Domini Impact International Equity Fund

As of 4/30/17. The Fund's Investor share class received five stars for the last 3 and 5 years rated against 269 and 222 U.S. domiciled Foreign Large Value funds, respectively, and three stars for the past 10 years, rated against 135 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

$8.74
Daily Price (NAV)
as of 07/26/2017
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 6/30/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX15.96%22.33%4.50%11.72%1.34%1.94%
MSCI EAFE (gross)14.23%20.83%1.61%9.18%1.50%2.55%
MSCI EAFE (net)13.81%20.27%1.15%8.69%1.03%2.26%
Quarter-End Returns as of 6/30/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX15.96%22.33%4.50%11.72%1.34%1.94%
MSCI EAFE (gross)14.23%20.83%1.61%9.18%1.50%2.55%
MSCI EAFE (net)13.81%20.27%1.15%8.69%1.03%2.26%

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)
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 6/30/17
COMPANY% OF PORTFOLIO
Sanofi3.0%
Unilever PLC2.4%
Nissan Motor Co. Ltd.2.0%
Kering1.9%
Siemens AG1.8%
Merck KGaA1.8%
Allianz SE Reg1.8%
Compagnie de Saint Gobain1.8%
Sandvik AB1.7%
Adecco Sa-Reg1.7%
TOTAL19.8%

Sector Weightings as of 6/30/17
SECTOR% OF PORTFOLIO
Financials24.6%
Industrials17.6%
Consumer Discretionary12.2%
Consumer Staples9.8%
Information Technology8.9%
Health Care8.3%
Real Estate6.5%
Materials5.9%
Telecommunication Services3.5%
Utilities1.3%
Energy1.2%
Total100.0%
Country Diversification as of 6/30/17
COUNTRY% OF PORTFOLIO
Japan22.4%
France12.9%
United Kingdom12.8%
Germany10.0%
Sweden5.5%
Australia4.6%
Switzerland4.4%
Spain4.2%
Hong Kong3.4%
Netherlands3.3%
South Korea2.0%
Taiwan1.9%
Singapore1.8%
Denmark1.7%
Other9.2%
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) 12.5x 14.0x
Price-to-Book Ratio 1.3x 1.7x
Beta (projected) 1.04 --
R-squared (projected) 0.98 --
Total Number of Holdings 161 914

All data as of 6/30/17.

*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 June 30, 2017

  Apr
2017
May
2017
June
2017
2nd Qtr
2017
YTD One
Year
Three
Year1
Five
Year1
Ten
Year1
Since Inception
(12/27/06)1
DOMIX 3.61% 2.88% -0.55% 6.01% 15.96% 22.33% 4.50% 11.72% 1.34% 1.94%
MSCI EAFE (gross) 2.62% 3.81% -0.15% 6.37% 14.23% 20.83% 1.61% 9.18% 1.50% 2.55%
MSCI EAFE (net) 2.54% 3.67% -0.18% 6.12% 13.81% 20.27% 1.15% 8.69% 1.03% 2.26%

Market Overview

For the second quarter of 2017, international equities remained in positive territory, with the MSCI EAFE Index returning 6.12%2. Despite heightened geopolitical risks and political uncertainty in Europe, equity markets were resilient, fueled by generally solid economic data and strong corporate earnings growth. European markets rallied around the results of France’s presidential election, which saw centrist Emmanuel Macron soundly defeat Marine Le Pen, providing needed reassurance around the stability of the European Union. Economic indicators out of the Eurozone suggested that regional growth momentum remains strong: the composite purchasing managers’ index held steady at a six-year high as manufacturing and services exceeded expectations, unemployment fell to its lowest level since the global financial crisis, and consumer confidence improved. However, volatility sparked in June after inflation dropped below the European Central Bank’s target, casting increased uncertainty over the pace on which the ECB should rein in its stimulus program.

Conversely, In the United Kingdom inflation accelerated to its fastest pace in nearly four years, prompting consumers to reduce discretionary spending and causing retail sales to tumble. Risk uncertainties escalated significantly after the snap election on June 8 backfired against Prime Minister Theresa May, who called the election in an attempt to strengthen her hand going into Brexit negotiations, but instead wound up losing her Conservative majority in Parliament. The resulting increase in uncertainty over the Brexit timetable further exacerbated concerns over the UK’s leadership and caused the British pound to fall.

Stocks in the Asia-Pacific region advanced for the fourth consecutive quarter. In Hong Kong, GDP growth accelerated, manufacturing data turned positive, and international visitors increased. In Japan, equities received continued support from the Bank of Japan’s ongoing accommodative monetary policy, as well as improving export growth and business sentiment. Although inflation is on an uptrend, it remains well below the central bank target of 2%. Australia underperformed the region, despite a falling unemployment rate, as manufacturing growth and consumer sentiment dipped.

Emerging markets had a very strong quarter, fueled by improving economic conditions, a weaker U.S. dollar, and upbeat corporate earnings. Asia drove the majority of gains, led by South Korea, which was boosted by receding political noise and strong corporate earnings, and China, which was supported by better-than-expected real estate sales in third-tier cities and MSCI’s decision to add China A-Shares to emerging market indexes.

 

Fund Performance

For the quarter, the Fund’s Investor shares returned 6.01%, modestly underperforming the MSCI EAFE Index net return of 6.12%2. Security selection was neutral, with strong selection in Consumer Discretionary and Financials offset by weaker selection in Consumer Staples, Energy and Information Technology. Sector allocation made a slight positive contribution to relative performance, thanks mainly to an underweight to Energy, which was the quarter’s worst performing sector.

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*
Kering Consumer Discretionary 28.08%
Aena S.A. Industrials 24.88%
3i Group plc Financials 27.70%
Crédit Agricole S.A. Financials 23.29%
ING Groep N.V. Financials 16.75%

Top Relative Detractors

Company Sector Stock Return*
Nestlé S.A.** Consumer Staples 16.95%
Fortescue Metals Group Ltd. Materials -15.75%
Südzucker AG Consumer Staples -17.09%
Banco do Brasil S.A. Financials -24.91%
Wharf Holdings Ltd. Real Estate -3.45%
*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 French luxury goods company Kering, which gained more than 28% for the quarter after reporting first-quarter results that far surpassed expectations. Improving Chinese demand and European tourism are providing a boost for luxury brands, and Kering is outpacing peers. Comparable sales improved 28.6% from prior-year quarter, driven by 48% growth for Kering’s largest brand, Gucci—its strongest quarterly growth in more than 20 years. The Saint Laurent brand also saw strong sales growth at 33%, while Bottega Veneta unexpectedly reversed its decline.

Spain’s Aena, which is primarily engaged in the operation of airports, was the second largest contributor for the quarter, returning almost 25%. Aena reported above-consensus results for the first quarter, driven by better-than-expected cost control, lower interest costs, volume growth in Spain, and across-theboard higher revenue.

The other top contributors this quarter came from the Financials sector. UK-based private equity and venture capital company 3i Group returned almost 28% for the quarter, reporting a 93% increase in total return for the year ended March 31, driven by gains in its private equity and infrastructure investments. Banking and financial services groups Crédit Agricole, based in France, and ING Groep, based in the Netherlands, respectively returned over 23% and almost 17%. The European banking sector, and French banks in particular, were fueled by Macron’s victory. With the political risk diminished and less cause for uncertainty on Europe’s macroeconomic recovery, investors refocused their attention on banks’ solid fundamentals, including strong credit and deposit growth and improving margin dynamics thanks to the steepening yield curve.

The largest individual detractor to relative performance this quarter was a benchmark holding that the Fund did not own: Swiss food and beverage company Nestlé, which gained almost 17% this quarter. Nestlé is not approved for investment by the Domini Funds primarily due to its leading role in the infant formula and bottled water industries, and related concerns.

The largest relative detractor that the Fund did hold was Australia’s Fortescue Metals, which declined almost 16%, as an oversupply of iron ore caused worse-than-expected pricing and shipments, leading to lower production and higher costs. Fortescue lowered full-year guidance as the price for iron ore hit a disappointing low.

Among the other largest detractors were two non-benchmark holdings: Südzucker, a German company engaged in the processing of sugar and other agricultural raw materials, and Banco do Brasil, a Brazilian financial services group. Südzucker fell more than 17% during the quarter, as progress for fiscal year 2018 is threatened by less-than-favorable trends in commodity markets. Banco do Brasil dropped almost 25% during the period held during the quarter amid declines driven by losses from small-and-medium-enterprise and auto loans.

The Fund’s overweight position in Hong Kong real estate company Wharf Holdings was another significant detractor, as stock pulled back more than 3%.

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.