Real-Life Success Stories

 

How Your Investment in the Domini Social Bond Fund Helps Build Communities

 

The Domini Social Bond Fund is a highly innovative way for individual investors to participate in a variety of community development initiatives across the United States.

 

As of September 30, 2006, the Fund invested in 30 community development banks and credit unions. Below are just a few of the real-life success stories that illustrate the accomplishments of the community development financial institutions (CDFIs) in the Fund’s portfolio.

 

Central Bank of Kansas City
A Single Mother Finds a Hearth and Home

 

The Blue Valley Neighborhood Preservation Initiative works to improve its Kansas City neighborhood by providing education and affordable housing so residents can become homeowners, and by encouraging neighborhood watches and other crime prevention techniques. The initiative typically tries to buy homes for under $10,000, rehabs them, and sells them for about $55,000. Central Bank of Kansas City provided $65,000 in seed money to buy homes, plus a $400,000 line of credit to help fund the rehab work.

 

In 1992, following the breakup of her marriage, Tonia Cunningham found herself in financial straits, facing eviction and homelessness with her three children. Even the local housing project rejected her. After repairing her credit, saving diligently, and receiving homeowner training, she found a fire-damaged but salvageable home in the Blue Valley area. She put down a $500 earnest payment and began working with the Blue Valley initiative, and in January 2002 she moved in — as the owner of the first home to be redeveloped through the initiative.

 

Harbor Bank of Maryland
“An Element of Hope” on Baltimore’s East Side

As part of its efforts to redevelop the distressed neighborhoods near the Johns Hopkins medical center, Harbor Bank of Maryland helped the United Baptist Church finish its new sanctuary. The bank helped the church deal with contractors, developers, permits, and other issues.

 

The Rev. Carl Solomon of United Baptist has an ambitious vision of outreach and ministries in the community, including daycare, adult care, and drug rehabilitation. According to Samuel Deal, senior vice president at Harbor Bank, United Baptist represents “a faith-based community project that turned into an element of hope for the east side of Baltimore.”

Lower East Side People’s Federal Credit Union
Helping a Dentist’s Dream Come True

 

Francisca Montero came to the U.S. from the Dominican Republic with the dream of opening her own dental practice. “The move to the Lower East Side meant everything to me because it would enable me to live, work and study all in one location, and all within my means.”

 

After graduating from New York University she approached several lenders for a loan to start her practice, but was turned down. “I joined the Credit Union and in very little time I got the financing I needed to get started. LESPFCU believed in me and my dream and gave me a chance that other lenders would not. On May 23, 2002, I opened my dental office.”

 

Mission Community Bank
A New Home for a New Kind of Bike Shop

When Shay Wotring and her husband Justin James took over a failing bike shop in San Luis Obispo, they had a vision of a store with high-end service and product, where customers would enjoy spending time and knowledgeable salespeople would provide expert advice. That’s why they renamed their store A Better Bike Shop. Just out of college and with few assets, the young couple financed the purchase of the store with help from relatives and a $68,000 Small Business Administration loan from Mission Community Bank.

 

Shay and Justin were held back, though, by their location: a “generic box” in a strip mall on the outskirts of town. With their business growing, they applied for and received a second SBA loan from Mission to finance a move. In July 2002 they moved into a more spacious and more central location in a former flower shop, where they share room with a café. “It’s twice the size of the old location and has a much more open feel,” says Ms. Wotring. “We hoped for growth of 20% to 30%, but since the move we’ve consistently doubled sales. Without the second loan there was no way we could do it.”

 

Santa Cruz Community Credit Union
Out of the Spare Room, Into a New Home

 

For seven years, Rigoberto and Cecilia Melgoza lived with Cecilia’s sister’s family, in a single room that they shared with their children Omar and Vianney. Though they both worked full-time, they could not afford to buy a home in Santa Cruz County, where median home prices were more than $583,000.

 

By using grant money to match the Melgozas’ savings at a rate of 3 to 1, Santa Cruz Community Credit Union’s IDA program helped them raise $20,000 toward their home. (Individual Development Accounts or IDAs use a variety of private and public funding sources to provide matching funds to people who are trying to buy their first home, pay for post-secondary education, or start a small business.) But for two years the Melgozas were outbid whenever they tried to buy a home.

 

A stroke of luck brought them a home at last. The City of Watsonville requires that a percentage of new homes must be sold at prices affordable to residents with median incomes. When 160 people took part in a lottery for six new affordable homes, 11-year-old Omar had the winning ticket. The Melgozas’ new home is in the “zero energy community” of Vista Montana. “Our house runs on solar energy,” says Cecilia Melgoza. “Our appliances are very efficient. Our utility bill is less than $10 a month.”

 

Self-Help Credit Union
Rebuilding a Neighborhood in North Carolina

 

In the Walltown neighborhood of Durham, North Carolina, the Self-Help Credit Union has achieved not just one success story but many, as it works to revitalize the entire neighborhood. Mill houses were built there in the early 20th century to house laborers in tobacco and textile factories, and at nearby Duke University. Over several recent decades the neighborhood decayed and became unsafe.

 

Around 1994 Self-Help joined forces with concerned residents and a neighborhood church, St. James Baptist, to promote homeownership. Initially, Self-Help bought 30 homes from one nonresident landlord and converted them from two- to one-family homes, upgrading the entire house including plumbing and electrical systems, roofs, floors, carpets, kitchens, porches, and yards. The homes were sold at affordable prices to low- and moderate-income first-time homebuyers. One new homeowner was Walter Shields, who after years of recovery from brain surgery was employed as a floor finisher at Duke University Medical Center and worked with Self-Help to buy a rehabbed house.

 

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 Domini Social Bond Fund currently holds a large percentage of its portfolio in mortgage-backed securities. During periods of falling interest rates, mortgage-backed securities may prepay the principal due, which may lower the Fund’s return by causing it to reinvest at lower interest rates. Some of the Fund’s community development investments may be unrated and carry greater credit risks than its other investments.

 

As of September 30, 2006, Central Bank of Kansas City, Harbor Bank of Maryland, Lower East Side People’s Federal Credit Union, Mission Community Bank, Santa Cruz Community Credit Union, and Self-Help Credit Union each represented 0.15% of the Domini Social Bond Fund’s portfolio. The composition of the Fund’s portfolio is subject to change. This commentary should not be considered a recommendation of the financial attractiveness as an investment of any of the issuers mentioned.