Domini Impact International Equity Fund

As of 10/31/17. The Fund's Investor share class received five stars for the last 3 and 5 years rated against 261 and 210 U.S. domiciled Foreign Large Value funds, respectively, and four stars for the past 10 years, rated against 136 U.S. domiciled Foreign Large Value funds. 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

$8.94
Daily Price (NAV)
as of 11/22/2017
Symbol DOMIX
Daily NAV Change $-0.01 (-0.11%)

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 10/31/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX23.05%22.69%8.38%11.00%1.60%2.44%
MSCI EAFE (gross)22.31%24.01%6.58%9.01%1.58%3.11%
MSCI EAFE (net)21.78%23.44%6.08%8.53%1.10%2.83%
Quarter-End Returns as of 9/30/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX21.14%19.98%7.77%10.93%1.79%2.31%
MSCI EAFE (gross)20.47%19.65%5.53%8.87%1.82%2.99%
MSCI EAFE (net)19.96%19.10%5.04%8.38%1.34%2.71%

Calendar Year Returns
DOMIXMSCI EAFE (gross)MSCI EAFE (net)
20163.05%1.51%1.01%
20151.76%-0.39%-0.82%
2014-3.27%-4.48%-4.90%
201325.77%23.29%22.79%
201222.53%17.90%17.32%
2011-13.45%-11.73%-12.13%
201011.25%8.21%7.74%
200928.68%32.45%31.79%
2008-46.65%-43.06%-43.39%
20072.22%11.62%11.18%

Quarterly Returns
DOMIXMSCI EAFE (gross)MSCI EAFE (net)
3rd Qtr 20174.47%5.47%5.40%
2nd Qtr 20176.01%6.37%6.12%
1st Qtr 20179.39%7.39%7.25%
4th Qtr 2016-0.96%-0.68%
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: 1.46% / Net: 1.46%. 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 10/31/17
COMPANY% OF PORTFOLIO
Sanofi2.8%
Allianz SE-Reg2.4%
Kering2.2%
Unilever PLC2.1%
Nissan Motor Co. Ltd.2.0%
Central Japan Railway Co.1.9%
Sandvik AB1.7%
DBS Group Holdings Ltd.1.6%
Compagnie de Saint-Gobain1.5%
Peugeot SA1.5%
TOTAL19.9%

Sector Weightings as of 9/30/17
SECTOR% OF PORTFOLIO
Financials24.0%
Industrials16.8%
Consumer Discretionary15.3%
Consumer Staples9.0%
Information Technology8.4%
Health Care7.6%
Real Estate6.5%
Materials6.2%
Telecommunication Services3.4%
Energy2.1%
Utilities0.8%
Total100.0%
Country Diversification as of 9/30/17
COUNTRY% OF PORTFOLIO
Japan21.9%
France14.7%
United Kingdom12.2%
Germany8.4%
Sweden5.6%
Switzerland5.5%
Australia4.5%
Netherlands4.3%
Hong Kong2.8%
Spain2.8%
Singapore2.4%
Denmark2.3%
Norway1.7%
Turkey1.7%
Other9.1%
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 international equity fund.

 

Investment Style:

Blend

Weighted Average Market Capitalization:

Large

Portfolio Statistics

  DOMIX MSCI EAFE*
Price-to-Earnings Ratio (projected) 12.4x 14.5x
Price-to-Book Ratio 1.4x 1.7x
Beta (projected) 1.03 --
R-squared (projected) 0.97 --
Total Number of Holdings 174 913

All data as of 9/30/17.

*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, 2017

  July
2017
Aug
2017
Sep
2017
3rd Qtr
2017
YTD One
Year
Three
Year1
Five
Year1
Ten
Year1
Since Inception
(12/27/06)1
DOMIX 3.06% 0.11% 1.25% 4.47% 21.14% 19.98% 7.77% 10.93% 1.79% 2.31%
MSCI EAFE (gross) 2.89% -0.02% 2.53% 5.47% 20.47% 19.65% 5.53% 8.87% 1.82% 2.99%
MSCI EAFE (net) 2.88% -0.04% 2.49% 5.40% 19.96% 19.10% 5.04% 8.38% 1.34% 2.71%

Market Overview

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.

 

Fund Performance

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.

Top Relative Contributors

Company Sector Stock Return*
Nine Dragons Paper Holdings Limited Materials 48.49%
Kering Consumer Discretionary 17.14%
Nestlé S.A.** Consumer Staples -3.82%
STMicroelectronics N.V. Information Technology 35.40%
Peugeot S.A. Consumer Discretionary 19.65%

Top Relative Detractors

Company Sector Stock Return*
Asahi Glass Co., Ltd. Industrials -11.90%
Merck KGaA Health Care -7.71%
Aena SME, S.A. Industrials -7.32%
Royal Dutch Shell plc** Energy 16.37%
mixi, Inc. Information Technology -12.39%
*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 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%.

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.