N-CSR 1 file1.htm FORM N-CSR

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  811-05823

DOMINI SOCIAL INVESTMENT 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.

 

 

ANNUAL REPORT 2007

July 31, 2007

 

 

DOMINI SOCIAL EQUITY FUND®

INVESTOR SHARES & CLASS R SHARES

DOMINI EUROPEAN SOCIAL EQUITY FUNDSM

INVESTOR SHARES

DOMINI PACASIA SOCIAL EQUITY FUNDSM

INVESTOR SHARES

DOMINI EUROPACIFIC SOCIAL EQUITY FUNDSM

INVESTOR SHARES

DOMINI SOCIAL BOND FUND®

INVESTOR SHARES

 


The Way You Invest Matters®

 

 

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

12

 

Economic and Market Background

15

 

Domini Social Equity Fund

21

 

Domini European Social Equity Fund

28

 

Domini PacAsia Social Equity Fund

36

 

Domini EuroPacific Social Equity Fund

45

 

Domini Social Bond Fund

 

 

 

52

 

Expense Example

 

 

 

55

 

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

 

 

 

70

 

Financial Statements

 

Domini Social Equity Fund

 

Domini European Social Equity Fund

 

 

Domini PacAsia Social Equity Fund

 

 

Domini EuroPacific Social Equity Fund

 

 

Report of Independent Registered Public Accounting Firm

 

 

 

89

 

Financial Statements

 

 

Domini Social Bond Fund

 

 

Report of Independent Registered Public Accounting Firm

 

 

 

99

 

Board of Trustees’ Consideration of Management and Submanagement Agreements

 

 

 

105

 

Trustees and Officers

 

 

 

110

 

Proxy Voting Information

 

 

 

110

 

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.

 

 

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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 from 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 Fund — 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 emissions 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 Fund, Domini European Social Equity Fund, Domini PacAsia Social Equity Fund, and Domini EuroPacific Social Equity Fund 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 Fund. Air France, Arriva, Fiat, Statoil, and TNT were held by the Domini European Social Equity Fund. Central Japan Railway, Honda Motor, and Kyocera were held by the Domini PacAsia Social Equity Fund. Air France, Central Japan Railway, Fiat, Honda Motor, Kyocera, Statoil, and TNT were held by the Domini EuroPacific Social Equity Fund.

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  

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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 contributed 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 Fund and the Domini EuroPacific Social Equity Fund. 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 Fund and Domini EuroPacific Social Equity Fund. 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

 

 

Economic and Market Background      13

 

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.

 

 

14      Economic and Market Background

 

DOMINI SOCIAL EQUITY FUND

PERFORMANCE COMMENTARY

For the year ended July 31, 2007, the Domini Social Equity Fund Investor Shares (the “Fund”) returned 15.11%, underperforming the Standard & Poor’s 500 Index (S&P 500) return by 1.02%.

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 Index.

 

 

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The Domini Social Equity Fund 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

 

COMPANY

 

% NET
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.

 

 

16  

Domini Social Equity Fund –– Performance Commentary

 

AVERAGE ANNUAL TOTAL RETURNS

 

 

 

Domini Social Equity Fund
Investor Shares (DSEFX)

Domini Social Equity Fund
Class R Shares (DSFRX)

S&P 500

As of

1 Year

20.77

%

21.20

%

20.59

%

6-30-07

5 Year

9.03

%

9.27

%

10.70

%

 

10 Year

6.27

%

6.39

%

7.13

%

 

Since Inception

10.11

%(1)

10.21

%(2)

10.93

%(1)

As of

1 Year

15.11

%

15.43

%

16.13

%

7-31-07

5 Year

9.71

%

9.95

%

11.81

%

 

10 Year

4.88

%

5.00

%

5.98

%

 

Since Inception

9.76

%(1)

9.83

%(2)

10.66

%(1)

COMPARISON OF $10,000 INVESTMENT IN THE

DOMINI SOCIAL EQUITY FUND INVESTOR SHARES 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 above 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 Fund 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. 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.

For the period reported in its current prospectus, the Fund’s gross annual operating expenses were estimated to total 1.19% 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 1.15% of net assets.

______________

(1)

Since June 3, 1991.

(2)

Performance for the Class R shares includes the performance of the Investor shares for periods prior to the offering of Class R shares. This performance has not been adjusted to take into account the lower expenses applicable to Class R shares.

This material must be preceded or accompanied by the Fund’s current prospectus. DSIL Investment Services LLC, Distributor. 09/07

 

 

 

Domini Social Equity Fund –– Performance Commentary  

17

 

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

 

 

 

18

 

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

 

 

 

19

 

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 IndustriesInc., 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, 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

 

 

20

 

DOMINI EUROPEAN SOCIAL EQUITY FUND

PERFORMANCE COMMENTARY

For the year ended July 31, 2007, the Domini European Social Equity Fund (the “Fund”) returned 26.49%, underperforming the Morgan Stanley Capital International Europe Index (MSCI Europe) by 1.78%.

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.

 

 

21

 

The Domini European Social Equity Fund 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
ASSETS

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.

 

 

22  

Domini European Social Equity Fund — Performance Commentary

 

AVERAGE ANNUAL TOTAL RETURNS

 

 

 

 

 

Domini European Social
Equity Fund (DEUFX)

 

MSCI Europe

As of 6-30-07

 

1 Year

 

 

33.06%

 

33.07%

 

Since Inception

 

 

33.03%(1)

 

    28.84%(1)

As of 7-31-07

 

1 Year

 

 

26.49%

 

28.27%

 

Since Inception

 

 

28.60%(1)

 

    25.85%(1)

COMPARISON OF $10,000 INVESTMENT IN THE

DOMINI EUROPEAN SOCIAL EQUITY FUND AND 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 quoted 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 Fund 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 1.88% 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 1.60% 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

 

 

 

Domini European Social Equity Fund — Performance Commentary  

23

 

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

 

 

 

24

 

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

 

 

 

25

 

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

 

 

 

26

 

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

 

 

27

 

DOMINI PACASIA SOCIAL EQUITY FUND

PERFORMANCE COMMENTARY

From the Domini PacAsia Social Equity Fund’s (the “Fund”) inception on December 27, 2006, through July 31, 2007, the Fund returned 6.56%, underperforming the Morgan Stanley Capital International All Country Asia Pacific Index (MSCI AC Asia Pacific) by 7.13%.

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.

 

28

 

The Domini PacAsia Social Equity Fund 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
ASSETS

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.

 

 

 

Domini PacAsia Social Equity Fund — Performance Commentary    29

 

Total Return Since Inception (12/27/2006)

 

 

Domini PacAsia Social
Equity Fund (DPAFX)

 

MSCI AC Asia Pacific

As of 6-30-07

5.76%

 

11.28%

As of 7-31-07

6.56%

 

13.69%

COMPARISON OF $10,000 INVESTMENT IN THE

DOMINI PACASIA SOCIAL EQUITY FUND AND MSCI AC 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 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 PacAsia Social Equity Fund 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 2.35% 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 1.60% 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

 

30  

Domini PacAsia Social Equity Fund — Performance Commentary

 

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

 

 

31

 

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

Elpida Memory Inc (a)

 

Semiconductors & 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

 

 

32

 

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

Tokyo Electron Limited

 

Semiconductors &
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

STATS ChipPAC Ltd. (a)

 

Semiconductors & 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

 

 

33

 

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

Powerchip Semiconductor Corp

 

Semiconductors & Semiconductor Equipment

 

500,536

 

 

321,093

Pro Mos Technologies Inc

 

Semiconductors & Semiconductor Equipment

 

728,394

 

 

280,898

Siliconware Precision Inds

 

Semiconductors & 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

 

 

34

 

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

 

 

35

 

DOMINI EUROPACIFIC SOCIAL EQUITY FUND

PERFORMANCE COMMENTARY

From the Domini EuroPacific Social Equity Fund’s (the “Fund”) inception on December 27, 2006, through July 31, 2007, the Fund returned 3.82%, underperforming the Morgan Stanley Capital International Europe Australasia Far East Index (MSCI EAFE) by 6.80%.

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.

 

 

36

 

The Domini EuroPacific Social Equity Fund 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)

  

COMPANY

 

% NET
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.

 

 

Domini EuroPacific Social Equity Fund –– Performance Commentary  

37

 

Total Return Since Inception (12/27/2006)

 

 

Domini EuroPacific
Social Equity Fund (DUPFX)

 

MSCI EAFE

As of 6-30-07

7.06%

 

12.26%

As of 7-31-07

3.82%

 

10.62%

COMPARISON OF $10,000 INVESTMENT IN THE

DOMINI EUROPACIFIC SOCIAL EQUITY FUND INVESTOR SHARES AND THE MSCI EAFE


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 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 EuroPacific Social Equity Fund 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 2.35% 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 1.60% 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

 

38      Domini EuroPacific Social Equity Fund –– Performance Commentary  

 

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

 

 

39

 

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

 

 

40

 

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

Elpida Memory Inc (a)

 

Semiconductors &
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

 

 

41

 

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

 

 

42

 

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

 

 

43

 

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

 

Total Common Stocks (Cost $14,263,857)

 

 

 

 

 

 

2,742,896

 

Repurchase Agreements – 2.4%

 

 

 

 

 

 

13,951,393

 

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

 

44

 

DOMINI SOCIAL BOND FUND

PERFORMANCE COMMENTARY

For the year ended July 31, 2007, the Domini Social Bond Fund (the "Fund") returned 4.49%, underperforming the Lehman Brothers Intermediate Aggregate Index (LBIA) by 1.01%.

The Fund's performance relative to the index was hurt primarily by its positioning in the U.S. government bond sector. During periods when interest rates are rising and the market displays volatility, government bonds generally perform better than other sectors, so the Fund's underweight position was negative for performance. The Fund was also hurt by security selection caused by overweighting of longer-duration agency bonds. The Fund uses agency bonds as a proxy for Treasuries, which are excluded by Domini's Global Investment Standards because they help pay for nuclear weapons.

Performance was helped during the year by the Fund's allocation to taxable municipal bonds and to project loans, which help provide financing for developments like low-income housing projects and nursing homes. Security selection within the commercial mortgage sector was also positive.

The Domini Social Bond Fund is designed to use the power of fixed-income investing to revitalize struggling communities. The Fund seeks investments that increase access to capital for those historically underserved by mainstream financial services providers, that create public goods for those most in need, and that use financial innovation in the service of the economically disadvantaged. All holdings are evaluated according to their social impact, using Domini's five-level Community Impact Gradient.

The Fund invests primarily in intermediate-maturity, investment-grade fixed-income securities issued by government agencies, corporations, and other institutions. The Fund allocates up to 10% of its assets directly to community development banks and credit unions, and other investments with innovative approaches to small business development, community revitalization, rural development, education, environmental recovery, and healthcare. Some of the Fund's community development investments may be unrated, illiquid, and carry greater credit risks than its other investments.

 

 

45

 

The bar chart below provides information as of July 31, 2007, about the percentage of the Fund's portfolio holdings invested in various types of debt obligations:

PORTFOLIO COMPOSITION (% OF NET ASSETS)

 


* Other reflects Repurchase Agreements and Other Assets, less liabilities.

The Domini Social Bond Fund is not insured and is subject to market risks, interest rate risks, and credit risks. Investment return, principal value, and yield of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. You may lose money.

During periods of rising interest rates, bond funds can lose value. The Fund's community development investments may be unrated and may carry greater risks than the Fund's other holdings. The Fund currently holds a large percentage of its portfolio in mortgage-backed securities. During periods of falling interest rates these securities may prepay the principal due, which may lower the Fund's return by causing it to reinvest at lower interest rates.

______________

The holdings mentioned above are described in the Fund's Portfolio of Investments at July 31, 2007, included herein. The composition of the Fund's portfolio is subject to change.

 

46  

Domini Social Bond Fund –– Performance Commentary

 

AVERAGE ANNUAL TOTAL RETURNS

 

 

 

 

 

Domini Social Bond
Fund (DSBFX)

 

Lehman Brothers
Intermediate
Aggregate Index
(LBIA)

As of
6-30-07

 

1 Year

 

4.77%

 

5.99%

 

5 Year

 

3.17%

 

4.15%

 

 

Since Inception(1)

 

5.12%

 

5.98%

As of
7-31-07

 

1 Year

 

4.49%

 

5.50%

 

5 Year

 

3.02%

 

4.06%

 

 

Since Inception(1)

 

5.18%

 

6.03%

COMPARISON OF $10,000 INVESTMENT IN THE

DOMINI SOCIAL BOND FUND AND LBIA

 


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 above 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 Bond Fund 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 1.32% 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 0.95% of net assets.

The Lehman Brothers Intermediate Aggregate Index (LBIA) is an unmanaged index of intermediate investment-grade fixed-income securities. Investors cannot invest directly in the LBIA.

______________

(1)

Since June 1, 2000.

This material must be preceded or accompanied by the Fund's current prospectus. DSIL Investment Services LLC, Distributor. 09/07

 

 

Domini Social Bond Fund –– Performance Commentary  

47

 

DOMINI SOCIAL BOND FUND

PORTFOLIO OF INVESTMENTS

JULY 31, 2007

 

 

 

PRINCIPAL
AMOUNT

 

VALUE
(NOTE 1)

 

U.S. Government Agency Obligations — 30.1%

 

 

 

 

 

 

 

FANNIE MAE:

 

 

 

 

 

 

 

4.500%, 2/15/2011

 

$

750,000

 

$

738,641

 

4.625%, 10/15/2013

 

 

1,000,000

 

 

972,685

 

4.750%, 3/12/2010

 

 

2,100,000

 

 

2,089,494

 

5.000%, 5/11/2017

 

 

4,365,000

 

 

4,243,548

 

5.000%, 10/15/2011

 

 

4,250,000

 

 

4,238,338

 

5.500%, 3/15/2011

 

 

300,000

 

 

304,577

 

FEDERAL AGRICULTURE MORTGAGE CORPORATION:

 

 

 

 

 

 

 

6.680%, 6/10/2014

 

 

1,000,000

 

 

1,084,147

 

FEDERAL FARM CREDIT BANK:

 

 

 

 

 

 

 

6.300%, 6/6/2011

 

 

250,000

 

 

261,459

 

FEDERAL HOME LOAN BANK:

 

 

 

 

 

 

 

6.625%, 11/15/2010

 

 

465,000

 

 

487,310

 

7.375%, 2/12/2010

 

 

500,000

 

 

528,277

 

FREDDIE MAC:

 

 

 

 

 

 

 

5.500%, 9/15/2011

 

 

5,065,000

 

 

5,137,971

 

U.S. SMALL BUSINESS ADMINISTRATION:

 

 

 

 

 

 

 

2003-10C 1, 3.530%, 5/1/2013

 

 

290,622

 

 

279,171

 

2003-20D 1, 4.760%, 4/1/2023

 

 

441,521

 

 

428,248

 

2003-20E 1, 4.640%, 5/1/2023

 

 

443,756

 

 

427,099

 

2003-20F 1, 4.070%, 6/1/2023

 

 

374,778

 

 

347,444

 

2003-20G 1, 4.350%, 7/1/2023

 

 

207,612

 

 

195,918

 

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

 

 

 

 

 

 

 

(COST $21,883,624)

 

 

 

 

 

21,764,327

 

U.S. Government Agency Mortgage Securities — 43.0%

 

 

 

 

 

 

 

FANNIE MAE:

 

 

 

 

 

 

 

13743, 6.600%, VR, 11/1/2019

 

 

10,494

 

 

10,732

 

250168, 8.000%, 12/1/2009

 

 

19,917

 

 

20,308

 

252120, 7.500%, 8/1/2025

 

 

41,515

 

 

43,434

 

402999, 7.375%, VR, 10/1/2027

 

 

4,630

 

 

4,672

 

526882, 7.353%, VR, 2/1/2029

 

 

8,880

 

 

8,938

 

696355, 5.500%, 3/1/2033

 

 

1,252,675

 

 

1,216,087

 

789089, 5.500%, 8/1/2019

 

 

552,444

 

 

547,149

 

892917, 6.500%, 8/1/2036

 

 

1,972,928

 

 

1,993,382

 

895098, 7.000%, 8/1/2036

 

 

1,864,484

 

 

1,916,314

 

937881, 5.500%, 6/1/2022

 

 

1,491,815

 

 

1,473,675

 

FANNIE MAE CMO:

 

 

 

 

 

 

 

1990-99 K, 6.500%, 8/25/2020

 

 

15,302

 

 

15,340

 

1993-106 Z, 7.000%, 6/25/2013

 

 

6,300

 

 

6,467

 

2003-66 MB, 3.500%, 5/25/2023

 

 

549,950

 

 

508,428

 

2003-73 GA, 3.500%, 5/25/2031

 

 

636,323

 

 

591,294

 

2005-M1 A, 4.479%, 10/26/2031

 

 

398,237

 

 

389,972

 

FREDDIE MAC:

 

 

 

 

 

 

 

845025, 6.283%, VR, 12/1/2018

 

 

18,077

 

 

18,334

 

A18404, 5.500%, 2/1/2034

 

 

536,480

 

 

520,288

 

A30028, 6.000%, 11/1/2034

 

 

279,170

 

 

277,987

 

A51729, 6.500%, 8/1/2036

 

 

1,660,647

 

 

1,679,906

 

A62612, 5.500%, 6/1/2037

 

 

1,369,207

 

 

1,322,964

 

B11108, 5.500%, 11/1/2018

 

 

863,282

 

 

856,180

 

B11109, 4.500%, 11/1/2018

 

 

1,062,579

 

 

1,017,482

 

C77635, 5.500%, 2/1/2033

 

 

1,191,520

 

 

1,156,797

 

 

48

 

DOMINI SOCIAL BOND FUND / PORTFOLIO OF INVESTMENTS (CONTINUED)

JULY 31, 2007

 

 

 

PRINCIPAL
AMOUNT

 

VALUE
(NOTE 1)

 

U.S. Government Agency Mortgage Securities (Continued)

 

 

 

 

 

 

 

FREDDIE MAC CMO:

 

 

 

 

 

 

 

1208 D, 4.650%, VR, 2/15/2022

 

$

21,276

 

$

21,267

 

2302 J, 6.500%, 4/15/2031

 

 

85,140

 

 

87,386

 

2628 LE, 3.250%, 6/15/2033

 

 

460,433

 

 

431,133

 

GINNIE MAE CMO:

 

 

 

 

 

 

 

2001-34, 6.378%, VR, 10/16/2020

 

 

383,685

 

 

386,402

 

2001-44, 6.114%, 11/16/2021

 

 

82,710

 

 

83,060

 

2002-26 C, 5.990%, VR, 2/16/2024

 

 

538,881

 

 

544,095

 

2002-37 C, 5.878%, 6/16/2024

 

 

709,728

 

 

718,109

 

2002-9, 5.881%, 3/16/2024

 

 

168,208

 

 

168,099

 

2003-36 C, 4.254%, 2/16/2031

 

 

1,000,000

 

 

970,256

 

2003-78 C, 5.373%, VR, 2/16/2031

 

 

1,000,000

 

 

983,258

 

2004-6 C, 4.660%, 7/16/2033

 

 

1,000,000

 

 

966,278

 

2004-77 AB, 4.368%, 11/16/2030

 

 

843,250

 

 

815,348

 

2005-42 B, 4.571%, 9/15/2027

 

 

1,000,000

 

 

970,933

 

2005-67 B, 4.751%, 10/16/2026

 

 

1,000,000

 

 

979,188

 

2005-79 A, 3.998%, 10/16/2033

 

 

877,377

 

 

858,165

 

2005-87, 4.449%, 3/16/2025

 

 

909,050

 

 

893,969

 

2005-89, 4.811%, 5/16/2027

 

 

958,854

 

 

946,382

 

2005-90, 3.760%, 9/16/2028

 

 

950,511

 

 

921,998

 

2006-05 A, 4.241%, 7/16/2029

 

 

921,787

 

 

902,303

 

2006-3 A, 4.212%, VR, 1/16/2028

 

 

962,050

 

 

941,371

 

2006-9 B, 5.269%, 3/16/2037

 

 

1,000,000

 

 

975,286

 

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:

 

 

 

 

 

 

 

2038, 8.500%, 7/20/2025

 

 

10,956

 

 

11,799

 

2380, 8.500%, 2/20/2027

 

 

13,958

 

 

14,978

 

3233, 5.500%, 5/20/2017

 

 

522,689

 

 

518,111

 

615760, 5.500%, 8/15/2028

 

 

435,333

 

 

425,421

 

TOTAL U.S. GOVERNMENT AGENCY MORTGAGE SECURITIES

 

 

 

 

 

 

 

(COST $31,681,485)

 

 

 

 

 

31,130,725

 

Corporate Obligations — 12.7%

 

 

 

 

 

 

 

Anadarko Petroleum Corporation, 5.950%, 9/15/2016

 

 

600,000

 

 

590,647

 

CenterPoint Energy, Inc., 7.875%, 4/1/2013

 

 

700,000

 

 

765,671

 

Cisco Systems Inc., 5.500%, 2/22/2016

 

 

600,000

 

 

590,153

 

CIT Group Inc., 5.600%, 4/27/2011

 

 

700,000

 

 

694,870

 

Citigroup Inc., 5.300%, 1/7/2016

 

 

700,000

 

 

667,554

 

Comcast Corporation, 4.950%, 6/15/2016

 

 

600,000

 

 

548,273

 

Goldman Sachs Group Inc., 5.350%, 1/15/2016

 

 

600,000

 

 

568,961

 

Kimberly-Clark, 6.125%, 8/1/2017

 

 

700,000

 

 

706,238

 

Lehman Brothers Holdings Inc., 5.250%, 2/6/2012

 

 

700,000

 

 

683,672

 

SBC Communications, 5.100%, 9/15/2014

 

 

600,000

 

 

569,084

 

Time Warner Companies Inc., 5.500%, 11/15/2011

 

 

700,000

 

 

696,067

 

Travelers Cos Inc., 5.375%, 6/15/2012

 

 

700,000

 

 

701,551

 

Verizon Communications, 5.550%, 2/15/2016

 

 

700,000

 

 

681,503

 

Wachovia Corporation, 5.300%, 10/15/2011

 

 

700,000

 

 

692,765

 

TOTAL CORPORATE OBLIGATIONS

 

 

 

 

 

 

 

(COST $9,304,497)

 

 

 

 

 

9,157,009

 

 

49

DOMINI SOCIAL BOND FUND / PORTFOLIO OF INVESTMENTS (CONTINUED)

JULY 31, 2007

 

 

 

PRINCIPAL
AMOUNT

 

VALUE
(NOTE 1)

 

Corporate Mortgage Securities — 2.6%

 

 

 

 

 

 

 

CRFCM 2004-1A A 144A, 5.500%, 4/25/2035

 

$

1,568,940

 

$

1,534,009

 

WFMBS 2003-8 A7, 4.500%, 8/25/2018

 

 

389,487

 

 

353,092

 

TOTAL CORPORATE MORTGAGE SECURITIES

 

 

 

 

 

 

 

(COST $1,949,177)

 

 

 

 

 

1,887,101

 

State & Municipal Obligations — 5.1%

 

 

 

 

 

 

 

City of Cleveland, OH, 4.350%, 12/1/2011 (Insurer: AMBAC)

 

 

500,000

 

 

485,190

 

City of Zion, IL, 6.250%, 12/1/2012 (Insurer: FGIC)

 

 

250,000

 

 

260,878

 

Hudson County, NJ, Improvement Authority, 7.240%, 9/1/2008 (Insurer: AMBAC)

 

 

195,000

 

 

199,557

 

Hudson County, NJ, Improvement Authority, 7.290%, 9/1/2009 (Insurer: AMBAC)

 

 

175,000

 

 

182,877

 

Kentucky State Property and Buildings Commission, 3.960%,10/1/2009 (Insurer: MBIA)

 

 

300,000

 

 

293,787

 

Los Angeles, CA, Community Redevelopment Agency, 6.600%, 9/1/2020 (Insurer: FSA)

 

 

515,000

 

 

547,207

 

New Jersey Economic Development Authority, 3.700%, 4/1/2008 (Insurer: AMBAC)

 

 

200,000

 

 

198,346

 

North Carolina State University at Raleigh, 6.160%, 10/1/2009

 

 

400,000

 

 

408,044

 

Pennsylvania Economic Development Financing Authority, 5.650%, 6/1/2015 (Insurer: FGIC)

 

 

380,000

 

 

384,036

 

State of Mississippi, 3.510%, 11/1/2009

 

 

500,000

 

 

485,060

 

Yazoo County, MS, 4.200%, 9/1/2008 (Insurer: AMBAC)

 

 

225,000

 

 

223,173

 

TOTAL STATE & MUNICIPAL OBLIGATIONS

 

 

 

 

 

 

 

   (COST $3,755,112)

 

 

 

 

 

3,668,155

 

Certificates of Deposit — 4.3%

 

 

 

 

 

 

 

Albina Community Bank, 4.410%, 7/29/2008 (a)

 

 

100,000

 

 

100,000

 

Appalachian Federal Credit Union, 5.000%, 4/17/2008 (a)

 

 

100,000

 

 

100,000

 

Carver Federal Savings Bank, 4.930%, 11/12/2007 (a)

 

 

100,000

 

 

100,000

 

Central Bank of Kansas City, 4.680%, 5/30/2008 (a)

 

 

100,000

 

 

100,000

 

Citizens Savings Bank & Trust, 5.100%, 4/30/2008 (a)

 

 

100,000

 

 

100,000

 

City First Bank of D.C., 4.940%, 2/5/2008 (a)

 

 

100,000

 

 

100,000

 

City National Bank of Newark, NJ, 4.880%, 11/14/2007 (a)

 

 

100,000

 

 

100,000

 

Community Commerce Bank, 5.000%, 6/1/2008 (a)

 

 

100,000

 

 

100,000

 

Communitywide Federal Credit Union, 5.300%, 12/31/2007 (a)

 

 

100,000

 

 

100,000

 

Dakotaland Federal Credit Union, 5.000%, 4/22/2008 (a)

 

 

100,000

 

 

100,000

 

Delta Southern Bank, 5.010%, 1/21/2008 (a)

 

 

100,000

 

 

100,000

 

Elk Horn Bank & Trust, 4.890%, 3/20/2008 (a)

 

 

100,000

 

 

100,000

 

First Delta Federal Credit Union, 3.750%, 7/29/2008 (a)

 

 

100,000

 

 

100,000

 

First National Bank of the Delta, N.A., 4.500%, 6/24/2008 (a)

 

 

100,000

 

 

100,000

 

Harbor Bank of Maryland, 4.250%, 7/25/2008 (a)

 

 

100,000

 

 

100,000

 

Latino Community Credit Union, 5.150%, 5/30/2008 (a)

 

 

100,000

 

 

100,000

 

Legacy Bank, 4.750%, 7/26/2008 (a)

 

 

100,000

 

 

100,000

 

Liberty Bank and Trust Co., 3.250%, 12/5/2007 (a)

 

 

100,000

 

 

100,000

 

Louisville Community Development Bank, 3.750%, 6/25/2008 (a)

 

 

100,000

 

 

100,000

 

Lower East Side People’s Federal Credit Union, 2.250%, 12/6/2007 (a)

 

 

100,000

 

 

100,000

 

Mission Community Bank, 4.590%, 12/3/2007 (a)

 

 

100,000

 

 

100,000

 

Neighborhood National Bank, 4.500%, 6/1/2008 (a)

 

 

100,000

 

 

100,000

 

New Resource Bank, 4.000%, 6/25/2008 (a)

 

 

100,000

 

 

100,000

 

Northside Community Federal Credit Union, 4.500%, 6/28/2008 (a)

 

 

100,000

 

 

100,000

 

One United Bank, 4.500%, 2/27/2008 (a)

 

 

100,000

 

 

100,000

 

 

50

DOMINI SOCIAL BOND FUND / PORTFOLIO OF INVESTMENTS (CONTINUED)

JULY 31, 2007

 

 

 

PRINCIPAL
AMOUNT

 

VALUE
(NOTE 1)

 

Certificates of Deposit (Continued)

 

 

 

 

 

 

 

Opportunities Credit Union, 3.000%, 7/21/2008 (a)

 

$

100,000

 

$

100,000

 

Santa Cruz Community Credit Union, 4.650%, 3/1/2008 (a)

 

 

100,000

 

 

100,000

 

Self-Help Credit Union, 5.000%, 12/13/2007 (a)

 

 

100,000

 

 

100,000

 

Shore Bank Pacific, 4.470%, 11/6/2007 (a)

 

 

100,000

 

 

100,000

 

University National Bank, 4.570%, 7/26/2008 (a)

 

 

100,000

 

 

100,000

 

Wainwright Bank & Trust Co., 5.030%, 4/4/2008 (a)

 

 

100,000

 

 

100,000

 

TOTAL CERTIFICATES OF DEPOSIT

 

 

 

 

 

 

 

   (COST $3,100,000)

 

 

 

 

 

3,100,000

 

Cash Equivalents — 1.3%

 

 

 

 

 

 

 

Repurchase Agreements:

 

 

 

 

 

 

 

State Street Bank & Trust, dated 7/31/07, 3.52% due 8/1/07,

 

 

 

 

 

 

 

maturity amount $609,389 (collateralized by U.S. Government

 

 

 

 

 

 

 

   Agency Obligations, Fannie Mae, 31359MW66, 6.00%,

 

 

 

 

 

 

 

   8/22/2016, market value $625,250)

 

 

609,330

 

 

609,330

 

Money Market Demand Accounts:

 

 

 

 

 

 

 

Self-Help Credit Union, 4.680%, 8/1/2007 (a)

 

 

229,290

 

 

229,290

 

University National Bank, 2.510%, 8/1/2007 (a)

 

 

108,917

 

 

108,917

 

TOTAL CASH EQUIVALENTS

 

 

 

 

 

 

 

   (COST $947,537)

 

 

 

 

 

947,537

 

Total Investments — 99.1%

 

 

 

 

 

 

 

   (COST $72,621,432) (b)

 

 

 

 

 

71,654,854

 

Other Assets, less liabilities — 0.9%

 

 

 

 

 

656,680

 

Net Assets — 100.0%

 

 

 

 

$

72,311,534

 
______________

(a)

Securities (other than short-term obligations with remaining maturities of less than 60 days) 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 Fund’s Board of Trustees.

(b)

The aggregate cost for book and federal income tax purposes is $72,621,432. The aggregrate gross unrealized appreciation is $93,469, and the aggregate gross unrealized depreciation is $1,060,047, resulting in net unrealized depreciation of $966,578.

AMBAC — American Municipal Bond Assurance Corporation

CMO — Collateralized Mortgage Obligation

FGIC — Financial Guarantee Insurance Company

FSA — Financial Security Assurance Company

MBIA — Municipal Bond Investors Assurance

VR — Variable interest rate. Rate shown is that on July 31, 2007.

144A — Security that may be sold to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended.

SEE NOTES TO FINANCIAL STATEMENTS

51

DOMINI FUNDS

EXPENSE EXAMPLE

As a shareholder of the Domini Funds, you incur two types of costs:

•

Transaction costs such as 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 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.

 

 

52

 

Fund Name

 

Expenses

 

Beginning
Account
Value as of
2/1/2007

 

Ending
Account
Value as of
7/31/2007

 

Expenses
Paid During
Period
02/01/2007 –
7/31/2007

 

 

 

 

 

 

 

 

 

 

 

Domini Social
Equity Fund
Investor Shares

 

Actual Expenses

 

$1,000.00

 

$

997.30

  

 

$5.351

 

 

Hypothetical Expenses
(5% return before expenses)

 

$1,000.00

 

$

1,019.44

  

 

$5.411

 

Domini Social
Equity Fund
Class R Shares

 

Actual Expenses

 

$1,000.00

 

$

988.00

  

 

$3.861

 

 

Hypothetical Expenses
(5% return before expenses)

 

$1,000.00

 

$

1,020.93

  

 

$3.911

 

Domini European
Social Equity Fund

 

Actual Expenses

 

$1,000.00

 

$

1,040.70

  

 

$8.102

 

 

Hypothetical Expenses
(5% return before expenses)

 

$1,000.00

 

$

1,016.86

  

 

$8.002

 

Domini PacAsia
Social Equity Fund

 

Actual Expenses

 

$1,000.00

 

$

1,062.40

  

 

$8.133

 

 

Hypothetical Expenses
(5% return before expenses)

 

$1,000.00

 

$

1,016.91

  

 

$7.953

 

Domini EuroPacific
Social Equity Fund

 

Actual Expenses

 

$1,000.00

 

$

1,033.00

  

 

$7.964

 

 

Hypothetical Expenses
(5% return before expenses)

 

$1,000.00

 

$

1,016.96

  

 

$7.904

 

Domini Social
Bond Fund

 

Actual Expenses

 

$1,000.00

 

$

1,016.70

  

 

$4.755

 

 

Hypothetical Expenses
(5% return before expenses)

 

$1,000.00

 

$

1,020.08

  

 

$4.765

 

1

Expenses are equal to the Fund’s annualized expense ratio of 1.08% for Investor shares, or 0.78% for Class R shares, 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 1.60%, 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 1.59%, 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 1.58%, 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 EuroPacific Social Equity Trust, the underlying portfolio in which the Fund invests.

5

Expenses are equal to the Fund’s annualized expense ratio of 0.95%, multiplied by average account value over the period, multiplied by 181, and divided by 365.



 

Domini Funds — Expense Example  

53

 

THIS PAGE INTENTIONALLY LEFT BLANK

 

FINANCIAL STATEMENTS


55


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

 

 

56

 

 

 

 

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

 

 

57

 

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

 

 

58

 

 

 

 

 

Domini Social
Equity Trust

 

Domini European
Social Equity Trust

 

Domini PacAsia
Social Equity Trust

 

Domini EuroPacific
Social Equity Trust

 

 

 

FOR THE
YEAR ENDED
JULY 31, 2007

 

FOR THE
YEAR ENDED
JULY 31, 2007

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

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

 

59

 

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
JULY 31, 2007

 

YEAR ENDED
JULY 31, 2006

 

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

 

 

 

60

 

 

 

 

Domini European Social Equity Trust

 

Domini PacAsia
Social Equity Trust

 

Domini EuroPacific
Social Equity Trust

 

 

 

YEAR ENDED
JULY 31, 2007

 

FOR THE PERIOD
OCTOBER 3, 2005
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2006

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

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

 

 

61

 

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

 

 

 

 

 

 

 

YEAR ENDED
JULY 31, 2007

FOR THE PERIOD
OCTOBER 3, 2005
(COMMENCEMENT
OF OPERATIONS)
THROUGH
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

 

62

 

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

 

63

 

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

 

 

64

 

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  

65

 

 

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.

 

 

66  

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
WAIVED

 

EXPENSES
REIMBURSED

 

 

 

 

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  

67

 

 

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 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 Trusts is currently assessing the impact, if any, that will result from adopting SFAS No. 157.

 

 

68  

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 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. 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

 

 

 

 

69

 

DOMINI SOCIAL EQUITY FUND

DOMINI EUROPEAN SOCIAL EQUITY FUND

DOMINI PACASIA SOCIAL EQUITY FUND

DOMINI EUROPACIFIC SOCIAL EQUITY FUND

STATEMENTS OF ASSETS AND LIABILITIES

JULY 31, 2007

 

 

 

 

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Portfolio, at value

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable for capital shares

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable for capital shares

 

 

 

 

 

 

 

 

 

 

 

 

 

Sponsorship/Management fee payable

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution 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 Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized appreciation (depreciation) from Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

NET ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

NET ASSET VALUE PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding shares of beneficial interest

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value and offering price per share*

 

 

 

 

 

 

 

 

 

 

 

 

 

Class R shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding shares of beneficial interest

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value and offering price per share*

 

 

 

 

 

 

 

 

 

 

 

 

 
______________

*

Redemption price is equal to net asset value less any applicable redemption fees retained by the Fund.

 

 

70

 

 

 

 

Domini Social
Equity Fund

 

Domini European
Social Equity Fund

 

Domini PacAsia
Social Equity Fund

 

Domini EuroPacific
Social Equity Fund

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Portfolio, at value

 

$

1,125,025,974

 

$

128,022,420

 

$

25,955,110

 

$

13,259,434

 

Receivable for capital shares

 

 

842,393

 

 

211,841

 

 

130,360

 

 

89,169

 

Total assets

 

 

1,125,868,367

 

 

128,234,261

 

 

26,085,470

 

 

13,348,603

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable for capital shares

 

 

1,010,255

 

 

225,095

 

 

—

 

 

—

 

Sponsorship/Management fee payable

 

 

456,068

 

 

28,510

 

 

5,483

 

 

2,804

 

Distribution fee payable

 

 

113,526

 

 

25,892

 

 

—

 

 

—

 

Other accrued expenses

 

 

267,300

 

 

106,742

 

 

17,159

 

 

6,498

 

Total liabilities

 

 

1,847,149

 

 

386,239

 

 

22,642

 

 

9,302

 

NET ASSETS

 

$

1,124,021,218

 

$

127,848,022

 

$

26,062,828

 

$

13,339,301

 

NET ASSETS CONSIST OF:

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

976,405,665

 

$

108,674,927

 

$

24,905,062

 

$

13,537,430

 

Undistributed net investment income (loss)

 

 

706,814

 

 

50,000

 

 

(40,150

)

 

8,060

 

Accumulated net realized gain (loss) from Portfolio

 

 

(36,671

)

 

9,146,378

 

 

122,791

 

 

82,470

 

Net unrealized appreciation (depreciation) from Portfolio

 

 

146,945,410

 

 

9,976,717

 

 

1,075,125

 

 

(288,659

)

NET ASSETS

 

$

1,124,021,218

 

$

127,848,022

 

$

26,062,828

 

$

13,339,301

 

NET ASSET VALUE PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

$

1,066,137,853

 

$

127,848,022

 

$

26,062,828

 

$

13,339,301

 

Outstanding shares of beneficial interest

 

 

31,356,486

 

 

8,584,797

 

 

2,448,867

 

 

1,301,115

 

Net asset value and offering price per share*

 

$

34.00

 

$

14.89

 

$

10.64

 

$

10.25

 

Class R shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

$

57,883,365

 

 

 

 

 

 

 

 

 

 

Outstanding shares of beneficial interest

 

 

4,502,924

 

 

 

 

 

 

 

 

 

 

Net asset value and offering price per share*

 

$

12.85

 

 

 

 

 

 

 

 

 

 

 

SEE NOTES TO FINANCIAL STATEMENTS

 

71

 

DOMINI SOCIAL EQUITY FUND

DOMINI EUROPEAN SOCIAL EQUITY FUND

DOMINI PACASIA SOCIAL EQUITY FUND

DOMINI EUROPACIFIC SOCIAL EQUITY FUND

STATEMENTS OF OPERATIONS

 

INCOME:

Investment income from Portfolio (net of foreign taxes $0, $693,172, $21,400, and $35,118, respectively)

Expenses from Portfolio

Net investment income (loss) from Portfolio

EXPENSES:

Sponsor/Management fee

Distribution fees – Investor shares

Transfer agent fees

Printing

Miscellaneous

Professional fees

Registration fees

Trustees fees

Accounting fees

Total expenses

Fees waived and expenses reimbursed

Net expenses

NET INVESTMENT INCOME (LOSS)

REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:

NET REALIZED GAIN (LOSS) FROM PORTFOLIO:

Investments

Foreign Currency

Net realized gain (loss)

NET CHANGES IN UNREALIZED APPRECIATION (DEPRECIATION) FROM PORTFOLIO:

Investments

Translation of assets and liabilities in foreign currencies

Net change in unrealized appreciation (depreciation)

NET REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

 

 

72

 

 

 

 

Domini Social
Equity Fund

 

Domini European
Social Equity Fund

 

Domini PacAsia
Social Equity Fund

 

Domini EuroPacific
Social Equity Fund

 

 

 

FOR THE
YEAR ENDED
JULY 31, 2007

 

FOR THE
YEAR ENDED
JULY 31, 2007

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income from Portfolio (net of foreign taxes $0, $693,172, $21,400, and $35,118, respectively)

 

$

20,554,044

 

$

4,653,046

 

$

227,294

 

$

254,354

 

Expenses from Portfolio

 

 

(3,500,425

)

 

(842,428

)

 

(84,918

)

 

(35,268

)

Net investment income (loss) from Portfolio

 

 

17,053,619

 

 

3,810,618

 

 

142,376

 

 

219,086

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sponsor/Management fee

 

 

5,512,769

 

 

252,035

 

 

27,431

 

 

11,471

 

Distribution fees – Investor shares

 

 

2,831,912

 

 

252,035

 

 

27,431

 

 

11,471

 

Transfer agent fees

 

 

1,702,650

 

 

246,601

 

 

28,031

 

 

22,700

 

Printing

 

 

248,620

 

 

24,784

 

 

9,811

 

 

9,662

 

Miscellaneous

 

 

174,529

 

 

14,413

 

 

717

 

 

248

 

Professional fees

 

 

132,228

 

 

35,055

 

 

25,652

 

 

25,531

 

Registration fees

 

 

51,993

 

 

46,854

 

 

10,303

 

 

9,115

 

Trustees fees

 

 

39,815

 

 

3,018

 

 

206

 

 

78

 

Accounting fees

 

 

23,370

 

 

14,295

 

 

7,867

 

 

7,850

 

Total expenses

 

 

10,717,886

 

 

889,090

 

 

137,449

 

 

98,126

 

Fees waived and expenses reimbursed

 

 

(1,547,446

)

 

(121,765

)

 

(48,057

)

 

(60,800

)

Net expenses

 

 

9,170,440

 

 

767,325

 

 

89,392

 

 

37,326

 

NET INVESTMENT INCOME (LOSS)

 

 

7,883,179

 

 

3,043,293

 

 

52,984

 

 

181,760

 

REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:

 

 

 

 

 

 

 

 

 

 

 

 

 

NET REALIZED GAIN (LOSS) FROM PORTFOLIO:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

311,713,708

 

 

9,553,295

 

 

137,242

 

 

89,309

 

Foreign Currency

 

 

—

 

 

(44,756

)

 

(71,755

)

 

(33,289

)

Net realized gain (loss)

 

 

311,713,708

 

 

9,508,539

 

 

65,487

 

 

56,020

 

NET CHANGES IN UNREALIZED APPRECIATION (DEPRECIATION) FROM PORTFOLIO:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

(153,726,679

)

 

6,309,694

 

 

1,074,798

 

 

(288,236

)

Translation of assets and liabilities in foreign currencies

 

 

—

 

 

381

 

 

327

 

 

(423

)

Net change in unrealized appreciation (depreciation)

 

 

(153,726,679

)

 

6,310,075

 

 

1,075,125

 

 

(288,659

)

NET REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO

 

 

157,987,029

 

 

15,818,614

 

 

1,140,612

 

 

(232,639

)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

 

$

165,870,208

 

$

18,861,907

 

$

1,193,596

 

$

(50,879

)

SEE NOTES TO FINANCIAL STATEMENTS

 

73

 

DOMINI SOCIAL EQUITY FUND

DOMINI EUROPEAN SOCIAL EQUITY FUND

DOMINI PACASIA SOCIAL EQUITY FUND

DOMINI EUROPACIFIC SOCIAL EQUITY FUND

STATEMENT OF CHANGES IN NET ASSETS

 

 

 

Domini Social Equity Fund

 

 

 

YEAR ENDED
JULY 31, 2007

 

YEAR ENDED
JULY 31, 2006

 

INCREASE IN NET ASSETS:

 

 

 

 

 

 

 

FROM OPERATIONS:

 

 

 

 

 

 

 

Net investment income (loss)

 

$

7,883,179

 

$

9,301,237

 

Net realized gain (loss) from Portfolio

 

 

311,713,708

 

 

(31,706,488

)

Net change in unrealized appreciation (depreciation) from Portfolio

 

 

(153,726,679

)

 

32,607,374

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

 

165,870,208

 

 

10,202,123

 

DISTRIBUTIONS AND/OR DIVIDENDS:

 

 

 

 

 

 

 

Dividends to shareholders from net investment income:

 

 

 

 

 

 

 

Investor shares

 

 

(7,476,620

)

 

(8,688,804

)

Class R shares

 

 

(555,388

)

 

(450,837

)

Distributions to shareholders from net realized gain:

 

 

 

 

 

 

 

Investor shares

 

 

—

 

 

—

 

Class R shares

 

 

—

 

 

—

 

Net Decrease in Net Assets from Distributions and/or Dividends

 

 

(8,032,008

)

 

(9,139,641

)

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

Investor Shares:

 

 

 

 

 

 

 

Proceeds from sale of shares

 

 

106,056,177

 

 

119,920,657

 

Net asset value of shares issued in reinvestment of distributions and dividends

 

 

7,147,865

 

 

8,306,089

 

Redemption fees

 

 

31,677

 

 

28,060

 

Payments for shares redeemed

 

 

(291,821,985

)

 

(307,233,912

)

Net Increase (Decrease) in Net Assets from Capital Share Transactions

 

$

(178,586,266

)

$

(178,979,106

)

 

 

74

 

 

 

 

Domini European Social Equity Fund

 

Domini PacAsia
Social Equity Fund

 

Domini EuroPacific
Social Equity Fund

 

 

 

YEAR ENDED
JULY 31, 2007

 

FOR THE PERIOD
OCTOBER 3, 2005
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2006

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

INCREASE IN NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

FROM OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

3,043,293

 

$

767,394

 

$

52,984

 

$

181,760

 

Net realized gain (loss) from Portfolio

 

 

9,508,539

 

 

1,562,562

 

 

65,487

 

 

56,020

 

Net change in unrealized appreciation (depreciation) from Portfolio

 

 

6,310,075

 

 

3,666,642

 

 

1,075,125

 

 

(288,659

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

 

18,861,907

 

 

5,996,598

 

 

1,193,596

 

 

(50,879

)

DISTRIBUTIONS AND/OR DIVIDENDS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends to shareholders from net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor shares

 

 

(2,909,050

)

 

(801,320

)

 

(35,830

)

 

(147,250

)

Class R shares

 

 

—

 

 

—

 

 

—

 

 

—

 

Distributions to shareholders from net realized gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor shares

 

 

(1,977,345

)

 

—

 

 

—

 

 

—

 

Class R shares

 

 

—

 

 

—

 

 

—

 

 

—

 

Net Decrease in Net Assets from Distributions and/or Dividends

 

 

(4,886,395

)

 

(801,320

)

 

(35,830

)

 

(147,250

)

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of shares

 

 

69,480,419

 

 

50,870,995

 

 

25,605,680

 

 

13,726,761

 

Net asset value of shares issued in reinvestment of distributions and dividends

 

 

3,616,408

 

 

459,720

 

 

13,705

 

 

138,361

 

Redemption fees

 

 

27,559

 

 

3,551

 

 

617

 

 

274

 

Payments for shares redeemed

 

 

(14,675,818

)

 

(1,105,602

)

 

(714,940

)

 

(327,966

)

Net Increase (Decrease) in Net Assets from Capital Share Transactions

 

$

58,448,568

 

$

50,228,664

 

$

24,905,062

 

$

13,537,430

 

SEE NOTES TO FINANCIAL STATEMENTS

 

 

75

 

STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)

 

 

 

Domini Social Equity Fund

 

 

 

YEAR ENDED
JULY 31, 2007

 

YEAR ENDED
JULY 31, 2006

 

Class R Shares:

 

 

 

 

 

 

 

Proceeds from sale of shares

 

$

24,434,667

 

$

21,274,147

 

Net asset value of shares issued in reinvestment of distributions and dividends

 

 

555,264

 

 

450,734

 

Redemption fees

 

 

3,732

 

 

4,865

 

Payments for shares redeemed

 

 

(17,577,846

)

 

(36,793,735

)

Net Increase (Decrease) in Net Assets from Capital Share Transactions

 

 

7,415,817

 

 

(15,063,989

)

Total Increase (Decrease) in Capital Share Transactions

 

 

(171,170,449

)

 

(194,043,095

)

Total Increase (Decrease) in Net Assets

 

 

(13,332,249

)

 

(192,980,613

)

NET ASSETS:

 

 

 

 

 

 

 

Beginning of period

 

 

1,137,353,467

 

 

1,330,334,080

 

End of period

 

$

1,124,021,218

 

$

1,137,353,467

 

Undistributed net investment income (loss)

 

$

706,814

 

$

939,826

 

CAPITAL SHARE TRANSACTIONS IN SHARES:

 

 

 

 

 

 

 

Investor Shares:

 

 

 

 

 

 

 

Sold

 

 

3,151,547

 

 

3,988,472

 

Issued in reinvestment of distributions and/or dividends

 

 

208,566

 

 

276,338

 

Redeemed

 

 

(8,747,440

)

 

(10,242,766

)

Net Increase (Decrease)

 

 

(5,387,327

)

 

(5,977,956

)

Class R Shares:

 

 

 

 

 

 

 

Sold

 

 

1,859,669

 

 

1,855,343

 

Issued in reinvestment of distributions and/or dividends

 

 

42,312

 

 

39,680

 

Redeemed

 

 

(1,386,593

)

 

(3,209,549

)

Net Increase (Decrease)

 

 

515,388

 

 

(1,314,526

)

 

 

76

 

 

 

 

Domini European Social Equity Fund

 

Domini PacAsia
Social Equity Fund

 

Domini EuroPacific
Social Equity Fund

 

 

 

YEAR ENDED
JULY 31, 2007

 

FOR THE PERIOD
OCTOBER 3, 2005
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2006

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

Class R Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of shares

 

$

—

 

$

—

 

$

—

 

$

—

 

Net asset value of shares issued in reinvestment of distributions and dividends

 

 

—

 

 

—

 

 

—

 

 

—

 

Redemption fees

 

 

—

 

 

—

 

 

—

 

 

—

 

Payments for shares redeemed

 

 

—

 

 

—

 

 

—

 

 

—

 

Net Increase (Decrease) in Net Assets from Capital Share Transactions

 

 

—

 

 

—

 

 

—

 

 

—

 

Total Increase (Decrease) in Capital Share Transactions

 

 

58,448,568

 

 

50,228,664

 

 

24,905,062

 

 

13,537,430

 

Total Increase (Decrease) in Net Assets

 

 

72,424,080

 

 

55,423,942

 

 

26,062,828

 

 

13,339,301

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

55,423,942

 

 

—

 

 

—

 

 

—

 

End of period

 

$

127,848,022

 

$

55,423,942

 

$

26,062,828

 

$

13,339,301

 

Undistributed net investment income (loss)

 

$

50,000

 

$

(42,909

)

$

(40,150

)

$

8,060

 

CAPITAL SHARE TRANSACTIONS IN SHARES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sold

 

 

4,809,600

 

 

4,561,506

 

 

2,515,380

 

 

1,318,624

 

Issued in reinvestment of distributions and/or dividends

 

 

245,492

 

 

39,631

 

 

1,309

 

 

13,202

 

Redeemed

 

 

(976,912

)

 

(94,520

)

 

(67,822

)

 

(30,711

)

Net Increase (Decrease)

 

 

4,078,180

 

 

4,506,617

 

 

2,448,867

 

 

1,301,115

 

Class R Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sold

 

 

—

 

 

—

 

 

—

 

 

—

 

Issued in reinvestment of distributions and/or dividends

 

 

—

 

 

—

 

 

—

 

 

—

 

Redeemed

 

 

—

 

 

—

 

 

—

 

 

—

 

Net Increase (Decrease)

 

 

—

 

 

—

 

 

—

 

 

—

 

SEE NOTES TO FINANCIAL STATEMENTS

 

 

77

 

DOMINI SOCIAL EQUITY FUND – INVESTOR SHARES

FINANCIAL HIGHLIGHTS

 

 

 

YEAR ENDED JULY 31,

 

 

 

2007

 

2006

 

2005

 

2004

 

2003

 

For a share outstanding for the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

29.73

 

$

29.74

 

$

27.18

 

$

24.55

 

$

22.19

 

Income from investment operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

 

0.23

 

 

0.23

 

 

0.34

 

 

0.15

 

 

0.14

 

Net realized and unrealized gain (loss) on investments

 

 

4.26

 

 

(0.02

)

 

2.56

 

 

2.61

 

 

2.37

 

Total income from investment operations

 

 

4.49

 

 

0.21

 

 

2.90

 

 

2.76

 

 

2.51

 

Less dividends and distributions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends to shareholders from net investment income

 

 

(0.22

)

 

(0.22

)

 

(0.34

)

 

(0.13

)

 

(0.15

)

Distributions to shareholders from net realized gain

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Total distributions

 

 

(0.22

)

 

(0.22

)

 

(0.34

)

 

(0.13

)

 

(0.15

)

Redemption fee proceeds**

 

 

—

*

 

—

*

 

—

*

 

—

*

 

—

 

Net asset value, end of period

 

$ 

34.00

 

$

29.73

 

$

29.74

 

$

27.18

 

$

24.55

 

Total return

 

 

15.11

%

 

0.72

%

 

10.68

%

 

11.24

%

 

11.36

%

Portfolio turnover†

 

 

126

%

 

12

%

 

9

%

 

8

%

 

8

%

Ratios/supplemental data (annualized):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (in millions)

 

$

1,066

 

$

1,092

 

$

1,271

 

$

1,261

 

$

1,099

 

Ratio of expenses to average net assets

 

 

1.08

%(1)

 

0.95

%(1)

 

0.95

%(1)

 

0.94

%(1)

 

0.92

%(1)

Ratio of net investment income (loss) to average net assets

 

 

0.66

%

 

0.74

%

 

1.20

%

 

0.55

%

 

0.63

%

*

Amount represents less than 0.005 per share.

**

Redemption fee instituted on December 1, 2003.

†

For the Trust in which the Fund invests.

(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 1.23%, 1.14%, 1.13%, 1.16%, and 1.26%, for the years ended July 31, 2007, 2006, 2005, 2004, and 2003, respectively.

SEE NOTES TO FINANCIAL STATEMENTS

 

 

78

 

DOMINI SOCIAL EQUITY FUND – CLASS R SHARES

FINANCIAL HIGHLIGHTS

 

 

 

YEAR ENDED JULY 31,

 

FOR THE PERIOD
NOVEMBER 28, 2003
(COMMENCEMENT
OF OPERATIONS)
THROUGH

 

 

 

2007

 

2006

 

2005

 

JULY 31, 2004

 

For a share outstanding for the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

11.25

 

$

11.25

 

$

10.28

 

$

10.00

 

Income from investment operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

 

0.12

 

 

0.11

 

 

0.15

 

 

0.07

 

Net realized and unrealized gain (loss) on investments

 

 

1.62

 

 

0.01

 

 

0.98

 

 

0.35

 

Total income from investment operations

 

 

1.74

 

 

0.12

 

 

1.13

 

 

0.42

 

Less dividends and distributions:

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends to shareholders from net investment income

 

 

(0.14

)

 

(0.12

)

 

(0.16

)

 

(0.14

)

Redemption fee proceeds**

 

 

—

*

 

—

*

 

—

*

 

—

*

Net asset value, end of period

 

$

12.85

 

$

11.25

 

$

11.25

 

$

10.28

 

Total return

 

 

15.43

%

 

1.04

%

 

11.04

%

 

4.14

%‡

Portfolio turnover†

 

 

126

%

 

12

%

 

9

%

 

8

%

Ratios/supplemental data (annualized):

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (in millions)

 

$

58

 

$

45

 

$

60

 

$

34

 

Ratio of expenses to average net assets

 

 

0.78

%(1)

 

0.63

%(1)

 

0.62

%(1)

 

0.63

%(1)

Ratio of net investment income (loss) to average net assets

 

 

0.89

%

 

1.07

%

 

1.35

%

 

0.79

%

*

Amount represents less than 0.005 per share.

**

Redemption fee instituted on December 1, 2003.

†

For the Trust in which the Fund invests.

‡

Not annualized.

(1)

Reflects a waiver of fees by the Manager of the Trust and the Sponsor of the Fund. Had the Manager and the Sponsor not waived their fees, the ratio of expenses to average net assets would have been 0.89%, 0.78%, 0.74%, and 0.86% for the years ended July 31, 2007, 2006, 2005, and 2004, respectively.

SEE NOTES TO FINANCIAL STATEMENTS

 

 

79

 

DOMINI EUROPEAN SOCIAL EQUITY FUND

FINANCIAL HIGHLIGHTS

 

 

 

YEAR ENDED
JULY 31, 2007

 

FOR THE PERIOD
OCTOBER 3, 2005
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2006

 

For a share outstanding for the period:

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

12.30

 

$

10.00

 

Income from investment operations:

 

 

 

 

 

 

 

Net investment income (loss)

 

 

0.36

 

 

0.19

 

Net realized and unrealized gain (loss) on investments

 

 

2.88

 

 

2.31

 

Total income from investment operations

 

 

3.24

 

 

2.50

 

Less dividends and/or distributions:

 

 

 

 

 

 

 

Dividends to shareholders from net investment income

 

 

(0.34

)

 

(0.20

)

Distributions to shareholders from net realized gain

 

 

(0.31

)

 

—

 

Total distributions

 

 

(0.65

)

 

(0.20

)

Redemption fee proceeds

 

 

—

*

 

—

*

Net asset value, end of period

 

$

14.89

 

$

12.30

 

Total return

 

 

26.49

%

 

25.11

%**

Portfolio turnover†

 

 

88

%

 

69

%

Ratios/supplemental data (annualized):

 

 

 

 

 

 

 

Net assets, end of period (in millions)

 

$

128

 

$

55

 

Ratio of expenses to average net assets

 

 

1.60

%(1)

 

1.59

%(1)

Ratio of net investment income (loss) to average net assets

 

 

3.02

%

 

3.11

%

*

Amount represents less than 0.005 per share.

**

Not annualized.

†

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 1.79% for the year ended July 31, 2007, and 1.87% for the period ended July 31, 2006.

SEE NOTES TO FINANCIAL STATEMENTS

 

 

80

 

DOMINI PACASIA SOCIAL EQUITY FUND

FINANCIAL HIGHLIGHTS

 

 

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

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

 

 

0.64

 

Total income from investment operations

 

 

0.66

 

Less dividends and/or distributions:

 

 

 

 

Dividends to shareholders from net investment income

 

 

(0.02

)

Distributions to shareholders from net realized gain

 

 

—

 

Total distributions

 

 

(0.02

)

Redemption fee proceeds

 

 

—

*

Net asset value, end of period

 

$

10.64

 

Total return

 

 

6.56

%**

Portfolio turnover†

 

 

41

%

Ratios/supplemental data (annualized):

 

 

 

 

Net assets, end of period (in millions)

 

$

26

 

Ratio of expenses to average net assets

 

 

1.59

%(1)

Ratio of net investment income (loss) to average net assets

 

 

0.48

%

*

Amount represents less than 0.005 per share.

**

Not annualized.

†

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 3.22% for the period ended July 31, 2007.

SEE NOTES TO FINANCIAL STATEMENTS

 

 

81

 

DOMINI EUROPACIFIC SOCIAL EQUITY FUND

FINANCIAL HIGHLIGHTS

 

 

 

 

FOR THE PERIOD
DECEMBER 27, 2006
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JULY 31, 2007

 

For a share outstanding for the period:

 

 

 

 

Net asset value, beginning of period

 

$

10.00

 

Income from investment operations:

 

 

 

 

Net investment income (loss)

 

 

0.16

 

Net realized and unrealized gain (loss) on investments

 

 

0.22

 

Total income from investment operations

 

 

0.38

 

Less dividends and/or distributions:

 

 

 

 

Dividends to shareholders from net investment income

 

 

(0.13

)

Distributions to shareholders from net realized gain

 

 

—

 

Total distributions

 

 

(0.13

)

Redemption fee proceeds

 

 

—

*

Net asset value, end of period

 

 

10.25

 

Total return

 

 

3.82

%**

Portfolio turnover†

 

 

46

%

Ratios/supplemental data (annualized):

 

 

 

 

Net assets, end of period (in millions)

 

$

13

 

Ratio of expenses to average net assets

 

 

1.58

%(1)

Ratio of net investment income (loss) to average net assets

 

 

3.96

%

*

Amount represents less than 0.005 per share.

**

Not annualized.

†

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 and reimbursed expenses, the ratio of expenses to average net assets would have been 5.87% for the period ended July 31, 2007.

SEE NOTES TO FINANCIAL STATEMENTS

 

 

82

 

DOMINI SOCIAL EQUITY FUND

DOMINI EUROPEAN SOCIAL EQUITY FUND

DOMINI PACASIA SOCIAL EQUITY FUND

DOMINI EUROPACIFIC SOCIAL EQUITY FUND

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2007

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Domini Social Investment Trust is a Massachusetts business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Domini Social Investment Trust comprises five separate series: Domini Social Equity Fund, Domini European Social Equity Fund, Domini PacAsia Social Equity Fund, Domini EuroPacific Social Equity Fund, and Domini Social Bond Fund (each the “Fund,” collectively the “Funds”). The financial statements of the Domini Social Bond Fund are included elsewhere in this report. 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 reflect the Funds’ proportionate interest in the net assets of the Trusts (approximately 86.8% of Domini Social Equity Trust, 95.9% of Domini European Social Equity Trust, 96.1% of Domini PacAsia Social Equity Trust, and 94.3% 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.

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 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 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. Dividends to shareholders are usually declared and paid semi-annually from net investment income. Distributions to shareholders of realized

 

83

 

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. Accordingly, 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 pro rata on a daily basis 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 Domini Social Equity Trust.

(C) Sponsor/Manager. Pursuant to a Sponsorship Agreement (with respect to the Domini Social Equity Fund) and a Management Agreement (with respect to the Domini European Social Equity Fund, Domini PacAsia Social Equity Fund, and Domini EuroPacific Social Equity Fund), 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, 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 Fund

 

0.45% of the first $2 billion of net assets managed

 

 

84

Notes to Financial Statements

 

 

 

 

0.44% of the next $1 billion of net assets managed,

 

 

and

 

 

0.43% of net assets managed in excess of $3 billion

 

 

0.25% of the first $250 million of net assets

Domini European Social Equity Fund

 

managed,

 

 

0.24% of the next $250 million of net assets

Domini PacAsia Social Equity Fund, and

 

managed, and

 

 

0.23% of net assets managed in excess of

Domini EuroPacific Social Equity Fund

 

$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 Fund at no greater than 1.15% of the average daily net assets representing Investor shares and 0.85% of the average daily net assets representing Class R shares. For the period prior to November 30, 2006, Domini capped aggregate annual operating expenses at 0.95% and 0.63% for Investor and Class R shares, respectively. Since the inception of the Domini European Social Equity Fund, Domini PacAsia Social Equity Fund, and Domini EuroPacific Social Equity Fund, 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 Fund, Domini PacAsia Social Equity Fund, and Domini EuroPacific Social Equity Fund at no greater than 1.60% 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
WAIVED

 

EXPENSES
REIMBURSED

 

Domini Social Equity Fund

$

918,167

 

$

—

 

Domini European Social Equity Fund

 

—

 

 

—

 

Domini PacAsia Social Equity Fund

 

26,160

 

 

—

 

Domini EuroPacific Social Equity Fund

 

11,471

 

 

37,858

 

(D) Distributor. The Board of Trustees of the Funds has adopted a Distribution Plan with respect to the Funds’ Investor shares in accordance with Rule 12b-1 under the Act. DSIL Investment Services LLC, a wholly owned subsidiary of Domini (DSILD), acts as agent of the Funds in connection with the offering of Investor shares of the Funds pursuant to a Distribution Agreement. Under the Distribution Plan, the Funds pay expenses incurred in connection with the sale of Investor shares and pay DSILD a distribution fee at an aggregate annual rate not to exceed 0.25% of the average daily net assets representing the Investor shares. For the period ended July 31, 2007, fees waived were $629,279, $121,765, $21,897, and $11,471 for the Domini Social Equity Fund, Domini European Social Equity Fund, Domini PacAsia Social Equity Fund, and Domini EuroPacific Social Equity Fund, respectively.

 

 

 

Notes to Financial Statements  

85

 

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 Fund

 

$130,669,839

 

$319,410,270

 

Domini European Social Equity Fund

 

69,514,566

 

16,454,530

 

Domini PacAsia Social Equity Fund

 

25,475,832

 

803,708

 

Domini EuroPacific Social Equity Fund

 

13,637,800

 

364,813

 

4. FEDERAL TAX STATUS

The tax basis of the components of net assets for the Funds at July 31, 2007, are as follows:

 

 

 

 

DOMINI
SOCIAL
EQUITY
FUND

 

DOMINI
EUROPEAN
SOCIAL
EQUITY
FUND

 

DOMINI
PACASIA
SOCIAL
EQUITY
FUND

 

DOMINI
EUROPACIFIC SOCIAL
EQUITY
FUND

 

Undistributed ordinary income

 

$

706,260

 

$

6,168,796

 

$

207,662

 

$

132,247

 

Undistributed long term capital gains

 

 

61,150,165

 

 

3,195,790

 

 

—

 

 

—

 

Capital losses, other losses and other temporary differences

 

 

(28,436,376

)

 

(39,764

)

 

2,942

 

 

(1,999

)

Unrealized appreciation/(depreciation)

 

 

114,195,504

 

 

9,848,273

 

 

947,162

 

 

(328,377

)

Distributable net earnings/(deficit)

 

$

147,615,553

 

$

19,173,095

 

$

1,157,766

 

$

(198,129

)

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.

For federal income tax purposes, dividends paid were characterized as follows:

 

 

 

DOMINI SOCIAL
EQUITY FUND

 

DOMINI EUROPEAN
SOCIAL EQUITY
FUND

 

DOMINI
PACASIA
SOCIAL
EQUITY
FUND

 

DOMINI
EUROPACIFIC
SOCIAL
EQUITY
FUND

 

 

 

YEAR
ENDED
JULY 31,
2007

 

YEAR
ENDED
JULY 31,
2006

 

YEAR
ENDED
JULY 31,
2007

 

YEAR
ENDED
JULY 31,
2006

 

YEAR
ENDED
JULY 31,
2007

 

YEAR
ENDED
JULY 31,
2007

 

Ordinary income

 

$

8,032,008

 

$

9,139,641

 

$

4,874,061

 

$

801,320

 

$

35,830

 

$

147,250

 

Long-term capital gain

 

 

—

 

 

—

 

 

12,334

 

 

—

 

 

—

 

 

—

 

Total

 

$

8,032,008

 

$

9,139,641

 

$

4,886,395

 

$

801,320

 

$

35,830

 

$

147,250

 

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

 

 

86  

Notes to Financial Statements

 

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 would use in pricing the asset or liability, and 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.

 

 

 

Notes to Financial Statements  

87

 


Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Domini Social Investment Trust:

We have audited the accompanying statement of assets and liabilities of Domini Social Equity Fund, Domini European Social Equity Fund, Domini PacAsia Social Equity Fund, and Domini EuroPacific Social Equity Fund (collectively the “Funds”), each a series of Domini Social Investment 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 24, 2007

 

 

88

 

DOMINI SOCIAL BOND FUND

STATEMENT OF ASSETS AND LIABILITIES

JULY 31, 2007

 

ASSETS:

 

 

 

 

Investments at value (cost $72,621,432)

 

$

71,654,854

 

Interest receivable

 

 

736,900

 

Receivable for capital shares

 

 

67,060

 

Total assets

 

 

72,458,814

 

LIABILITIES:

 

 

 

 

Payable for capital shares

 

 

79,077

 

Management fee payable

 

 

39,639

 

Other accrued expenses

 

 

15,780

 

Dividend payable

 

 

12,784

 

Total liabilities

 

 

147,280

 

NET ASSETS

 

$

72,311,534

 

NET ASSETS CONSIST OF:

 

 

 

 

Paid-in capital

 

 

73,915,351

 

Accumulated net realized loss from investments

 

 

(637,239

)

Net unrealized depreciation from investments

 

 

(966,578

)

 

$

72,311,534

 

NET ASSET VALUE PER SHARE

 

 

 

 

Net asset value and offering price per share* ($72,311,534 ÷ 6,803,606 outstanding shares of beneficial interest)

 

$

10.63

 

 

______________

*

Redemption price is equal to net asset value less any applicable redemption fees retained by the Fund.

SEE NOTES TO FINANCIAL STATEMENTS

 

 

89

 

DOMINI SOCIAL BOND FUND

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JULY 31, 2007

 

INCOME:

 

 

Interest income

 

$

3,417,591

  

EXPENSES:

 

 

 

  

Management fee

 

 

274,690

  

Administrative fee

 

 

171,682

  

Distribution fees

 

 

171,682

  

Transfer agent fees

 

 

206,262

  

Accounting and custody fees

 

 

66,789

  

Printing

 

 

33,688

  

Professional fees

 

 

52,339

  

Registration

 

 

25,839

  

Miscellaneous

 

 

7,984

  

Trustees fees

 

 

2,306

  

Total Expenses

 

 

1,013,261

  

Fees waived

 

 

(361,111

 )

Net Expenses

 

 

652,150

  

NET INVESTMENT INCOME

 

 

2,765,441

  

NET REALIZED AND UNREALIZED GAIN (LOSS):

 

 

 

  

Net realized gain (loss) on investments

 

 

(353,795

 )

Net change in unrealized appreciation (depreciation) on investments

 

 

516,487

  

Net realized and unrealized gain (loss) from investments

 

 

162,692

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

2,928,133

  

 

SEE NOTES TO FINANCIAL STATEMENTS

 

90

 

DOMINI SOCIAL BOND FUND

STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

YEAR ENDED
JULY 31, 2007

 

YEAR ENDED
JULY 31, 2006

 

 

 

 

 

 

 

 

INCREASE IN NET ASSETS:

 

 

 

 

 

 

 

FROM OPERATIONS:

 

 

 

 

 

 

 

Net investment income (loss)

 

$

2,765,441

 

$

2,441,061

 

Net realized gain (loss) on investments

 

 

(353,795

)

 

(118,912

)

Net change in unrealized appreciation (depreciation) on investments

 

 

516,487

 

 

(1,666,258

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

 

2,928,133

 

 

655,891

 

DISTRIBUTIONS AND DIVIDENDS:

 

 

 

 

 

 

 

Dividends to shareholders from net investment income

 

 

(2,765,441

)

 

(2,441,353

)

Distributions to shareholders from net realized gain

 

 

—

 

 

—

 

Net Decrease in Net Assets from Distributions and Dividends

 

 

(2,765,441

)

 

(2,441,353

)

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

Proceeds from sale of shares

 

 

16,183,875

 

 

14,102,624

 

Net asset value of shares issued in reinvestment of distributions and dividends

 

 

2,606,151

 

 

2,299,009

 

Redemption fee

 

 

832

 

 

1,867

 

Payment for shares redeemed

 

 

(11,946,572

)

 

(13,322,139

)

Net Increase in Net Assets from Capital Share Transactions

 

 

6,844,286

 

 

3,081,361

 

Total Increase (Decrease) in Net Assets

 

 

7,006,978

 

 

1,295,899

 

NET ASSETS:

 

 

 

 

 

 

 

Beginning of year

 

 

65,304,556

 

 

64,008,657

 

End of year (including undistributed net investment income of $0 and $0, respectively)

 

$

72,311,534

 

$

65,304,556

 

CAPITAL SHARE TRANSACTIONS IN SHARES:

 

 

 

 

 

 

 

Sold

 

 

1,513,152

 

 

1,315,796

 

Issued in reinvestment of distributions and/or dividends

 

 

243,404

 

 

214,836

 

Redeemed

 

 

(1,118,032

)

 

(1,246,013

)

Net Increase (Decrease)

 

 

638,524

 

 

284,619

 

 

SEE NOTES TO FINANCIAL STATEMENTS

 

91

 

DOMINI SOCIAL BOND FUND

FINANCIAL HIGHLIGHTS

 

 

 

YEAR ENDED JULY 31,

 

 

2007

 

2006

 

2005

 

2004

 

2003

 

For a share outstanding for the period:

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of year

 

$10.59

 

$10.88

 

$10.91

 

$10.97

 

$11.03

 

Income from investment operations:

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

0.43

 

0.40

 

0.38

 

0.36

 

0.40

 

Net realized and unrealized gain (loss) on investments

 

0.04

 

(0.29

)

(0.03

)

(0.03

)

(0.03

)

Total income from investment operations

 

0.47

 

0.11

 

0.35

 

0.33

 

0.37

 

Less dividends and distributions:

 

 

 

 

 

 

 

 

 

 

 

Dividends to shareholders from net investment income

 

(0.43

)

(0.40

)

(0.38

)

(0.36

)

(0.40

)

Distributions to shareholders from net realized gain

 

—

 

—

 

—

 

(0.03

)

(0.03

)

Total dividends and distributions

 

(0.43

)

(0.40

)

(0.38

)

(0.39

)

(0.43

)

Redemption fee proceeds*

 

—

**

—

**

—

**

—

**

—

 

Net asset value, end of year

 

$10.63

 

$10.59

 

$10.88

 

$10.91

 

$10.97

 

Total return

 

4.49

%

1.06

%

3.25

%

3.02

%

3.33

%

Portfolio turnover

 

54

%

34

%

25

%

46

%

24

%

Ratios/supplemental data (annualized):

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (000s)

 

$72,312

 

$65,305

 

$64,009

 

$59,288

 

$47,853

 

Ratio of expenses to average net assets

 

0.95

%(1)

0.95

%(1)

0.95

%(1)

0.95

%(1)

0.95

%(1)

Ratio of net investment income to average net assets

 

4.03

%

3.76

%

3.48

%

3.27

%

3.56

%
   
   

*

Redemption fee instituted on December 1, 2003.

**

Amount represents less than $0.005 per share.

(1)

Reflects a waiver of fees by the Manager due to a contractual fee waiver. Had the Manager not waived its fees, the ratio of expenses to average net assets would have been 1.48%, 1.32%, 1.47%, 1.64%, and 1.71%, for the years ended July 31, 2007, 2006, 2005, 2004, and 2003, respectively.

 

SEE NOTES TO FINANCIAL STATEMENTS

 

92

 

DOMINI SOCIAL BOND FUND

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2007

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Domini Social Bond Fund (the “Fund”) is a series of the Domini Social Investment Trust. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940 as an open-end management investment company. The Fund seeks to provide its shareholders with a high level of current income and total return by investing in bonds and other debt instruments that are consistent with the Fund’s social and environmental standards and the submanager’s security selection approach. 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 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 Fund’s significant accounting policies.

(A) Valuation of Investments. Bonds and other fixed-income securities (other than obligations with maturities of 60 days or less) are valued on the basis of valuations furnished by an independent pricing service, use of which has been approved by the Board of Trustees of the Fund. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques that take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data, without exclusive reliance upon quoted prices or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Short-term obligations (maturing in 60 days or less) are valued at amortized cost, which constitutes fair value as determined by the Board of Trustees of the Fund.

Securities (other than short-term obligations with remaining maturities of 60 days or less) 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 Fund’s Board of Trustees.

(B) Repurchase Agreements. The Fund may enter into repurchase agreements with selected banks or broker-dealers. Each repurchase agreement is recorded at cost, which approximates fair value. The Fund requires 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 the Fund to obtain those securities in the event of a default of the

 

93

 

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) Investment Transactions, Investment Income and Dividends to Shareholders. Investment transactions are recorded on trade date. Dividends to shareholders are usually declared daily and paid monthly 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 Fund’s components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax regulations.

(D) Federal Taxes. The 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. Accordingly, no provision for federal income or excise tax is deemed necessary.

(E) Redemption Fees. Redemptions and exchanges of Fund shares held less than 60 days may be subject to the Fund’s redemption fee, which is 2% of the amount redeemed. Such fees are retained by the Fund and are recorded as an adjustment to paid-in capital.

2. TRANSACTIONS WITH AFFILIATES

(A) Manager/Administrator. The Fund has retained Domini Social Investments LLC (Domini) to serve as investment manager and administrator. The services provided by Domini consist of investment supervisory services, overall operational support, and administrative services, including the provision of general office facilities and supervising the overall administration of the Fund. For its services under the Management Agreement, Domini receives from the Fund a fee accrued daily and paid monthly at an annual rate equal to 0.40% of the Fund’s average daily net assets. For its services under the Administration Agreement, Domini receives from the Fund a fee accrued daily and paid monthly at an annual rate equal to 0.25% of the Fund’s average daily net assets. For the period from November 30, 2006, until November 30, 2007, Domini is waiving its fee to the extent necessary to keep the aggregate annual operating expenses of the Fund (excluding brokerage fees and commissions, interest, taxes, and other extraordinary expenses), net of waivers and reimbursements, at no greater than 0.95% of the Fund’s average daily net assets. A similar fee waiver arrangement was in effect in prior periods. For the year ended July 31, 2007, Domini waived fees totaling $189,429.

(B) Submanager. Seix Advisors (Seix), the fixed-income division of Trusco Capital Management, Inc., provides investment submanagement services to the Fund on a day-to-day basis pursuant to a Submanagement Agreement with Domini.

 

94  

Domini Social Bond Fund – Notes to Financial Statements

 

(C) Distributor. The Board of Trustees of the Fund has adopted a Distribution Plan in accordance with Rule 12b-1 under the Act. DSIL Investment Services LLC, a wholly owned subsidiary of Domini (DSILD), acts as agent of the Fund in connection with the offering of shares of the Fund pursuant to a Distribution Agreement. Under the Distribution Plan, the Fund pays expenses incurred in connection with the sale of Fund shares and pays DSILD a distribution fee at an aggregate annual rate not to exceed 0.25% of the Fund’s average daily net assets. For the year ended July 31, 2007, fees waived totaled $171,682.

3. INVESTMENT TRANSACTIONS

For the year ended July 31, 2007, cost of purchase and proceeds from sales of investments other than short-term obligations were as follows:

 

 

 

Purchases

 

Sales

 

Government Securities

 

$

33,015,430

 

$

26,238,855

 

Corporate Obligations

 

 

9,466,651

 

 

7,155,463

 

State & Municipal Obligations

 

 

—

 

 

635,000

 

4. FEDERAL TAX STATUS

The tax basis of the components of net assets at July 31, 2007, is as follows:

 

Undistributed ordinary income

 

$

12,784

 

Capital losses, other losses and other temporary differences

 

 

 (650,023

) 

Unrealized appreciation (depreciation)

 

 

 (966,578

) 

Distributable net earnings (deficit)

 

$

(1,603,817

) 

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.

The Fund has net realized capital losses of $245,357 incurred during the period from November 1, 2006 through July 31, 2007. These losses are deferred and will be recognized on August 1, 2007, for tax purposes.

The Fund has accumulated capital loss carryforwards of $391,882, of which $164,532 will expire in the year 2013, $16,995 will expire in the year 2014, and $210,355 will expire in the year 2015. To the extent that the Fund realizes future net capital gains, those gains will be offset by any unused capital loss carryforwards.

 

 

Domini Social Bond Fund – Notes to Financial Statements  

95

 

For federal income tax purposes, dividends paid were characterized as follows:

 

 

 

YEAR ENDED 

 

 

 

2007

 

2006

 

Ordinary income

 

$

2,765,441

 

$

2,441,353

 

Long-term capital gain

 

 

—

 

 

—

 

Total

 

$

2,765,441

 

$

2,441,353

 

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 fund’s 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 Fund’s 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 measurements, 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 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.

 

96  

Domini Social Bond Fund – Notes to Financial Statements

 


Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Domini Social Investment Trust:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Domini Social Bond Fund (the “Fund”), a series of the Domini Social Investment Trust, as of July 31, 2007, and the related statement of operations for the year then ended, statements of changes in net assets for each of the years in the two-year period then ended, and financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s 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 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 Domini Social Bond Fund as of July 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.


Boston, Massachusetts

September 24, 2007

 

 

97

 

THE DOMINI FUNDS

TAX INFORMATION (UNAUDITED)

FOR THE YEAR ENDED JULY 31, 2007

For tax purposes for the year ended July 31, 2007, the Funds made the following Long-Term Capital Gain Designations:

 

Domini Social Equity Fund

—

Domini European Social Equity Fund

12,334

Domini PacAsia Social Equity Fund

—

Domini EuroPacific Social Equity Fund

—

Domini Social Bond Fund

—

For dividends paid during the year ended July 31, 2007, the Funds designated the following as Qualified Dividend Income:

 

Domini Social Equity Fund

$7,881,650

Domini European Social Equity Fund

4,874,061

Domini PacAsia Social Equity Fund

35,830

Domini EuroPacific Social Equity Fund

147,250

For corporate shareholders, 98% of dividends paid from net investment income for the Domini Social Equity Fund were eligible for the corporate dividends received deduction.

 

 

 

FOREIGN TAX PAID

 

FOREIGN SOURCE INCOME

 

 

 

 

TOTAL

 

 

PER SHARE

 

 

TOTAL

 

PER SHARE

 

Domini European Social Equity Fund

 

$

635,976

 

$ 

0.07

 

$

5,333,709

 $

0.62

 

Domini PacAsia Social Equity Fund

 

 

21,355

 

 

0.01

 

 

242,647

 

0.10

 

Domini EuroPacific Social Equity Fund

 

 

34,349

 

 

0.03

 

 

286,145

 

0.22

 

The foreign taxes paid or withheld per share represent taxes incurred by the Funds on interest and dividends received by the Funds 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.

 

98

 

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.

BOND FUND

Nature, Quality, And Extent Of Services Provided. The Trustees noted that pursuant to the management agreement for the Bond Fund, Domini,

 

99

 

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 with 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 the 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 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)

 

100

 

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 peer 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 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

 

101

 

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 management 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 securities 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 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.

 

102

 

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 agreed-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 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

 

103

 

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 relationship 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.

 

104

 

TRUSTEES AND OFFICERS

The following table presents information about each Trustee and each Officer of the Domini Social Investment 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,
Position(s) Held,
and Length of
Time Served

 

Principal Occupation(s) During Past 5 Years and
Other Directorships Held

 

Number of Funds
and Portfolios in
the Domini Family
of Funds Overseen
by Trustee

 

 

 

 

 

Amy L. Domini* (57)
Chair, Trustee, and President of the
Trust and the Master Trust since 1990

 

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

 

 

 

105

 

 

Disinterested Trustees

 

Name, Age,
Position(s) Held,
and Length of
Time Served

 

Principal Occupation(s) During Past 5 Years and
Other Directorships Held

 

Number of Funds
and Portfolios in
the Domini Family
of Funds Overseen
by Trustee

 

 

 

 

 

Julia Elizabeth Harris
(59)
Trustee of the Trust and the Master Trust since 1999

 

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
(60)
Trustee of the Trust and the Master Trust since 1999

 

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
(63)
Trustee of the Trust since 1990 and the Master Trust since 1997

 

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
(62)
Trustee of the Trust since 1990 and the Master Trust since 1997

 

Visiting Professor, Escuela Graduado Administracion Direccion Empresas, Instituto Tecnologico 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
(47)
Trustee of the Trust and the Master Trust since 1999

 

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

 

 

 

 

106

 

 

Disinterested Trustees (continued)

 

Name, Age,
Position(s) Held,
and Length of
Time Served

 

Principal Occupation(s) During Past 5 Years and
Other Directorships Held

 

Number of Funds
and Portfolios in
the Domini Family
of Funds Overseen
by Trustee

 

 

 

 

 

John L. Shields
(54)
Trustee of the Trust and the Master Trust since 2004

 

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,
Position(s) Held,
and Length of
Time Served

 

Principal Occupation(s) During Past 5 Years and
Other Directorships Held

 

Number of Funds
and Portfolios in
the Domini Family
of Funds Overseen
by Trustee

 

 

 

 

 

Megan L. Dunphy*
(37)
Secretary of the Trust and the Master Trust since 2005

 

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*
(41)
Chief Legal Officer of the Trust and the Master Trust since 2003
Vice President of the Trust and Master Trust since 2007

 

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

 

 

 

107

 

 

Officers (continued)

 

Name, Age,
Position(s) Held,
and Length of
Time Served

 

Principal Occupation(s) During Past 5 Years and
Other Directorships Held

 

Number of Funds
and Portfolios in
the Domini Family
of Funds Overseen
by Trustee

 

 

 

 

 

Carole M. Laible*
(43)
Treasurer of the Trust and the Master Trust since 1997
Vice President of the Trust and Master Trust since 2007

 

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*
(51)
Assistant Secretary of the Trust and the Master Trust since 2007

 

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*
(61)
Vice President of the Trust and the Master Trust since 1990

 

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*
(27)
Assistant Secretary of the Trust and the Master Trust since 2007

 

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*
(37)
Assistant Treasurer of the Trust and the Master Trust since 2007

 

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

 

 

108

 

 

Officers (continued)

 

Name, Age,
Position(s) Held,
and Length of
Time Served

 

Principal Occupation(s) During Past 5 Years and
Other Directorships Held

 

Number of Funds
and Portfolios in
the Domini Family
of Funds Overseen
by Trustee

 

 

 

 

 

Maurizio Tallini*
(33)
Chief Compliance Officer of the Trust and the Master Trust since 2005 Vice President of the Trust and Master Trust since 2007

 

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.

 

 

 

109

 

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 the 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.

 

 

110

 

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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 Submanagers:

Domini Social Equity Trust

Domini European Social Equity Trust

Domini PacAsia Social Equity Trust

Domini EuroPacific Social Equity Trust

Wellington Management Company, LLP

75 State Street

Boston, MA 02109

Domini Social Bond Fund

Seix Advisors
10 Mountain View Road, Suite C-200

Upper Saddle River, NJ 07458

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 years 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 audits 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 Fund

 

$14,700

 

$14,000

 

Domini Social Bond Fund

 

$23,100

 

$22,000

 

Domini European Social Equity Fund

 

$14,700

 

$14,000

 

Domini EuroPacific Social Equity Fund

 

$14,700

 

—*

 

Domini PacAsia Social Equity Fund

 

$14,700

 

—*

 
______________

* The Domini EuroPacific Social Equity Fund and the Domini PacAsia Social Equity Fund 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

In each of the fiscal years 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 Fund

 

$4,200

 

$5,500

 

Domini Social Bond Fund

 

$4,200

 

$5,500

 

Domini European Social Equity Fund

 

$4,200

 

$5,500

 

Domini EuroPacific Social Equity Fund

 

$4,200

 

—*

 

Domini PacAsia Social Equity Fund

 

$4,200

 

—*

 
______________

* The Domini EuroPacific Social Equity Fund and Domini PacAsia Social Equity Fund 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 target management and external tax advisors. Advice regarding the target fund’s overall tax posture and historical and future tax exposures.

 

Not to exceed $8,000 per merger during the Pre-Approval Period

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 Fund

 

0%

Domini Social Bond Fund

 

0%

Domini European Social Equity Fund

 

0%

Domini EuroPacific Social Equity Fund

 

0%

Domini PacAsia Social Equity Fund

 

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 $21,000, and for the fiscal year ended July 31, 2006, were $16,500.

(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 nominees 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 SOCIAL INVESTMENT TRUST

By: 


/s/ Amy L. Thornton

 

Amy L. Thornton

 

President

Date: October 5, 2007

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: 


/s/ Amy L. Thornton

 

Amy L. Thornton

 

President (Principal Executive Officer)

Date: October 5, 2007

By: 


/s/ Carole M. Laible

 

Carole M. Laible

 

Treasurer (Principal Financial Officer)

Date: October 5, 2007