UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-21653
DOMINI ADVISOR TRUST
(Exact Name of Registrant as Specified in Charter)
536 Broadway, 7th Floor, New York, New York 10012
(Address of Principal Executive Offices)
Amy Domini Thornton
Domini Social Investments LLC
536 Broadway, 7th Floor
New York, New York 10012
(Name and Address of Agent for Service)
Registrant’s Telephone Number, including Area Code: 212-217-1100
Date of Fiscal Year End: July 31
Date of Reporting Period: July 31, 2007
Item 1. | Reports to Stockholders. |
A copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 follows.
TABLE OF CONTENTS
| 2 |
| Letter from the President |
| 4 |
| Domini News |
| 5 |
| The Way You Invest Matters: Climate Change |
| 10 |
| The Way You Invest Matters: Activism |
|
| Fund Performance and Holdings | |
| 11 |
| Economic and Market Background |
| 14 |
| Domini Social Equity Portfolio |
| 20 |
| Domini European Social Equity Portfolio |
| 27 |
| Domini PacAsia Social Equity Portfolio |
| 35 |
| Domini EuroPacific Social Equity Portfolio |
| 44 |
| Expense Example |
| 47 |
| Financial Statements |
|
| Domini Social Equity Trust | |
|
| Domini European Social Equity Trust | |
|
| Domini PacAsia Social Equity Trust | |
|
| Domini EuroPacific Social Equity Trust | |
|
| Report of Independent Registered Public Accounting Firm | |
| 62 |
| Financial Statements |
|
| Domini Social Equity Portfolio | |
|
| Domini European Social Equity Portfolio | |
|
| Domini PacAsia Social Equity Portfolio | |
|
| Domini EuroPacific Social Equity Portfolio | |
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| Report of Independent Registered Public Accounting Firm | |
| 79 |
| Board of Trustees’ Consideration of Management and Submanagement Agreements |
| 85 |
| Trustees and Officers |
| 90 |
| Proxy Voting Information |
| 90 |
| Quarterly Portfolio Schedule Information |
THE WAY YOU INVEST MATTERS |
LETTER FROM THE PRESIDENT
Dear Fellow Shareholders:
These have been twelve difficult months for many Americans, offering reasons for worry but also opportunities to make a difference. The Iraq war drags on, and even its supporters have become discouraged. Extreme weather conditions — including a tornado that touched down a mere six miles from our New York offices — highlight a climate crisis driven by our dependence on oil. The cost of filling our gas tanks has gone so high that people go into debt just to pay their bills. More and more families face foreclosure, in many cases because a deceptive financing company has sold them a mortgage they can’t afford.
Our highways are collapsing, just as the levees failed in Louisiana. Billions of dollars once invested in America’s infrastructure continue to pour into war, and into corporate welfare for pharmaceutical, agricultural, and weapons companies. Government functions have been transferred into corporate hands, often via no-bid contracts that prioritize private profit over public good.
So where do we see opportunities? Two recent trends show promise, and both connect directly to the work that you and I do as social investors.
First, some leading corporations are coming to realize their responsibility to people and the planet. Global warming presents an interesting example. Here in the U.S., some companies are far ahead of government, which has so far utterly failed to play its part. Several years back, when Domini began to talk to companies about climate change, it seemed unlikely that corporations — including many that don’t meet Domini’s investment standards — would lobby for regulation of carbon. But today many of them do. Social investors played a crucial role here, and in this report we highlight ways in which your investments matter in seeking solutions to climate change.
Second, strong global markets have in recent years been driven largely by developments beyond our borders. What baby boomers did for the 20th century American economy, the emerging economies are now doing for global growth and prosperity.
The widely touted “three billion new consumers” in emerging economies have created a huge new market for products and services that we in the West now take for granted: cell phones, potable water, transportation and energy systems. New technologies offer these countries a chance to develop faster, more efficiently, and with less environmental damage than we experienced in the West. Yet we find ourselves at a fork in the road, as these emerging populations grow so quickly that the future cannot come fast enough. They demand oil and coal, paper, timber, and weapons; they foul their waters with mercury and cover their exports with lead paint.
Our challenge, as social investors, is to emphasize the future while managing the present. Our role, internationally, is the same as it has been
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THE WAY YOU INVEST MATTERS |
in the U.S.: telling companies, through our investments, that they must behave responsibly toward the environment and communities that are the foundation of their prosperity.
We at Domini are proud of our decision to invest globally. Our funds now enable us to communicate your values of fairness and sustainability to companies around the world, and to make an impact on a global scale. Corporations need to know that there are investors who believe that responsibility to people and the planet matter just as much as rewards for executives and Wall Street. Together, we are perfectly positioned to deliver that crucial message.
Thank you, as always, for your decision to invest with us.
Very truly yours,
Amy Domini
amy@domini.com
KEEP IN TOUCH WITH DOMINI |
If you’re a Domini shareholder, you receive a report like this twice each year. But your dollars are working for change all year long, and now there’s a great way to stay in touch. When you sign up for Domini Updates, here’s what you’ll get:
• | Our email newsletter Investing Matters, with convenient links to quarterly Social Impact Updates and fund commentaries. |
• | Domini Action Alerts, giving you an opportunity to speak out on issues from child labor to global warming. (More than 400 people responded to our recent Action Alert asking the SEC to preserve ordinary investors’ right to file shareholder resolutions. We know our voices were heard, as the SEC cited Domini’s email in its resulting proposal.) |
To get Domini Updates, visit www.domini.com and sign up on our home page.
We will not “spam” you or overwhelm you with emails, and we will never sell or rent your email address to anyone, for any reason. (Please visit our website for more information about our Privacy Policy.) And you can, of course, unsubscribe from Domini Updates at any time.
If you invest directly with Domini, you can also sign up for paperless E-Delivery of your statements and reports — just log into your account and select E-Delivery from the “Account Maintenance” drop-down menu. If you invest through a financial advisor, brokerage firm, or employer-sponsored retirement plan, why not ask your advisor or plan sponsor how to receive your documents electronically? It can reduce your carbon footprint, save trees, and unclutter your life, all with just a few strokes of your keyboard!
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THE WAY YOU INVEST MATTERS |
DOMINI NEWS
Protecting Shareholders’ Voices: On behalf of our investors, Domini has filed or co-filed about 150 shareholder resolutions since 1994, and voted in favor of hundreds more — helping us convince companies to report greenhouse gas emissions, publish sustainability reports, disclose political contributions, prohibit discrimination against gay and lesbian employees, and more.
In late July, a sharply divided Securities and Exchange Commission proposed two rules governing the nomination of corporate directors. The SEC also raised questions that could eliminate or severely impair shareholders’ ability to file resolutions if they become the basis of a formal rule. In the run-up to the SEC’s July meeting, more than 400 people had responded to a Domini Action Alert in defense of shareholder rights. Their comments gained the attention of the SEC, which referred to them in a footnote to its proposal.
This important issue remains unresolved, and we continue to work with our colleagues around the world to protect these critical tools for corporate accountability. We encourage you to visit www.domini.com to sign up for email updates, including future Action Alerts on matters impacting corporate accountability and social investing.
Domini Votes for Change: A recent study published at www.fundvotes.com highlighted the wide gap in the use of proxy votes between “mainstream” and socially responsible mutual funds. Mainstream fund companies examined in the study voted for only 13% of the social and environmental proxy resolutions presented to them, including resolutions on global warming. Socially responsible fund families, as a group, voted for 83% of the resolutions on average, and Domini voted for 94% of them. Domini was one of four mutual fund managers rated “most activist” in the most recent assessment by The Corporate Library, a respected information source on corporate governance.
New International Funds Gain Assets: Just seven months after their launch, the Domini PacAsia Social Equity Trust and Domini EuroPacific Social Equity Trust have over $40 million in combined assets under management. These new funds empower shareholders to bring about social and environmental change on a global scale, drawing companies around the world into dialogue on such issues as global warming, sweatshop labor, and product safety.
Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity.
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THE WAY YOU INVEST MATTERS |
THE WAY YOU INVEST MATTERS: CLIMATE CHANGE
Climate change has become one of the pressing issues — perhaps the pressing issue — of our time.
With a clear scientific consensus about global warming and its human causes, research and discussion are focusing not on proving that climate change is occurring, but on understanding its consequences and developing ways to reverse it. These consequences are in the news virtually every day: from receding glaciers and melting polar ice to accelerating desertification, from changing crop patterns to the increasing severity of storms. Clearly, urgent action is needed.
The scale of the threat will require change at many levels of our society and economy. Certainly, government will have to take a leading role, through regulation, tax policy, and technology investment. Individual action, too, will be crucial. Changing light bulbs, riding bikes, using mass transit or fuel-efficient cars, eating locally grown foods, turning down the heat in the winter or the air conditioning in the summer — all of these, when done by enough of us, can have an impact.
Corporations must address this crisis too. Big companies decide, in large part, what kinds of products will be made available to us — and how they are manufactured, how the raw materials are mined or harvested, how they are transported to market, and how they reenter the waste stream.
Through their investments, millions of ordinary working people are the ultimate owners of the world’s corporations. On climate change, as on other important issues of sustainability and fairness, we use our investment decisions and our voice as owners to encourage companies to clean up after themselves, to innovate, to reduce emissions, and to create solutions. In this report, we look at some of the ways in which your investments are making a difference on climate change.
Domini’s Response
In addressing the climate crisis, Domini brings to bear all of the tools of the social investor — applying thoughtful investment standards, conducting in-depth company research, engaging in direct dialogue with the companies we own, speaking out for investors on public policy — in an effort to maximize our shareholders’ impact.
Our investment process begins with an in-house research team, which uses our Global Investment Standards to compile a list of eligible investments. Our subadvisors then use that list as the basis for selecting securities and constructing portfolios. (Details on Domini’s standards are available at www.domini.com.) Using a top-down/bottom-up approach, we evaluate how industries, specific business lines or “subindustries,” and finally individual companies contribute to climate change.
5
THE WAY YOU INVEST MATTERS |
Within the energy sector, for instance, we tend to favor natural gas (a relatively cleaner “transitional” fuel) over oil (a major contributor to climate change) or nuclear power (which we exclude from our portfolios due to concerns about waste disposal and nuclear weapons proliferation). Of course, alternative energy sources like wind or solar are vastly preferable to any of those, and our investment standards lead us to seek out companies like the Japanese technology firm Kyocera, which has shown a commitment to solar energy.
Key factors for a climate change evaluation can include evaluation of greenhouse gas emission reduction strategies, energy efficiency, use of renewable energy, forestry or recycling practices, and development of products that empower consumers to reduce their carbon footprint. In the energy sector, for example, the Norwegian company Statoil has addressed climate change through carbon sequestration and the use of emissions trading, while the U.S. energy companies Unit and XTO Energy derive most of their revenue fr om natural gas production and distribution. Each of these companies meets our standards for investment. Meanwhile, many of the energy companies that are common in “mainstream” mutual funds — notably, much of “Big Oil” — are excluded from Domini portfolios.
When Domini analysts evaluate a company’s sustainability record, they need information. Because social investors like ourselves are asking questions, thousands of companies now produce reports on the long-term sustainability of their business activities. It’s a business truism that what gets reported gets measured, and what gets measured gets managed. Often, a company that agrees to report its carbon emissions begins trying to reduce the emission that they now have to report.
This impact continues when we engage companies directly. In 2006, working with the Carbon Disclosure Project, we wrote to more than 200 U.S. and European companies asking them to disclose their greenhouse gas emissions and climate change policies. Domini’s efforts over the years have been credited with significant improvements in the responsiveness of U.S. companies to this global survey. After we filed shareholder resolutions and engaged them in dialogue, three oil and gas producers held by the Domini Social Equity Portfolio — Apache, Anadarko, and Devon Energy — agreed to begin public reporting about their response to climate change. Working together with other social investors, public and private pension funds, and environmental organizations, we have seen concrete change in corporate behavior taking place.
Domini has taken a lead role in pressing companies to adopt more sustainable forestry policies, as part of our overall approach to climate change. Kimberly-Clark — the manufacturer of Kleenex — recently agreed to publicly state a preference for wood fiber certified by the Forest Stewardship Council (FSC) after two years of dialogue with Domini. This signal to the marketplace, from the world’s largest tissue manufacturer, should reduce demand for wood from endangered forests, and increase demand for responsibly harvested wood. The implications for climate change are enormous.
6 | The Way You Invest Matters: Climate Change |
THE WAY YOU INVEST MATTERS |
The climate crisis has no quick and easy solutions. Facing this challenge will require that thousands of corporations worldwide begin placing sustainability at the forefront of their business decisions. On your behalf, Domini is sending companies this message.
Focus on: Transportation
While climate change is an issue that we look at across all industries, for some it plays more of a key role than for others. Transportation, for instance, is one of the three largest contributors to global warming, accounting for more than 13% of the total impact. But within this industry, some subindustries have greater impact than others, and each has its particular set of challenges.
Because fuel is an important component of transportation costs, we believe that more energy-efficient companies are well positioned to both reduce carbon emissions and maximize their profitability.
Certain modes of transportation are preferable to others in terms of their impact on the climate. Shipping by sea and rail tends to be the most fuel-efficient means of transporting goods, while air freight and long-haul trucking are much more carbon-intensive. For long-haul people-moving, there are few practical alternatives to air travel, despite its substantial negative impact on global warming, but we look closely at the business models of airline companies to see which ones are trying to minimize their impact. In local and regional transportation, public transportation by rail or bus is generally preferable. Travel by car, meanwhile, is often the least fuel-efficient method of moving people.
Within this sector, the overall shape of Fund portfolios often reflects these preferences. In addition, within each sub-industry, we seek to identify companies that are developing innovative, efficient solutions to the industry’s pressing challenges. Here are some examples:
Public Transportation
Based in the U.K., Arriva provides bus and train service in nine European countries. The company reports that it reduces its environmental impact by using a range of fuels, including ultra-low-sulfur diesel and compressed natural gas, and is conducting trials of vegetable-oil fuel in its German rail operations. In March 2007, the company introduced what the company says is the world’s first hybrid double-decker bus in London. Arriva says that all its new buses comply with the latest environmental requirements, and that older buses have been retrofitted with cleaner engines.
Central Japan Railway owns and operates a high-speed train that links the cities of the “Tokaido” region — Tokyo, Nagoya, and Osaka — and provides conventional rail service. Japan’s Minister of Environment has reportedly praised the company’s aggressive introduction of energy- efficient railroad cars. According to the company, a cogeneration system at the company’s JR Central Towers facility uses exhaust heat from power
The Way You Invest Matters: Climate Change | 7 |
THE WAY YOU INVEST MATTERS |
generation to improve energy efficiency and reduce CO2 emissions. Solar panels generate electricity at its Kyoto station and its research facility in Komaki.
Airlines
Although it is hard to envision real progress in reducing the greenhouse gas effects of the airline industry, Air France stands out for its fuel efficiency initiatives. The company says it increases fuel efficiency by reducing the weight of onboard equipment, operating with optimally clean engines, and replacing some training flights with flight simulators. The Air France fleet is also younger than the industry average. By replacing Boeing 747s with newer 777-300s, the company reports that low-altitude hydrocarbon emissions are cut by 35%, carbon monoxide by 12%, and nitrogen oxides by 8%. Air France has spoken out for a worldwide system of emissions trading, and believes that mobile sources like aircraft should be added to the European Union’s emis sions trading system.
Automobiles
Although automobiles are a significant contributor to global warming, FIAT’s fleet is reportedly one of the most fuel-efficient in Europe. Fiat’s research effort, which by 2005, according to the company, included nearly 900 employees focusing exclusively on issues of energy, environment, and sustainability, has developed prototype hybrid and fuel-cell engines, and is developing a prototype hydrogen-fueled car. Fiat manufactures cars that run on bioethanol for use in Brazil, and its Panda Natural Power car runs on compressed natural gas.
By introducing high-efficiency hybrid versions of its most popular cars, like the Civic, the Japanese automaker Honda Motor has reportedly gained 31% of the world market share for hybrid vehicles. The company has announced that it will sell advanced diesel cars to meet California’s new emissions standards, and (like Fiat) bioethanol vehicles for the Brazilian market. Honda developed and has started to sell a next- generation fuel-cell car, which emits only water.
Delivery Services
United Parcel Service reported as of December 2006 that it operated a fleet of more than 10,000 low-emission and alternative-fuel vehicles worldwide. It measures its U.S. fuel consumption in terms of gallons used per package delivered, and operates one of the largest private fleets in the country to run on compressed natural gas. The company says that its flight planning system saved nearly $1 million in fuel each month in 2005.
Through its Driving Clean program, the Dutch delivery service TNT seeks to reduce the environmental impact of its fleet of vehicles. In addition to working with the Dutch government to retrofit vehicles with diesel particulate filters, the company is investing in technology that complies with Euro 5, an environmental standard that becomes compulsory in
8 | The Way You Invest Matters: Climate Change |
THE WAY YOU INVEST MATTERS |
November 2009. The company says it has built six filling stations that supply an additive called AdBlue, which reduces nitrogen oxides from exhaust, and in 2006 it bought 165 trucks that meet the Euro 5 standard. TNT reports that it is investigating the use of hybrid vehicles in Australia and Turkey, uses compressed natural gas in Berlin, and runs about 53 vehicles in Amsterdam on canola oil. In December 2006, it reportedly introduced a high-performance 7.5-metric-ton zero emission electric vehicle for use in London.
Unlike other mutual funds, the Domini Social Equity Portfolio, Domini European Social Equity Portfolio, Domini PacAsia Social Equity Portfolio, and Domini EuroPacific Social Equity Portfolio seek to achieve their investment objectives by investing all of their investable assets, respectively, in separate portfolios with identical investment objectives called the Domini Social Equity Trust (DSET), Domini European Social Equity Trust (DESET), Domini PacAsia Social Equity Trust (DASET), and Domini EuroPacific Social Equity Trust (DUSET). References to each Domini Fund include the applicable Domini Trust, unless the context otherwise requires.
The holdings discussed above can be found in the portfolios of the Domini Funds, included herein. The composition of the Funds’ portfolios is subject to change.
As of July 31, 2007, the companies discussed above were held in the portfolios of the following Domini Funds: Anadarko, Apache, Devon Energy, Kimberly-Clark, Unit, UPS, and XTO Energy were held by the Domini Social Equity Portfolio. Air France, Arriva, Fiat, Statoil, and TNT were held by the Domini European Social Equity Portfolio. Central Japan Railway, Honda Motor, and Kyocera were held by the Domini PacAsia Social Equity Portfolio. Air France, Central Japan Railway, Fiat, Honda Motor, Kyocera, Statoil, and TNT were held by the Domini EuroPacific Social Equity Portfolio.
Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity.
The preceding profiles should not be deemed an offer to sell or a solicitation of an offer to buy the stock of any of the companies noted, or a recommendation concerning the merits of any of these companies as an investment.
The Way You Invest Matters: Climate Change | 9 |
THE WAY YOU INVEST MATTERS |
THE WAY YOU INVEST MATTERS: ACTIVISM
As a Domini shareholder, you make a difference in the world. By applying social and environmental standards to our holdings, Domini and its shareholders create accountability, encourage transparency, spur demand for more information, and reshape the way the world thinks about corporations and their role in our lives. By engaging in dialogue with the companies we invest in, filing shareholder resolutions, and actively voting our proxies, we make our voices heard on a wide range of issues. By investing in underserved communities, we enable people to buy homes, start businesses, and revitalize their neighborhoods, an important part of building a more fair and sustainable economy.
Here are a few recent highlights of Domini’s shareholder activism, which each year includes meetings with dozens of companies on a wide range of important issues. (For more information, visit our website, www.domini.com.)
Rights for Coffee Farmers: Over the past year, we expressed our strong concerns to Starbucks officials about their dispute with the government of Ethiopia over ownership of the names of its prime coffee-growing regions, culminating in a detailed letter to the CEO. We also helped enable representatives of Oxfam and Ethiopian coffee farmers to ask questions at the company’s annual meeting. In June, the company reversed its position, and signed a historic agreement acknowledging Ethiopian rights to these names, which should help Ethiopian farmers more effectively market their coffees, and ultimately capture their fair share of the profits. By participating in this engagement, we contribut ed to an important achievement for Ethiopian farmers by creating a more sustainable business model for this highly sought-after commodity.
Gender Diversity in Japan: Domini’s proxy voting guidelines require that when a company has an all-male board, we vote against the entire slate of directors. Among the 46 Japanese companies that we held, we voted against the board slate of all but one: Sony, which has one woman on its board.
A First in Europe: Domini filed its first shareholder resolution in Europe, with the British transportation company FirstGroup, on behalf of the Domini European Social Equity Portfolio and the Domini EuroPacific Social Equity Portfolio. The proposal, which addresses allegations of anti-union activity at a U.S. school bus subsidiary, was co-filed with labor unions and more than 140 FirstGroup employees. Domini’s participation was critical in allowing the unions to meet onerous British filing requirements. Our engagement with the company included a meeting with senior executives, including the CEO and chairman, in London.
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FUND PERFORMANCE AND HOLDINGS
ECONOMIC AND MARKET BACKGROUND
United States Markets Financial markets in the U.S. were generally strong for the year ended July 31, 2007. The S&P 500 Index returned 16.13% and the bond market (as measured by the Lehman Brothers Intermediate Aggregate Index, or LBIA) returned 5.50%.
Stock market performance for the period was driven by corporate earnings and resilient consumer spending, sustained by reasonably strong employment. The Dow Jones Industrial Average passed 14,000 for the first time in mid-July — but the end of the month saw a sharp downturn caused by the crisis in the subprime mortgage market, a slowdown in housing, and a global tightening of credit.
American workers have now experienced five years of economic growth without a sustained increase in wages. American consumers are also being squeezed by increases in their fixed costs — including higher interest rates on their credit card and mortgage debt, and increased food, fuel, and healthcare costs.
The residential real estate market has cooled markedly over the past year. One result is the recent meltdown of the subprime mortgage market. Though subprime lending — home loans to borrowers who don’t qualify for standard mortgages — can make it possible for lower-income people to purchase their own homes, it is vulnerable to abusive “predatory lending” practices. The recent softening of the housing market, coinciding with the expiration of low “promotional” interest rates, has made it much more difficult for borderline borrowers to make ends meet, and foreclosure rates have risen sharply. Because many of these mortgages are “packaged” by Wall Street into mortgage-backed bonds, this development presents significant challenges for the bond market, and triggered the stock market’s late-July downturn, which continued beyond the end of the period.
The Federal Reserve, seeking to balance its goals of inflation control and economic growth, held the Fed funds rate steady at 5.25% through July 2007 (although market turmoil caused the Fed to lower its overnight discount rate in August). High oil and food prices continued to present a risk of inflation.
European Markets The European stock market had strong returns for the year ended July 31, 2007. In local currency terms, the MSCI Europe Index returned 19.56% for the year. Viewed in U.S. dollar terms, the MSCI Europe Index produced a total return of 28.27%, as the dollar continued to weaken against the euro and other currencies.
Underlying Europe’s strong markets for the year was accelerating economic growth. The German economy, the largest in Europe, grew
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almost 3% in 2006, the fastest rate since 2000, and grew at a rate of more than 3% in early 2007, despite the impact of an increase to the value added tax. Consumer confidence has rebounded and unemployment has fallen, although many of the new jobs created in the past year have been temporary and lower paid.
The election in May of Nicolas Sarkozy to the French presidency reflects a view that change is needed in order to improve France’s economic performance, which has lagged that of Germany and the U.K. In June, Prime Minister Tony Blair was succeeded by Gordon Brown, the former Chancellor of the Exchequer. As chief economic policy maker in Blair’s cabinet, Brown held office during a period of low inflation, low interest rates, and low unemployment.
Economic indicators in the euro zone continue to be generally positive. Business confidence has remained high, while consumer confidence has weakened only slightly. Although June’s inflation rate was 1.9%, within the European Central Bank’s definition of price stability, the bank increased short-term interest rates for the second time in 2007, from 3.75% to 4.00%.
Asian Markets Asia-Pacific stock markets had strong returns for the period since the inception of the Domini PacAsia Social Equity Portfolio and Domini EuroPacific Social Equity Portfolio. For the period from December 27, 2006, through July 31, 2007, the MSCI All Country Asia Pacific Index returned 11.12% in local currency terms. Viewed in U.S. dollar terms, the index produced a total return of 13.69%.
Although Asian banks and major investors in Asia have little direct exposure to the U.S. market in subprime mortgages, analysts expressed concern that Asian markets could be hurt by the indirect effects of the crisis, such as a falling U.S. dollar or decreased U.S. demand for Asian products.
Japan, the region’s largest market, continues to enjoy its longest economic recovery since World War II, with the economy reportedly growing at a strong annual rate of 3.3% as of the first quarter of 2007. Surveys of manufacturers show that business confidence remains high as exporters benefit from the weak yen, which makes Japanese exports more competitive, and from strong demand in Asian markets.
One of the best-performing markets in the region in 2007 was China, fueled by a rapidly expanding economy that many believe may be overheating. Meanwhile, social and environmental concerns in China were widely reported, including severe air pollution, slave labor at Chinese mines and brick factories, and issues of product and food safety among Chinese exports.
Domini believes that concerned investors should — without loosening their social and environmental standards — seek out forward-looking
12 | Economic and Market Backgroud |
companies in China, stimulate dialogue about fair and sustainable business practices, and press companies whenever possible to improve their social and environmental performance. For our part, Domini will continue to encourage U.S. companies with business ties to China to use their influence to improve conditions.
Economic and Market Backgroud | 13 |
DOMINI SOCIAL EQUITY PORTFOLIO
PERFORMANCE COMMENTARY
For the year ended July 31, 2007, the Domini Social Equity Portfolio (the “Fund”) returned 14.69%, excluding sales charges, underperforming the Standard and Poor’s 500 Index (S&P 500) return by 1.44%.
During the four months ended November 29, 2006, the Fund was managed as an index fund. In this period, the Fund’s performance was helped by its underweighting to the energy sector, which underperformed as oil and gas prices declined, and its overweighting to the information technology sector. Stocks that helped performance included Microsoft and Cisco Systems. In the same four-month period, the Fund’s performance was hurt by an overweighting in the consumer staples sector and by stock selection within the financials sector.
On November 30, 2006, the Fund transitioned to an active investment strategy, and Wellington Management Company became the Fund’s submanager.
During the eight months following this transition, the Fund was hurt by its underweighting to the energy sector and its overweighting to the financials sector. The big three oil companies, which do not meet Domini’s sustainability standards for Fund investment, performed well, in part due to high oil prices during the period. However, these negative effects of sector allocation were largely offset by positive effects in other sectors.
The Fund’s active investment process is designed to highlight stock selection as a primary factor driving the Fund’s performance relative to its benchmark. During this eight-month period, the Fund was helped by its investments in two industrial companies that manufacture diesel engines: Navistar (which also makes trucks and school buses) and Cummins. Cummins’ share price nearly doubled during this period, as its earnings exceeded analysts’ expectations.
The Fund was hurt by its positions in several technology stocks. Lexmark International stock declined more than 40% during the eight months since the Fund’s transition, due to weakness in its inkjet printing business. The stock of semiconductor manufacturer Micron Technology, which like Lexmark is no longer held by the fund, declined about 20%, in part due to declining prices caused by an oversupply of memory chips. Apple Computer’s stock rose more than 40%, driven by strong sales of Macintosh computers and iPod music players, and by market expectations for the new iPhone. However, the percentage of Apple stock in the Fund’s portfolio was less than its percentage in the S&P 500.
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The Domini Social Equity Portfolio invests in the Domini Social Equity Trust. The table and bar chart below provide information as of July 31, 2007, about the ten largest holdings of the Domini Social Equity Trust and its portfolio holdings by industry sector:
TEN LARGEST HOLDINGS
| % NET | |
COMPANY |
| ASSETS |
Intl Business Machines Corp. |
| 3.79% |
Verizon Communications Inc. |
| 3.46% |
JP Morgan Chase & Co. |
| 3.40% |
Citigroup Inc. |
| 3.25% |
Hewlett-Packard Company |
| 3.23% |
Merck & Co. Inc. |
| 3.16% |
Bank of America Corporation |
| 2.94% |
Johnson & Johnson |
| 2.63% |
Goldman Sachs Group Inc. |
| 2.62% |
Microsoft Corp. |
| 2.41% |
PORTFOLIO HOLDINGS BY INDUSTRY SECTOR (% OF NET ASSETS)
* | Other reflects Repurchase Agreements and Other Assets, less liabilities. |
The holdings mentioned above are described in the Domini Social Equity Trust’s Portfolio of Investments at July 31, 2007, included herein. The composition of the Trust’s portfolio is subject to change.
Domini Social Equity Portfolio — Performance Commentary | 15 |
AVERAGE ANNUAL TOTAL RETURNS
|
|
|
| Domini Social Equity |
| Domini Social Equity |
| S&P 500 | |||
|
| 1 year |
| 14.62 | % |
| 20.34 | % |
| 20.59 | % |
As of |
| 5 Year |
| 7.82 | % |
| 8.88 | % |
| 10.70 | % |
6-30-07 |
| 10 Year |
| 5.69 | % |
| 6.20 | % |
| 7.13 | % |
|
| Since Inception(1) |
| 9.71 | % |
| 10.05 | % |
| 10.93 | % |
|
| 1 Year |
| 9.24 | % |
| 14.69 | % |
| 16.13 | % |
As of |
| 5 Year |
| 8.51 | % |
| 9.57 | % |
| 11.81 | % |
7-31-07 |
| 10 Year |
| 4.31 | % |
| 4.82 | % |
| 5.98 | % |
|
| Since Inception(1) |
| 9.34 | % |
| 9.67 | % |
| 10.66 | % |
COMPARISON OF $10,000 INVESTMENT IN THE
DOMINI SOCIAL EQUITY PORTFOLIO (WITH 4.75% MAXIMUM SALES CHARGE) AND S&P 500
Past performance is no guarantee of future results. The Fund’s returns quoted above represent past performance after all expenses. Economic and market conditions change, and both will cause investment return, principal value, and yield to fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month-end, call 1-800-582-6757 or visit www.domini.com. A 2.00% redemption fee is charged on sales or exchanges of shares made less than 60 days after the settlement of purchase or acquisition through exchange, with certain exceptions. Performance data quoted ab ove does not reflect the deduction of this fee, which would reduce the performance quoted. See the Fund’s prospectus for further information.
The table and the graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Total return for the Domini Social Equity Portfolio is based on the Fund’s net asset values and assumes all dividends and capital gains were reinvested. An investment in the Fund is not a bank deposit and is not insured.
You may lose money. Certain fees payable by the Fund were waived during the period, and the Fund’s average annual total returns would have been lower had these not been waived.
For the period reported in its current prospectus, the Fund’s gross annual operating expenses were estimated to total 37.76% of net assets. Until November 30, 2007, Domini has contractually agreed to waive fees and reimburse expenses to limit the Fund’s expenses, on a per annum basis, to 1.13% of net assets.
The Standard & Poor’s 500 Index (S&P 500) is an unmanaged index of common stocks. Investors cannot invest directly in the S&P 500.
______________(1) | The Domini Social Equity Portfolio, which commenced operations on May 1, 2005, invests all of its assets in the Domini Social Equity Trust (DSET), which has the same investment objectives as the Fund. The DSET commenced operations on June 3, 1991. Performance prior to the Fund’s commencement of operations is the performance of the DSET adjusted for expenses of the Fund. |
This material must be preceded or accompanied by the Fund’s current prospectus. DSIL Investment Services LLC, Distributor. 09/07
16 | Domini Social Equity Portfolio — Performance Commentary |
DOMINI SOCIAL EQUITY TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 2007
SECURITY |
| SHARES |
| VALUE |
| |
Common Stocks – 99.5% |
|
|
|
|
|
|
Consumer Discretionary – 10.2% |
|
|
|
|
|
|
Amazon.com, Inc. |
| 41,000 |
| $ | 3,220,140 |
|
AutoZone Inc. (a) |
| 54,047 |
|
| 6,853,700 |
|
Best Buy Co., Inc. |
| 858 |
|
| 38,258 |
|
Big Lots, Inc. (a) |
| 231,100 |
|
| 5,976,246 |
|
Bright Horizons Family Solutions, Inc. (a) |
| 443 |
|
| 17,188 |
|
CBS Corporation, Class B |
| 699,300 |
|
| 22,181,796 |
|
Coach Inc. (a) |
| 176,500 |
|
| 8,023,690 |
|
Comcast Corporation, Class A (a) |
| 6,750 |
|
| 177,323 |
|
Cooper Tire & Rubber |
| 172,000 |
|
| 3,954,280 |
|
Disney (Walt) Company (The) |
| 285,937 |
|
| 9,435,921 |
|
Family Dollar Stores Inc. |
| 986 |
|
| 29,205 |
|
Gap Inc. |
| 2,187 |
|
| 37,616 |
|
Home Depot, Inc. (The) |
| 3,344 |
|
| 124,296 |
|
Horton, (D.R.), Inc. |
| 1,975 |
|
| 32,232 |
|
Interface Inc., Class A |
| 1,268 |
|
| 23,369 |
|
J.C. Penney Company Inc. |
| 111,417 |
|
| 7,580,813 |
|
Johnson Controls Inc. |
| 818 |
|
| 92,557 |
|
Limited Brands |
| 868 |
|
| 20,962 |
|
Lowe’s Companies, Inc. |
| 2,686 |
|
| 75,235 |
|
Mattel Inc. |
| 642,100 |
|
| 14,710,511 |
|
McDonald’s Corporation |
| 413,974 |
|
| 19,816,935 |
|
McGraw-Hill Companies |
| 1,512 |
|
| 91,476 |
|
Meredith Corporation |
| 623 |
|
| 35,193 |
|
NIKE Inc., Class B |
| 2,388 |
|
| 134,803 |
|
Nordstrom, Inc. |
| 595 |
|
| 28,310 |
|
Pulte Homes, Inc. |
| 1,594 |
|
| 30,828 |
|
Radio One, Inc. (a) |
| 2,279 |
|
| 13,948 |
|
RadioShack Corporation |
| 130,200 |
|
| 3,271,926 |
|
Scholastic Corporation (a) |
| 722 |
|
| 23,234 |
|
Staples, Inc. |
| 1,858 |
|
| 42,771 |
|
Starbucks Corporation (a) |
| 2,378 |
|
| 63,445 |
|
Target Corporation |
| 1,736 |
|
| 105,150 |
|
Time Warner, Inc. |
| 171,076 |
|
| 3,294,924 |
|
Washington Post Company, Class B |
| 95 |
|
| 75,121 |
|
Wendy’s International, Inc. |
| 1,823 |
|
| 63,860 |
|
Whirlpool Corporation |
| 222,063 |
|
| 22,674,853 |
|
|
|
|
|
| 132,372,115 |
|
Consumer Staples – 7.4% |
|
|
|
|
|
|
Avon Products, Inc. |
| 1,706 |
| $ | 61,433 |
|
Church & Dwight Co., Inc. |
| 70,785 |
|
| 3,472,712 |
|
Coca Cola Company |
| 349,484 |
|
| 18,211,611 |
|
Colgate-Palmolive Company |
| 1,796 |
|
| 118,536 |
|
CVS Caremark Corporation |
| 1,905 |
|
| 67,037 |
|
Estee Lauder Companies, Inc., Class A |
| 457,149 |
|
| 20,580,848 |
|
General Mills Inc. |
| 137,400 |
|
| 7,642,188 |
|
Green Mountain Coffee, Inc. (a) |
| 966 |
|
| 28,642 |
|
Hershey Company (The) |
| 1,736 |
|
| 80,030 |
|
J.M. Smucker Company (The), New Common |
| 181,941 |
|
| 10,154,127 |
|
Kimberly-Clark Corporation |
| 1,456 |
|
| 97,945 |
|
Kroger Company |
| 697,377 |
|
| 18,103,907 |
|
PepsiCo, Inc. |
| 4,153 |
|
| 272,520 |
|
Procter & Gamble Company |
| 62,301 |
|
| 3,853,940 |
|
SunOpta Inc. (a) |
| 2,500 |
|
| 28,175 |
|
Supervalu Inc. |
| 326,300 |
|
| 13,596,921 |
|
United Natural Foods, Inc. (a) |
| 732 |
|
| 19,932 |
|
Walgreen Company |
| 1,964 |
|
| 86,770 |
|
Wild Oats Markets, Inc. (a) |
| 1,259 |
|
| 20,270 |
|
|
|
|
|
| 96,497,544 |
|
Energy – 6.8% |
|
|
|
|
|
|
Anadarko Petroleum Corporation |
| 4,618 |
|
| 232,424 |
|
Apache Corporation |
| 66,462 |
|
| 5,366,807 |
|
Devon Energy Corporation |
| 3,970 |
|
| 296,202 |
|
ENSCO International, Inc. |
| 131,300 |
|
| 8,018,491 |
|
EOG Resources, Inc. |
| 3,008 |
|
| 210,861 |
|
Metretek Technologies, Inc. (a) |
| 1,700 |
|
| 23,885 |
|
National Oilwell Varco Inc. |
| 33,800 |
|
| 4,059,718 |
|
Noble Corporation |
| 47,100 |
|
| 4,825,866 |
|
Noble Energy, Inc. |
| 90,200 |
|
| 5,514,828 |
|
Tidewater Inc. |
| 316,600 |
|
| 21,661,772 |
|
Unit Corporation (a) |
| 424,800 |
|
| 23,389,487 |
|
XTO Energy Inc. |
| 266,916 |
|
| 14,554,929 |
|
|
|
|
|
| 88,155,270 |
|
17
DOMINI SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
SECURITY |
| SHARES |
| VALUE |
| |
Financials – 24.2% |
|
|
|
|
|
|
Allstate Corporation |
| 240,200 |
| $ | 12,766,630 |
|
American Express Company |
| 3,876 |
|
| 226,901 |
|
Assurant, Inc. |
| 112,700 |
|
| 5,716,144 |
|
Bank of America Corporation |
| 804,000 |
|
| 38,125,680 |
|
Chubb Corporation |
| 191,666 |
|
| 9,661,883 |
|
CIT Group, Inc. |
| 258,400 |
|
| 10,640,912 |
|
Citigroup, Inc. |
| 903,200 |
|
| 42,062,024 |
|
Fannie Mae |
| 242,416 |
|
| 14,506,173 |
|
FirstFed Financial Corp. (a) |
| 142,600 |
|
| 6,445,520 |
|
Freddie Mac |
| 2,222 |
|
| 127,254 |
|
Goldman Sachs Group, Inc. (The) |
| 180,300 |
|
| 33,957,702 |
|
Hartford Financial Services Group (The) |
| 226,038 |
|
| 20,766,111 |
|
Heartland Financial USA, Inc. |
| 498 |
|
| 8,487 |
|
Lehman Brothers Holdings Inc. |
| 46,200 |
|
| 2,864,400 |
|
Medallion Financial Corporation |
| 1,275 |
|
| 14,650 |
|
Morgan (J.P.) Chase & Co. |
| 1,001,530 |
|
| 44,077,335 |
|
Nationwide Financial Services, Inc., Class A |
| 224,600 |
|
| 12,781,986 |
|
Popular Inc. |
| 4,111 |
|
| 54,224 |
|
Prudential Financial, Inc. |
| 204,100 |
|
| 18,089,383 |
|
SunTrust Banks, Inc. |
| 156,426 |
|
| 12,248,156 |
|
Travelers Companies, Inc. (The) |
| 482,652 |
|
| 24,509,069 |
|
U.S. Bancorp |
| 5,163 |
|
| 154,632 |
|
Wachovia Corporation |
| 68,783 |
|
| 3,247,245 |
|
Washington Mutual, Inc. |
| 4,331 |
|
| 162,542 |
|
Wells Fargo & Company |
| 6,826 |
|
| 230,514 |
|
|
|
|
|
| 313,445,557 |
|
Health Care – 12.9% |
|
|
|
|
|
|
Amgen, Inc. (a) |
| 150,766 |
|
| 8,102,165 |
|
Baxter International, Inc. |
| 301,422 |
|
| 15,854,797 |
|
Becton Dickinson & Company |
| 2,202 |
|
| 168,145 |
|
Conceptus, Inc. (a) |
| 1,100 |
|
| 17,820 |
|
Express Scripts, Inc. (a) |
| 125,200 |
|
| 6,276,276 |
|
Forest Laboratories, Inc. (a) |
| 233,000 |
|
| 9,366,600 |
|
Genentech, Inc. (a) |
| 1,600 |
|
| 119,008 |
|
Gilead Sciences, Inc. (a) |
| 155,210 |
|
| 5,778,468 |
|
Invacare Corporation |
| 1,260 |
|
| 25,893 |
|
Johnson & Johnson |
| 563,424 |
| $ | 34,087,152 |
|
Kinetic Concepts, Inc. (a) |
| 144,500 |
|
| 8,883,860 |
|
Medtronic, Inc. |
| 3,455 |
|
| 175,065 |
|
Merck & Co., Inc. |
| 823,602 |
|
| 40,891,839 |
|
Watson Pharmaceuticals, Inc. (a) |
| 384,300 |
|
| 11,690,406 |
|
Zimmer Holdings, Inc. (a) |
| 335,843 |
|
| 26,115,152 |
|
|
|
|
| 167,552,646 |
| |
Industrials – 7.1% |
|
|
|
|
|
|
3M Company |
| 2,664 |
|
| 236,883 |
|
Baldor Electric Company |
| 1,190 |
|
| 54,312 |
|
Brady Corporation, Class A |
| 654 |
|
| 22,883 |
|
Cooper Industries, Ltd., Class A |
| 2,386 |
|
| 126,267 |
|
Cummins Inc. |
| 182,232 |
|
| 21,630,937 |
|
Deere & Company |
| 70,100 |
|
| 8,441,442 |
|
Deluxe Corporation |
| 265,200 |
|
| 10,013,952 |
|
Donnelley (R.R.) & Sons Company |
| 2,118 |
|
| 89,507 |
|
Emerson Electric Company |
| 4,408 |
|
| 207,485 |
|
Evergreen Solar, Inc. (a) |
| 1,700 |
|
| 14,161 |
|
Fuel Tech, Inc. (a) |
| 700 |
|
| 19,579 |
|
FuelCell Energy, Inc. (a) |
| 2,600 |
|
| 19,136 |
|
Granite Construction Incorporated |
| 737 |
|
| 47,898 |
|
Herman Miller, Inc. |
| 896 |
|
| 27,355 |
|
Illinois Tool Works, Inc. |
| 2,800 |
|
| 154,140 |
|
JetBlue Airways Corporation (a) |
| 2,293 |
|
| 22,586 |
|
Kadant Inc. (a) |
| 627 |
|
| 16,898 |
|
Monster Worldwide, Inc. (a) |
| 835 |
|
| 32,473 |
|
Navistar International Corporation (a) |
| 134,900 |
|
| 8,498,700 |
|
PACCAR Inc. |
| 206,900 |
|
| 16,928,558 |
|
Pitney Bowes, Inc. |
| 1,457 |
|
| 67,168 |
|
Ryder System, Inc. |
| 154,684 |
|
| 8,410,169 |
|
Southwest Airlines Co. |
| 3,478 |
|
| 54,465 |
|
Tennant Company |
| 1,296 |
|
| 49,961 |
|
Trex Company, Inc. (a) |
| 888 |
|
| 14,830 |
|
United Parcel Service, Inc., Class B |
| 1,873 |
|
| 141,824 |
|
YRC Worldwide Inc. (a) |
| 506,579 |
|
| 16,271,317 |
|
|
|
|
|
| 91,614,886 |
|
Information Technology – 17.6% |
|
|
|
|
|
|
Apple Inc. (a) |
| 1,312 |
|
| 172,869 |
|
Applied Materials, Inc. |
| 301,000 |
|
| 6,634,040 |
|
Arrow Electronics, Inc. |
| 146,900 |
|
| 5,614,518 |
|
18
DOMINI SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
SECURITY |
| SHARES |
| VALUE |
| |
Information Technology (Continued) |
|
|
|
|
|
|
Cisco Systems, Inc. (a) |
| 8,816 |
| $ | 254,871 |
|
Convergys Corporation (a) |
| 218,300 |
|
| 4,158,615 |
|
Dell Inc. (a) |
| 301,684 |
|
| 8,438,101 |
|
eBay Inc. (a) |
| 2,176 |
|
| 70,502 |
|
Electronic Data Systems Corporation |
| 980,900 |
|
| 26,474,491 |
|
Google Inc., Class A (a) |
| 300 |
|
| 153,000 |
|
Hewlett-Packard Company |
| 908,347 |
|
| 41,811,212 |
|
Intel Corporation |
| 10,039 |
|
| 237,121 |
|
International Business Machines Corporation |
| 444,500 |
|
| 49,183,925 |
|
Itron, Inc. (a) |
| 445 |
|
| 35,346 |
|
Jabil Circuit, Inc. |
| 1,500 |
|
| 33,796 |
|
Juniper Networks, Inc. (a) |
| 1,900 |
|
| 56,924 |
|
LAM Research Corporation (a) |
| 338,900 |
|
| 19,601,976 |
|
MEMC Electronic Materials, Inc. (a) |
| 129,700 |
|
| 7,953,204 |
|
Microsoft Corporation |
| 1,076,952 |
|
| 31,220,838 |
|
Motorola, Inc. |
| 5,000 |
|
| 84,950 |
|
Power Integrations, Inc. (a) |
| 600 |
|
| 15,901 |
|
QUALCOMM, Inc. |
| 3,434 |
|
| 143,026 |
|
SunPower Corporation, Class A (a) |
| 400 |
|
| 28,213 |
|
Symantec Corporation (a) |
| 425,846 |
|
| 8,176,243 |
|
Texas Instruments, Inc. |
| 3,628 |
|
| 127,669 |
|
Western Digital Corporation (a) |
| 526,800 |
|
| 11,247,180 |
|
Xerox Corporation (a) |
| 375,198 |
|
| 6,550,957 |
|
|
|
|
| 228,479,488 |
| |
Materials – 2.1% |
|
|
|
|
|
|
Airgas, Inc. |
| 1,159 |
|
| 54,125 |
|
Ecolab, Inc. |
| 1,757 |
|
| 73,987 |
|
International Paper Company |
| 3,000 |
|
| 111,210 |
|
Lubrizol Corporation |
| 88,200 |
|
| 5,526,612 |
|
MeadWestvaco Corporation |
| 2,666 |
|
| 86,752 |
|
Nucor Corporation |
| 189,116 |
|
| 9,493,623 |
|
Rock-Tenn Company, Class A |
| 592 |
|
| 18,187 |
|
Rohm and Haas Company |
| 1,510 |
|
| 85,345 |
|
Schnitzer Steel Industries Inc., Class A |
| 1,269 |
| $ | 68,767 |
|
Sonoco Products Company |
| 1,260 |
|
| 46,204 |
|
United States Steel Corporation |
| 115,300 |
|
| 11,332,837 |
|
|
|
|
|
| 26,897,649 |
|
Telecommunication Services – 6.7% |
|
|
|
|
|
|
AT&T Inc. |
| 747,904 |
|
| 29,287,921 |
|
CenturyTel, Inc. |
| 271,200 |
|
| 12,439,944 |
|
Sprint Nextel Corp. |
| 5,159 |
|
| 105,914 |
|
Verizon Communications Inc. |
| 1,053,538 |
|
| 44,901,789 |
|
|
|
|
|
| 86,735,568 |
|
Utilities – 4.5% |
|
|
|
|
|
|
Atmos Energy Corporation |
| 130,000 |
|
| 3,649,100 |
|
CenterPoint Energy, Inc. |
| 936,700 |
|
| 15,436,816 |
|
Energen Corporation |
| 435,247 |
|
| 23,028,919 |
|
ONEOK, Inc. |
| 187,100 |
|
| 9,495,325 |
|
Pepco Holdings, Inc. |
| 250,200 |
|
| 6,772,914 |
|
WGL Holdings |
| 8,577 |
|
| 256,795 |
|
|
|
|
|
| 58,639,869 |
|
Total Common Stocks |
|
|
|
|
|
|
(Cost $1,180,493,385) |
|
|
|
| 1,290,390,592 |
|
Repurchase Agreements – 0.4% |
|
|
|
|
|
|
State Street Bank & Trust, dated 7/31/07, 3.52% due 8/1/07, maturity amount $4,790,465 (collateralized by U.S. Government Agency Mortgage Securities, Fannie Mae, 31359MZ22, 5.45%, 10/18/2021, market value $4,886,869) |
| 4,789,996 |
|
| 4,789,996 |
|
Total Repurchase Agreements |
|
|
|
|
|
|
(Cost $4,789,996) |
|
|
|
| 4,789,996 |
|
Total Investments – 99.9% |
|
|
|
|
|
|
(Cost $1,185,283,381) (b) |
|
|
|
| 1,295,180,588 |
|
Other Assets, less liabilities – 0.1% |
|
|
|
| 889,974 |
|
Net Assets – 100.0% |
|
|
| $ | 1,296,070,562 |
|
(a) | Non-income producing security. |
(b) | The aggregate cost for federal income tax purposes is $1,229,563,689. The aggregrate gross unrealized appreciation is $103,861,105 and the aggregate gross unrealized depreciation is $38,244,206, resulting in net unrealized appreciation of $65,616,899. |
SEE NOTES TO FINANCIAL STATEMENTS
19
DOMINI EUROPEAN SOCIAL EQUITY PORTFOLIO
PERFORMANCE COMMENTARY
For the year ended July 31, 2007, the Domini European Social Equity Portfolio (the “Fund”) returned 26.82%, excluding sales charges, underperforming the Morgan Stanley Capital International Europe Index (MSCI Europe) by 1.45%.
The Fund’s performance relative to its benchmark was hurt by its position in the Irish fruit and produce distributor Fyffes. The company’s share price declined in the second quarter after it failed to meet analysts’ earnings expectations, which it attributed in part to an increase in fuel prices. The Fund was also hurt by its position in the French pharmaceutical company Sanofi-Aventis.
The Fund’s position in the Italian automaker Fiat was a positive contributor to returns, as its stock price doubled during the year. (See our discussion of Fiat in “The Way You Invest Matters: Global Warming.”) The exclusion of the integrated oil company BP also contributed to the Fund’s relative performance, as BP’s stock performance was essentially flat in a year when the market was rising sharply. The company, which does not meet Domini’s investment standards, has suffered setbacks including the departure of its CEO and maintenance problems at its facility in Prudhoe Bay, Alaska.
The Fund was helped by its positions in the British company Aggreko, which rents power generators, and the Swedish bus and truck manufacturer Scania, which claims to be the world’s only supplier of ethanol-powered commercial vehicles. The Fund was also helped by its avoidance of the British pharmaceutical company AstraZeneca, which does not meet our investment standards.
20 |
|
The Domini European Social Equity Portfolio invests in the Domini European Social Equity Trust. The table and bar chart below provide information as of July 31, 2007, about the ten largest holdings of the Domini European Social Equity Trust and its portfolio holdings by industry sector and by country:
TEN LARGEST HOLDINGS
COMPANY |
| % NET |
|
Vivendi SA |
| 3.02% |
|
Swiss Re-Reg |
| 2.92% |
|
Sanofi-Aventis |
| 2.78% |
|
Fiat SPA |
| 2.65% |
|
Royal Bank of Scotland Group |
| 2.64% |
|
Statoil ASA |
| 2.64% |
|
UniCredito Italiano SPA |
| 2.23% |
|
Muenchener Rueckver AG-Reg |
| 2.21% |
|
Allianz SE-Reg |
| 2.12% |
|
National Grid PLC |
| 2.04% |
|
PORTFOLIO HOLDINGS BY INDUSTRY SECTOR (% OF NET ASSETS)
* Other reflects Repurchase Agreements and Other Assets, less liabilities.
PORTFOLIO HOLDINGS BY COUNTRY (% OF NET ASSETS)
* Other reflects Turkey, Poland, Portugal, Repurchase Agreements, and Other Assets, less liabilities.
______________The holdings mentioned above are described in the Domini European Social Equity Trust’s Portfolio of Investments at July 31, 2007, included herein. The composition of the Trust’s portfolio is subject to change.
Domini European Social Equity Portfolio — Performance Commentary | 21 |
AVERAGE ANNUAL TOTAL RETURNS
|
|
|
| Domini European Social |
| Domini European Social |
| MSCI |
|
As of |
| 1 Year |
| 26.88% |
| 33.20% |
| 33.07% |
|
6-30-07 |
| Since Inception(1) |
| 29.35% |
| 33.02% |
| 28.84% |
|
As of |
| 1 Year |
| 20.79% |
| 26.82% |
| 28.27% |
|
7-31-07 |
| Since Inception(1) |
| 25.20% |
| 28.59% |
| 25.85% |
|
COMPARISON OF $10,000 INVESTMENT IN THE
DOMINI EUROPEAN SOCIAL EQUITY PORTFOLIO (WITH 4.75% MAXIMUM SALES CHARGE) AND THE MSCI EUROPE
Past performance is no guarantee of future results. The fund’s returns quoted above represent past performance after all expenses. Economic and market conditions change, and both will cause investment return, principal value, and yield to fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month-end, call 1-800-582-6757 or visit www.domini.com. A 2.00% redemption fee is charged on sales or exchanges of shares made less than 60 days after the settlement of purchase or acquisition through exchange, with certain exceptions. Performance data quo ted above does not reflect the deduction of this fee, which would reduce the performance quoted. See the Fund’s prospectus for further information.
Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity.
The table and the graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Total return for the Domini European Social Equity Portfolio is based on the Fund’s net asset values and assumes all dividends and capital gains were reinvested. An investment in the Fund is not a bank deposit and is not insured. You may lose money. Certain fees payable by the Fund were waived during the period, and the Fund’s average annual total returns would have been lower had these not been waived.
For the period reported in its current prospectus, the Fund’s gross annual operating expenses were estimated to total 30.44% of net assets. Until November 30, 2007, Domini has contractually agreed to waive fees and reimburse expenses to limit the Fund’s expenses, on a per annum basis, to 1.57% of net assets.
The Morgan Stanley Capital International Europe Index (MSCI Europe) is an unmanaged index of common stocks. Investors cannot invest directly in the MSCI Europe.
______________(1) | Since October 3, 2005 |
This material must be preceded or accompanied by the Fund’s current prospectus. DSIL Investment Services LLC, Distributor. 09/07
22 | Domini European Social Equity Portfolio — Performance Commentary |
DOMINI EUROPEAN SOCIAL EQUITY TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 2007
COUNTRY/ SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Common Stocks – 98.8% |
|
|
|
|
|
|
|
|
Austria – 2.5% |
|
|
|
|
|
|
|
|
Immoeast AG (a) |
| Real Estate |
| 62,915 |
| $ | 817,378 |
|
Immofinanz AG (a) |
| Real Estate |
| 107,410 |
|
| 1,350,676 |
|
OMV AG |
| Energy |
| 2,399 |
|
| 149,123 |
|
Voestalpine AG |
| Materials |
| 11,768 |
|
| 979,526 |
|
|
|
|
|
|
|
| 3,296,703 |
|
Belgium – 3.9% |
|
|
|
|
|
|
|
|
Belgacom SA |
| Telecommunication Services |
| 48,604 |
|
| 1,968,715 |
|
Fortis |
| Diversified Financials |
| 41,009 |
|
| 1,617,109 |
|
Omega Pharma SA |
| Health Care Equipment & Services |
| 19,098 |
|
| 1,638,734 |
|
|
|
|
|
|
|
| 5,224,558 |
|
Denmark – 2.4% |
|
|
|
|
|
|
|
|
Dampskibsselskabet Torm |
| Energy |
| 45,252 |
|
| 1,803,004 |
|
Danske Bank A/S |
| Banks |
| 7,856 |
|
| 331,022 |
|
H. Lundbeck A/S |
| Pharma, Biotech & Life Sciences |
| 5,300 |
|
| 136,396 |
|
Sydbank A/S |
| Banks |
| 18,800 |
|
| 954,824 |
|
|
|
|
|
|
|
| 3,225,246 |
|
Finland – 5.0% |
|
|
|
|
|
|
|
|
Elisa OYJ – A Shares |
| Telecommunication Services |
| 14,545 |
|
| 411,374 |
|
Kesko OYJ – B Shares |
| Food & Staples Retailing |
| 27,708 |
|
| 1,468,107 |
|
Metso OYJ |
| Capital Goods |
| 7,144 |
|
| 452,425 |
|
Orion OYJ |
| Pharma, Biotech & Life Sciences |
| 73,462 |
|
| 1,925,050 |
|
Outokumpu OYJ |
| Materials |
| 21,597 |
|
| 669,260 |
|
Rautaruukki OYJ |
| Materials |
| 26,846 |
|
| 1,759,840 |
|
|
|
|
|
|
|
| 6,686,056 |
|
France – 14.4% |
|
|
|
|
|
|
|
|
Air France – KLM |
| Transportation |
| 33,873 |
|
| 1,525,426 |
|
BNP Paribas |
| Banks |
| 23,573 |
|
| 2,592,584 |
|
Credit Agricole SA |
| Banks |
| 18,360 |
|
| 701,883 |
|
France Telecom SA |
| Telecommunication Services |
| 94,621 |
|
| 2,545,099 |
|
Lafarge SA |
| Materials |
| 1,395 |
|
| 236,411 |
|
Michelin (CDGE) – B |
| Automobiles & Components |
| 5,884 |
|
| 777,256 |
|
Sanofi – Aventis |
| Pharma, Biotech & Life Sciences |
| 44,329 |
|
| 3,714,994 |
|
Societe Generale |
| Banks |
| 8,920 |
|
| 1,533,942 |
|
Ste Des Ciments Francais – A |
| Materials |
| 3,576 |
|
| 813,204 |
|
Valeo |
| Automobiles & Components |
| 13,920 |
|
| 714,038 |
|
Vivendi SA |
| Media |
| 94,767 |
|
| 4,027,413 |
|
|
|
|
|
|
|
| 19,182,250 |
|
Germany – 11.7% |
|
|
|
|
|
|
|
|
Allianz SE – Reg |
| Insurance |
| 13,278 |
|
| 2,824,930 |
|
Altana AG |
| Pharma, Biotech & Life Sciences |
| 36,224 |
|
| 851,066 |
|
Celesio AG |
| Health Care Equipment & Services |
| 40,107 |
|
| 2,410,227 |
|
Deutsche Lufthansa – Reg |
| Transportation |
| 63,951 |
|
| 1,795,338 |
|
Deutsche Telekom AG – Reg |
| Telecommunication Services |
| 34,069 |
|
| 588,077 |
|
Epcos AG |
| Technology Hardware & Equipment |
| 37,186 |
|
| 749,176 |
|
Fresenius SE |
| Health Care Equipment & Services |
| 28,437 |
|
| 2,065,576 |
|
Merck KGAA |
| Pharma, Biotech & Life Sciences |
| 5,829 |
|
| 727,650 |
|
Muenchener Rueckver AG – Reg |
| Insurance |
| 17,158 |
|
| 2,956,565 |
|
ProSieben Sat.1 Media AG |
| Media |
| 17,237 |
|
| 622,053 |
|
|
|
|
|
|
|
| 15,590,658 |
|
23
DOMINI EUROPEAN SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/ SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Ireland – 1.4% |
|
|
|
|
|
|
|
|
Fyffes PLC |
| Food & Staples Retailing |
| 1,375,229 |
| $ | 1,505,491 |
|
Kerry Group PLC – A |
| Food & Beverage |
| 14,438 |
|
| 383,032 |
|
|
|
|
|
|
|
| 1,888,523 |
|
Italy – 5.2% |
|
|
|
|
|
|
|
|
Banca Popolare Emilia Romagna |
| Banks |
| 20,412 |
|
| 495,969 |
|
Fiat SPA |
| Automobiles & Components |
| 120,134 |
|
| 3,534,901 |
|
UniCredito Italiano SPA |
| Banks |
| 350,135 |
|
| 2,971,701 |
|
|
|
|
|
|
|
| 7,002,571 |
|
Netherlands – 8.6% |
|
|
|
|
|
|
|
|
Arcelor Mittal |
| Materials |
| 33,829 |
|
| 2,075,604 |
|
Fugro NV – CVA |
| Energy |
| 16,388 |
|
| 1,091,097 |
|
ING Groep NV – CVA |
| Diversified Financials |
| 50,956 |
|
| 2,152,174 |
|
Koninkijke KPN NV |
| Telecommunication Services |
| 87,899 |
|
| 1,360,673 |
|
OCE NV |
| Technology Hardware & Equipment |
| 65,016 |
|
| 1,505,327 |
|
SNS Reaal |
| Insurance |
| 49,704 |
|
| 1,106,471 |
|
TNT NV |
| Transportation |
| 44,686 |
|
| 1,918,695 |
|
Unilever NV – CVA |
| Food & Beverage |
| 8,276 |
|
| 250,255 |
|
|
|
|
|
|
|
| 11,460,296 |
|
Norway – 5.1% |
|
|
|
|
|
|
|
|
Norsk Hydro ASA |
| Energy |
| 26,828 |
|
| 1,033,879 |
|
Orkla ASA |
| Capital Goods |
| 46,500 |
|
| 875,107 |
|
Petroleum Geo – Services |
| Energy |
| 16,167 |
|
| 384,520 |
|
Statoil ASA |
| Energy |
| 118,967 |
|
| 3,520,287 |
|
Tandberg ASA |
| Technology Hardware & Equipment |
| 25,104 |
|
| 569,314 |
|
Telenor ASA |
| Telecommunication Services |
| 23,978 |
|
| 439,016 |
|
|
|
|
|
|
|
| 6,822,123 |
|
Poland – 0.3% |
|
|
|
|
|
|
|
|
Globe Trade Centre SA (a) |
| Real Estate |
| 10,681 |
|
| 147,548 |
|
Polish Oil & Gas |
| Energy |
| 166,817 |
|
| 292,894 |
|
|
|
|
|
|
| 440,442 |
| |
Portugal – 0.2% |
|
|
|
|
|
|
|
|
Banco Espirito Santo – Reg |
| Banks |
| 10,373 |
|
| 243,529 |
|
|
|
|
|
|
|
| 243,529 |
|
Spain – 1.3% |
|
|
|
|
|
|
|
|
Gas Natural SDG SA |
| Utilities |
| 25,993 |
|
| 1,492,474 |
|
Telefonica SA |
| Telecommunication Services |
| 10,472 |
|
| 245,205 |
|
|
|
|
|
|
|
| 1,737,679 |
|
Sweden – 5.9% |
|
|
|
|
|
|
|
|
Electrolux AB – Ser B |
| Consumer Durables & Apparel |
| 27,600 |
|
| 690,186 |
|
Eniro AB |
| Media |
| 61,200 |
|
| 753,990 |
|
Industrivarden AB – C Shares |
| Diversified Financials |
| 34,800 |
|
| 716,688 |
|
Investor AB – B Shares |
| Diversified Financials |
| 20,200 |
|
| 522,493 |
|
Nordea AB |
| Banks |
| 61,223 |
|
| 986,447 |
|
Scania AB – B Shares |
| Capital Goods |
| 76,600 |
|
| 1,825,375 |
|
SSAB Svenskt Stal AB – Ser A |
| Materials |
| 7,050 |
|
| 252,983 |
|
SSAB Svenskt Stal AB – Ser A Rights (c) |
| Materials |
| 7,050 |
|
| 24,458 |
|
Swedbank AB |
| Banks |
| 49,700 |
|
| 1,804,818 |
|
Teliasonera AB |
| Telecommunication Services |
| 44,500 |
|
| 336,442 |
|
|
|
|
|
|
|
| 7,913,880 |
|
24
DOMINI EUROPEAN SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/ SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Switzerland – 4.5% |
|
|
|
|
|
|
|
|
Novartis AG – Reg Shares |
| Pharma, Biotech & Life Sciences |
| 19,482 |
| $ | 1,049,457 |
|
Rieter Holding AG |
| Automobiles & Components |
| 993 |
|
| 522,848 |
|
Swiss Re – Reg |
| Insurance |
| 45,478 |
|
| 3,896,937 |
|
The Swatch Group AG – Reg |
| Consumer Durables & Apparel |
| 9,901 |
|
| 576,802 |
|
|
|
|
|
|
|
| 6,046,044 |
|
Turkey – 0.6% |
|
|
|
|
|
|
|
|
Ihlas Holding (a) |
| Capital Goods |
| 262,048 |
|
| 143,533 |
|
Trakya Cam Sanayii A.S. |
| Capital Goods |
| 92,053 |
|
| 344,453 |
|
Turk Sise ve Cam Fabrikalari AS |
| Consumer Durables & Apparel |
| 64,938 |
|
| 289,864 |
|
|
|
|
|
|
|
| 777,850 |
|
United Kingdom – 25.8% |
|
|
|
|
|
|
|
|
3i Group PLC |
| Diversified Financials |
| 101,733 |
|
| 2,204,144 |
|
Aggreko PLC |
| Commercial Services & Supplies |
| 47,281 |
|
| 519,670 |
|
Arriva PLC |
| Transportation |
| 47,675 |
|
| 756,839 |
|
Aviva PLC |
| Insurance |
| 63,993 |
|
| 889,716 |
|
Barclays PLC |
| Banks |
| 177,780 |
|
| 2,498,261 |
|
Barratt Developments PLC |
| Consumer Durables & Apparel |
| 24,983 |
|
| 468,191 |
|
Bellway PLC |
| Consumer Durables & Apparel |
| 11,578 |
|
| 289,142 |
|
BG Group PLC |
| Energy |
| 38,952 |
|
| 633,906 |
|
Bovis Homes Group PLC |
| Consumer Durables & Apparel |
| 21,038 |
|
| 327,619 |
|
BT Group PLC |
| Telecommunication Services |
| 263,647 |
|
| 1,671,703 |
|
Drax Group PLC |
| Utilities |
| 97,495 |
|
| 1,351,755 |
|
Firstgroup PLC |
| Transportation |
| 49,226 |
|
| 629,099 |
|
GlaxoSmithKline PLC |
| Pharma, Biotech & Life Sciences |
| 95,715 |
|
| 2,423,495 |
|
HBOS PLC |
| Banks |
| 93,511 |
|
| 1,821,762 |
|
Home Retail Group |
| Retailing |
| 78,297 |
|
| 650,553 |
|
HSBC Holdings PLC |
| Banks |
| 17,643 |
|
| 327,079 |
|
Man Group PLC |
| Diversified Financials |
| 147,075 |
|
| 1,673,410 |
|
National Express Group PLC |
| Transportation |
| 38,434 |
|
| 886,769 |
|
National Grid PLC |
| Utilities |
| 191,882 |
|
| 2,721,554 |
|
Next PLC |
| Retailing |
| 48,876 |
|
| 1,867,161 |
|
Royal Bank of Scotland Group |
| Banks |
| 295,833 |
|
| 3,523,764 |
|
Stagecoach Group |
| Transportation |
| 82,873 |
|
| 352,358 |
|
Standard Life PLC |
| Insurance |
| 151,181 |
|
| 937,800 |
|
Taylor Woodrow PLC |
| Consumer Durables & Apparel |
| 313,600 |
|
| 2,066,903 |
|
Travis Perkins PLC |
| Capital Goods |
| 11,226 |
|
| 427,231 |
|
Trinity Mirror PLC |
| Media |
| 43,648 |
|
| 446,185 |
|
Vodafone Group PLC |
| Telecommunication Services |
| 108,452 |
|
| 326,175 |
|
Whitbread PLC |
| Consumer Services |
| 7,826 |
|
| 262,836 |
|
William Morrison Supermarkets PLC |
| Food & Staples Retailing |
| 238,320 |
|
| 1,452,437 |
|
|
|
|
|
|
|
| 34,407,517 |
|
Total Common Stocks (Cost $121,514,472) |
|
|
|
|
|
| 131,945,925 |
|
25
DOMINI EUROPEAN SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/ SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Repurchase Agreements – 1.0% |
|
|
|
|
|
|
|
|
State Street Bank & Trust, dated 7/31/07, 3.52% due 8/1/07, maturity amount $1,334,587 (collateralized by U.S. Government Agency Mortgage Securities, Fannie Mae, 5.45%, 10/18/2021, market value $1,365,956) |
| Repurchase Agreement |
| 1,334,456 |
| $ | 1,334,456 |
|
Total Repurchase Agreements (Cost $1,334,456) |
|
|
|
|
|
| 1,334,456 |
|
Total Investments – 99.8% (Cost $122,848,928) (b) |
|
|
|
|
|
| 133,280,381 |
|
Other Assets, less liabilities – 0.2% |
|
|
|
|
|
| 222,712 |
|
Net Assets – 100.0% |
|
|
|
|
| $ | 133,503,093 |
|
(a) | Non-income producing security. |
(b) | The aggregate cost for federal income tax purposes is $122,982,772. The aggregate gross unrealized appreciation is $16,472,046 and the aggregate gross unrealized depreciation is $6,174,437, resulting in net unrealized appreciation of $10,297,609. |
(c) | Securities for which there are no such quotations or valuations are valued at fair value as determined in good faith by or at the direction of the Trust’s Board of Trustees. |
As of the date of this report, certain foreign securities were fair valued by an independent pricing service under the direction of the Board of Trustees or its delegates in accordance with the Trust’s Valuation and Pricing Policies and Procedures.
SEE NOTES TO FINANCIAL STATEMENTS
26
DOMINI PACASIA SOCIAL EQUITY PORTFOLIO
PERFORMANCE COMMENTARY
From the Domini PacAsia Social Equity Portfolio’s (the “Fund”) inception on December 27, 2006, through July 31, 2007, the Fund returned 6.73%, excluding sales charges, underperforming the Morgan Stanley Capital International All Country Asia Pacific Index (MSCI AC Asia Pacific) by 6.96%.
The Fund was hurt by its exclusion of the Australian mining company BHP Billiton, which returned more than 60% for the first seven months of 2007. BHP Billiton does not meet our investment standards due to its major involvement in uranium mining and other social and environmental concerns.
The Fund was also hurt by its position in the Japanese automaker Honda Motor and the Japanese homebuilder Sekisui House. Sekisui House is notable for its use of environmentally friendly technologies such as fuel cells and solar cells.
The Fund was helped by its avoidance of the Japanese automaker Toyota Motor, which does not meet our investment standards. Toyota’s stock declined approximately 10% during the first seven months of 2007.
The Fund’s underweighting to China, where relatively few companies currently meet Domini’s investment standards, also hurt performance.
| 27 |
The Domini PacAsia Social Equity Portfolio invests in the Domini PacAsia Social Equity Trust. The table and bar chart below provide information as of July 31, 2007, about the ten largest holdings of the Domini PacAsia Social Equity Trust and its portfolio holdings by industry sector and by country:
TEN LARGEST HOLDINGS
COMPANY |
| % NET |
|
Honda Motor Co Ltd. |
| 2.70% |
|
Fuji Film Holdings Corp. |
| 2.41% |
|
Mitsui Trust Holding Inc. |
| 2.07% |
|
Nintendo Company Ltd. |
| 2.04% |
|
Sony Corporation |
| 2.02% |
|
Nippon Express Co Ltd. |
| 1.90% |
|
Sekisui House Limited |
| 1.88% |
|
Kawasaki Kisen Kaisha Ltd. |
| 1.83% |
|
TDK Corp. |
| 1.82% |
|
Toppan Printing Company Ltd. |
| 1.81% |
|
PORTFOLIO HOLDINGS BY INDUSTRY SECTOR (% OF NET ASSETS)
*Other reflects Repurchase Agreements and Other Liabilities, less assets.
PORTFOLIO HOLDINGS BY COUNTRY (% OF NET ASSETS)
* Other reflects Repurchase Agreements and Other Liabilities, less assets.
______________The holdings mentioned above are described in the Domini PacAsia Social Equity Trust’s Portfolio of Investments at July 31, 2007, included herein. The composition of the Trust’s portfolio is subject to change.
28 | Domini PacAsia Social Equity Portfolio — Performance Commentary |
TTOTAL RETURN SINCE INCEPTION (12-27-06)
| Domini PacAsia Social | Domini PacAsia Social | MSCI AC Asia Pacific |
As of 6-30-07 | 0.90% | 5.93% | 11.28% |
As of 7-31-07 | 1.66% | 6.73% | 13.69% |
COMPARISON OF $10,000 INVESTMENT IN THE
DOMINI PACASIA SOCIAL EQUITY PORTFOLIO (WITH 4.75% MAXIMUM SALES CHARGE)
AND THE MSCI ASIA PACIFIC
Past performance is no guarantee of future results. The Fund’s returns quoted above represent past performance after all expenses. Economic and market conditions change, and both will cause investment return, principal value, and yield to fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month-end, call 1-800-582-6757 or visit www.domini.com. A 2.00% redemption fee is charged on sales or exchanges of shares made less than 60 days after the settlement of purchase or acquisition through exchange, with certain exceptions. Performance data quoted ab ove does not reflect the deduction of this fee, which would reduce the performance quoted. See the Fund’s prospectus for further information.
Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Total return for the Domini PacAsia Social Equity Portfolio is based on the Fund’s net asset values and assumes all dividends and capital gains were reinvested. An investment in the Fund is not a bank deposit and is not insured. You may lose money. Certain fees payable by the Fund were waived during the period, and the Fund’s average annual total returns would have been lower had these not been waived.
For the period reported in its current prospectus, the Fund’s gross annual operating expenses were estimated to total 2.32% of net assets. Until November 30, 2007, Domini has contractually agreed to waive fees and reimburse expenses to limit the Fund’s expenses, on a per annum basis, to 1.57% of net assets.
The Morgan Stanley Capital International All Country Asia Pacific Index (MSCI AC Asia Pacific) is an unmanaged index of common stocks. Investors cannot invest directly in the MSCI AC Asia Pacific.
______________This material must be preceded or accompanied by the Fund’s current prospectus. DSIL Investment Services LLC, Distributor. 09/07
Domini PacAsia Social Equity Portfolio — Performance Commentary | 29 |
DOMINI PACASIA SOCIAL EQUITY TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 2007
COUNTRY/SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Common Stocks – 99.0% |
|
|
|
|
|
|
|
|
Australia – 11.0% |
|
|
|
|
|
|
|
|
Australia and New Zealand Banking Group Lt |
| Banks |
| 14,411 |
| $ | 347,348 |
|
CFS Retail Property Trust |
| Real Estate |
| 88,275 |
|
| 160,583 |
|
Commonwealth Bank Of Australia |
| Banks |
| 3,468 |
|
| 159,935 |
|
Commonwealth Property Office |
| Real Estate |
| 68,765 |
|
| 93,414 |
|
CSL Limited |
| Pharma, Biotech & Life Sciences |
| 785 |
|
| 59,132 |
|
DB RREEF Trust |
| Real Estate |
| 80,104 |
|
| 123,364 |
|
GPT Group |
| Real Estate |
| 8,767 |
|
| 33,477 |
|
Insurance Australia Group Lt |
| Insurance |
| 23,701 |
|
| 114,671 |
|
Investa Property Group |
| Real Estate |
| 19,609 |
|
| 48,839 |
|
Macquarie Infrastructure Group |
| Transportation |
| 166,629 |
|
| 462,555 |
|
QBE Insurance Group Ltd |
| Insurance |
| 18,389 |
|
| 466,854 |
|
Telstra Corp Ltd |
| Telecommunication Services |
| 19,793 |
|
| 77,654 |
|
Westfield Group |
| Real Estate |
| 21,175 |
|
| 342,573 |
|
Westfield Group – New |
| Real Estate |
| 1,840 |
|
| 29,197 |
|
Westpac Banking Corporation |
| Banks |
| 8,613 |
|
| 191,480 |
|
Zinifex Ltd |
| Materials |
| 14,905 |
|
| 247,845 |
|
|
|
|
|
|
|
| 2,958,921 |
|
China – 1.3% |
|
|
|
|
|
|
|
|
Agile Property Holdings Ltd |
| Real Estate |
| 42,000 |
|
| 73,333 |
|
Chaoda Modern Agriculture |
| Food & Beverage |
| 132,903 |
|
| 98,906 |
|
TPV Technology Ltd |
| Technology Hardware & Equipment |
| 214,223 |
|
| 164,092 |
|
|
|
|
|
|
|
| 336,331 |
|
Hong Kong – 8.6% |
|
|
|
|
|
|
|
|
Cathay Pacific Airways Ltd |
| Transportation |
| 31,002 |
|
| 80,783 |
|
Chinese Estates Holdings Ltd |
| Real Estate |
| 92,239 |
|
| 167,561 |
|
First Pacific Co |
| Diversified Financials |
| 58,389 |
|
| 41,789 |
|
Hang Lung Group Ltd |
| Real Estate |
| 26,665 |
|
| 130,742 |
|
Henderson Land Development |
| Real Estate |
| 13,142 |
|
| 94,667 |
|
Hopewell Highway Infrastructure Ltd |
| Transportation |
| 42,000 |
|
| 40,147 |
|
Hopewell Holdings |
| Transportation |
| 49,086 |
|
| 211,939 |
|
Hysan Development Company |
| Real Estate |
| 31,000 |
|
| 80,607 |
|
Jardine Matheson Holdings Ltd |
| Diversified Financials |
| 5,993 |
|
| 145,031 |
|
Jardine Strategic Holdings Ltd |
| Diversified Financials |
| 9,859 |
|
| 129,153 |
|
Kingboard Chemicals Holdings |
| Technology Hardware & Equipment |
| 36,728 |
|
| 202,165 |
|
Orient Overseas Intl Ltd |
| Transportation |
| 9,666 |
|
| 115,064 |
|
Sun Hung Kai Properties |
| Real Estate |
| 2,833 |
|
| 36,029 |
|
Swire Pacific Ltd ‘A’ |
| Real Estate |
| 19,664 |
|
| 222,572 |
|
30 |
|
DOMINI PACASIA SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Hong Kong (Continued) |
|
|
|
|
|
|
|
|
Wharf Holdings Ltd |
| Real Estate |
| 91,675 |
| $ | 378,458 |
|
Wheelock & Co Ltd |
| Real Estate |
| 90,418 |
|
| 233,567 |
|
|
|
|
|
|
|
| 2,310,274 |
|
India – 2.4% |
|
|
|
|
|
|
|
|
Bharti Airtel Limited (a) |
| Telecommunication Services |
| 3,330 |
|
| 73,745 |
|
Hindalco Industries –144a GDR |
| Materials |
| 104,028 |
|
| 457,723 |
|
Punjab National Bank |
| Banks |
| 9,500 |
|
| 119,564 |
|
|
|
|
|
|
|
| 651,032 |
|
Indonesia – 0.4% |
|
|
|
|
|
|
|
|
Bank Rakyat Indonesia |
| Banks |
| 157,500 |
|
| 105,058 |
|
|
|
|
|
|
|
| 105,058 |
|
Japan – 51.7% |
|
|
|
|
|
|
|
|
Alps Electric Co Ltd |
| Technology Hardware & Equipment |
| 22,051 |
|
| 217,456 |
|
Amada Co Ltd |
| Capital Goods |
| 29,220 |
|
| 339,417 |
|
Aoyama Trading Co Ltd |
| Retailing |
| 3,400 |
|
| 97,376 |
|
Asahi Kasei Corporation |
| Materials |
| 50,640 |
|
| 359,959 |
|
Astellas Pharma Inc |
| Pharma, Biotech & Life Sciences |
| 4,984 |
|
| 203,726 |
|
Brother Industries Ltd |
| Technology Hardware & Equipment |
| 12,000 |
|
| 171,832 |
|
Central Japan Railway Co |
| Transportation |
| 20 |
|
| 205,771 |
|
COMSYS Holdings Corp |
| Capital Goods |
| 16,000 |
|
| 176,477 |
|
Dai Nippon Printing Co Ltd |
| Commercial Services & Supplies |
| 25,399 |
|
| 370,810 |
|
Daiichi Sankyo Co Ltd |
| Pharma, Biotech & Life Sciences |
| 12,439 |
|
| 341,969 |
|
Daito Trust Construct Co Ltd |
| Consumer Durables & Apparel |
| 2,584 |
|
| 127,638 |
|
Daiwa House Industry Co Ltd |
| Consumer Durables & Apparel |
| 9,000 |
|
| 117,441 |
|
Eisai Co Ltd |
| Pharma, Biotech & Life Sciences |
| 751 |
|
| 31,523 |
|
|
| Semiconductors & |
|
|
|
|
|
|
Elpida Memory Inc (a) |
| Semiconductor Equipment |
| 4,800 |
|
| 210,910 |
|
Fuji Film Holdings Corp |
| Consumer Durables & Apparel |
| 14,957 |
|
| 651,495 |
|
Fujikura Ltd |
| Capital Goods |
| 11,578 |
|
| 71,422 |
|
Hokuhoku Financial Group Inc |
| Banks |
| 25,000 |
|
| 78,984 |
|
Honda Motor Co Ltd |
| Automobiles & Components |
| 20,203 |
|
| 729,863 |
|
Joyo Bank Ltd |
| Banks |
| 52,740 |
|
| 304,989 |
|
JS Group Corp |
| Capital Goods |
| 18,600 |
|
| 348,833 |
|
Kamigumi Co Ltd |
| Transportation |
| 4,677 |
|
| 40,210 |
|
Kawasaki Kisen Kaisha Ltd |
| Transportation |
| 36,206 |
|
| 493,078 |
|
Kyocera Corporation |
| Technology Hardware & Equipment |
| 3,127 |
|
| 302,414 |
|
Mazda Motor Corp |
| Automobiles & Components |
| 12,000 |
|
| 67,820 |
|
Mitsui Chemicals Inc |
| Materials |
| 54,880 |
|
| 423,632 |
|
Mitsui Trust Holding Inc |
| Banks |
| 63,533 |
|
| 558,767 |
|
Nintendo Company Ltd |
| Software & Services |
| 1,148 |
|
| 550,695 |
|
Nippon Express Co Ltd |
| Transportation |
| 95,000 |
|
| 512,086 |
|
Nippon Paper Group Inc |
| Materials |
| 70 |
|
| 226,474 |
|
Nippon Telegraph & Telephone |
| Telecommunication Services |
| 108 |
|
| 467,342 |
|
Nomura Holdings Inc |
| Diversified Financials |
| 13,953 |
|
| 263,512 |
|
Orix Corporation |
| Diversified Financials |
| 1,993 |
|
| 475,942 |
|
Pioneer Corporation |
| Consumer Durables & Apparel |
| 3,320 |
|
| 44,421 |
|
Ricoh Company Limited |
| Technology Hardware & Equipment |
| 12,503 |
|
| 269,656 |
|
Sapporo Hokuyo Holdings Inc |
| Banks |
| 4 |
|
| 42,275 |
|
| 31 |
DOMINI PACASIA SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Japan (Continued) |
|
|
|
|
|
|
|
|
SBI Holdings Inc |
| Diversified Financials |
| 803 |
| $ | 244,985 |
|
Seiko Epson Corp |
| Technology Hardware & Equipment |
| 9,010 |
|
| 261,570 |
|
Seino Holdings Co Ltd |
| Transportation |
| 15,800 |
|
| 152,377 |
|
Sekisui House Limited |
| Consumer Durables & Apparel |
| 41,188 |
|
| 508,496 |
|
Shin-Etsu Chemical Company Ltd |
| Materials |
| 900 |
|
| 66,121 |
|
Shinko Securities Co Ltd |
| Diversified Financials |
| 7,000 |
|
| 33,799 |
|
Sony Corporation |
| Consumer Durables & Apparel |
| 10,278 |
|
| 545,984 |
|
Sumitomo Trust & Bkg |
| Banks |
| 18,874 |
|
| 158,545 |
|
Suzuken Company Limited |
| Health Care Equipment & Services |
| 3,900 |
|
| 120,775 |
|
TDK Corp |
| Technology Hardware & Equipment |
| 5,800 |
|
| 491,932 |
|
Teijin Limited |
| Materials |
| 59,000 |
|
| 318,822 |
|
| Semiconductors & |
|
|
|
|
|
| |
Tokyo Electron Limited |
| Semiconductor Equipment |
| 500 |
|
| 35,853 |
|
Tokyo Steel Mfg Co Ltd |
| Materials |
| 12,000 |
|
| 195,130 |
|
Toppan Printing Company Ltd |
| Commercial Services & Supplies |
| 45,406 |
|
| 489,428 |
|
Toyo Seikan Kaisha Limited |
| Materials |
| 21,587 |
|
| 376,352 |
|
Wacoal Holdings Corp |
| Consumer Durables & Apparel |
| 6,000 |
|
| 73,587 |
|
|
|
|
|
|
|
| 13,969,971 |
|
Malaysia – 1.7% |
|
|
|
|
|
|
|
|
AMMB Holdings BHD |
| Diversified Financials |
| 38,400 |
|
| 51,783 |
|
Bumiputra-Commerce Hldgs BHD |
| Banks |
| 45,400 |
|
| 152,920 |
|
Public Bank BHD – Foreign Market |
| Banks |
| 24,000 |
|
| 72,429 |
|
Telekom Malaysia BHD |
| Telecommunication Services |
| 18,500 |
|
| 54,222 |
|
Tenaga Nasional BHD |
| Utilities |
| 31,756 |
|
| 99,995 |
|
YTL Corporation Berhad |
| Utilities |
| 16,040 |
|
| 34,921 |
|
|
|
|
|
|
|
| 466,270 |
|
New Zealand – 1.8% |
|
|
|
|
|
|
|
|
Kiwi Income Property Trust |
| Real Estate |
| 105,947 |
|
| 122,883 |
|
Telecom Corp of New Zealand |
| Telecommunication Services |
| 44,137 |
|
| 154,100 |
|
Vector Ltd |
| Utilities |
| 100,805 |
|
| 202,845 |
|
|
|
|
|
|
|
| 479,828 |
|
Philippines – 0.6% |
|
|
|
|
|
|
|
|
Globe Telecom Inc |
| Telecommunication Services |
| 5,867 |
|
| 168,940 |
|
|
|
|
|
|
|
| 168,940 |
|
Singapore – 2.2% |
|
|
|
|
|
|
|
|
DBS Group Holdings Ltd. |
| Banks |
| 6,106 |
|
| 91,222 |
|
Jardine Cycle & Carriage Ltd |
| Retailing |
| 20,361 |
|
| 212,812 |
|
Oversea-Chinese Banking Corp |
| Banks |
| 14,381 |
|
| 84,986 |
|
|
| Semiconductors & |
|
|
|
|
|
|
STATS ChipPAC Ltd. (a) |
| Semiconductor Equipment |
| 52,000 |
|
| 56,839 |
|
United Industrial Corp Ltd |
| Real Estate |
| 16,277 |
|
| 32,914 |
|
United Overseas Bank |
| Banks |
| 7,899 |
|
| 115,388 |
|
|
|
|
|
|
|
| 594,161 |
|
32 |
|
DOMINI PACASIA SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
South Korea – 8.9% |
|
|
|
|
|
|
|
|
Daegu Bank |
| Banks |
| 2,100 |
| $ | 41,118 |
|
GS Holdings Corp |
| Energy |
| 5,069 |
|
| 278,657 |
|
Hana Financial Holdings |
| Banks |
| 2,100 |
|
| 113,304 |
|
Hyundai Securities Co |
| Diversified Financials |
| 2,540 |
|
| 84,326 |
|
Industrial Bank of Korea |
| Banks |
| 8,995 |
|
| 205,847 |
|
Kookmin Bank |
| Banks |
| 1,284 |
|
| 112,066 |
|
Korea Zinc Co Ltd |
| Materials |
| 1,125 |
|
| 247,720 |
|
KT Corp |
| Telecommunication Services |
| 6,803 |
|
| 325,239 |
|
LG Corp |
| Commercial Services & Supplies |
| 5,692 |
|
| 322,850 |
|
LG Electronics Inc |
| Consumer Durables & Apparel |
| 3,561 |
|
| 298,631 |
|
Pacific Corp |
| Household & Personal Products |
| 649 |
|
| 129,368 |
|
Pusan Bank |
| Banks |
| 6,480 |
|
| 124,062 |
|
Shinhan Financial Group Ltd |
| Banks |
| 1,933 |
|
| 130,807 |
|
|
|
|
|
|
|
| 2,413,995 |
|
Taiwan – 7.5% |
|
|
|
|
|
|
|
|
Asustek Computer Inc |
| Technology Hardware & Equipment |
| 30,000 |
|
| 85,196 |
|
Au Optronics Corp |
| Technology Hardware & Equipment |
| 97,000 |
|
| 164,307 |
|
Chi Mei Optoelectronics Corp |
| Technology Hardware & Equipment |
| 71,560 |
|
| 79,628 |
|
China Steel Corp |
| Materials |
| 274,214 |
|
| 357,808 |
|
Chunghwa Picture Tubes Ltd (a) |
| Technology Hardware & Equipment |
| 146,000 |
|
| 41,409 |
|
Chunghwa Telecom Co Ltd |
| Telecommunication Services |
| 89,624 |
|
| 154,192 |
|
Compal Electronics |
| Technology Hardware & Equipment |
| 353,615 |
|
| 401,748 |
|
|
| Semiconductors & |
|
|
|
|
|
|
Powerchip Semiconductor Corp |
| Semiconductor Equipment |
| 500,536 |
|
| 321,093 |
|
|
| Semiconductors & |
|
|
|
|
|
|
Pro Mos Technologies Inc |
| Semiconductor Equipment |
| 728,394 |
|
| 280,898 |
|
|
| Semiconductors & |
|
|
|
|
|
|
Siliconware Precision Inds |
| Semiconductor Equipment |
| 19,024 |
|
| 36,356 |
|
Taiwan Cooperative Bank |
| Banks |
| 140,569 |
|
| 106,299 |
|
|
|
|
|
|
|
| 2,028,934 |
|
Thailand – 0.9% |
|
|
|
|
|
|
|
|
Bangkok Bank Pub Co – For Reg |
| Banks |
| 52,318 |
|
| 195,283 |
|
Siam Cement Pub Co – For Reg |
| Materials |
| 5,800 |
|
| 46,709 |
|
|
|
|
|
|
|
| 241,992 |
|
Total Common Stocks (Cost $25,611,904) |
|
|
|
|
|
| 26,725,707 |
|
| 33 |
DOMINI PACASIA SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY |
| INDUSTRY |
| SHARES |
|
| VALUE |
|
Repurchase Agreements – 1.7% |
|
|
|
|
|
|
|
|
State Street Bank & Trust, dated 7/31/07, 3.52% due 8/1/07, maturity amount $462,675 (collateralized by U.S. Government Agency Mortgage Securities, Fannie Mae, 5.45%, 10/18/2021, market value $473,400) |
|
Repurchase Agreement |
|
462,630 |
|
$ |
462,630 |
|
Total Repurchase Agreements (Cost $462,630) |
|
|
|
|
|
| 462,630 |
|
Total Investments — 100.7% (Cost $26,074,534) (b) |
|
|
|
|
|
| 27,188,337 |
|
Other Liabilities, less assets — (0.7)% |
|
|
|
|
|
| (182,088 | ) |
Net Assets — 100.0% |
|
|
|
|
| $ | 27,006,249 |
|
(a) | Non-income producing security. |
(b) | The aggregate cost for federal income tax purposes is $26,207,677. The aggregate gross unrealized appreciation is $1,856,105 and the aggregate gross unrealized depreciation is $875,445, resulting in net unrealized appreciation of $980,660. |
As of the date of this report, certain foreign securities were fair valued by an independent pricing service under the direction of the Board of Trustees or its delegates in accordance with the Trust’s Valuation and Pricing Policies and Procedures.
GDR — Global Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS
34 |
|
DOMINI EUROPACIFIC SOCIAL EQUITY PORTFOLIO
PERFORMANCE COMMENTARY
From the Domini EuroPacific Social Equity Portfolio’s (the ‘‘Fund’’) inception on December 27, 2006, through July 31, 2007, the Fund returned 6.99%, excluding sales charges, underperforming the Morgan Stanley Capital International Europe Australasia Far East Index (MSCI EAFE) by 3.63%.
The Fund was hurt by its exclusion of the Australian mining company BHP Billiton, which returned more than 60% during 2007. BHP Billiton does not meet our investment standards due to its major involvement in uranium mining and other social and environmental concerns. The Fund was hurt also by its positions in the Japanese financial group Resona Holdings (which is no longer held by the Fund) and in the Japanese homebuilder Sekisui House. Sekisui House is notable for its use of environmentally friendly technologies such as fuel cells and solar cells.
The Fund was helped by its position in the Italian automaker Fiat, which is notable for its fuel efficiency and alternative energy initiatives, and by the Swedish bus and truck manufacturer Scania, which claims to be the world’s only supplier of ethanol-powered commercial vehicles. (See our discussion of Fiat in ‘‘The Way You Invest Matters: Global Warming.’’) Unlike the EAFE index, the portfolio of the Fund includes emerging markets, which contributed to performance.
| 35 |
The Domini EuroPacific Social Equity Portfolio invests in the Domini EuroPacific Social Equity Trust. The table and bar chart below provide information as of July 31, 2007, about the ten largest holdings of the Domini EuroPacific Social Equity Trust and its portfolio holdings by industry sector and by country:
TEN LARGEST HOLDINGS(1)
|
| % NET |
COMPANY |
| ASSETS |
Royal Bank of Scotland Group |
| 2.25% |
Vodafone Group PLC |
| 2.25% |
Sanofi-Aventis |
| 2.21% |
Swiss Re-Reg |
| 2.17% |
Allianz SE-Reg |
| 1.88% |
Honda Motor Co Ltd. |
| 1.86% |
France Telecom SA |
| 1.69% |
Arcelor Mittal |
| 1.68% |
UniCredito Italiano SPA |
| 1.64% |
Muenchener Rueckver AG |
| 1.63% |
PORTFOLIO HOLDINGS BY INDUSTRY SECTOR (% OF NET ASSETS)
* | Other reflects Repurchase Agreements and Other Liabilities, less assets. |
PORTFOLIO HOLDINGS BY COUNTRY (% OF NET ASSETS)
* | Other reflects Ireland, Denmark, Singapore, Turkey, Russia, Poland, Portugal, Taiwan, New Zealand, China, Philippines, Hungary, Czech Republic, Greece, Repurchase Agreements, and Other Liabilities, less assets. |
(1) | Excluding Repurchase Agreements. |
The holdings mentioned above are described in the Domini EuroPacific Social Equity Trust’s Portfolio of Investments at July 31, 2007, included herein. The composition of the Trust’s portfolio is subject to change.
36 | Domini EuroPacific Social Equity Portfolio — Performance Commentary |
TOTAL RETURN SINCE INCEPTION (12-27-06)
|
| Domini EuroPacific Social |
| Domini EuroPacific Social |
| MSCI EAFE |
| |
As of 6-30-07 |
| 5.00% |
| 10.24 | % |
| 12.26% |
|
As of 7-31-07 |
| 1.91% |
| 6.99 | % |
| 10.62% |
|
COMPARISON OF $10,000 INVESTMENT IN THE
DOMINI EUROPACIFIC SOCIAL EQUITY PORTFOLIO (WITH 4.75% MAXIMUM SALES
CHARGE) AND THE MSCI EAFE
Past performance is no guarantee of future results. The Fund’s return quoted above represents past performance after all expenses. Economic and market conditions change, and both will cause investment return, principal value, and yield to fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month-end, call 1-800-582-6757 or visit www.domini.com. A 2.00% redemption fee is charged on sales or exchanges of shares made less than 60 days after the settlement of purchase or acquisition through exchange, with certain exceptions. Performance data quoted ab ove does not reflect the deduction of this fee, which would reduce the performance quoted. See the Fund’s prospectus for further information.
Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Total return for the Domini EuroPacific Social Equity Portfolio is based on the Fund’s net asset values and assumes all dividends and capital gains were reinvested. An investment in the Fund is not a bank deposit and is not insured. You may lose money. Certain fees payable by the Fund were waived during the period, and the Fund’s average annual total returns would have been lower had these not been waived.
For the period reported in its current prospectus, the Fund’s gross annual operating expenses were estimated to total 2.32% of net assets. Until November 30, 2007, Domini has contractually agreed to waive fees and reimburse expenses to limit the Fund’s expenses, on a per annum basis, to 1.57% of net assets.
The Morgan Stanley Capital International Europe Australasia Far East Index (MSCI EAFE) is an unmanaged index of common stocks. Investors cannot invest directly in the MSCI EAFE.
______________This material must be preceded or accompanied by the Fund’s current prospectus. DSIL Investment Services LLC, Distributor. 09/07
Domini EuroPacific Social Equity Portfolio — Performance Commentary | 37 |
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 2007
COUNTRY/SECURITY | INDUSTRY | SHARES |
|
| VALUE |
|
Common Stocks – 99.2% |
|
|
|
|
|
|
Australia – 4.7% |
|
|
|
|
|
|
CFS Retail Property Trust | Real Estate | 98,567 |
| $ | 179,304 |
|
DB RREEF Trust | Real Estate | 52,603 |
|
| 81,011 |
|
Macquarie Infrastructure Group | Transportation | 55,456 |
|
| 153,944 |
|
QBE Insurance Group Ltd | Insurance | 1,331 |
|
| 33,791 |
|
Westfield Group | Real Estate | 4,717 |
|
| 76,313 |
|
Westfield Group | Real Estate | 206 |
|
| 3,269 |
|
Westpac Banking Corporation | Banks | 2,455 |
|
| 54,578 |
|
Zinifex Ltd | Materials | 4,996 |
|
| 83,075 |
|
|
|
|
|
| 665,285 |
|
Austria – 1.8% |
|
|
|
|
|
|
Immofinanz AG (a) | Real Estate | 9,364 |
|
| 117,752 |
|
Meinl European Land Ltd (a) | Real Estate | 2,920 |
|
| 67,877 |
|
OMV AG | Energy | 1,098 |
|
| 68,252 |
|
|
|
|
|
| 253,881 |
|
Belgium – 1.9% |
|
|
|
|
|
|
Belgacom SA | Telecommunication Services | 2,486 |
|
| 100,696 |
|
Delhaize Group | Food & Staples Retailing | 450 |
|
| 41,866 |
|
Omega Pharma SA | Health Care Equipment & Services | 919 |
|
| 78,856 |
|
S.A. D’Ieteren N.V. | Retailing | 100 |
|
| 40,233 |
|
|
|
|
|
| 261,651 |
|
China – 0.2% |
|
|
|
|
|
|
TPV Technology Ltd | Technology Hardware & Equipment | 35,775 |
|
| 27,403 |
|
|
|
|
|
| 27,403 |
|
Czech Republic – 0.1% |
|
|
|
|
|
|
Telefonica O2 Czech Republic | Telecommunication Services | 692 |
|
| 19,630 |
|
|
|
|
|
| 19,630 |
|
Denmark – 1.0% |
|
|
|
|
|
|
Dampskibsselskabet Torm AS | Energy | 500 |
|
| 19,922 |
|
H. Lundbeck A/S | Pharma, Biotech & Life Sciences | 2,545 |
|
| 65,496 |
|
Sydbank A/S | Banks | 1,228 |
|
| 62,368 |
|
|
|
|
|
| 147,786 |
|
Finland – 2.6% |
|
|
|
|
|
|
Kesko OYJ – B Shares | Food & Staples Retailing | 393 |
|
| 20,823 |
|
Konecranes OYJ | Capital Goods | 452 |
|
| 18,304 |
|
Metso OYJ | Capital Goods | 320 |
|
| 20,265 |
|
Orion OYJ/New | Pharma, Biotech & Life Sciences | 4,806 |
|
| 125,940 |
|
Outokumpu OYJ | Materials | 1,569 |
|
| 48,621 |
|
Rautaruukki OYJ | Materials | 569 |
|
| 37,300 |
|
Sampo Insurance Co – A Share | Insurance | 3,186 |
|
| 95,629 |
|
|
|
|
|
| 366,882 |
|
France – 7.9% |
|
|
|
|
|
|
Air France-KLM | Transportation | 2,540 |
|
| 114,386 |
|
BNP Paribas | Banks | 1,236 |
|
| 135,937 |
|
38
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY | INDUSTRY | SHARES |
|
| VALUE |
|
France (Continued) |
|
|
|
|
|
|
France Telecom SA | Telecommunication Services | 8,833 |
| $ | 237,589 |
|
Michelin (CDGE) – Class B | Automobiles & Components | 308 |
|
| 40,686 |
|
Sanofi-Aventis | Pharma, Biotech & Life Sciences | 3,708 |
|
| 310,748 |
|
Schneider Electric SA | Capital Goods | 137 |
|
| 18,289 |
|
SCOR SE | Insurance | 899 |
|
| 23,019 |
|
Societe Generale | Banks | 174 |
|
| 29,922 |
|
Valeo | Automobiles & Components | 739 |
|
| 37,908 |
|
Vallourec | Capital Goods | 180 |
|
| 46,585 |
|
Vivendi SA | Media | 2,912 |
|
| 123,754 |
|
|
|
|
|
| 1,118,823 |
|
Germany – 7.9% |
|
|
|
|
|
|
Allianz SE-Reg | Insurance | 1,245 |
|
| 264,877 |
|
Altana AG | Pharma, Biotech & Life Sciences | 5,449 |
|
| 128,022 |
|
Celesio AG | Health Care Equipment & Services | 2,082 |
|
| 125,118 |
|
Commerzbank AG | Banks | 410 |
|
| 17,647 |
|
Deutsche Lufthansa – Reg | Transportation | 3,628 |
|
| 101,851 |
|
Deutsche Telekom AG – Reg | Telecommunication Services | 1,067 |
|
| 18,418 |
|
Epcos AG | Technology Hardware & Equipment | 3,236 |
|
| 65,195 |
|
Fresenius SE | Health Care Equipment & Services | 911 |
|
| 66,172 |
|
Merck KGAA | Pharma, Biotech & Life Sciences | 400 |
|
| 49,933 |
|
Muenchener Rueckver AG – Reg | Insurance | 1,329 |
|
| 229,005 |
|
Salzgitter AG | Materials | 200 |
|
| 40,692 |
|
|
|
|
|
| 1,106,930 |
|
Greece – 0.1% |
|
|
|
|
|
|
Titan Cement Co. S.A. | Materials | 383 |
|
| 19,521 |
|
|
|
|
|
| 19,521 |
|
Hong Kong – 2.4% |
|
|
|
|
|
|
Cathay Pacific Airways Ltd | Transportation | 7,573 |
|
| 19,733 |
|
Chinese Estates Holdings Ltd | Real Estate | 28,269 |
|
| 51,353 |
|
Hang Lung Group Ltd | Real Estate | 4,627 |
|
| 22,687 |
|
Hopewell Holdings | Transportation | 6,000 |
|
| 26,104 |
|
Jardine Matheson Holdings Ltd | Diversified Financials | 714 |
|
| 17,280 |
|
Jardine Strategic Holdings Ltd | Diversified Financials | 2,000 |
|
| 26,200 |
|
Kingboard Chemicals Holdings | Technology Hardware & Equipment | 7,243 |
|
| 39,868 |
|
Swire Pacific Ltd A | Real Estate | 2,334 |
|
| 26,418 |
|
Wharf Holdings Ltd | Real Estate | 14,970 |
|
| 61,800 |
|
Wheelock & Co Ltd | Real Estate | 18,250 |
|
| 47,143 |
|
|
|
|
|
| 338,586 |
|
Hungary – 0.1% |
|
|
|
|
|
|
MOL Hungarian Oil and Gas Nyrt. | Energy | 137 |
|
| 21,228 |
|
|
|
|
|
| 21,228 |
|
Ireland – 1.1% |
|
|
|
|
|
|
Irish Life & Permanent PLC | Insurance | 2,442 |
|
| 58,683 |
|
Kerry Group PLC – A | Food & Beverage | 3,595 |
|
| 95,373 |
|
|
|
|
|
| 154,056 |
|
39
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY | INDUSTRY | SHARES |
|
| VALUE |
|
Italy – 3.3% |
|
|
|
|
|
|
Fiat SPA | Automobiles & Components | 6,141 |
| $ | 180,697 |
|
IFIL Investments SPA | Diversified Financials | 5,213 |
|
| 54,795 |
|
UniCredito Italiano SPA | Banks | 27,178 |
|
| 230,667 |
|
|
|
|
|
| 466,159 |
|
Japan – 21.4% |
|
|
|
|
|
|
Alps Electric Co Ltd | Technology Hardware & Equipment | 3,718 |
|
| 36,665 |
|
Amada Co Ltd | Capital Goods | 2,386 |
|
| 27,716 |
|
Aoyama Trading Co Ltd | Retailing | 996 |
|
| 28,526 |
|
Astellas Pharma Inc | Pharma, Biotech & Life Sciences | 2,000 |
|
| 81,752 |
|
Brother Industries Ltd | Technology Hardware & Equipment | 1,310 |
|
| 18,758 |
|
Central Japan Railway Co | Transportation | 3 |
|
| 30,866 |
|
Dai Nippon Printing Co Ltd | Commercial Services & Supplies | 6,828 |
|
| 99,685 |
|
Daiichi Sanyko Co Ltd | Pharma, Biotech & Life Sciences | 1,100 |
|
| 30,241 |
|
Semiconductors & |
|
|
|
|
| |
Elpida Memory Inc (a) | Semiconductor Equipment | 1,019 |
|
| 44,774 |
|
Familymart Co Ltd | Food & Staples Retailing | 1,100 |
|
| 28,436 |
|
Fuji Film Holdings Corp | Consumer Durables & Apparel | 4,905 |
|
| 213,651 |
|
Honda Motor Co Ltd | Automobiles & Components | 7,228 |
|
| 261,121 |
|
Joyo Bank Ltd | Banks | 2,714 |
|
| 15,695 |
|
JS Group Corp | Capital Goods | 4,400 |
|
| 82,520 |
|
Kawasaki Kisen Kaisha Ltd | Transportation | 2,000 |
|
| 27,237 |
|
Kyocera Corporation | Technology Hardware & Equipment | 179 |
|
| 17,311 |
|
Mazda Motor Corp | Automobiles & Components | 4,000 |
|
| 22,607 |
|
Mitsui Chemicals Inc | Materials | 8,546 |
|
| 65,969 |
|
Mitsui Trust Holding Inc | Banks | 23,194 |
|
| 203,988 |
|
Nintendo Company Ltd | Software & Services | 207 |
|
| 99,298 |
|
Nippon Express Co Ltd | Transportation | 24,000 |
|
| 129,369 |
|
Nippon Paper Group Inc | Materials | 27 |
|
| 87,354 |
|
Nippon Telegraph & Telephone | Telecommunication Services | 23 |
|
| 99,527 |
|
Orix Corporation | Diversified Financials | 100 |
|
| 23,881 |
|
Pioneer Corporation | Consumer Durables & Apparel | 1,364 |
|
| 18,250 |
|
Ricoh Company Limited | Technology Hardware & Equipment | 4,484 |
|
| 96,708 |
|
Sapporo Hokuyo Holdings Inc | Banks | 5 |
|
| 52,843 |
|
SBI Holdings Inc | Diversified Financials | 240 |
|
| 73,221 |
|
Seiko Epson Corp | Technology Hardware & Equipment | 2,501 |
|
| 72,607 |
|
Seino Holdings Co Ltd | Transportation | 7,801 |
|
| 75,233 |
|
Sekisui House Limited | Consumer Durables & Apparel | 15,259 |
|
| 188,384 |
|
Sony Corporation | Consumer Durables & Apparel | 779 |
|
| 41,382 |
|
Suzuken Company Limited | Health Care Equipment & Services | 3,000 |
|
| 92,904 |
|
TDK Corp | Technology Hardware & Equipment | 1,700 |
|
| 144,187 |
|
Teijin Limited | Materials | 20,887 |
|
| 112,868 |
|
Tokyo Steel Mfg Co Ltd | Materials | 1,683 |
|
| 27,367 |
|
Toppan Printing Company Ltd | Commercial Services & Supplies | 12,154 |
|
| 131,007 |
|
Toyo Seikan Kaisha Limited | Materials | 6,161 |
|
| 107,412 |
|
|
|
|
|
| 3,011,320 |
|
40
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY | INDUSTRY | SHARES |
|
| VALUE |
|
Netherlands – 6.2% |
|
|
|
|
|
|
Arcelor Mittal | Materials | 3,860 |
| $ | 236,831 |
|
Fugro NV-CVA | Energy | 397 |
|
| 26,432 |
|
ING Groep NV-CVA | Diversified Financials | 1,491 |
|
| 62,974 |
|
Koninkijke KPN NV | Telecommunication Services | 1,573 |
|
| 24,350 |
|
Koninklijke DSM NV | Materials | 449 |
|
| 23,209 |
|
OCE NV | Technology Hardware & Equipment | 2,416 |
|
| 55,938 |
|
SNS Reaal | Insurance | 8,018 |
|
| 178,490 |
|
TNT NV | Transportation | 2,863 |
|
| 122,929 |
|
Unilever NV-CVA | Food & Beverage | 4,733 |
|
| 143,119 |
|
|
|
|
|
| 874,272 |
|
New Zealand – 0.3% |
|
|
|
|
|
|
Kiwi Income Property Trust | Real Estate | 15,292 |
|
| 17,736 |
|
Vector Ltd | Utilities | 9,175 |
|
| 18,463 |
|
|
|
|
|
| 36,199 |
|
Norway – 3.5% |
|
|
|
|
|
|
Fred Olsen Energy ASA | Energy | 341 |
|
| 17,084 |
|
Norsk Hydro ASA | Energy | 2,650 |
|
| 102,124 |
|
Orkla ASA | Capital Goods | 5,301 |
|
| 99,762 |
|
Petroleum Geo-Services | Energy | 2,262 |
|
| 53,800 |
|
Statoil ASA | Energy | 7,215 |
|
| 213,495 |
|
|
|
|
|
| 486,265 |
|
Philippines – 0.2% |
|
|
|
|
|
|
Globe Telecom Inc | Telecommunication Services | 792 |
|
| 22,806 |
|
|
|
|
|
| 22,806 |
|
Poland – 0.4% |
|
|
|
|
|
|
Globe Trade Centre SA (a) | Real Estate | 1,145 |
|
| 15,817 |
|
Polish Oil & Gas | Energy | 10,712 |
|
| 18,808 |
|
Telekomunikacja Polska | Telecommunication Services | 2,370 |
|
| 18,702 |
|
|
|
|
|
| 53,327 |
|
Portugal – 0.4% |
|
|
|
|
|
|
Banco Espirito Santo – Reg | Banks | 2,120 |
|
| 49,772 |
|
|
|
|
|
| 49,772 |
|
Russia – 0.4% |
|
|
|
|
|
|
Wimm-Bill-Dann Foods ADR | Food & Beverage | 533 |
|
| 50,102 |
|
|
|
|
|
| 50,102 |
|
Singapore – 0.4% |
|
|
|
|
|
|
Jardine Cycle & Carriage Ltd | Retailing | 2,764 |
|
| 28,889 |
|
United Overseas Bank | Banks | 1,593 |
|
| 23,270 |
|
|
|
|
|
| 52,159 |
|
South Korea – 2.0% |
|
|
|
|
|
|
GS Holdings Corp | Energy | 1,046 |
|
| 57,501 |
|
Hana Financial Holdings | Banks | 378 |
|
| 20,395 |
|
Industrial Bank of Korea | Banks | 917 |
|
| 20,985 |
|
Korea Zinc Co Ltd | Materials | 294 |
|
| 64,737 |
|
KT Corp | Telecommunication Services | 405 |
|
| 19,362 |
|
LG Corp | Commercial Services & Supplies | 494 |
|
| 28,020 |
|
LG Electronics Inc | Consumer Durables & Apparel | 243 |
|
| 20,378 |
|
41
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY | INDUSTRY | SHARES |
|
| VALUE |
|
South Korea (Continued) |
|
|
|
|
|
|
Pacific Corp | Household & Personal Products | 176 |
| $ | 35,083 |
|
Woori Finance Holdings Co | Banks | 769 |
|
| 19,802 |
|
|
|
|
|
| 286,263 |
|
Spain – 1.6% |
|
|
|
|
|
|
Corporacion Financiera Alba | Diversified Financials | 259 |
|
| 18,959 |
|
Gas Natural SDG SA | Utilities | 3,665 |
|
| 210,438 |
|
|
|
|
|
| 229,397 |
|
Sweden – 4.3% |
|
|
|
|
|
|
Electrolux AB – Ser B | Consumer Durables & Apparel | 1,483 |
|
| 37,085 |
|
Eniro AB | Media | 3,679 |
|
| 45,326 |
|
Industrivarden AB – C Shares | Diversified Financials | 2,188 |
|
| 45,061 |
|
Investor AB – B Shares | Diversified Financials | 2,199 |
|
| 56,879 |
|
Sandvik AB | Capital Goods | 5,800 |
|
| 116,601 |
|
Scania AB – B Shares | Capital Goods | 6,200 |
|
| 147,745 |
|
SSAB Svenskt Stal AB – Ser B | Materials | 600 |
|
| 20,456 |
|
SSAB Svenskt Stal AB – Ser B Rights (c) | Materials | 600 |
|
| 1,781 |
|
Swedbank AB | Banks | 2,400 |
|
| 87,154 |
|
Teliasonera AB | Telecommunication Services | 7,000 |
|
| 52,924 |
|
|
|
|
|
| 611,012 |
|
Switzerland – 2.8% |
|
|
|
|
|
|
Roche Holding AG | Pharma, Biotech & Life Sciences | 342 |
|
| 60,490 |
|
Swiss Re – Reg | Insurance | 3,567 |
|
| 305,650 |
|
The Swatch Group AG – Reg | Consumer Durables & Apparel | 365 |
|
| 21,264 |
|
|
|
|
|
| 387,404 |
|
Taiwan – 0.3% |
|
|
|
|
|
|
China Steel Corp | Materials | 15,942 |
|
| 20,802 |
|
Pro Mos Technologies Inc | Semiconductors & |
|
|
|
|
|
Semiconductor Equipment | 46,171 |
|
| 17,806 |
| |
|
|
|
|
| 38,608 |
|
Turkey – 0.4% |
|
|
|
|
|
|
Trakya Cam SAnayii AS | Capital Goods | 7,500 |
|
| 28,064 |
|
Turkiye Vakiflar Bankasi T – D | Banks | 7,424 |
|
| 23,706 |
|
|
|
|
|
| 51,770 |
|
United Kingdom – 19.5% |
|
|
|
|
|
|
3i Group PLC | Diversified Financials | 5,482 |
|
| 118,773 |
|
Aviva PLC | Insurance | 3,197 |
|
| 44,449 |
|
Barclays PLC | Banks | 1,401 |
|
| 19,688 |
|
Barratt Developments PLC | Consumer Durables & Apparel | 5,052 |
|
| 94,676 |
|
Bellway PLC | Consumer Durables & Apparel | 764 |
|
| 19,080 |
|
Bovis Homes Group PLC | Consumer Durables & Apparel | 2,942 |
|
| 45,815 |
|
BT Group PLC | Telecommunication Services | 9,235 |
|
| 58,556 |
|
Drax Group PLC | Utilities | 5,784 |
|
| 80,194 |
|
Emap PLC | Media | 3,655 |
|
| 61,850 |
|
Firstgroup PLC | Transportation | 1,468 |
|
| 18,761 |
|
GlaxoSmithKline PLC | Pharma, Biotech & Life Sciences | 2,815 |
|
| 71,276 |
|
HBOS PLC | Banks | 7,535 |
|
| 146,795 |
|
Home Retail Group | Retailing | 20,093 |
|
| 166,948 |
|
Investec PLC | Diversified Financials | 5,155 |
|
| 63,876 |
|
Kelda Group PLC | Utilities | 11,940 |
|
| 202,259 |
|
42
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST / PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2007
COUNTRY/SECURITY | INDUSTRY | SHARES |
|
| VALUE |
|
United Kingdom (Continued) |
|
|
|
|
|
|
Legal & General Group PLCE | Insurance | 33,472 |
| $ | 94,400 |
|
Man Group PLC | Diversified Financials | 5,030 |
|
| 57,231 |
|
National Express Group PLC | Transportation | 906 |
|
| 20,904 |
|
National Grid PLC | Utilities | 5,573 |
|
| 79,045 |
|
Next PLC | Retailing | 2,052 |
|
| 78,390 |
|
Royal Bank Of Scotland Group | Banks | 26,616 |
|
| 317,031 |
|
Smith & Nephew PLC | Health Care Equipment & Services | 3,941 |
|
| 46,928 |
|
Stagecoach Group Ordinary | Transportation | 16,442 |
|
| 69,908 |
|
Standard Life PLC | Insurance | 11,127 |
|
| 69,023 |
|
Taylor Woodrow PLC | Consumer Durables & Apparel | 14,485 |
|
| 95,469 |
|
The Berkeley Grp Holdings | Consumer Durables & Apparel | 541 |
|
| 17,829 |
|
Travis Perkins PLC | Capital Goods | 519 |
|
| 19,752 |
|
Trinity Mirror PLC | Media | 13,640 |
|
| 139,433 |
|
Vodafone Group PLC | Telecommunication Services | 105,339 |
|
| 316,813 |
|
William Morrison Supermarkets | Food & Staples Retailing | 17,679 |
|
| 107,744 |
|
|
|
|
|
| 2,742,896 |
|
Total Common Stocks (Cost $14,263,857) |
|
|
|
| 13,951,393 |
|
Repurchase Agreements – 2.4% |
|
|
|
|
|
|
State Street Bank & Trust, dated 7/31/07, 3.52% due 8/1/07, maturity amount $339,673 (collateralized by: U.S. Government Agency Mortgage Securities, Fannie Mae, 5.45%, 10/18/2021, market value $350,119) | Repurchase Agreement | 339,640 |
|
| 339,640 |
|
Total Repurchase Agreements (Cost $339,640) |
|
|
|
| 339,640 |
|
Total Investments — 101.6% (Cost $14,603,497) (b) |
|
|
|
| 14,291,033 |
|
Other Liabilities, less assets — (1.6)% |
|
|
|
| (226,121) |
|
Net Assets — 100.0% |
|
|
| $ | 14,064,912 |
|
______________
(a) | Non-income producing security. |
(b) | The aggregate cost for federal income tax purposes is $14,645,629. The aggregate gross unrealized appreciation is $447,618 and the aggregate gross unrealized depreciation is $802,214, resulting in net unrealized depreciation of $354,596. |
(c) | Securities for which there are no such quotations or valuations are valued at fair value as determined in good faith by or at the direction of the Trust’s Board of Trustees. |
As of the date of this report, certain foreign securities were fair valued by an independent pricing service under the direction of the Board of Trustees or its delegates in accordance with the Trust’s Valuation and Pricing Policies and Procedures.
ADR — American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS
43
DOMINI FUNDS
EXPENSE EXAMPLE
As a shareholder of the Domini Funds, you incur two types of costs:
• | Transaction costs such as sales charges (loads) on purchases and redemption fees deducted from any redemption or exchange proceeds if you sell or exchange shares of the Fund after holding them less than 60 days |
• | Ongoing costs, including management fees, distribution (12b-1) fees, and other Fund expenses |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested on February 1, 2007, and held through July 31, 2007.
Actual Expenses
The line of the table captioned “Actual Expenses” below provides information about actual account value and actual expenses. You may use the information in this line, together with the amount invested, to estimate the expenses that you paid over the period as follows:
• | Divide your account value by $1,000. |
• | Multiply your result in step 1 by the number in the first line under the heading ‘‘Expenses Paid During Period’’ in the table. |
• | The result equals the estimated expenses you paid on your account during the period. |
Hypothetical Expenses
The second line of the tables below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s return. The hypothetical account values and expenses may not be used to estimate actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical example that appears in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges and redemption fees. Therefore, the second line of the tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
44
Fund Name |
| Expenses |
| Beginning |
| Ending |
| Expenses |
Domini Social |
| Actual Expenses |
| $1,000.00 |
| $996.30 |
| $5.401 |
|
| (5% return before expenses) |
| $1,000.00 |
| $1,019.39 |
| $5.461 |
Domini European |
| Actual Expenses |
| $1,000.00 |
| $1,046.30 |
| $8.022 |
|
| (5% return before expenses) |
| $1,000.00 |
| $1,016.96 |
| $7.902 |
Domini PacAsia |
| Actual Expenses |
| $1,000.00 |
| $1,057.80 |
| $7.963 |
|
| (5% return before expenses) |
| $1,000.00 |
| $1,017.06 |
| $7.803 |
Domini EuroPacific |
| Actual Expenses |
| $1,000.00 |
| $1,033.70 |
| $7.824 |
|
| (5% return before expenses) |
| $1,000.00 |
| $1,017.11 |
| $7.754 |
1 | Expenses are equal to the Fund’s annualized expense ratio of 1.09%, multiplied by average account value over the period, multiplied by 181, and divided by 365. The example reflects the aggregate expenses of the Fund and the Domini Social Equity Trust, the underlying portfolio in which the Fund invests. |
2 | Expenses are equal to the Fund’s annualized expense ratio of 1.58%, multiplied by average account value over the period, multiplied by 181, and divided by 365. The example reflects the aggregate expenses of the Fund and the Domini European Social Equity Trust, the underlying portfolio in which the Fund invests. |
3 | Expenses are equal to the Fund’s annualized expense ratio of 1.56%, multiplied by average account value over the period, multiplied by 181, and divided by 365. The example reflects the aggregate expenses of the Fund and the Domini PacAsia Social Equity Trust, the underlying portfolio in which the Fund invests. |
4 | Expenses are equal to the Fund’s annualized expense ratio of 1.55%, multiplied by average account value over the period, multiplied by 181, and divided by 365. The example reflects the aggregate expenses of the Fund and the Domini EuroPacific Social Equity Trust, the underlying portfolio in which the Fund invests. |
| Expense Example | 45 |
THIS PAGE INTENTIONALLY LEFT BLANK
46 |
|
FINANCIAL STATEMENTS |
|
| 47 |
DOMINI SOCIAL EQUITY TRUST
DOMINI EUROPEAN SOCIAL EQUITY TRUST
DOMINI PACASIA SOCIAL EQUITY TRUST
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 2007
ASSETS: |
|
Investments at cost |
|
Investments at value |
|
Foreign currency, at value (cost $0, $198, $56,344, and $86, respectively) |
|
Receivable for securities sold |
|
Dividend, interest, and tax reclaim receivables |
|
Total assets |
|
LIABILITIES: |
|
Payable for securities purchased |
|
Management fee payable |
|
Other accrued expenses |
|
Total liabilities |
|
NET ASSETS APPLICABLE TO INVESTORS’ BENEFICIAL INTERESTS |
|
48
|
| Domini Social Equity Trust |
| Domini European Social Equity Trust |
| Domini PacAsia Social Equity Trust |
| Domini EuroPacific Social Equity Trust |
| ||||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at cost |
| $ | 1,185,283,381 |
| $ | 122,848,928 |
| $ | 26,074,534 |
| $ | 14,603,497 |
|
Investments at value |
| $ | 1,295,180,588 |
| $ | 133,280,381 |
| $ | 27,188,337 |
| $ | 14,291,033 |
|
Foreign currency, at value (cost $0, $198, $56,344, and $86, respectively) |
|
| — |
|
| 198 |
|
| 56,347 |
|
| 86 |
|
Receivable for securities sold |
|
| 78,105,819 |
|
| 197 |
|
| — |
|
| 180,115 |
|
Dividend, interest, and tax reclaim receivables |
|
| 1,564,090 |
|
| 375,914 |
|
| 74,757 |
|
| 37,672 |
|
Total assets |
|
| 1,374,850,497 |
|
| 133,656,690 |
|
| 27,319,441 |
|
| 14,508,906 |
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable for securities purchased |
|
| 78,272,517 |
|
| 198 |
|
| 294,739 |
|
| 434,804 |
|
Management fee payable |
|
| 350,701 |
|
| 89,143 |
|
| 17,140 |
|
| 8,856 |
|
Other accrued expenses |
|
| 156,717 |
|
| 64,256 |
|
| 1,313 |
|
| 334 |
|
Total liabilities |
|
| 78,779,935 |
|
| 153,597 |
|
| 313,192 |
|
| 443,994 |
|
NET ASSETS APPLICABLE TO INVESTORS’ BENEFICIAL INTERESTS |
| $ | 1,296,070,562 |
| $ | 133,503,093 |
| $ | 27,006,249 |
| $ | 14,064,912 |
|
SEE NOTES TO FINANCIAL STATEMENTS
49
DOMINI SOCIAL EQUITY TRUST
DOMINI EUROPEAN SOCIAL EQUITY TRUST
DOMINI PACASIA SOCIAL EQUITY TRUST
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST
STATEMENTS OF OPERATIONS
INVESTMENT INCOME: |
Dividends (net of foreign taxes of $0, $722,603, $22,220, and $37,307, respectively) |
Interest income |
Investment income |
EXPENSES: |
Management fee |
Custody fees |
Professional fees |
Trustees fees |
Miscellaneous |
Total expenses |
Fees paid indirectly |
Fees waived and expenses reimbursed |
Net expenses |
NET INVESTMENT INCOME (LOSS) |
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY: |
NET REALIZED GAIN (LOSS) FROM: |
Investments |
Foreign currency |
Net realized gain (loss) |
NET CHANGES IN UNREALIZED APPRECIATION (DEPRECIATION) ON: |
Investments |
Translation of assets and liabilities in foreign currencies |
Net change in unrealized appreciation (depreciation) |
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
50 |
|
|
| Domini Social |
| Domini European |
| Domini PacAsia |
| Domini EuroPacific |
| ||||
| FOR THE |
| FOR THE |
| FOR THE PERIOD |
| FOR THE PERIOD |
| |||||
INVESTMENT INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends (net of foreign taxes of $0, $722,603, $22,220, and $37,307, respectively) |
| $ | 24,239,924 |
| $ | 4,840,597 |
| $ | 230,248 |
| $ | 266,261 |
|
Interest income |
|
| 84,867 |
|
| 20,761 |
|
| 5,313 |
|
| 4,150 |
|
Investment income |
|
| 24,324,791 |
|
| 4,861,358 |
|
| 235,561 |
|
| 270,411 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fee |
|
| 3,716,184 |
|
| 795,714 |
|
| 85,183 |
|
| 36,269 |
|
Custody fees |
|
| 316,873 |
|
| 169,618 |
|
| 101,138 |
|
| 99,394 |
|
Professional fees |
|
| 207,730 |
|
| 44,370 |
|
| 40,520 |
|
| 40,351 |
|
Trustees fees |
|
| 48,151 |
|
| 3,195 |
|
| 213 |
|
| 83 |
|
Miscellaneous |
|
| 75,280 |
|
| 3,980 |
|
| 8,991 |
|
| 8,809 |
|
Total expenses |
|
| 4,364,218 |
|
| 1,016,877 |
|
| 236,045 |
|
| 184,906 |
|
Fees paid indirectly |
|
| (145,233 | ) |
| (52,716 | ) |
| (13,145 | ) |
| (4,246 | ) |
Fees waived and expenses reimbursed |
|
| (108,473 | ) |
| (78,112 | ) |
| (134,887 | ) |
| (143,241 | ) |
Net expenses |
|
| 4,110,512 |
|
| 886,049 |
|
| 88,013 |
|
| 37,419 |
|
NET INVESTMENT INCOME (LOSS) |
|
| 20,214,279 |
|
| 3,975,309 |
|
| 147,548 |
|
| 232,992 |
|
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REALIZED GAIN (LOSS) FROM: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
| 363,584,469 |
|
| 10,072,971 |
|
| 143,065 |
|
| 95,053 |
|
Foreign currency |
|
| — |
|
| (47,809 | ) |
| (73,689 | ) |
| (35,565 | ) |
Net realized gain (loss) |
|
| 363,584,469 |
|
| 10,025,162 |
|
| 69,376 |
|
| 59,488 |
|
NET CHANGES IN UNREALIZED APPRECIATION (DEPRECIATION) ON: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
| (171,583,725 | ) |
| 6,759,558 |
|
| 1,113,803 |
|
| (312,463 | ) |
Translation of assets and liabilities in foreign currencies |
|
| — |
|
| 622 |
|
| 376 |
|
| (378 | ) |
Net change in unrealized appreciation (depreciation) |
|
| (171,583,725 | ) |
| 6,760,180 |
|
| 1,114,179 |
|
| (312,841 | ) |
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY |
|
| 192,000,744 |
|
| 16,785,342 |
|
| 1,183,555 |
|
| (253,353 | ) |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
| $ | 212,215,023 |
| $ | 20,760,651 |
| $ | 1,331,103 |
| $ | (20,361 | ) |
SEE NOTES TO FINANCIAL STATEMENTS
51 |
DOMINI SOCIAL EQUITY TRUST
DOMINI EUROPEAN SOCIAL EQUITY TRUST
DOMINI PACASIA SOCIAL EQUITY TRUST
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
|
| Domini Social Equity Trust |
| ||||
|
| YEAR ENDED |
| YEAR ENDED |
| ||
INCREASE IN NET ASSETS: |
|
|
|
|
|
|
|
FROM OPERATIONS: |
|
|
|
|
|
|
|
Net investment income (loss) |
| $ | 20,214,279 |
| $ | 22,399,802 |
|
Net realized gain (loss) |
|
| 363,584,469 |
|
| (38,712,595 | ) |
Net change in unrealized appreciation (depreciation) |
|
| (171,583,725 | ) |
| 38,008,922 |
|
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
| 212,215,023 |
|
| 21,696,129 |
|
TRANSACTIONS IN INVESTORS’ BENEFICIAL INTEREST: |
|
|
|
|
|
|
|
Additions |
|
| 149,773,706 |
|
| 245,457,285 |
|
Reductions |
|
| (473,539,053 | ) |
| (471,501,091 | ) |
Net Increase (Decrease) in Net Assets from Transactions in Investors’ Beneficial Interests |
|
| (323,765,347 | ) |
| (226,043,806 | ) |
Total Increase (Decrease) in Net Assets |
|
| (111,550,324 | ) |
| (204,347,677 | ) |
NET ASSETS: |
|
|
|
|
|
|
|
Beginning of period |
|
| 1,407,620,886 |
|
| 1,611,968,563 |
|
End of period |
| $ | 1,296,070,562 |
| $ | 1,407,620,886 |
|
52 |
|
|
| Domini European Social Equity Trust |
| Domini PacAsia |
| Domini EuroPacific |
| ||||||
| YEAR ENDED | FOR THE PERIOD | FOR THE PERIOD | FOR THE PERIOD | |||||||||
INCREASE IN NET ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
FROM OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) |
| $ | 3,975,309 |
| $ | 976,092 |
| $ | 147,548 |
| $ | 232,992 |
|
Net realized gain (loss) |
|
| 10,025,162 |
|
| 1,574,769 |
|
| 69,376 |
|
| 59,488 |
|
Net change in unrealized appreciation (depreciation) |
|
| 6,760,180 |
|
| 3,677,012 |
|
| 1,114,179 |
|
| (312,841 | ) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
| 20,760,651 |
|
| 6,227,873 |
|
| 1,331,103 |
|
| (20,361 | ) |
TRANSACTIONS IN INVESTORS’ BENEFICIAL INTEREST: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
| 78,695,157 |
|
| 51,295,957 |
|
| 26,495,325 |
|
| 14,712,073 |
|
Reductions |
|
| (21,885,599 | ) |
| (1,590,946 | ) |
| (820,179 | ) |
| (626,800 | ) |
Net Increase (Decrease) in Net Assets from Transactions in Investors’ Beneficial Interests |
|
| 56,809,558 |
|
| 49,705,011 |
|
| 25,675,146 |
|
| 14,085,273 |
|
Total Increase (Decrease) in Net Assets |
|
| 77,570,209 |
|
| 55,932,884 |
|
| 27,006,249 |
|
| 14,064,912 |
|
NET ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
| 55,932,884 |
|
| — |
|
| — |
|
| — |
|
End of period |
| $ | 133,503,093 |
| $ | 55,932,884 |
| $ | 27,006,249 |
| $ | 14,064,912 |
|
SEE NOTES TO FINANCIAL STATEMENTS
| 53 |
FINANCIAL HIGHLIGHTS
DOMINI SOCIAL EQUITY TRUST |
|
| YEAR ENDED JULY 31, |
| |||||||||||||
|
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| 2003 |
| |||||
Net assets (in millions) |
| $ | 1,296 |
| $ | 1,408 |
| $ | 1,612 |
| $ | 1,527 |
| $ | 1,318 |
|
Total return |
|
| 16.00 | % |
| 1.46 | % |
| 11.48 | % |
| 12.01 | % |
| 12.13 | % |
Ratio of net investment income (loss) to average net assets (annualized) |
|
| 1.44 | % |
| 1.48 | % |
| 1.92 | % |
| 1.25 | % |
| 1.32 | % |
Ratio of expenses to average net assets (annualized) |
|
| 0.30 | %(1)(2) |
| 0.22 | %(2) |
| 0.23 | %(2) |
| 0.24 | %(2) |
| 0.23 | %(1)(2) |
Portfolio turnover rate |
|
| 126 | % |
| 12 | % |
| 9 | % |
| 8 | % |
| 8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Reflects an expense reimbursement and fee waiver by the Manager of 0.01% for the year ended July 31, 2007, and 0.01% for the year ended July 31, 2003. Had the Manager not waived its fee and reimbursed expenses, the ratio of expenses to average net assets would have been 0.31% for the year ended July 31, 2007, and 0.24% for the year ended July 31, 2003. |
(2) | Ratio of expenses to average net assets does not include indirectly paid expenses. Including indirectly paid expenses, the expense ratios would have been 0.29%, 0.21%, 0.22%, 0.24%, and 0.23%, for the years ended July 31, 2007, 2006, 2005, 2004, and 2003, respectively. |
DOMINI EUROPEAN SOCIAL EQUITY TRUST |
|
|
|
| FOR THE PERIOD |
| ||
|
|
|
| OCTOBER 3, 2005 |
| ||
|
|
|
| (COMMENCEMENT |
| ||
|
|
|
| OF OPERATIONS) |
| ||
|
| YEAR ENDED |
| THROUGH |
| ||
|
| JULY 31, 2007 |
| JULY 31, 2006 |
| ||
Net assets (in millions) |
| $ | 134 |
| $ | 56 |
|
Total return |
|
| 27.45 | % |
| 25.96 | %* |
Ratio of net investment income to average net assets (annualized) |
|
| 3.75 | % |
| 3.92 | % |
Ratio of expenses to average net assets (annualized) |
|
| 0.88 | %(1)(2) |
| 0.88 | %(1)(2) |
Portfolio turnover rate |
|
| 88 | % |
| 69 | %* |
|
|
|
|
|
|
|
|
* | Not annualized. |
(1) | Reflects an expense reimbursement and fee waiver by the Manager of 0.07% for the year ended July 31, 2007, and 0.47% for the period ended July 31, 2006. Had the Manager not waived its fee, the ratio of expenses to average net assets would have been 0.96% for the year ended July 31, 2007, and 1.35% for the period ended July 31, 2006. |
(2) | Ratio of expenses to average net assets does not include indirectly paid expenses. Including indirectly paid expenses, the expense ratios would have been 0.83% for the year ended July 31, 2007, and 0.77% for the period ended July 31, 2006. |
SEE NOTES TO FINANCIAL STATEMENTS
54
FINANCIAL HIGHLIGHTS
DOMINI PACASIA SOCIAL EQUITY TRUST |
|
| FOR THE PERIOD |
| |
|
| DECEMBER 27, 2006 |
| |
|
| (COMMENCEMENT |
| |
|
| OF OPERATIONS) |
| |
|
| THROUGH |
| |
|
| JULY 31, 2007 |
| |
Net assets (in millions) |
| $ | 27 |
|
Total return |
|
| 7.14 | %* |
Ratio of net investment income to average net assets (annualized) |
|
| 1.30 | % |
Ratio of expenses to average net assets (annualized) |
|
| 0.89 | %(1)(2) |
Portfolio turnover rate |
|
| 41 | %* |
|
|
|
|
|
* | Not annualized. |
(1) | Reflects an expense reimbursement and fee waiver of 1.19% for the period ended July 31, 2007. Had the Manager not waived its fee, the ratio of expenses to average net assets would have been 2.08% for the period ended July 31, 2007. |
(2) | Ratio of expenses to average net assets does not include indirectly paid expenses. Including indirectly paid expenses, the expense ratio would have been 0.77% for the period ended July 31, 2007. |
DOMINI EUROPACIFIC SOCIAL EQUITY TRUST |
|
| FOR THE PERIOD |
| |
|
| DECEMBER 27, 2006 |
| |
|
| (COMMENCEMENT |
| |
|
| OF OPERATIONS) |
| |
|
| THROUGH |
| |
|
| JULY 31, 2007 |
| |
Net assets (in millions) |
| $ | 14 |
|
Total return |
|
| 4.38 | %* |
Ratio of net investment income to average net assets (annualized) |
|
| 4.82 | % |
Ratio of expenses to average net assets (annualized) |
|
| 0.86 | %(1)(2) |
Portfolio turnover rate |
|
| 46 | %* |
|
|
|
|
|
* | Not annualized. |
(1) | Reflects an expense reimbursement and fee waiver by the Manager of 2.96% for the period ended July 31, 2007. Had the Manager not waived its fee, the ratio of expenses to average net assets would have been 3.82% for the period ended July 31, 2007. |
(2) | Ratio of expenses to average net assets does not include indirectly paid expenses. Including indirectly paid expenses, the expense ratio would have been 0.77% for the period ended July 31, 2007. |
SEE NOTES TO FINANCIAL STATEMENTS
55
DOMINI SOCIAL EQUITY TRUST
DOMINI EUROPEAN SOCIAL EQUITY TRUST
DOMIN PACASIA SOCIAL EQUITY TRUST
DOMIN EUROPACIFIC SOCIAL EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
July 31, 2007
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Domini Social Trust was organized as a trust under the laws of the State of New York on June 7, 1989, and is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Domini Social Trust consists of four separate series: Domini Social Equity Trust, Domini European Social Equity Trust, Domini PacAsia Social Equity Trust, and Domini EuroPacific Social Equity Trust (each a “Trust” and collectively the “Trusts”). The Declaration of Trust permits the Trustees to issue an unlimited number of beneficial interests in the Trusts. Each Trust seeks to provide its shareholders with long-term total return.
The Domini Social Equity Trust was designated as a series of the Domini Social Trust on June 7, 1989, and began investment operations on June 3, 1991. The Trust invests primarily in stocks of U.S. companies that meet Domini’s social and environmental standards.
The Domini European Social Equity Trust was designated as a series of the Domini Social Trust on August 1, 2005, and commenced investment operations on October 3, 2005. The Trust invests primarily in stocks of European companies that meet Domini’s social and environmental standards.
The Domini PacAsia Social Equity Trust was designated as a series of the Domini Social Trust on August 1, 2006, and commenced investment operations on December 27, 2006. The Trust invests primarily in stocks of Asia-Pacific companies that meet Domini’s social and environmental standards.
The Domini EuroPacific Social Equity Trust was designated as a series of the Domini Social Trust on August 1, 2006, and commenced investment operations on December 27, 2006. The Trust invests primarily in stocks of European and Asia-Pacific companies that meet Domini’s social and environmental standards.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
56 |
|
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the Trusts’ significant accounting policies.
(A) Valuation of Investments. Securities listed or traded on national securities exchanges are valued at the last sale price reported by the security’s primary exchange or, if there have been no sales that day, at the mean of the current bid and ask price that represents the current value of the security. Securities listed on the NASDAQ National Market System are valued using the NASDAQ Official Closing Price (the “NOCP”). If an NOCP is not available for a security listed on the NASDAQ National Market System, the security will be valued at the last sale price or, if there have been no sales that day, at the mean of the current bid and ask price. Securities for which market quotations are not readily available are valued at fair value as determined in good faith under procedures established by and under the supervision of the Trusts’ Board of Trustees.
Securities that are primarily traded on foreign exchanges generally are valued at the closing price of such securities on their respective exchanges, except that if the Trusts’ manager or submanager, as applicable, is of the opinion that such price would result in an inappropriate value for a security, including as a result of an occurrence subsequent to the time a value was so established, then the fair value of those securities may be determined by consideration of other factors (including the use of an independent pricing service) by or under the direction of the Board of Trustees or its delegates.
(B) Repurchase Agreements. The Trusts may enter into repurchase agreements with selected banks or broker-dealers. Each repurchase agreement is recorded at cost, which approximates fair value. The Trusts require that collateral, represented by securities (primarily U.S. government agency securities), in a repurchase transaction be maintained in a segregated account with a custodian bank in a manner sufficient to enable each Trust to obtain those securities in the event of a default of the counterparty. In the event of default or bankruptcy by another party to the repurchase agreement, retention of the collateral may be subject to legal proceedings.
(C) Foreign Currency Translation. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts on the date of valuation. Purchases and sales of securities, and income and expense items denominated in foreign currencies, are translated into U.S. dollar amounts on the respective dates of such transactions. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board of Trustees.
Notes to Financial Statements | 57 |
The Trusts do not separately report the effect of fluctuations in foreign exchange rates from changes in market prices on securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in fair value of assets and liabilities other than investments in securities held at the end of the reporting period, resulting from changes in exchange rates.
(D) Foreign Currency Contracts. When the Trusts purchase or sell foreign securities they may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed-upon exchange rate on a specified date.
(E) Investment Transactions and Investment Income. Investment transactions are accounted for on trade date. Realized gains and losses from security transactions are determined on the basis of identified cost. Interest income is recorded on an accrual basis. Dividend income, net of any applicable withholding tax, is recorded on the ex-dividend date or for certain foreign securities, when the information becomes available to the Trusts.
(F) Federal Taxes. The Trusts will be treated as partnerships for U.S. federal income tax purposes and are therefore not subject to U.S. federal income tax. As such, investors in the Trusts will be taxed on their share of the applicable Trust’s ordinary income and capital gains. It is intended that the Trusts will be managed in such a way that an investor will be able to satisfy the requirements of the Internal Revenue Code applicable to regulated investment companies.
58 | Notes to Financial Statements |
2. TRANSACTIONS WITH AFFILIATES
(A) Manager. Domini Social Investments LLC (Domini) is registered as an investment advisor under the Investment Advisers Act of 1940. The services provided by Domini consist of investment supervisory services, overall operational support, and administrative services. The administrative services include the provision of general office facilities and supervising the overall administration of the Trusts. For its services under the Management Agreements, Domini receives from each Trust a fee accrued daily and paid monthly at the annual rate below of the respective Trusts’ average daily net assets before any fee waivers:
Domini Social Equity Trust |
| 0.20% of the first $2 billion of net assets managed, |
(prior to November 30, 2006) |
| 0.19% of the next $500 million of net assets managed, |
|
| and 0.18% of net assets managed in excess of $2.5 billion |
Domini Social Equity Trust |
| 0.30% of the first $2 billion of net assets managed, |
(effective November 30, 2006) |
| 0.29% of the next $1 billion of net assets managed, and |
|
| 0.28% of net assets managed in excess of $3 billion |
Domini European Social Equity Trust, |
| 0.75% of the first $250 million of net assets managed, |
Domini PacAsia Social Equity Trust, and |
| 0.70% of the next $250 million of net assets managed, |
Domini EuroPacific Social Equity Trust |
| and 0.65% of net assets managed in excess of $500 million |
For the period ended July 31, 2007, Domini voluntarily waived fees and reimbursed expenses as follows:
|
| FEES |
| EXPENSES |
| |||
Domini Social Equity Trust |
| $ | 108,473 |
|
| — |
| |
Domini European Social Equity Trust |
| $ | 78,112 |
|
| — |
| |
Domini PacAsia Social Equity Trust |
| $ | 85,183 |
| $ | 49,704 |
| |
Domini EuroPacific Social Equity Trust |
| $ | 36,269 |
| $ | 106,972 |
| |
(B) Submanager. Wellington Management Company, LLP (Wellington) provides investment submanagement services to the Trusts on a day-to-day basis pursuant to Submanagement Agreements with Domini. Domini pays Wellington from its management fees. Prior to November 30, 2006, SSgA Funds Management, Inc. provided these services to Domini Social Equity Trust.
3. INVESTMENT TRANSACTIONS
For the period ended July 31, 2007, cost of purchases and proceeds from sales of investments, other than U.S. government securities and short-term obligations, were as follows:
|
| PURCHASES |
| SALES |
| ||
Domini Social Equity Trust |
| $ | 1,732,845,489 |
| $ | 2,036,593,561 |
|
Domini European Social Equity Trust |
|
| 151,212,600 |
|
| 91,219,391 |
|
Domini PacAsia Social Equity Trust |
|
| 33,026,789 |
|
| 7,557,949 |
|
Domini EuroPacific Social Equity Trust |
|
| 17,796,945 |
|
| 3,628,141 |
|
Notes to Financial Statements | 59 |
Per the Trusts’ arrangement with State Street Bank and Trust Company (formerly Investors Bank and Trust Company), credits realized as a result of uninvested cash balances are used to reduce a portion of the Trusts’ expenses. For the period ended July 31, 2007, custody fees of the Trusts, under these arrangements, were reduced by $145,233, $52,716, $13,145, and $4,246 for the Domini Social Equity Trust, Domini European Social Equity Trust, Domini PacAsia Social Equity Trust, and Domini EuroPacific Social Equity Trust, respectively.
4. OTHER ACCOUNTING PRONOUNCEMENTS
On September 15, 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS No. 157”), “Fair Value Measurements.” The new accounting statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumpti ons developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. As of July 31, 2007, management of the Trusts is currently assessing the impact, if any, that will result from adopting SFAS No. 157.
60 | Notes to Financial Statements |
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Investors
Domini Social Trust:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Domini Social Equity Trust, Domini European Social Equity Trust, Domini PacAsia Social Equity Trust, and Domini EuroPacific Social Equity Trust (collectively the ‘‘Trusts’’), each a series of Domini Social Trust (formerly Domini Social Index Portfolio), as of July 31, 2007, and the related statements of operations for the year or period then ended, statements of changes in net assets for each of the years or periods in the two-year period then ended, and financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Trusts’ management. Our responsibility is to express an opinion on these financial statements and financial highligh ts based on our audits.
We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the custodian and brokers or by other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned Trusts as of July 31, 2007, the results of their operations for the year or period then ended, and the changes in their net assets for each of the years or periods in the two-year period then ended, and financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
September 24, 2007
61 |
DOMINI SOCIAL EQUITY PORTFOLIO
DOMINI EUROPEAN SOCIAL EQUITY PORTFOLIO
DOMINI PACASIA SOCIAL EQUITY PORTFOLIO
DOMINI EUROPACIFIC SOCIAL EQUITY PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 2007
|
|
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| ||||
ASSETS: |
|
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|
|
|
|
|
|
|
|
|
|
Investment in Trust, at value |
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable for capital shares |
|
|
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|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable for capital shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsorship/Management fee payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other accrued expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS CONSIST OF: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed net investment income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated net realized gain (loss) from Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation (depreciation) from Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSET VALUE PER SHARE* |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding shares of beneficial interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
MAXIMUM OFFERING PRICE PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
(net asset value per share ÷ (1-4.75%)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
| Domini |
| Domini |
| Domini |
| Domini |
| ||||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Trust, at value |
| $ | 2,010,878 |
| $ | 5,480,673 |
| $ | 1,051,139 |
| $ | 805,477 |
|
Receivable for capital shares |
|
| 7,620 |
|
| 8,030 |
|
| — |
|
| — |
|
Total assets |
|
| 2,018,498 |
|
| 5,488,703 |
|
| 1,051,139 |
|
| 805,477 |
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable for capital shares |
|
| — |
|
| 12,674 |
|
| 2,011 |
|
| — |
|
Sponsorship/Management fee payable |
|
| 785 |
|
| 1,158 |
|
| 226 |
|
| 162 |
|
Other accrued expenses |
|
| 705 |
|
| 244 |
|
| 528 |
|
| 381 |
|
Total liabilities |
|
| 1,490 |
|
| 14,076 |
|
| 2,765 |
|
| 543 |
|
NET ASSETS |
| $ | 2,017,008 |
| $ | 5,474,627 |
| $ | 1,048,374 |
| $ | 804,934 |
|
NET ASSETS CONSIST OF: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital |
| $ | 1,953,389 |
| $ | 4,496,601 |
| $ | 1,004,702 |
| $ | 823,718 |
|
Undistributed net investment income (loss) |
|
| 137 |
|
| 2,210 |
|
| (621 | ) |
| 70 |
|
Accumulated net realized gain (loss) from Trust |
|
| 266,210 |
|
| 515,342 |
|
| 5,238 |
|
| 5,328 |
|
Net unrealized appreciation (depreciation) from Trust |
|
| (202,728 | ) |
| 460,474 |
|
| 39,055 |
|
| (24,182 | ) |
NET ASSETS |
| $ | 2,017,008 |
| $ | 5,474,627 |
| $ | 1,048,374 |
| $ | 804,934 |
|
NET ASSET VALUE PER SHARE* |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
| $ | 2,017,008 |
| $ | 5,474,627 |
| $ | 1,048,374 |
| $ | 804,934 |
|
Outstanding shares of beneficial interest |
| $ | 173,715 |
|
| 362,056 |
|
| 98,354 |
|
| 76,469 |
|
Net asset value per share |
| $ | 11.61 |
| $ | 15.12 |
| $ | 10.66 |
| $ | 10.53 |
|
MAXIMUM OFFERING PRICE PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
(net asset value per share ÷ (1-4.75%)) |
| $ | 12.19 |
| $ | 15.87 |
| $ | 11.19 |
| $ | 11.06 |
|
* | Redemption price is equal to net asset value less any applicable redemption fees retained by the Fund |
SEE NOTES TO FINANCIAL STATEMENTS
| 63 |
DOMINI SOCIAL EQUITY PORTFOLIO
DOMINI EUROPEAN SOCIAL EQUITY PORTFOLIO
DOMINI PACASIA SOCIAL EQUITY PORTFOLIO
DOMINI EUROPACIFIC SOCIAL EQUITY PORTFOLIO
STATEMENTS OF OPERATIONS
INCOME: |
|
Investment income from Trust (net of foreign taxes $0, $29,430, $820, and $2,189, respectively) |
|
Expenses from Trust |
|
Net investment income from Trust |
|
EXPENSES: |
|
Sponsor/Management fee |
|
Distribution fees |
|
Registration Fees. |
|
Professional fees. |
|
Accounting fees |
|
Printing. |
|
Miscellaneous |
|
Transfer agent fees |
|
Trustees fees |
|
Total expenses |
|
Fees waived and expense reimbursed |
|
Net expenses |
|
NET INVESTMENT INCOME |
|
REALIZED AND UNREALIZED GAIN (LOSS) FROM TRUST: |
|
NET REALIZED GAIN (LOSS) FROM TRUST: |
|
Investments |
|
Foreign Currency |
|
Net realized gain (loss) |
|
NET CHANGES IN UNREALIZED APPRECIATION (DEPRECIATION) FROM TRUST: |
|
Investments |
|
Translation of assets and liabilities in foreign currencies |
|
Net change in unrealized appreciation (depreciation) |
|
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM TRUST |
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
|
64
|
| Domini Social |
| Domini European |
| Domini PacAsia Social Equity Portfolio |
| Domini EuroPacific |
| ||||
|
| FOR THE YEAR |
| FOR THE YEAR |
| FOR THE PERIOD |
| FOR THE PERIOD |
| ||||
INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income from Trust (net of foreign taxes $0, $29,430, $820, and $2,189, respectively) |
| $ | 21,066 |
| $ | 208,312 |
| $ | 8,267 |
| $ | 16,056 |
|
Expenses from Trust |
|
| (3,902 | ) |
| (43,621 | ) |
| (3,094 | ) |
| (2,151 | ) |
Net investment income from Trust |
|
| 17,164 |
|
| 164,691 |
|
| 5,173 |
|
| 13,905 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsor/Management fee |
|
| 5,769 |
|
| 13,207 |
|
| 1,004 |
|
| 703 |
|
Distribution fees |
|
| 3,136 |
|
| 13,207 |
|
| 1,004 |
|
| 703 |
|
Registration Fees. |
|
| 40,534 |
|
| 30,534 |
|
| 7,715 |
|
| 8,465 |
|
Professional fees. |
|
| 23,825 |
|
| 20,419 |
|
| 19,150 |
|
| 19,806 |
|
Accounting fees |
|
| 21,810 |
|
| 17,054 |
|
| 9,872 |
|
| 9,821 |
|
Printing. |
|
| 12,548 |
|
| 24,008 |
|
| 2,431 |
|
| 2,423 |
|
Miscellaneous |
|
| 4,053 |
|
| 4,521 |
|
| 355 |
|
| 250 |
|
Transfer agent fees |
|
| 2,996 |
|
| 8,167 |
|
| 1,973 |
|
| 1,477 |
|
Trustees fees |
|
| 36 |
|
| 180 |
|
| 7 |
|
| 5 |
|
Total expenses |
|
| 114,707 |
|
| 131,297 |
|
| 43,511 |
|
| 43,653 |
|
Fees waived and expense reimbursed |
|
| (104,921 | ) |
| (91,635 | ) |
| (40,346 | ) |
| (41,448 | ) |
Net expenses |
|
| 9,786 |
|
| 39,662 |
|
| 3,165 |
|
| 2,205 |
|
NET INVESTMENT INCOME |
|
| 7,378 |
|
| 125,029 |
|
| 2,008 |
|
| 11,700 |
|
REALIZED AND UNREALIZED GAIN (LOSS) FROM TRUST: |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REALIZED GAIN (LOSS) FROM TRUST: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
| 280,166 |
|
| 519,676 |
|
| 5,824 |
|
| 5,744 |
|
Foreign Currency |
|
| — |
|
| (3,053 | ) |
| (1,935 | ) |
| (2,276 | ) |
Net realized gain (loss) |
|
| 280,166 |
|
| 516,623 |
|
| 3,889 |
|
| 3,468 |
|
NET CHANGES IN UNREALIZED APPRECIATION (DEPRECIATION) FROM TRUST: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
| (204,552 | ) |
| 449,864 |
|
| 39,005 |
|
| (24,227 | ) |
Translation of assets and liabilities in foreign currencies |
|
| — |
|
| 241 |
|
| 50 |
|
| 45 |
|
Net change in unrealized appreciation (depreciation) |
|
| (204,552 | ) |
| 450,105 |
|
| 39,055 |
|
| (24,182 | ) |
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM TRUST |
|
| 75,614 |
|
| 966,728 |
|
| 42,944 |
|
| (20,714 | ) |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
| $ | 82,992 |
| $ | 1,091,757 |
| $ | 44,952 |
| $ | (9,014 | ) |
SEE NOTES TO FINANCIAL STATEMENTS
65
DOMINI SOCIAL EQUITY PORTFOLIO
DOMINI EUROPEAN SOCIAL EQUITY PORTFOLIO
DOMINI PACASIA SOCIAL EQUITY PORTFOLIO
DOMINI EUROPACIFIC SOCIAL EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
|
| Domini Social Equity Portfolio |
| ||||
| YEAR ENDED |
| YEAR ENDED |
| |||
INCREASE IN NET ASSETS: |
|
|
|
|
|
|
|
FROM OPERATIONS: |
|
|
|
|
|
|
|
Net investment income (loss) |
| $ | 7,378 |
| $ | 2,297 |
|
Net realized gain (loss) from Trust |
|
| 280,166 |
|
| (6,823 | ) |
Net change in unrealized appreciation (depreciation) from Trust |
|
| (204,552 | ) |
| (4,225 | ) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
| 82,992 |
|
| (8,751 | ) |
DISTRIBUTIONS AND/OR DIVIDENDS: |
|
|
|
|
|
|
|
Dividends to shareholders from net investment income |
|
| (7,590 | ) |
| (2,409 | ) |
Distributions to shareholders from net realized gain |
|
| (3,134 | ) |
| (1,276 | ) |
Net Decrease in Net Assets from Distributions and/or Dividends |
|
| (10,724 | ) |
| (3,685 | ) |
CAPITAL SHARE TRANSACTIONS: |
|
|
|
|
|
|
|
Proceeds from sale of shares |
|
| 1,522,510 |
|
| 376,156 |
|
Net asset value of shares issued in reinvestment of distributions and dividends |
|
| 10,589 |
|
| 3,685 |
|
Redemption fees |
|
| — |
|
| 190 |
|
Payments for shares redeemed |
|
| (67,693 | ) |
| (17,702 | ) |
Total Increase (Decrease) in Capital Share Transactions |
|
| 1,465,406 |
|
| 362,329 |
|
Total Increase (Decrease) in Net Assets |
|
| 1,537,674 |
|
| 349,893 |
|
NET ASSETS: |
|
|
|
|
|
|
|
Beginning of period |
|
| 479,334 |
|
| 129,441 |
|
End of period |
| $ | 2,017,008 |
| $ | 479,334 |
|
Undistributed net investment income (loss) |
| $ | 137 |
| $ | 363 |
|
CAPITAL SHARE TRANSACTIONS IN SHARES: |
|
|
|
|
|
|
|
Sold |
|
| 131,697 |
|
| 35,670 |
|
Issued in reinvestment of distributions and/or dividends |
|
| 906 |
|
| 356 |
|
Redeemed |
|
| (5,853 | ) |
| (1,668 | ) |
Net Increase (Decrease) |
|
| 126,750 |
|
| 34,358 |
|
66
|
| Domini European Social Equity Portfolio |
| Domini PacAsia |
| Domini EuroPacific |
| ||||||
|
| YEAR ENDED |
| FOR THE PERIOD |
| FOR THE PERIOD |
| FOR THE PERIOD |
| ||||
INCREASE IN NET ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
FROM OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) |
| $ | 125,029 |
| $ | 6,705 |
| $ | 2,008 |
| $ | 11,700 |
|
Net realized gain (loss) from Trust |
|
| 516,623 |
|
| 12,207 |
|
| 3,889 |
|
| 3,468 |
|
Net change in unrealized appreciation (depreciation) from Trust |
|
| 450,105 |
|
| 10,369 |
|
| 39,055 |
|
| (24,182 | ) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
| 1,091,757 |
|
| 29,281 |
|
| 44,952 |
|
| (9,014 | ) |
DISTRIBUTIONS AND/OR DIVIDENDS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends to shareholders from net investment income |
|
| (119,450 | ) |
| (7,057 | ) |
| (1,280 | ) |
| (9,770 | ) |
Distributions to shareholders from net realized gain |
|
| (16,505 | ) |
| — |
|
| — |
|
| — |
|
Net Decrease in Net Assets from Distributions and/or Dividends |
|
| (135,955 | ) |
| (7,057 | ) |
| (1,280 | ) |
| (9,770 | ) |
CAPITAL SHARE TRANSACTIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of shares |
|
| 9,187,524 |
|
| 583,697 |
|
| 1,017,482 |
|
| 1,069,140 |
|
Net asset value of shares issued in reinvestment of distributions and dividends |
|
| 121,081 |
|
| 4,701 |
|
| 650 |
|
| 6,156 |
|
Redemption fees |
|
| 1,049 |
|
| 125 |
|
| — |
|
| 5,134 |
|
Payments for shares redeemed |
|
| (5,389,947 | ) |
| (11,629 | ) |
| (13,430 | ) |
| (256,712 | ) |
Total Increase (Decrease) in Capital Share Transactions |
|
| 3,919,707 |
|
| 576,894 |
|
| 1,004,702 |
|
| 823,718 |
|
Total Increase (Decrease) in Net Assets |
|
| 4,875,509 |
|
| 599,118 |
|
| 1,048,374 |
|
| 804,934 |
|
NET ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
| 599,118 |
|
| — |
|
| — |
|
| — |
|
End of period |
| $ | 5,474,627 |
| $ | 599,118 |
| $ | 1,048,374 |
| $ | 804,934 |
|
Undistributed net investment income (loss) |
| $ | 2,210 |
| $ | (462 | ) | $ | (621 | ) | $ | 70 |
|
CAPITAL SHARE TRANSACTIONS IN SHARES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold |
|
| 658,514 |
|
| 49,415 |
|
| 99,591 |
|
| 102,092 |
|
Issued in reinvestment of distributions and/or dividends |
|
| 7,889 |
|
| 407 |
|
| 62 |
|
| 572 |
|
Redeemed |
|
| (353,221 | ) |
| (948 | ) |
| (1,299 | ) |
| (26,195 | ) |
Net Increase (Decrease) |
|
| 313,182 |
|
| 48,874 |
|
| 98,354 |
|
| 76,469 |
|
SEE NOTES TO FINANCIAL STATEMENTS
67
DOMINI SOCIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
|
| YEAR ENDED |
| YEAR ENDED |
| FOR THE PERIOD |
| |||
For a share outstanding for the period: |
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period |
| $ | 10.21 |
| $ | 10.27 |
| $ | 9.50 |
|
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) |
|
| 0.06 |
|
| 0.04 |
|
| 0.04 |
|
Net realized and unrealized gain (loss) on investments |
|
| 1.44 |
|
| 0.02 |
|
| 0.73 |
|
Total income from investment operations |
|
| 1.5 |
|
| 0.06 |
|
| 0.77 |
|
Less dividends and distributions: |
|
|
|
|
|
|
|
|
|
|
Dividends to shareholders from net investment income |
|
| (0.07 | ) |
| (0.07 | ) |
| — |
|
Distributions to shareholders from net realized gain |
|
| (0.03 | ) |
| (0.06 | ) |
| — |
|
Total distributions |
|
| (0.10 | ) |
| (0.13 | ) |
| — |
|
Redemption fee proceeds |
|
| — |
|
| 0.01 | ** |
| — |
|
Net asset value, end of period |
| $ | 11.61 |
| $ | 10.21 |
| $ | 10.27 |
|
Total return(2) |
|
| 14.69 | % |
| 0.51 | % |
| 8.11 | % |
Portfolio turnover† |
|
| 126 | % |
| 12 | % |
| 9 | % |
Ratios/supplemental data (annualized): |
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (in thousands) |
| $ | 2,017 |
| $ | 479 |
| $ | 129 |
|
Ratio of expenses to average net assets |
|
| 1.09 | %(1) |
| 0.95 | %(1) |
| 0.95 | %(1) |
Ratio of net investment income (loss) to average net assets |
|
| 0.59 | % |
| 0.74 | % |
| 0.60 | % |
|
|
|
|
|
|
|
|
|
|
|
† | For the Trust in which the Fund invests. |
** | Based on average shares outstanding. |
(1) | Reflects a waiver of fees by the Manager of the Trust, the Sponsor, and the Distributor of the Fund. Had the Manager, the Sponsor, and the Distributor not waived their fees, the ratio of expenses to average net assets would have been 9.47% and 37.78% for the years ended July 31, 2007 and July 31, 2006 and 135.29% for the period ended July 31, 2005. |
(2) | Total Return does not reflect sales commissions and is not annualized for periods less than one year. |
SEE NOTES TO FINANCIAL STATEMENTS
68
DOMINI EUROPEAN SOCIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
|
|
| YEAR ENDED |
|
|
| FOR THE PERIOD |
| |
For a share outstanding for the period: |
|
|
|
|
|
|
|
| |
Net asset value, beginning of period |
| $ | 12.26 |
|
| $ | 10.00 |
| |
Income from investment operations: |
|
|
|
|
|
|
|
| |
Net investment income (loss) |
|
| 0.42 |
|
|
| 0.19 |
| |
Net realized and unrealized gain (loss) on investments |
|
| 2.88 |
|
|
| 2.26 |
| |
Total income from investment operations |
|
| 3.30 |
|
|
| 2.45 |
| |
Less dividends and/or distributions: |
|
|
|
|
|
|
|
| |
Dividends to shareholders from net investment income |
|
| (0.40 | ) |
|
| (0.20 | ) | |
Distributions to shareholders from net realized gain |
|
| (0.04 | ) |
|
| — |
| |
Total distributions |
|
| (0.44 | ) |
|
| (0.20 | ) | |
Redemption fee proceeds |
|
| — | * |
|
| 0.01 | ** | |
Net asset value, end of period |
| $ | 15.12 |
|
| $ | 12.26 |
| |
Total return(2) |
|
| 26.82 | % |
|
| 24.76 | % | |
Portfolio turnover† |
|
| 88 | % |
|
| 69 | % | |
Ratios/supplemental data (annualized): |
|
|
|
|
|
|
|
| |
Net assets, end of period (in thousands) |
| $ | 5,475 |
|
| $ | 559 |
| |
Ratio of expenses to average net assets |
|
| 1.58 | %(1) |
|
| 1.58 | %(1) | |
Ratio of net investment income (loss) to average net assets |
|
| 2.37 | % |
|
| 3.98 | % | |
* | Amount represents less than 0.005 per share. |
** | Based on average shares outstanding. |
† | For the Trust in which the Fund invests. |
(1) | Reflects a waiver of fees by the Manager of the Trust and the Manager and Distributor of the Fund. Had the Manager and the Distributor not waived their fees, the ratio of expenses to average net assets would have been 3.38% for the year ended July 31, 2007, and 30.47% for the period ended July 31, 2006. |
(2) | Total Return does not reflect sales commissions and is not annualized for periods less than one year. |
SEE NOTES TO FINANCIAL STATEMENTS
69
DOMINI PACASIA SOCIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
|
|
| FOR THE PERIOD |
|
For a share outstanding for the period: |
|
|
|
|
Net asset value, beginning of period |
| $ | 10.00 |
|
Income from investment operations: |
|
|
|
|
Net investment income (loss) |
|
| 0.02 |
|
Net realized and unrealized gain (loss) on investments |
|
| 0.65 |
|
Total income from investment operations |
|
| 0.67 |
|
Less dividends and/or distributions: |
|
|
|
|
Dividends to shareholders from net investment income |
|
| (0.01 | ) |
Distributions to shareholders from net realized gain |
|
| — |
|
Total distributions |
|
| (0.01 | ) |
Redemption fee proceeds |
|
| — |
|
Net asset value, end of period |
| $ | 10.66 |
|
Total return(2) |
|
| 6.73 | % |
Portfolio turnover† |
|
| 41 | % |
Ratios/supplemental data (annualized): |
|
|
|
|
Net assets, end of period (in thousands) |
| $ | 1,048 |
|
Ratio of expenses to average net assets |
|
| 1.56 | %(1) |
Ratio of net investment income (loss) to average net assets |
|
| 0.50 | % |
|
|
|
|
|
† | For the Trust in which the Fund invests. |
(1) | Reflects a waiver of fees by the Manager of the Trust and the Manager and Distributor of the Fund. Had the Manager and the Distributor not waived their fees, the ratio of expenses to average net assets would have been 12.80% for the period ended July 31, 2007. |
(2) | Total Return does not reflect sales commissions and is not annualized for periods less than one year. |
SEE NOTES TO FINANCIAL STATEMENTS
70 |
|
DOMINI EUROPACIFIC SOCIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
|
| FOR THE PERIOD |
| |
For a share outstanding for the period: |
|
|
|
|
Net asset value, beginning of period |
| $ | 10.00 |
|
Income from investment operations: |
|
|
|
|
Net investment income (loss) |
|
| 0.20 |
|
Net realized and unrealized gain (loss) on investments |
|
| 0.38 |
|
Total income from investment operations |
|
| 0.58 |
|
Less dividends and/or distributions: |
|
|
|
|
Dividends to shareholders from net investment income |
|
| (0.17 | ) |
Distributions to shareholders from net realized gain |
|
| — |
|
Total distributions |
|
| (0.17 | ) |
Redemption fee proceeds |
|
| 0.12 | ** |
Net asset value, end of period |
|
| 10.53 |
|
Total return(2) |
|
| 6.99 | % |
Portfolio turnover† |
|
| 46 | % |
Ratios/supplemental data (annualized): |
|
|
|
|
Net assets, end of period (in thousands) |
| $ | 805 |
|
Ratio of expenses to average net assets |
|
| 1.55 | %(1) |
Ratio of net investment income (loss) to average net assets |
|
| 4.16 | % |
|
|
|
|
|
** | Based on average shares outstanding. |
† | For the Trust in which the Fund invests. |
(1) | Reflects a waiver of fees by the Manager of the Trust and the Manager and Distributor of the Fund. Had the Manager and the Distributor not waived their fees, the ratio of expenses to average net assets would have been 19.25% for the period ended July 31, 2007. |
(2) | Total Return does not reflect sales commissions and is not annualized for periods less than one year. |
SEE NOTES TO FINANCIAL STATEMENTS
71
DOMINI SOCIAL EQUITY PORTFOLIO
DOMINI EUROPEAN SOCIAL EQUITY P ORTFOLIO
DOMINI PACASIA SOCIAL EQUITY PORTFOLIO
DOMINI EUROPACIFIC SOCIAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2007
1.ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Domini Advisor Trust is a Massachusetts business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust comprises four separate series: the Domini Social Equity Portfolio, Domini European Social Equity Portfolio, Domini PacAsia Social Equity Portfolio, and Domini EuroPacific Social Equity Portfolio (each the “Fund,” collectively the “Funds”). Each Fund invests substantially all of its assets in the Domini Social Equity Trust, Domini European Social Equity Trust, Domini PacAsia Social Equity Trust, and Domini EuroPacific Social Equity Trust, respectively (the “Trusts”). The Trusts are diversified, open-end management investment companies having the same investment objectives as the respective Funds. The Trusts are each a series of Domini Social Trust. The values of such investments re flect the Funds’ proportionate interest in the net assets of the Trusts (approximately 0.2% of Domini Social Equity Trust, 4.1% of Domini European Social Equity Trust, 3.9% of Domini PacAsia Social Equity Trust, and 5.7% of Domini EuroPacific Social Equity Trust, respectively, at July 31, 2007). The financial statements of the Trusts are included elsewhere in this report and should be read in conjunction with the Funds’ financial statements.
Shares of the Funds are sold with a front-end sales charge (load) of up to 4.75%.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the f inancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the Funds’ significant accounting policies.
(A) Valuation of Investments: Valuation of securities by the Trusts is discussed in Note 1 of the Trusts’ Notes to Financial Statements, which are included elsewhere in this report.
(B) Investment Income and Dividends to Shareholders: The Funds earn income daily, net of Trust expenses, on their investments in the Trusts.
72
Dividends to shareholders are usually declared and paid semi-annually from net investment income. Distributions to shareholders of realized capital gains, if any, are made annually. Distributions are determined in conformity with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications have been made to the Funds’ components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax regulations.
(C) Federal Taxes: Each Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income, including net realized gains, if any, within the prescribed time periods. Accor dingly, no provision for federal income or excise tax is deemed necessary.
(D) Other: All net investment income and realized and unrealized gains and losses of the Trusts are allocated daily pro rata among the Funds and the other investors in the Trusts.
(E) Redemption Fees: Redemptions and exchanges of Fund shares held less than 60 days may be subject to the Funds’ redemption fee, which is 2% of the amount redeemed. Such fees are retained by the Funds and are recorded as an adjustment to paid-in capital.
2. TRANSACTIONS WITH AFFILIATES
(A) Manager. The Trusts have retained Domini Social Investments LLC (Domini) to serve as investment manager and administrator. The services provided by and fees paid to Domini under the Management Agreements are discussed in Note 2(A) of the Trusts’ Notes to Financial Statements, which are included elsewhere in this Report.
(B) Submanager. Wellington Management Company, LLP (Wellington) provides investment submanagement services to the Trusts on a day-to-day basis pursuant to Submanagement Agreements with Domini. Prior to November 30, 2006, SSgA Funds Management, Inc. was the submanager for the Domi ni Social Equity Trust.
(C) Sponsor/Manager. Pursuant to a Sponsorship Agreement (with respect to the Domini Social Equity Portfolio) and a Management Agreement (with respect to the Domini European Social Equity Portfolio, Domini PacAsia Social Equity Portfolio, and Domini EuroPacific Social Equity Portfolio), Domini provides the Funds with the administrative personnel and services necessary to operate the Funds. In addition to general administrative services and facilities for the Funds similar to those provided by Domini to the Trusts under the Management Agreements, Domini answers questions from the general public and the media regarding the securities holdings of the Trusts. For these services and facilities,
Notes to Financial Statements | 73 |
Domini receives fees accrued daily and paid monthly from the Funds at the annual rate below of the respective Funds’ average daily net assets before any fee waivers:
Domini Social Equity Portfolio (prior to November 30, 2006) |
| 0.50% of net assets managed |
Domini Social Equity Portfolio (effective November 30, 2006) |
| 0.45% of the first $2 billion of net assets managed, |
|
| 0.44% of the next $1 billion of net assets managed, and |
|
| 0.43% of net assets managed in excess of $3 billion |
|
|
|
Domini European Social Equity Portfolio, Domini PacAsia Social Equity Portfolio, and Domini EuroPacific Social Equity Portfolio |
| 0.25% of the first $250 million of net assets managed, |
|
| 0.24% of the next $250 million of net assets managed, and |
|
| 0.23% of net assets managed in excess of $500 million |
Effective November 30, 2006, Domini has reduced its fees and reimbursed expenses to the extent necessary to keep the aggregate annual operating expenses of the Domini Social Equity Portfolio at no greater than 1.13% of the average daily net assets. For the period prior to November 30, 2006, Domini capped aggregate annual operating expenses at 0.95%. Effective November 30, 2006, Domini has reduced its fees and reimbursed expenses to the extent necessary to keep the aggregate annual operating expenses of the Domini European Social Equity Portfolio at no greater than 1.57% of the average daily net assets. For the period prior to November 30, 2006, Domini capped aggregate annual operating expenses at 1.60%. Since the inception of the Domini PacAsia Social Equity Portfolio and Domini EuroPacific Social Equity Portfolio, Domini has reduced its fees and reimbursed expenses to the e xtent necessary to keep the aggregate annual operating expenses at no greater than 1.57% of each Fund’s average daily net assets. The waivers currently in effect are contractual and in effect until November 30, 2007, absent an earlier modification by the Board of Trustees, which oversees the Funds. For the period ended July 31, 2007, Domini waived fees and reimbursed expenses as follows:
|
| FEES |
| EXPENSES |
| ||
Domini Social Equity Portfolio |
| $ | 5,769 |
| $ | 96,016 |
|
Domini European Social Equity Portfolio |
|
| 13,207 |
|
| 65,221 |
|
Domini PacAsia Social Equity Portfolio |
|
| 1,004 |
|
| 38,338 |
|
Domini EuroPacific Social Equity Portfolio |
|
| 703 |
|
| 40,042 |
|
(D) Distributor. The Board of Trustees of the Funds has adopted a Distribution Plan in accordance with Rule 12b-1 under the Act. DSIL Investment Services LLC (DSILD), a wholly owned subsidiary of Domini, acts as agent of the Funds in connection with the offering of shares of the Funds pursuant to a Distribution Agreement. Under the Distribution Plan, the Funds pay expenses incurred in connection with the sale of Fund shares and pay DSILD a distribution fee at an aggregate annual rate not to exceed 0.25% of the average daily net assets. For the period ended July 31, 2007, fees waived were $3,136, $13,207, $1,004, and $703 for the Domini Social Equity Portfolio, Domini European Social Equity Portfolio, Domini PacAsia Social Equity Portfolio, and Domini EuroPacific Social Equity Portfolio, respectively.
74 | Notes to Financial Statements |
DSIL Investment Services, LLC, (DSIL) the Funds’ Distributor, has received commissions related to the sale of fund shares. For the period ended July 31, 2007, DSIL received $8,383, $55,398, $1,136, and $2,599 from Domini Social Equity Portfolio, Domini European Social Equity Portfolio, Domini PacAsia Social Equity Portfolio, and Domini EuroPacific Social Equity Portfolio, respectively.
3. INVESTMENT TRANSACTIONS
For the period ended July 31, 2007, additions and reductions in the Funds’ investment in the Trusts were as follows:
|
| ADDITIONS |
| REDUCTIONS |
| ||
Domini Social Equity Portfolio |
| $ | 1,507,131 |
| $ | 68,854 |
|
Domini European Social Equity Portfolio |
|
| 9,180,591 |
|
| 5,431,069 |
|
Domini PacAsia Social Equity Portfolio |
|
| 1,019,493 |
|
| 16,471 |
|
Domini EuroPacific Social Equity Portfolio |
|
| 1,074,274 |
|
| 261,987 |
|
4. FEDERAL TAX STATUS
The tax basis of the components of net assets for the Funds at July 31, 2007, are as follows:
|
|
| DOMINI |
|
| DOMINI |
|
| DOMINI |
|
| DOMINI |
|
Undistributed ordinary income |
| $ | 137 |
| $ | 348,600 |
| $ | 12,739 |
| $ | 5,813 |
|
Undistributed long term capital gains |
|
| — |
|
| 134,588 |
|
| — |
|
| — |
|
Capital losses, other losses and other temporary differences |
|
| 164,976 |
|
| 39,764 |
|
| (2,942 | ) |
| 1,999 |
|
Unrealized appreciation (depreciation) |
|
| (101,494 | ) |
| 455,074 |
|
| 33,875 |
|
| (26,596 | ) |
Distributable net earnings (deficit) |
| $ | 63,619 |
| $ | 978,026 |
| $ | 43,672 |
| $ | (18,784 | ) |
The difference between components of Distributable Earnings on a tax basis and the amounts reflected in the statement of assets and liabilities are primarily due to differences in book and tax policies and capital loss carryovers.
During the period from November 1, 2006 through July 31, 2007 the Funds’ net realized capital losses were as follows:
Domini Social Equity Portfolio |
| $38,372 |
|
Domini European Social Equity Portfolio |
| — |
|
Domini PacAsia Social Equity Portfolio |
| — |
|
Domini EuroPacific Social Equity Portfolio |
| — |
|
These losses are deferred and will be recognized on August 1, 2007, for tax purposes.
Notes to Financial Statements | 75 |
For federal income tax purposes, dividends paid were characterized as follows:
|
| DOMINI |
| DOMINI |
| DOMINI |
| DOMINI |
| ||||||||||
|
| YEAR ENDED |
| YEAR ENDED |
| YEAR ENDED |
| YEAR ENDED |
| YEAR ENDED |
| YEAR ENDED |
| ||||||
Ordinary income |
| $ | 7,742 |
| $ | 2,412 |
| $ | 135,778 |
| $ | 7,057 |
| $ | 1,280 |
| $ | 9,770 |
|
Long-term capital gain |
|
| 2,982 |
|
| 1,273 |
|
| 177 |
|
| — |
|
| — |
|
| — |
|
Total |
| $ | 10,724 |
| $ | 3,685 |
| $ | 135,955 |
| $ | 7,057 |
| $ | 1,280 |
| $ | 9,770 |
|
5. OTHER ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the effective date. FIN 48 is not expected to have a material effect on the Funds’ financial statements. However, as analysis is on-going, the conclusions regarding FIN 48 may be subject to review and adjustment.
On September 15, 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS No. 157”), “Fair Value Measurements.” The new accounting statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants wo uld use in pricing the asset or liability, a nd establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. As of July 31, 2007, management of the Fund is currently assessing the impact, if any, that will result from adopting SFAS No. 157.
76 | Notes to Financial Statements |
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders
Domini Advisor Trust:
We have audited the accompanying statement of assets and liabilities of Domini Social Equity Portfolio, Domini European Social Equity Portfolio, Domini PacAsia Social Equity Portfolio, and Domini EuroPacific Social Equity Portfolio (collectively the “Funds”), each a series of Domini Advisor Trust, as of July 31, 2007, and the related statements of operations for the year or period then ended, statements of changes in net assets for each of the years or periods in the two-year period then ended, and financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of the investment owned in the Trusts as of July 31, 2007, by correspondence with the record keeper for the Trusts. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned Funds as of July 31, 2007, the results of their operations for the year or period then ended, and the changes in their net assets for each of the years or periods in the two-year period then ended, and financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
September 28, 2007
77
THE DOMINI FUNDS
TAX INFORMATION (UNAUDITED)
FOR THE YEAR ENDED JULY 31, 2007
The amount of long-term capital gains paid for the year ended July 31, 2007 was as follows:
Domini Social Equity Portfolio |
| 2,982 | |
Domini European Social Equity Portfolio |
| 177 | |
Domini PacAsia Social Equity Portfolio |
| — | |
Domini EuroPacific Social Equity Portfolio |
| — |
For dividends paid from net investment income during the year ended July 31, 2007, the Funds designated the following as Qualified Dividend Income:
Domini Social Equity Portfolio |
| 7,369 | |
Domini European Social Equity Portfolio |
| 135,778 | |
Domini PacAsia Social Equity Portfolio |
| 1,280 | |
Domini EuroPacific Social Equity Portfolio |
| 9,770 |
For corporate shareholders, 95% of dividends paid from net investment income for the Domini Social Equity Portfolio were eligible for the corporate dividends received deduction.
|
| FOREIGN TAX PAID |
| FOREIGN SOURCE INCOME |
| ||||||||
|
| TOTAL |
| PER SHARE |
| TOTAL |
| PER SHARE |
| ||||
Domini European Social Equity Portfolio |
| $ | 26,981 |
| $ | 0.07 |
| $ | 228,611 |
| $ | 0.63 |
|
Domini PacAsia Social Equity Portfolio |
|
| 865 |
|
| 0.01 |
|
| 9,821 |
|
| 0.1 |
|
Domini EuroPacific Social Equity Portfolio |
|
| 2,087 |
|
| 0.03 |
|
| 17,393 |
| $ | 0.23 |
|
The foreign taxes paid or withheld per share represent taxes incurred by the Funds on interest and dividends received by the Fund from foreign sources. Foreign taxes paid or withheld should be included in taxable income with an offsetting deduction from gross income or as a credit for taxes paid to foreign governments. Consult your tax advisor regarding the appropriate treatment of foreign taxes paid.
78 |
|
BOARD OF TRUSTEES’ CONSIDERATION OF MANAGEMENT AND SUBMANAGEMENT AGREEMENTS
Domini manages the assets of the Domini European Social Equity Trust (the “European Trust”) and each of its feeder funds, the Domini European Social Equity Fund and Domini European Social Equity Portfolio (together with the European Trust, the “European Funds”). In addition, Domini manages the assets of the Domini Social Bond Fund (the “Bond Fund”). Wellington Management Company LLP (“Wellington Management”) is the submanager of the European Trust. Seix Advisors is the submanager of the Bond Fund. Set forth below is a discussion of the Board of Trustees’ considerations and determinations with respect to the management and submanagement agreements for the European Funds and the Bond Fund.
Domini also manages the assets of the Domini Social Equity Trust, the Domini PacAsia Social Equity Trust, the Domini EuroPacific Social Equity Trust, and the feeder funds for the Domini PacAsia Social Equity Trust and Domini EuroPacific Social Equity Trust. Wellington Management is the submanager for each of the Domini Social Equity Trust, Domini PacAsia Social Equity Trust, and Domini EuroPacific Social Equity Trust. A discussion of the Board of Trustees’ considerations and determinations with respect to the management and submanagement agreements for the Equity Trust is included in its Annual Report for the period ended July 31, 2006. A discussion of the Board of Trustees’ considerations and determinations with respect to the management and submanagement agreements for the PacAsia and EuroPacific Funds is included in their Semi-Annual Report for the period ended January 31, 2007.
* * *
At a meeting held on April 27, 2007, the Trustees approved the continuance of the management and submanagement agreements for the Bond Fund and the European Funds. In connection with that meeting, the Trustees reviewed extensive information provided by Domini, Seix Advisors, and Wellington Management regarding, among other things, the nature and quality of services provided; legal, regulatory, and compliance matters; the fees to be paid to Domini; the fees to be paid by Domini to Seix Advisors and Wellington Management; comparable fees paid by other funds; and certain other information.
In reaching their determination to approve the agreements for the Bond Fund and European Funds, the Trustees considered a variety of factors they believed relevant and balanced a number of considerations. The Trustees did not identify any particular information or factor that was all-important or controlling. The primary factors considered and the conclusions reached are described below.
| 79 |
BOND FUND
Nature, Quality, and Extent of Services Provided. The Trustees noted that pursuant to the management agreement for the Bond Fund, Domini, subject to the direction of the Board, is responsible for providing advice and guidance and for managing the investment of the assets of the Bond Fund, which it does by engaging and overseeing the activities of Seix Advisors. They considered that under the management agreement, Domini is responsible for applying social and environmental standards to a universe of securities. The Trustees also considered the scope and quality of the services provided by Seix Advisors pursuant to the submanagement agreement, such as the provision of the day-to-day portfolio management of the Bond Fund, including making purchases and sales of socially screened portfolio securities consistent wit h the Bond Fund’s investment objective and policies.
The Trustees considered the professional experience, tenure, and qualifications of each of the portfolio management teams and the other senior personnel at Domini and Seix Advisors. They also considered Domini’s capabilities and experience in the development and application of social and environmental standards and its reputation and leadership in the socially responsible investment community. The Trustees considered the information they had received from Domini concerning the growth of Domini’s social research team and the fact that Domini was responsible for the Bond Fund’s community development investments. They considered the quality of the administrative services Domini provided to the Bond Fund. In addition, they considered the compliance policies, procedures, and record of Domini and Seix Advisors. The Trustees concluded that they were satisfied with th e nature, quality, and extent of services provided by Domini and Seix Advisors to the Bond Fund under the management and submanagement agreements.
Investment Results. The Trustees reviewed information provided to them by Domini regarding the investment returns of the Bond Fund since Seix Advisors became the submanager of the Fund (February 28, 2005) and for the 3-month, 1-year, and 2-year periods ended December 31, 2006, and February 28, 2007. They considered the performance of the Bond Fund’s benchmark, the Lehman Brothers Intermediate Aggregate Index, and other relevant benchmarks for the same period and the performance of the Bond Fund’s peer group. The Trustees noted that the Bond Fund had underperformed relative to the benchmark on a net basis but that the Fund had relatively good performance gross of fees compared to the benchmark and Seix Advisors’ intermediate fixed-income composite. The Trustees also considered Seix Advisors’ short tenure as submanager of the Bond Fund. In light of the foregoing, the Trustees concluded that the performance of the Bond Fund was sufficient to warrant continuance of the management and submanagement agreements.
Fees and Other Expenses. The Trustees considered the management and submanagement fees paid to Domini and Seix Advisors with respect to the
80 |
|
Bond Fund. The Trustees also considered the administrative fees paid by the Bond Fund to Domini. The Trustees considered the fees that each of Domini and Seix Advisors charges its other clients with similar investment objectives. The Trustees considered that Domini (and not the Bond Fund) pays Seix Advisors from its advisory fee. The Trustees considered the level of the Bond Fund’s advisory and administrative fees versus the average advisory and administrative fees for the relevant peer group and compared the Bond Fund’s total expense ratio to the median total expense ratios of those peers, taking into account the agreed-upon waiver of fees and such other matters as the Trustees considered relevant in the exercise of their reasonable judgment. Noting that the total expense ratio of the Bond Fund was about the same as the median total expense ratio of the relevant p eer group and lower than the average total expense ratio of the socially responsible bond fund peer group and the relatively small size of the Bond Fund, the Trustees concluded that the management and submanagement fees payable with respect to the Bond Fund are reasonable and supported continuance of the management and submanagement agreements.
Costs of Services Provided and Profitability. The Trustees reviewed information provided to them by Domini concerning the costs borne by and profitability of Domini with respect to the advisory and administrative services provided to the Bond Fund in 2006, along with a description of the methodology used by Domini in preparing the profitability information. The Trustees concluded that they were satisfied that Domini’s level of profitability with respect to the Bond Fund was reasonable in view of the nature, quality, and extent of services provided.
The Trustees also reviewed the most recent annual report for Sun Trust Banks, Inc. (the parent company of Seix Advisors). The Trustees considered Seix Advisors’ profit margin with respect to the Bond Fund in comparison to the industry data provided by Domini. Based on the information provided, the Trustees concluded that they were satisfied that Seix Advisors’ level of profitability with respect to the Bond Fund was not excessive in view of the nature, quality, and extent of services provided.
Economies of Scale. The Trustees also considered whether economies of scale would be realized by Domini and Seix Advisors as assets grew and the extent to which economies of scale were reflected in the fees charged under the management and submanagement agreements. The Trustees noted that there were breakpoints in the fees charged under each agreement, and also considered the fee waivers proposed by Domini. They concluded that breakpoints were an effective way to share economies of scale with shareholders and that this was a positive factor in support of approval of the continuance of the management and submanagement agreements.
Other Benefits. The Trustees considered the other benefits that Domini, Seix Advisors, and their respective affiliates receive from their relationship with the Bond Fund, noting that Seix Advisors and its affiliates provide no other services to the Domini Funds. The Trustees reviewed the character
| 81 |
and amount of payments received by Domini and its affiliates in connection with the Bond Fund and the other Domini Funds. The Trustees considered that Domini’s profitability would be lower if the benefits related to distribution fees were not received. The Trustees considered the brokerage practices of Domini and Seix Advisors, and noted that neither Domini nor Seix Advisors received the benefit of “soft dollar” commissions in connection with the Bond Fund. The Trustees also considered the intangible benefits that would continue to accrue to Domini, Seix Advisors, and each of their respective affiliates by virtue of their relationship with the Bond Fund and the other Domini Funds. The Trustees concluded that the benefits received by Domini, Seix Advisors, and their respective affiliates were reasonable and supported the approval of the continuance of the manag ement and submanagement agreements.
EUROPEAN FUNDS
Nature, Quality, and Extent of Services Provided. The Trustees noted that pursuant to the European Funds’ management agreements, Domini, subject to the direction of the Board, is responsible for providing advice and guidance with respect to each European Fund and for managing the investment of the assets of the European Trust, which it does by engaging and overseeing the activities of Wellington Management. They considered that under the management agreements, Domini is responsible for applying social and environmental standards to a universe of securities. The Trustees considered the scope and quality of the services provided by Wellington Management, such as the provision of the day-to-day portfolio management of the European Trust, including making purchases and sales of socially screened portfolio secu rities consistent with the European Trust’s investment objective and policies.
The Trustees considered the professional experience, tenure, and qualifications of each of the portfolio management teams and the other senior personnel at Domini and Wellington Management. They also considered Domini’s capabilities and experience in the development and application of social and environmental standards and its reputation and leadership in the socially responsible investment community. In addition, they considered the compliance policies, procedures, and record of Domini and Wellington Management. The Trustees concluded that Domini and Wellington Management had the necessary capabilities, resources, and personnel to continue providing services under the management and submanagement agreements.
Investment Results. The Trustees reviewed information provided to them by Domini regarding the investment returns of the European Funds for the 3-month, 6-month, and 1-year periods ended February 28, 2007, and December 31, 2007, as well as cumulative performance from inception (October 15, 2005) and through December 31, 2006, and February 28, 2007. They considered the performance of the MSCI Europe Index, the benchmark for the European Funds, and other relevant benchmarks for the same period, as well as the performance of the peer group. The
82 |
|
Trustees noted that the European Funds had outperformed the MSCI Europe Index for the relevant periods and concluded that that such performance was sufficient to warrant continuance of the management and submanagement agreements.
Fees and other Expenses. The Trustees considered the management and submanagement fees paid to Domini and Wellington Management with respect to the European Funds. The Trustees considered the fees that each of Domini and Wellington Management charges its other clients with similar investment objectives. The Trustees considered that Domini (and not the European Trust) pays Wellington Management from its advisory fee. The Trustees considered that the subadvisory fees Wellington Management receives with respect to the European Trust were within the general range of the fees it receives with respect to the management of the assets of its other clients. The Trustees reviewed the total expense ratios of each of the European Funds versus the advisory and administrative fees of similar funds, taking into account the ag reed-upon waiver of advisory fees, and such other matters as the Trustees considered relevant in the exercise of their reasonable judgment, including the compensation to be paid. Noting that the total expense ratios of the European Funds were lower than the median total expense ratio of a relevant peer group and lower than the average total expense ratio of the socially responsible European Fund peer group, the Trustees concluded that the management and submanagement fees payable with respect to the European Funds were reasonable and supported continuance of the management and submanagement agreements.
Costs of Services Provided and Profitability. The Trustees reviewed information provided to them by Domini concerning the costs borne by and profitability of Domini with respect to the advisory services provided, along with a description of the methodology used by Domini in preparing the profitability information. The Trustees concluded that they were satisfied that Domini’s level of profitability with respect to the European Funds was reasonable in view of the nature, quality, and extent of services to be provided.
The Trustees also reviewed Wellington Management’s consolidated balance sheet at December 31, 2005, and its pro-forma income statement for the year ended December 31, 2005, which reflected partnership income as if the firm was in corporate form. The pro-forma statement identified the revenues generated by the European Trust as a separate item and reflected assumptions and estimates regarding operating expenses. Based on the information provided, the Trustees concluded that they were satisfied that Wellington Management’s level of profitability with respect to the European Trust was not excessive in view of the nature, quality, and extent of services provided to the European Trust.
Economies of Scale. The Trustees also considered whether economies of scale would be realized by Domini and Wellington Management as assets grew and the extent to which economies of scale were reflected in the fees
| 83 |
charged under the management and submanagement agreements. The Trustees noted that there were breakpoints in the fees charged under the management and submanagement agreements, and also considered the fee waivers proposed by Domini. They concluded that breakpoints were an effective way to share economies of scale with shareholders and that this was a positive factor in support of approval of the continuance of the management and submanagement agreements.
Other Benefits. The Trustees considered the other benefits that Domini, Wellington Management, and their respective affiliates receive from their relationship with the European Funds. The Trustees reviewed the character and amount of payments received by Domini and its affiliates in connection with the European Funds and the other Domini Funds. The Trustees considered that Domini’s profitability would be lower if the benefits related to distribution fees and sales charges were not received. The Trustees considered the brokerage practices of Domini and Wellington Management, including their use of soft dollar arrangements. The Trustees also considered the intangible benefits that would continue to accrue to Domini, Wellington Management, and each of their respective affiliates by virtue of their relationshi p with European Funds and the other Domini Funds. The Trustees concluded that the benefits received by Domini, Wellington Management, and their respective affiliates were reasonable and supported the approval of the continuance of the management and submanagement agreements.
84 |
|
TRUSTEES AND OFFICERS
The following table presents information about each Trustee and each Officer of the Domini Advisor Trust (the “Trust”) and Domini Social Trust (the “Master Trust”) as of July 31, 2007. Asterisks indicate that those Trustees and Officers are “interested persons” (as defined in the Investment Company Act of 1940) of the Trust and Master Trust. Each Trustee and each Officer of the Trust and the Master Trust noted as an interested person is interested by virtue of his or her position with Domini Social Investments LLC as described below. Unless otherwise indicated below, the address of each Trustee and each Officer is 536 Broadway, 7th Floor, New York, NY 10012. Neither the Funds nor the Trusts holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. This means that each Trustee will be elected to hold office until his or her successor is elected or until he or she retires, resigns, dies, or is removed from office. No Trustee or Officer is a director of a public company or a registered investment company other than, with respect to the Trustees, the Domini Funds.
Interested Trustee and Officer |
Name, Age, |
| Principal Occupation(s) During Past 5 Years and Other Directorships Held |
| Number of Funds |
Amy L. Domini* |
| CEO (since 2002), President (2002-2005), and Manager (since 1997), Domini Social Investments LLC; Manager, DSIL Investment Services LLC (since 1998); Manager, Domini Holdings LLC (holding company) (since 2002); Director, Tom’s of Maine, Inc. (natural care products) (2004); Board Member, Progressive Government Institute (nonprofit education on executive branch of the federal government) (2003-2005); Board Member, Financial Markets Center (nonprofit financial markets research and education resources provider) (2002-2004); Trustee, New England Quarterly (periodical) (since 1998); Trustee, Episcopal Church Pension Fund (1994-2006); Private Trustee, Loring, Wolcott & Coolidge Office (fiduciary) (since 1987); Partners for the Common Good (community development nonprofit) (since 2005) |
| 14 |
85
Disinterested Trustees |
Name, Age, |
| Principal Occupation(s) During Past 5 Years and Other Directorships Held |
| Number of Funds |
|
|
|
|
|
Julia Elizabeth Harris |
| Director and President, Alpha Global Solutions, LLC (agribusiness) (since 2004); Trustee, Fiduciary Trust Company (financial institution) (2001-2005); Executive Vice President, UNC Partners, Inc. (financial management) (since 1990). |
| 14 |
|
|
|
|
|
Kirsten S. Moy |
| Board Member, Community Reinvestment Fund (since 2003); Director, Economic Opportunities Program, The Aspen Institute (research and education) (since 2001); Director, NCB Capital Impact (since 2006). |
| 14 |
|
|
|
|
|
William C. Osborn |
| Manager, Massachusetts Green Energy Fund Management 1, LLC (venture capital) (since 2004); Manager, Commons Capital Management LLC (venture capital) (since 2000); Special Partner/Consultant, Arete Corporation (venture capital) (since 1999); Director, CTP Hydrogen, Inc. (hydrogen generation technology) (since 2005); Director, World Power Technologies, Inc. (power equipment production) (1999-2004); Director, Investors’ Circle (socially responsible investor network) (1999-2004). |
| 14 |
|
|
|
|
|
Karen Paul |
| Visiting Professor, Escuela Graduado Administración Dirección Empresas, Instituto Tecnológico y de Estudios Superiores de Monterrey (2004); Professor, Catholic University of Bolivia (2003); Fulbright Fellow, U.S. Department of State (2003); Partner, Trinity Industrial Technology (1997-2002); Executive Director, Center for Management in the Americas (1997-2002); Professor of Management and International Business, Florida International University (since 1990). |
| 14 |
|
|
|
|
|
Gregory A. Ratliff |
| Senior Program Officer, Bill and Melinda Gates Foundation (since 2007); Community Investment Consultant (self-employment) (since 2002); Senior Fellow, The Aspen Institute (research and education) (2002); Director, Economic Opportunity, John D. and Catherine T. MacArthur Foundation (private philanthropy) (1997-2002). |
| 14 |
86
Disinterested Trustees (continued) |
Name, Age, |
| Principal Occupation(s) During Past 5 Years and Other Directorships Held |
| Number of Funds |
|
|
|
|
|
John L. Shields |
| Principal, MainStay Consulting Group, LLC (management consulting firm) (since 2006); CEO, Open Investing, Inc. (investment advisor) (2006-2007); CEO, Harris Insight Funds Trust (mutual funds) (2005-2006); Managing Director, Navigant Consulting, Inc. (management consulting firm) (2004-2006); Advisory Board Member, Vestmark, Inc. (software company) (since 2003); Managing Principal, Shields Smith & Webber LLC (management consulting firm) (2002-2004); President and CEO, Citizens Advisers, Inc. (1998-2002); President and CEO, Citizens Securities, Inc. (1998-2002); President and Trustee, Citizens Funds (1998-2002). |
| 14 |
Officers |
Name, Age, |
| Principal Occupation(s) During Past 5 Years and Other Directorships Held |
| Number of Funds |
|
|
|
|
|
Megan L. Dunphy* (37) |
| Mutual Fund Counsel, Domini Social Investments LLC (since 2005); Secretary, Domini Funds (since 2005); Counsel, ING (formerly Aetna Financial Services) (financial services) (1999-2004). |
| N/A |
|
|
|
|
|
Adam M. Kanzer* |
| Managing Director (since January 2007), General Counsel and Director of Shareholder Advocacy (since 1998) and Chief Compliance Officer (April 2005-May 2005), Domini Social Investments LLC; Chief Legal Officer (since 2003), Chief Compliance Officer (April 2005-July 2005), Vice President (since April 2007), Domini Funds. |
| N/A |
87
Officers (continued) |
Name, Age, |
| Principal Occupation(s) During Past 5 Years and Other Directorships Held |
| Number of Funds |
|
|
|
|
|
Carole M. Laible* |
| President (since 2005), Member (since 2006), Chief Operating Officer (since 2002), and Financial/Compliance Officer (1997-2003), Domini Social Investments LLC; President and CEO (since 2002), Chief Compliance Officer (since 2001), Chief Financial Officer, Secretary, and Treasurer (since 1998), DSIL Investment Services LLC; Treasurer (since 1997), Vice President (since April 2007), Domini Funds. |
| N/A |
|
|
|
|
|
Douglas Lowe* |
| Senior Compliance Manager and Counsel, Domini Social Investments LLC (since 2006); Assistant Secretary, Domini Funds (since April 2007); Executive Director, Morgan Stanley (2002-2005). |
| N/A |
|
|
|
|
|
Steven D. Lydenberg* |
| Chief Investment Officer (since 2003) and Member (since 1997), Domini Social Investments LLC; Vice President, Domini Funds (since 1990); Director (1990-2003) and Director of Research (1990-2001), KLD Research & Analytics, Inc. (social research provider). |
| N/A |
|
|
|
|
|
Meaghan T. O’Rourke* |
| Compliance Associate (since 2005), Institutional Client Relationships Associate (2004-2005), Administrative Assistant (2002-2004), Domini Social Investments LLC; Assistant Secretary, Domini Funds (since April 2007). |
| N/A |
|
|
|
|
|
Christina Povall* |
| Director of Finance, Domini Social Investments LLC (since 2004); Assistant Treasurer, Domini Funds (since April 2007); Senior Manager, PricewaterhouseCoopers LLP (independent registered public accounting firm) ( 1999-2004). |
| N/A |
88
Officers (continued) |
Name, Age, |
| Principal Occupation(s) During Past 5 Years and Other Directorships Held |
| Number of Funds |
|
|
|
|
|
Maurizio Tallini* |
| Managing Director (since January 2007), Chief Compliance Officer (since 2005), Domini Social Investments LLC; Vice President (since April 2007), Chief Compliance Officer (since 2005), Domini Funds; Venture Capital Controller, Rho Capital Partners (venture capital) (2001-2005). |
| N/A |
The Funds’ Statement of Additional Information includes additional information about the Trustees and is available without charge, upon request, by calling the following toll-free number: 1-800-217-0017.
89
PROXY VOTING INFORMATION
The Domini Funds have established Proxy Voting Policies and Procedures that the Funds use to determine how to vote proxies relating to portfolio securities. The Domini Funds’ Proxy Voting Policies and Procedures are available, free of charge, by calling 1-800-762-6814, by visiting www.domini.com/shareholder-advocacy/Proxy-Voting/index.htm, or by visiting the EDGAR database on the Securities and Exchange Commission’s (SEC) website at http://www.sec.gov. All proxy votes cast for the Domini Funds are posted to Domini’s website on an ongoing basis over the course of the year. An annual record of all proxy votes cast for th e Funds during the most recent 12-month period ended June 30 can be obtained, free of charge, at www.domini.com, and on the EDGAR database on the SEC’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE INFORMATION
The Domini Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Domini Funds’ Forms N-Q are available on the EDGAR database on the SEC’s website at http://www.sec.gov. These Forms may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The information on Form N-Q is also available to be viewed at www.domini.com.
90 |
|
DOMINI FUNDS
P.O. Box 9785
Providence, RI 02940-9785
1-800-582-6757
www.domini.com
Investment Manager or Sponsor:
Domini Social Investments LLC
536 Broadway, 7th Floor
New York, NY 10012
Investment Submanager:
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Distributor:
DSIL Investment Services LLC
536 Broadway, 7th Floor
New York, NY 10012
1-800-762-6814
Transfer Agent:
PFPC Inc.
760 Moore Road
King of Prussia, PA 19406
Custodian:
State Street Bank and Trust Company
200 Clarendon Street
Boston, MA 02116
Independent Registered Public Accounting Firm:
KPMG LLP
99 High Street
Boston, MA 02110
Legal Counsel:
Bingham McCutchen LLP
150 Federal Street
Boston, MA 02110
Item 2. | Code of Ethics. |
(a) As of the end of the period covered by this report on Form N-CSR, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, and principal accounting officer.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Registrant is filing its code of ethics with this report.
Item 3. | Audit Committee Financial Expert. |
John L. Shields, a member of the Audit Committee, has been determined by the Board of Trustees of the registrant in its reasonable business judgment to meet the definition of “audit committee financial expert” as such term is defined in the instructions to Form N-CSR. In addition, Mr. Shields is an “independent” member of the Audit Committee as defined in the instructions to Form N-CSR.
Item 4. | Principal Accountant Fees and Services. |
(a) Audit Fees
For the fiscal year ended July 31, 2007 and July 31, 2006, the aggregate audit fees billed to the registrant by KPMG LLP (“KPMG”) for professional services rendered for the audit of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, are shown in the table below.
Fund |
| 2007 |
| 2006 |
Domini Social Equity Portfolio |
| $14,700 |
| $14,000 |
Domini European Social Equity Portfolio |
| $14,700 |
| $14,000 |
Domini EuroPacific Social Equity Portfolio |
| $14,700 |
| - * |
Domini PacAsia Social Equity Portfolio |
| $14,700 |
| - * |
* The Domini EuroPacific Social Equity Portfolio and the Domini PacAsia Social Equity Portfolio commenced operations during December, 2006. |
(b) Audit-Related Fees
There were no audit-related fees billed by KPMG for services rendered for assurance and related services to the registrant that were reasonably related to the performance of the audit or review of the registrant’s financial statements, but not reported as audit fees, for the fiscal years ended July 31, 2007, and July 31, 2006.
There were no audit-related fees billed by KPMG for the fiscal years ended July 31, 2007, and July 31, 2006 that were required to be approved by the registrant’s Audit Committee for services rendered on behalf of Domini Social Investments LLC and entities controlling, controlled by, or under common control with Domini Social Investments LLC (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the registrant (“Service Providers”).
(c) Tax Fees
For the fiscal year ended July 31, 2007, and July 31, 2006, the aggregate tax fees billed by KPMG for professional services rendered for tax compliance, tax advice, and tax planning for the registrant are shown in the table below.
Fund |
| 2007 |
| 2006 |
Domini Social Equity Portfolio |
| $4,200 |
| $5,500 |
Domini European Social Equity Portfolio |
| $4,200 |
| $5,500 |
Domini EuroPacific Social Equity Portfolio |
| $4,200 |
| -* |
Domini PacAsia Social Equity Portfolio |
| $4,200 |
| -* |
* The Domini EuroPacific Social Equity Portfolio and Domini PacAsia Social Equity Portfolio commenced operations during December, 2006. |
There were no tax fees billed by KPMG for the fiscal years ended July 31, 2007, and July 31, 2006 that were required to be approved by the registrant’s Audit Committee for services rendered on behalf of the registrant’s Service Providers.
(d) All Other Fees
There were no other fees billed by KPMG for the fiscal years ended July 31, 2007, and July 31, 2006, for other non-audit services rendered to the registrant.
There were no other fees billed by KPMG for the fiscal years ended July 31, 2007, and July 31, 2006 that were required to be approved by the registrant’s Audit Committee for other non-audit services rendered on behalf of the registrant’s Service Providers.
(e)(1) Audit Committee Preapproval Policy: The Registrant’s Audit Committee Preapproval Policy is set forth below:
1. Statement of Principles
The Audit Committee is required to preapprove audit and non-audit services performed for each series of the Domini Social Trust, the Domini Social Investment Trust, the Domini Institutional Trust and the Domini Advisor Trust (each such series, a “Fund” and collectively, the “Funds”) by the independent registered public accountant in order to assure that the provision of such services does not impair the accountant’s independence. The Audit Committee also is required to preapprove non-audit services performed by the Funds’ independent registered public accountant for the Funds’ investment adviser, and certain of the adviser’s affiliates that provide ongoing services to the Funds, if the services to be provided by the accountant relate directly to the operations and financial reporting of the Funds. The preapproval of these services also is intended to assure that the provision of the services does not impair the accountant’s independence.
Unless a type of service to be provided by the independent registered public accountant has received preapproval, it will require separate preapproval by the Audit Committee. Also, any proposed services exceeding preapproved cost levels will require separate preapproval by the Audit Committee. When considering services for preapproval the Audit Committee will take into account such matters as it deems appropriate or advisable, including applicable rules regarding auditor independence.
The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services for the Funds, that have the preapproval of the Audit Committee. The term of any preapproval is 12 months from the date of preapproval, unless the Audit Committee specifically provides for a different period. The Audit Committee will periodically revise the list of preapproved services based on subsequent determinations.
Notwithstanding any provision of this Policy, the Audit Committee is not required to preapprove services for which preapproval is not required by applicable law, including de minimis and grandfathered services.
2. Delegation
The Audit Committee may delegate preapproval authority to one or more of its members. The member or members to whom such authority is delegated shall report any preapproval decisions to the Audit Committee at its next scheduled meeting. By adopting this Policy the Audit Committee does not delegate to management the Audit Committee’s responsibilities to preapprove services performed by the independent auditor.
3. Audit Services
The annual Audit services engagement terms and fees for the Funds will be subject to the preapproval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope or other matters.
In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant preapproval for other Audit services, which are those services that only the independent registered public accountant reasonably can provide. The Audit Committee has preapproved the Audit services listed in Appendix A. All Audit services not listed in Appendix A must be separately preapproved by the Audit Committee.
4. Audit-Related Services
Audit-related services are assurance and related services for the Funds that are reasonably related to the performance of the audit or review of the Funds’ financial statements or that are traditionally performed by the independent registered public accountant. The Audit Committee believes that the provision of Audit-related services does not impair the independence of the accountant, and has preapproved the Audit-related services listed in Appendix B. All Audit-related services not listed in Appendix B must be separately preapproved by the Audit Committee.
5. Tax Services
The Audit Committee believes that the independent registered public accountant can provide Tax services to the Funds such as tax compliance, tax planning and tax advice without impairing the accountant’s independence. However, the Audit Committee will not permit the retention of the independent registered public accountant in connection with a transaction initially recommended by the independent registered public accountant, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has preapproved the Tax services listed in Appendix C. All Tax services not listed in Appendix C must be separately preapproved by the Audit Committee.
6. All Other Services
The Audit Committee may grant preapproval to those permissible non-audit services for the Funds classified as All Other services that it believes are routine and recurring services, and would not impair the independence of the accountant. The Audit Committee has preapproved the All Other services listed in Appendix D. Permissible All Other services not listed in Appendix D must be separately preapproved by the Audit Committee.
A list of the SEC’s prohibited non-audit services is attached to this policy as Exhibit 1. The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions.
7. Preapproval Fee Levels
Preapproval fee levels for all services to be provided by the independent registered public accountant to the Funds, and applicable non-audit services to be provided by the accountant to the Funds’ investment adviser and its affiliates, will be established periodically by the Audit Committee. Any proposed services exceeding these levels will require specific preapproval by the Audit Committee.
8. Supporting Documentation
With respect to each service that is separately preapproved, the independent auditor will provide detailed back-up documentation, which will be provided to the Audit Committee, regarding the specific services to be provided.
9. Procedures
Requests or applications to provide services that require separate approval by the Audit Committee will be submitted to the Audit Committee by both the independent registered public accountant and the Funds’ treasurer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
Management will promptly report to the Chair of the Audit Committee any violation of this Policy of which it becomes aware.
Appendix A – Audit Committee Preapproval Policy
Preapproved Audit Services
for
October 27, 2006 through October 31, 2007
Service |
| Fee Range |
|
Statutory audits or financial audits (including tax services associated with non-audit services) |
| As presented to Audit Committee in a separate engagement letter1 |
|
Services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., consents), and assistance in responding to SEC comment letters |
| Not to exceed $9,000 per filing |
|
Appendix B - Audit Committee Preapproval Policy
Preapproved Audit-Related Services
for
October 27, 2006 through October 31, 2007
Service |
| Fee Range |
|
Consultations by Fund management with respect to the accounting or disclosure treatment of securities, transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies |
| Not to exceed $5,000 per occurrence during the Pre-Approval Period |
|
Review of Funds’ semi-annual financial statements |
| Not to exceed $2,000 per set of financial statements per fund |
|
Regulatory compliance assistance |
| Not to exceed $5,000 per quarter |
|
Training Courses |
| Not to exceed $5,000 per course |
|
Appendix C – Audit Committee Preapproval Policy
Preapproved Tax Services
for
October 27, 2006 through October 31, 2007
Service |
| Fee Range |
|
Review of federal and state income tax returns and federal excise tax returns for the Funds including assistance and review with excise tax distributions. |
| As presented to Audit Committee in a separate engagement letter1 |
|
Tax assistance and advice regarding statutory, regulatory or administrative developments |
| Not to exceed $5,000 for the Funds’ or for the Funds’ investment adviser during the Pre-Approval period |
|
Assistance with custom tax audits and related matters
|
| Not to exceed $15,000 per Fund during the Pre-Approval Period |
|
Tax Training Courses |
| Not to exceed $5,000 per course during the Pre-Approval Period |
|
M & A tax due diligence services associated with Fund mergers including: review of the target fund’s historical tax filings, review of the target fund’s tax audit examination history, and hold discussions with |
| Not to exceed $8,000 per merger during the Pre-Approval Period |
|
| target management and external tax advisors. Advice regarding the target fund’s overall tax posture and historical and future tax exposures. | |||
Tax services related to the preparation of annual PFIC statements and annual Form 5471 (Controlled Foreign Corporation for structured finance vehicles) |
| Not to exceed $20,000 during the Pre-Approval Period |
|
Appendix D – Audit Committee Preapproval Policy
Preapproved All Other Services
for
October 27, 2006 through October 31, 2007
Service |
| Fee Range |
No other services for the Pre-Approval Period have been specifically preapproved by the Audit Committee. |
| N/A |
Exhibit 1 – Audit Committee Preapproval Policy
Prohibited Non-Audit Services
• | Bookkeeping or other services related to the accounting records or financial statements of the audit client |
• | Financial information systems design and implementation |
• | Appraisal or valuation services, fairness opinions or contribution-in-kind reports |
• | Actuarial services |
• | Internal audit outsourcing services |
• | Management functions |
• | Human resources |
• | Broker-dealer, investment adviser or investment banking services |
• | Legal services |
• | Expert services unrelated to the audit |
1 For new funds launched during the Pre-Approval Period, the fee ranges pre-approved will be the same as those for existing funds, pro-rated in accordance with inception dates as provided in the auditors’ proposal or any engagement letter covering the period at issue. Fees in the engagement letter will be controlling.
(e)(2) None, or 0%, of the services relating to the audit-related fees, tax fees, and all other fees paid by the registrant disclosed above were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit review or attest services, if certain conditions are satisfied).
(f) According to KPMG for the fiscal year ended July 31, 2007, the percentage of hours spent on the audit of the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than KPMG’s full-time, permanent employees is as follows:
Fund |
| 2007 |
|
Domini Social Equity Portfolio |
| 0% |
|
Domini European Social Equity Portfolio |
| 0% |
|
Domini EuroPacific Social Equity Portfolio |
| 0% |
|
Domini PacAsia Social Equity Portfolio |
| 0% |
|
(g) There were no non-audit fees billed by KPMG, the registrant’s accountant, for services rendered to the registrant’s Service Providers for the last two fiscal years of the registrant. The aggregate non-audit fees billed by KPMG for services rendered to the registrant for the fiscal year ended July 31, 2007, were $16,800, and for the fiscal year ended July 31, 2006, were $11,000.
(h) Not applicable.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable to the registrant.
Item 6. | Schedule of Investments. |
The Schedule of Investments is included as part of the report to stockholders filed under Item 1.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to the registrant.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to the registrant.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable to the registrant.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There were no material changes to the procedures by which shareholders may submit recommendations for nominee to the Registrant’s Board of Trustees.
Item 11. | Controls and Procedures. |
(a) Within 90 days prior to the filing of this report on Form N-CSR, Amy L. Thornton, the registrant’s President and Principal Executive Officer, and Carole M. Laible, the registrant’s Treasurer and Principal Financial Officer, reviewed the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) of the Investment Company Act of 1940) and evaluated their effectiveness. Based on their evaluation, Ms. Thornton and Ms. Laible determined that the disclosure controls and procedures adequately ensure that information required to be disclosed by the registrant in this report on Form N-CSR is recorded, processed, summarized, and reported within the time periods required by the Securities and Exchange Commission’s rules and forms, including ensuring that information required to be disclosed in this report on Form N-CSR is accumulated and communicated to the registrant’s management, including the Ms. Thornton and Ms. Laible, as appropriate to allow timely decisions regarding required disclosures.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. | Exhibits. |
(a)(1) The Code of Ethics referred to in Item 2 is filed herewith.
(a)(2) Separate certifications required by Rule 30a-2(a) under the Investment Company Act of 1940 for each principal executive officer and principal financial officer of the registrant are filed herewith.
(a)(3) Not applicable to the registrant.
(b) A single certification required by Rule 30a-2(b) under the Investment Company Act of 1940, Rule 13a-14b or Rule 15d-14(b) under the Securities Exchange Act of 1934, and Section 1350 of Chapter 63 of Title 18 of the United States Code for the chief executive officer and the chief financial officer of the registrant is filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DOMINI ADVISOR TRUST |
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By: |
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| Amy L. Thornton |
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Date: October 5, 2007 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: |
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| Amy L. Thornton |
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Date: October 5, 2007 |
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By: |
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| Carole M. Laible |
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Date: October 5, 2007 |
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