AFL-CIO
Housing
Investment
Trust
Semi-Annual Report
for the Period Ended June 30, 1996
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE HIGHLIGHTS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 JUNE 30, 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Net Assets $1.26 billion $1.08 billion
Participant investment $ 112 million $ 37 million
Reinvestment of income $ 37 million $ 34 million
Investment commitments $ 234 million $ 176 million
Investment fundings $ 212 million $ 119 million
Number of participants 393 382
Units of participation 1,193,829 1,009,243
Total gross rate of return, 1-year 6.80% 13.47%
</TABLE>
<PAGE>
REPORT TO PARTICIPANTS
We are pleased to report that in the first six months of 1996, the Trust
achieved a record pace of commitments to quality developments and resulting
performance returns that exceeded standard industry benchmarks. The
accomplishments detailed in this report, coupled with the prudent policies
that guide the Trust's fund management practices, provide evidence that the
HIT continues to be one of the most attractive fixed income investment options
available to pension investors.
PARTICIPANT INVESTMENTS
Investors demonstrated confidence in the Trust by investing a record $149
million in new investment during the first two quarters of 1996 versus $71
million during the same period last year. The Trust attracted eleven new
participants, who with existing participants invested over $112 million in new
capital and reinvested more than $37 million of dividend earnings. Total
units of participation increased from 1,062,234 as of December 31, 1995 to
1,193,829 as of June 30, 1996.
INVESTMENT PRODUCTION
HIT is well on its way to a record-breaking year in loan production, having
committed a total of $234 million as of the mid-year point. Multi-family
housing accounted for $199 million of the Trust's commitments during the
January-June period. The 12 new projects approved for financing by the Trust
will provide over 4,300 housing units. An additional $35 million in
financing was issued for single family homes.
Through its growing network of relationships and innovative products, the
Trust's pipeline of investment opportunities is expected to achieve total 1996
commitments in excess of $400 million. These commitments will contribute to
the revitalization of communities from Laredo, Texas, to Rochester, Minnesota,
and from Los Angeles, California to New York, New York.
<TABLE>
<CAPTION>
Loan Production Volume
Dollar Volume in Millions
Year Single-Family Multi-Family Total
- ----- ------------- ------------ -----
<S> <C> <C> <C>
1992 $102 $ 67 $169
1993 42 103 145
1994 51 161 212
1995 70 258 328
June 1996 35 199 234
</TABLE>
<PAGE>
As of June 30, 1996, mortgage-backed securities accounted for 37.6 percent of
the portfolio; FHA mortgages, 33.1 percent; FHA construction loans, 18.2
percent; local initiatives, 1.0 percent; and short-term investments 10.1
percent.
<TABLE>
<CAPTION>
Portfolio Allocation as of June 30, 1996
- ----------------------------------------
<S> <C>
Mortgage-Backed Securities 37.6%
FHA Mortgages 33.1%
FHA Construction Loans 18.2%
Short-term Investments 10.1%
Local Initiatives 1.0%
</TABLE>
PERFORMANCE
Total net assets of the Trust at mid-year were $1.26 billion, a 8.2 percent
increase from year-end 1995.
The Trust's active portfolio management proved
successful in avoiding negative impact from the volatility experienced in the
financial markets during the period. At June 30, HIT's one-year total gross
rate of return stood at 6.80 percent, exceeding the Salomon Brothers Mortgage
Index of 5.80 percent; the Lehman Brothers Aggregate Bond Index of 5.02
percent.
HIT also posted highly competitive returns over the long term with annualized
gross rates for the 3, 5 and 10-year periods at 6.63 percent, 8.60 percent and
9.55 percent, respectively.
<TABLE>
<CAPTION>
TOTAL GROSS RATES OF RETURN
1 YEAR 3 YEAR 5 YEAR 10 YEAR
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING INVESTMENT TRUST 6.80% 6.63% 8.60% 9.55%
SALOMON BROTHERS MORTGAGE INDEX 5.80% 5.50% 7.90% 9.10%
LEHMAN BROTHERS AGGREGATE BOND INDEX 5.02% 5.30% 8.30% 8.60%
</TABLE>
During the period, steps were taken to lower the overall duration of the
portfolio in defense of the potential impact of rising interest rates. These
steps included increasing investments in single family mortgages and allowing
the Trust's short-term investments to increase from 4.4 percent at the
beginning of the year to 10.1 percent at June 30. As a result, the Trust was
able to mitigate losses in value during the period and enhance returns to
participants.
The HIT's administrative expenses continued to be among the lowest in the
industry with the annualized ratio of expenses to average net assets dropping
from 0.51 percent at the end of 1995 to 0.48 percent at June 30.
<PAGE>
PARTNERSHIP INITIATIVES
Contributing to the record level of investments during the period was the
growing network of relationships the Trust has established with public and
private housing organizations across the country. Alliances fostered through
our National Partnership for Community Investment have helped identify a
significantly increased number of attractive investment opportunities. As a
result of the Trust's proactive efforts to assist communities in meeting
housing needs, the Trust has gained increased influence within the housing
finance industry.
The Trust continues to explore new opportunities created by changes in real
estate markets and government housing programs. For example, methods to
increase funding of single family housing are being developed in concert with
a recently announced HUD initiative to create home ownership zones in selected
cities. The Trust is also evaluating ways that it might participate in
efforts to restructure the housing held in the FHA portfolio. By staying on
the cutting edge of federal, state and local government developments, the
Trust is assuring a position to take advantage of new opportunities created by
the changes in housing policies nationwide.
SUMMARY
We are pleased and proud of the overall growth and performance of the Trust
during the first two quarters if 1996. As the year progresses, we will
continue to monitor the financial markets and act to maximize returns to
participants while helping to address the nation's critical housing needs.
Given the success achieved through mid-year and the continued support of our
participants, we have every reason to expect that 1996 will be another banner
year for the Trust.
Stephen Coyle
Chief Executive Officer
William C. Tutt Michael M. Arnold
Financial Manager Director of Investor Relations
Helen R. Kanovsky
General Counsel
<PAGE>
AFL-CIO
HOUSING
INVESTMENT
TRUST
Semi-Annual Financial Statements
for the Six Months Ended June 30, 1996
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
- ------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $1,252,561,011) $1,254,524,273
Cash 429,373
Accrued interest receivable 9,751,679
Accounts receivable (note 2) 1,045,413
Prepaid expenses and other assets 838,859
- ------------------------------------------------------------------------------
Total Assets 1,266,589,597
- ------------------------------------------------------------------------------
LIABILITIES
Accounts payable and accrued expenses 479,319
Redemptions payable 60,000
Borrower deposits 407,769
Quarterly income distribution payable, net
of dividends reinvested of $19,002,966 3,383,308
- ------------------------------------------------------------------------------
Total Liabilities 4,330,396
- ------------------------------------------------------------------------------
Net assets applicable to participants' equity -
certificates of participation; authorized unlimited;
outstanding 1,193,829 units (note 5) $1,262,259,201
- ------------------------------------------------------------------------------
Net asset value per unit of participation $1,057.49
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
FHA Mortgages (33.1%)
Face Amortized
Interest Rate Maturity Date Amount Cost Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Single-family
5.38% Sep-96-Oct-96 $988 988 988
5.50% Aug-96 810 810 810
7.75% Aug-21-Jul-21 2,526,713 2,526,713 2,478,993
8.00% Jul-21 2,256,913 2,268,289 2,233,081
10.31% Feb-16 79,952 79,952 86,098
11.00% Dec-17 120,251 120,251 119,049
11.31% Mar-16 91,024 91,024 100,175
------------------------------------
5,076,651 5,088,027 5,019,194
------------------------------------
Multifamily
7.25% Dec-28-Feb-29 34,167,851 34,757,342 32,458,009
7.43% May-23 18,280,270 18,688,558 17,408,258
7.50% Nov-22 7,765,663 7,975,258 7,414,432
7.55% Aug-12 1,005,505 736,625 980,916
7.63% Apr-31 33,365,070 33,365,070 32,425,580
7.75% Apr-29 23,447,651 23,455,027 22,748,616
7.88% Apr-35 11,927,473 11,933,768 11,780,607
7.93% Jul-35 19,788,711 19,798,348 19,235,132
8.00% Aug-30-Sep-34 4,025,711 4,028,636 4,005,400
8.13% Oct-32 2,098,507 2,108,589 2,086,490
8.25% Feb-26-Sep-35 47,154,698 47,187,078 47,395,351
8.30% Aug-33 4,706,177 4,708,751 4,738,146
8.38% Jan-27-Nov-34 39,625,842 39,648,158 40,055,393
8.40% Apr-12-Jan-28 14,963,893 14,581,406 15,161,744
8.50% Apr-12-Feb-35 13,347,189 13,183,247 13,624,450
8.60% Jan-28 2,077,761 2,081,156 2,158,746
8.63% Dec-29 4,293,088 4,296,818 4,385,100
8.64% Sep-28 4,333,843 4,209,563 4,384,407
8.65% Jul-22 1,451,828 1,452,687 1,483,748
8.70% Jan-27-Feb-33 13,351,313 13,486,215 13,693,809
8.80% Oct-32 5,691,460 5,694,858 5,805,289
8.88% Sep-29-Jun-36 23,198,586 23,153,901 24,165,959
9.00% Mar-29-Jun-34 15,408,454 15,284,567 16,226,601
9.13% Apr-31-May-35 16,533,358 16,499,269 17,368,446
9.25% Jun-98-Jun-34 17,083,545 17,177,302 17,692,074
9.31% Dec-32 186,549 183,172 195,877
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
FHA Mortgages (33.1%)
Face Amortized
Interest Rate Maturity Date Amount Cost Value
- ------------------------------------------------------------------------------
Multifamily,
continued
<S> <C> <C> <C> <C>
9.38% Jun-32-Jun-34 $6,852,390 6,939,906 7,298,068
9.50% Jul-27 383,635 394,523 410,489
9.73% Jan-35 6,461,093 6,462,882 6,590,315
9.75% Apr-17-Jan-33 6,759,233 6,733,178 7,206,306
10.00% May-02-Mar-31 5,925,541 5,925,541 6,043,380
10.15% Mar-34 1,976,749 1,976,749 2,095,354
10.45% Jan-30 1,227,891 1,229,327 1,264,728
11.39% Sep-28 376,607 371,704 376,607
----------------------------------------
409,243,134 409,709,180 410,363,831
-----------------------------------------
Total FHA Mortgages 414,319,784 414,797,208 415,383,025
-----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
FHA Construction Loans (18.2%)
Interest Rates Maturity Commitment Face Amortized
Const Perm Date* Amount Amount Cost Value
- -----------------------------------------------------------------------------
Multifamily
<C> <C> <C> <C> <C> <C> <C>
6.50% 6.50% Aug-2004 $22,086,600 20,649,049 20,649,049 19,668,839
7.25% 7.90% Sep-2035 12,395,200 11,622,531 11,229,280 10,971,557
7.50% 7.50% May-2037 10,145,100 1,576,492 1,576,492 1,259,591
7.55% 7.55% Nov-2037 9,225,000 402,596 402,596 114,841
7.63% 7.63% Dec-2027 33,989,100 3,436,504 3,428,667 2,600,633
7.63% 8.90% Apr-2036 7,254,600 6,867,109 6,811,054 6,655,866
7.63% 7.63% Apr-2037 12,068,000 1,459,270 1,436,469 1,166,967
7.63% 7.63% Jun-2037 12,105,000 649,934 649,934 360,588
7.70% 7.95% Apr-2038 85,621,900 11,882,101 9,957,462 9,011,932
7.75% 7.75% Oct-2037 3,050,000 3,050,000 3,042,405 3,051,536
7.88% 7.88% Jan-2037 13,714,100 10,301,836 10,502,669 9,923,401
7.88% 7.88% Mar-2037 4,275,000 1,126,377 1,130,370 1,130,607
7.90% 8.13% Feb-2038 41,836,000 6,406,464 6,204,628 5,492,258
8.13% 8.13% Jul-2029 14,037,000 13,511,796 13,449,444 13,316,164
8.13% 8.13% Aug-2037 15,013,200 6,784,855 6,793,502 6,543,317
8.18% 8.65% Feb-2036 4,247,200 3,504,839 3,443,694 3,441,226
8.18% 8.65% Nov-2036 10,079,100 8,312,514 8,191,035 8,158,820
8.18% 8.65% Nov-2036 26,999,500 21,432,070 21,041,465 21,020,358
8.25% 8.25% Nov-2036 3,645,000 472,767 475,956 429,658
8.25% 8.50% Feb-2037 5,265,000 1,502,129 1,507,095 1,408,147
8.30% 8.30% Jun-2036 2,702,300 2,299,937 2,300,167 2,280,303
8.75% 8.88% Jan-2036 8,562,900 7,863,594 7,736,079 7,970,038
8.75% 8.75% May-2036 3,861,700 3,310,685 3,326,030 3,396,027
8.75% 8.80% Mar-2037 29,095,200 17,569,111 17,575,389 18,124,604
8.88% 8.88% Sep-2035 9,194,900 8,274,971 8,280,897 8,454,260
9.00% 9.00% Nov-2035 7,306,500 7,180,828 7,082,505 7,394,209
9.25% 9.25% Sep-96 10,106,000 9,426,345 9,429,038 9,523,920
9.25% 9.25% May-2036 20,599,900 18,991,913 18,997,814 20,433,906
9.40% 9.40% Jan-2036 9,706,400 7,531,301 7,536,787 8,263,308
9.90% 10.00% Oct-2032 2,261,500 2,185,854 2,185,894 2,344,159
-------------------------------------
Total FHA Construction Loans 219,585,771 216,373,865 213,911,042
--------------------------------------
* Permanent mortgage maturity date.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
GNMA Securities (25.4%)
Interest Face Amortized
Rate Maturity Date Amount Cost Value
- ------------------------------------------------------------------------------
Single-family
<C> <C> <C> <C> <C>
7.50% Nov-2025-Dec-2025 $9,263,589 9,475,510 9,091,344
8.00% Mar-2017-Nov-2025 59,243,077 60,385,084 59,579,731
8.50% Jul-2021-Mar-2023 50,588,751 52,477,107 52,153,318
8.75% Mar-2025 2,782,755 2,895,276 2,887,543
9.00% May-2016-Jun-2025 29,610,943 30,990,036 30,962,953
9.25% May-2016-Jan-2025 1,678,017 1,761,117 1,774,503
9.50% Aug-2016-Jun-2025 8,643,916 9,091,691 9,252,454
10.00% Jun-2019 54,297 54,297 58,370
11.00% Jul-2015-Sep-2016 254,324 254,324 284,757
11.25% Oct-2015 90,888 90,888 103,508
12.00% Apr-2015-Jun-2015 71,511 71,511 83,535
12.25% Apr-2015 16,913 16,913 19,736
13.00% Jul-2014 6,316 6,316 7,576
13.25% Dec-2014 8,259 8,259 9,995
13.50% Aug-2014 8,192 8,192 10,002
------------------------------------------
162,321,746 167,586,523 166,279,325
------------------------------------------
Multifamily
6.75% Nov-2028 13,266,502 13,307,005 12,445,936
6.88% Jan-2029 22,629,852 22,712,011 21,405,661
8.00% Jun-2030 21,537,499 21,537,544 21,931,177
8.13% May-2029 4,948,278 4,870,514 5,092,224
8.25% May-2032 4,651,331 4,730,719 4,680,496
8.50% Jan-2027-Jul-2029 13,475,372 13,595,964 13,982,207
8.75% Dec-2026 4,438,717 4,401,489 4,552,193
9.00% Jun-2030-May-2031 12,782,976 12,149,362 13,456,766
9.25% Dec-2030 10,884,043 10,824,368 11,101,724
9.50% Nov-2027 4,636,156 4,636,156 4,775,693
9.75% Oct-2032 9,726,865 9,727,820 10,311,119
9.80% Mar-2028-Oct-2031 11,957,134 11,959,548 12,616,718
9.88% Jul-2031 4,768,419 4,727,711 4,982,998
10.05% May-2026 1,270,139 1,270,139 1,303,480
10.25% Nov-2025 3,912,637 3,850,323 4,022,680
12.55% Jun-2025 6,154,549 6,050,675 6,327,646
---------------------------------------
151,040,471 150,351,349 152,988,718
---------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
GNMA Securities (25.4%)
Interest Rates Maturity Commitment Face Amortized
Const Perm Date* Amount Amount Cost Value
- -----------------------------------------------------------------------------
Construction Loan Certificates
<C> <C> <C> <C> <C> <C> <C>
6.75% 6.75% Jan-2034 $3,733,300 3,117,612 2,589,956 3,002,829
7.50% 7.50% May-2038 5,440,000 30,000 30,000 (163,653)
7.70% 7.85% Apr-2037 9,041,900 2,657,859 2,673,104 2,497,320
7.75% 8.90% Nov-2034 7,984,400 7,491,842 7,187,110 7,252,900
8.25% 8.25% Sep-2036 3,272,600 2,097,445 2,097,446 2,086,421
---------------------------------------
15,394,758 14,577,616 14,675,817
---------------------------------------
Total GNMA Securities 328,756,975 332,515,487 333,943,860
---------------------------------------
* Permanent mortgage maturity date.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
FNMA Securities (9.2%)
Interest Maturity Commitment Face Amortized
Rate Date Amount Amount Cost Value
- -----------------------------------------------------------------------------
Single-Family
<C> <C> <C> <C> <C> <C>
7.50% Jul-2024-Dec-2025 20,723,383 21,145,463 20,454,627
8.00% May-2015-Aug-2025 43,038,669 43,203,878 43,388,359
8.25% Oct-2021 252,850 249,835 257,275
8.50% Aug-2021-Apr-2023 1,080,477 1,078,127 1,109,515
9.00% Jan-2024 1,588,855 1,669,338 1,658,367
------------------------------------
66,684,235 67,346,641 66,868,143
------------------------------------
Multifamily
7.63% Apr-2012 $1,488,900 0 0 44,516
7.75% Apr-2012 1,110,800 0 0 8,707
7.88% Feb-2013-Apr-2027 4,222,900 0 0 15,101
8.00% Nov-2019-May-2020 7,359,468 7,307,836 7,417,662
8.13% May-2020 8,519,421 8,451,568 8,660,151
8.25% Jun-2008 6,757,047 6,725,561 6,784,743
8.25% Mar-2014 1,850,000 0 0 55,600
8.50% Aug-2006-May-2012 2,850,541 0 0 106,961
8.63% Feb-2006 790,000 0 0 43,490
8.75% Sep-2025-Sep-2025 10,471,368 0 0 314,341
9.00% Aug-2021 1,138,553 0 0 56,958
9.13% Jul-2012 8,826,745 8,826,745 9,276,280
9.13% May-2022-Sep-2025 8,151,375 2,121,004 2,129,205 2,535,612
9.13% Sep-2025 4,324,606 4,283,819 4,632,017
9.13% Feb-2026 1,550,000 0 0 85,233
9.25% May-2021 5,514,000 5,480,949 5,955,120
9.75% Feb-2023 2,002,153 1,976,489 2,202,368
------------------------------------
45,424,444 45,182,172 48,194,859
------------------------------------
Total FNMA Securities 112,108,678 112,528,813 115,063,002
-------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
FHLMC Securities (3.0%)
Interest Maturity Face Amortized
Rate Date Amount Cost Value
- -----------------------------------------------------------------------------
Single-Family
<C> <C> <C> <C> <C>
7.00% Feb-2026 $ 1,396,534 1,407,333 1,345,691
7.50% Aug-2024-Jun-2026 6,132,828 6,197,594 6,059,042
8.00% Jun-2024-Nov-2025 7,377,589 7,461,753 7,444,448
8.25% Dec-2022 670,539 665,891 682,797
8.50% Jul-2024-Jun-2025 10,351,169 10,439,759 10,635,827
9.00% Mar-2025 2,477,482 2,520,369 2,584,324
------------------------------------
28,406,141 28,692,699 28,752,128
------------------------------------
Multifamily
8.00% Feb-2009 8,892,641 8,823,952 8,915,989
------------------------------------
Total FHLMC Securities 37,298,782 37,516,651 37,668,118
------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Local Initiatives (1.0%)
Interest Maturity Commitment Face Amortized
Rate Date Amount Amount Cost Value
- -----------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Multifamily
8.00% Dec-2023-May-2025 5,989,313 5,967,385 5,689,216
8.38% Feb-2007 $ 995,894 995,894 1,024,158 960,903
8.50% Jan-2005 1,016,160 0 0 13,279
8.63% Jun-2025 1,458,441 1,458,441 1,402,723
9.13% May-2017 716,883 723,141 720,456
9.50% Dec-2011-Apr-2024 3,144,940 3,166,152 3,278,940
------------------------------------
Total Local Initiatives 12,305,471 12,339,278 12,065,518
-------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
Short-Term Investments (10.1%)
Interest Face Amortized
Description Rate Amount Cost Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Repurchase Agreements
NationsBank, due 7/1/96 5.20% $16,100,000 16,100,000 16,100,000
--------------------------------------------------
16,100,000 16,100,000 16,100,000
---------------------------------------
Commercial Paper
Falcon Asset Management,
due 7/1/96 5.33% 5,100,000 5,100,000 5,100,000
Ranger Funding Corp.,
due 7/3/96 5.38% 5,100,000 5,098,476 5,098,476
Prudential Funding Corp.,
due 7/8/96 5.33% 5,000,000 4,994,818 4,994,818
ALFA Corporation,
due 7/10/96 5.32% 5,000,000 4,993,350 4,993,350
Ford Motor Credit Corp.,
due 7/12/96 5.29% 5,000,000 4,991,918 4,991,918
Bear Stearns Cos, Inc.,
due 7/15/96 5.32% 5,150,000 5,139,345 5,139,345
Corporate Receivable Corp.,
due 7/15/96 5.35% 5,000,000 4,989,597 4,989,597
Fingerhunt Owners Trust,
due 7/16/96 5.31% 5,000,000 4,988,938 4,988,938
Merrill Lynch & Co.,
due 7/18/96 5.40% 5,025,000 5,012,186 5,012,186
Corporate Asset Funding Corp.,
due 7/22/96 5.33% 5,000,000 4,984,454 4,984,454
PHH Corp., due 7/22/96 5.36% 5,067,000 5,051,157 5,051,157
Lucent Technologies,
due 7/23/96 5.33% 5,000,000 4,983,714 4,983,714
Goldman Sachs Group, LP,
due 7/24/96 5.33% 5,075,000 5,057,718 5,057,718
BAT Industries, due 7/26/96 5.35% 5,000,000 4,981,424 4,981,424
GW University, due 7/26/96 5.38% 5,000,000 5,000,000 5,000,000
McCormick Industries,
due 7/29/96 5.33% 5,000,000 4,979,272 4,979,272
VA Power, due 7/30/96 5.35% 5,000,000 4,978,451 4,978,451
Phillip Morris Co.,
due 7/30/96 5.33% 5,000,000 4,978,532 4,978,532
Colonial Pipeline,
due 8/1/96 5.33% 5,000,000 4,977,051 4,977,051
Clipper Receivables Corp.,
due 8/1/96 5.40% 5,000,000 4,976,750 4,976,750
BI Funding, due 8/5/96 5.33% 5,000,000 4,974,090 4,974,090
Enterprise Funding Corp.,
due 8/16/96 5.34% 5,170,000 5,134,723 5,134,723
- -----------------------------------------------------------------------------
110,687,000 110,365,966 110,365,966
----------------------------------------
Money Market Accounts
NationsBank 3.11% 23,744 23,744 23,744
- ------------------------------------------------------------------------------
23,744 23,744 23,744
Total Short-Term Investments 126,810,744 26,489,709 126,489,709
- ------------------------------------------------------------------------------
Total Investments $1,251,184,205 1,252,561,011 1,254,524,273
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest:
FHA mortgages $17,017,152
FHA construction loans 9,437,757
GNMA securities 12,809,677
FNMA securities 4,056,854
FHLMC securities 1,513,583
Local Initiatives 554,792
Short-term Investments 2,014,129
Premium amortization and other income (591,671)
- ------------------------------------------------------------------------------
Total Income 46,812,273
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses
Salaries and fringe benefit $1,685,153
Administrative and general expenses 621,600
Legal fees 107,026
Program development 96,303
Consultant fees 31,039
Auditing and tax accounting fees 41,865
Insurance 71,180
Marketing and sales promotion 227,562
Trustee expenses 15,548
- ------------------------------------------------------------------------------
Total Expenses 2,897,276
- ------------------------------------------------------------------------------
Investment Income - net 43,914,997
- ------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments 663,545
Change in unrealized depreciation on
investments (Note 4) (45,243,941)
- ------------------------------------------------------------------------------
Net gain on investments (44,580,396)
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations ($665,399)
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income - net $43,914,997
Net realized and unrealized gain(loss)
on investments (44,580,396)
- ------------------------------------------------------------------------------
Net increase in net assets
resulting from operations (665,399)
- ------------------------------------------------------------------------------
Distribution paid to participants or reinvested from:
Investment Income - net (43,914,997)
- ------------------------------------------------------------------------------
Increase in Net Assets from Share Transactions
Proceeds from the sale of 105,416
units of participation 112,305,367
Dividend reinvestment of 34,980
units of participation 37,211,072
Payments for redemption of 8,801
units of participation (9,370,313)
- ------------------------------------------------------------------------------
Net increase from share transactions 140,146,126
- ------------------------------------------------------------------------------
Total Increase 95,565,730
Net Assets at the beginning of period 1,166,893,471
- ------------------------------------------------------------------------------
Net Assets at end of period $1,262,459,201
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The American Federation of Labor and Congress of Industrial Organizations
(AFL-CIO) Housing Investment Trust (the Trust) is a common law trust created
under the laws of the District of Columbia and is registered under the
Investment Company Act of 1940 as a no-load, open-end investment company. The
Trust has obtained certain exemptions from the requirements of the Investment
Company Act of 1940 which are described in the Trust's prospectus.
Participation in the Trust is limited to labor organizations and eligible
pension, welfare and retirement plans which have beneficiaries who are
represented by labor organizations.
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
INVESTMENT VALUATION
Investments are presented at value. Value determinations are summarized by
specific category of investment as follows:
Long-term investments consisting of permanent mortgages, mortgage-backed
securities, construction loans and participation certificates are valued using
published prices or dealer bids, supported by the present value of the
projected cash flows, discounted using market-based discount and prepayment
rates, developed individually for each security. The market-based discount
rate is composed of the sum of a risk-free yield (i.e., a U.S. Treasury Note
with a weighted average life comparable to the security being valued) and
adjusted for an appropriate risk premium. The risk premium reflects actual
premiums in the marketplace over the yield on U.S. Treasury securities of a
comparable risk and maturity to the security being valued. On loans for which
the Trust finances the construction and permanent mortgage, value is
determined based upon the total amount of the commitment for the term of the
construction loan plus the permanent mortgage loan. For construction only
loans, the outstanding principal balance of the loan is used to approximate
value, assuming no decline in credit quality.
Short-term investments, consisting of repurchase agreements, commercial paper
and money market accounts; which mature less than sixty days from the balance
sheet date are valued at amortized cost, which approximates value. Short-term
investments which mature more than sixty days from the balance sheet date are
valued at the last reported sales price on the last business day of the month
or the mean between the reported bid and ask price if there was no sale.
Short-term investments maturing more than sixty days from the balance sheet
date for which there are no quoted market prices are valued to reflect current
market yields for securities with comparable terms and interest rates.
Additional information relative to investment terms and credit risks are
described more fully in the Trust's prospectus.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
FEDERAL INCOME TAXES
The Trust's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
all of its taxable income to its shareholders. Therefore, no federal income
tax provision is required.
The total cost of the portfolio of investments for federal income tax
purposes, approximates the cost of all investments for financial statement
purposes.
DISTRIBUTIONS TO PARTICIPANTS
At the end of each calendar quarter (March 31, June 30, September 30, and
December 31), pro rata distribution is made to participants of the net
investment income earned during the preceding three-month period. Amounts
distributable, but not disbursed, as of the balance sheet date are classified
as income distribution payable.
Participants redeeming their investments are paid their pro rata share of
undistributed net income accrued through the month-end of redemption.
The Trust offers an income reinvestment plan which allows current participants
to automatically reinvest their quarterly income distribution into Trust units
of participation. Total reinvestment approximated 85 percent for the six
months ended June 30, 1996.
INVESTMENT INCOME
Interest income is recognized on an accrual basis. Commitment fees, points
and other discounts or premiums resulting from the funding or acquisition of
mortgage loans or mortgage-backed securities are accounted for as an
adjustment to the cost of the investment and amortized over the estimated life
of the mortgage loan or mortgage-backed security, using an amortization method
which approximates the effective interest method. Realized gains and losses
from investment transactions are recorded on the trade date using an
identified cost basis.
<PAGE>
2. TRANSACTIONS WITH AFFILIATES
----------------------------
During the six months ended June 30, 1996, certain members of the Trust's
staff provided services to the AFL-CIO Building Investment Trust, a Maryland
Group Trust created by a national bank to which the AFL-CIO has granted
permission to use its name. The total cost for these services and related
expenses as of June 30, 1996, amounted to $531,301. The Trust was reimbursed
for $266,344 of these costs with the remaining amount of $264,957 included in
the accompanying financial statements as accounts receivable.
3. COMMITMENTS
-----------
The assets of the Trust are invested in short-term investments until they are
required to fund commitments for construction loans, mortgage-backed
securities or permanent mortgages. At June 30, 1996, the Trust had remaining
unfunded commitments of approximately $346,200,000 to fund construction and
permanent mortgages, and other investments. The Trust is required to maintain
a segregated account of securities in an amount no less than the total
unfunded commitments less short-term investments.
4. INVESTMENT TRANSACTIONS
-----------------------
A summary of investment transactions for the separate instruments included in
the Trust's investment portfolio, at amortized cost, for the year ended June
30, 1996, follows:
<TABLE>
<CAPTION>
FHA
FHA Construction GNMA FNMA
FHLMC Local
Mortgages Loans Securities Securities
Securities Initiatives
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<C>
Balance,
January 1, 1996 $391,182,933 $193,669,712 $335,270,003 $90,406,042
$37,970,039 $12,731,521
Purchases and
construction
oan advances,
net of discounts 33,457,321 71,955,926 76,892,797 27,914,058
3,642,334 39,413
Amortization of
discounts (premiums) (32,184) 51,827 (457,528) 49,350
(49,295) (15,895)
Transfers 47,299,775 (47,299,775) 0 0
0 0
Principal
reductions (57,110,637) (2,003,825) (79,189,785) (5,840,637)
(4,046,427) (415,761)
---------- --------- ---------- ----------
- --------- --------
Balance,
June 30, 1996 $414,797,208 $216,373,865 $332,515,487 $112,528,813
$37,516,651 $12,339,278
------------ ------------ ------------ ------------
- ----------- -----------
------------ ------------ ------------ ------------
- ----------- -----------
</TABLE>
<PAGE>
4. INVESTMENT TRANSACTIONS (CONTINUED)
-----------------------------------
For the six months ended June 30, 1996, changes in gross unrealized
appreciation and depreciation in value of investments were:
Unrealized appreciation $ 6,806,599
Unrealized depreciation (52,050,540)
------------
Net unrealized depreciation change $ (45,243,941)
------------
------------
As of June 30, 1996, the accumulated unrealized appreciation in the value of
investments of securities was $1,963,263; accumulated undistributed net
realized loss on investment transactions totaled $102,637.
5. PARTICIPANTS' EQUITY
--------------------
Participants' equity consisted of the following at June 30, 1996:
Amount invested and reinvested by
current participants $1,260,169,559
Excess of redemption over issue price
for units of participation 78,552
Accumulated unrealized appreciation
in the value of investment $1,963,263
Accumulated undistributed net
realized loss on investments (102,637)
Accumulated undistributed investment income - net 350,464
---------------
$1,262,459,201
---------------
---------------
6. RETIREMENT AND DEFERRED COMPENSATION PLANS
------------------------------------------
The Trust participates in the AFL-CIO Staff Retirement Plan, which is a multi-
employer defined benefit pension plan, covering substantially all employees.
This plan was funded by employer contributions, at rates approximating 17.7
percent of employees' salaries during the six months ended June 30, 1996. The
total Trust pension expense for the six months ended June 30, 1996 was
approximately $238,000.
The Trust also participates in a deferred compensation plan, referred to as a
401(k) plan, covering substantially all employees. This plan permits an
employee to defer the lesser of 10 percent of their annual salary or the
applicable IRS limit. The Trust matches dollar for dollar the first $1,150 of
employee contributions. The Trust's 401(k) contribution for the six months
ended June 30, 1996 was approximately $43,000.
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL INFORMATION - SELECTED PER SHARE DATA AND RATIOS
FOR THE SIX MONTHS ENDED JUNE 30, 1996,
AND THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993 AND 1992
(UNAUDITED)
Six Months
Ended Years Ended Decemeber 31,
June 30, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Investment Income $42.56 86.50 87.13 91.83 87.28
Expenses (2.63) (5.38) (5.47) (5.90) (5.74)
- ------------------------------------------------------------------------------
Investment Income - net 39.93 81.12 81.66 85.93 81.54
Distribution from investment
income - net (39.93) (80.77) (81.66) (85.93) (81.54)
- ------------------------------------------------------------------------------
Net asset value
Beginning of period 1,098.53 991.40 1,102.58 1,086.40 1,106.90
Net realized and
unrealized gains(losses)
on investments.
Net increase (decrease)
in net asset value (41.04) 107.13 (111.18) 16.18 (20.50)
- ------------------------------------------------------------------------------
End of period $1,057.49 1,098.53 991.40 1,102.58 1,086.40
- ------------------------------------------------------------------------------
RATIOS
Ratio of expenses to
average net assets 0.5%<FN1> 0.5% 0.5% 0.5% 0.5%
Ratio of net investment
income to net assets 7.3%<FN1> 7.6% 7.8% 7.5% 7.4%
Portfolio turnover rate 23.5%<FN1> 31.2% 27.5% 24.2% 22.1%
- ------------------------------------------------------------------------------
Number of outstanding
units at end of period 1,193,829 1,062,234 943,378 767,101 609,295
- ------------------------------------------------------------------------------
<FN1> Percents are annualized.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
1996 PARTICIPANTS MEETING
The 1996 Annual Meeting of Participants was held in Washington D.C. on June
24, 1996. The following matters were put to a vote of Participants, through
the solicitation of proxies, at the meeting:
- - Richard Ravitch was re-elected to chair the Board of Trustees by a vote
of 767,998.7922 for, 539.3588 against, 0 abstentions, and 358,302.4286
votes not cast.
- - The following table details votes pertaining to Trustees who were elected
at the Annual Meeting:
<TABLE>
<CAPTION>
VOTES VOTES VOTES VOTES
TRUSTEE FOR AGAINST ABSTAINED NOT CAST
- ------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Richard L. Trumka 768,528.1510 0 10.0000 358,302.4286
Linda Chavez-Thompson 768,538.1510 0 0 358,302.4286
Francis X. Hanley 752,582.8636 2,461.2779 13,494.0095 358,302.4286
Walter Kardy 751,996.3709 2,927.0239 13,614.7562 358,302.4286
George Latimer 751,298.2365 2,035.6897 15,204.2248 358,302.4286
H. D. LaVere 737,401.6993 17,511.6955 13,624.7562 358,302.4286
</TABLE>
- - Trustees Arthur A. Coia, Terrence R. Duvernay, Alfred J. Fleischer,
Robert A. Georgine, Frank Hurt, John T. Joyce, A.L. Monroe, Jack F.
Moore, Marlyn J. Spear, Tony Stanley, John J. Sweeney and Patricia F.
Wiegert were not up for election in 1996. Their terms continued after
the date of the Annual Meeting. Trustee George A. Miller, whose term
ended at the 1996 Annual Meeting and who did not stand for election in
1996, was appointed by the Board of Trustees to fill the remaining year
of the term of the late Anthony R. Presutto.
- - KPMG Peat Marwick LLP was ratified as the Trust's Public Accountants by a
vote of 754,211.8666 for, 466.0560 against, 13,860.2284 abstentions, and
358,302.4286 votes not cast.
<PAGE>
AFL-CIO HOUSING INVESTMENT TRUST
1717 K Street, N.W., Suite 707
Washington, D.C. 20006
(202) 331-8055
