Below are the final 2005 year-end distributions for the Domini Funds.  Distributions are paid to everyone owning shares on the record date of the distribution, regardless of how long the shares have been held.  If both a dividend and a capital gain distribution occurred on the same date, each distribution is listed separately. Dividends and capital gains are paid in cash or reinvested in additional shares.

 

Fund Name	Ticker	Income	Capital Gain Per Share†		Pay	Record	Reinvest Date	Reinvest Price
			Short Term	Long Term
Domini Social Equity Fund	DSEFX	$0.107	0.000	0.000	12/15	12/14	12/15	$30.55
Domini Social Equity Portfolio Class A Shares	DSEPX	$0.034	0.0001	0.056	12/15	12/14	12/15	$10.49
Domini Social Equity Fund Class R	DSFRX	$0.058	0.000	0.000	12/15	12/14	12/15	$11.55
Domini Institutional Equity Fund	DIEQX	$0.061	0.000	0.000	12/15	12/14	12/15	$18.52
Domini  European Social Equity Fund	DEUFX	$0.000	0.000	0.000	12/15	12/14	12/15	$10.41
Domini  European Social Equity Portfolio Class A Shares	DEEPX	$0.014	0.000	0.000	12/15	12/14	12/15	$10.29
Domini Social Bond Fund	DSBFX	N/A*	0.000	0.000	12/15	12/14	12/15	$10.76

 

† Qualified 5-year gains are taxed at 8% instead of 10% for individual taxpayers in the lowest tax bracket. This information will be reported in Box 2c on your 1099-DIV, which will be mailed in late January.

 

* Dividends from net income, if any, are paid by the Domini Social Bond Fund monthly.

 

Why do Domini Funds make distributions?

Mutual funds are required by the IRS to distribute nearly all interest and dividends earned, less fund operating expenses, as well as any realized capital gains.  These distributions can reduce the fund’s NAV (Net Asset Value or share price).  But unless there is a change in value of the fund’s portfolio securities, the distributions do not affect the value of your account.

How is a fund’s NAV (share price) affected when a distribution is paid?

When a distribution is made on a fund’s “reinvest date” (which is also known as ex-date, or ex-dividend) the Net Asset Value (NAV) goes down by the same amount.  However, even though the NAV may go down, unless there is a change to the fund’s underlying securities, the value of your account will not be affected.

For example: Assume you own 100 shares of a fund with an NAV of $10, your investment is worth $1,000. The fund declares and makes a distribution of $0.10 per share. On the reinvest date, the fund's NAV drops to $9.90 per share, assuming the shares did not change in value due to market conditions. If you reinvest your $10 distribution (100 shares x $0.10 per share), you buy an additional 1.01 shares at $9.90 per share. The value of your account is still $1,000 (101.01 shares x $9.90 per share).

If you do not reinvest your distribution, the value of your account would be worth $990 (100 shares x $9.90 per share). But you would not have lost any money because you will receive the $10 distribution, either by check, directly into your bank account or invested in another Domini Fund, however you choose.

 

Who is responsible for paying taxes on these distributions?

Since a mutual fund is considered a “pass-through” entity, fund shareholders pay tax on their portion of the realized capital gain and net investment income.  Unless you own fund shares in an IRA account or other tax-deferred account, all individual shareholders will receive an IRS form 1099-DIV at the end of January, which reports all dividends and distributions received as cash or reinvested in additional shares.  If you own shares in a taxable account you could owe taxes on the distributions, even if you reinvest the distribution in additional shares.  Remember, you should not prepare your taxes until you receive all your official tax forms.

Before you purchase new mutual fund shares, it is advisable to check the fund’s distribution schedule.  If you purchase new shares just before a fund’s distribution, a portion of your investment will be immediately returned to you along with a tax bill.  Because you are essentially increasing your tax bill with your fund purchase, this likely means a short-term loss on your investment.