
Five
Year1
Since Inception
(12/27/06)1
DOMIX 4.53% 0.41% 1.48% 6.52% 4.05% 6.47% 2.81% 10.18% 0.65%
MSCI EAFE 5.08% 0.08% 1.27% 6.50% 2.20% 7.06% 0.93% 7.88% 1.42%

Market Overview

As the initial shock of the United Kingdom’s vote to exit the European Union subsided, and with central banks around the world continuing to support equity markets through stimulus packages, market volatility diminished in the third quarter. Global equities posted strong gains, offsetting losses from earlier in the year and turning year-to-date results positive.
 
In Europe, despite ongoing concerns over the Italian banking system and a potential UK recession in the wake of Brexit, stocks were lifted by continued accommodative monetary policy and fairly encouraging economic data, including solid GDP growth, positive retail trends, and employment gains. To counteract Brexit fears, the Bank of England (BOE) announced a robust stimulus package to help sustain growth and employment, including cutting interest rates to a historic low of 0.25%, expanding quantitative easing, and providing additional funds to banks to promote domestic lending. UK stocks posted strong gains for the quarter, as manufacturing grew more than expected, and the services sector returned to growth. The housing market also showed resilience, with house prices rebounding in September following consecutive monthly declines. Stocks also outperformed in Spain, where unemployment declined to a six-year low, as well as in Germany, where industrial production and exports bounced back from previous declines and investor confidence recovered. Risk appetites were somewhat dampened toward the end of the quarter due to fears that Deutsche Bank, one of the world’s largest banks and a cornerstone of the European financial system, would need to raise capital in order to settle a $14 billion claim with the U.S. Justice Department related to an investigation into mortgage securities fraud. Deutsche Bank is not approved for investment by the Domini Funds due to recurring controversies involving fraud, money laundering, tax evasion, and market manipulation.
 
Stocks also performed better this quarter in the more export-driven economies of the Asia-Pacific region. In Japan, stocks recovered some of their losses from earlier in the year thanks to continued monetary stimulus and more encouraging economic data. The Bank of Japan (BOJ) announced a policy shift centered on controlling interest rates and committed to exceeding its inflation target. Hong Kong stocks performed particularly well this quarter, as GDP grew at its fastest rate since 2011 thanks to a pickup in exports. Results were more mixed in Australia, where the economy continued to expand, but employment declined for the first time in seven months.
 
Emerging markets performed well, showing resilience to a number of market shocks, including Brexit, fluctuating oil prices, yuan depreciation, and an attempted coup d’état in Turkey. Chinese stocks performed particularly well, as economic indicators showed signs of stabilization and corporate earnings came in better than expected. The State Council of China furthered its efforts to open up the country’s financial markets to foreign investors by approving the Shenzhen-Hong Kong Stock Connect. Meanwhile, equities in Brazil rose after the Senate voted overwhelmingly to impeach President Dilma Rousseff on charges of illegally manipulating the budget, permanently removing her from office. The country’s new administration made continued progress toward addressing the country’s fiscal imbalances. Mexico underperformed amid growing political uncertainty related to the presidential election in the U.S.
 

Fund Performance

For the quarter, the Fund’s Investor shares returned 6.52%, slightly outperforming the MSCI EAFE Index, which returned 6.50%. Sector allocation made a positive contribution to relative performance, with the Fund benefitting from underweights to health care, energy, utilities and consumer staples. Security selection also made a slight positive contribution, with weaker selection in telecommunication services, financials and industrials more than offset by stronger selection in consumer staples, materials, and energy.
 
Security selection was particularly strong in Europe, most notably in Denmark, Switzerland, the UK, and Norway. This was somewhat offset by weaker selection in Japan. The Fund’s out-of-benchmark emerging-market positions were mostly neutral as a whole, with positive contributions from China and Brazil offset by declines in Turkey.
 
The top contributor to relative performance this quarter was Danish wind-turbine manufacturer Vestas Wind Systems, which returned 21.9%. Vestas reported excellent results for the second quarter, with strong overall turbine deliveries driving better-than-expected sales and margin growth. Vestas is one of the most dominant players in the U.S. wind-power market, which is expected to grow significantly over the next several years, helped by an extension of subsidies until 2023, which will allow the technology to further develop. 
 
Other top contributors this quarter included French car manufacturer Peugeot (PSA Group), which gained 27.2%, and Australian steelmaker BlueScope Steel, a non-benchmark holding, which gained 25.5%. Peugeot recovered some of its post-Brexit losses after reporting a 32% jump in earnings for the first half of the year, and promised that cost cuts will help to keep its turnaround on track, despite Brexit headwinds. BlueScope, meanwhile, rose to a five-year high after reporting fiscal 2016 results that saw earnings more than double, helped by higher volumes, improved sales mix, and lower costs. 
 
Relative performance this quarter also benefitted from what the Fund did not hold, most notably Danish health care company Novo Nordisk and the Anglo-Dutch multinational oil and gas company Royal Dutch Shell. Novo Nordisk, which specializes in diabetes care, declined 21.5% for the quarter after reporting disappointing second-quarter results, driven by a contract loss with UnitedHealth and weakness in its U.S. insulin business. Shell, which is not approved for investment by the Domini Funds, lost 5.9% after reporting its lowest quarterly earnings result in 11 years, due to lower oil prices, weaker refining margins, and production halts.
 
At the other end of the spectrum, the quarter’s largest detractors from relative performance were Australia’s TPG Telecom and Japan’s Ono Pharmaceutical. TPG declined 25.6% after providing disappointing guidance for fiscal 2017, despite recording a 69% increase in operating profit for fiscal 2016. Ono fell 38.4% during the period it was held by the Fund, after lung cancer drug Opdivo, which Ono is commercializing in partnership with Bristol-Myers Squibb, unexpectedly failed a late-stage clinical trial as a first-line treatment for non-small cell lung cancer (NSCLC). Although Opdivo is already approved as a second-line treatment, success in this trial would have greatly expanded its use. Opdivo was also the subject of a meeting by a special committee on drug prices this quarter after Japan’s Ministry of Health, Labour, and Welfare proposed an irregular reduction in the insurance reimbursement price based on market expansion, which could result in the drug’s price being reduced by 25%.

Making a Difference

Domini engages in direct dialogue with corporations in our portfolios 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.

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.

Addressing Corporate Tax Avoidance

Corporate tax avoidance has been an important component of our engagement and policy work for several years.  The United Nations’ backed Principles for Responsible Investment is a global network of investors responsible for $60 trillion in assets.  After expressions of interest from a significant number of its members, PRI established a Taskforce on Tax, including Domini, to develop guidance to help investors engage with corporations on global tax strategies.  

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.

United Nations Includes Corporate Sustainability Reporting in its Sustainable Development Goals

In September 2015, the United Nations’ General Assembly adopted its 2030 Agenda for Sustainable Development. In meetings with UN delegates in 2012 and 2013, we explained that the private sector and, in particular, multinational corporations, will need to play an important role if these ambitious “Sustainable Development Goals” are to be realized.