Domini International Social Equity Fund

As of 8/31/16. The Fund's Class A Share Class was rated against 286 and 236 U.S. domiciled Foreign Large Value funds for the last 3 and 5 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

$7.93
Daily Price (NAV)
as of 09/23/2016
Symbol DOMAX
Daily NAV Change $-0.05 (-0.63%)

Overview

Class A Shares Overview

Class A shares are intended for investors who invest through a financial advisor. They carry a front-end sales charge (load) that is paid to the advisor buying the Fund on behalf of the investor. If you do not invest through a financial advisor, please refer to the Investor shares.

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

Class A Shares Performance

Month-End Returns as of 8/31/16
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/2006)*
DOMAX (without load)2.65%1.29%4.79%7.37%NA0.50%
DOMAX (with max. load)-2.22%-3.52%3.10%6.32%NA0.00%
MSCI EAFE0.92%0.38%2.93%5.48%NA1.30%
Quarter-End Returns as of 6/30/16
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (12/27/2006)*
DOMAX (without load)-2.22%-7.70%4.36%3.55%NA0.00%
DOMAX (with max. load)-6.87%-12.09%2.68%2.55%NA-0.51%
MSCI EAFE-4.04%-9.72%2.52%2.15%NA0.79%

Calendar Year Returns
DOMAX (without load)MSCI EAFE
20151.74%-0.39%
2014-3.34%-4.48%
201326.04%23.29%
201222.42%17.90%
2011-13.50%-11.73%
201011.32%8.21%
200928.99%32.45%
2008-46.65%-43.06%
20072.22%11.62%

Quarterly Returns
DOMAX (without load)MSCI EAFE
2nd Qtr 2016-3.49%-1.19%
1st Qtr 20161.31%-2.88%
4th Qtr 20152.27%4.75%
3rd Qtr 2015-7.70%-10.19%
2nd Qtr 20151.71%0.84%
1st Qtr 20155.95%5.00%
4th Qtr 2014-1.50%-3.53%
3rd Qtr 2014-4.77%-5.83%
2nd Qtr 20142.68%4.34%
1st Qtr 20140.35%0.77%
4th Qtr 20136.27%5.75%
3rd Qtr 201311.23%11.61%
2nd Qtr 2013-0.85%-0.73%
1st Qtr 20137.54%5.23%

*Average annual total returns

Annual Expense Ratio: Gross: 1.68% / Net: 1.57%. Per current prospectus. Domini has contractually agreed to cap Class A share expenses to not exceed 1.57% 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.

The Fund's Class A shares are subject to a front-end sales charge of up to 4.75%. The quarterly and calendar year performance tables above do not reflect the deduction of this sales charge. If the sales charge were reflected, the performance would have been lower.

A shares were not offered prior to 11/28/08. All performance information for time periods beginning prior to that date is the performance of the Investor shares. This performance has not been adjusted to reflect the lower expenses of the Class A shares, but does reflect an adjustment for the maximum applicable sales charges of 4.75%, except where noted above.

Holdings


Ten Largest Holdings as of 8/31/16
COMPANY% OF PORTFOLIO
Nissan Motor Co. Ltd.2.4%
Vodafone Group plc2.1%
Allianz SE2.0%
Central Japan Railway Co.1.9%
ING Groep NV1.9%
Vestas Wind Systems A/S1.9%
Norsk Hydro ASA1.8%
Kingfisher plc1.8%
AXA SA1.7%
Orange1.7%
TOTAL19.2%

Sector Weightings as of 6/30/16
SECTOR% OF PORTFOLIO
Financials26.9%
Industrials14.7%
Consumer Discretionary14.7%
Consumer Staples10.1%
Health Care9.7%
Telecommunication Services7.6%
Information Technology6.4%
Materials5.9%
Energy3.0%
Utilities1.0%
Total100.0%
Country Diversification as of 6/30/16
COUNTRY% OF PORTFOLIO
Japan20.0%
United Kingdom15.4%
France12.4%
Germany8.8%
Australia7.6%
Switzerland5.9%
Netherlands4.9%
Sweden3.1%
Hong Kong2.3%
South Korea2.2%
Denmark2.0%
Norway2.0%
Brazil1.8%
Italy1.7%
Turkey1.6%
Other8.5%
Total100.0%

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

Formerly the Domini European PacAsia Social Equity Fund.

Characteristics

Portfolio Overview

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

 

Investment Style:

Blend

Weighted Average Market Capitalization:

Large

Portfolio Statistics

  DOMAX MSCI EAFE*
Price-to-Earnings Ratio (projected) 11.8 12.7
Price-to-Book Ratio 1.1 1.4
Beta (projected) 1.02 --
R-squared (projected) 0.98 --
Total Number of Holdings 152 --

All data as of 6/30/16.

*The Morgan Stanley Capital International Europe, Australia, 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

Class A 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 June 30, 2016

  April
2016
May
2016
June
2016
2nd Qtr
2016
YTD One
Year
Three
Year2
Five
Year2
Since Inception (12/27/06)2,3
DOMAX
(without load)
1.81%  -0.51% -4.72% -3.49% -2.22% -7.70% 4.36% 3.55% 0.00%
DOMAX
(with max. load1)
-3.02% -5.23% -9.24% -8.07% -6.87% -12.09% 2.68% 2.55% -0.51%
MSCI EAFE 3.00% -0.78% -3.32% -1.19% -4.04% -9.72% 2.52% 2.15% 0.79%

Market Overview

The second quarter was marked by global economic uncertainty. After a long and contentious campaign that weighed on investors’ risk sentiment throughout the quarter, the UK unexpectedly voted to leave the EU on June 23, creating tumult throughout global financial markets in the final days of the quarter. While the timing and details of how “Brexit” will play out remain unclear, it will change the way that trade, immigration, and international relations are handled between the UK and the EU following decades of close economic and social integration, and it will have significant repercussions for companies operating in Europe, the UK, and around the world. Nonetheless, despite the shadow that Brexit has cast over financial markets, the global economic backdrop painted during the second quarter looked promising.

Encouraging economic data releases from around Europe and the European Central Bank’s (ECB) reaffirmation of its accommodative monetary policy stance helped to support European equities. An increase in investment drove better-than-expected eurozone GDP growth of 1.7% in the first quarter, industrial production rebounded in May after declining in April, and the manufacturing Purchasing Manager’s Index rose well above expectations in June. In the UK, wage growth picked up as the jobless rate fell to its lowest level in over a decade. In France, first-quarter GDP growth was better than expected thanks to a rise in business investment and in Germany, unemployment hit a record low, factory orders rebounded on strong exports, and investment growth accelerated to its fastest pace in two years. However, stocks pulled back at the end of the quarter following the Brexit vote, and most European currencies fell against the U.S. dollar, diminishing returns for U.S. investors. The British pound suffered the most, falling to a near 31-year low.

The outlook was mixed in the Asia-Pacific region, where stocks declined sharply following the Brexit vote. Japanese equities declined, as machine orders disappointed and exports fell due to declining shipments to Europe, China, and the U.S. However, first-quarter GDP grew at a better-than-expected 1.9%, and a surge in the yen to its highest levels since 2013 helped to offset negative returns for U.S. investors. Australian stocks were the strongest in the region, as unemployment fell to its lowest level in two and a half years, while Singapore benefitted from a surge in exports, and Hong Kong saw better-than-expected exports and retail sales.

Emerging markets around the world were supported by the U.S. Federal Reserve Bank’s deferral of an anticipated interest rate hike, easing U.S. dollar strength, and accommodative monetary policy decisions from a number of central banks, including those in South Korea, Indonesia, and Taiwan. Markets stabilized in China, helped by improving signs from economic data releases and an emphasis by the central bank on currency stability. In Latin America, politics continued to dominate the news. Brazilian equities rose on upbeat economic data and rising consumer confidence, boosted by a surge in the Brazilian real following the impeachment of President Dilma Rousseff. Vice President Michel Temer took over as acting president and quickly named a new Cabinet perceived to be more market-friendly.

Fund Performance

For the quarter, the Fund’s Class A shares (without load) declined 3.49%, underperforming the MSCI EAFE Index, which declined 1.19%. The primary driver of underperformance was security selection, with weak selection in the consumer discretionary, energy, consumer staples, and materials sectors more than offsetting stronger selection in the financials and health care sectors. Sector allocations also detracted from performance due to overweights to the underperforming consumer discretionary and financials sectors, and underweights to the better performing energy, health care and consumer staples sectors.

Among the top contributors to relative performance were non-benchmark emerging-market positions. The top contributor was Brazil’s BM&FBOVESPA, which is primarily engaged in the operation of the São Paulo stock exchange. The stock returned 29.8%, thanks to strong non-trading revenues and solid equity and derivatives revenues, which were up on both a quarter-by-quarter and year-over-year basis. 

     

Another non-benchmark emerging-market position that made a strong positive contribution to relative performance was Telekom Indonesia, which rose 23.4%. The company reported strong results for the first quarter, driven by strong year-over-year data revenue growth, as its 3G/4G subscriber base grew to 64.5 million customers.

Several top contributors this quarter came out of Japan, where returns were also boosted by a recovery in the yen. These included Dai Nippon Printing, which rose 24.4% after reporting better-than-expected earnings growth of 27% for its fiscal year ended March 31; and Otsuka Holdings (the parent company of Otsuka Pharmaceutical), which climbed 27.8% after analysts upgraded the stock on the expectation that earnings will begin to recover in the second half of the year, and the company reported better-than-expected first-quarter results. 

Unfortunately, strong performance from these names was offset by weaker performance elsewhere. Most of the largest detractors this quarter came out of Europe, particularly the UK and France. The single largest detractor was French car manufacturer Peugeot, which declined 29.9% after reporting mixed results for the first quarter, with revenues down from the fourth quarter. The stock fell sharply on Brexit news due to its overexposure to the UK market, where it generates over €3 billion in revenues a year. Another French car manufacturer Renault was also a significant detractor from performance.

British housebuilders Persimmon and Berkeley Group were also top detractors in the wake of Brexit, declining 35.5% and 27.1%, respectively, amid fears that a slowing British economy could result in job losses and tightening mortgage-lending conditions, which would sink transaction volumes. Prior to the uncertainty Brexit created for the UK’s property market, Persimmon reported strong first-quarter results, with private sales, visitor rates on site, and total order book all up year-over-year. Among the other UK stocks that were top detractors from performance this quarter was supermarket chain Sainsbury’s, which declined 19.3% after reporting a second straight year of profit decline, dragged down by low food prices due to intense competitive pressures that management does not expect to ease up for the foreseeable future. 

Flight Centre Travel, an Australian travel agency group, was also a top detractor from relative performance, declining 29.2% for the quarter after management cut guidance for fiscal-year 2016 as a result of increasing uncertainty due to upcoming federal elections in Australia and the U.S., the Zika outbreak, and the UK referendum.

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

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.