*Average annual total returns.

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

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

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.

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.

Driven by broad-based expansion of economic growth and supportive monetary policy, global equities continued to rally, with the MSCI EAFE index returning 5.40%² to mark its third straight quarter of gains. Despite heightening geopolitical risks around the global and escalating sociopolitical tensions throughout Europe, European equities advanced thanks to continued economic improvement, with eurozone GDP advancing 2.2% year-over-year. Economic confidence reached a decade-high in September amid an eight-year low in unemployment, strong manufacturing data and a reacceleration in the services sector. With a stronger euro weighing on its ability to achieve higher inflation, however, the European Central Bank remained dovish, leaving rates unchanged in July and suggesting the need for further stimulus to maintain price growth. The euro reached its highest level against the U.S. dollar since January 2015, until finally easing in the buildup to the German election. Chancellor Angela Merkel was reelected for a fourth term, but she is expected to face difficult negotiations in forming a new governing coalition, as Eurosceptic the Alternative for Germany (AfD) become the first far-right party in over half a century to win seats in the Bundestag. A fractured parliament in Europe’s largest economy could place further pressure on the euro and will likely complicate efforts led by Merkel and French President Emmanuel Macron to deepen eurozone integration.

Equity returns were more subdued in the United Kingdom, which saw GDP growth fall to its lowest level in more than four years. Partly due to eurozone strength and continued concerns over Brexit, the British pound fell to an eight-year low against the euro, and inflation rose to an five-year high. Household spending dropped and the trade deficit widened unexpectedly, as the weaker pound failed to boost exports.

The Asia-Pacific region continued to advance, led by Hong Kong, which saw continued recovery in its manufacturing sector, solid year-over-year export growth, and accelerating retail sales. While GPD growth of 3.8% in the second quarter marked a deceleration from the first quarter, it remains substantially better than a year ago. Japan was also strong, lifted by an accelerating manufacturing sector and the most significant improvement in exports since 2013. While inflation remains well shy of the Bank of Japan’s 2% target, it improved throughout the quarter, and the BOJ’s Tankan Survey reached a ten-year high, indicating that activity for Japan’s largest manufacturers has been strong. Australia lagged the region amid slumping retail sales, but real GDP growth accelerated and the job market continued to improve.

Emerging markets were very strong during the third quarter, helped by improving fundamentals, higher commodity prices, and upbeat corporate earnings. Latin America was particularly strong, including Brazil, which saw a favorable mix of lower interest rates, higher commodity prices and a weakening U.S. dollar. China led gains in Asia amid a strong corporate earnings season, a solid real estate market and MSCI’s decision to add China A-shares to its indexes.

For the quarter, the Fund’s Investor shares returned 4.47%, underperforming the MSCI EAFE Index net return of 5.40%². Security selection was the largest driver of underperformance, with strong selection in the consumer discretionary sectors more than offset by weaker selection in industrials and information technology. Sector allocation also detracted from relative performance; the Fund benefitted from its underweight to health care, but that benefit was more than offset by its underweight to energy. Geographically, security selection was strong in Europe--especially in France—but this was offset by weaker security selection in Japan.

Geographically, security selection was very strong in Europe, with strong selection in the Netherlands and United Kingdom slightly offset by weaker selection in Norway. Selection was also strong in Japan, but was more than offset by weaker selection in Hong Kong. Relative performance benefitted from the Fund’s out-of-benchmark emerging-market positions—with strong contributions from South Korea, China, and Turkey—but this benefit was mostly offset by weakness from its out-of-benchmark positions in Brazil.

The top individual contributor to relative performance was non-benchmark holding Nine Dragons Paper, which manufactures and sells packaging paper, recycled printing and writing paper, and high-value specialty paper products in China. The company rose more than 48% on the back of strong fiscal 2017 results, with strong year-over-year revenue and net profit growth driven by rising average selling prices and margin expansion. The Chinese government’s increased environmental inspection and enforcement led to a demand-supply dynamic change that helped paper makers like Nine Dragons regain pricing power.

French luxury goods company Kering and car manufacturer Peugeot were also among the top contributors, returning more than 17% and 19%, respectively. Kering reported better-than-expected earnings for the first half of the year, driven by resurgent sales for its Gucci brand. Peugeot, aka Groupe PSA, which owns automobile brands Peugeot, Citroën and DS, completed its acquisition of the Opel and Vauxhall brands from GM, now making it the second largest car manufacturer in Europe.

European chipmaker STMicroelectronics—which designs, develops, manufactures and markets a range of semiconductor solutions, including discrete and standard commodity components and application-specific integrated circuits for analog, digital and mixed-signal applications—was another top contributor, gaining more than 35%. The company posted solid second-quarter results driven by widespread strength across its portfolio, and expects all segments to grow in the second half of 2017. ST has begun to ramp up its new facial-recognition image sensor for Apple’s iPhone X ahead of its upcoming launch, which is expected to provide a boost in the fourth quarter.

The largest detractor from performance this quarter was Japanese glass manufacturer Asahi Glass, which dropped almost 12%. The company reported mixed results for the first half of 2017, with positive operating profit surpassing market expectations. Sharp declines in the glass and electronics segments were offset by sharp growth in the chemicals segment, benefits from the consolidation of an acquisition, and higher shipment volume across multiple segments. The glass segment suffered from the sluggish production of automotive glass in Europe and higher fuel costs, while weakness in electronics was attributed to lower prices for LCD substrate glass.

German pharmaceutical company Merck was another large detractor, declining almost 8%. Merck’s second-quarter results disappointed, with earnings down despite sales being up. Growth in its life science segments was offset by decline in healthcare and performance materials. Merck also announced a strategic review of its consumer health division as it faces increased competition.

Spain’s Aena, which is primarily engaged in the operation of airports, and Japanese social media networking company mixi also detracted from relative results with respective declines of more than 7% and 12%. Aena reported solid results for the second quarter that were broadly in-line with expectations, but uncertainty mounted due to a sharp quarter-to-quarter decline in revenues per passenger in its commercial subdivision.

Benchmark holdings that are not approved for investment by the Domini Funds also affected relative results. The Fund benefitted from not owning Swiss food and beverage company Nestlé, which declined almost 4%, but this benefit was mostly offset by not owning British-Dutch oil and gas company Royal Dutch Shell, which gained more than 16%.

View or download the Domini Funds’ prospectus and other documents below. If you would like any of these documents mailed to you, free of charge, call 1-800-762-6814 (Monday to Friday, 9 a.m. - 6 p.m. EST) or fill out our online Request Information form.

Many of the documents listed below are in PDF format. To view these documents, you will need Adobe Reader software, version 4.0 or higher. If you don’t have Adobe Reader, you can download it for free at Adobe’s website.