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Domini Impact Equity Fund sm

Fund Information

$44.75
Daily Price (NAV)
as of 12/09/2016
Symbol DSEFX
Daily NAV Change $0.02 (0.04%)

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 11/30/16
YTD1Yr3 Yr*5 Yr*10 Yr*Since Inception (6/3/91)*
DSEFX9.82%5.56%5.66%11.22%5.49%8.17%
S&P 5009.79%8.06%9.07%14.45%6.89%9.24%

Quarter-End Returns as of 9/30/16
YTD1Yr3 Yr*5 Yr*10 Yr*Since Inception (6/3/91)*
DSEFX7.01%9.47%7.37%12.67%5.71%8.12%
S&P 5007.84%15.43%11.16%16.37%7.24%9.22%

Calendar Year Returns
DSEFXS&P 500
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 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 10/31/16
COMPANY% OF PORTFOLIO
Amazon.com Inc.3.5%
Verizon Communications Inc.3.5%
Merck & Co. Inc.3.5%
Intel Corp.3.0%
Prudential Financial Inc.3.0%
PepsiCo Inc.3.0%
Cummins Inc.2.8%
F5 Networks Inc.2.6%
Gilead Sciences Inc.2.6%
Sysco Corp.2.4%
TOTAL29.9%

Sector Weightings as of 9/30/16
SECTOR% OF PORTFOLIO
Information Technology23.2%
Financials15.1%
Health Care14.7%
Consumer Discretionary10.8%
Industrials9.6%
Consumer Staples9.3%
Energy4.3%
Telecommunication Services4.3%
Materials3.4%
Real Estate2.9%
Utilities2.3%
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) 14.1 15.9
Price-to-Book Ratio 2.3 2.9
Beta (projected) 1.04 --
R-squared (projected) 0.97 --
Market Cap Asset Weighted Avg. (Millions) $96,860 $146,208
Total Number of Holdings 85 502

All data as of 9/30/16 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 September 30, 2016

  July
2016
Aug
2016
Sep
2016
3nd Qtr
2016
YTD One
Year
Three
Year1
Five
Year1
Ten
Year1†
Since Inception
(6/3/91)1†
DSEFX 5.70% 0.65% 1.12% 7.58% 7.01% 9.47% 7.37% 12.67% 5.71% 8.12%
S&P 500 3.69% 0.14% 0.02% 3.85% 7.84% 15.43% 11.16% 16.37% 7.24% 9.22%

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 risk assets through accommodative monetary policies, volatility in equity markets diminished in the third quarter. Equities in the U.S. remained steadfast, and the S&P 500 returned 3.85% to post its fourth straight quarter of gains.
 
The quarter got off to a very strong start in July thanks to solid corporate earnings and encouraging housing and employment data releases. Nonfarm payrolls data exceeded forecasts in July and August, and the unemployment rate held steady at 4.9%. Homebuilder confidence rose to an 11-month high, buoyed by low mortgage rates, a strong labor market, rising household formations, and low supply. Stocks held steady in August, as investors focused on the timing of the Federal Reserve Bank’s (Fed’s) next rate hike. The market faltered during the first half of September, however, as a number of factors weighed on investor sentiment, including uncertainty over the upcoming election, valuation concerns, and less encouraging economic data. The Institute for Supply Management’s (ISM’s) Purchasing Manufacturer’s Index (PMI) slipped to its lowest level since January, and September’s nonfarm payrolls report disappointed. Nevertheless, stocks bounced back during the second half of the month after the Fed signaled an increased likelihood of a rate hike before year-end. During the final days of the quarter, the brief rally was supported by polls which favored Secretary Hillary Clinton after the first presidential debate.
 

Fund Performance

The Fund’s Investor shares returned 7.58% for the quarter, outperforming the S&P 500 Index return of 3.85%. The largest driver of outperformance was security selection, particularly within the financials, consumer discretionary, industrials, health care, and information technology sectors. Outperformance was helped by the Fund’s current preference toward value stocks, i.e., stocks that are attractively priced by the market relative to peers.  In a reversal of recent market conditions this quarter, value stocks outperformed momentum stocks, i.e. stocks that have provided strong returns in the recent past, and for which valuations had become increasingly stretched. 
 
Exemplifying this normalization trend, fashion retailer Nordstrom—which was the largest detractor from relative performance last quarter—was the top contributor this quarter, rebounding with a 37.3% return after reporting encouraging second-quarter results. Second-quarter profit surpassed expectations, driven by higher sales at its discount chain, Nordstrom Rack, and by its Anniversary promotional event, which drew an all-time high sales volume. Although department stores have been struggling recently, Nordstrom’s strong second-quarter results signal that it is achieving success in its appeal to more value-conscious customers.
 
Medical equipment company, Edwards Lifesciences, the world’s largest maker of artificial heart valves implanted without open-heart surgery, was another top contributor, gaining 20.9% for the quarter. Edwards reported better-than-expected second-quarter results and raised its fiscal-year 2016 earnings forecast for the third quarter in a row. Whereas the company’s heart valves had previously been restricted to older patients at high risk from surgery, they are now being used by younger and healthier patients, greatly increasing the company’s addressable patient population.
     
Applied Materials, which manufactures machinery used to make semiconductors, rose 26.2%, as the company released sales and earnings forecasts that exceeded expectations. The company’s earnings are at an all-time high, driven by new technologies, and it is expecting orders to surge as chipmakers and display manufacturers are forced to upgrade their equipment to remain competitive.
 
Engine manufacturer Cummins was another top contributor, gaining 14.9%. Despite a decline in year-over-year sales due to weak global demand and lower truck production in North America, the company was able to mitigate the impact on its bottom line and deliver better-than-expected earnings through restructuring actions, material-cost reduction initiatives, and improvement in product quality, which the company argues should position Cummins for stronger performance when markets improve.
 
Life insurer Prudential Financial also had a strong quarter, returning 15.5%, as insurers were lifted by strong equity markets and the Fed’s rate-hike signal.
 
Strong returns from these and other names were slightly offset by a number of notable detractors to relative performance. The Fund’s largest detractor this quarter was its non-benchmark position in generic drug manufacturer Taro Pharmaceutical Industries, which fell 24.3% after a disappointing fiscal-first-quarter result that saw a steep decline in sales, rising sales costs, and signs of price erosion due to increased competition. Biotechnology company Gilead Sciences also detracted, declining 4.6% after the company reported lower-than-expected quarterly sales of its hepatitis C drugs and cut its 2016 sales forecast. Other significant detractors with substantial overweight positions included Con Edison and Verizon Communications, which declined 5.6% and 5.9%, respectively. Relative performance was also hampered by the Fund’s underweight position in Apple, which gained 18.9% for the quarter, following an enthusiastic response to the iPhone 7 unveiling and a higher-than-expected number of preorders.

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.