Domini International Social Equity Fund

As of 1/31/16. The Fund's Investor Share Class was rated against 286 and 253 U.S. domiciled Foreign Large Value funds for the last three and five 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 International Social Equity Fund SM

Fund Information

$6.50
Daily Price (NAV)
as of 2/12/2016
Symbol DOMIX
Daily NAV Change $0.05 (0.78%)

Overview

Investor Shares Overview

The Domini International Social 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 Social 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 Social 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 1/31/16
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX-4.68%-5.31%4.04%4.03%NA-0.27%
MSCI EAFE-7.22%-8.04%1.11%2.04%NA0.46%
Quarter-End Returns as of 12/31/15
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/06)*
DOMIX1.76%1.76%7.38%5.60%NA0.26%
MSCI EAFE-0.39%-0.39%5.46%4.07%NA1.30%

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
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: 1.59% / Net: 1.59%. Per current prospectus. Domini has contractually agreed to cap Investor share expenses to not exceed 1.60% until 11/30/16, 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 12/31/15
COMPANY% OF PORTFOLIO
Sanofi2.5%
Central Japan Railway Co.2.1%
Orange2.1%
AXA SA2.0%
Vivendi2.0%
ING Groep NV CVA1.9%
Swiss Re AG1.8%
Allianz SE1.7%
Koninklijke Ahold NV1.7%
Marks & Spencer Group plc1.7%
TOTAL19.4%

Sector Weightings as of 12/31/15
SECTOR% OF PORTFOLIO
Financials28.4%
Consumer Discretionary17.7%
Industrials14.3%
Health Care8.9%
Consumer Staples8.8%
Information Technology7.9%
Telecommunication Services6.9%
Materials4.6%
Energy1.8%
Utilities0.8%
Total100.0%
Country Diversification as of 12/31/15
COUNTRY% OF PORTFOLIO
Japan19.0%
United Kingdom16.2%
France13.0%
Switzerland7.1%
Germany5.9%
Netherlands5.9%
Australia5.8%
Sweden3.0%
Denmark2.7%
Finland2.7%
South Korea2.2%
Hong Kong2.1%
South Africa2.0%
Norway1.8%
Italy1.6%
Other9.0%
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) 14.0 14.1
Price-to-Book Ratio 1.4 1.6
Beta (projected) 1.02 --
R-squared (projected) 0.98 --
Total Number of Holdings 136 --

All data as of 12/31/15.

*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 Social 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 December 31, 2015

  Oct
2015
Nov
2015
Dec
2015
4th Qtr
2015
YTD One
Year
Three
Year*
Five
Year*
Since Inception
(12/27/06)*†
DOMIX 7.11% -2.55% -1.96% 2.33% 1.76% 1.76% 7.38% 5.60% 0.26%
MSCI EAFE 7.82% -1.54% -1.33% 4.75% -0.39% -0.39% 5.46% 4.07% 1.30%

Market Overview

After a turbulent third quarter, in which fears of an economic slowdown in China rattled financial markets, global equities recovered significantly in the fourth quarter. Monetary policy accommodation by major central banks helped to ease concerns over slowed growth and support equity markets, as the European Central Bank (ECB) and the Bank of Japan (BOJ) announced additional quantitative easing measures, and the People’s Bank of China (PBOC) cut interest rates and reserve requirements. Meanwhile, monetary policy diverted in the U.S., as the Federal Reserve Bank, encouraged by continued signs of U.S. economic health, finally moved forward with a much-anticipated interest-rate hike in December, the first in nearly a decade. Robust mergers and acquisitions activity helped to fuel positive sentiment, as global M&A volume rose beyond $5 trillion for 2015, setting a new annual record.

European equities climbed for the first time in three quarters, despite disappointment with the magnitude of the ECB’s stimulus measures announced in December, which were perceived to be less aggressive than signaled earlier in the quarter. European economic data was mixed, as eurozone GDP growth fell short of projections, but better-than-expected manufacturing activity and consumer confidence, as well as the lowest unemployment level in almost four years, provided encouragement. Germany led the region higher, despite the ongoing Volkswagen scandal and weaker demand from China. Gains were more modest in France, where business sentiment fell in the wake of November’s terrorist attacks. Gains were also more modest in the UK, where unemployment fell to its lowest level in nearly ten years, but GDP growth slowed more than expected, dragged down by weaker growth in the services sector. 

Stocks rallied in the Asia-Pacific region, led by Japan, whose economy returned to growth in the third quarter after contracting in the second quarter, and manufacturing growth hitting a 20-month high in November. Emerging-market equities stabilized, mainly driven by outperformance in Asia, as Chinese equities reacted positively to the PBOC’s measures to support the economy. Nonetheless, stocks continued to decline in emerging markets in Latin America and Europe, the Middle East, and Africa (EMEA). Brazil, Latin America’s largest economy, was hit with another credit downgrade, prompting its finance minister to resign in December. South Africa also had its credit rating downgraded amid rising fiscal and political uncertainty after a variety of questionable decisions by South Africa’s President, Jacob Zuma, including the appointment of the country’s third finance minister in the space of one week.

Fund Performance

For the quarter, the Fund's Investor shares returned 2.33%, underperforming the MSCI EAFE Index return of 4.75%. The primary driver of underperformance was security selection, as positive selection within financials was more than offset by weaker selection within the health care, information technology, and consumer discretionary sectors.

The Fund’s top two contributors to relative performance this quarter were Danish and German wind-turbine manufacturers Vestas Wind Systems and non-benchmark holding Nordex, which gained 35% and 30%, respectively. Both companies reported strong results for the third quarter, surpassing consensus estimates. Both companies also took important strategic steps to accelerate international expansion. Vestas acquired UpWind Solutions, a U.S. independent service provider, in an effort to expand its footprint in North America. Meanwhile, Nordex acquired AWP, the windturbine business of Spain’s Acciona Group, as part of its strategy to grow and diversify further in the Americas and emerging markets. The landmark agreement reached by world leaders at the COP 21 Paris Climate summit, as well as the extension of the Production Tax Credit for wind-power projects in the U.S., was a particularly important short-term growth driver for Vestas.

Unfortunately, these positive contributions were more than offset by poor performance from a number of other holdings. The largest detractor from performance this quarter was French pharmaceutical company Sanofi, which declined almost 10% after reporting underwhelming results and lowering guidance for the year. Earnings were below consensus estimates, driven by disappointing sales for its diabetes franchise, which management believes will remain challenged in the near-term and for which it projects a global decline annually through 2018. 

Another significant detractor was Marks & Spencer, a UK-based retailer of clothing, home products, and foods, which declined 11% despite reporting positive half-year results. The company is facing increased skepticism around a sustainable recovery, as it continues to see consistent sales declines and market-shares losses in general merchandise. It also faces additional concerns over execution risks from the ongoing reorganization of its distribution center network and an expensive undertaking to improve the state of its stores. 

Non-benchmark holding Sims Metal Management, an Australian metals and electronics recycler, also detracted significantly, dropping more than 21% after providing a profit warning in early November, acknowledging that the global scrap market is structurally impaired and that a near-term recovery is highly unlikely. Significantly lower scrap prices caused volumes to fall in the third quarter, but the company was able to offset the earnings impact through a focus on cost savings.

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.

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.

Addressing Corporate Tax Avoidance

One of the most important areas of corporate social responsibility has gone largely ignored, until now. The headlines are filled with stories of aggressive strategies by corporations to minimize or eliminate their tax payments, primarily through the use of offshore tax havens. Countries around the world are losing billions in tax revenues, all in the name of shareholder value.

Tax avoidance weakens societies and threatens long-term wealth creation. That is why Domini is taking a lead role in asking corporations to adopt more responsible and transparent 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.