As filed with the Securities and Exchange Commission on June 17, 1998
Registration No. 2-78066
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-1A
Registration Statement Under
The Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 28 [X]
and/or
Registration Statement Under
The Investment Company Act of 1940
Amendment No. 31 [X]
-------------------------------------
Registrant's Name, Address and Telephone Number:
American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
(202) 331-8055
Name and Address of Agent for Service:
Kenneth G. Lore
Swidler & Berlin, Chartered
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Approximate Date of Proposed Public Offering:
Public Offering Commenced February 9, 1983
-------------------------------
It is proposed that this filing will become effective:
[x] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Rule 24f-2(a)(1) Declaration:
An indefinite number of Units of Beneficial Interest of the Registrant
are being registered by this Registration Statement pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's most recent Rule 24f-2
Notice was filed on February 27, 1998 and registration fees totaling
$72,049.58 were paid. Future Rule 24f-2 Notices will be filed and further
filing fees paid as prescribed in Rule 24f-2.
<PAGE>
<PAGE>
AMERICAN FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
N-1A Item No. Location
- - ------------- ---------
PART A: PROSPECTUS
Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary
Item 3. Condensed Financial Condensed Financial
Information Information
Item 4. General Description of Prospectus Summary;
Registrant History and Purpose;
Investment Objective and Policies
Investment Restrictions
Risk Factors
Item 5. Management of the Fund Prospectus Summary;
Management; Investment Adviser
Item 5A. Management's Discussion Trust Performance
of Fund Performance
Item 6. Capital Stock and Other Prospectus Summary;
Securities Incidents of Ownership of Units
Securities Offered; Tax Status
Item 7. Purchase of Securities Prospectus Summary;
Being Offered Securities Offered;
Sales Activities
Item 8. Redemption or Repurchase Prospectus Summary; Redemption
Item 9. Legal Proceedings Pendency of Legal Proceedings
<PAGE>
<PAGE>
PART B: STATEMENT OF ADDITIONAL INFORMATION
N-1A Item No. Location
- - -------------- --------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History; Exemptions
History from Specific Requirements of the
Investment Company Act;
Supplementary Information
Item 13. Investment Objective and Prospectus Investment Objective
and Policies and Policies; Prospectus
Investment Restrictions
Item 14. Management of the Management of the Trust
Registrant
Item 15. Control Persons and Principal Holders of
Principal Holders of Securities
Securities
Item 16. Investment Advisory and Management of the Trust;
Other Services Investment Adviser;
Sales and Distribution Activities;
Supplementary Information
Item 17. Brokerage Allocation and Prospectus Management;
Other Services Investment Adviser
Item 18. Capital Stock and Other Admission to the Trust
Securities
Item 19. Purchase, Redemption and Sales and Distribution Activities;
Pricing of Securities Being Admission to the Housing Trust;
Offered Prospectus Securities Offered
Item 20. Tax Status Prospectus Tax Status
Item 21. Underwriters Not Applicable
Item 22. Calculation of Not Applicable
Performance Data
Item 23. Financial Statements Financial Statements<PAGE>
<PAGE>
PART C: STATEMENT OF OTHER INFORMATION
N-1A Item No. Location
- - ------------- ---------
Item 24. Financial Statements and Financial Statements and Exhibits
and Exhibits
Item 25. Persons Controlled by or Common Control
Under Common Control
Item 26. Number of Holders of Number of Security Holders
Securities
Item 27. Indemnification Indemnification
Item 28. Business and Other Connections Business and Other Connections
of Investment Adviser of Investment Advisor
Item 29. Principal Underwriters Not Applicable
Item 30. Location of Accounts and Location of Accounts and
Records Records
Item 31. Management Services Not Applicable
Item 32. Undertakings Not Applicable
SIGNATURES Signatures
<PAGE>
<PAGE>
AFL-CIO
HOUSING INVESTMENT TRUST
-------------------
PROSPECTUS
-------------------
The investment objective of the American Federation of Labor and
Congress of Industrial Organizations Housing Investment Trust ("Trust") is to
provide current income through a program of investment in construction and
long-term mortgage loans, secured bridge loans and mortgage-backed securities
carrying competitive market yields. The Trust invests primarily in
obligations that are evidenced or secured by mortgage-backed securities,
mortgages or other liens on real estate. At least 70% of the mortgage loans
and mortgage-backed securities in which the Trust invests directly or that
back other investments of the Trust are either federally insured or guaranteed
or issued or guaranteed by the Federal National Mortgage Association ("Fannie
Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). At the
same time, the Trust seeks to promote important objectives of the American
labor union movement by encouraging the construction of housing and by
promoting additional and continuing employment for union members in the
construction trades and related industries that provide materials,
furnishings, appliances and services related to housing construction. The
Trust proposes to achieve these union objectives by limiting investments
secured by mortgaged real estate involving new construction or rehabilitation
work to those in which such new construction or rehabilitation work is done by
union labor. Real estate securing Trust investments will include
single-family dwellings, multi-family projects, and certain health care
facilities including hospitals, intermediate care facilities and nursing
homes.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Trust
that a prospective investor ought to know before investing. Investors should
read and retain this Prospectus for future reference. A Statement of
Additional Information about the Trust has been filed with the Securities and
Exchange Commission ("SEC") and is available upon request without charge from
Trust headquarters. The Statement of Additional Information, including the
Trust's audited financial statements for the year ended December 31, 1997, is
incorporated by reference in this Prospectus.
The date of this Prospectus is June 17, 1998.
The date of the Statement of Additional Information is June 17, 1998.
<PAGE>
<PAGE>
Prospectus Summary.................................................... 1
Condensed Financial Information........................................ 6
History and Purpose.................................................... 7
Investment Objective and Policies...................................... 8
Investment Restrictions................................................ 26
Risk Factors........................................................... 28
Management............................................................. 37
Trust Performance...................................................... 38
Investment Adviser..................................................... 41
Incidents of Ownership of Units........................................ 43
Securities Offered..................................................... 44
Sales Activities....................................................... 48
Redemption............................................................. 49
Tax Status............................................................. 50
Pendency of Legal Proceedings.......................................... 50
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THIS OFFERING, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THESE SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE.
2<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The summary information below should be read in conjunction with the detailed
information appearing elsewhere in this Prospectus.
ISSUER
The Trust is a common law trust created under the laws of the District of
Columbia and sponsored by the American Federation of Labor and Congress of
Industrial Organizations ("AFL-CIO"). The terms of the Trust are set forth in
the Declaration of Trust as amended to date ("Declaration of Trust"). See
"HISTORY AND PURPOSE."
The Trust is governed by a Board of Trustees, consisting of up to 12
Trustees who are officers of the AFL-CIO or its member unions ("Union
Trustees"); up to 12 Trustees who are (i) officers or management employees of
one or more organizations contributing directly or indirectly through
contractors to an Eligible Pension Plan (as defined below), or officers or
management employees of such a Plan, or (ii) with respect to not more than 2
of such Trustees, an officer, director or trustee of an organization connected
in whole or in part with the housing industry, or an elected or appointed
official of the federal or any state or local government or an agency or
instrumentality thereof ("Management Trustees"); and one Trustee who is
neither an officer, trustee or employee of any organization that participates
in the Trust ("Chairman"). The number of Management Trustees may not exceed
the number of Union Trustees except in case a Trustee dies or resigns before
the expiration of his or her term. See "MANAGEMENT."
ELIGIBLE INVESTORS
Units of beneficial interest ("Units") in the Trust are offered, without
charge of any sales load or commission, only to organizations which exist for
the purpose of dealing with employees regarding terms and conditions of
employment, as well as any employee benefit plan or other organization
affiliated with or sponsored by such an organization ("Labor Organizations")
and to pension plans constituting qualified trusts under Section 401(a) of the
Internal Revenue Code of 1986, as amended ("IRC") that have beneficiaries who
are union members ("Eligible Pension Plans"). See "SECURITIES OFFERED" for
more complete definitions. Eligible Labor Organizations include 72 national
and international unions and 651 state and local central bodies directly
affiliated with the AFL-CIO, the great number of local unions and state and
local central bodies affiliated directly with those national and international
unions, and other labor organizations.
SECURITIES OFFERED
Units representing interests in the Trust are offered at the Net Asset
Value per Unit as of the last business day of each month ("Valuation Date")
following receipt of a purchase order. A minimum initial investment of
$50,000 is required. See "SECURITIES OFFERED." Securities may be issued for
whole or fractional Units. Units are not transferable and are not assignable.
The Trust is an open-end company but securities are redeemable in whole or
3<PAGE>
<PAGE>
fractional Units as of monthly Valuation Dates with at least 15 days prior
written notice. See "REDEMPTION." Each Unit will be valued at its pro rata
share of the Net Asset Value of the Trust as of the close of business on the
last business day of each month. The Trust does not issue certificates
evidencing ownership of Units. Units are issued and redeemed by bookkeeping
entry and without physical delivery of securities.
INVESTMENT OBJECTIVE
The Trust's investment objective is to provide current income through
investment in construction and long-term mortgage loans, mortgage-backed
securities secured by mortgages or other liens upon real estate and other
mortgage-backed obligations and secured bridge loans (sometimes referred to
collectively as "Mortgage Investments") carrying competitive market yields.
The Trust invests primarily in obligations that are evidenced or secured by
mortgage-backed securities, mortgages or liens on real estate. At least 70%
of the mortgage loans and mortgage-backed securities in which the Trust
invests or that back investments of the Trust are either federally insured or
guaranteed or issued or guaranteed by Fannie Mae or Freddie Mac. Although
principal and interest (base interest in the case of contingent interest
mortgage loans) payments are guaranteed, the market value of such mortgage
loans and securities is not guaranteed and will fluctuate. One purpose of
these investments is to encourage construction of housing and thereby
facilitate additional and continuing employment for union members in the
construction trades and related industries. In addition, to promote its
objective of encouraging union construction, the Trust may enter into
pre-construction loan commitments. See "INVESTMENT OBJECTIVE AND
POLICIES--Pre-construction Commitments." The Trust has been established to
promote important objectives of the American labor union movement.
The Trust may invest up to 100% of its assets in construction and
long-term loans insured or guaranteed by the Federal Housing Administration
("FHA"), the Department of Veterans Affairs ("VA") and the Government National
Mortgage Association ("Ginnie Mae") and securities that are secured by
securities and/or mortgage loans issued or insured, as applicable, by FHA, VA
and Ginnie Mae if the securities are rated in one of the two highest rating
categories (that is, AAA or AA) of a nationally recognized rating agency. The
Trust may invest up to 100% of its assets in obligations that are issued or
guaranteed by Fannie Mae or Freddie Mac (including Fannie Mae mortgage-backed
securities and Freddie Mac participation certificates) and in securities
backed by Fannie Mae or Freddie Mac if the securities are rated in one of the
two highest rating categories (that is, AAA or AA) of a nationally recognized
rating agency (such obligations and securities are sometimes hereinafter
referred to collectively as "Fannie Mae and Freddie Mac Investments").
Trust investments may include federal government-related, Fannie Mae, and
Freddie Mac contingent interest mortgage loans. See "INVESTMENT OBJECTIVE AND
POLICIES -- Contingent Interest Mortgage Loans" and "INVESTMENT OBJECTIVE AND
POLICIES -- Pass-Through and Pay-Through Securities." Trust investments also
may include federally insured or guaranteed mortgages or securities backed
thereby and Fannie Mae and Freddie Mac Investments that include a right to
require early repayment under certain circumstances. See "INVESTMENT
OBJECTIVE AND POLICIES--Early Repayment Loans."
4<PAGE>
<PAGE>
The Trust may invest up to 30% of its assets in certain privately
collateralized obligations and in certain qualified state and local
government-related investments, including certain secured bridge loans
("Secured Bridge Loans"). Secured Bridge Loans may not, in the aggregate,
exceed 5% of the Trust's assets. See "INVESTMENT OBJECTIVE AND
POLICIES--Privately Collateralized Investments; State and Local
Government-Related Investments."
Although the Trust's Declaration of Trust authorizes the Trust to invest
in a range of investments (as described above), historically the Trust has
concentrated its investments in FHA-, VA- and Ginnie Mae-insured or guaranteed
construction loans and in Fannie Mae and Freddie Mac investments. At December
31, 1997, such investments represented 99.2 % of the Trust's total investment
portfolio. The Management of the Trust intends to maximize Trust investments
in such assets to the extent market conditions permit, consistent with the
overall objectives of the Trust. However, there can be no assurance that this
historic concentration of investments will be maintained.
Pending investment in Mortgage Investments, assets of the Trust are held
in various instruments, including United States Government issues, federal
agency issues, mutual funds that invest in such securities, commercial paper,
collateral loans and warehousing agreements and instruments which are liquid
but which may or may not be secured by real estate or by federal guarantees or
insurance. See "INVESTMENT OBJECTIVE AND POLICIES--Temporary Investments." A
portion of such instruments may be managed by Wellington Management Company,
an investment advisor that has been retained by the Trust to manage short-term
Trust assets. See "INVESTMENT ADVISER."
RISK FACTORS
The Net Asset Value of each Unit will reflect the market value of the
Trust's portfolio of investments. The current market value of the Trust's
portfolio will fluctuate, primarily in response to changing interest rates.
Generally, the market value of Trust mortgage loans, mortgage securities and
other assets will fall below the principal amount of such assets at times when
market interest rates rise above the interest rates on such investments.
Participants who redeem Units in such circumstances will suffer the resulting
loss in value of Trust assets.
While the Trust does not buy Mortgage Investments for purposes other than
investment, the Trust will from time to time buy or sell Mortgage Investments
in order to prevent fluctuations in the weighted average maturity of its
portfolio or to maintain a desirable level of portfolio diversification. The
Trust retains the flexibility to sell all or any portion of its assets if
circumstances (e.g., changed market conditions) suggest the prudence of that
course. Although registered investment companies generally must value their
assets and accept redemption requests daily, the Trust is permitted to value
its assets and accept redemption requests no more often than quarterly, by
virtue of an exemptive order received from the SEC. The Trust's Board of
Trustees has implemented monthly valuations of the Trust's assets, which
enables the Trust to redeem Units on a monthly, rather than quarterly, basis.
Consistent with the Trust's exemptive order and its redemption procedures (see
"REDEMPTION"), the Trust will invest at least 90% of the value of its assets
5<PAGE>
<PAGE>
in investments that are readily marketable and convertible into cash within
120 days without a discount from their market value (see "INVESTMENT
RESTRICTIONS"). It is possible, however--due to changes in interest rates,
the performance of specific properties, or general economic conditions since
the monthly Valuation Date preceding a request for redemption--for the market
value of an investment at the time of its liquidation to be less than its
market value as of the monthly Valuation Date preceding a request for
redemption.
Most of the Trust's assets could be disposed of in a time frame
sufficient to meet monthly redemptions. In the event the Trust were to
receive redemption requests with respect to a particular monthly Valuation
Date in an amount that exceeds the amount of assets that the Trust could
liquidate at market value prior to the applicable redemption date, the Trust
would not be able to satisfy such redemption requests without liquidating
certain of its assets at a discount from their market value. If such
circumstances were to occur, the Trust would be unable to satisfy at least
some of the redemption requests on a timely basis because the Trust would not
liquidate assets at a discount from their market value. Therefore, in
anticipating the availability of funds based on a redemption of Units,
investors should be prepared for the possibility of a delay in the
satisfaction of a monthly redemption request. Such a delay would not,
however, extend more than 120 days beyond the monthly Valuation Date following
the Trust's receipt of the redemption request (except to the extent it were
necessary to liquidate that portion of the Trust's portfolio (up to 10%) not
required to be invested in assets that are readily marketable and convertible
into cash within 120 days without a discount from their market value). See
"REDEMPTION." The Trust has never failed to satisfy any redemption request on
a timely basis.
Other risk factors relating to an investment in Units include: the
possible reduction in yield caused by prepayments, a limited resale market for
certain types of loans, inflation, defaults on loans and other Mortgage
Investments, changes in ratings, lack of diversification and real
estate-related risks for certain Mortgage Investments that are neither
federally insured or guaranteed nor issued or guaranteed by Fannie Mae or
Freddie Mac. For a discussion of these items, see "RISK FACTORS."
INVESTMENT MANAGEMENT
The Trust's Chief Executive Officer, assisted by the Chief Investment
Officer, Director of Investor Relations and the General Counsel, is
responsible for the day to day administration of the Trust, including the
selection of investments, other than certain short-term investments, and
communication with existing and potential investors. For the fiscal year
ended December 31, 1997, the Trust's personnel expenses (salaries and
benefits) for all Trust officers and staff members totaled $3,797,617. See
"MANAGEMENT."
Set forth below is certain information regarding fund operating expenses
in tabular format:
6<PAGE>
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)
12b-1 Fees 0.03%
Other Expenses 0.40%
Total Fund Operating Expenses 0.43%
EXAMPLE
1 year 3 years 5 years 10 years
You would pay the
following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each time
period: $4.52 $13.56 $22.60 $45.20
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in the Trust
will bear directly or indirectly. The Trust does not charge a sales load or
redemption fee on the purchase or redemption of its Units. For a more
complete description of the various costs and expenses listed above, see
"MANAGEMENT" and "SALES ACTIVITIES."
The foregoing example should not be considered a representation of past
or future expenses. Actual expenses may be greater or lesser than those
shown.
REDEMPTION
The Trust will redeem Units after receipt of a written request for
redemption. Redemptions will be made without any charge, at the Net Asset
Value of each Unit, determined as of the next Valuation Date following the
request. The Trust will accept a request for redemption only if received 15
days or more before the Valuation Date as of which the Net Asset Value is to
be determined. It usually takes from 7 to 10 business days to calculate the
Trust's Net Asset Value after a Valuation Date. Cash payment upon redemption
will be made within 7 days after the Net Asset Value has been determined. See
"REDEMPTION."
REGISTERED INVESTMENT COMPANY
The Trust has registered as an investment company under the Investment
Company Act of 1940, as amended ("Investment Company Act"), and accordingly is
subject to the regulatory authority of the SEC. The Trust has been exempted
from certain investor protection provisions of the Investment Company Act.
See "EXEMPTIONS FROM SPECIFIC REQUIREMENTS OF THE INVESTMENT COMPANY ACT" in
the Statement of Additional Information. THE SEC HAS NOT "APPROVED" OR
"DISAPPROVED" THE UNITS ISSUED BY THE TRUST OR PASSED UPON THE ACCURACY OF
THIS PROSPECTUS.
7<PAGE>
<PAGE>
INVESTMENT ADVISER
Except with respect to certain short-term assets, the Trust operates without
an investment adviser. Except with respect to such short-term assets,
investment decisions are the responsibility of the Trust's Chief Executive
Officer, Chief Investment Officer and General Counsel subject to the
supervision and control of the Board of Trustees and the Executive Committee
(with respect to certain activities delegated to such committee by the full
Board). Certain short-term assets are managed by Wellington Management
Company, LLP, a registered investment adviser. See "INVESTMENT ADVISER."
Sales of Units are effected only by representatives of the Trust. See "SALES
ACTIVITIES."
CONDENSED FINANCIAL INFORMATION
The following information regarding per unit income and capital changes is
presented here for the fiscal year ended December 31, 1997 and the condensed
financial information of fiscal year 1997 has been derived from financial
statements audited by Arthur Andersen, LLP, the Trust's independent certified
public accountants, and should be read in conjunction with the financial
statements and the notes thereto. The financial statements as of December 31,
1997, and the selected per share data and ratios for the years ended December
31, 1997, together with the auditors' report thereon, are included in the
Statement of Additional Information. The following data is presented for each
unit outstanding throughout each period.
The following information regarding per unit income and capital changes is
also presented here for the fiscal year ended September 30, 1987, the 3 month
period ended December 31, 1987, and the years ended December 31, 1988, 1989,
1990, 1991, 1992, 1993, 1994, 1995, and 1996. The condensed financial
information for the above-stated periods has been derived from financial
statements audited by KPMG Peat Marwick, LLP, the Trust's former independent
certified public accountants, and should be read in conjunction with the
financial statements and the notes thereto. The financial statements as of
December 31, 1996, and for each of the years in the 2 year period then ended,
and the selected per share data and ratios for the years ended December 31,
1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and 1988, together with the
auditors' report thereon, are included in the Statement of Additional
Information. The following data is presented for each unit outstanding
throughout each period.
[Financial information is set forth on the following pages 8-A through 8-C.]
8<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
(amounts in thousands)
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Year Ended Three Months Ended
September 30, 1987 December 31, 1987
- - ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
Beginning of Period 1,064.08 991.28
Net Investment
Income 96.65 25.00
Net Gains (losses)
on investments -
realized and unrealized (72.80) (17.60)
Dividends (from
net investment
income) <F1> (96.65) (25.00)
Distributions
(from capital gains) ---- ----
Net Asset Value,
End of Period 991.28 1,008,88
Total Gross Return 2.78% 4.46%
Ratios/Supplemental Data
- - ------------------------------------------------------------------------------
Year Ended Three Months Ended
September 30, 1987 December 31, 1987
- - ------------------------------------------------------------------------------
<S> <C> <C>
Net Assets,
End of Period 186,666,594 201,924,231
Ratio of Expenses to
Average Net Assets <F2> 0.7% 0.7%<F3>
Ratio of Net Income
to Average Net Assets <F2> 8.9% 9.8%<F3>
Portfolio Turnover Rate 12.0% 6.2%<F3>
</TABLE>
<F1> Includes income distributed for the semi-annual periods ended March 31
and September 30 of 1987, and June 30 and December 31 for 1988; and for
the quarterly periods ended March 31, June 30, September 30, and December
31, 1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996.
<F2> Average net assets were computed on the net asset value at the end of
each quarter. Investments were valued quarterly through September 30,
1987.
<F3> Percentages are annualized.
- - ------------------
Primarily as a result of fluctuations in market interest rates, the net
unrealized gains (losses) on investments fluctuate from month to month.
Return on investment calculated on a market value basis would consist of both
net investment income and net realized and unrealized gains (losses) on
investments.
8-A<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
(amounts in thousands)
- - ------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1988 1989 1990 1991
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period 1,008.88 994.27 1,056.29 1,054.91
Net Investment Income 99.12 100.22 96.89 91.99
Net Gains (losses)
on investments -
realized and unrealized (14.61) 62.02 (1.38) 51.99
Dividends (from net
investment income) <F1> (99.12) (100.22) (96.89) (91.99)
Distributions (from
capital gains) --- --- --- ---
Net Asset Value, End
of Period 994.27 1,056.29 1,054.91 1,106.90
Total Gross Return 9.15% 17.65% 10.25% 14.90%
Ratios/Supplemental Data
- - ------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1988 1989 1990 1991
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets,
End of Period 227,570,708 284,723,220 366,147,338 528,731,177
Ratio of Expenses to
Average Net Assets 0.6% 0.6% 0.6% 0.6%
Ratio of Net Income to
Average Net Assets 9.7% 9.7% 9.3% 8.4%
Portfolio Turnover Rate 7.0% 8.6% 2.3% 9.5%
</TABLE.
<F1> Includes income distributed for the semi-annual periods ended March 31
and September 30 of 1987, and June 30 and December 31 for 1988; and for
the quarterly periods ended March 31, June 30, September 30, and December
31, 1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996.
- - ----------
Primarily as a result of fluctuations in market interest rates, the net
unrealized gains (losses) on investments fluctuate from month to month.
Return on investment calculated on a market value basis would consist of both
net investment income and net realized and unrealized gains (losses) on
investments.
8-B
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(amounts in thousands)
- - -------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1992<F4> 1993 1994 1995 1996 1997
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period 1,106.90 1,086.40 1,102.58 991.40 1098.53 1,072.98
Net Investment Income 81.54 85.93 81.66 81.12 79.11 79.06
Net Gains (Losses) on
investments -
realized and unrealized (20.50) 16.18 (111.18) 107.13 (25.55) 31.32
Dividends (from net
investment income)<F1> (81.54) (83.64) (81.66) (80.77) (78.76) (79.10)
Undistributed Investment
Income --- --- --- (.35) (.35) .04
Distributions (from
capital gains) --- (2.29) --- --- --- (.48)
Net Asset Value,
End of Period 1,086.40 1,102.58 991.40 1,098.53 1,072.98 1,104.30
Total Gross Return 6.25% 10.17% (2.15%) 20.11% 5.59% 11.22%
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- - --------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1992<F4> 1993 1994 1995 1996 1997
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Assets,
End of Period 661,940,825 845,793,592 935,264,189 1,166,893,471 1,383,163,166 1,671,744,859
Ratio of Expenses
to Average Net Assets 0.5% 0.5% 0.5% 0.5% 0.5% 0.4%
Ratio of Net Income
to Average Net Assets 7.4% 7.5% 7.8% 7.6% 7.3% 7.2%
Portfolio Turnover Rate 22.1% 24.2% 27.5% 31.2% 20.3% 15.3%
<F1> Includes income distributed for the semi-annual periods ended March 31
and September 30 of 1987, and June 30 and December 31 for 1988; and for the
quarterly periods ended March 31, June 30, September 30, and December 31,
1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996, and for the monthly
periods ended December 31, 1997.
<F4> Beginning as of May 21, 1992, the Trust engaged Wellington Management
Company to furnish investment advisory services concerning certain short-
term, liquid assets in the Trust's portfolio. See "INVESTMENT ADVISER."
- - -------
Primarily as a result of fluctuations in market interest rates, the net
unrealized gains (losses) on investments fluctuate from month to month.
Return on investment calculated on a market value basis would consist of both
net investment income and net realized and unrealized gains (losses) on
investments.</TABLE>
8-C<PAGE>
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HISTORY AND PURPOSE
The Trust is a common law trust created under the laws of the District of
Columbia pursuant to a Declaration of Trust originally executed September 19,
1981. The Trust is an open-end management company with a portfolio that may
be either diversified or nondiversified, as it changes from time to time.
The Trust has been established under the sponsorship of the AFL-CIO as an
instrumentality of the United States labor union movement. The Trust acquired
all the assets of the AFL-CIO Mortgage Investment Trust ("Mortgage Trust") in
exchange for Units of the Trust on the basis of relative net asset values as
of September 30, 1984. The exchange was approved by order of the SEC dated
October 1, 1984. Trust Units received in the exchange were distributed on a
pro rata basis to Mortgage Trust participants as of September 30, 1984 and the
Mortgage Trust was thereupon liquidated.
The Trust is a non-tax-exempt investment company operated without profit
to the Trust or the AFL-CIO for funds controlled by or of interest to unions
that may wish to place a portion of their assets in mortgage investments. The
Trust pays expenses of trust administration but, except with respect to
certain short-term assets (see "INVESTMENT ADVISER"), no investment advisor
earns a profit of the sort normally taken by an investment adviser for a
commercial investment company; instead the Trust distributes all net earnings
on investments to Participants (as defined below). See "MANAGEMENT." The
Trust increases the amount of financing available for housing and other
construction projects. It thereby creates job opportunities for union labor
in the construction trades and related industries and stimulates the
production of housing.
The Labor Organizations and Eligible Pension Plans for which the Trust is
designed ("Participants") are institutional-type investors that are interested
in a long-term income investment program. Units are sold without charge of
any sales load or commission. Units are nonassignable and nontransferable.
The minimum initial investment by any Participant is $50,000. Each Unit is
valued at its pro rata share of the Net Asset Value of the Trust as of the
close of business on the last business day of each month ("Valuation Date").
The Trust is an open-end investment company but Units are redeemable as of
each Valuation Date with at least 15 days prior written notice. Any order to
purchase or request for redemption of Units made between Valuation Dates is
honored as of the next Valuation Date. See "REDEMPTION." The Trust
distributes net income quarterly. See "INCIDENTS OF OWNERSHIP OF UNITS."
9<PAGE>
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INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust concentrates its investments in the real estate industry. For
purposes of the Investment Company Act, "concentration" means more than
twenty-five percent of asset value in any one industry.) The Trust invests
primarily in Mortgage Investments that are directly or indirectly secured by
mortgages or liens on real estate, at least 70% of which mortgages or
mortgage-backed securities acquired by the Trust or backing Mortgage
Investments acquired by the Trust will be federally insured or guaranteed or
guaranteed by Fannie Mae or Freddie Mac with respect to the payment of
principal and interest, or issued by Fannie Mae or Freddie Mac. These are
fundamental policies and may not be changed without the approval of the
holders of a majority of the Trust's outstanding Units.
The investment objective of the Trust is to earn current income through
investment in Mortgage Investments. The Trust will limit Mortgage Investments
involving new construction or rehabilitation work to those in which such new
construction or rehabilitation work is done by union labor. The Trust will
acquire only Mortgage Investments with yields competitive with those then
generally prevailing on similar investments having comparable terms and
conditions taking into account differences in risk including those resulting
from differences in properties, borrowers and loan terms.
Under existing federal housing programs, the federally insured or
guaranteed mortgage loans eligible for direct purchase by the Trust are first
or second mortgage loans insured by the Department of Housing and Urban
Development ("HUD") acting by and through the FHA to finance the purchase and
ownership of completed single-family dwellings and, in some circumstances, the
construction or renovation of single-family dwellings, or to provide
construction and/or permanent financing for multi-family housing projects and
certain health care facilities, including hospitals, intermediate care
facilities and nursing homes. These mortgage loans have maturities that range
from 10 to 40 years from project completion and commencement of principal
repayments. The Trust may also purchase mortgage loans guaranteed by the VA
to finance the purchase of single-family dwellings. Obligations of FHA are
backed by the General Insurance Fund established pursuant to the National
Housing Act of 1934, as amended. Obligations of the VA are backed by the Loan
Guaranty Revolving Fund.
The Trust may also purchase notes or other obligations guaranteed under
Section 108 of the Housing and Community Development Act of 1974, as amended
("Section 108"). Under Section 108, HUD is authorized to guaranty notes or
other obligations issued by eligible public entities; the proceeds from the
sale of the notes are used by such public entities for eligible community
development and economic development activities, including rehabilitation of
privately owned or publicly owned housing. The Trust may purchase such notes
in cases where the proceeds will be used to finance the construction or
rehabilitation of housing, and may invest in mortgage loans for the
construction or rehabilitation of housing if such mortgage loans are
guaranteed under Section 108. Section 108-guaranteed notes have terms not
exceeding 20 years and bear interest rates that are generally slightly higher
than rates on Treasury obligations of comparable maturity. Under Section 108,
10<PAGE>
<PAGE>
the timely payment of all principal of and interest on the guaranteed note is
guaranteed by the full faith and credit of the United States.
The Trust may also purchase federally guaranteed mortgage-backed
certificates. Such certificates are issued by a mortgage banker or other
lender and carry the right to receive principal and interest payments related
to payments of principal and interest under one or more identified mortgages.
Full and timely payment under these mortgage-backed securities is guaranteed
by Ginnie Mae and backed by the full faith and credit of the United States.
These Ginnie Mae securities are readily marketable, generally at publicly
quoted prices. Such Ginnie Mae securities bear interest at rates ranging from
0.125% to 0.5% less than the whole loans backing such securities, reflecting
the cost of the Ginnie Mae guarantee and servicing of the mortgages in the
pool.
Other Mortgage Investments that the Trust is authorized to make are
Fannie Mae and Freddie Mac Investments, contingent interest mortgage loans,
early repayment loans, pass-through and pay-through securities, construction
loans secured by a bank letter of credit or other guarantee, state and local
government-related investments, pre-construction commitments and Secured
Bridge Loans, in each case as described below and subject to the restrictions
noted below.
Certain of the Trust's authorized investments are tied to specified
ratings by one or more nationally recognized statistical rating agencies. A
description of Standard & Poor's Corporation ("Standard & Poor's") rating
categories is included as Appendix A to the Statement of Additional
Information. The rating categories of other nationally recognized statistical
rating agencies are similar to those of Standard & Poor's.
THE NATIONAL PARTNERSHIP FOR COMMUNITY INVESTMENT
In 1993, the Trust initiated a 5 year investment initiative called The
National Partnership for Community Investment ("National Partnership").
Pursuant to this initiative, the Trust expects to invest significant funds in
mortgage loans and securities secured by properties located in major
metropolitan areas and regions throughout the country. As of December 31,
1997, $1,244,597,331 in investment commitments have been made pursuant to the
National Partnership initiative.
One potential benefit to the Trust from the National Partnership
initiative is expected to be larger and more diversified investment
opportunities. The National Partnership initiative is also expected to benefit
the nation's urban areas and create employment opportunities for union
members.
Each investment made by the Trust through the National Partnership
program must meet the underwriting criteria established in its Declaration of
Trust, and may be insured or guaranteed by the FHA, the VA, Ginnie Mae, Fannie
Mae or Freddie Mac. While the investments will be consistent with the Trust's
present Declaration of Trust, the National Partnership initiative will help
target investments within the selected metropolitan areas, located in all
regions of the country. The Trust believes this targeting will enable it to
originate investments more expeditiously and at lower cost with borrowers who
11<PAGE>
<PAGE>
will better understand the Trust's investment criteria and origination and
underwriting procedures.
The Trust hopes to secure the involvement and assistance of local and
state housing groups, labor organizations and the United States Departments of
Labor and Housing and Urban Development in achieving its objectives under the
National Partnership initiative.
FANNIE MAE AND FREDDIE MAC INVESTMENTS
The Trust may invest up to 100% of its total assets in Fannie Mae and
Freddie Mac Investments, which consist of (i) obligations issued or guaranteed
by Fannie Mae or Freddie Mac, including Fannie Mae and Freddie Mac
mortgage-backed securities and Freddie Mac participation certificates backed
by pooled conventional mortgages and (ii) securities that are backed by Fannie
Mae or Freddie Mac and are, at the time of their acquisition by the Trust,
rated in one of the two highest categories by at least one nationally
recognized statistical rating agency. The backing referred to in clause (ii)
may take the form of Fannie Mae mortgage-backed securities and Freddie Mac
participation certificates. SEE "INVESTMENT OBJECTIVE AND POLICIES --
PASS-THROUGH AND PAY-THROUGH SECURITIES."
Fannie Mae and Freddie Mac are federally chartered corporations engaged
principally in providing a secondary market for mortgage obligations. Neither
Fannie Mae mortgage-backed securities nor Freddie Mac participation
certificates, nor any other Fannie Mae or Freddie Mac Investments, are
federally insured or guaranteed. The mortgages backing any Fannie Mae and
Freddie Mac mortgage-related investments in which the Trust invests will meet
Fannie Mae or Freddie Mac standards, as applicable, will, when the Trust
commits to acquire them, carry competitive market yields and will be secured
by real estate, on which any buildings, structures and improvements to be
built or rehabilitated will be built or rehabilitated with union labor.
As a result of a significant decrease in the availability of FHA-insured
multi-family mortgage loans, Ginnie Mae-guaranteed securities backed by
multi-family mortgage loans, and other multi-family projects, the Trust has,
since 1991, increased investments in single-family Fannie Mae and Freddie Mac
mortgage-backed securities. In these investments, the Trust enters into
commitments with mortgage banking firms, banks and other financial
institutions ("Issuers") to purchase mortgage-backed securities secured by
mortgage loans financing the purchase of newly-constructed single-family homes
that are union-built and meet certain eligibility criteria. The securities
which are purchased by the Trust under this program are single-family
mortgage-backed securities guaranteed by Fannie Mae or Freddie Mac. The
securities are generally required to be delivered to the Trust within 60 days
after all of the qualified mortgage loans backing a given issue of securities
have been closed.
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<PAGE>
The interest rate and discount points for each mortgage loan backing an
issue of securities is generally established under one of two alternate
methods. Under the first and most frequently used mechanism, the Trust and
each Issuer agree weekly, based on a survey of current market conditions, on
an interest rate and discount point schedule which is used to determine the
maximum interest rate and maximum discount points on each mortgage loan for
which the Issuer issues a loan commitment during the applicable week. Under
the second mechanism, the Trust and each Issuer agree to use the interest
rates and discount points publicly quoted for securities of the type to be
purchased by the Trust at the time the loan applications for the underlying
mortgage loans are accepted plus the applicable servicing and guarantee fees
with respect to the related securities. Depending upon the terms and
conditions of the loan, the Trust will lock the interest rate for a period of
time in advance of the loan closing. Typically, the interest rate lock will
be for a period of no more than 18 months. The number of points that the
Trust charges for the interest rate lock varies depending upon the length of
the lock-in period.
The interest rates and discount points may be reduced by the mortgagor
prior to the closing of the underlying mortgage loan if market interest rates
have declined from the commitment date. The Trust has concluded that the
slight reduction in yield on the securities backed by mortgage loans whose
interest rates and discount points are reduced in this way is largely offset
by savings on transactions fees that would have been incurred in purchasing
comparable securities from broker-dealers in the secondary market (which
securities also would not necessarily have financed union-built single family
homes).
Almost all of the single family Fannie Mae and Freddie Mac
mortgage-backed securities purchased by the Trust to date have been backed by
fixed rate mortgage loans, although the Trust has the authority to acquire
single family Fannie Mae and Freddie Mac securities which are backed by
adjustable rate mortgage loans and the Trust anticipates that in the future a
larger portion of the single family Fannie Mae and Freddie Mac securities it
purchases may be backed by adjustable rate mortgage loans. There are a wide
variety of adjustable rate mortgage loans which may be used to back the single
family Fannie Mae and Freddie Mac securities. These range from loans on which
the interest rate is adjusted periodically (with adjustments occurring from
every 6 months to annually to each 3 or 5 years) based upon a specified market
index at the time of each adjustment to loans which carry a fixed interest
rate for a specified period of time (e.g., 3 or 5 years in the case of Freddie
Mac securities or 5 or 7 years in the case of Fannie Mae securities) after
which the interest rate on the loan is adjusted annually based on a specified
market index. There are specified limits on the maximum amount of each upward
or downward adjustment in the interest rate on these mortgage loans and caps
on the maximum aggregate adjustment in the interest rate, either up or down,
over the life of each loan. These limits and caps vary based on the frequency
with which the adjustments are made and by loan type. Some types of the
adjustable rate mortgage loans which may back single family Fannie Mae and
Freddie Mac securities also have provisions under which they may be converted
into fixed rate mortgage loans at the option of the mortgagor at specified
times.
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<PAGE>
Under the single family Fannie Mae and Freddie Mac securities backed by
adjustable rate mortgage loans, Fannie Mae or Freddie Mac, as applicable,
guarantees the timely payment of interest, based upon the interest rates borne
by the underlying mortgage loans, as the same are adjusted from time to time,
less applicable servicing and guaranty fees.
CONTINGENT INTEREST MORTGAGE LOANS
The Trust is authorized to make or invest in federal government-related,
Fannie Mae or Freddie Mac contingent interest mortgage loans. A contingent
interest mortgage loan of this type is a mortgage loan on a rental project
which provides for repayment of principal and base interest at a fixed rate
which is insured or guaranteed by the federal government or an agency thereof,
or is guaranteed by Fannie Mae or Freddie Mac, and also includes separate
contractual provisions obligating the borrower to pay additional interest
based entirely on net or gross cash flow and/or net or gross proceeds upon
sale, refinancing or disposition of the project. This additional interest is
not insured or guaranteed, and is sometimes referred to as "contingent
interest."
Agreements for such contingent interest mortgage loans would be
negotiated on a project-by-project basis. Accordingly, the precise formula
for calculating the amount of contingent interest payments would vary
depending on several factors, including the projected cash flow from the
project, the base interest rate and financial resources of the borrower, and
other factors which the Trust deems relevant. Receipt of contingent interest
is affected by the amount of appreciation and rental income and expenses of a
project. Generally, if there is insufficient cash flow or appreciation, no
contingent interest is due or payable.
Contingent interest mortgage loans generally require the lender to accept
a lower base interest rate than it otherwise would have been able to negotiate
in return for the right to receive as additional interest a portion of cash
flow and/or proceeds from the sale or refinancing of the project. The Trust
is permitted to make a contingent interest mortgage loan in return for a base
interest rate which is up to 2% per annum lower than the rate which it would
otherwise be willing to accept (i.e., in the absence of the contingent
interest feature). Although all principal and base interest would remain
insured by FHA, or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac, as the
case may be, this structure may result in a reduction of current income
(particularly during construction and rent-up) in the hope of greater returns
in future years based on the project's economic performance. As noted above,
such amounts of contingent interest are neither federally guaranteed or
insured nor guaranteed by Fannie Mae or Freddie Mac. See "RISK
FACTORS--Defaults on Loans."
EARLY REPAYMENT LOANS
The Trust also may invest in federally insured or guaranteed mortgages or
securities backed thereby and in Fannie Mae and Freddie Mac Investments that
include a right to require the borrower to repay a mortgage loan prior to the
regular maturity date of the mortgage loan after an initial period during
which the loan cannot be called. This authorization affords the Trust
additional flexibility to make loans of shorter duration. Such loans may be
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<PAGE>
more attractive to borrowers since the rate of interest on shorter term loans
may be lower and may be more attractive to the Trust because it involves a
commitment of funds for a shorter term.
In the case of such "early repayment" loans that are federally insured or
guaranteed, while all principal and base interest would continue to be insured
or guaranteed by FHA, VA or Ginnie Mae, the balloon repayment obligation would
not be secured by the mortgaged real property or by any government insurance
or guarantee. It is anticipated that such obligation instead would be secured
by a security interest in the ownership interests of the principals of the
borrower or other security as negotiated by the Trust and the borrower or
principals. Since the obligation to repay the loan prior to its stated
maturity would not be included in the note and mortgage, the Trust would not
be entitled to foreclose on the mortgaged property or obtain insurance
proceeds in the event of non-compliance with a demand for repayment at such
earlier date. The Trust expects that if it is unable to enforce its right to
early repayment, it would continue to hold the mortgage loan or the securities
backed by such mortgage loan, the principal and interest of which would remain
federally insured or guaranteed. In such event, a loss could be incurred
because the Trust would have required a higher rate for a mortgage or
mortgage-backed security that was not accompanied by the right to demand
repayment at an earlier date. The risk described in this paragraph does not
apply to "early repayment" loans, or securities backed thereby, that are
guaranteed by Fannie Mae or Freddie Mac. This is because such loans and
securities are guaranteed at the stated early maturity.
PASS-THROUGH AND PAY-THROUGH SECURITIES
The Trust also is authorized to invest in mortgage-backed pass-through or
pay-through securities if the securities are rated in one of the two highest
rating categories of a national rating agency, such as Standard and Poor's or
Moody's Investors Service ("Moody's"), and also backed by certain Mortgage
Investments in which the Trust is otherwise authorized to invest.
Mortgage-backed pass-through or pay-through securities are securities
which may be issued by privately owned corporations or public issuers and
secured by mortgages or mortgage-related instruments such as FHA-insured or
VA-guaranteed loans, Ginnie Mae securities or securities which are guaranteed
by Fannie Mae or Freddie Mac, and provide certain characteristics and features
that federally insured loans or guaranteed certificates do not. Although
payment of the principal of, and interest on, such mortgage-backed securities
may be secured by Ginnie Mae securities, FHA-insured loans, VA-guaranteed
loans or securities which are guaranteed by Fannie Mae or Freddie Mac, such
mortgage-backed pass-through or pay-through securities represent obligations
solely of the issuer and will not themselves be guaranteed or insured by any
governmental entity or instrumentality.
Although the Trust will purchase only mortgage-backed pass-through and
pay-through securities that have been rated in one of the two highest rating
categories by a nationally recognized statistical rating agency, there is no
assurance that any rating on securities purchased by the Trust will continue
for any given period of time or that it will not be revised downward or
withdrawn entirely by the rating agency if, in its judgment, circumstances so
warrant. Any such downward revision or withdrawal of such rating would be
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likely to signify an increase in the risk to the Trust associated with the
related securities and would be likely to result in a reduction in the value
of the related securities. The Trust is not required to dispose of securities
the rating for which has been revised below the second highest rating category
or withdrawn except to the extent required by certain investment restrictions.
See "INVESTMENT RESTRICTIONS"; " RISK FACTORS--Investment Restrictions."
PRIVATELY COLLATERALIZED INVESTMENTS; STATE AND LOCAL
GOVERNMENT-RELATED INVESTMENTS
The Trust is authorized to invest up to 30% of its total assets in the
following three categories of investments.
1. Privately Collateralized Investments
------------------------------------
The Trust may invest in construction loans, or securities backed by
construction loans or interests in such loans or securities, if the loans or
securities are collateralized by (a) a letter of credit issued by a depository
institution rated in category "B" or higher by Thomson Bankwatch, Inc.
("Thomson Bankwatch") on terms and conditions acceptable to the Trust, or (b)
another form of guaranty issued by an entity with a short-term (12 months or
less) rating at the time of issuance of the guaranty of at least "A-1" from
Standard & Poor's or "P-1" from Moody's with respect to a guaranty with a
duration of 12 months or less, or with a long-term (more than 12 months)
rating in one of the two highest rating categories of at least one nationally
recognized statistical rating agency with respect to a guaranty with a
duration of more than 12 months.
Thomson Bankwatch is a proprietary credit ratings and consulting service.
A rating of "B" is the third highest of nine rating categories. A bank rated
in category "B" is characterized as follows: "A strong company with a solid
financial record and well received by its natural money markets. Some minor
weaknesses may exist, but any deviation from the company's historical
performance levels should be both limited and short-lived. The likelihood of
a problem developing is small, yet slightly greater than for a higher-rated
company." As of December 31, 1997, there were 125 banks in the United States
rated in category "B" or higher by Thomson Bankwatch. A description of all
Thomson Bankwatch rating categories is included as Appendix B to the Trust's
Statement of Additional Information.
There is no assurance that the rating of the issuer of any letter of
credit or other form of guaranty which collateralizes a construction loan
investment acquired by the Trust will continue for any given period of time or
that it will not be revised downward or withdrawn entirely by the rating
agency if, in the rating agency's judgment, circumstances so warrant. Any
such downward revision or withdrawal of such rating would be likely to signify
an increase in the risk to the Trust associated with the related investment
and would be likely to result in a reduction in the value of the related
obligation. The Trust is not required to dispose of privately collateralized
construction investments if the rating of the issuer of the related letter of
credit or guaranty is downgraded or withdrawn, except to the extent required
by certain investment restrictions. See "INVESTMENT RESTRICTIONS"; "RISK
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FACTORS--Investment Restrictions." Notwithstanding any of the above, such a
downward revision or withdrawal of a rating would not have any impact upon the
flow of income from the project to the Trust.
If the issuer of any letter of credit or other form of guaranty which
secures a privately collateralized construction investment fails or is unable
to meet its obligations under such letter of credit or other guaranty, the
Trust would be subject to the same real estate-related risks and uncertainties
that apply to real estate investments generally, which could have a material
adverse effect on the value and performance of the investments, except to the
extent that the Trust has obtained other forms of credit enhancement or has
taken other steps to secure its interests in the project. See "RISK FACTORS
- - -- Real Estate-Related Risks."
The Trust intends to enter into a Memorandum of Understanding with
approximately 4 or 5 major banks with respect to privately collateralized
construction loan investments. It is anticipated that the Memorandum of
Understanding with each bank will provide as follows: The Trust and the bank
will cooperate with each other in marketing efforts with respect to new
construction and substantial rehabilitation and permanent mortgage loan
financing on multifamily rental and cooperative housing projects and single
family developments located within a specified market region. The
construction loan will be secured by a letter of credit issued by the bank or
another form of guaranty issued by the bank or another entity acceptable to
the Trust. The making of the Trust loan is also conditioned on the delivery
of a commitment from (a) Fannie Mae to issue mortgage-backed securities
secured by the permanent loan, (b) another source acceptable to the Trust to
provide credit enhancement for the permanent loan on terms acceptable to the
Trust, or (c) a commitment for a take-out of the construction loan from an
entity, and on terms, acceptable to the Trust.
2. State and Local Government-Related Obligations
----------------------------------------------
The Trust may invest in the types of state and local government-related
obligations described below.
(a) Full Faith and Credit. The Trust may invest in construction
and/or permanent loans, or securities backed by construction and/or permanent
loans, or interests in such loans or securities, if such loans or securities
are supported by a full faith and credit guaranty of a state or local
government or agency or instrumentality thereof that has general taxing
authority, without regard to the credit rating of such entity or the
obligations acquired. There is no requirement that obligations acquired
under this category be rated or ratable. If the state or local government or
agency or instrumentality which provided such guaranty fails or is unable to
meet its obligations thereunder, the Trust would be subject to the same real
estate-related risks and uncertainties that apply to real estate investments
generally, which could have a material adverse effect on the value and
performance of the investments. See, "RISK FACTORS -- Real Estate-Related
Risks."
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(b) "Top Tier" Agencies. The Trust may invest in construction and/or
permanent loans, or securities backed by construction and/or permanent loans,
or interests in such loans or securities, provided that such loans or
securities are issued (with or without recourse) or guaranteed, as the case
may be, by a state or local housing finance agency designated "top tier" by
Standard & Poor's (or designated comparably by another nationally recognized
statistical rating agency, as determined by the Executive Committee of the
Trust) at the time of acquisition by the Trust, and are (i) with full recourse
(directly or by way of guaranty or indemnity) to such agency's general credit
and assets, or (ii) secured by recourse to such assets of the agency or by
such third party credit enhancement as to provide, in the judgment of
management, protection comparable to a pledge of the agency's general credit,
or (iii) backed by the "moral obligation" of the state in which such agency is
located in the form of the state's commitment to replenish any insufficiencies
in the funds pledged to debt service on the obligations.
Although the agency must be rated "top tier" by Standard & Poor's, there
is no requirement that the obligations to be acquired by the Trust be rated or
ratable at all, as long as the agency is a top tier agency at the time an
obligation is acquired by the Trust. Standard & Poor's has informally
indicated to the Trust that the only relevance a top tier designation would
have on the rating of particular obligations issued by such an agency is that
Standard & Poor's would, under certain circumstances, increase the rating of
such obligations from the level they would otherwise be entitled to receive by
one-half a level within an existing rating category. So, for example, an
issue that might otherwise be entitled to an A rating could get an A+ rating
if the agency was top tier (or an AA- rating could be raised to an AA rating).
However, an A+ rating would not be increased to AA- because it would take the
rating into another rating category (that is, from single-A to double-A).
Before designating a housing agency as top tier, Standard & Poor's must
favorably evaluate a number of criteria, including the agency's general track
record, unrestricted fund balances, administrative capabilities, investment
policy, internal controls, portfolio quality and the sponsoring state's
commitment to housing. For a more complete description of the guidelines used
by Standard & Poor's, see Appendix C to the Statement of Additional
Information. There can be no assurance that any such rating of any agency
would continue for any given period of time after the Trust acquires such an
obligation, or that it would not be revised downward or withdrawn entirely by
the rating entity if, in its judgment, circumstances so warrant. A downgrade
in or withdrawal of the rating of an agency would signify an increase in the
risk that the obligations issued or guaranteed by that agency would not be
paid in accordance with their terms and would be likely to result in a
reduction in the value of the related obligations, except to the extent that
the Trust has obtained other forms of credit enhancement or has taken other
steps to secure its interests in the project. The Trust is not required to
dispose of the obligations issued or guaranteed by an agency which loses its
top tier rating, except to the extent required by certain investment
restrictions. See "INVESTMENT RESTRICTIONS;" "RISK FACTORS--Investment
Restrictions."
With respect to any obligation issued or guaranteed by a top tier agency,
the Trust expects that it will be secured either by the recourse obligation of
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the issuer (or its guarantee) or by other collateral security, in addition to
having the benefit (directly or indirectly) of a lien on the underlying real
estate. Management of the Trust intends to undertake transactions with top
tier agencies under the foregoing authority selectively, and only after having
made its own independent evaluation and investigation with respect to the
experience, credit history, and underwriting expertise of the agencies issuing
the obligations to be acquired. The Trust therefore believes that the direct
obligation or other collateral security provided by the top tier issuer will
be a significant factor in helping to assure the safety and soundness of the
investment to the Trust. If such recourse or other collateral security which
the Trust receives in conjunction with an investment issued by a top tier
agency proves insufficient to ensure full and timely performance of the
obligations of the issuer under the terms of the investment, the Trust (or an
agent or nominee on its behalf) will have recourse to a lien on the underlying
real property securing the projects financed. If the Trust is required to
enforce its rights to the underlying real property because its recourse to the
issuer or the other collateral security is insufficient, the Trust will be
subject to the same real estate-related risks and uncertainties that apply to
real estate investments generally, which could have a material adverse effect
on the value and performance of the investments. For a description of these
potential risks, see "RISK FACTORS -- Real Estate-Related Risks" below.
(c) Agencies Rated "A" or Higher. The Trust is permitted to invest
in construction and/or permanent mortgage loans, or securities backed by
construction and/or permanent mortgage loans, or interests in such loans or
securities, provided that such loans or securities are issued or guaranteed,
as the case may be, by a state or local housing finance agency with a general
obligation rating of "A" or better by Standard & Poor's (or a comparable
rating by another nationally recognized statistical rating agency, as
determined by the Executive Committee of the Trust) at the time of the
acquisition of the investment by the Trust; and are (i) with full recourse
(directly or by way of full indemnity or guarantee) to such agency's general
credit and assets or (ii) backed by the "moral obligation" of the state in
which such agency is located, in the form of the state's commitment to
replenish any insufficiencies in the funds pledged to debt service on the
obligations or similar commitment. Although a state or local agency which
issues or guarantees an obligation to be acquired by the Trust must have a
general obligation debt rating of "A" or better, there is no requirement that
the obligation itself be rated or ratable. There is no rating requirement for
states which provide their "moral obligation" for such obligations.
As indicated above, the Trust may acquire obligations which are backed by
the "moral obligation" of the state in which the agency is located (without
regard to the credit rating of such state), in lieu of recourse against the
state or local agency. Obligations which are backed by the "moral obligation"
of the related state could include loans from the Trust to the agency,
securities issued by the agency or loans or participation interests in loans
made by the Trust or the agency to the underlying borrower (or securities
backed by a loan made by the agency to the borrower). However, these
obligations would be secured by the state's "moral obligation", rather than by
full recourse against the agency. The state's "moral obligation" could take
the form of a commitment to replenish any insufficiencies in the funds pledged
to debt service on the investment or a commitment to pay any amounts due on
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the investment in the event that the revenues from the underlying real
property are insufficient to pay all amounts when due. However, the state's
"moral obligation" would not be a binding, legal obligation of the state to
pay amounts due under the obligations acquired by the Trust and could not be
enforced against the state or its general credit and assets.
Before rating a housing agency's general obligation debt as "A" or
better, Standard & Poor's has indicated that it must favorably evaluate a
number of criteria, including the state's economic base, the agency's
legislative mandate and the sponsoring state's commitment to housing programs,
the operating performance and management of the agency and earnings quality
and financial strength of the agency. As of January 1998, the following state
and municipal housing finance agencies had a general obligation rating of "A"
or better from Standard & Poor's: Alaska, California, Illinois, New Jersey,
Nebraska, New York City, New Mexico, Massachusetts, Michigan, Minnesota,
Missouri, Pennsylvania, Utah, Virginia and West Virginia.
There can be no assurance that the general debt obligation rating of an
agency of "A" or better would continue for any given period of time after the
Trust acquires an obligation issued or guaranteed by that agency, or that the
rating would not be revised downward or withdrawn entirely by the rating
entity if, in its judgment, circumstances so warrant. A downgrade in or
withdrawal of the rating of an agency would signify an increase in the risk
that the obligations issued or guaranteed by that agency would not be paid in
accordance with their terms and would be likely to result in a reduction in
the value of the related obligations, except to the extent that the Trust has
obtained other forms of credit enhancement for the investment. The Trust
would not be required to dispose of the obligations issued or guaranteed by an
agency which loses its general obligation rating of "A" or better, except to
the extent required by certain investment restrictions. See "INVESTMENT
RESTRICTIONS"; "RISK FACTORS--Investment Restrictions."
Although the agency which issues or guarantees an obligation must have a
rating of "A" or better on its general debt obligations, there is no
requirement that the obligation itself be rated or ratable. While a rating
on an obligation does not provide any assurance of repayment and is subject to
revision or withdrawal at any time by the assigning rating agency, such
ratings do provide the prospective investor with some indication that the
proposed structure and revenue analysis for the obligation satisfy the rating
agency's internal criteria for the applicable rating. However, the Trust
intends to undertake transactions under this authority selectively, and only
after having made its own independent evaluation with respect to the
experience, credit history, and management expertise of the agencies issuing
or guaranteeing the obligations to be acquired. Unrated investments may also
be less liquid than rated investments. However, the Mortgage Investments made
under this authority, together with all other Trust investments, would be
subject to the SEC requirement which requires that at least 90% of the value
of the Trust's assets be invested in investments that are readily marketable
and convertible into cash within 120 days without a discount from their market
value.
The Trust believes that the direct recourse provided by the agency
involved in these investments or the "moral obligation" of the related state
will be a significant factor in helping to assure the safety and soundness of
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the investments to the Trust. However, if such recourse proves insufficient
to ensure full and timely performance of the obligations of the issuer under
the terms of the investment, the Trust (or an agent or nominee on its behalf)
will have recourse to a lien on the underlying real property securing the
project financed. If the Trust is required to enforce its rights to the
underlying real property because its recourse against the issuer is
insufficient, the Trust will be subject to the same real estate-related risks
and uncertainties that apply to real estate investments generally, which could
have a material adverse effect on the value and performance of the
investments. See "RISK FACTORS--Real Estate-Related Risks."
(d) State Insurance Funds/Programs. The Trust may invest in
construction and/or permanent loans, or securities backed by construction
and/or permanent loans, or interests in such loans or securities, if no less
than the first 75% of such loan or securities is supported by a guaranty of a
state-related agency under a state insurance or guarantee program with a
record of creditworthiness, as evidenced by a rating of the agency or the
obligations issued or guaranteed by such agency, of at least "A-" by Standard
& Poor's, Fitch Investors Services Inc. ("Fitch"), or Duff & Phelps Inc.
("Duff & Phelps") or at least "A3" by Moody's at the time of the acquisition
of such investment by the Trust. There can be no assurance that any such
rating would continue for any given period of time after the insurance or
guaranty is issued, or that it would not be revised downward or withdrawn
entirely by the rating entity if, in its judgment, circumstances so warrant.
A downgrade in or withdrawal of the rating would signify an increase in the
risk to the Trust associated with the related investments, and would be likely
to result in a reduction in the value of the related obligations. The Trust
is not required to dispose of these investments if the rating of an agency or
the obligations issued or guaranteed by such agency is downgraded or
withdrawn, except to the extent required by certain investment restrictions.
See "INVESTMENT RESTRICTIONS" RISK FACTORS--INVESTMENT RESTRICTIONS."
There is no requirement that obligations acquired under this category be
rated or ratable.
If the state-related agency providing the guaranty for obligations
acquired under this investment authority failed or is unable to meet its
obligations thereunder, or if the guaranty was insufficient to cover all
losses in the event of a default on a construction or permanent loan in which
the Trust invests or which backs securities in which the Trust invests, the
Trust would be subject to the same real estate-related risks and uncertainties
that apply to real estate investments generally, which could have a material
adverse effect on the value and performance of the investments. See, "RISK
FACTORS--Real Estate-Related Risks."
(e) State and Local Government Encouraged Projects Meeting Specified
Underwriting Criteria. The Trust is permitted to invest in construction
and/or permanent loans, or securities backed by construction and/or permanent
loans or interests in such loans or securities, that have evidence of support
by a state or local government or an agency or instrumentality thereof
(evidenced by at least the adoption of a resolution by the governing body or
other applicable governmental agency in support of the related project),
provided that all of the following criteria are satisfied: (i) the
loan-to-value ratio of the project shall not exceed 50%, the "value" for such
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purposes to be determined on the basis of an independent appraisal by a
licensed appraiser acceptable to the Trust, except that a loan-to-value ratio
of up to 65% shall be permitted if mortgage insurance in an amount that will
cover all first losses down to a 50% loan-to-value level has been provided by
a mortgage insurance provider rated at least "A-" by Standard & Poor's, Fitch
or Duff & Phelps or at least "A3" by Moody's or approved and accepted by
Fannie Mae or Freddie Mac for insurance of the type of obligation to be
acquired by the Trust; (ii) the state or local government or agency or
instrumentality thereof or a foundation exempt from federal income tax under
IRC Section 501(c) must have, in the aggregate, a financial participation in
the project of at least $15,000 (present value) per unit for a period at least
equal to the outstanding term of the Trust's investment, such financial
interest to be in the form of subordinate financing, an interest rate
write-down, a donation of land, some other form of insurance or guarantee or
some other similar contribution within guidelines adopted by the Executive
Committee of the Trust; (iii) the sponsor of the project must have a
demonstrably successful record of developing or managing low-income housing
projects, in accordance with guidelines developed by the Trust; (iv) the
underwriter and servicer of the mortgage loan for the project must have been
approved by the Trust; (v) the construction of the project must be supervised
on a regular basis by agents or employees of the state or local government or
agency or instrumentality thereof, or tax-exempt foundation; and (vi) the
minimum debt service coverage for the project must be at least 1.15 to 1,
based upon projections of future income and expenses satisfactory to the
Trust. There is no requirement that the obligations acquired by the Trust
under this category be rated or ratable.
The investments in this category are subject to real-estate related risks
which could have a material adverse effect on the value and performance of the
obligations. See "RISK FACTORS--Real Estate-Related Risks."
(f) Collateralized Loans. The Trust may invest in construction (but
not permanent) loans or securities backed by construction loans, interests in
such loans or securities, made by a state or local government or an agency or
instrumentality thereof, or by another party so long as the related project is
sponsored by a state or local government or an agency or instrumentality
thereof, to the extent that such loans are fully collateralized or secured in
a manner satisfactory to the Trust by: (i) cash placed in trust or in escrow
by a state or local government or agency or instrumentality thereof with an
independent third party satisfactory to the Trust on terms and conditions
satisfactory to the Trust; or (ii) a letter of credit established by or at the
direction of a state or local government, or an agency or instrumentality
thereof, with a depository institution rated in category "B" or higher by
Thomson Bankwatch, on terms and conditions acceptable to the Trust; or (iii)
some other form of guaranty issued by an entity with a short-term (twelve
months or less) rating at the time of issuance of the guaranty of at least
"A-1" from Standard & Poor's or "P-1" from Moody's with respect to a guaranty
with a duration of 12 months or less, or with a long-term (more than 12
months) rating in one of the two highest rating categories by at least one
nationally recognized statistical rating agency with respect to a guaranty
with a duration of more than twelve months. Obligations acquired by the Trust
under this category are not required to be rated or ratable.
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There is no assurance that the rating of the issuer of any letter of
credit or other form of guaranty which collateralizes this type of
construction loan investment acquired by the Trust will continue for any given
period of time or that it will not be revised downward or withdrawn entirely
by the rating agency if, in the rating agency's judgment, circumstances so
warrant. Any such downward revision or withdrawal of such rating would
signify an increase in the risk to the Trust associated with the related
investment and would be likely to result in a reduction in the value of the
related obligation. The Trust is not required to dispose of its investments
in collateralized loans if the rating of the issuer of the related letter of
credit or guaranty is downgraded or withdrawn, except to the extent required
by certain investment restrictions. See "INVESTMENT RESTRICTIONS" RISK
FACTORS--INVESTMENT RESTRICTIONS."
If the issuer of any letter of credit or other form of guaranty which
secures this type of collateralized construction loan investment fails to meet
its obligations under such letter of credit or other guaranty, the Trust will
be subject to the same real estate-related risks and uncertainties that apply
to real estate investments generally, which could have a material adverse
effect on the value and performance of the investments. See, "RISK
FACTORS--Real Estate-Related Risks".
3. Secured Bridge Loans
The Trust is permitted to invest up to 5% of all the Trust's assets in
Secured Bridge Loans, as part of the privately collateralized and state and
local government-related obligations in which it may invest up to 30% of its
total assets.
Secured Bridge Loans are loans related to single family or multifamily
housing developments which are eligible to receive and have allocations or
other rights to receive Low Income Housing Tax Credits ("LIHTCs") under
Section 42 of the Internal Revenue Code of 1986, as amended. Borrowers on
LIHTC projects are eligible to receive tax credits which may be used dollar-
for-dollar to offset federal taxes otherwise due, subject to certain
limitations. Sponsors of LIHTC projects frequently sell ownership interests
in their projects to investors who want to receive the benefits of the LIHTCs.
The LIHTCs are available to owners in proportion to their ownership interests
in the development and are provided in substantially equal annual amounts to
owners of the development over a ten year period, generally commencing in the
year in which the units of each building are available for occupancy.
Investors generally agree to pay for their ownership interests in the
development (and, consequently, the LIHTCs) in installments over the
construction, rent-up and later periods, as negotiated on a case by case
basis.
The investor generally makes an initial payment upon admission to the
ownership entity and pays subsequent installments as various events are
achieved, such as lien free completion of construction and achievement of
stabilized occupancy for an agreed period of time (usually three to six
consecutive months of occupancy at a specified debt service coverage level).
Payment obligations are generally evidenced by notes or contractual
agreements.
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Development sponsors generally need the proceeds of the sale of LIHTCs at
or before the time construction commences to make up the difference between
the construction financing and other sources of funds available and the total
development cost of the development. Accordingly, it is customary for
sponsors to obtain bridge loan financing at or prior to the closing on the
construction loan financing to close this gap; the bridge loan financing is to
be repaid from the payments due from the LIHTC investors as the development is
constructed and reaches the achievement levels required by the LIHTC
investors. Unlike other construction financing, Secured Bridge Loans of the
type in which the Trust is permitted to invest are not secured by the
underlying development. Instead, such Secured Bridge Loans are secured, as
described below, primarily by the general credit of the issuer or guarantor
and, to a lesser extent, by the LIHTC investors' ownership interests in the
development owner.
The Trust intends to make Secured Bridge Loans in a way which it believes
will minimize the Trust's risks on such loans. The Trust proposes to limit
such loans to loans which on the date of the Trust's acquisition or making of
the loan are:
(a) (i) issued or guaranteed by a state or local agency designated as
"Top Tier" by Standard & Poor's (or a comparable rating by
another nationally recognized statistical rating agent, as
determined by the Executive Committee of the Trust) with full
recourse to the assets and credit of such agency (or in lieu of
such full recourse, secured by such third party credit
enhancement which, in the judgment of management of the Trust,
provides security comparable to full recourse to the assets and
credit of such agency, or
(ii) issued (with recourse) or guaranteed by a state or local agency
which has its long term credit rating at the level of "A" or
above by Standard & Poor's (or a comparable rating by another
nationally recognized rating agency approved by the Trust's
Executive Committee) for a Secured Bridge Loan with a term of
longer than 12 months and at the rating level of A-1 or better
by Standard & Poor's (or a comparable rating by another
nationally recognized rating agency approved by the Trust's
Executive Committee) for a Secured Bridge Loan with a term of
less than 12 months;
(b) issued (with recourse) or guaranteed by FHA, GNMA, Fannie Mae,
Freddie Mac or another entity rated AA or above by Standard &
Poor's (or a comparable rating by another nationally recognized
rating agency approved by the Trust's Executive Committee) or
fully collateralized by obligations issued (with recourse) or
guaranteed by FHA, GNMA, Fannie Mae, Freddie Mac or another
entity rated AA or above by Standard & Poor's (or a comparable
rating by another nationally recognized rating agency approved
by the Trust's Executive Committee); or
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(c) fully collateralized by a letter of credit or other guaranty by a
bank or other financial entity whose credit rating is rated as AA
or above by Standard & Poor's (or a comparable rating by another
nationally recognized rating agency approved by the Trust's
Executive Committee) or a bank with a rating Thompson Bankwatch
of "B" or better.
The Trust will invest in Secured Bridge Loans only in cases where the
Trust is otherwise committed to invest in the project's construction and/or
permanent mortgage loan, except in cases where the project's permanent loan is
less than $1 million or is anticipated to be financed primarily on a tax-exempt
basis, in which event the Trust may make the Secured Bridge Loan even
if the Trust is not committed to make the construction or permanent loan.
The credit enhancement mechanisms set forth above may be structured to
provide either an assurance that all scheduled payments under the Secured
Bridge Loans will be made when due or an assurance only of the ultimate
repayment of all amounts due under such loans at maturity or after foreclosure
or other liquidation.
There is no requirement that the Secured Bridge Loan itself be rated or
ratable.
The Secured Bridge Loans will be paid down in a manner approved by the
Trust as capital contributions are made by the LIHTC investors, although not
all of the proceeds of investor payments will be required to reduce the
Trust's loan if the Trust so approves.
Unlike most other assets in which the Trust invests, Secured Bridge Loans
are not secured by mortgages on real property or directly related to payments
on first-lien mortgage loans, nor are they necessarily insured or guaranteed
by the federal government or a federal government-sponsored enterprise such as
Fannie Mae. However, as described above, Secured Bridge Loans will be
guaranteed or credit-enhanced by state housing finance agencies, letter-of
- - -credit providers or other mechanisms which are of the same credit quality as
those which provide credit enhancement for the privately collateralized and
state and local government-related investments in which the Trust may invest
up to 30% of its total assets.
The borrower's obligation to make principal and interest payments on a
Secured Bridge Loan will not be contingent on the borrower's receipt of
investor payments and the Trust will obtain one of the types of credit
enhancement described above. However, the development owner may depend on
investor payments to obtain the funds with which to make payments on a Secured
Bridge Loan; payments to the development owner from its investors in turn may
be dependent on certain factors relating to completion, rent-up, other matters
relating to the LIHTC and otherwise. The Trust expects, however, that its
investments will be made on the basis of the credit of the guarantor or issuer
as described in (a) through (c) above, and to a lesser extent by the LIHTC
investors' ownership interests in the development owner. The
Trust's investment criteria have been designed to enhance the likelihood that
the Trust will invest only in credit-worthy Secured Bridge Loans. The Trust
also believes that any additional risk associated with bridge loans, as
compared to the Trust's other authorized investments, will be offset by the
higher interest rates payable on Secured Bridge Loans.
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Presently, the Trust is limited to investing at least 90% of its assets
in investments that are readily marketable and convertible into cash within
120 days without a discount from their market value. Secured Bridge Loans may
not be liquid investments. The authority to invest in Secured Bridge Loans
will not increase the 10% limit on illiquid assets, but it may result in an
increase the proportion of illiquid investments in the Trust's portfolio.
In evaluating investments in all categories of state and local
government-related obligations described above, the Trust staff will consider,
among other factors: (i) the experience, past performance, credit rating,
competence and managerial and marketing ability of prospective project
developers; (ii) the geographic area; (iii) the location, construction
quality, condition and design of the project; (iv) the projected
loan-to-appraised value ratio and underlying assumptions on which such
projections are based; (v) the current and projected cash flow; (vi) the
potential for capital appreciation; (vii) the occupancy, supply of and demand
for properties of similar type in the vicinity; (viii) the prospects for
liquidity through sale, financing or refinancing of the project; and (ix) such
other factors as become relevant in the course of the evaluation process. In
evaluating such underwriting criteria, the Trust may retain consultants to
assist them in evaluating state and local government investment opportunities.
See "INVESTMENT OBJECTIVE AND POLICIES -- Retention of Technical Consultants."
In determining whether to invest in a state or local government-related
mortgage loan or security, the Trust is not limited to investments which have
been rated in any particular category by a nationally recognized statistical
rating organization. Although such a rating provides no assurance of
repayment and is subject to revision or withdrawal at any time by the
assigning rating agency, ratings do provide the prospective investor with some
indication that the proposed structure and revenue analysis satisfy the rating
agency's internal criteria for the respective rating. The Trust will seek to
minimize the risk of loss in this connection by investing only in instruments
satisfying other criteria, as outlined above.
The Trust believes that the foregoing state and local government-related
investments provide the Trust with considerable flexibility in creating
investment opportunities for the Trust. In addition to the issues outlined
above, the investments can involve certain risks not present with other
authorized investments. Without requirements for ratings or access to taxing
power, the credit determinations with respect to the proposed state and local
government-related investments could be more difficult to make, and their
credit quality could be lower than that of other investments the Trust is
permitted to make. The state and local government-related investments may
also be less liquid than most other investments authorized for the Trust.
However, the state and local government-related investments, together with all
other Trust investments, would be subject to the SEC's requirement that at
least 90% of the value of the Trust's assets be invested in investments that
are readily marketable and convertible into cash within 120 days without a
discount from their market value. See "INVESTMENT RESTRICTIONS;" "RISK
FACTORS--Redemption." To the extent that state and local government-related
investments are not rated or may not be readily traded in existing markets,
the valuation of these are likely to be less precise than those of the Trust's
other investments.
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MORTGAGE INVESTMENTS SUPPORTED BY MORE THAN ONE FORM OF CREDIT ENHANCEMENT
The Trust may also invest in construction and/or permanent loans or
securities or obligations backed by construction and/or permanent loans which
are supported by any combination of two or more of the types of credit
enhancement which must support Mortgage Investments in which the Trust is
otherwise authorized to invest, as described above, as long as all of the
principal component of such loans or securities or obligations backed by such
loans are fully collateralized by one or more of such types of credit
enhancement. The multiple forms of credit enhancement may be combined either
concurrently or sequentially.
PRE-CONSTRUCTION COMMITMENTS
The Trust may enter into pre-construction commitments to provide
long-term financing upon satisfactory completion of a specified project. Such
commitments, commonly known as permanent financing commitments, are often a
precondition to the ability of a developer to obtain a construction loan. The
Trust may receive good-faith deposits for such permanent financing
commitments, but such deposits are not expected to be a major source of Trust
income. In contrast to a company hoping to earn a standby commitment fee
without investment, the Trust will make permanent financing commitments with
the purpose and ability to acquire the Mortgage Investment.
Because complete funding of construction and long-term mortgage loans
requires up to three years after making a financing commitment, the Trust
estimates the amount of funds it expects to have available for investment from
principal payments and prepayments on existing Mortgage Investments, dividend
reinvestment and sales of additional Units to new or existing Participants.
Loan commitments are made after considering reasonable projections of
available funds. At times, the Trust's short-term cash balances may be less
than its outstanding financing commitments. This commitment policy reduces
the amount of assets the Trust would otherwise invest in lower yielding,
short-term investments. The Trust maintains highly liquid government
securities in a segregated account which, in addition to short-term liquid
assets, and amounts projected to be available, is at least equal to
outstanding financing commitments. If, however, a substantial amount of the
funds projected to be available are not in fact received, the Trust would
either borrow funds pursuant to lines of credit previously established with
commercial banks (in accordance with applicable asset coverage requirements)
or sell long-term assets to raise the cash necessary to fund the financing
commitments.
FORWARD COMMITMENTS
The majority of the Trust's investments are made pursuant to forward
commitments, in which the Trust agrees to purchase investments in or backed by
mortgage loans that have not yet been originated. This type of transaction
requires the Trust to commit funds for future purchases of such investments at
rates which are set at the time of the commitment. With respect to
multi-family mortgage loans, the Trust sets fixed rates for future delivery.
With respect to single-family mortgage loans, the Trust generally sets either
(i) a fixed rate or (ii) a maximum rate that may be adjusted by the mortgagor
prior to the closing of the mortgage loan if market interest rates decline.
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In the event market interest rates decline, it may be difficult for the
Trust to get delivery of the single- and multi-family mortgage loans that back
the Trust's investments. The Trust generally imposes penalties equal to the
commitment fee on the Mortgage Investment (generally 1/2 to 4 points) where
delivery on a forward commitment is not fulfilled. Where obtainable, the
Trust also includes mandatory-delivery clauses in its forward commitments on
certain obligations secured by mortgages on multi-family projects.
Notwithstanding such penalties and clauses referred to above, there is no
guarantee that the obligations committed to will be delivered to the Trust.
TEMPORARY INVESTMENTS
The Trust will invest funds temporarily in liquid assets until they can
be placed in Mortgage Investments meeting Trust investment objectives. Such
liquid assets are limited by the Declaration of Trust to: United States
Treasury issues; federal agency issues; commercial bank time certificates of
deposit and savings bank deposits in domestic banks insured by the Federal
Deposit Insurance Corporation (through the Bank Insurance Fund); domestic
savings and loan association deposits insured by the Federal Deposit Insurance
Corporation (through the Savings Association Insurance Fund); bankers
acceptances (drafts or bills of exchange accepted by a bank or trust company
that guarantees payment thereof); commercial paper rated as category A-1 or
P-1 by Standard & Poor's or Moody's; collateral loans and warehousing
agreements (temporary assignments of mortgage notes or mortgage-backed
securities) secured by mortgages on FHA-insured or VA-guaranteed single-family
mortgage or FHA-insured multi-family projects; and interests (including
repurchase agreements, that is, purchase of securities accompanied by an
agreement to resell the securities at a later date) in United States
Government securities pledged by a bank or other borrower to secure short-term
loans from the Trust.
The Trust also may invest funds temporarily in registered investment
companies investing predominantly in United States Treasury issues or federal
agency issues. Investments in other registered investment companies are
restricted as follows:
(1) Such securities acquired by the Trust shall not exceed 3% of the
total outstanding voting stock of any investment company;
(2) The total value of such securities acquired by the Trust in any
one investment company shall not exceed 5% of the Trust's total assets; and
(3) The total value of such securities acquired by the Trust in all
investment companies shall not exceed 10% of the Trust's total assets.
RETENTION OF TECHNICAL CONSULTANTS
The majority of the construction and long-term mortgage loans and
mortgage-backed securities in which the Trust invests have been underwritten
to meet the requirements of HUD, Fannie Mae or Freddie Mac, or have been
underwritten by state or local housing finance authorities based on specified
qualifying loan to value standards. In evaluating certain investments,
however, the Trust may retain consultants to provide site inspections,
appraisal reviews, environmental analyses, property management reviews, and
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such other statistical and factual information as the Trust may deem useful to
its evaluation and investment decision-making. Such consultants would provide
such analysis on a case-by-case basis and only with respect to occasional
transactions in specific proposals. It is anticipated that any such
consultants would be compensated either on an hourly basis or for a set fee
for evaluating each specific proposal.
OTHER POLICIES
If it is feasible and profitable, the Trust may directly service some of
the long-term loans in which it invests. Generally, however, the Mortgage
Investments in which the Trust proposes to invest, whether or not they are
originated by the Trust, will ordinarily be serviced by mortgage banks or
other mortgage servicing institutions, such as savings and loan institutions
or commercial banks, located throughout the United States. Such institutions
are generally compensated for their services at rates that vary from
one-twentieth to three-quarters of one percent (.05%-.75%) per annum,
calculated monthly, on the then current outstanding principal balance in the
case of long-term first mortgage loans, and at rates of 1.20% per annum or
more of the total loan commitment in the case of construction loans.
The Trust is empowered to invest Mortgage Investments backed by projects
anywhere in the United States. The Trust will invest only in Mortgage
Investments which provide yields competitive with those then generally
prevailing in the market taking into consideration all factors relevant to an
appropriate evaluation of risk and return and the overall objectives of the
Trust. Among Mortgage Investments of comparable yield, the Trust will, if
possible, invest in projects in geographic areas in which Participants or
their members are located.
While the Trust does not buy Mortgage Investments for purposes other than
investment, the Trust will from time to time buy or sell Mortgage Investments
in order to prevent fluctuations in the weighted average maturity of its
portfolio or to maintain a desirable level of portfolio diversification.
Moreover, the Trust remains free to dispose of Mortgage Investments at any
time to meet objectives of the Trust, generally on the basis of changed
circumstances or market conditions. The short-term liquid assets in which the
Trust may temporarily invest are subject to a very high turnover rate. Fees
associated with the purchase, sale or redemption of such liquid assets are
nominal. See "INVESTMENT ADVISER."
INVESTMENT RESTRICTIONS
The Trust operates under the following restrictions and policies relating
to investment of its assets and activities.
The Trust will not:
(1) concentrate its investments in any industry except the real estate
industry as set forth above;
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(2) permit less than 70% of the mortgages and mortgage-backed securities
acquired by the Trust or backing Mortgage Investments acquired by
the Trust to be federally insured or guaranteed or guaranteed by
Fannie Mae or Freddie Mac with respect to the payment of principal
and interest (base interest in the case of contingent interest
mortgage loans) or issued by Fannie Mae or Freddie Mac; or
(3) originate or purchase any Mortgage Investment secured by a project
involving new construction or rehabilitation unless the buildings,
structures, or other improvements to be built on the real estate
subject to such mortgage will be built or rehabilitated by union
labor.
The foregoing policies are fundamental to the Trust and may not be
changed without the approval of the holders of a majority of the Trust's
outstanding Units.
In addition, the Trust will not:
(1) issue senior securities, except in accordance with clause (9) below;
(2) purchase securities on margin (but the Trust may obtain such
short-term credits as may be necessary for the clearance of
transactions);
(3) sell any securities short;
(4) write put and call options;
(5) underwrite the securities of other issuers except that the Trust may
resell to other financing institutions all or a portion of the
Mortgage Investments acquired by the Trust in transactions exempt
from registration under the Securities Act of 1933, as amended;
(6) purchase or sell real estate (other than real estate mortgage loans
and construction loans) except for real estate acquired through the
foreclosure of mortgage loans and construction loans held by the
Trust;
(7) purchase or sell commodities or commodities futures contracts;
(8) lend any assets of the Trust except as set forth above;
(9) borrow money from banks unless immediately after such borrowing
there is an asset coverage of at least 300% of all borrowings of the
Trust. Not more than fifty percent of the value of the Trust's
assets will be used as security for such borrowings. This borrowing
provision is not for investment leverage, but primarily to
facilitate management the portfolio by enabling the Trust to meet
redemption requests and to make advances on construction loans
securing Mortgage Investments and to meet outstanding Trust
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commitment obligations (and, on occasion, to make income
distributions) when available Trust cash is insufficient for such
purposes and the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. Interest paid by the Trust on
borrowed funds will decrease the amount of Trust assets available
for investment;
(10) invest in commodities, commodity contracts, oil, gas or other
mineral leases, or arbitrage transactions; or
(11) invest more than 10% of the value of the Trust's assets in Mortgage
Investments that are not readily marketable and convertible into
cash within 120 days without a discount from their market value.
One effect of the restriction described in clause (11) above is to
prohibit the Trust from investing more than ten percent of the value of its
assets in investments that do not satisfy the liquidity requirement even
though they may otherwise be permitted under the Trust's Declaration of Trust.
RISK FACTORS
RELIANCE ON MANAGEMENT -- UNSPECIFIED INVESTMENTS
The Trustees and officers of the Trust will invest the Trust's assets as
deemed prudent by the Trustees. See "INVESTMENT OBJECTIVE AND POLICIES," and
"MANAGEMENT." Investors in the Trust will not have any specific information
with which to evaluate future Mortgage Investments of the Trust in advance of
the Trust's investment or commitment to invest. Given present uncertainties
concerning the future status of FHA and HUD, there can be no assurance that
the Trust will be successful in acquiring Mortgage Investments that meet the
business objectives and investment objectives and policies of the Trust.
FLUCTUATING INTEREST RATES
While the Trust retains the freedom to sell all or any portion of its
assets if circumstances (e.g., changed market conditions) suggest the prudence
of that course, it will manage its assets with the expectation that despite
major temporary fluctuations in interest rates from time to time, return on
assets over a long term will be satisfactory. Nevertheless, the market value
of Trust Mortgage Investments and the resulting net asset value of the Trust
portfolio will fluctuate with short-term changes in interest rates. When
market interest rates rise, the net asset value of the Trust will decline;
Participants who redeem Units in such circumstances will suffer the resulting
loss in value of Trust assets. Conversely, in certain periods of declining
interest rates, Mortgage Investments held by the Trust will increase in market
value but may be prepaid by the various borrowers or other obligors so that
anticipated yields on such investments may not be realized.
Scheduled payments of principal and any prepayments will be reinvested at
prevailing interest rates, which may be less than the rate of interest for the
Mortgage Investments on which such payments are made. In addition, to the
extent the Trust purchases Mortgage Investments at a premium (i.e., an amount
in excess of the principal amount of the asset purchased), partial prepayments
of principal would reduce the yield to the Trust and, in the event of complete
prepayment, the Trust would be unable to recover or recoup the premium.
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REDEMPTION
While the Trust does not buy Mortgage Investments for purposes other than
investment, the Trust will from time to time buy or sell Mortgage Investments
in order to prevent fluctuations in the weighted average maturity of its
portfolio or to maintain a desirable level of portfolio diversification. See
"INVESTMENT OBJECTIVE AND POLICIES--Other Policies.) Although registered
investment companies generally must value their assets and accept redemption
requests daily, the Trust is permitted to value its assets and accept
redemption requests no more often than quarterly, by virtue of an exemptive
order received from the SEC. The Trust's Board of Trustees has implemented
monthly valuations of the Trust's assets, which enables the Trust to redeem
Units on a monthly, rather than quarterly, basis. Consistent with the Trust's
exemptive order and its redemption procedures (see "REDEMPTION"), the Trust
will invest at least 90% of the value of its assets in investments that are
readily marketable and convertible into cash within 120 days without a
discount from their market value (see "INVESTMENT RESTRICTIONS"). It is
possible, however--due to changes in interest rates, the performance of
specific properties, or general economic conditions since the monthly
Valuation Date preceding a request for redemption--for the market value of an
investment at the time of its liquidation to be less than its market value as
of the monthly Valuation Date preceding a request for redemption.
Most of the Trust's assets could be disposed of in a time frame
sufficient to meet monthly redemptions. In the event the Trust were to
receive redemption requests with respect to a particular monthly Valuation
Date in an amount that exceeds the amount of assets that the Trust could
liquidate at market value prior to the applicable redemption date, the Trust
would not be able to satisfy such redemption requests without liquidating
certain of its assets at a discount from their market value. If such
circumstances were to occur, the Trust would be unable to satisfy at least
some of the redemption requests on a timely basis because the Trust would not
liquidate assets at a discount from their market value. Therefore, in
anticipating the availability of funds based on a redemption of Units,
investors should be prepared for the possibility of a delay in the
satisfaction of a monthly redemption request. Such a delay would not,
however, extend more than 120 days beyond the monthly Valuation Date following
the Trust's receipt of the redemption request (except to the extent it were
necessary to liquidate that portion (up to 10%) of the Trust's portfolio not
required to be invested in assets that are readily marketable and convertible
into cash within one hundred twenty days without a discount from their market
value). See "REDEMPTION." Redemption is the only means available to the
holder of a Unit wishing to liquidate its interest in the Trust, as the Units
may not be transferred, assigned, pledged or otherwise encumbered. See
"INCIDENTS OF OWNERSHIP OF UNITS." The Trust has never failed to satisfy any
redemption request on a timely basis.
LIMITED RESALE MARKET FOR CERTAIN TYPES OF MORTGAGE INVESTMENTS
The Trust normally anticipates holding the majority of its Mortgage
Investments to maturity. However, if for any reason the Trust were required
to sell such Mortgage Investments quickly, it may, on occasion, be able to
dispose of them only at a discount from their market value. These constraints
relate principally to Mortgage Investments that are not federally insured or
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guaranteed or not issued or guaranteed by Fannie Mae or Freddie Mac or backed
by loans or securities that are not federally insured or guaranteed or not
issued or guaranteed by Fannie Mae or Freddie Mac. Under the Trust's
Declaration of Trust, such Mortgage Investments may not exceed more than 30%
of the Trust's portfolio. Moreover, to the extent such Mortgage Investments
are considered illiquid for purposes of the Investment Company Act (see
"INVESTMENT RESTRICTIONS"), they will be treated as such by the Trust.
A number of factors constrain the marketability of long-term Mortgage
Investments that are not federally insured or guaranteed or not issued or
guaranteed by Fannie Mae or Freddie Mac or backed by loans or securities that
are not federally insured or guaranteed or not issued or guaranteed by Fannie
Mae or Freddie Mac. Administrative loan servicing requirements and costs and
other factors restrict the resale market for single-family mortgage loans to
some extent. The large denominations of Mortgage Investments for multi-family
projects restrict the number of buyers interested in them. In the case of any
long-term Mortgage Investment, the market is apt to be more limited than for
Mortgage Investments of shorter maturity. Required liquidation of long-term
Mortgage Investments in an unfavorable market could result in significant
losses from face value.
The market for construction period Mortgage Investments is affected by
the uncertainties inherent in building construction. If a Mortgage Investment
is sold during the construction period, the purchaser customarily will seek
assurances as to the status of construction, the nature of the permanent
financing commitment and other matters relating to the underlying project.
These and other factors may cause delays in the event a decision is made to
sell construction period Mortgage Investments.
INFLATION
Loans and other Mortgage Investments in which the Trust invests generally
do not include any provision giving the lender or issuer the right to require
repayment of principal in advance of maturity except in the case of default.
The rate of inflation in the national economy may from time to time be such
that prevailing interest rates exceed the rates earned on the Mortgage
Investments in the Trust's portfolio. Such circumstances could diminish the
value of the Trust's assets, although continued sales of Units will tend to
mitigate such diminution.
DEFAULTS ON LOANS
The Trust may experience certain losses in the event of default on the
loans which directly or indirectly back the Trust's Mortgage Investments.
This is true even for federally insured or guaranteed loans. Losses on
federally insured or guaranteed loans can occur as a result of: (i) the
requirement in some cases that the holder of a mortgage loan in default
generally pay an assignment fee of 1% when receiving an insurance settlement;
(ii) the requirement in some cases that the holder of the mortgage loan obtain
title to the property, through foreclosure or otherwise, in order to obtain an
insurance settlement; (iii) the fact that federal agencies can, in some cases,
settle insurance obligations by payment in debentures rather than in cash;
(iv) possible offsets of insurance proceeds against amounts held by the Trust
or mortgage banker; (v) loss of certain interest payments upon default that
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are not covered by certain FHA insurance programs; (vi) costs of foreclosure
and related costs; and (vii) other reasons.
For VA-guaranteed loans not included in Ginnie Mae pools, it is possible
that the amount of the loss will exceed VA's maximum loss exposure under its
guaranty. If this were to occur, the Trust would bear the portion of the loss
not covered by VA's guaranty.
The Trust may invest in certain loans or securities which, in addition to
principal and base interest insured or guaranteed by FHA, VA or Ginnie Mae, or
guaranteed by Fannie Mae or Freddie Mac, include separate uninsured
obligations. These investments may consist of (i) federal
government-related, Fannie Mae and Freddie Mac contingent interest mortgage
loans which include separate contractual provisions obligating the borrower to
pay additional interest based entirely on net or gross cash flow and/or net or
gross proceeds upon sale, refinancing or disposition of the project (the
contingent interest); and (ii) mortgage loans that include a right to require
the borrower to repay a mortgage loan prior to the regular maturity date of
the insured mortgage loan. See "INVESTMENT OBJECTIVE AND POLICIES."
Contingent interest obligations in excess of principal and base interest
are not secured by the mortgaged real property, by any government insurance or
guarantee, or by any obligation of Fannie Mae or Freddie Mac. Moreover, in
the event of a default under the mortgage loan which results in a claim under
the federal government's insurance or guarantee, or against Fannie Mae or
Freddie Mac's obligation, the right to receive the contingent interest would
either be assigned to the federal government agency, Fannie Mae or Freddie
Mac, as the case may be, or would terminate. In addition, the obligation of
the principals of a project owner to pay contingent interest is generally not
a personal obligation of such parties. There can be no assurance that any
project owner or principals thereof will have sufficient financial resources
to pay any contingent interest that may be owing. The Trust expects that it
will attempt to secure a contingent interest obligation by obtaining, where
possible, a subordinate mortgage and/or a security interest in the ownership
interest of the principals of the borrower or other security.
State usury laws establish restrictions, in certain circumstances, on the
maximum rate of interest that may be charged and impose penalties on the
making of usurious loans, including monetary penalties, forfeiture of interest
and unenforceability of the debt. Although the Trust does not intend to make
or invest in mortgage loans charging contingent interest rates in excess of
those permitted by law, there is a risk that interest on contingent interest
mortgage loans could be found to exceed legal limits as a result of
uncertainties in determining the maximum legal rate of interest in certain
jurisdictions, especially with respect to contingent interest. To address
this risk, in circumstances where the Trust invests in contingent interest
mortgage loans, the Trust intends to obtain (i) an opinion of counsel from the
jurisdiction in which the mortgaged property is located stating that, in the
opinion of counsel, the rate of contingent interest does not and will not
exceed the maximum rate of interest allowed by law and/or (ii) a special
endorsement to the title insurance policy, in jurisdictions where obtainable,
insuring the Trust against penalties that may arise from the charging of
interest in excess of the maximum rate of interest allowed by law.
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If the Trust obtains a subordinate mortgage or other security to secure
the payment of contingent interest, there can be no assurance that such
subordinate mortgage or other security will provide meaningful protection to
the Trust with respect to any payments due, because rights under such
subordinate mortgage or other security to the related project and the revenues
therefrom will be subordinate to the rights of the first priority lien holder.
The Trust's ability to collect contingent interest in excess of insured
base interest will be dependent also on the economic performance of the
project and will be subject to the risks inherent in investing in real estate.
The economic performance of a project may be affected by a number of factors,
including occupancy levels, defaults by tenants in the payment of rent,
increases in project operating expenses and acts of God, such as earthquakes
and floods.
With respect to federally insured or guaranteed mortgage loans that
include a right to require the borrower to repay the indebtedness prior to the
regular maturity date of a mortgage loan, the balloon repayment obligation
would not be secured by the federally insured note or mortgage or by any
government insurance or guarantee. It is anticipated instead that such
obligation would be secured by a security interest in the ownership interests
of the principals of the borrower or other security, including, where
obtainable, a subordinate mortgage. Because the obligation to repay the loan
prior to its stated maturity would not be included in the federally insured or
guaranteed note and mortgage, the Trust would not be entitled to obtain
insurance proceeds in the event of non-compliance with a demand for repayment
at such earlier date. If the Trust has obtained a subordinate mortgage to
secure the early repayment of the mortgage loan, the Trust would be able,
subject to compliance with certain conditions, foreclose on the mortgaged
property, and obtain title (either directly or through an agent or nominee) to
the underlying real property subject to the federally insured first mortgage.
However, even if the Trust obtains a subordinate mortgage or other security,
there can be no assurance that such subordinate mortgage or other security
will provide meaningful protection to the Trust with respect to the early
repayment of the loan, because the rights under such subordinate mortgage or
other security to the related project and the revenues therefrom will be
subordinate to the rights of the holder of the first mortgage. The Trust
expects that if it is unable to enforce its right to early repayment, it would
continue to hold its interests in the mortgage loan or the securities backed
by such mortgage loan, the principal and interest of which mortgage loan or
securities would remain federally insured or guaranteed. In such event, a
loss could be incurred because the Trust would have required a higher rate for
an investment in a mortgage loan or mortgage-backed security that was not
accompanied by the right to demand repayment at an earlier date. The risk
described in this paragraph does not apply to "early repayment" loans, or
securities backed thereby, that are guaranteed by Fannie Mae or Freddie Mac,
because payments on such loans and securities are guaranteed at the stated
early maturity.
In addition, not all loans or mortgage-related assets in which the Trust
may invest are federally insured or guaranteed, or guaranteed by Fannie Mae or
Freddie Mac; Mortgage Investments which are not so insured or guaranteed will
be subject to all the risks inherent in investing in real estate. See
"INVESTMENT OBJECTIVE AND POLICIES; RISK FACTORS -- Real Estate-Related
Risks."
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DEFAULTS ON SECURED BRIDGE LOANS
If the issuer of any letter of credit or other form of guaranty which
secures a Secured Bridge Loan fails or is unable to meet its obligations under
such letter of credit or other guaranty, the Trust would be subject to the
risk that LIHTC investors may not make required payments on their obligations
to the development owner as scheduled and also to certain real estate risks
relating to the underlying development. LIHTC investors may not make the
payments for reasons relating to the performance of the development, i.e.,
because the agreed upon circumstances under which the payments would become
due do not occur. In addition, however, the LIHTC investors may not make the
payments as a result of changes in the financial capacity of the LIHTC
investors themselves. In the event that the LIHTC investors do not make
required payments, the Trust may be required to enforce the obligations of the
LIHTC investors under their notes or other payment agreements with the
development owner. Enforcement actions may include foreclosing upon or
otherwise acquiring the defaulting LIHTC investors' ownership interests. As
the owner of such interests in the development owner, the Trust would be
subject to the real estate risks that any development owner would face.
Certain of these risks are described below under the caption "RISK FACTORS--
Real Estate-Related Risks."
RATINGS
There can be no assurance that a rating that exists when a Trust
investment is made will continue for any given period of time, or that it
would not be revised downward or withdrawn entirely by the rating entity if,
in its judgment, circumstances so warrant. A downgrade in the rating or
withdrawal of the rating would signify an increase in the risk of default on
the related Mortgage Investment and would be likely to result in a reduction
in the value of the investment.
LACK OF DIVERSIFICATION
The Investment Company Act defines a "diversified company" as an
investment company that maintains at least seventy-five percent of the value
of its total assets in, among other investments, securities of any one issuer
limited to an amount not greater in value than 5% of the value of the
company's total assets. In this connection, the Declaration of Trust does not
specify the proportion of the Trust's assets that may be committed to each of
the several types of investments the Trust may make. The Trust plans to
follow a policy of investing no more than 15% of the value of its total assets
in any single Mortgage Investment as of the time of investment. Given the
foregoing definition of a diversified company, the Trust's ability to invest
up to 15% of its total assets in a single Mortgage Investment under this
policy may from time to time result in the Trust's investment portfolio
shifting from nondiversified to diversified and back again, without prior
investor approval. This shift is contrary to Section 13(a)(1) of the
Investment Company Act, absent prior security holder approval. However, the
Trust has obtained from the SEC an exemption from this requirement insofar as
the exemption might be necessary for the Trust to conduct its investment
practices as described above. To the extent the Trust operates as a
nondiversified company, the risk of loss on its investment portfolio will be
increased. See "EXEMPTIONS FROM SPECIFIC REQUIREMENTS OF THE INVESTMENT
COMPANY ACT" in the Statement of Additional Information.
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The terms "diversified" and "nondiversified" as used herein are not
intended to describe the geographical locations or concentrations of
properties backing the Mortgage Investments in the Trust's portfolio. Such
properties are spread throughout the United States and it is the Trust's
intention to maintain such geographical diversity.
INVESTMENT RESTRICTIONS
Because of certain legal restrictions, the Trust may not invest more than
10% of the value of the Trust's assets in securities or investments that are
not readily marketable and convertible into cash within 120 days without a
discount from their market value. As of December 31, 1997, 0.8% of the
Trust's net assets were in this category. See "INVESTMENT RESTRICTIONS."
Circumstances may arise where the aggregate of such restricted investments
held by the Trust temporarily exceeds the 10% limitation. For example, the
rating of the issuer of a letter of credit or guarantee related to a privately
collateralized investment held by the Trust, or the rating of a state agency
guaranteeing obligations held by the Trust, may be downgraded or withdrawn,
which could in turn result in the investments being not readily marketable or
not convertible into cash within 120 days without a discount from their market
value. To the extent that the total amount of such securities or investments
exceeds 10% of the value of the Trust's assets, such securities or investments
must be liquidated by the Trust even if the market requires that they be
liquidated at a price that reflects a substantial discount from their market
value.
REAL ESTATE-RELATED RISKS
Certain authorized Mortgage Investments that (i) are neither federally
insured or guaranteed nor issued or guaranteed by Fannie Mae or Freddie Mac
(ii) are not backed by loans or securities which are federally insured or
guaranteed or issued or guaranteed by Fannie Mae or Freddie Mac or (iii)
provide for contingent interest (see "INVESTMENT OBJECTIVE AND
POLICIES--Privately Collateralized investments; State and Local Government
Related Investments; Secured Bridge Loans.") will be subject to one or more
real estate-related risks described below.
Construction Risks. Due to the lack of federal insurance or guarantees,
some proposed investments may involve potential construction risks. The
construction period is an extremely risky phase of any project development for
a variety of reasons. For example, it is sometimes difficult accurately to
estimate prior to the commencement of construction the total costs of
construction and related carrying costs that will be required in order to
complete a project and to pay operating expenses, leasing costs and debt
service until the project reaches sustaining occupancy. In addition, the
construction period may be subject to unforeseeable delays and difficulties
which may adversely affect the project and the related construction loan.
The total development costs of a project and its scheduled completion
date are subject to change as construction and operation of a project
progresses. During all stages of development and construction, a developer is
subject to extensive environmental, building, land use, zoning and other
statutes and regulations administered by various federal, state, county and
local authorities. Such statutory and regulatory requirements (and any
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changes in such requirements during construction) may result in increased
costs, delays in construction and/or an inability to complete a project on
schedule and in accordance with development plans. For example, changes in
environmental or other laws may impose or increase restrictions on the use or
operation of a project, may increase certain expenses of a project or may
necessitate potentially expensive changes in the physical configuration of the
property. Changes in federal tax laws may make investment in real estate less
attractive economically and thereby adversely affect real estate values.
Other factors that may result in increased costs, delays in construction
and/or an inability to complete a project on schedule and in accordance with
development plans include, without limitation, cost increases or shortages in,
or the unavailability when needed of, materials, labor and/or services,
construction or labor disputes, delays in construction caused by adverse
weather, casualty and other factors, poor management, delays, unanticipated
costs and difficulties in obtaining lease-up of a project and other unforeseen
occurrences. Such cost overruns and delays may adversely affect the
developer's ability to complete the construction of a project, as well as the
economic viability of a project.
Although the project and the sponsor will be carefully reviewed and
underwritten, there is no assurance that a borrower will have the resources
available to fund the total construction and marketing costs of a project or
will be able to secure secondary or alternative financing of cost overruns or
unanticipated costs. In the event that construction loan proceeds and other
funds available to a borrower are insufficient to pay all such costs, the
project may not reach completion, satisfy any requirements for permanent
financing and/or reach sustaining occupancy, in which event the borrower is
unlikely to be able to repay the loan.
There is no assurance that a borrower will be able to complete the
construction or lease-up of a project as required. Delays may result from a
variety of causes, including, without limitation, the factors discussed above,
despite the developer's contractual obligations as to completion and lease-up.
Any failure to complete the construction or lease-up of a project on schedule
and in accordance with development plans may result in loss of rental income,
loss of permanent financing (if the Trust is providing only construction
financing) or other financial assistance for the project.
Market conditions also may change between the time at which a commitment
is issued or the construction loan is made and the completion of a project,
rendering the project economically unfeasible or anticipated rents
unattainable. In the event that any of the foregoing or other difficulties
occur during the construction period, the Trust may not receive the repayment
on a timely basis of all amounts advanced under or with respect to a
construction loan.
Risks Affecting the Operation of Projects and Repayment of Permanent
Loans. A borrower's ability to make required payments on any mortgage loan
after the completion of construction of a project will be affected by a
variety of factors. These include, but are not limited to, the achievement
and maintenance of a sufficient level of occupancy, sound management of the
project, timely receipt of rental income, increases in rents to cover
increases in operating expenses (including taxes, utility rates and
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maintenance costs), and the costs of required repairs resulting from
reasonable wear and tear and casualties and changes in applicable laws and
governmental regulations. In addition, the continued feasibility of a project
may depend in part upon general and local economic factors, the supply and
demand for rental housing in the area in which the project is located,
competition from other rental housing projects, rent controls and profit
controls. There are no assurances that a project owner will be able to
achieve and maintain sufficient rental income in order to pay all operating
expenses and maintenance and repair costs of a project and the debt service
on the related mortgage loan on a timely basis. In the event that a project
owner is unable to pay all such costs, expenses and debt service, a default on
the related mortgage loan is likely to occur.
Environmental and Litigation Risks. Certain states impose a statutory
lien for associated costs on property that is the subject of a cleanup action
by the state on account of hazardous wastes or hazardous substances released
or disposed of on the property. Such a lien generally will have priority over
all subsequent liens on the property and, in certain states, will have
priority over prior recorded liens, including the lien of a mortgage. In
addition, under federal environmental law and possibly under state law in a
number of states, a secured party which takes a deed in lieu of foreclosure or
acquires a mortgaged property at a foreclosure sale may be liable for the
costs of cleaning up a contaminated site. Such costs could be substantial.
The imposition of such costs on a project owner may adversely affect such
owner's ability to pay the debt service on a mortgage loan. It is unclear
whether such costs would be imposed on a secured lender such as the Trust or
any secured lender acting on behalf of the Trust in the event that the secured
lender did not actually acquire title to the project. In the event that title
to a project securing a mortgage loan was acquired by the Trust or any lender
acting on behalf of the Trust and cleanup costs were incurred in respect of
the project (or such cleanup costs were imposed upon the Trust as a secured
lender or any secured lender acting on behalf of the Trust even if the Trust
or such other lender did not acquire title to the project), the Trust could
realize a loss.
Any project owner may be vulnerable to potential litigation arising from
public or private disputes about the conduct of its business or the operation
of its project. A project owner may become involved in disputes or
litigation, during construction or in the course of continuing operations, as
to violations of federal, state or local laws, property tax valuations and
assessments, rent or profit controls, the terms of lease agreements with
tenants or any other contract or agreement as to which it is a party or will
become a party in the course of its business operations. There is no
assurance that litigation arising from such disputes will be resolved in favor
of the project owner and the existence of such a dispute or an unfavorable
resolution of such a dispute could adversely affect the ability of a project
owner to pay the debt service on its mortgage loan.
Foreclosure Risks. In cases in which the Trust invests directly in
mortgage loans, it is anticipated that the mortgage loan will be secured by a
deed of trust or mortgage, depending upon the prevailing practice in the state
in which the subject property is located. Foreclosure of a deed of trust may
be accomplished in certain jurisdictions by a non-judicial trustee's sale
under a specific provision in the deed of trust which authorizes the trustee
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to sell the property upon any default by the borrower under the terms of the
note or deed of trust. Foreclosure of a mortgage generally is accomplished by
judicial action. The action is initiated by the service of legal pleadings
upon all parties having an interest in the real property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating necessary party defendants. The borrower may seek bankruptcy
protection in an attempt to delay or avert a foreclosure and/or assert other
defenses to the proceedings. Any bankruptcy filing will, and the assertion of
other defenses may, significantly delay the proceedings and increase the
expenses incurred by the lender in prosecuting the proceedings, and could
result in a reduction of the secured debt in the event of a "cramdown" by a
bankruptcy court. Depending upon market conditions, the net proceeds of the
sale of the property after foreclosure, fix-up, and selling expenses may be
less than the Trust's investment.
In some states, after foreclosure and sale, the borrower and foreclosed
junior lienholders are given a statutory period in which to redeem the
property from the foreclosure sale. In some states, redemption may occur only
upon payment of the entire principal balance of the loan, accrued interest and
expenses of foreclosure. In other states, redemption may be authorized if the
former borrower pays only a portion of the sums due. The effect of a
statutory right of redemption is to diminish the ability of the lender to sell
the foreclosed property. Consequently, the practical effect of the redemption
right is often to force the lender to retain the property and pay the expenses
of ownership until the redemption period has run.
MANAGEMENT
Under the terms of the Declaration of Trust, the power to exercise a
controlling influence over the management and policies of the Trust is vested
exclusively in the Board of Trustees. The Declaration of Trust provides that
the Board may have up to 25 Trustees. Up to 12 of the Trustees may be Union
Trustees, up to 12 of the Trustees may be Management Trustees, and one Trustee
is to be the Chairman. As of April 1, 1998, the Board of Trustees consisted
of the Chairman, 9 Union Trustees and 8 Management Trustees. The number of
Management Trustees may not exceed the number of Union Trustees except in the
event a Trustee dies or resigns before expiration of his term.
The Board of Trustees has overall responsibility for the management of
the Trust. Between meetings of the full Board, the Executive Committee of the
Board of Trustees, currently consisting of the Chairman, one Union Trustee and
one Management Trustee, acts for the Board in managing Trust affairs. When
the Executive Committee is not in session, the Chief Executive Officer is
responsible for Trust management.
The Declaration of Trust divides the Union and Management Trustees into 3
Classes. Each Class is required to have, insofar as the pool of Trustees
permits, an equal number of Union and Management Trustees. The term of each
Class expires at the third annual meeting following its election. At each
annual meeting, the Participants will elect a Chairman to serve until the
next annual meeting and such number of Trustees as is necessary to fill
vacancies in the Class whose terms expire as of that meeting and any Trustee
appointed to complete the remainder of a term. The current Trustees and
officers of the Trust and their principal occupations are described in the
Statement of Additional Information under "MANAGEMENT OF THE TRUST."
38<PAGE>
<PAGE>
The Trust pays the Chairman $10,000 per year. The Trust pays Management
Trustees $500 per day for participation in Board of Trustee meetings and
committee meetings. The Trust pays no remuneration to any Union Trustee.
Individual Trustees are reimbursed for out-of-pocket expenses of attending
Trustee and committee meetings. The Trust employs the Chief Executive Officer
as a salaried employee pursuant to an employment agreement with him.
For the fiscal year ended December 31, 1997, the Trust's personnel
expenses (salaries and benefits) for all Trust officers and staff members
totaled $3,797,617.
The Trust has no independent investment adviser, except with respect to
certain short-term assets. See "INVESTMENT ADVISER." Investment decisions
are made by the Chief Executive Officer, the Chief Investment Officer, the
General Counsel, the Director of Investor Relations and the Portfolio Manager
of the Trust under the general supervision of the Executive Committee and,
ultimately, the Board of Trustees. Since the Chief Executive Officer, the
Chief Investment Officer, the General Counsel and the Portfolio Manager are
officers of the Trust and none of these officers are engaged in the business
of providing securities investment advice to others, neither the Chief
Executive Officer, the Chief Investment Officer, the General Counsel nor the
Portfolio Manager have registered or plans to register as an investment
adviser under the Investment Advisers Act. The Trust has no independent
transfer agent or dividend paying agent. Issuance and redemption of Units and
distribution of interest income are the responsibility of the Chief Executive
Officer and his staff.
The Chief Executive Officer, the Chief Investment Officer, the General
Counsel and the Portfolio Manager can acquire the Trust's Mortgage Investments
from, in participation with, or with the assistance of FHA- and VA-approved
mortgage banking firms, Fannie Mae- and Freddie Mac-approved seller/servicers,
depository institutions, investment bankers and other lenders approved by
management, located throughout the United States believed to be in a position
to know the standing of local builders and other borrowers and the merit of
the building projects considered for investment. These officers have broad
discretion regarding the mortgage banking firms and institutions through which
the Trust deals. Mortgage Investments are acquired from mortgage banking
firms or other lenders or issuers on a net price basis without commissions,
although the Trust will typically pay the mortgage banker or servicer involved
an ongoing loan servicing fee in connection with whole mortgage loans and
participations therein, in each case ranging from .05% to 1.20% of the amount
involved in the transaction.
The Trust does not ordinarily engage brokers to effectuate transactions
in Mortgage Investments. It is customary for brokers for construction and
long-term real estate loans to be engaged by the mortgage borrower or the
mortgage banker without expense to mortgage investors such as the Trust.
Transactions in short-term liquid assets are customarily effectuated on a net
price basis without commission.
During the year ended December 31, 1997, the Trust's expenses totaled
$6,457,647 (0.43% of average net assets). The Trust does not expect to incur
a material amount of extraordinary expense during the current fiscal year.
39<PAGE>
<PAGE> TRUST PERFORMANCE
The factors that materially influenced the Trust's performance during its
most recently completed fiscal year are discussed in the Trust's 1997 annual
report to shareholders, currently on file with the SEC.
The following graph illustrates the net and gross account value of
$50,000 invested in the Trust on January 1, 1988 at the end of each of the
past ten years, compared to the account value of $50,000 invested on the same
date at total rate of return of the Salomon Brothers Broad Bond Index, Salomon
Brothers Mortgages Index and the U.S. Treasury Bill Index.
Trust's Annualized Total Gross Returns
One-year ended Five years ended Ten years ended
December 31, 1997 December 31, 1997 December 31, 1997
11.22% 8.74% 10.15%
PAST PERFORMANCE OF AN INVESTMENT IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
COMPARATIVE RATES OF RETURN 1988 - 1997
<TABLE>
<CAPTION>
COMPARATIVE RATES OF RETURN 1988 - 1997
- - ------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENT FOR YEAR ENDING
1988 1989 1990 1991 1992
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AFL-CIO Housing
Investment Trust
Total Gross Rate
of Return $54,575.00 64,207.49 70,788.75 81,336.29 86,419.80
AFL-CIO Housing
Investment Trust
Total Net Rate
of Return $54,310.00 63,569.86 69,717.06 79,686.60 84,276.55
Salomon Brothers
Broad Bond -
Total Gross Rate
of Return $ 55,000.00 61,776.00 67,397.62 78,181.23 84,123.01
Salomon Brothers
Mortgages -
Total Gross Rate
of Return $ 54,415.00 62,658.87 69,488.69 80,356.72 86,287.05
U.S. Treasury
Bill - Total
Gross Rate of
Return $ 53,050.00 57,187.90 61,305.43 64,493.31 66,557.10
</TABLE>
40<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE RATES OF RETURN 1988 - 1997 (continued)
- - ------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENT FOR YEAR ENDING
1993 1994 1995 1996 1997
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AFL-CIO Housing
Investment Trust
Total Gross Rate
of Return $ 98,208.69 93,161.70 111,896.52 118,151.54 131,408.14
AFL-CIO Housing
Investment Trust
Total Net Rate
of Return $ 92,426.09 89,930.59 107,521.01 113,036.84 125,176.99
Salomon Brothers
Broad Bond -
Total Gross Rate
of Return $ 92,451.19 89,770.10 106,467.34 110,300.17 120,933.10
Salomon Brothers
Mortgages -
Total Gross Rate
of Return $ 92,344.40 91,023.87 106,297.68 112,027.12 122,412.04
U.S. Treasury
Bill - Total
Gross Rate of
Return $ 68,354.14 70,814.89 74,284.82 77,776.20 81,509.46
</TABLE>
INVESTMENT ADVISER
Beginning as of May 21, 1992, the Trust engaged Wellington Management
Company, LLP ("Wellington Management") to furnish investment advisory services
concerning certain of the short-term, liquid assets in the Trust's portfolio
designated by the Trust from time to time. The Trust currently has no
independent investment adviser other than Wellington Management, whose
Investment Advisory Agreement with the Trust was initially approved by
Participants at the Trust's 1992 Annual Meeting. As of December 31, 1997, the
value of all short term assets eligible for management by Wellington
Management was $84,582,295 which represented 5% of the Trust's total net
assets at that date. The Investment Advisory Agreement was amended and
extended for a period of two years by a vote of the Participants at the
Trust's Annual Meeting in May, 1997 to include investment advisory services
concerning certain of the intermediate-term, liquid assets in the Trust's
portfolio designated by the Trust from time to time and certain other
portfolio analysis services.
41<PAGE>
<PAGE>
Wellington Management, a Massachusetts limited liability partnership, is
a registered investment adviser with principal offices located at 75 State
Street, Boston, Massachusetts 02109. Its Managing Partners are Robert W.
Doran, Duncan M. McFarland and John R. Ryan. Wellington Management is a
professional investment counseling firm that provides investment services to
investment companies, employee benefit plans, endowment funds, foundations,
and other institutions and individuals. As of February 28, 1998, Wellington
Management held investment management authority over approximately $185
billion of assets, including $20.2 billion of cash and cash-equivalent assets.
Wellington Management and its predecessor organizations have provided
investment advisory services to investment companies since 1928 and to
investment counseling clients since 1960.
Under the Investment Advisory Agreement, Wellington Management provides
investment advisory services concerning certain of the short-term and
intermediate-term, liquid assets in the Trust's portfolio (the
"Short/Intermediate Term Assets"). Wellington Management manages the
investment and reinvestment of the Short/Intermediate Term Assets;
continuously reviews, supervises and administers the investment program of the
Short/Intermediate Term Assets; determines the securities to be purchased,
retained and sold (and implements those decisions); renders regular reports to
the Trust's officers and Trustees concerning its discharge of the foregoing
responsibilities, including providing to the Trust's officers within 2
business days after each Valuation Date market prices as of the Valuation Date
for Short/Intermediate Term Assets that mature more than 60 days after the
Valuation Date; monitors portfolio investment characteristics; analyzes
portfolio performance and provides to the Trust's officers within 10 business
days after each calendar month end a report regarding such performance for
such month; provides analysis on markets and instruments; provides investment
overview and economic outlook forecasts; provides information and comment on
various relevant regulatory and legal issues; attends meetings of the Trust's
Executive Committee and Trustees as reasonably requested; supplies the Trust's
officers and Trustees with statistical information and reports, and provides
the Trust with certain portfolio analysis functions and reports, including
analysis and reports which may assist the Trust in determining the allocation
of assets within the Short/Intermediate Term Assets. Wellington Management
discharges these and its other duties subject to the oversight of the officers
and Trustees of the Trust and in compliance with the Trust's policies.
Wellington Management renders all of the services described above at its
own expense, and provides the office space, furnishings and equipment, and
personnel required by it to perform those services for the compensation
described below.
Wellington Management is authorized to arrange for the execution of
portfolio transactions by selecting brokers or dealers that will execute the
transactions, and is directed to use its best efforts to obtain the best net
results, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of
execution, and operational facilities of the firm involved. Wellington
Management may in its discretion purchase and sell portfolio securities
through brokers who provide it or the Trust with research, analysis, advice
and similar services, and Wellington Management may pay to these brokers, in
return for research and analysis, a higher commission than may be charged by
other brokers, provided that Wellington Management determines in good faith
42<PAGE>
<PAGE>
that such commission is reasonable in terms either of that particular
transaction or of the overall responsibility of Wellington Management, that
the total commission paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long term, and that the total commission paid
by the Trust is consistent with commissions paid in comparable transactions.
In selecting a broker for each specific transaction, Wellington
Management has agreed to use its best judgment to choose the broker most
capable of providing the brokerage services necessary to obtain the best
available price and most favorable execution. The full range and quality of
brokerage services available will be considered in making these
determinations. For example, brokers may be selected on the basis of the
quality of such brokerage services related to the requirements of the specific
transaction such as the following; capable floor brokers or traders, competent
block trading coverage, good communications, ability to position, use of
automation, research contracts, arbitrage skills, administrative ability, or
provision of market information relating to the security. Wellington
Management will make periodic evaluations of the quality of these brokerage
services as provided by various firms and measure these services against its
own standards of execution. Brokerage services will be obtained only from
those firms which meet its standards, maintain a reasonable capital position,
and can be expected to reliably and continuously supply these services.
On occasions when Wellington Management deems the purchase or sale of a
security to be in the best interest of the Trust as well as other clients,
Wellington Management, to the extent permitted by applicable laws and
regulations, may, but is under no obligation to, aggregate the securities to
be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Wellington Management in the manner it considers
to be the most equitable and consistent with its fiduciary obligations.
Under the terms of the Investment Advisory Agreement, Wellington
Management is compensated monthly at the annual rate of 0.16% of the market
value of the Trust's assets under management by Wellington Management, based
upon the average monthly market value of such assets.
INCIDENTS OF OWNERSHIP OF UNITS
Beneficial interests of the Trust are divided into Units representing
equal portions of Trust assets. Rights arising from ownership of Units are
set forth in the Declaration of Trust. The Declaration of Trust can be
amended by vote of a majority of Trustees without any requirements of a vote
by holders of Units. However, the Declaration of Trust provides that,
notwithstanding anything to the contrary contained in the Declaration of Trust
or any amendment thereto, no part of the Trust that equitably belongs to any
investor (other than such part as is required to pay the expenses of the
Trust) is to be used for any purpose other than the exclusive benefit of the
investors. In addition, fundamental investment policies may not be changed
without the approval of holders of a majority of the Trust's outstanding
Units.
43<PAGE>
<PAGE>
Each Unit carries the right to vote to elect a Class of Trustees, to
ratify selection of the auditors for the Trust, and to approve changes in
investment policy. Each Unit entitles the holder thereof to participate pro
rata with all other Units in the distribution of assets in any liquidation of
the Trust. No preemptive rights attach to Units; the Trust has the right to
sell or exchange Units without offering the same to the holders of the then
outstanding Units.
The overwhelming majority of jurisdictions in the United States recognize
a trust, such as the Trust, as a separate legal entity, wholly distinct from
its beneficiaries. In those jurisdictions, the beneficiaries of a trust, such
as the Participants in the Trust, are not liable for the debts or other
obligations of the trust. A few jurisdictions, particularly Texas and Kansas,
do not recognize so-called "business trusts" as separate legal entities and
hold the beneficiaries of such trusts personally liable for actions of the
business trusts. The Trust nevertheless does not expect to exclude otherwise
eligible investors in Kansas and Texas and other such jurisdictions from
investing in Units.
The Declaration of Trust requires that every written undertaking contain
a provision stating that such undertaking is not binding upon any investor
personally and that any person, firm, corporation or association dealing with
the Trustees shall be limited to satisfying any obligation, liability, or
covenant of the Trustees out of the Trust property and not out of the personal
property of any investor. Counsel for the Trust is of the opinion that in the
overwhelming majority of jurisdictions, no personal liability will attach to
the holders of Units on any undertaking containing such a provision. However,
in those jurisdictions that refuse to recognize the separate status of trusts
such as the Trust, Participants could be held personally liable for claims
against the Trust. These claims could include contract claims where the
provision referred to above is omitted from the undertaking, tort claims, tax
claims and certain other statutory liabilities. If such liability were ever
imposed upon Participants, they would be liable only to the extent that Trust
assets and insurance were not adequate to satisfy the claims.
Units are not transferable and are not assignable. No holder of a Unit
has the authority to pledge the Unit as collateral for any loan. The Trust
does not issue certificates to evidence ownership of Units. In lieu thereof,
Units are issued and redeemed by bookkeeping entry and without physical
delivery of any securities.
The Trust, at the end of each calendar quarter, makes pro rata
distributions of net income earned during the preceding three-month period.
Such distributions are made in cash. Pursuant to an Internal Revenue Service
ruling received by the Trust, a Participant may authorize the Trust
automatically to reinvest any dividends to which the Participant is entitled
in the Trust in exchange for a corresponding amount of Units, calculated at
the Net Asset Value as of the end of the calendar quarter.
The Trust may be terminated at any time by the Trustees after notice in
writing to all Participants.
44<PAGE>
<PAGE>
Any inquiries or expressions of interest concerning sales transactions
should be referred to the Director of Investor Relations at Trust
headquarters, 1717 K Street, N.W., Suite 707, Washington, D.C. 20006.
SECURITIES OFFERED
ELIGIBLE INVESTORS
Only "Labor Organizations" and "Eligible Pension Plans" are eligible to
own Units. A Labor Organization means any organization of any kind, any
agency, employee representation committee, group, association, or plan in
which employees participate directly or through affiliated organizations, and
which exists for the purpose, in whole or in part, of dealing directly or
through affiliated organizations with employers concerning terms or conditions
of employment and any employee benefit plan of such an organization, or any
other organization which is, in the discretion of the Board of Trustees,
affiliated with or sponsored by such an organization. An Eligible Pension
Plan is a pension plan constituting a qualified trust under IRC Section 401(a)
that has beneficiaries who are represented by a Labor Organization and the
management of which has the discretionary right to invest funds of
beneficiaries without the direct intervention or control of those
beneficiaries.
VALUATION
The price of Units is based on Net Asset Value as of the monthly
Valuation Date following receipt of a purchase order by dividing the value of
the Trust's portfolio plus any cash and other assets (including interest and
dividends accrued but not collected) less all liabilities (including accrued
expenses but excluding capital and surplus) as of that Valuation Date by the
number of Units then outstanding.
Admission to or withdrawal from the Trust is permitted in whole or
fractional Units as of monthly Valuation Dates. A request for purchase of
Units must be received by the Trust before the Valuation Date as of which it
is to be issued. A minimum initial investment of $50,000 is required. A
request for purchase of Units must be accompanied by cash or by a subscription
agreement providing for a cash escrow of the amount to be invested as of the
forthcoming Valuation Date.
Forms of subscription agreements with banks providing for a cash escrow
pursuant to which escrowed amounts will be held in interest-bearing form are
available from the Trust. There is no sales charge or commission payable in
connection with the purchase of Units or the escrow.
The Trust has retained an independent third-party valuation firm to
perform the monthly valuation of all long-term investments. A summary of the
current valuation methodology used by the third-party valuation firm, in
consultation with Trust management, with respect to various categories of
investments is as follows:
SHORT-TERM INVESTMENTS consisting of repurchase agreements, commercial
paper, bankers acceptances, investment trusts, other investments and
warehousing loans, which mature less than sixty days from the Valuation Date
45<PAGE>
<PAGE>
are valued at amortized cost which approximates value. Short-term investments
which mature more than sixty days from the Valuation 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 Valuation Date for which
there are no quoted market prices are valued to reflect current market yields
for securities with comparable terms and interest rates.
LONG-TERM INVESTMENTS consisting of mortgage-backed securities, permanent
mortgages, construction loans, participation certificates and other mortgage-
backed obligations are valued using published prices, dealer bids or cash flow
models discounted using market-based discount and prepayment rates, developed
individually for each investment. The market-based discount rate is composed
of a risk-free yield (i.e., a U.S. Treasury Note with a weighted average life
comparable to the security being valued), 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
investment being valued as adjusted for other market considerations. On
investments for which involve the construction and permanent financing, value
is determined based upon the total amount of the commitment for the term of
the construction period plus the permanent mortgage loan period. For
investments which involve only construction period financing, the outstanding
principal balance of the underlying loan is used to approximate value,
assuming no decline in credit quality.
CONTINGENT INTEREST LOANS. Contingent interest mortgage loans bear a
base rate of interest at a rate below the market rate for non-contingent
interest mortgage loans prevailing at the time the loan was made in return for
the right to receive as additional interest a portion of (i) net cash flow
from operations and/or (ii) proceeds from the sale or refinancing of the
related project. In general, the interest in the early years is lower than
would be the case for non-contingent interest mortgage loans, but increases in
later years as net operating cash flow increases and/or upon receipt of
proceeds of a sale or refinancing, and is added to the base interest. The
Trust, as holder of the contingent interest loan or of an interest therein or
of a obligation secured thereby, is entitled to receive additional interest in
excess of the base interest rate. Because the amount of any proceeds from net
cash flow cannot be determined in advance, and the amount of any proceeds from
a sale or refinancing cannot be determined before a sale or refinancing
actually occurs, it is not possible to value the contingent interest feature
with precision.
The values of non-contingent mortgage loans are affected primarily by
changes in interest rates and secondarily by the performance of the underlying
property. With regard to contingent interest mortgage loans, however, the
performance of the underlying property becomes a more important determinant of
value.
Contingent interest mortgage loans generally are accounted for by an
estimate of the underlying property's value in those circumstances where no
exchange market exists. It is possible that the exchange value that would
take place between a willing buyer and a willing seller could differ from the
estimated value, and that the difference could be significant. The estimated
46<PAGE>
<PAGE>
value is determined by an appraisal method that discounts the expected cash
flows of the underlying property. During the initial years the investment is
carried at outstanding principal amounts plus accrued interest (assuming no
inherent credit problems with the underlying property). In later years, as
the property matures, the Trust may record appreciation or depreciation in the
value of the investment based on whether the performance of the underlying
property exceeds or falls short of expectations. As long as the underlying
property is projected to generate net operating cash flow above the base rate,
the amount of the projected contingent interest obligation is accruable by the
Trust throughout the term of the investment. In no event, however, will the
carrying value of the underlying property exceed its appraised value at any
one reporting date.
Determining the value of underlying properties necessarily requires
assumptions and estimates about future events and cash flows of the
properties. It is the intent of the Trust to engage a qualified MAI appraiser
to perform the appraisal of underlying property every five years and to place
into effect appropriate procedures to assess the relevance of individual
appraisals so that they may be updated annually by the Trust.
PRIVATELY COLLATERALIZED INVESTMENTS; STATE AND LOCAL GOVERNMENT-RELATED
INVESTMENTS:
(1) Public ratings. Obligations which carry a public rating from one
or more nationally recognized rating agencies are valued to reflect current
market yields as determined by giving effect to the average of quotes obtained
from dealers in such obligations for securities of comparable quality,
interest rates and maturities.
(2) No public rating with recourse to issuer and/or with credit
enhancement. Obligations which do not carry a public rating but are with
recourse to the issuer and/or have the benefit of credit enhancement are
valued to reflect current market yields as determined by giving effect to the
average of quotes obtained from dealers in such obligations for securities of
comparable yield and term to maturity and of a quality which, in the
determination of the Trust, is most nearly comparable to obligations in any
one or more of the following categories:
(a) obligations which carry a private rating upon which the Trust is
entitled to rely shall be valued against securities having
comparable public or private ratings;
(b) obligations which are guaranteed or otherwise secured by the
general credit or moral obligation of a state or local government
or an agency or instrumentality thereof shall be compared to other
publicly sold obligations of the particular state or local
government or agency or instrumentality thereof carrying comparable
guarantees or security arrangements;
(c) obligations with respect to which no other publicly sold
obligations issued or guaranteed or otherwise secured by a
particular state or local government or agency or instrumentality
47<PAGE>
<PAGE>
thereof are available (for purposes of determining comparable
quality) will be valued as if they were comparable in quality to
the lowest rated "investment grade" obligations of the particular
issuer with respect to which comparable quotes are available, and if
the only obligations of such issuer with respect to which comparable
quotes are available are of a grade higher than the lowest rated
investment grade, the Trust will make an appropriate discount from
quotes on such obligations to reflect a reduction to the lowest
rated investment grade; or
(d) obligations with respect to which no publicly sold securities of
comparable quality are found in accordance with the foregoing
guidelines will be valued by management on the basis of the
particular facts and circumstances of the case based on investments
that are comparable with respect to terms, quality and yield.
The averaging of quotes from dealers may be supplemented by application
of the following valuation criteria when, in the opinion of management, the
application of such supplemental criteria is warranted or desirable:
(i) discounting of expected future cash flows;
(ii) assessing the nature of the issuer or the entity providing credit
enhancement, as applicable, risks it is subject to, historical patterns of
revenue assessment and collection;
(iii) assessing tangible book value and financial condition of the issuer
or the entity providing credit enhancement, as applicable;
(iv) assessing revenue history of the issuer or the entity providing
credit enhancement, as applicable.
Obligations with respect to which a notice of redemption has been issued
will be valued on the basis of their current market yield and yield to
maturity, if the Trust has no reason to believe that payment on the
obligations will not be made at the call date. Any obligations (i) which are
in default or (ii) with respect to which one or more underlying assets are in
default and there is no mortgage insurance or other credit enhancement
available to assure full and timely payment will be valued by management based
upon the particular facts and circumstances of the case.
(3) No public rating without recourse to issuer and without credit
enhancement. Obligations which do not carry a public rating, are without
recourse to the issuer, and are without credit enhancement will be valued by
management on the basis of the particular facts and circumstances of the case
based on investments that are comparable with respect to terms, quality and
yield.
General. In addition to the valuation methods described above, all
investments are reviewed and appropriate adjustments are made to reflect the
effect of income (collected or accrued), realized and unrealized gains and
losses, expenses and any material impairments in value arising from the
specific conditions of investment (e.g., mortgage in default).
48<PAGE>
<PAGE>
SALES ACTIVITIES
The Trust conducts sales and distribution activities for Units that are
directed to certain pension plans. These activities, which are conducted by
and under the direction of the Director of Investor Relations, include
solicitations in person or by mail or telephone, as well as responding to
inquiries concerning the Trust's offering of Units, and the ministerial and
clerical work of effecting sales of Units. All inquiries concerning the
Trust's offering of Units should be directed to AFL-CIO Housing Investment
Trust, 1717 K Street, N.W., Suite 707, Washington, D.C. 20006, Attention:
Director of Investor Relations, (202) 331-8055. Expenses of sales and
distribution of Units are paid by the Trust pursuant to a Plan for
Distribution adopted pursuant to SEC Rule 12b-1 under the Investment Company
Act. The budget for the sales and distribution activities authorized by the
Participants was $500,000 in 1997 and is $550,000 in 1998. Such sales and
distribution expenses for the year ended December 31, 1997 were $498,303,
which represented approximately 0.03 percent of $1,671,744,859 in net Trust
assets as of December 31, 1997. No material increase in the budgeted rate of
sales and distribution expense will be made without Participant approval. See
"SALES AND DISTRIBUTION ACTIVITIES" in the Statement of Additional Information
for a more detailed discussion of sales and distribution.
The Plan for Distribution will continue in effect until April 30, 1999,
unless earlier terminated by vote of a majority of the Trust's outstanding
Units or by a majority of disinterested Trustees. Any change in the Plan for
Distribution that would materially increase the amount of distribution expense
borne by the Trust requires Participants' approval; any other material change
requires approval by the Trustees, including a majority of the disinterested
Trustees. The Plan for Distribution may continue in effect for successive
one-year periods, provided that each continuance is specifically approved:
(a) by a vote of the majority of the Trust's Units or by the Trustees; and (b)
by the vote of a majority of the Trustees who are disinterested and who have
no direct or indirect financial interest in the Plan for Distribution or any
related agreements. For additional information regarding the Plan for
Distribution, see "SALES AND DISTRIBUTION ACTIVITIES" in the Statement of
Additional Information.
In general, SEC Rule 12b-1, with which the Trust will comply, requires
that a Plan for Distribution be approved in a specified manner by the holders
of voting securities and Trustees, that quarterly reports of distribution
expenses be made to the Trustees, and that the plan be terminable upon
specified conditions.
REDEMPTION
A request for redemption of Units will be honored if it is in writing and
received 15 days or more before the Valuation Date on which the Units are to
be redeemed. Securities may be redeemed in whole or fractional Units.
Payment in satisfaction of duly tendered requests for redemption will be made
as soon as practicable and, in any event, within 7 business days after the Net
Asset Value of the Trust is ascertained for the Valuation Date as of which
redemption is effected. It usually takes 7 to 10 business days to calculate
the Trust's Net Asset Value after a Valuation Date.
49<PAGE>
<PAGE>
Upon the agreement of the redeeming Participant, the Trust may tender
securities or mortgages or other Trust assets in partial or full satisfaction
of a duly tendered request for redemption. Such securities, mortgages or
other assets will be treated for redemption purposes as the cash equivalent of
their value on the Valuation Date on which redemption is effected. A
Participant receiving such assets may incur expenses in disposing of such
assets for cash.
Section 22(c) of the Investment Company Act and SEC Rule 22c-1 thereunder
provide that no registered investment company issuing a redeemable security
and no principal underwriter of such company shall sell or redeem any such
security except at a price based on the current net asset value of such
security that is next computed after receipt of a tender of such security for
redemption or of an order to purchase such security. Section 22(e) provides
that no registered investment company shall postpone the date of payment upon
redemption of a redeemable security in accordance with its terms for more than
seven days after the tender of such security for redemption except in certain
limited circumstances. The Trust's redemption policies do not conform to the
foregoing requirements. The Trust has obtained exemption from generally
applicable redemption requirements on the grounds that the interests of its
Participants will make investment and redemption other than on a quarterly
basis unnecessary and that daily valuation of the Trust portfolio of mortgage
loans would be unduly burdensome. The Board of Trustees has implemented
monthly valuations of the Trust's assets, which enables the Trust to sell and
redeem Units on a monthly, rather than quarterly, basis. See "RISK
FACTORS--Redemption."
TAX STATUS
The Trust has filed its tax returns as a regulated investment company
under Subchapter M of the Internal Revenue Code and intends to operate in a
manner which qualifies for treatment as a regulated investment company. If
the Trust so qualifies and distributes all of its taxable income to
Participants, it will not be subject to federal income tax. Participants
will be required to report their proportionate share of such income for income
tax purposes, but Participants not subject to tax on their income will not be
required to pay tax on amounts distributed to them. The Trust will inform
Participants annually of the amounts and nature of such income.
PENDENCY OF LEGAL PROCEEDINGS
The Trust is not involved in any material legal proceedings and is not
aware of any legal proceedings against it contemplated by any governmental
authorities.
50<PAGE>
<PAGE>
PART B. STATEMENT OF ADDITIONAL INFORMATION
AFL-CIO
HOUSING INVESTMENT TRUST
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
(202) 331-8055
STATEMENT OF ADDITIONAL INFORMATION
- - -----------------------------------
This Statement of Additional Information is not a Prospectus. It should
be read in conjunction with the American Federation of Labor and Congress of
Industrial Organizations Housing Investment Trust ("Trust") Prospectus, dated
June 17, 1998, which may be obtained without charge from Trust headquarters.
The date of this Statement of Additional Information is June 17, 1998.
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
History............................................................... 1
Exemptions from Specific Requirements of the Investment
Company Act......................................................... 1
Nondiversification.............................................. 1
Redemption Restrictions......................................... 2
Investment Objective and Policies..................................... 3
Management of the Trust............................................... 4
Principal Holders of Securities....................................... 14
Investment Adviser.................................................... 15
Sales and Distribution Activities..................................... 17
Admission to the Trust................................................ 18
Supplementary Information............................................. 19
Custodian....................................................... 19
Auditors........................................................ 19
Reports......................................................... 19
Legal Matters................................................... 19
Financial Statements.................................................. 19
Appendix A............................................................ A-1
Appendix B............................................................ B-1
Appendix C............................................................ C-1
B-2<PAGE>
<PAGE>
HISTORY
The American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust ("Trust") is a common law trust created under the
laws of the District of Columbia pursuant to a Declaration of Trust originally
executed September 19, 1981. The name of the Trust was changed from "AFL-CIO
Pooled Investment Trust" on May 27, 1982. The Trust has been established
under the sponsorship of the AFL-CIO as an instrumentality of the United
States labor union movement.
EXEMPTIONS FROM SPECIFIC
REQUIREMENTS OF THE INVESTMENT COMPANY ACT
On April 21, 1982 the Trust obtained from the Securities and Exchange
Commission ("SEC") an order under Section 6(c) of the Investment Company Act
of 1940, as amended ("Investment Company Act") exempting the Trust from
certain requirements of that Act (SEC Release No. 12387). The following is a
brief summary of certain of these exemptions.
NONDIVERSIFICATION
The Investment Company Act provides that no registered investment company
shall change its subclassification from diversified to nondiversified without
the shareholders' authorization. Under Section 5(b) of the Act, a
"diversified company" is:
A management company which meets the following requirements: At least 75
percentum of the value of its total assets is represented by cash and cash
items (including receivables), Government securities, securities of other
investment companies and other securities for the purposes of this calculation
limited in respect to any one issuer to an amount not greater in value than 5
percentum of the value of the total assets of such management company and to
not more than 10 percentum of the outstanding voting securities of such
issuer.
A "nondiversified company" means any management company other than a
diversified company.
The Trust will seek to remain as diversified as practicable. Because,
however, the mortgages in which it proposes to invest are often offered in
large denominations, the Trust may shift from time to time from diversified to
nondiversified status. The Trust has obtained an exemption from the
requirement of a shareholder vote before shifting its diversification status.
The terms "diversified" and "non-diversified" as used herein are not
intended to describe the geographical locations or concentrations of mortgaged
properties represented in the Trust's portfolio. Such properties are spread
throughout the United States and it is the Trust's intention to maintain such
geographical diversity.
REDEMPTION RESTRICTIONS
Section 22(c) of the Investment Company Act and SEC Rule 22c-1 thereunder
provide that no registered investment company issuing a redeemable security
B-3<PAGE>
<PAGE>
and no principal underwriter of such company shall sell or redeem any such
security except at a price based on the current net asset value of such
security that is next computed after receipt of a tender of such security for
redemption or of an order to purchase such security. Section 22(e) provides
that no registered investment company shall postpone the date of payment upon
redemption of a redeemable security in accordance with its terms for more than
seven days after the tender of such security for redemption except in certain
limited circumstances. The Trust's redemption policies do not conform to the
foregoing requirements. See "REDEMPTION" in the Prospectus. The Trust has
obtained exemption from generally applicable redemption requirements on the
grounds that the interests of its Participants will make investment and
redemption other than on a quarterly basis unnecessary and that daily
valuation of the Trust portfolio of mortgage loans would be unduly burdensome.
Effective October 1, 1987, the Board of Trustees authorized investments and
redemptions on a monthly basis instead of a quarterly basis.
INVESTMENT OBJECTIVE AND POLICIES
A description of the Trust's investment objective and policies is set
forth in the Trust's Prospectus under "INVESTMENT OBJECTIVE AND POLICIES."
Certain of the Trust's authorized investments are tied to ratings at various
levels by one or more nationally recognized statistical rating agencies. A
description of Standard & Poor's rating categories for long-term debt and
short-term debt are attached as Appendix A to this Statement of Additional
Information. The rating categories of other nationally recognized statistical
rating agencies are similar to those of Standard & Poor's.
Similarly, certain of the Trust's authorized investments relate to
depository institutions rated in category "B" or higher by Thomson Bankwatch,
Inc. See "INVESTMENT OBJECTIVE AND POLICIES--Privately Collateralized
Investments; State and Local Government-Related Investments in the Prospectus.
A description of the rating categories of Thomson Bankwatch, Inc. is attached
as Appendix B to this Statement of Additional Information.
The following information is included to augment the discussion of "top
tier" agencies and agencies with a general obligation rating of "A" or better
under "INVESTMENT OBJECTIVE AND POLICIES--Privately Collateralized
Investments; State and Local Government-Related Investments" in the
Prospectus. The Trust is allowed to invest in construction or permanent
loans, or securities backed by construction or permanent loans, or interests
in such loans or securities, provided that such loans or securities are issued
or guaranteed, as the case may be, by (i)a state or local housing finance
agency designated "top tier" by Standard & Poor's (or designated comparably by
another nationally recognized statistical rating agency, as determined by the
Executive Committee of the Trust) or (ii) a state or local housing finance
agency having a general obligation rating of "A" or higher by Standard &
Poor's (or a comparable rating from another nationally recognized statistical
rating agency, as determined by a Executive Committee of the Trust) at the
time of acquisition by the Trust. Before designating a housing agency as top
tier, Standard & Poor's must favorably evaluate a number of criteria,
including the agency's general track record, unrestricted fund balances,
administrative capabilities, investment policy, internal controls, portfolio
B-4<PAGE>
<PAGE>
quality and the sponsoring state's commitment to housing. More complete
descriptions of the guidelines used by Standard & Poor's with respect to "top
tier" designations and general obligation ratings are attached to this
Statement of Additional Information as Appendices C and D, respectively.
MANAGEMENT OF THE TRUST
The current Trustees and officers of the Trust and their principal
occupations are as follows:
MANAGEMENT OF THE TRUST
The current Trustees and officers of the Trust and their principal
occupations are as follows:
Position with Principal Occupation(s)
Name, Address, and Age Housing Trust During Past 5 Years
- - --------------------- --------------- ------------------------
Richard Ravitch Chairman Formerly President and
350 Park Avenue Chief Executive Officer,
18th Floor Player Relations Committee
New York, New York of Major League Baseball;
age 64 formerly Chairman, Aquarius
Management Corporation
(limited profit housing
project management); formerly
Chairman and Chief Executive
Officer, Bowery Savings Bank
Linda Chavez-Thompson* Union Trustee Executive Vice President,
815 16th Street, N.W. AFL-CIO; formerly Inter-
Washington, D.C. 20006 national Vice President,
age 54 American Federation of State,
County and Municipal
Employees
Arthur A. Coia* Union Trustee General President, Laborers'
905 16th Street, N.W. International Union of
Washington, D.C. 20006 North America
age 55
John E. Cullerton Management Trustee Central Pension Fund of the
55 West Van Buren Street International Union of
Chicago, Illinois 60605 Operating Engineers and
age 82 Consultant to the Hotel
Employees and Restaurant
Employees International
Union; formerly Fund Advisor
to Trustees for the Hotel
Employees and Restaurant
Employees International Union
Health, Welfare and Pension
Funds
Robert A. Georgine* Union Trustee President, Building and
815 16th Street, N.W. Construction Trades
Washington, D.C. 20006 Department, AFL-CIO
age 65
Francis X. Hanley* Union Trustee General President (formerly
1125 17th Street, N.W. General Secretary-Treasurer
Washington, D.C. 20036 International Union of
age 67 Operating Engineers
B-5<PAGE>
<PAGE>
Edwin D. Hill* Union Trustee Secretary, International
1125 15th Street, N.W. Brotherhood of Electrical
Washington, D.C. 20005 Workers; formerly
age 60 International Vice President,
International Brotherhood of
Electrical Workers Third
District Office
Frank Hurt* Union Trustee President, Bakery,
10401 Connecticut Avenue Confectionery & Tobacco
Kensington, MD 20895 Workers International Union
age 59
John T. Joyce* Union Trustee President, Bricklayers &
815 15th Street, N.W. Allied Craftsmen Internationl
Washington, D.C. 20005 Union
age 62
Martin J. Maddaloni* Union Trustee President, United Association
901 Massachusetts Avenue, N.W. of Journeyman and Apprentices
Washington, D.C. 20001 of the Plumbing And Pipe
age 58 Fitting Industry of the
United States and Canada
("UA"); formerly
International Vice President,
UA District 2; formerly
International Representative,
UA; formerly Special
Representative, UA
A.L. Monroe* Union Trustee General President,
1750 New York Ave., N.W. International Brotherhood of
Washington, D.C. 20006 Painters and Allied Trades
age 64
Andrew Stern* Union Trustee President, Service Employees
1313 L Street, N.W. International Union
Washington, D.C. 20005
age 47
John J. Sweeney* Union Trustee President, AFL-CIO;
815 16th Street, N.W. Formerly International
Washington, D.C. 20006 President, Service
age 64 Employees International
Union
Richard L. Trumka* Union Trustee Secretary-Treasurer,
815 16th Street, N.W. AFL-CIO, formerly
Washington, D.C. 20006 President, Mine Workers
age 48 of America, United
Terrence R. Duvernay* Management Trustee Public Finance division,
4740 Guilford Forest Dr. Legg Mason; formerly
Atlanta, GA 30331 Deputy Secretary of U.S.
age 55 Department of Housing and
Urban Development; formerly
Executive Director of Georgia
Housing and Finance Authority
and Michigan State Housing
Development Authority
Alfred J. Fleischer Management Trustee Chairman, Fleischer-Seeger
5725 Manchester Avenue Construction Corporation;
St. Louis, MO 63110 formerly a Direction of the
age 77 National Corporation for
Housing Partnerships of
Washington, D.C.
Walter Kardy Management Trustee President, Specialty
9500 Barroll Lane Contractor's Management, Inc.
Kensington, MD 20895
age 70
George Latimer Management Trustee Chief Executive Officer,
547 West Jackson National Equity Fund;
Suite 601 Professor of Urban Studies,
Chicago, IL 60661 Macalster College; Formerly
age 62 Director, Special Actions
Office, HUD
B-6<PAGE>
<PAGE>
Position with Principal Occupation(s)
Name, Address, and Age Housing Trust During Past 5 Years
- - --------------------- --------------- ------------------------
H.D. LaVere Management Trustee President, Michigan
1100 Owendale Avenue Carpentry, Inc. (residential
Suite K building contractor); Labor
Troy, Michigan 48083-1914 Relations Director, Michigan
age 68 Carpentry Contractor
Association
Marlyn J. Spear Management Trustee Investment Coordinator, The
500 Elm Grove Road Building Trades United
Room 300 Pension Trust Fund
Elm Grove, WI 53122-0530
age 45
Tony Stanley Management Trustee Executive Vice President and
25250 Rockside Road Director, TransCon Builders,
Bedford Heights, OH 44146 Inc. (building construction)
age 64
Patricia F. Wiegert Management Trustee Retirement Administrator,
1355 Willow Way Contra Costa County
Suite 221 Employee's Retirement
Concord, CA 94520 Association
age 51
Stephen F. Coyle* Chief Executive Formerly Director of the
1717 K Street, N.W. Officer Boston Redevelopment
Suite 707 Authority
Washington, D.C. 20006
age 52
Michael M. Arnold* Director of Investor Director of Investor
1717 K Street, N.W. Relations Relations, AFL-CIO Housing
Suite 707 Investment Trust
Washington, D.C. 20006
age 58
ElChino Martin* General Counsel Formerly Chief of Staff
1717 K Street, N.W. and Development Counsel,
Suite 707 AFL-CIO Housing Investment
Washington, D.C. 20006 Trust
age 46
James D. Campbell* Chief Investment Formerly Director, National
1717 K Street, NW Officer Partnership for Community
Suite 707 Investment, AFL-CIO
Washington, D.C. 20006 Housing Investment Trust
age 44
B-7<PAGE>
<PAGE>
Position with Principal Occupation(s)
Name, Address, and Age Housing Trust During Past 5 Years
- - --------------------- --------------- ------------------------
Harry W. Thompson* Controller Formerly Deputy Financial
1717 K Street, NW Officer Manager, AFL-CIO Housing
Suite 707 Investment Trust
Washington, D.C. 20006
age 38
Patton H. Roark, Jr.* Portfolio Manager Formerly Portfolio
1717 K Street, NW Manager, AFL-CIO Housing
Suite 707 Investment Trust
Washington, D.C. 20006
age 31
Union Trustees Chavez-Thompson, Hanley and Trumka and Management Trustees
Kardy, Latimer and LaVere are "Class I" Trustees, whose terms expire at the
1999 Annual Meeting of Participants. Union Trustees Georgine and Joyce and
Management Trustees Fleischer and Spear are "Class II" Trustees whose terms
expire at the 2000 Annual Meeting of Participants. Union Trustees Coia, Hurt,
Monroe and Sweeney and Management Trustees Duvernay, Stanley and Wiegert are
"Class III" Trustees whose terms expire at the 1998 Annual Meeting of
Participants. Trustee Ravitch is the Chairman (a non-classified trustee) with
a one-year term expiring at the 1998 Annual Meeting of Participants.
Those Trustees and officers whose names are marked with an asterisk (*)
may be considered to be "interested persons" within the meaning of Section
2(19) of the Investment Company Act although the Trust does not concede that
such is the case. Each of these Trustees and officers is an officer or
employee of the AFL-CIO, a Labor Organization (as that term is defined in the
Trust's Declaration of Trust) that is a member of the AFL-CIO, or the Trust.
The Executive Committee of the Trust is composed of the Chairman, Richard
Ravitch (Chairman of the Executive Committee), Union Trustee John J. Sweeney
and Management Trustee Tony Stanley (Vice Chairman of the Executive
Committee). The Executive Committee has all the authority of the Board of
Trustees when the Board is not in session, except to the extent that such
authority is limited by law. The Executive Committee also serves as
Nominating Committee with authority to identify potential new members of the
Board of Trustees.
Since February 1, 1992, Stephen Coyle has served as Chief Executive
Officer of the Trust. Mr. Coyle, age 52, served as Director of the Boston
Redevelopment Authority from July 1984 to January 1992. Prior to that, he
served as Chief Executive Officer of John Carl Warnecke & Associates in San
Francisco, a national firm for architecture and urban design. From 1977
through 1980, Mr. Coyle served the Federal Government in Washington, D.C. as
Deputy Under Secretary of the United States Department of Health and Human
Services and Executive Assistant to the Secretary of the United States
Department of Housing and Urban Development. Mr. Coyle earned his Bachelor's
degree from Brandeis University (Waltham), his Master's degree from the
Harvard Kennedy School of Government, and a law degree from Stanford Law
School.
B-8<PAGE>
<PAGE>
The Trustees have selected Mr. Arnold to be Director of Investor
Relations. Mr. Arnold is 58 years old. He joined the Trust in April 1985
after being employed by the AFL-CIO Human Resources Development Institute
(HRDI) since 1969. During his tenure with HRDI, he held the positions of area
representative, regional director, assistant director and executive director.
As executive director during the six years prior to being employed by the
Trust, he was responsible for overall administration and fiscal affairs and
the general supervision of staff located at the national office in Washington,
D.C. and in field offices in 59 major metropolitan areas of the country.
During this period, Mr. Arnold had extensive experience in working with
officers and staff of international, state and local labor organizations. In
1967-68, Mr. Arnold was manpower coordinator and labor liaison officer with
the Dallas Community Action Agency. He is a 37-year member and former local
union officer of the International Union of Bricklayers and Allied Craftsmen,
and is also a licensed real estate broker.
The Trustees have selected Mr. Martin to be General Counsel. Mr. Martin
is 36 years old. He joined the Trust in 1992. From 1992 until 1993, he served
as Special Counsel, when he became Chief of Staff. From 1995 until his
appointment as General Counsel, he served as Chief of Staff and Development
Counsel. Prior to joining the Trust, from 1988 to 1992, Mr. Martin was an
associate in the Real Estate Department of Morrison & Foerster. From 1986
until 1988, he served as law clerk to the Honorable Gabrielle K. McDonald,
U.S. District Court for the Southern District of Texas. Mr. Martin earned his
Bachelor of Arts degree from the University of North Carolina at Chapel Hill
and his Juris Doctor degree from Yale Law School.
The Trustees have selected Mr. Campbell to be Chief Investment officer of
the Trust. Mr. Campbell is 44 years old. He joined the Trust in 1993 after
serving as Financial Consultant to the Boston Redevelopment Authority from
1990 to 1992. Prior to that, from 1986 to 1989, Mr. Campbell served as Vice
President for Development for Related Companies Northeast. From 1983 to 1986,
he served as Director of the East Cambridge Riverfront Redevelopment Project.
Mr. Campbell earned his Bachelor's degree from Syracuse University and his
Master's degree in City Planning from Harvard University.
Harry W. Thompson, age 38, was appointed Controller in December 1997. Mr.
Thompson joined the Trust in 1991. From 1991 until 1993, he served as Deputy
Financial Manager, when he became Controller. Prior to joining the Trust,
from 1988 through 1991, Mr. Thompson was the Controller for Rosewood
Residential, an apartment developer and their predecessor Property Company of
America. From 1985 to 1988, Mr. Thompson held Asset Manager positions with
CRI Inc. and Shelter Can-American. From 1982 to 1985, Mr. Thompson was on the
audit staff of KMG/Main Hurdman, an international accounting firm. Mr.
Thompson earned his Bachelor of Science in Business Administration degree,
with a double major in professional accounting and finance, from The American
University.
Patton H. Roark, Jr., age 31, was appointed Portfolio Manager in December
1997. Mr. Roark joined the Trust in 1993 as Portfolio Manager. Prior to
joining the Trust, Mr. Roark, from 1990 to 1993, was a Senior Consultant for
Price Waterhouse, an international accounting firm. From 1989 to 1990, Mr.
Roark was an internal auditor with the Inspector General's office of the
Office of Personnel Management. Mr. Roark is a Chartered Financial Analyst,
B-9<PAGE>
<PAGE>
Certified Public Accountant and Certified Internal Auditor, and earned his
Bachelors of Science degree in accounting from Shepherd College.
Mr. Arnold, Mr. Martin, Mr. Campbell, Mr. Thompson and Mr. Roark and
their staff are responsible, under the supervision of the Chief Executive
Officer, for the day-to-day administration and operation of the Trust,
including the selection of mortgage and other investments (with the exception
of certain short-term assets--see "Investment Adviser") and communication with
existing and potential investors.
The following table sets forth the aggregate remuneration, including any
deferred compensation, which was paid during 1997 to each executive officer of
the Trust and to all executive officers and trustees of the Trust as a group:
<TABLE>
<CAPTION>
1997 Compensation Table
NAME OF PERSON, AGGREGATE PENSION ESTIMATED TOTAL
POSITION COMPENSATION OR RETIREMENT ANNUAL COMPENSATION
FROM TRUST<F5> BENEFITS BENEFITS FROM TRUST
($) ACCRUED AS UPON PAID TO
PART OF TRUST RETIREMENT DIRECTORS<F7>
EXPENSES ($) <F6>($) ($)
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen Coyle<F8>
Chief Executive can not be not
Officer 135,862.59 74,881.38 determined applicable
Michael M. Arnold<F9>
Director of not
Investor Relations 97,919.05 24,391.41 46,336.23 applicable
Helen R. Kanovsky<F10> not
General Counsel 96,015.85 22,682.92 10,140.06 applicable
James D. Campbell<F11>
Chief Investment not
Officer 113,280.22 22,664.81 12,165.93 applicable
ElChino Martin<F12> not
General Counsel 119,477.93 20,184.62 14,306.83 applicable
Harry Thompson<F13> not
Controller 104,170.00 19,206.60 16,570.23 applicable
Patton H. Roark, Jr.<F14> not
Portfolio Manager 78,530.25 13,498.90 6,904.09 applicable
Richard Ravitch,
Chairman 10,000.00 0.00 0.00 10,000.00
Arthur A. Coia*,
Union Trustee 0.00 0.00 0.00 0.00
B-10<PAGE>
<PAGE>
NAME OF PERSON, AGGREGATE PENSION ESTIMATED TOTAL
POSITION COMPENSATION OR RETIREMENT ANNUAL COMPENSATION
FROM TRUST<F5> BENEFITS BENEFITS FROM TRUST
($) ACCRUED AS UPON PAID TO
PART OF TRUST RETIREMENT DIRECTORS<F7>
EXPENSES ($) <F6>($) ($)
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Linda Chavez-
Thompson,*
Union Trustee 0.00 0.00 0.00 0.00
Terence R. Duvernay,
Management Trustee 0.00 0.00 0.00 0.00
Alfred J. Fleischer,
Management Trustee 1,500.00 0.00 0.00 1,500.00
Robert A. Georgine*,
Union Trustee 0.00 0.00 0.00 0.00
Francis X. Hanley*,
Union Trustee 0.00 0.00 0.00 0.00
Frank Hurt*,
Union Trustee 0.00 0.00 0.00 0.00
John T. Joyce*,
Union Trustee 0.00 0.00 0.00 0.00
Walter Kardy,
Management Trustee 0.00 0.00 0.00 0.00
George Latimer,
Management Trustee 0.00 0.00 0.00 0.00
H.D. LaVere,
Management Trustee 0.00 0.00 0.00 0.00
George Miller*,<F15>
Management Trustee 1,000.00 0.00 0.00 1,000.00
A.L. Monroe*,
Union Trustee 0.00 0.00 0.00 0.00
Jack F. Moore*,<F15>
Union Trustee 0.00 0.00 0.00 0.00
Marlyn J. Spear,
Management Trustee 0.00 0.00 0.00 0.00
Tony Stanley,
Management Trustee 3,500.00 0.00 0.00 3,500.00
B-11<PAGE>
<PAGE>
NAME OF PERSON, AGGREGATE PENSION ESTIMATED TOTAL
POSITION COMPENSATION OR RETIREMENT ANNUAL COMPENSATION
FROM TRUST<F5> BENEFITS BENEFITS FROM TRUST
($) ACCRUED AS UPON PAID TO
PART OF TRUST RETIREMENT DIRECTORS<F7>
EXPENSES ($) <F6>($) ($)
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John Sweeney*,
Union Trustee 0.00 0.00 0.00 0.00
Richard Trumka*,
Union Trustee 0.00 0.00 0.00 0.00
Patricia F. Wiegert,
Management Trustee 0.00 0.00 0.00 0.00
All Directors and
Officers as a Group
(24 persons) $ 761,255.89 $197,510.64 $106,423.37 $16,000.00
<F5> Compensation figures represent 100% of each executive officer's
compensation for time devoted to Trust matters. Approximately 30% of Mr.
Coyle's time, 36% of Mr. Arnold's time, 30% of Ms. Kanovsky's time, 17% of Mr.
Campbell's time, 2% of Mr. Martin's time, 6% of Mr. Thompson's time and 0% of
Mr. Roark's time was devoted to matters relating to the AFL-CIO Building
Investment Trust ("BIT"). Messrs. Coyle, Arnold and Campbell and Ms. Kanovsky
received compensation from BIT Limited Partnership in addition to the amount
set forth above.
<F6> The Internal Revenue Code limits the permissible benefit payments that
may be paid under the Retirement Plan. Consequently, the amounts of
retirement benefits that actually may be paid to individual employees may be
significantly lower than as shown, depending on several factors, including but
not limited to the employee's years of service, level of compensation, and
actual year of retirement.
<F7> Includes compensation from the Trust and all other registered 1940 Act
companies that have a common investment advisor with the Trust, or an
investment advisor that is an affiliated person of the Trust's investment
advisor.
<F8> Aggregate Compensation includes $5,591.61 of deferred compensation in
1997 under the 401(k) Plan, and excludes compensation deferred in lieu of
participation in the Retirement Plan, and interest thereon. Pension or
Retirement Benefits Accrued as Part of Trust Fund Expenses includes $1,250.00
of matching funds accrued under the 401(k) Plan and $73,631.38 of deferred
compensation in lieu of participation in the Retirement Plan. The total amount
of compensation deferred by Mr. Coyle through December 31, 1997 in lieu of
participation in the Retirement Plan, including interest, is $246,385.45 and
the total amount deferred under the 401(k) Plan through December 31, 1997,
including interest and Trust matching, is $18,744.44.
B-11<PAGE>
<PAGE>
<F9> Aggregate Compensation includes $9,500.00 of deferred compensation in
1997 under the 401(k) Plan, and excludes amounts contributed to the Retirement
Plan on Mr. Arnold's behalf. Pension or Retirement Benefits Accrued as Part
of Trust Fund Expenses includes $1,250.00 of matching funds accrued under the
401(k) Plan and $23,141.41 contributed to the Retirement Plan in 1997. The
total amount of compensation deferred by Mr. Arnold as of December 31, 1997
under the 401(k) Plan, including interest and Trust matching, is $231,053.28.
<F10> Aggregate Compensation includes $9,499.88 of deferred compensation in
1997 under the 401(k) Plan, and excludes amounts contributed to the Retirement
Plan on Ms. Kanovsky's behalf. Pension or Retirement Benefits Accrued as Part
of Trust Fund Expenses includes $1,250.00 of matching funds accrued under the
401(k) Plan and $21,432.92 contributed to the Retirement Plan in 1997. The
total amount of compensation deferred by Ms. Kanovsky as of December 31, 1997
under the 401(k) Plan, including interest and Trust matching, is $26,945.12.
<F11> Aggregate Compensation includes $2,080.00 of deferred compensation in
1997 under the 401(k) Plan, and excludes amounts contribute to the Retirement
Plan on Mr. Campbell's behalf. Pension or Retirement Benefits Accrued as Part
of Trust Fund Expenses includes $1,250.00 of matching funds accrued under the
401(k) Plan and $21,414.81 contributed to the Retirement Plan in 1997. The
total amount of compensation deferred by Mr. Campbell's as of December 31,
1996 under the 401(k) Plan, including interest and Trust matching, is
$14,588.05.
<F12> Aggregate Compensation includes $9,500.00 of deferred compensation in
1997 under the 401(k) Plan, and excludes amounts contribute to the Retirement
Plan on Mr. Martin's behalf. Pension or Retirement Benefits Accrued as Part
of Trust Fund Expenses includes $1,250.00 of matching funds accrued under the
401(k) Plan and $18,934.62 contributed to the Retirement Plan in 1997. The
total amount of compensation deferred by Mr. Martin's as of December 31, 1996
under the 401(k) Plan, including interest and Trust matching, is $72,997.93.
<F13> Aggregate Compensation includes $9,500.00 of deferred compensation in
1997 under the 401(k) Plan, and excludes amounts contribute to the Retirement
Plan on Mr. Thompson's behalf. Pension or Retirement Benefits Accrued as Part
of Trust Fund Expenses includes $1,250.00 of matching funds accrued under the
401(k) Plan and $17,956.60 contributed to the Retirement Plan in 1997. The
total amount of compensation deferred by Mr. Thompson's as of December 31,
1996 under the 401(k) Plan, including interest and Trust matching, is
$66,759.00.
<F14> Aggregate Compensation includes $2,860.00 of deferred compensation in
1997 under the 401(k) Plan, and excludes amounts contribute to the Retirement
Plan on Mr. Roark's behalf. Pension or Retirement Benefits Accrued as Part of
Trust Fund Expenses includes $1,250.00 of matching funds accrued under the
401(k) Plan and $12,248.90 contributed to the Retirement Plan in 1997. The
total amount of compensation deferred by Mr. Roark's as of December 31, 1996
under the 401(k) Plan, including interest and Trust matching, is $17,778.12.
<F15> Union Trustee Moore and Management Trustee Miller will not stand for
reelection.
</TABLE>
B-12<PAGE>
<PAGE>
Prior to October 1, 1990, the Trust had not established or adopted any
bonus, profit sharing, pension, retirement, stock purchase, or other
compensation or incentive plans for its officers and employees. Personnel
(other than the Chief Executive Officer) were provided pursuant to a Personnel
Contract between the Trust and the AFL-CIO, whereby the Trust reimbursed the
AFL-CIO for the AFL-CIO's costs of employing the personnel. While the
Personnel Contract was in effect, the personnel participated in the AFL-CIO
Deferred Compensation Plan, a defined contribution plan, and were subject to
the AFL-CIO Staff Retirement Plan ("Retirement Plan"), a defined benefit plan.
Any amounts contributed by the AFL-CIO on behalf of such personnel pursuant to
the Retirement Plan were reimbursed by the Trust pursuant to the Personnel
Contract. The Trust adopted the Retirement Plan for all of its employees
except for its Chief Executive Officer, effective as of October 1, 1990.
Also, effective October 1, 1990, the Trust adopted the 401(k) Plan for all of
its employees including its Chief Executive Officer (and subsequent Chief
Executive Officers)
THE RETIREMENT PLAN
Under the Retirement Plan, contributions are based on an eligible employee's
base salary. In general, rates are determined actuarially every other year.
The Retirement Plan was funded by employer contributions at rates of 16.9% of
eligible employees' base salaries during the six months ended June 30, 1997,
and 17.4 percent of eligible employees' base salaries during the six months
ended December 31, 1997. During 1997, the base salaries of Mr. Arnold, Ms.
Kanovsky, Mr. Campbell, Mr. Martin, Mr. Thompson and Mr. Roark were $135,000,
$125,000, $125,000, $110,482, $104,755 and $76,901, respectively.
The Retirement Plan is open to employees of the AFL-CIO and other
participating employers approved by the Retirement Plan's board of trustees
that make contributions to the Retirement Plan on their behalf. Such
employees become members of the Retirement Plan on their first day of
employment that they are scheduled to work at least 1,000 hours during the
next 12 consecutive months.
The Retirement Plan provides a normal retirement pension to eligible
employees for life, beginning at age 65. The amount of this pension depends
on salary and years of credited service at retirement. Eligible employees
will receive 2.80 percent of the average of their highest three years'
earnings ("Final Average Salary") for each year of credited service up to 25
years, and 0.5 percent of their Final Average Salary of each year of credited
service over 25 years. Eligible employees must have at least five years of
service to retire and receive a monthly pension. Eligible employees generally
earn credited service toward their pension for each year that they work for a
participating employer.
An eligible employee can also receive full benefits after reaching age
55, if his or her age plus his or her years of service equals 80 or more. It
is also possible for an employee who meets the combination of 80 requirement
to retire after age 50, but in such event benefits would be reduced 4 percent
for each year or portion thereof that the employee is less than 55 years old.
B-13<PAGE>
<PAGE>
Set forth below is a table showing estimated annual benefits payable upon
retirement<F16> in specified compensation and years of service
classifications. As of the date hereof, Mr. Arnold, Ms. Kanovsky, Mr.
Campbell, Mr. Martin, Mr. Thompson and Mr. Roark have approximately 13, 3, 5,
5, 7 and 5 credited years of service, respectively, under the Retirement Plan.
<TABLE>
<CAPTION>
Years of Service
----------------
Final
Average Salary 15<F17> 20<F17> 25<F17> 30<F18> 35<F18>
- - -------------- ------ ------ ----- ------- -------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 21,000 $ 28,000 $ 35,000 $ 36,250 $ 37,500
70,000 29,400 39,200 49,000 50,750 52,500
100,000 42,000 56,000 70,000 72,500 75,000
- - --------------------------
<F16> The Internal Revenue Code limits the permissible benefit payments that
may be paid under the Retirement Plan. Consequently, the amounts of
retirement benefits that actually may be paid to individual employees may be
significantly lower than as shown, depending on several factors, including but
not limited to the employee's years of service, level of compensation, and
actual year of retirement.
<F17> 2.80 percent per year up to 25 years.
<F18> 0.5 percent per year for years over 25 years.
</TABLE>
Benefits listed in the table are not subject to any deduction for Social
Security benefits or other offset amounts.
THE 401(K) PLAN
Under the 401(k) Plan, an eligible employee may agree with the Trust to
set aside up to 15 percent of his or her total compensation, up to a maximum
of $10,000 in 1998. In 1998, the Trust will match dollar-for-dollar the first
$1,350 contributed. The amount set aside by an eligible employee and the
amount of the Trust's matching contribution, if any, will be deposited in a
trust account in the employee's name. Every employees of the Trust is
eligible to participate in the 401(k) Plan provided such employee has reached
the age of 21 and is not a nonresident alien.
When a participating employee terminates his or her employment, retires,
or becomes disabled, the employee will be able to receive as a lump sum
payment the salary reduction amounts that were contributed to the Trust on the
employee's behalf, the additional amounts that the Trust contributed to the
trust account on the employee's behalf, plus income (less the employee's
allocated share of expenses) earned on these contributions.
If the employee continues to work for the Trust, the employee cannot
withdraw these amounts unless the employee has a financial hardship. A
financial hardship is an immediate and heavy financial need for which the
employee has no other available resources, and includes medical expenses, the
B-14<PAGE>
<PAGE>
purchase of a primary residence, the payment of tuition and related
educational fees and the need to prevent eviction from, or foreclosure on the
mortgage of, the employee's primary residence. The employee will be required
to present evidence of the financial hardship and upon submission of such
evidence may be entitled to withdraw an amount, up to the balance in the
employee's account, to meet the immediate financial need.
The amount in an employee's account must be distributed to the employee
in one lump sum or in periodic installments beginning the April 1 of the year
following the year in which the employee reaches age 70 1/2. Additionally,
these amounts must be distributed within a reasonable time following the
termination of the 401(k) Plan or the termination of the employee's
employment. An employee will be entitled to receive a distribution of the
amounts in their account upon the employee's attainment of age 65.
A participating employee may borrow from his or her account subject to
certain prescribed limitations.
The following table sets forth the amounts paid or distributed pursuant
to the 401(k) Plan in 1997 to the executive officers listed in the
Compensation Table above, and the amounts deferred and accrued pursuant to the
401(k) Plan for the accounts of such individuals during 1997, the distribution
or unconditional vesting of which are not subject to future events.
Name of Individual Amount Paid or Amount Employer
Number of Group Distributed($) Deferred Matching ($)
- - ------------------ --------------- -------- ------------
Stephen Coyle -0- 5,591.61 1,250.00
Michael M. Arnold -0- 9,500.00 1,250.00
James D. Campbell -0- 2,080.00 1,250.00
ElChino M. Martin -0- 9,500.00 1,250.00
Harry W. Thompson -0- 9,500.00 1,250.00
Patton H. Roark, Jr. -0- 2,860.00 1,250.00
All executive officers
as a group
(6 persons) -0- 39,031.61 7,250.00
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the beneficial ownership information as of
April 1, 1998 with respect to each Labor Organization and Eligible Pension
Plan (as those terms are defined in the Trust's Declaration of Trust) known to
the Trust to be the beneficial owner of more than 5 percent (that is more than
78,437.5645 Units) of the Trust's 1,568,751.2908 outstanding Units of
Participation. Because only Labor Organizations and Eligible Pension Plans
are eligible to own Units of Participation in the Trust, no Units of
Participation are owned by any Trustee or officer individually. Each
beneficial owner set forth below is also the record owner of the Units
specified.
B-15<PAGE>
<PAGE>
Name and Address Number of Units Percent of Class
- - ----------------- --------------- ----------------
California Public Employees'
Retirement System (Lincoln Plaza
400 P Street, Suite 2220
Sacramento, CA 96814) 96,994.2998 units 6.2%
INVESTMENT ADVISER
Beginning as of May 21, 1992, the Trust engaged Wellington Management
Company, LLP ("Wellington Management") to furnish investment advisory services
concerning certain of the short-term, liquid assets in the Trust's portfolio
designated by the Trust from time to time. The Trust currently has no
independent investment adviser other than Wellington Management, whose
Investment Advisory Agreement with the Trust was initially approved by
Participants at the Trust's 1992 Annual Meeting. As of December 31, 1997, the
value of all short term assets eligible for management by Wellington
Management was $84,582,295 which represented 5% of the Trust's total net
assets at that date. The Investment Advisory Agreement was amended and
extended for a period of two years by a vote of the Participants at the
Trust's Annual Meeting in May 1997 to include investment advisory services
concerning certain of the intermediate-term, liquid assets in the Trust's
portfolio designated by the Trust from time to time and certain other
portfolio analysis services.
Wellington Management, a Massachusetts limited liability partnership, is
a registered investment adviser with principal offices located at 75 State
Street, Boston, Massachusetts 02109. Its Managing Partners are Robert W.
Doran, Duncan M. McFarland and John R. Ryan.
Wellington Management is a professional investment counseling firm that
provides investment services to investment companies, employee benefit plans,
endowment funds, foundations, and other institutions and individuals. As of
February 28, 1998, Wellington Management held investment management authority
over approximately $185 billion of assets, including $20.2 billion of cash and
cash-equivalent assets. Wellington Management and its predecessor
organizations have provided investment advisory services to investment
companies since 1928 and to investment counseling clients since 1960.
Under the Investment Advisory Agreement, Wellington Management provides
investment advisory services concerning certain of the short-term and
intermediate-term, liquid assets in the Trust's portfolio (the
"Short/Intermediate Term Assets"). Wellington Management manages the
investment and reinvestment of the Short/Intermediate Term Assets;
continuously reviews, supervises and administers the investment program of the
Short/Intermediate Term Assets; determines the securities to be purchased,
retained and sold (and implements those decisions); renders regular reports to
the Trust's officers and Trustees concerning its discharge of the foregoing
responsibilities, including providing to the Trust's officers within 2
business days after each Valuation Date market prices as of the Valuation Date
of Short/Intermediate Term Assets that mature more than 60 days after the
Valuation Date; monitors portfolio investment characteristics; analyzes
portfolio performance and provides to the Trust's officers within 10 business
B-16<PAGE>
<PAGE>
days after each calendar month end a report regarding such performance for
such month; provides analysis on markets and instruments; provides investment
overview and economic outlook forecasts; provides information and comment on
various relevant regulatory and legal issues; attends meetings of the Trust's
Executive Committee and Trustees as reasonably requested; supplies the Trust's
officers and Trustees with statistical information and reports, and provides
the Trust with certain portfolio analysis functions and reports including
analysis and reports which may assist the Trust in determining the allocation
of assets within the Short/Intermediate Term Assets. Wellington Management
discharges these and its other duties subject to the oversight of the officers
and Trustees of the Trust and in compliance with the Trust's policies.
Wellington Management renders all of the services described above at its
own expense, and provides the office space, furnishings and equipment, and
personnel required by it to perform those services for the compensation
described below.
Wellington Management is authorized to arrange for the execution of
portfolio transactions by selecting brokers or dealers that will execute the
transactions, and is directed to use its best efforts to obtain the best net
results, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of
execution, and operational facilities of the firm involved. Wellington
Management may in its discretion purchase and sell portfolio securities
through brokers who provide it or the Trust with research, analysis, advice
and similar services, and Wellington Management may pay to these brokers, in
return for research and analysis, a higher commission than may be charged by
other brokers, provided that Wellington Management determines in good faith
that such commission is reasonable in terms either of that particular
transaction or of the overall responsibility of Wellington Management, that
the total commission paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long term, and that the total commission paid
by the Trust is consistent with commissions paid in comparable transactions.
In selecting a broker for each specific transaction, Wellington
Management has agreed to use its best judgment to choose the broker most
capable of providing the brokerage services necessary to obtain the best
available price and most favorable execution. The full range and quality of
brokerage services available will be considered in making these
determinations. For example, brokers may be selected on the basis of the
quality of such brokerage services related to the requirements of the specific
transaction such as the following; capable floor brokers or traders, competent
block trading coverage, good communications, ability to position, use of
automation, research contracts, arbitrage skills, administrative ability, or
provision of market information relating to the security. Wellington
Management will make periodic evaluations of the quality of these brokerage
services as provided by various firms and measure these services against its
own standards of execution. Brokerage services will be obtained only from
those firms which meet its standards, maintain a reasonable capital position,
and can be expected to reliably and continuously supply these services.
On occasions when Wellington Management deems the purchase or sale of a
security to be in the best interest of the Trust as well as other clients,
Wellington Management, to the extent permitted by applicable laws and
B-17<PAGE>
<PAGE>
regulations, may, but is under no obligation to, aggregate the securities to
be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Wellington Management in the manner it considers
to be the most equitable and consistent with its fiduciary obligations.
Under the terms of the Investment Advisory Agreement, Wellington
Management is compensated monthly at the annual rate of 0.16% of the market
value of the Trust's assets under management by Wellington Management, based
upon the average monthly market value of such assets. During the year ended
December 31, 1997, under the fee structure that was in place before the
amendment of the Investment Advisory Agreement, the Trust incurred total
investment advisory fees of $111,196, which represented 0.007% of the Trust's
average net assets for such period. During its last three fiscal years, the
Trust incurred total investment advisory fees of $267,125.
SALES AND DISTRIBUTION ACTIVITIES
The Director of Investor Relations of the Trust, operating out of the
Trust headquarters in the District of Columbia, conducts, and is responsible
for other Trust staff members who conduct, sales and distribution activities
for the Trust. Sales and distribution activities are directed to certain
pension plans and include solicitations in person or by mail or telephone as
well as responding to inquiries concerning the Trust's offering of Units, and
the ministerial and clerical work of effecting sales of Units. Expenses of
sales and distribution of Units in this manner are paid by the Trust pursuant
to a Plan for Distribution adopted by the Trustees and the Participants
pursuant to SEC Rule 12b-1 under the Investment Company Act. Sales and
distribution expenses, including printing of the prospectus and travel costs,
for the year ended December 31, 1997 were $498,303, which represents
approximately 0.03 percent of the $1,671,744,859 in net Trust assets as of
December 31, 1997. In 1997, the Board of Trustees approved a budget of
$500,000 per year for the Plan for Distribution from which non-material
increases may be made by the Board. At its 1997 fall meeting, the Board of
Trustees approved a budget of $550,000 for the Plan of Distribution in 1998.
No material increase in the budget for the Plan for Distribution will be made
without Participant approval.
Under the Plan for Distribution approved by Participants and Trustees,
including all disinterested Trustees, the Trust may finance any activity that
is primarily intended to result in the sale of the Trust's Units, subject to
the limitations set forth above, including but not limited to advertising and
other expenses relating to selling efforts, printing of prospectuses and
reports for other than existing Participants, and preparation and distribution
of advertising material and sales literature. Each expenditure must be
specifically approved in advance by the Chief Executive Officer or the Chief
Investment Officer of the Trust, who will provide at least quarterly to the
Trustees a written report setting forth amounts expended and the purposes for
which the expenditures were made. In approving the Plan for Distribution in
accordance with the requirements of Rule 12b-1 under the Investment Company
Act, the Trustees (including the disinterested Trustees, none of whom have any
direct or indirect financial interest in the Plan for Distribution or any
related agreements) considered various factors and determined that there is a
B-18<PAGE>
<PAGE>
reasonable likelihood that the Plan for Distribution will benefit the Trust
and its Participants because a relatively constant flow of funds into the
Trust, even at times when asset values are relatively high, will tend to
offset the effect of possible liquidation effected to obtain cash for
redemptions from the Trust when asset values are relatively low. The Plan
for Distribution will continue in effect until April 30, 1999, unless earlier
terminated by vote of a majority of the Trust's outstanding Units or by a
majority of disinterested Trustees. Any change in the Plan for Distribution
that would materially increase the amount of distribution expense borne by the
In general, SEC Rule 12b-1, with which the Trust will comply, requires
that such a plan be approved in a specified manner by the holder of voting
securities and Trustees, that quarterly reports of distribution expenses be
made to the Trustees, and that the plan be terminable upon specified
conditions.
Trust requires Participants' approval; any other material change requires
approval by the Trustees, including a majority of the disinterested Trustees.
The Plan for Distribution may continue in effect for successive one-year
periods, provided that each continuance is specifically approved: (a) by a
vote of the majority of the Trust's Units or by the Trustees; and (b) by the
vote of a majority of the Trustees who are disinterested and who have no
direct or indirect financial interest in the Plan for Distribution or any
related agreements. Any agreements relating to the Plan for Distribution will
be terminable upon assignment or upon 60 days written notice without payment
of any penalty by vote of a majority of Trustees who are not interested
persons.
Of the $498,303 of sales and distribution expenses incurred for the year
ended December 31, 1997, the following amounts were expended on each of the
categories listed below. All such amounts were paid in cash.
Year Ended
Category December 31, 1997
- - --------- -----------------
Printing and mailing of prospectuses
to other than current security holders $ 7,200
Compensation to sales personnel
(salaries plus fringe benefits) $ 245,461
Other (includes travel and meeting
expenses, office supplies, consulting
fees and expenses and printing and
mailing of sales literature $ 245,642
TOTAL $ 498,303
No interested person of the Trust or any disinterested Trustee had any
direct or indirect financial interest in the operation of the Plan for
Distribution or related agreement during the year ended December 31, 1997,
with the possible exception of Director of Investor Relations Arnold who, if
he were determined to be an interested person of the Trust, would have such an
interest because part of his compensation is covered by the Plan.
B-19<PAGE>
<PAGE>
ADMISSION TO THE TRUST
Only Labor Organizations and Eligible Pension Plans are eligible to own
Units. See "SECURITIES OFFERED" in the Prospectus for a discussion of
eligible persons.
The price of Units is based on Net Asset Value. Net Asset Value for a
particular purchase will be determined as of each Valuation Date following
receipt of the purchase order by dividing the value of the Trust's portfolio
plus any cash and other assets (including interest and dividends accrued but
not collected) less all liabilities (including accrued expenses but excluding
capital and surplus), by the number of Units outstanding as of that Valuation
Date.
Admission to the Trust is permitted in whole or fractional Units as of
monthly Valuation Dates. A request for purchase of Units must be received by
the Trust before the Valuation Date as of which they are to be issued. A
minimum initial purchase of $50,000 is required. A request for purchase of
Units must be accompanied by cash or by a subscription agreement providing for
a cash escrow of the amount to be invested as of the forthcoming Valuation
Date. See "SECURITIES OFFERED" in the Prospectus for a discussion of the
valuation methods used by the Trust in determining the market price of its
portfolio assets.
SUPPLEMENTARY INFORMATION
CUSTODIAN
NationsBank Trust, 1501 Pennsylvania Avenue, N.W., Washington, D.C. acts
as a bank custodian of Trust portfolio securities pursuant to a safekeeping
agreement dated December 21, 1988, as amended. For providing such safekeeping
services, the Bank charges the Trust an annual fee of $4,000 plus a $10
transaction charge for each asset accepted or released. The Bank also serves
as custodian for the Trust's short-term account, pursuant to an amendment to
the safekeeping agreement dated May 21, 1991. Pursuant to this amendment, the
Bank charges the Trust an annual fee of $1,800 per year plus a $20 transaction
charge.
AUDITORS
Arthur Andersen, L.L.P., 1666 K Street, N.W., Washington, D.C., was
approved by the Participants at the 1998 Annual Meeting of Participants as the
independent certified public accountants for the Trust for the period ending
December 31, 1998. Arthur Andersen, L.L.P. audits the financial statements of
the Trust at the conclusion of each fiscal year, prepares applicable tax
returns for the Trust, and counsels the officers of the Trust with respect to
accounting, taxation and general business matters from time to time.
REPORTS
In accordance with SEC requirements under the Investment Company Act,
the Trust will distribute periodic financial statements to Participants and
will file periodic reports with the SEC. Financial statements distributed to
Participants will include unaudited semi-annual statements and audited annual
statements. Copies of all reports filed with the SEC will be made available
for inspection by Participants at Trust headquarters in Washington, D.C.
B-20<PAGE>
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the offering of Units were
reviewed for the Trust by Swidler & Berlin, Chartered, 3000 K Street, N.W.,
Suite 300, Washington, D.C. 20007.
FINANCIAL STATEMENTS
Reference is hereby made to the Financial Statements of the AFL-CIO
Housing Investment Trust filed with the Securities and Exchange Commission on
March 9, 1998 as part of the Trust's Annual Report to Participants, which are
incorporated herein by reference.
B-21<PAGE>
<PAGE>
APPENDIX A
STANDARD & POOR'S DEBT RATING DEFINITIONS
Excerpted from Standard & Poor's "Credit Week", April 18, 1994, page 15.
----------------------------------------------------
----------------------------------------------------
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information,
or based on other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA -- Debt rated AAA' has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA -- Debt rated AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.
A -- Debt rated A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
B-22<PAGE>
<PAGE>
BBB -- Debt rated BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB', B', CCC', CC', and C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB' indicates the least degree of speculation
and CCC' the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
BB -- Debt rated BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB-' rating.
B -- Debt rated B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB' or BB-' rating.
CCC-- Debt rated CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B' or B-' rating.
CC -- The rating CC' typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC' rating.
C -- The rating C' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied CCC-' debt rating. The C'
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI -- The rating CI' is reserved for income bonds on which no interest
is being paid.
D -- Debt rated D' is in payment default. The D' rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D' rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
B-23<PAGE>
<PAGE>
Plus (+) or Minus (-): The ratings from AA' to CC' may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
c -- The letter c' indicates that the holder's option to tender the
security for purchase may be canceled under certain prestated conditions
enumerated in the tender option documents.
L -- The letter L' indicates the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured and interest is adequately collateralized. In the case of
certificates of deposit, the letter L' indicates that the deposit, combined
with other deposits being held in the same right and capacity, will be honored
for principal and accrued pre-default interest up to the federal insurance
limits within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution, upon
maturity.
p -- The letter p' indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
* Continuance of the rating is contingent upon S&P's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
N.R. -- Not rated.
Debt Obligations of Issuers outside the U.S. and its territories are
rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
B-24<PAGE>
<PAGE>
APPENDIX B
THOMSON BANKWATCH RATING CHARACTERISTICS
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
A Company possesses an exceptionally strong balance sheet and earnings
record, translating into an excellent reputation and very good access to
its natural money markets. If weakness or vulnerability exists in any
aspect of the company's business, it is entirely mitigated by the
strengths of the organization.
A/B Company is financially very solid with a favorable track record and no
readily apparent weakness. Its overall risk profile, while low, is not
quite as favorable as for companies in the highest rating category.
B A strong company with a solid financial record and well received by its
natural money markets. Some minor weaknesses may exist but any
deviation from the company's historical performance levels should be
both limited and short-lived. The likelihood of a problem developing is
small, yet slightly greater than for a higher-rated company.
B/C Company is clearly viewed as a good credit. While some shortcomings are
apparent, they are not serious and/or are quite manageable in the short-
term.
C Company is inherently a sound credit with no serious deficiencies, but
financials reveal at least one fundamental area of concern that prevents
a higher rating. Company may recently have experienced a period of
difficulty, but those pressures should not be long-term in nature. The
company's ability to absorb a surprise, however, is less than that for
organizations with better operating records.
C/D While still considered an acceptable credit, the company has some
meaningful deficiencies. Its ability to deal with further deterioration
is less than that for better-rated companies.
D Company's financials suggest obvious weaknesses, most likely created by
asset quality considerations and/or a poorly structured balance sheet.
A meaningful level of uncertainty and vulnerability exists going
forward. The ability to address further unexpected problems must be
questioned.
D/E Company has areas of major weakness which may include funding and/or
liquidity difficulties. A high degree of uncertainty exists as the
company's ability to absorb incremental problems.
E Very serious problems exist for the company, creating doubt as to its
continued viability without some form of outside assistance - regulatory
or otherwise.
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APPENDIX C
STANDARD & POOR'S STATE AGENCY RATINGS
Excerpted from Standard & Poor's "Credit Review",
February 7, 1994, pages 59-61.
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- - ------------------------------------------------------------------------------
State housing finance agencies (HFAs) represent an important presence in
the municipal bond market, with over $80 billion of debt outstanding. These
agencies have a 10 to 20-year history of debt issuance and have funded over
one million loans for first-time buyers of single-family homes and over
900,000 units of rental housing. Many agencies have built up a considerable
level of expertise in all areas of finance, development, and portfolio
management. In addition, because of their prudent and conservative approach
and many successful years of bond issuance, many HFAs have built up
significant fund balances either in their own general funds or under various
bond resolutions.
S&P's assessment of the managerial, administrative and financial
resources of agencies is an integral part of the bond rating. Managerial and
administrative capabilities are evaluated based upon meetings with the agency
at its offices, at which time the team of S&P analysts focuses on all systems
and procedures applicable to the bonds being rated. The specific areas of
focus are detailed in the attachment entitled "Checklist for Good Management."
The assessment of these capabilities is important because in addition to their
role as issuer, many agencies lend support to their bond programs depending on
their ability to:
- Perform the role of master servicer and directly service loan
portfolios;
- Manage investment portfolio to provide ongoing credit quality and
meet liquidity needs;
- Directly provide primary mortgage insurance and portfolio loss
coverage, or participate in risk sharing programs; and
- Generate bond cash flows at the time of the rating, and at critical
junctures of bond administration, such as prior to extension of
acquisition periods, exercising open flow of funds, recycling of
prepayments to make new loans and non-pro rata redemptions.
In addition to S&P's recognition of an agency's ability to perform these
responsibilities, additional flexibility in bond programs is often permitted.
For example, with regard to [certain housing bonds], S&P uses a blended rating
approach in determining the appropriate ratings of credit enhancement
providers, depending upon the level of investments the magnitude, duration and
purpose of the credit support, and such factors as the agency's cash flow
strength and portfolio performance. Agencies can also receive flexibility in
investment maturity standards, if they can substantiate their ability to
provide liquidity as needed. In the area of cash flow standards, agencies who
act as master servicer for their programs and demonstrate a strong track
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record of good portfolio performance and monitoring, can reduce the lag in
receipt of mortgage payments on `AA' rated transactions from 60 to 30 days.
Other reserves can be reduced as agency financial strength and track
records dictate.
GENERAL OBLIGATION RATINGS. State HFAs may also be assigned their own
general obligation ratings. Although several agencies' debt incorporates a
general obligation pledge, the rating on that debt has traditionally addressed
the credit strength of the primary security for the bonds, such as the
mortgage portfolio, reserves and investments. When an agency has been
afforded its own general obligation rating, the rating on the bonds reflects
the overall financial strength of the agency first.
TOP TIER STATUS. Top tier status was developed by S&P in 1986 to
recognize agencies with superior managerial and administrative strength who
also showed the willingness and the ability to lend financial support to their
bond programs. The top tier designation affords agencies increased
flexibility and can result in higher ratings than would be attainable based
solely on the credit strength of the bonds being rated. To date, 12 state
HFAs have been designated top tier. Local housing finance agencies are also
eligible, as evidenced by the recent addition of New York City Housing
Development Corporation, to the list of Top Tier agencies. The seven
guidelines for Top Tier status are as follows:
Years Issuing Bonds. S&P looks at the years of experience in active
management of the entire agency in the tax-exempt bond area. Continuity of
management and the agency's ability to resolve difficult situations in the
face of changing legislatures, changing governors and changing economic cycles
over the past 10 to 15 years are evaluated. S&P also focuses on the track
records of the agency, on its programs and overall operations and any lapses
in years issuing bonds.
Unrestricted Fund Balance. S&P will examine two levels: the overall
percentage of total unrestricted funds to total debt, and the percentage of
liquid unrestricted funds to total mortgages outstanding. As guidelines, the
percentages should be in the range of total unencumbered fund balances equal
to 4% of outstanding bonds, of which a minimum of 2% of outstanding mortgages
is liquid (i.e. with maturities of 18 months or less). This 4% ratio cannot
include money pledged to risk share programs, self-insurance funds,
multifamily coinsurance, letter of credit reimbursement obligations or any
other programs where the agency is taking on additional risk, that is not
covered by indentured monies. S&P reviews these ratios annually and factors
in all upcoming risks on issues anticipated for the coming year. Further,
these unencumbered fund balances should be stable over several fiscal years.
Surpluses under specific resolutions are eligible to be counted among agency
fund balances as long as they can be made available as needed. S&P will
examine whether the funds to be considered unrestricted are tangible assets
available for any general agency use. Outstanding debt should include
short-term obligations and overall debt may be reduced, for calculation
purposes, if it is considered to have S&P's lowest degree of risk or highest
ratings.
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Administrative Capabilities. In general, S&P will evaluate the
degree of portfolio oversight and computerization of the agency's entire
operations. Established procedures should be in effect requiring periodic
reports to senior staff as well as the board of directors. In addition, an
agency should be able to substantiate its ability to assume servicing of a
given portfolio, if necessary, without delays. Parallel monitoring, including
access to (or duplicates) of actual loan documents, indicate the agency's
level of preparedness. An ideal situation is when an agency maintains
parallel systems with the servicer and can track the loans individually
themselves, on a daily basis instead of relying solely on servicer's reports.
Periodic reviews of the performance of the entire portfolio should be designed
to address problems at an early stage of development.
Investment Policy. S&P will focus on the investment of unrestricted
fund balances and other funds being counted to meet financial standards for
top tier, including procedures for making investment decisions and monitoring
the investment portfolio. Written investment guidelines are considered
essential to good management. Investment standards should meet S&P's
standards at the `A' rating level. It is viewed positively when an agency is
on line with the trustee, which enables them to have immediate access to all
investment decisions as parallel computer systems are maintained.
Internal Controls and Financial Management. On a regular basis, S&P
will evaluate the agency's ability to produce audited financial reports,
including balance sheets, revenue and expenditure statements, changes in fund
balances, and changes in financial position. Interim statements need not be
audited or include notes to financials, but should be prepared on the same
basis as audited statements. An agency's accounting and/or financial control
area, as indicated on an organizational chart, will be evaluated as a separate
department. Long-term financial planning and the ability to deliver annual
cash flow projections on bond programs is considered favorably.
Portfolio Quality. The performance of an agency's single-family
portfolio is evaluated in comparison to the national and respective state
averages based on Mortgage Bankers Association (MBA) statistics, and compared
to the performance of other state agency portfolios. Other appropriate
measures may be used and the relative risk, including any available offsetting
coverage, will be considered. All loan portfolios, whether under rated or
unrated programs, will be assessed according to S&P's single-family mortgage
loan criteria, as detailed in [S&P's Credit Review, February 7, 1994].
Multifamily portfolios will be addresses according to S&P's multifamily
criteria. Good portfolio performance and close monitoring as outlined in the
"Checklist for Good Management" are earmarks of a top tier agency. Most
agencies do experience portfolio problems from time to time due to economic
and market downturns. This would not preclude an agency from being designated
top tier as long as they demonstrate strong portfolio oversight and the
ability to turn around problem situations.
State Support. S&P will examine any agency's legislative mandate
and review the degree to which a state interacts with the agency's programs
and purpose. S&P looks for a positive relationship where the state is working
with the housing agency to address the state's housing needs. Top tier
agencies should be able to demonstrate strong state support for its programs.
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Past appropriations or expected future appropriations would be considered
evidence of state government support. As mentioned previously, S&P is
especially concerned about potential threats to agency fund balances. S&P
should be notified immediately of any such event. S&P's general obligation
group will assist in evaluating the degree of state involvement and financial
control of its housing finance agency. As part of the top tier review, S&P
may meet with members of state government, as well as the agency's board, to
better understand the interaction among the agency, state governments and its
board.
B-28<PAGE>
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APPENDIX D
From Standard & Poor's Creditweek, February 7, 1994
STATE HOUSING FINANCE AGENCY G.O. DEBT CRITERIA
A state housing finance agency (HFA) G.O. rating is a comprehensive
assessment of the agency's ability to meet its general obligations. The
diverse nature of state HFAs has led S&P to develop a "top-down" analytical
approach that takes market, as well as agency-specific, risks into account
when evaluating how an agency generates revenue and what factors could
adversely affect its ability to meet G.O. debt service.
One might expect S&P's analysis of a state HFA to be analogous to its
analysis of a financial institution, such as a commercial thrift. However,
the institutions are quite different. Thrifts have experienced wide
mismatches between the maturities of assets and liabilities, which led to
substantial losses in the 1980s. They have registered losses, reflecting
severe asset quality problems. In addition, thrifts have depositors and make
lending decisions based on profit and dividends for shareholders.
Unlike thrifts, state HFAs have the luxury of matching the maturities of
their assets and liabilities by issuing tax-exempt debt, thereby minimizing
their interest rate exposure. Agency assets consist primarily of mortgage
loans for single-family homeownership and rental housing for low- and
moderate-income individuals and families. The relatively low tax-exempt
interest rates and access to federal, state, and local housing assistance
programs provide the necessary subsidy to create high-quality, below-market-
rate loans. In addition, state HFAs serve the public and, therefore, are
answerable to state legislatures. The public nature of state HFAs makes the
autonomy of their management and security of general fund balances an
important credit consideration.
S&P evaluates the capacity and willingness of state HFAs to repay their
G.O. debt by examining four basic analytical areas:
- State economy,
- Legislative mandate,
- Management,
- Earnings quality and financial strength.
THE ECONOMY
The state's economic base is a critical element in determining how the
housing market will perform and has a direct impact on the agency's financial
performance. The general characteristics and strengths of an agency are
assessed relative to both local and national economic factors. This includes
evaluating the impact of changes in demand for housing, the impact of changing
regulatory and legislative environment for low- and moderate-income housing,
and the state's dependence on specific industries and how that may affect the
agency's mortgage portfolio.
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The key economic factor in S&P's analysis is the demand for the
state's housing stock. This is directly affected by the employment base in
the region and the desirability of the area to current and potential employers
and residents. Therefore, factors to be considered include:
- Composition by employment sector--manufacturing, trade,
construction, services, government and agriculture;
Concentration in major employers or reliance on particular
industries;
- Employer commitment to the state--importance of state facilities
and employees to the overall strategy of the employers, business
development plans, age of plant, and industry prospects;
- Employment trends and quality of the local labor force; and
Regional economic patterns to assess relative gains in employment
and income growth.
LEGISLATIVE MANDATE
The importance a state government places on housing--both homeownership
and rental--can be a significant rating factor. S&P needs to be assured that
the long-term viability of the agency has the full support of the governor and
state legislature. S&P looks for security of agency fund balances and
continued management autonomy. In many instances, however, much of the
initial funding for the agencies may have been provided by the state and key
members of the agencies may have been appointed by the governor or the
legislature.
Unlike commercial banks, mortgage finance corporations, and savings and
loans, state HFAs face political pressures. Therefore, S&P prefers to see
lending decisions insulated from the political process.
The key to this analysis is the ability to identify detractors of the
authority, if there are any, and find bipartisan support for the authority's
programs. This can be demonstrated by a history of legislative approvals of
annual budgets, special programs, additional funding, housing legislation, and
so forth. Also, the autonomy of the management team, ideally, should be
unaffected by gubernatorial and legislative elections. The agency also should
anticipate the housing needs of the legislatures' constituents and continue to
develop programs to address them.
MANAGEMENT
S&B initially assesses the operating performance of the state HFA under
consideration, focusing on organization, philosophy, strategies, and
administrative procedures. The agency should have a long track record so S&P
can assess the continuity of management and the agency's ability to resolve
difficult situations over its operating history. S&P also evaluates the
agency's administrative capabilities as to degree of portfolio oversight, loan
servicing capability, planning procedures, and computerization. This analysis
incorporates S&P's "Top-Tier" guidelines. The Top Tier designation is the
recognition of an agency's history of superior portfolio management and
underwriting, depth of financial resources, prudent investment policies, and
other characteristics.
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Next, financial management is considered. Historical financial
performance, as well as the experience and qualifications of financial
personnel and overall management, all have an impact on the bottom line.
Major aspects of financial management that are considered include the
structure of debt, knowledge of and response to interest rate movements,
management of cash and other assets, and financial reporting. Although some
aspects of financial management, such as cash flow generation, may be
contracted out, effective management includes active review and oversight of
all financial operations. Reliance on financial advisers without a strong
knowledge of the intricacies of financing techniques are viewed negatively.
S&P looks at the methodology used by management in evaluating interest
rate risk, its tolerance for such risk, and the degree to which it measures
and reacts to interest rate changes. This has been increasingly important in
the current interest rate environment. Interest rates directly affect the
competitiveness of the agency's product--mortgages. The ability to issue
tax-exempt debt allows an agency to finance mortgages to first-time home
buyers at rates below the conventional market. Therefore, the spread between
tax-exempt and taxable yields directly affects the agency's ability to
provide below-market mortgage rates.
S&P also focuses on the investment of fund balances, both restricted and
unrestricted, as well as bond funds. S&P reviews the amount of funds being
invested, who manages the money, how daily investment decisions are made, and
what type of guidelines are in place. The agency's investments should meet
S&P's standard permitted investment guidelines, as well as be rated as high as
the agency's G.O. rating.
A state HFA's accounting quality, both historical and current, is
reviewed. This includes the quality of external auditor's opinion, use of
generally accepted accounting principles, the impact of accounting for mergers
and acquisitions, asset and liability valuations, recognition of income,
pension liabilities, and accounting for asset sales and hedge transactions.
EARNINGS QUALITY & FINANCIAL STRENGTH
The assessment of earnings quality and financial strength is important in
determining an appropriate credit rating. Financial performance for the past
five years is reviewed, with emphasis placed on any notable fluctuations. A
premium is placed on consistency of performance. However, one bad year is not
necessarily a negative factor, unless it signifies the beginning of a
permanent shift.
S&P uses income statement analysis to evaluate revenue sources, cost
controls, and profitability in tandem with a balance sheet analysis of
liquidity, capitalization, and asset quality. Both approaches require further
evaluation of an agency's cash accumulation levels, types of investments,
interfund borrowing, historical use of debt, loan-loss reserves, real estate
owned, net charge-offs, equity and unrestricted fund balances. In addition,
S&P reviews the most recent budgets of the state HFA, relying on the
aforementioned income statement and balance sheet analysis.
S&P also continues to evaluate the quality of the agency's mortgage
collateral. The focus is on portfolio size, dwelling type, loan types,
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payment characteristics, mortgage insurance and guaranties, loan
underwriting criteria, and location. The agency's loan portfolio performance
is measured against comparable state agency and Mortgage Bankers Association
delinquency statistics.
While financial performance is important it must be viewed in conjunction
with the other rating factors--the economy, management, and the agency's
relationship with the state. However, analysis of an agency's financial
performance is essential in determining the capacity of a state HFA to repay
its G.O. debt.
THE FUTURE
S&P believes many state HFAs have the capacity to issue debt rated based
on their G.O. pledges. S&P already has used this comprehensive analysis to
evaluate the ability of an agency's capital base to absorb loan losses, as
well as to determine whether the agency's assets are of sufficient rating
quality and liquidity to support the G.O. rating. That agency was the Alaska
Housing Finance Corp., which in 1991 was the first housing agency to receive a
rating based solely on its G.O. pledge.
The G.O. rating has been used by state HFAs to lend support to financings
that may not have been ratable relying on the underlying collateral alone.
Also, the rating allows an HFA to hedge against negative arbitrage by issuing
commercial paper to finance mortgage warehousing activities.
In the future, the rating may be used in conjunction with HUD's
anticipated risk-sharing program. The regulations provide for streamlined
state agency qualification for those agencies with G.O. debt rated A' or
higher. However, it is important to note that, although many agencies have
rated G.O. debt, many of the ratings are based on the underlying collateral
and not the G.O. of the agency itself.
A G.O. rating also brings with it the added burden of better disclosure
and more uniform accounting practices. For example, commercial paper ratings
required a minimum of quarterly reporting to S&P to maintain the outstanding
ratings. Therefore, state HFAs must be mindful of the additional
responsibility a G.O. rating confers and how that responsibility may affect
their housing programs.
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PART C: STATEMENT OF OTHER INFORMATION
AFL-CIO
HOUSING INVESTMENT TRUST
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
(202) 331-8055
STATEMENT OF OTHER INFORMATION
This Statement of Other Information is not a prospectus. It should be
read in conjunction with the AFL-CIO Housing Investment Trust ("Trust")
Prospectus, dated June 17, 1998, which may be obtained without charge from
Trust headquarters.
The date of this Statement of Other Information is June 17, 1998.
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
----
Financial Statements and Exhibits..................................... 1
Persons Controlled by or Under
Common Control with Registrant...................................... 6
Business and Other Connections of Investment Advisor.................. 6
Number of Holders of Securities....................................... 6
Indemnification....................................................... 6
Location of Accounts and Records...................................... 7
Signatures............................................................ 8
C-2<PAGE>
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FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements pertaining to the year ended
December 31, 1997 are incorporated by reference in Part B of this
Registration Statement (the Statement of Additional Information):
(i) Statement of Assets and Liabilities
(ii) Schedule of Investments
(iii) Statement of Operations
(iv) Statement of Changes in Net Assets
(v) Notes to Financial Statements
(vi) Supplemental Information -- Selected Per Share Data
and Ratios
(vii) Report of Arthur Amdersen, LLP independent auditors
(b) Exhibits:
(1) Copies of the charter as now in effect;
Declaration of Trust as amended through May 13, 1997,
is included as Exhibit 1.1 to this Registration
Statement.
Declaration of Trust as amended through April 7, 1998,
is included as Exhibit 1.2 to this Registration
Statement.
(2) Copies of the existing by-laws or instruments corresponding
thereto;
Rules and Regulations as amended through March 15, 1990:
incorporated by reference to Part C, Item 24(b)(2)
[Exhibit(2)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933(Post-Effective
Amendment No. 13)and the Investment Company Act of 1940
(Amendment No. 16), Registration No. 2-78066, as filed
with the SEC on April 30, 1990.
(3) Copies of any voting trust agreement with respect to more than
5 percent of any class of equity securities of the Registrant;
(Not applicable)
C-3<PAGE>
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(4) Specimens or copies of each security issued by the Trust,
including copies of all constituent instruments, defining the
rights of the holders of such securities, and copies of each
security being registered;
(Not applicable)
(5) Copies of all investment advisory contracts relating to the
management of the assets of the Trust;
Investment Advisory Agreement dated May 21, 1997 with
Wellington Management Company is included as Exhibit
5 of this Registration Statement;
(6) Copies of each underwriting or distribution contract between
the Trust and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(Not applicable)
(7) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Trust in their capacity as such;
if any such plan is not set forth in a formal document,
furnish a reasonably detailed description thereof;
(a) Summary of AFL-CIO Staff Retirement Plan dated
July 1985 and amendments thereto in effect as of January
30, 1989: incorporated by reference to Part C, Item
24(b)(7)(b) [Exhibit 7(b)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 14) and the Investment
Company Act of 1940 (Amendment No. 17), Registration No.
2-78066, as filed with the SEC on March 25, 1991.
(b) AFL-CIO Deferred Compensation Plan and Trust, as
restated and amended through August 1, 1988: incorporated
by reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
14) and the Investment Company Act of 1940 (Amendment No.
17), Registration No. 2-78066, as filed with the SEC on
March 25, 1991.
(c) AFL-CIO Housing Investment Trust 401(k) Retirement
Plan, effective as of October 1, 1996: incorporated by
reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)] of
the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997.
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(8) Copies of all custodian agreements and depository contracts
under Section 17(f) of the Investment Company Act, with
respect to securities and similar investments of the Trust,
including the schedule of remuneration;
Custody Agreement with American Security Bank dated
October 18, 1983, as amended through December 21, 1988:
incorporated by reference to Part C, Item 24(b)(8)
[Exhibit (8)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 12) and the Investment
Company Act of 1940 (Amendment No. 15), Registration No.
2-78066, as filed with the SEC on April 28, 1989.
Custodian Agreement with Security Trust Company, N.A.
dated May 21, 1991: incorporated by reference to Part C,
Item 24(b)(8) [Exhibit (8)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post Effective Amendment No. 16) and the Investment
Company Act of 1940 (Amendment No. 19), Registration
No. 2-78066, as filed with the SEC on April 22, 1992.
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed in whole
or in part at or after the date of filing the Registration
Statement;
(Not applicable)
(10) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid, and non-assessable;
Opinion letter and written consent of Swidler & Berlin,
Chartered, dated , is included as Exhibit
(10) to this Registration Statement.
(11) Copies of any other opinions, appraisals, or rulings, and
consents to the use thereof relied on in the preparation of
this Registration Statement and required by Section 7 of the
1933 Act;
Consent of Arthur Andersen LLP dated April 30,
1998 is included as Exhibit (11) to this Registration
Statement.
(12) All financial statements omitted from Item 23 of Part B;
(Not applicable)
C-5<PAGE>
(13) Copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Trust, the underwriter, adviser, promoter, or
initial stockholders and written assurances from promoters or
initial stockholders that their purchases were made for
investment purposes without any present intention of redeeming
or reselling;
(Agreements for Advances, executed September 24, 1981,
September 25, 1981, October 19, 1981 and April 16, 1982,
previously submitted, have expired.)
(14) Copies of the model plan used in the establishment of any
retirement plan in conjunction with which the Trust offers its
securities, any instructions thereto, and any other documents
making up the model plan. Such form(s) should disclose the
costs and fees charged in connection therewith;
(Not applicable)
(15) Copies of any plan entered into by the Trust pursuant to Rule
12b-1 under the Investment Company Act, which describes all
material aspects of the financing of distribution of the
Trust's shares, and any agreements with any person relating to
implementation of such plan;
Plan for Distribution as amended through December 11,
1997 is included as Exhibit (15) of this Registration
Statement.
(16) Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22
(which need not be audited);
(Not applicable)
(17) Financial Data Schedule is included as Exhibit (17)
to this Registration Statement.
(18) Other Exhibits:
(a) Powers of Attorney for Trustees Moore, Sweeney,
Georgine, LaVere, Fleischer, Joyce, Coia, Monroe,
Duvernay, Chavez-Thompson, Kardy, Latimer, Stanley,
Fleischer, Hanley, Hurt, Spear, Ravitch and Wiegert
and Trust Officers Coyle, Campbell, Martin, Thompson
and Roark are filed as Exhibit 18(a) to this Registration
Statement.
C-6<PAGE>
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PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT
See "History and Purpose" in Part A of this Registration Statement.
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Wellington Management Company ("Wellington Management") is an investment
adviser registered under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). The list required by this Item 28 of officers and partners
of Wellington Management, together with information as to any business
profession, vocation or employment of substantial nature engaged in by such
officers and partners during the past two years, is incorporated herein by
reference to Schedules A and D of Form ADV filed by Wellington Management
pursuant to the Advisers Act (SEC File No. 801-15908).
NUMBER OF HOLDERS OF SECURITIES
The number of record holders of Units of Participation of the Trust as
of April 1, 1998 is shown in the following table. No other securities were
outstanding as of that date.
Number of Record
Title of Class Holders
- - -------------- -----------------
Units of Participation 394
INDEMNIFICATION
Pursuant to Section 4.8 of the Trust's Declaration of Trust (see Exhibit
(1) under "Financial Statements and Exhibits" above), each Trustee and officer
and each former Trustee and officer shall be indemnified against fines,
judgments, amounts paid in settlement and expenses, including attorney's fees,
actually and reasonably incurred in connection with any pending or threatened
criminal action, civil suit or administrative or investigative proceeding (any
"matter") against him or her arising by reason of the fact that he or she is
or was a Trustee or officer of the Trust, or by reason of actions taken by him
or her as such Trustee or officer, if it is found that his or her liability
does not result from willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office
("disabling conduct"). The finding that liability does not arise from
disabling conduct may be made in a final decision by a court or other body
before which the matter giving rise to the expense or liability was brought
or, in the absence of such a decision, by (a) the vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as
defined in Section 2(a)(19) of the Investment Company Act of 1940 nor parties
to such matter ("disinterested non-party trustees") or (b) an independent
legal counsel in a written opinion. Expenses of the kind eligible for
indemnification may be paid as incurred by a Trustee or officer in advance of
final disposition of a matter upon receipt of an undertaking by the recipient
to repay such amount unless it is ultimately determined that he is entitled to
indemnification hereunder if (a) the indemnity provides security for his or
her undertaking, (b) the Trust is insured for losses arising by reason of any
lawful advances or (c) a majority of a quorum of disinterested non-party
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Trustees or independent legal counsel (in a written opinion) determines, based
on a review of readily available facts, that there is reason to believe that
the indemnitee ultimately will be found entitled to indemnification. Section
4.8 is intended to provide indemnification to Trustees and officers to the
full extent permitted by law and is to be construed and enforced to that
extent.
LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by
Section 31(a) of the Investment Company Act and Rules 31a-1 to 31a-3
thereunder are maintained in the possession of the Chief Executive Officer of
the Trust, 1717 K Street, N.W., Suite 707, Washington, D.C. 20006.
C-8<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Washington, District of Columbia on
the 17 th day of June, 1998.
AMERICAN FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
By: *
--------------------------------
Stephen Coyle
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated:
* Chairman
----------------
Richard Ravitch
* Union Trustee
---------------------
Linda Chavez-Thompson
* Union Trustee
----------------
Arthur A. Coia
* Management Trustee
----------------
John E. Cullerton
* Union Trustee
-------------------
Robert A. Georgine
* Union Trustee
------------------
Francis X. Hanley
* Union Trustee
------------------
Edwin D. Hill
* Union Trustee
-----------------
Frank Hurt
* Union Trustee
-------------------
John T. Joyce
* Union Trustee
-------------------
Martin J. Maddaloni
* Union Trustee
--------------------
A.L. Monroe
C-10<PAGE>
<PAGE>
* Union Trustee
---------------------
Andrew Stern
* Union Trustee
---------------------
John Sweeney
* Union Trustee
---------------------
Richard L. Trumka
* Management Trustee
----------------------
Terrence R. Duvernay
* Management Trustee
----------------------
Alfred J. Fleischer
* Management Trustee
----------------------
Walter Kardy
* Management Trustee
-----------------------
George Latimer
* Management Trustee
------------------------
H.D. LaVere
* Management Trustee
------------------------
Tony Stanley
* Management Trustee
-----------------------
Marlyn J. Spear
* Management Trustee
-------------------------
Patricia F. Wiegert
* Chief Executive
------------------------ Officer (Principal
Stephen Coyle Executive Officer)
* Chief Investment
-------------------------- Officer (Principal
James D. Campbell Financial and Accounting
Officer)
* General Counsel
--------------------------
ElChino M. Martin
C-11<PAGE>
<PAGE>
* Controller
--------------------------
Harry W. Thompson
* . Portfolio Manager
--------------------------
Patton H. Roark, Jr.
/s/Michael M. Arnold Director of Investor
- - ----------------------------- Relations
Michael M. Arnold
* Michael M. Arnold, by signing his name hereto, signs this document on
behalf of each of the persons so indicated above pursuant to powers of
attorney duly executed by such person and filed herewith as Exhibit (18).
C-12<PAGE>
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Page Exhibit
- - -------- -------
(1) Copies of the charter as now in effect;
Declaration of Trust as amended through May 13, 1997,
is included as Exhibit 1.1 to this Registration
Statement.
Declaration of Trust as amended through April 7, 1998,
is included as Exhibit 1.2 to this Registration
Statement.
(2) Copies of the existing by-laws or instruments corresponding
thereto;
Rules and Regulations as amended through March 15, 1990:
incorporated by reference to Part C, Item 24(b)(2)
[Exhibit(2)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933(Post-Effective
Amendment No. 13)and the Investment Company Act of 1940
(Amendment No. 16), Registration No. 2-78066, as filed
with the SEC on April 30, 1990.
(3) Copies of any voting trust agreement with respect to more than
5 percent of any class of equity securities of the Registrant;
(Not applicable)
C-13<PAGE>
<PAGE>
(4) Specimens or copies of each security issued by the Trust,
including copies of all constituent instruments, defining the
rights of the holders of such securities, and copies of each
security being registered;
(Not applicable)
(5) Copies of all investment advisory contracts relating to the
management of the assets of the Trust;
Investment Advisory Agreement dated May 21, 1997 with
Wellington Management Company is included as Exhibit
5 of this Registration Statement;
(6) Copies of each underwriting or distribution contract between
the Trust and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(Not applicable)
(7) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Trust in their capacity as such;
if any such plan is not set forth in a formal document,
furnish a reasonably detailed description thereof;
(a) Summary of AFL-CIO Staff Retirement Plan dated
July 1985 and amendments thereto in effect as of January
30, 1989: incorporated by reference to Part C, Item
24(b)(7)(b) [Exhibit 7(b)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 14) and the Investment
Company Act of 1940 (Amendment No. 17), Registration No.
2-78066, as filed with the SEC on March 25, 1991.
(b) AFL-CIO Deferred Compensation Plan and Trust, as
restated and amended through August 1, 1988: incorporated
by reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)]
of the Trust's Registration Statement on Form N-1A under
the Securities Act of 1933 (Post-Effective Amendment No.
14) and the Investment Company Act of 1940 (Amendment No.
17), Registration No. 2-78066, as filed with the SEC on
March 25, 1991.
(c) AFL-CIO Housing Investment Trust 401(k) Retirement
Plan, effective as of October 1, 1996: incorporated by
reference to Part C, Item 24(b)(7)(c) [Exhibit 7(c)] of
the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 (Post-Effective Amendment No. 25)
and the Investment Company Act of 1940 (Amendment No.
28), Registration No. 2-78066, as filed with the SEC on
April 30, 1997.
C-14<PAGE>
<PAGE>
(8) Copies of all custodian agreements and depository contracts
under Section 17(f) of the Investment Company Act, with
respect to securities and similar investments of the Trust,
including the schedule of remuneration;
Custody Agreement with American Security Bank dated
October 18, 1983, as amended through December 21, 1988:
incorporated by reference to Part C, Item 24(b)(8)
[Exhibit (8)] of the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933
(Post-Effective Amendment No. 12) and the Investment
Company Act of 1940 (Amendment No. 15), Registration No.
2-78066, as filed with the SEC on April 28, 1989.
Custodian Agreement with Security Trust Company, N.A.
dated May 21, 1991: incorporated by reference to Part C,
Item 24(b)(8) [Exhibit (8)] of the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933
(Post Effective Amendment No. 16) and the Investment
Company Act of 1940 (Amendment No. 19), Registration
No. 2-78066, as filed with the SEC on April 22, 1992.
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed in whole
or in part at or after the date of filing the Registration
Statement;
(Not applicable)
(10) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid, and non-assessable;
Opinion letter and written consent of Swidler & Berlin,
Chartered, dated , is included as Exhibit
(10) to this Registration Statement.
(11) Copies of any other opinions, appraisals, or rulings, and
consents to the use thereof relied on in the preparation of
this Registration Statement and required by Section 7 of the
1933 Act;
Consent of Arthur Andersen LLP dated April 30,
1998 is included as Exhibit (11) to this Registration
Statement.
(12) All financial statements omitted from Item 23 of Part B;
(Not applicable)
C-15<PAGE>
(13) Copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Trust, the underwriter, adviser, promoter, or
initial stockholders and written assurances from promoters or
initial stockholders that their purchases were made for
investment purposes without any present intention of redeeming
or reselling;
(Agreements for Advances, executed September 24, 1981,
September 25, 1981, October 19, 1981 and April 16, 1982,
previously submitted, have expired.)
(14) Copies of the model plan used in the establishment of any
retirement plan in conjunction with which the Trust offers its
securities, any instructions thereto, and any other documents
making up the model plan. Such form(s) should disclose the
costs and fees charged in connection therewith;
(Not applicable)
(15) Copies of any plan entered into by the Trust pursuant to Rule
12b-1 under the Investment Company Act, which describes all
material aspects of the financing of distribution of the
Trust's shares, and any agreements with any person relating to
implementation of such plan;
Plan for Distribution as amended through December 11,
1997 is included as Exhibit (15) of this Registration
Statement.
(16) Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22
(which need not be audited);
(Not applicable)
(17) Financial Data Schedule is included as Exhibit (17)
to this Registration Statement.
(18) Other Exhibits:
(a) Powers of Attorney for Trustees Cullerton, Hill,
Maddaloni, Stern, Moore, Sweeney, Georgine, LaVere,
Fleischer, Joyce, Coia, Monroe, Duvernay, Chavez-
Thompson, Kardy, Latimer, Stanley, Fleischer, Hanley,
Hurt, Spear, Ravitch and Wiegert and Trust Officers
Coyle, Campbell, Martin, Thompson and Roark are filed as
Exhibit 18(a) to this Registration Statement.
C-16
AMERICAN FEDERATION OF LABOR
AND CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
DECLARATION OF TRUST
(as amended and restated through April 7, 1998)
DECLARATION OF TRUST made in Washington, D.C. by the original signatories
to this instrument (who, together with their successors in office, are
hereinafter called "Trustees").
WHEREAS, by Declaration of Trust made September 19, 1981, there was
created a trust (the "Trust") as a step in the organization of a new pooled
investment fund to be created under the auspices of the American Federation of
Labor -- Congress of Industrial Organizations ("AFL-CIO"); and
WHEREAS, the Trustees have amended the Declaration of Trust from time to
time to create an investment fund by naming the Trust the "American Federation
of Labor and Congress of Industrial Organizations Housing Investment Trust"
and by restating the Declaration of Trust in its entirety as set forth herein;
and
WHEREAS, certain subscriptions to Units in the Trust hereby created have
been and will be received from the participants whose interests are
hereinafter described,
NOW, THEREFORE, the Trustees declare that they will hold all such
contributions that they have acquired or will acquire as Trustees, together
with the proceeds thereof, in trust, in the manner and subject to the
provisions hereof, for the benefit of any and all contributors to the corpus
of the Trust (hereinafter collectively called "Participants").
ARTICLE I
Purposes
Section 1.1. The purpose of this Trust shall be to earn a fair and secure
rate of return for its Participants by investing the pooled contributions of
all Participants principally in (a) long-term federally insured or guaranteed
real estate mortgage and construction loans and certificates representing
interests in one or more such loans and (b) obligations issued or guaranteed
by Federal National Mortgage Association ("Fannie Mae") or Federal Home Loan
Mortgage Corporation ("Freddie Mac") and obligations backed by such real
estate mortgages and construction loans. All buildings, structures and other
improvements that are to be built or rehabilitated on mortgaged real estate or
exchanged for such Trust investments must be built or rehabilitated by union
<PAGE>
<PAGE>
labor except as otherwise expressly provided in Section 3.3. The Trust may
make investments that are not federally insured or guaranteed only as and to
the extent provided in Section 3.3 hereof.
ARTICLE II
Name and Trustees
Section 2.1. The Trust shall be named "The American Federation of Labor
and Congress of Industrial Organizations Housing Investment Trust". The
Trustees shall manage the Trust property, execute all instruments in writing,
and do all other things relating to the Trust. Every duly authorized
instrument executed in the name of the Trust shall have the same effect as if
executed in the name of the Trustees.
Section 2.2. There shall be up to twenty-five voting Trustees and such
non-voting members of the Board of Trustees as provided by Section 2.10
hereof.
Section 2.3. (a) Up to twelve of the Trustees (hereinafter the "Union
Trustees") shall be officers or employees of the AFL-CIO or an AFL-CIO member
union; (b) up to twelve of the Trustees (hereinafter the "Management
Trustees") shall be (i) officers or management employees of one or more
organizations contributing directly or indirectly through contractors to an
Eligible Pension Plan as defined in Section 5.2 hereof, or officers or
management employees of such an Eligible Pension Plan, or (ii) with respect to
not more than two of the Management Trustees, an officer, director, or trustee
of an organization connected in whole or in part with the housing industry, or
an elected or appointed official of the federal or any state or local
government or an agency or instrumentality thereof; and (c) one Trustee
(hereinafter the "Chairman") shall be an individual who is neither an officer,
trustee, or employee of any organization that is a Participant in the Trust.
The number of Management Trustees shall not exceed the number of Union
Trustees except as the result of a vacancy during an unexpired term caused by
death or resignation.
Section 2.4. The Union and Management Trustees shall be divided into up
to three classes ("Classes") in respect to term of office, provided that no
new Class shall be established if any existing Class has less than five
Trustees. No Class shall have more than eight Trustees. Each Class shall
have, insofar as the population of Trustees permits, an equal number of Union
and Management Trustees and, upon the appointment of one or more new Trustees,
the Trustees shall alter Class assignments as required to comply with the
provisions of this sentence. The term of the first Class of Trustees shall
expire at the first annual meeting of Participants, the term of the second
Class shall expire at the second annual meeting of Participants, and the term
of the third Class shall expire at the third annual meeting of Participants.
After the expiration of the initial terms as set forth above, the term of each
Class of Trustee shall expire at the third annual meeting following its
election. At each annual meeting, the Participants shall elect a Chairman to
serve until the next annual meeting and such number of Trustees as necessary
to fill vacancies in the Class of Trustees whose terms expire as of such
meeting. Each Trustee shall serve until his successor shall be elected and
shall qualify.
2<PAGE>
<PAGE>
Section 2.5. A Trustee shall be an individual at least twenty-one years
of age who is not under legal disability and who shall have in writing
accepted his or her appointment and agreed to be bound by the terms of this
Declaration of Trust. The Trustees, in their capacity as Trustees, shall not
be required to devote their entire time to the business and affairs of the
Trust.
Section 2.6. All Trustees shall serve their full terms unless they
resign or die. Any Trustee can resign at any time by giving written notice to
the other Trustees, to take effect upon receipt of the notice or such later
date as the notice specifies.
Section 2.7. Upon the death or resignation of any Union Trustee, the
remaining Union Trustees shall appoint by a majority vote a replacement to
serve out the remainder of the term (with the Chairman, if any, voting only in
case of a tie). Upon the death or resignation of any Management Trustee, the
remaining Management Trustees shall appoint by majority vote a replacement to
serve out the remainder of the term (with the Chairman, if any, voting only in
case of a tie). Upon the death or resignation of the Chairman, the Union and
Management Trustees together shall appoint by majority vote a replacement to
serve out the remainder of the term.
Section 2.8. The death or resignation of one or more Trustees shall not
annul the Trust or revoke any existing agency created pursuant to the terms of
this Declaration of Trust. Whenever a Trustee's position becomes vacant
because of the Trustee's death or resignation the other Trustees shall have
all of the powers specified in this Declaration of Trust until such vacancy is
filled.
Section 2.9. The Chairman, Management Trustees and non-voting members
may be compensated for their services as provided by the Board of Trustees.
No Union Trustee shall receive any compensation or fee for his services as
Trustee. Trustees and non-voting members shall be reimbursed for expenses of
attending meetings of the Board of Trustees and committees thereof.
Section 2.10. The Chief Executive Officer, upon his or her retirement or
resignation, may be appointed by the Executive Committee, subject to approval
by the Board of Trustees, as a non-voting member of the Board of Trustees,
with the right to attend meetings and participate in discussions, for an
initial term not to exceed five years.
ARTICLE III
Powers
Section 3.1. The Trustees shall have power to do all things proper or
desirable in order to carry out, promote, or advance the purpose of the Trust
even though such things are not specifically mentioned in this Declaration of
Trust. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive.
3<PAGE>
<PAGE>
Section 3.2. The Trustees shall have without further authorization, full,
exclusive, and absolute power, control, and authority over the Trust property
and over the business of the Trust to the same extent as if the
Trustees were the sole owners of the Trust property and business in their own
right, subject to such delegation as may be permitted in this Declaration of
Trust. The enumeration of any specific powers or authority herein shall not
be construed as limiting the aforesaid powers or authority or any specific
power or authority. In construing the provisions of this Declaration of Trust
the presumption shall be in favor of a grant of power to the Trustees.
Section 3.3. The Trustees shall have each of the following specific
powers and authority in the administration of the Trust, to be executed in
their sole discretion exercised in accordance with their fiduciary duties
under the Investment Company Act of 1940, as amended ("Investment Company
Act"):
(a) To invest in construction and/or long-term mortgage loans or
mortgage-backed securities that are guaranteed or insured by the
federal government or an agency thereof or interests in such
mortgage loans or securities; and
(b) To invest in securities that are secured by securities and/or
mortgage loans of the type described in paragraph (a) above and that
are rated in one of the two highest rating categories by at least
one nationally recognized statistical rating agency; and
(c) To invest in (i) obligations issued or guaranteed by Fannie Mae or
Freddie Mac, or (ii) securities that are backed by Fannie Mae or
Freddie Mac and are, at the time of their acquisition by the Trust,
rated in one of the two highest rating categories by at least one
nationally recognized statistical rating agency; and
(d) To invest up to 30 percent of the value of all of the Trust's assets
in any of the following:
(i) Construction loans, or securities backed by construction loans
or interests in such loans or securities, which loans or
securities are collateralized by:
(A) a letter of credit issued by a depository institution rated
in category "B" or higher by Thomson Bankwatch, Inc.
("Thomson Bankwatch"), on terms and conditions acceptable to
the Trust; or
(B) another form of guaranty issued by an entity with a
short-term (12 months or less) rating at the time of the
issuance of the guaranty of at least "A-1" from Standard &
Poor's Corporation ("S&P") or "P-1" from Moody's Investors
Service, Inc. ("Moody's") with respect to a guaranty with a
duration of 12 months or less, or with a long-term (more
than 12 months) rating in one of the two highest rating
categories of at least one nationally recognized statistical
rating agency with respect to a guaranty with a duration of
more than 12 months.
4<PAGE>
<PAGE>
(ii) Construction and/or permanent loans, or securities backed by
construction and/or permanent loans, or interests in such loans
or securities, provided that:
(A) such loans or securities are supported by a full faith and
credit guaranty of a state or local government or agency
or instrumentality thereof that has general taxing
authority; or
(B) such loans or securities are issued (with or without
recourse) or guaranteed, as the case may be, by a state or
local housing finance agency designated "top tier" by S&P
(or designated comparably by another nationally recognized
statistical rating agency, as determined by the Executive
Committee of the Trust) at the time of acquisition by the
Trust; and are (i) with full recourse (directly or by way
of guaranty or indemnity) to such agency's general credit
and assets, or (ii) secured by recourse to such assets of
the agency or by such third party credit enhancement as to
provide, in the judgment of management, protection
comparable to a pledge of the agency's general credit, or
(iii) backed by the "moral obligation" of the state in
which such agency is located in the form of the state's
commitment to replenish any insufficiencies in the funds
pledged to debt service on the obligations; or
(C) such loans or securities are supported by a guaranty
of at least the first 75 percent of the principal amount of
such loans or securities under a state insurance or
guarantee program by a state-related agency with a record
of creditworthiness as evidenced by a rating of the agency
or the obligations issued or guaranteed by such agency of
at least "A-" by S&P, Fitch Investors Services Inc.
("Fitch") or Duff & Phelps Inc. ("Duff & Phelps") or at
least "A3" by Moody's at the time of their acquisition by
the Trust; or
(D) such loans or securities are issued or guaranteed, as the
case may be, by a state or local housing finance agency
with a general obligation rating of "A" or better by S&P
(or a comparable rating by another nationally recognized
statistical rating agency, as determined by the Executive
Committee of the Trust) at the time of acquisition by the
Trust; and are (i) with full recourse (directly or by way
of guaranty or indemnity) to such agency's general credit
and assets or (ii) backed by the "moral obligation" of the
state in which such agency is located, in the form of the
state's commitment to replenish any insufficiencies in the
funds pledged to debt service on the obligations or similar
commitment.
(iii) Construction and/or permanent loans, or securities backed
by construction and/or permanent loans or interests in such
loans or securities, that have evidence of support by a state
5<PAGE>
<PAGE>
or local government or an agency or instrumentality thereof,
such support being evidenced by at least the adoption of a
resolution by the governing body or other applicable
governmental agency in support of the project, provided that
all of the following criteria are satisfied:
(A) the loan-to-value ratio of the project shall not
exceed 50 percent, the "value" for such purposes to be determined on the basis
of an independent appraisal by a licensed appraiser acceptable to the Trust,
except that a loan-to-value ratio of up to 65 percent shall be permitted if
mortgage insurance in an amount which will cover all first losses down to a 50
percent loan-to-value level has been provided by a mortgage insurance provider
rated either at least "A-" by S&P, Fitch or Duff & Phelps or at least "A3" by
Moody's or approved and accepted by Fannie Mae or Freddie Mac for insurance of
the type of obligation to be acquired by the Trust;
(B) the state or local government or agency or
instrumentality thereof or a foundation exempt from federal income tax under
Section 501(c) of the Internal Revenue Code of 1986, as amended, must have a
financial participation in the project within guidelines adopted by the
Executive Committee of the Trust for a period at least equal to the
outstanding term of the Trust's investment, such financial interest to be in
the form of subordinate financing, an interest rate write-down, a donation of
land, some other form of insurance or guarantee or some other similar
contribution within guidelines adopted by the Executive Committee of the
Trust;
(C) the sponsor of the project must have a
demonstrably successful record of developing or managing low-income housing
projects, in accordance with guidelines to be developed by the Trust;
(D) the underwriter and servicer of the mortgage loan
for the project must have been approved by the Trust;
(E) the construction of the project must be supervised
on a regular basis by agents or employees of the state or local government or
agency or instrumentality thereof or tax-exempt foundation; and
(F) the minimum debt service coverage for the project
must be at least 1.15 to 1, based upon projections of future income and
expenses satisfactory to the Trust.
(iv) Construction loans or securities backed by construction loans,
or interests in such loans or securities, made by a state or
local government or an agency or instrumentality thereof, or by
another party so long as the related project is sponsored by a
state or local government or an agency or instrumentality
thereof, to the extent that such loans or the securities backed
by such loans are fully collateralized or secured in a manner
satisfactory to the Trust by:
(A) cash placed in trust or in escrow by a state or
local government or agency or instrumentality thereof with an independent
third party satisfactory to the Trust on terms and conditions satisfactory to
the Trust; or
6<PAGE>
<PAGE>
(B) a letter of credit established by or at the
direction of a state or local government, or an agency or instrumentality
thereof, with a depository institution rated in category "B" or higher by
Thomson Bankwatch, on terms and conditions acceptable to the Trust; or
(C) some other form of guaranty issued by an entity
with a short-term (12 months or less) rating at the time of issuance of the
guaranty of at least "A-1" from S&P or "P-1" from Moody's with respect to a
guaranty with a duration of 12 months or less, or with a long-term (more than
12 months) rating in one of the two highest rating categories by at least one
nationally recognized statistical rating agency with respect to a guaranty
with a duration of more than 12 months.
(v) Bridge loans made to the owners of single family or
multifamily housing developments which are eligible to receive and have
allocations or other rights to receive Low Income Housing Tax Credits under
Section 42 of the Internal Revenue Code of 1986, as amended, or interests in
such loans, provided that all of the following criteria are satisfied:
(A) at the time of the Trust's acquisition of such
investment, such investment must be:
(I) issued or guaranteed by a state or local
housing finance agency designated "top tier"
by S&P (or designated comparably by another
nationally recognized statistical rating
agency, as determined by the Executive
Committee of the Trust) with full recourse to
the assets and credit of such agency (or in
lieu of such full recourse, secured by such
third party credit enhancement as to provide,
in the judgment of management, security
comparable to full recourse to the assets and
credit of such agency); or
(II) issued (with recourse) or guaranteed by a
state or local agency which has a long term
credit rating of "A" or better by S&P (or a
comparable rating by another nationally
recognized rating agency approved by the
Executive Committee of the Trust) for a bridge
loan with a term of longer than 12 months and
a short-term rating of A-1 or better by S&P
(or a comparable rating by another nationally
recognized rating agency approved by the
Executive Committee of the Trust) for a bridge
loan with a term of less than 12 months;
(III) issued (with recourse) or guaranteed by FHA,
GNMA, Fannie Mae, Freddie Mac or another
entity with a credit rating of "AA" or better
by S&P (or a comparable rating by another
7<PAGE>
<PAGE>
nationally recognized rating agency approved
by the Executive Committee of the Trust) or
fully collateralized by obligations issued
(with recourse) or guaranteed by FHA, GNMA,
Fannie Mae or Freddie Mac or another entity
with a credit rating of "AA" or better by S&P
(or a comparable rating by another nationally
recognized rating agency approved by the
Executive Committee of the Trust); or
(IV) fully collateralized by a letter of credit or
other guaranty by a bank or other financial
entity with a credit rating of "AA" or better
by S&P (or a comparable rating by another
nationally recognized rating agency approved
by the Executive Committee of the Trust) or a
bank rated in category "B" or higher by
Thomson Bankwatch;
(B) at the time of the Trust's acquisition of such
investment, the Trust is committed to invest in the construction and/or
permanent loan for the related development, unless the permanent loan for the
development is anticipated to have an original principal balance which is less
than $1 million or is anticipated to be financed primarily on a tax-exempt
basis; and
(C) not more than 5% of the Trust's assets may at any time
be invested in bridge loans (or interests in bridge loans) acquired pursuant
to this Section 3.3(d)(v); and
(e) To invest in mortgage loans, or securities or obligations backed by
mortgage loans, described in paragraph (a) or paragraph (c) of this Section
3.3 that include provisions:
(i) Requiring the borrower to pay, in addition to all payments of
principal and base interest insured or guaranteed by the federal government,
an agency thereof, or by Fannie Mae or Freddie Mac, additional interest based
on net or gross cash flow and/or net or gross proceeds upon the sale,
refinancing or disposition of the mortgaged real estate properties which is
not guaranteed or insured, or
(ii) Requiring the borrower to pay the principal balance of the
mortgage loan in full prior to its scheduled maturity.
In negotiating investments with participating features or rights to
demand early repayment, the Trust may accept a base interest rate of up to 2
percent per annum lower than the rate which it would otherwise be willing to
receive in the absence of such features; and
(f) To invest in construction and/or permanent loans, or securities
or obligations backed by construction and/or permanent loans which are
supported, either concurrently or sequentially, by any combination of two or
more of the types of credit enhancement described in paragraphs (a) through
(d) of this section, as long as all of the principal component of such loans
or securities or obligations backed by such loans are fully collateralized by
8<PAGE>
<PAGE>
one or more of the different types of the credit enhancement described in
paragraphs (a) through (d) of this section; provided, however, that the
principal portion of any investment made pursuant to this paragraph which is
secured by one of the types of credit enhancement described in paragraph (d)
of this section shall be subject to the 30 percent limitation set forth in
paragraph (d) of this section; and
(g) If necessary or desirable to facilitate any investment by the
Trust permitted under paragraphs (a) through (f) of this section, to deposit
the purchase price for the loan, securities, interests in loans or other
obligations to be acquired by the Trust in an escrow account which is
structured and secured in a manner acceptable to the Trust and consistent with
the provisions of the Investment Company Act of 1940, as amended, until the
purchase price is disbursed, either in a lump sum or over time, to fund the
Trust's purchase of such investment, provided that (i) all monies in such
escrow must be invested, as fully and as continuously as practical, in
instruments in which the Trust is permitted to invest under paragraph (m) of
this section or (ii) all monies in such escrow must be secured or supported by
one or more of the different types of credit enhancement described in
paragraphs (a) through (d) of this section; and
(h) To sell any asset held by the Trust; and
(i) To renew or extend (or to participate in the renewal or extension
of) any mortgage construction loan; and
(j) To borrow from any bank, provided that immediately after such
borrowing there is an asset coverage of at least 300 percent of all borrowings
of the Trust and provided further that in the event that such asset coverage
shall at any time fall below 300 percent the Trust shall within three days
thereafter (not including Sundays and holidays) reduce the amount of its
borrowings to an extent that the asset coverage of such borrowings shall be at
least 300 percent; and
(k) To manage, administer, operate, lease for any number of years, or
sell any real estate acquired by reason of foreclosure by the Trust and to
hold such property in the name of the Trust or its nominees; and
(l) To take title to real estate in lieu of its foreclosure sale; and
(m) To invest money held pending investment in mortgages or
construction loans in any of the following instruments:
(i) United States Treasury issues;
(ii) Federal agency issues;
(iii) Commercial bank time certificates of deposit of banks whose
accounts are insured by the Federal Deposit Insurance Corporation through its
Bank Insurance Fund ("BIF");
(iv) Savings bank deposits (insured by the Federal Deposit
Insurance Corporation through BIF);
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(v) Savings and loan association deposits (insured by the Federal
Deposit Insurance Corporation through its Savings Association Insurance Fund);
(vi) Bankers acceptances;
(vii) Commercial paper rated as category A-1 or P-1 by S&P or
Moody's;
(viii) Collateral loans (including warehousing agreements) secured
by Federal Housing Administration or Veterans Administration guaranteed
single-family or multi-family mortgages;
(ix) Interests (including repurchase agreements) in U.S.
Government securities pledged by a bank or other borrower to secure short-term
loans from the Trust; and
(x) Securities issued by an investment company registered under
the Investment Company Act that invests predominantly in United States
Treasury issues or Federal agency issues; and
(n) To employ suitable counsel; and
(o) To employ banks or trust companies to act as depositories or
agents; and
(p) To engage in and to prosecute, compound, compromise, abandon, or
adjust by arbitration or otherwise any actions, suits, proceedings, disputes,
claims, or demands relating to the Trust property to pay any debts, claims, or
expenses incurred in connection therewith, including those of litigation, upon
any evidence that the Trustees may deem sufficient (these powers to apply
whether or not the Trust is named as a party or any of the Trustees are named
individually); and
(q) To form corporations, partnerships, or trusts upon such terms and
conditions as the Trustees deem advisable; and
(r) To purchase, sell, and hold legal title to any securities or
other property including Certificates of Interest in the Trust upon such terms
and conditions as the Trustees deem advisable; and
(s) To purchase, lease, or rent suitable offices for the transaction
of the business of the Trust; and
(t) To appoint, employ, or contract with any person or persons as the
Trustees deem necessary or desirable for the transaction of the business of
the Trust, including any person who, under the supervision of the Trustees and
consistent with the Trustees' ultimate responsibility to supervise the affairs
of the Trust, may, among other things:
(i) Administer the day-to-day operations of the Trust;
(ii) Serve as the Trust's adviser and consultant in connection with
policy decisions made by the Trustees;
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(iii) Furnish reports to the Trustees and provide research, economic,
and statistical data to the Trustees; and
(iv) Act as accountants, correspondents, technical advisers,
attorneys, brokers, underwriters, fiduciaries, escrow agents, depositories,
insurers or insurance agents, transfer agents, or registrars for Units, or in
any other capacity deemed necessary or desirable by the Trustees; and
(u) To purchase, maintain and pay for entirely out of Trust property
insurance policies insuring any person who is or was a Trustee, officer,
employee, or agent of the Trust or who is or was serving at the request of the
Trust as a director, officer, employee or agent of another person individually
against any claim or liability of any nature asserted against him or incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Trust would otherwise have the power to indemnify such person against
such liability; and
(v) To execute and deliver as Trustees hereunder any and all deeds,
leases, mortgages, conveyances, contracts, waivers, releases, and other
instruments in writing necessary or proper for the accomplishment of the
purposes of the Trust; and
(w) To pay out of the funds of the Trust property any and all taxes
or liens imposed upon or against the Trust property or any part thereof, or
imposed upon any of the Trustees herein, individually or jointly, by reason of
the Trust property, or of the business conducted by the Trustees under the
terms of this Declaration of Trust; and
(x) To issue, purchase, or sell Units in the Trust either for cash or
for property whenever and in such amounts as the Trustees deem desirable, but
subject to the limitations specified below; and
(y) To make distributions of net income to Participants, in the
manner specified below; and
(z) To determine whether money or other assets received by the Trust
shall be charged to income or capital or allocated between income and capital;
and
(aa) To determine conclusively the value of any of the Trust property
and of any services, securities, assets, or other consideration hereafter
acquired by the Trust, and to revalue Trust property; and
(bb) To make, adopt, amend, and repeal such rules and regulations
(not inconsistent with the terms of this Declaration of Trust) as the Trustees
deem necessary or desirable for the management of the Trust and for the
government of themselves, their officers, agents, employees, and
representatives; and
(cc) To issue new Units of the Trust in exchange for assets of the
AFL-CIO Mortgage Investment Trust ("Mortgage Trust") on the basis of relative
net asset values, provided that: the Board of Trustees of the Trust (including
a majority of the Trustees who are not interested persons of either the Trust
or the Mortgage Trust) find that the exchange is in the best interests of the
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Trust and that the interests of existing Participants in the Trust will not be
diluted as a result of its effecting the transactions; and provided further
that the United States Securities and Exchange Commission ("SEC") issues an
Order of Exemption under Section 17 of the Investment Company Act, having
found that: (1) the terms of the proposed transaction, including the
consideration to be paid or received, are reasonable and fair and do not
involve overreaching on the part of any person concerned; (2) the proposed
transaction is consistent with the policy of the Trust and the Mortgage Trust
as recited in their registration statements and reports filed with the SEC
under the Investment Company Act; and (3) the proposed transaction is
consistent with the general purposes of the Investment Company Act.
ARTICLE IV
Operations
Section 4.1. The principal office of the Trust shall be in Washington,
D.C., unless changed to another location by a majority vote of the Trustees.
The Trust may have such other office or places of business as the Trustees
determine necessary or expedient.
Section 4.2. The Chairman shall be the chairman of the Board of
Trustees. The Trustees may select from among themselves an Executive
Committee (chaired by the Chairman) to whom the Trustees may delegate
appropriate power to carry on the business of the Trust. The Trustees may
elect or appoint, from among their number or otherwise, or may authorize the
Chairman to appoint, such other officers or agents to perform functions on
behalf of the Trustees as the Trustees or Chairman deemed advisable.
Section 4.3. The Trustees shall meet at the Chairman's request or as
specified in rules and regulations of the Trustees, but in no event less than
once each year. Action by the Trustees may also be taken by them in writing.
A quorum for doing business shall be a majority of the Trustees entitled to
vote, but never less than three.
Section 4.4. The Trustees may authorize one or more of their number to
sign, execute, acknowledge, and deliver any note, deed, certificate, or other
instrument in the name of, and in behalf of, the Trust, and upon such
authorization such signature, acknowledgment, or delivery shall have full
force and effect as the act of all of the Trustees. The receipt of the
Trustees, or any of them, or any of the officers or agents thereunto
authorized, for money or property paid or delivered to them, or any of them,
shall be an effectual discharge therefor to the person paying or delivering
such money or property.
Section 4.5. This Declaration of Trust may be amended or altered by a
majority of the Trustees at any time. The Trust may be terminated at any time
by the Trustees after notice in writing to all Participants. Upon such
termination, the Trust shall carry on no business except for the purpose of
winding up its affairs, the Trustees shall return all powers given to them
under this Declaration of Trust until the Trust shall have been wound up, and,
after paying or adequately providing for the payment of all liabilities, the
Trustees shall distribute the Trust property to the Participants according to
their respective rights.
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Section 4.6. A majority of the Trustees may: (a) select or direct the
organization of a corporation, association, trust, or other organization to
take over the Trust property and carry on the affairs of the Trust; (b) sell,
convey, and transfer the Trust property to any such organization in exchange
for shares, securities, or beneficial interests therein, and the assumption by
such transferee of the liabilities of the Trust; and (c) thereupon terminate
the Trust and deliver such shares, securities, or beneficial interest
proportionately among the Participants in redemption of their Units.
Section 4.7. No Trustee shall be liable for having acted in good faith
in any transaction connected with the Trust or the administration of the
Trust. The Trustees shall be held harmless in acting upon any instrument,
certificate, or paper that they believe to be genuine and to be signed or
presented by the proper person or persons. The Trustees shall have no duty to
make any investigation or inquiry concerning any statement contained in any
such writing. No recourse shall be had at any time upon any note, bond,
contract, instrument, certificate, undertaking, obligation, covenant, or
agreement (whether oral or written) made, issued, or executed by the Trustees
in pursuance of the terms of this Declaration of Trust, or by any officer or
agent of the Trustees, against the Trustees or such officer or agent
individually by legal or equitable proceeding, except only to compel the
proper application or distribution of the Trust property, provided that no
Trustee shall be excused from liability for willful malfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office ("disabling conduct"). The Trustees shall not be liable for the
proper application of any part of the Trust property, provided that
distribution are made in accordance with directions provided in this
Declaration of Trust. Nothing contained in this Declaration of Trust shall be
construed as giving power to the Trustees to contract any debt or to do
anything that will bind any Participant personally. Any person, firm,
corporation, or association dealing with the Trustees shall be limited to
satisfying any obligation, liability, or covenant with the Trustees only out
of the Trust property, and not out of the personal property of any
Participant.
Section 4.8. The Trust shall indemnify each Trustee and officer and each
former Trustee and officer of the Trust against fines, judgments, amounts paid
in settlement and expenses, including attorneys' fees, actually and reasonably
incurred in connection with any pending or threatened criminal action, civil
suit or administrative or investigative proceeding (any "matter") against him
or her arising by reason of the fact that he or she is or was a trustee or
officer of the Trust, or by reason of actions taken by him or her as such
Trustee or officer, if it is found that his or her liability does not result
from disabling conduct. The finding that liability does not arise from
disabling conduct may be made in a final decision by a court or other body
before which the matter giving rise to the expense or liability was brought
or, in the absence of such a decision, by (a) the vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as
defined in Section 2(a)(19) of the Investment Company Act nor parties to such
matter ("disinterested non-party Trustees") or (b) an independent legal
counsel in a written opinion. Expenses of the kind eligible for
indemnification may be paid as incurred by a trustee or officer in advance of
final disposition of a matter upon receipt of an undertaking by the recipient
to repay such amount unless it is ultimately determined that he is entitled to
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indemnification hereunder if (a) the indemnitee provides security for his or
her undertaking, (b) the Trust is insured for losses arising by reason of any
lawful advances or (c) a majority of a quorum of disinterested non-party
Trustees or independent legal counsel (in a written opinion) determines, based
on a review of readily available facts, that there is reason to believe that
the indemnitee ultimately will be found entitled to indemnification. This
Section is intended to provide indemnification to Trustees and officers to the
full extent permitted by law and shall be construed and enforced to that
extent.
Section 4.9. The Trustees and any employee or agent of the Trustees
(except a bank or trust company) who handles funds or other property of the
Trust shall be bonded for the faithful discharge of his or her duties in such
amount and as otherwise required by applicable law. The expenses of such bond
shall be paid by the Trust.
Section 4.10. No person dealing with the Trustees shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made
by the Trustees, or be liable for the application of money or property paid,
loaned, or delivered. Every note, bond, contract, instrument, certificate, or
undertaking, and every other act or thing executed or done by any Trustee in
connection with the Trust, shall be conclusively taken to have been executed
or done only in his or her capacity as Trustee, and such Trustee shall not be
personally liable thereon. Every such note, bond, contract, certificate or
undertaking made or issued by the Trustees shall recite that it is executed or
made by them not individually, but as Trustees, and that the obligations of
any such instrument are not binding upon any of the Trustees individually, but
bind only the Trust property, and may contain any further recital that they
may deem appropriate, but the omission of such recital shall not operate to
bind the Trustees individually.
Section 4.11. The Trustees shall be reimbursed from the Trust property
for their expenses and disbursements, including expenses for clerks, transfer
agents, office hire, and counsel fees, and for all losses and liabilities by
them incurred in administering the Trust and for the payment of such expenses,
disbursements, losses, and liabilities, the Trustees shall have a lien on the
Trust property prior to any rights or interests of the Participants.
Section 4.12. This Declaration of Trust shall be construed, regulated,
and administered under the laws of the District of Columbia and in the courts
of the District of Columbia.
ARTICLE VI
Units and Distributions
Section 5.1. The beneficial interests of the Trust shall be divided into
equal portions ("Units"). In lieu of issuing certificates to evidence
ownership of such Units, the Trustees may establish a book-entry system
whereby Units may be issued and redeemed by bookkeeping entry and without
physical delivery of the securities. The number of Units shall be fixed from
time to time by the Trustees and such number may be increased or reduced by
them. Nothing herein shall be deemed a limitation on the rights of the
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Trustees to issue additional Units ranking with the same rights and privileges
as existing Units. The Trustees shall have the right to sell or exchange such
additional Units without offering the same to the holders of the
then-outstanding Units.
Section 5.2. Only Labor Organizations and Eligible Pension Plans as
defined in this section shall be eligible to own Units of the Trust or to hold
Units in the Trust. A "Labor Organization" means any organization of any
kind, any agency, employee representation committee, group, association or
plan in which employees participate directly or through affiliated
organizations, and which exists for the purpose, in whole or in part, of
dealing directly or through affiliated organizations with employers concerning
grievances, labor disputes, wages, rates of pay, hours or other terms or
conditions of employment and any employee benefit plan of such an
organization, or any other organization which is, in the discretion of the
Board of Trustees, affiliated with or sponsored by such an organization. An
"Eligible Pension Plan" is a pension plan constituting a qualified trust under
Section 401(a) of the Internal Revenue Code or any successor statute thereto
which has beneficiaries who are represented by a Labor Organization and the
management of which has the discretionary right to invest funds of
beneficiaries without the direct intervention or control of those
beneficiaries. Units will not be transferable or assignable. No holder of a
Unit will have the authority to pledge its Unit as collateral for any loan.
Section 5.3. The Trust shall be administered and invested as a unit and
shall be valued at fair values as determined by the Trustees as of the close
of business at the end of each calendar month (hereinafter "Valuation Dates").
On the basis of the valuation made on the Valuation Date, the beneficial
interest of each Participant shall be adjusted to reflect the effect of income
(collected or accrued), realized and unrealized gains and losses, expenses,
and all other transactions since the last preceding Valuation Date. Such
valuations and adjustments shall be made so as to preserve for each
Participant its beneficial interest in the Trust.
Section 5.4. The Trustees shall as of each Valuation Date declare
dividends of net income earned during each month. Such distributions will be
payable after the end of each calendar quarter and will be made in cash,
except that on written request of a Participant, distribution can be made in
Units of the Trust valued as of the distribution date provided that such
automatic reinvestment of income distribution does not subject the Trust to
adverse consequences in the opinion of legal counsel for the Trust.
Section 5.5. Notwithstanding anything to the contrary contained in this
Declaration of Trust or in any amendment thereto, no part of the Trust that
equitably belongs to any Participant (other than such part as is required to
pay the expenses of the Trust) shall be used for any purpose other than the
exclusive benefit of the Participant.
Section 5.6. The Trustees shall render from time to time an accounting
of the Trust's transactions. A copy of such accounting will be made available
to each Participant. No person other than a Participant may require an
accounting or bring any action against the Trustees with respect to the Trust
or because of any Trustee's actions on behalf of the Trust.
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Section 5.7. In case of the loss or destruction of any certificate, the
Trustees may, under such terms as they deem expedient, issue a new certificate
in place of the one so lost.
ARTICLE VI
Admissions to and Withdrawals from Trust
Section 6.1. No admission to or withdrawal from the Trust shall be
permitted except in Units. Units shall be issued and redeemed only as of a
Valuation Date and may be issued and redeemed in fractions of a Unit. A
request for issuance of Units must be received by the Trust before the
Valuation Date as of which they are to be issued. A request for redemption of
Units must be received by the Trust at least 15 days before the Valuation Date
as of which they are to be redeemed. No issue of Units will be made to any
new Participant having a value of less than Fifty Thousand Dollars ($50,000).
Any request for redemption of Units made between Valuation Dates will be
considered as having been made 15 days before the next ensuing Valuation Date
and will be honored only as of such date.
Section 6.2. Payment in satisfaction of a duly tendered request for
redemption shall be made as soon as practicable and in any event within seven
days after the net asset value of the Trust is ascertained for the Valuation
Date as of which redemption is effected.
Section 6.3. Upon the agreement of the redeeming Participant, the Trust
may give securities and/or mortgages or other Trust assets in partial or full
satisfaction of a duly tendered request for redemption. Such securities
and/or mortgages will be treated for redemption purposes as being the cash
equivalent of their value of the Valuation Date before the date on which
redemption was requested.
AMERICAN FEDERATION OF LABOR
AND CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
DECLARATION OF TRUST
(as amended and restated through May 13, 1997)
DECLARATION OF TRUST made in Washington, D.C. by the original signatories
to this instrument (who, together with their successors in office, are
hereinafter called "Trustees").
WHEREAS, by Declaration of Trust made September 19, 1981, there was
created a trust (the "Trust") as a step in the organization of a new pooled
investment fund to be created under the auspices of the American Federation of
Labor -- Congress of Industrial Organizations ("AFL-CIO"); and
WHEREAS, the Trustees have amended the Declaration of Trust from time to
time to create an investment fund by naming the Trust the "American Federation
of Labor and Congress of Industrial Organizations Housing Investment Trust"
and by restating the Declaration of Trust in its entirety as set forth herein;
and
WHEREAS, certain subscriptions to Units in the Trust hereby created have
been and will be received from the participants whose interests are
hereinafter described,
NOW, THEREFORE, the Trustees declare that they will hold all such
contributions that they have acquired or will acquire as Trustees, together
with the proceeds thereof, in trust, in the manner and subject to the
provisions hereof, for the benefit of any and all contributors to the corpus
of the Trust (hereinafter collectively called "Participants").
ARTICLE I
Purposes
Section 1.1. The purpose of this Trust shall be to earn a fair and secure
rate of return for its Participants by investing the pooled contributions of
all Participants principally in (a) long-term federally insured or guaranteed
real estate mortgage and construction loans and certificates representing
interests in one or more such loans and (b) obligations issued or guaranteed
by Federal National Mortgage Association ("Fannie Mae") or Federal Home Loan
Mortgage Corporation ("Freddie Mac") and obligations backed by such real
estate mortgages and construction loans. All buildings, structures and other
improvements that are to be built or rehabilitated on mortgaged real estate or
exchanged for such Trust investments must be built or rehabilitated by union
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labor except as otherwise expressly provided in Section 3.3. The Trust may
make investments that are not federally insured or guaranteed only as and to
the extent provided in Section 3.3 hereof.
ARTICLE II
Name and Trustees
Section 2.1. The Trust shall be named "The American Federation of Labor
and Congress of Industrial Organizations Housing Investment Trust". The
Trustees shall manage the Trust property, execute all instruments in writing,
and do all other things relating to the Trust. Every duly authorized
instrument executed in the name of the Trust shall have the same effect as if
executed in the name of the Trustees.
Section 2.2. There shall be up to twenty-five voting Trustees and such
non-voting members of the Board of Trustees as provided by Section 2.10
hereof.
Section 2.3. (a) Up to twelve of the Trustees (hereinafter the "Union
Trustees") shall be officers or employees of the AFL-CIO or an AFL-CIO member
union; (b) up to twelve of the Trustees (hereinafter the "Management
Trustees") shall be (i) officers or management employees of one or more
organizations contributing directly or indirectly through contractors to an
Eligible Pension Plan as defined in Section 5.2 hereof, or officers or
management employees of such an Eligible Pension Plan, or (ii) with respect to
not more than two of the Management Trustees, an officer, director, or trustee
of an organization connected in whole or in part with the housing industry, or
an elected or appointed official of the federal or any state or local
government or an agency or instrumentality thereof; and (c) one Trustee
(hereinafter the "Chairman") shall be an individual who is neither an officer,
trustee, or employee of any organization that is a Participant in the Trust.
The number of Management Trustees shall not exceed the number of Union
Trustees except as the result of a vacancy during an unexpired term caused by
death or resignation.
Section 2.4. The Union and Management Trustees shall be divided into up
to three classes ("Classes") in respect to term of office, provided that no
new Class shall be established if any existing Class has less than five
Trustees. No Class shall have more than eight Trustees. Each Class shall
have, insofar as the population of Trustees permits, an equal number of Union
and Management Trustees and, upon the appointment of one or more new Trustees,
the Trustees shall alter Class assignments as required to comply with the
provisions of this sentence. The term of the first Class of Trustees shall
expire at the first annual meeting of Participants, the term of the second
Class shall expire at the second annual meeting of Participants, and the term
of the third Class shall expire at the third annual meeting of Participants.
After the expiration of the initial terms as set forth above, the term of each
Class of Trustee shall expire at the third annual meeting following its
election. At each annual meeting, the Participants shall elect a Chairman to
serve until the next annual meeting and such number of Trustees as necessary
to fill vacancies in the Class of Trustees whose terms expire as of such
meeting. Each Trustee shall serve until his successor shall be elected and
shall qualify.
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Section 2.5. A Trustee shall be an individual at least twenty-one years
of age who is not under legal disability and who shall have in writing
accepted his or her appointment and agreed to be bound by the terms of this
Declaration of Trust. The Trustees, in their capacity as Trustees, shall not
be required to devote their entire time to the business and affairs of the
Trust.
Section 2.6. All Trustees shall serve their full terms unless they
resign or die. Any Trustee can resign at any time by giving written notice to
the other Trustees, to take effect upon receipt of the notice or such later
date as the notice specifies.
Section 2.7. Upon the death or resignation of any Union Trustee, the
remaining Union Trustees shall appoint by a majority vote a replacement to
serve out the remainder of the term (with the Chairman, if any, voting only in
case of a tie). Upon the death or resignation of any Management Trustee, the
remaining Management Trustees shall appoint by majority vote a replacement to
serve out the remainder of the term (with the Chairman, if any, voting only in
case of a tie). Upon the death or resignation of the Chairman, the Union and
Management Trustees together shall appoint by majority vote a replacement to
serve out the remainder of the term.
Section 2.8. The death or resignation of one or more Trustees shall not
annul the Trust or revoke any existing agency created pursuant to the terms of
this Declaration of Trust. Whenever a Trustee's position becomes vacant
because of the Trustee's death or resignation the other Trustees shall have
all of the powers specified in this Declaration of Trust until such vacancy is
filled.
Section 2.9. The Chairman, Management Trustees and non-voting members
may be compensated for their services as provided by the Board of Trustees.
No Union Trustee shall receive any compensation or fee for his services as
Trustee. Trustees and non-voting members shall be reimbursed for expenses of
attending meetings of the Board of Trustees and committees thereof.
Section 2.10. The Chief Executive Officer, upon his or her retirement or
resignation, may be appointed by the Executive Committee, subject to approval
by the Board of Trustees, as a non-voting member of the Board of Trustees,
with the right to attend meetings and participate in discussions, for an
initial term not to exceed five years.
ARTICLE III
Powers
Section 3.1. The Trustees shall have power to do all things proper or
desirable in order to carry out, promote, or advance the purpose of the Trust
even though such things are not specifically mentioned in this Declaration of
Trust. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive.
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Section 3.2. The Trustees shall have without further authorization, full,
exclusive, and absolute power, control, and authority over the Trust property
and over the business of the Trust to the same extent as if the
Trustees were the sole owners of the Trust property and business in their own
right, subject to such delegation as may be permitted in this Declaration of
Trust. The enumeration of any specific powers or authority herein shall not
be construed as limiting the aforesaid powers or authority or any specific
power or authority. In construing the provisions of this Declaration of Trust
the presumption shall be in favor of a grant of power to the Trustees.
Section 3.3. The Trustees shall have each of the following specific
powers and authority in the administration of the Trust, to be executed in
their sole discretion exercised in accordance with their fiduciary duties
under the Investment Company Act of 1940, as amended ("Investment Company
Act"):
(a) To invest in construction and/or long-term mortgage loans or
mortgage-backed securities that are guaranteed or insured by the
federal government or an agency thereof or interests in such
mortgage loans or securities; and
(b) To invest in securities that are secured by securities and/or
mortgage loans of the type described in paragraph (a) above and that
are rated in one of the two highest rating categories by at least
one nationally recognized statistical rating agency; and
(c) To invest in (i) obligations issued or guaranteed by Fannie Mae or
Freddie Mac, or (ii) securities that are backed by Fannie Mae or
Freddie Mac and are, at the time of their acquisition by the Trust,
rated in one of the two highest rating categories by at least one
nationally recognized statistical rating agency; and
(d) To invest up to 30 percent of the value of all of the Trust's assets
in any of the following:
(i) Construction loans, or securities backed by construction loans
which loans are collateralized by:
(A) a letter of credit in favor of the Trust issued by a
depository institution rated in category "B" or higher by
Thomson Bankwatch, Inc. ("Thomson Bankwatch"), on terms and
conditions acceptable to the Trust; or
(B) another form of guaranty issued by an entity with a
short-term (12 months or less) rating at the time of the
issuance of the guaranty of at least "A-1" from Standard &
Poor's Corporation ("S&P") or "P-1" from Moody's Investors
Service, Inc. ("Moody's") with respect to a guaranty with a
duration of 12 months or less, or with a long-term (more
than 12 months) rating in one of the two highest rating
categories of at least one nationally recognized statistical
rating agency with respect to a guaranty with a duration of
more than 12 months.
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(ii) Construction or permanent loans, or securities backed by
construction or permanent loans, or interests in such loans
or securities, provided that:
(A) such loans or securities are supported by a full faith and
credit guaranty of a state or local government or agency
or instrumentality thereof that has general taxing
authority; or
(B) such loans or securities are issued (with or without
recourse) or guaranteed, as the case may be, by a state or
local housing finance agency designated "top tier" by S&P
(or designated comparably by another nationally recognized
statistical rating agency, as determined by the Executive
Committee of the Trust) at the time of acquisition by the
Trust; and are (i) with full recourse (directly or by way
of guaranty or indemnity) to such agency's general credit
and assets, or (ii) secured by recourse to such assets of
the agency or by such third party credit enhancement as to
provide, in the judgment of management, protection
comparable to a pledge of the agency's general credit, or
(iii) backed by the "moral obligation" of the state in
which such agency is located in the form of the state's
commitment to replenish any insufficiencies in the funds
pledged to debt service on the obligations; or
(C) such loans or securities are supported by a guaranty
of at least the first 75 percent of the obligation acquired
by the Trust under a state insurance or
guarantee program by a state-related agency with a record
of creditworthiness as evidenced by a rating of the agency
or the obligations issued or guaranteed by such agency of
at least "A-" by S&P, Fitch Investors Services Inc.
("Fitch") or Duff & Phelps Inc. ("Duff & Phelps") or at
least "A3" by Moody's at the time of their acquisition by
the Trust; or
(D) such loans or securities are issued or guaranteed, as the
case may be, by a state or local housing finance agency
with a general obligation rating of "A" or better by S&P
(or a comparable rating by another nationally recognized
statistical rating agency, as determined by the Executive
Committee of the Trust) at the time of acquisition by the
Trust; and are (i) with full recourse (directly or by way
of guaranty or indemnity) to such agency's general credit
and assets or (ii) backed by the "moral obligation" of the
state in which such agency is located, in the form of the
state's commitment to replenish any insufficiencies in the
funds pledged to debt service on the obligations or similar
commitment.
(iii) Construction or permanent loans, or securities backed
by construction or permanent loans that have evidence of
support by a state
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or local government or an agency or instrumentality thereof,
such support being evidenced by at least the adoption of a
resolution by the governing body or other applicable
governmental agency in support of the project, provided that
all of the following criteria are satisfied:
(A) the loan-to-value ratio of the project shall not
exceed 50 percent, the "value" for such purposes to be determined on the basis
of an independent appraisal by a licensed appraiser acceptable to the Trust,
except that a loan-to-value ratio of up to 65 percent shall be permitted if
mortgage insurance in an amount which will cover all first losses down to a 50
percent loan-to-value level has been provided by a private mortgage insurance
company rated either at least "A-" by S&P, Fitch or Duff & Phelps or at least
"A3" by Moody's or approved and accepted by Fannie Mae or Freddie Mac for
insurance of the type of obligation to be acquired by the Trust;
(B) the state or local government or agency or
instrumentality thereof or a foundation exempt from federal income tax under
Section 501(c) of the Internal Revenue Code of 1986, as amended, must have a
financial participation in the project within guidelines adopted by the
Executive Committee of the Trust for a period at least equal to the
outstanding term of the Trust's investment, such financial interest to be in
the form of subordinate financing, an interest rate write-down, a donation of
land, some other form of insurance or guarantee or some other similar
contribution within guidelines adopted by the Executive Committee of the
Trust;
(C) the sponsor of the project must have a
demonstrably successful record of developing or managing low-income housing
projects, in accordance with guidelines to be developed by the Trust;
(D) the underwriter and servicer of the mortgage loan
for the project must have been approved by the Trust;
(E) the construction of the project must be supervised
on a regular basis by agents or employees of the state or local government or
agency or instrumentality thereof or tax-exempt foundation; and
(F) the minimum debt service coverage for the project
must be at least 1.15 to 1, based upon projections of future income and
expenses satisfactory to the Trust.
(iv) Construction loans made by a state or local government or an
agency or instrumentality thereof, or by
another party so long as the related project is sponsored by a
state or local government or an agency or instrumentality
thereof, to the extent that such loans or the securities backed
by such loans are fully collateralized or secured in a manner
satisfactory to the Trust by:
(A) cash placed in trust or in escrow by a state or
local government or agency or instrumentality thereof with an independent
third party satisfactory to the Trust on terms and conditions satisfactory to
the Trust; or
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(B) a letter of credit in favor of the Trust
established by or at the direction of a state or local government, or an
agency or instrumentality thereof, with a depository institution rated in
category "B" or higher by Thomson Bankwatch, on terms and conditions
acceptable to the Trust; or
(C) some other form of guaranty issued by an entity
with a short-term (12 months or less) rating at the time of issuance of the
guaranty of at least "A-1" from S&P or "P-1" from Moody's with respect to a
guaranty with a duration of 12 months or less, or with a long-term (more than
12 months) rating in one of the two highest rating categories by at least one
nationally recognized statistical rating agency with respect to a guaranty
with a duration of more than 12 months.
(v) Bridge loans made to the owners of single family or
multifamily housing developments which are eligible to receive and have
allocations or other rights to receive Low Income Housing Tax Credits under
Section 42 of the Internal Revenue Code of 1986, as amended, or interests in
such loans, provided that all of the following criteria are satisfied:
(A) at the time of the Trust's acquisition of such
investment, such investment must be:
(I) are issued or guaranteed by a state or local
housing finance agency designated "top tier"
by S&P (or designated comparably by another
nationally recognized statistical rating
agency, as determined by the Executive
Committee of the Trust) with full recourse to
the assets and credit of such agency (or in
lieu of such full recourse, secured by such
third party credit enhancement as to provide,
in the judgment of management, security
comparable to full recourse to the assets and
credit of such agency); or
(II) issued (with recourse) or guaranteed by a
state or local agency which has a long term
credit rating of "A" or better by S&P (or a
comparable rating by another nationally
recognized rating agency approved by the
Executive Committee of the Trust) for a bridge
loan with a term of longer than 12 months and
a short-term rating of A-1 or better by S&P
(or a comparable rating by another nationally
recognized rating agency approved by the
Executive Committee of the Trust) for a bridge
loan with a term of less than 12 months;
(III) issued (with recourse) or guaranteed by FHA,
GNMA, Fannie Mae, Freddie Mac or another
entity with a credit rating of "AA" or better
by S&P (or a comparable rating by another
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nationally recognized rating agency approved
by the Executive Committee of the Trust) or
fully collateralized by obligations issued
(with recourse) or guaranteed by FHA, GNMA,
Fannie Mae or Freddie Mac or another entity
with a credit rating of "AA" or better by S&P
(or a comparable rating by another nationally
recognized rating agency approved by the
Executive Committee of the Trust); or
(IV) fully collateralized by a letter of credit or
other guaranty by a bank or other financial
entity with a credit rating of "AA" or better
by S&P (or a comparable rating by another
nationally recognized rating agency approved
by the Executive Committee of the Trust) or a
bank rated in category "B" or higher by
Thomson Bankwatch;
(B) at the time of the Trust's acquisition of such
investment, the Trust is committed to invest in the construction and/or
permanent loan for the related development, unless the permanent loan for the
development is anticipated to have an original principal balance which is less
than $1 million; and
(C) not more than 5% of the Trust's assets may at any time
be invested in bridge loans (or interests in bridge loans) acquired pursuant
to this Section 3.3(d)(v); and
(e) To invest in mortgage loans, or securities or obligations backed by
mortgage loans, described in paragraph (a) or paragraph (c) of this Section
3.3 that include provisions:
(i) Requiring the borrower to pay, in addition to all payments of
principal and base interest insured or guaranteed by the federal government,
an agency thereof, or by Fannie Mae or Freddie Mac, additional interest based
on net or gross cash flow and/or net or gross proceeds upon the sale,
refinancing or disposition of the mortgaged real estate properties which is
not guaranteed or insured, or
(ii) Requiring the borrower to pay the principal balance of the
mortgage loan in full prior to its scheduled maturity.
In negotiating investments with participating features or rights to
demand early repayment, the Trust may accept a base interest rate of up to 2
percent per annum lower than the rate which it would otherwise be willing to
receive in the absence of such features; and
(f) To sell any asset held by the Trust; and
(g) To renew or extend (or to participate in the renewal or extension
of) any mortgage construction loan; and
(h) To borrow from any bank, provided that immediately after such
borrowing there is an asset coverage of at least 300 percent of all borrowings
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of the Trust and provided further that in the event that such asset coverage
shall at any time fall below 300 percent the Trust shall within three days
thereafter (not including Sundays and holidays) reduce the amount of its
borrowings to an extent that the asset coverage of such borrowings shall be at
least 300 percent; and
(i) To manage, administer, operate, lease for any number of years, or
sell any real estate acquired by reason of foreclosure by the Trust and to
hold such property in the name of the Trust or its nominees; and
(j) To take title to real estate in lieu of its foreclosure sale; and
(k) To invest money held pending investment in mortgages or
construction loans in any of the following instruments:
(i) United States Treasury issues;
(ii) Federal agency issues;
(iii) Commercial bank time certificates of deposit of banks whose
accounts are insured by the Federal Deposit Insurance Corporation through its
Bank Insurance Fund ("BIF");
(iv) Savings bank deposits (insured by the Federal Deposit
Insurance Corporation through BIF);
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(v) Savings and loan association deposits (insured by the Federal
Deposit Insurance Corporation through its Savings Association Insurance Fund);
(vi) Bankers acceptances;
(vii) Commercial paper rated as category A-1 or P-1 by S&P or
Moody's;
(viii) Collateral loans (including warehousing agreements) secured
by Federal Housing Administration or Veterans Administration guaranteed
single-family or multi-family mortgages;
(ix) Interests (including repurchase agreements) in U.S.
Government securities pledged by a bank or other borrower to secure short-term
loans from the Trust; and
(x) Securities issued by an investment company registered under
the Investment Company Act that invests predominantly in United States
Treasury issues or Federal agency issues; and
(l) To employ suitable counsel; and
(m) To employ banks or trust companies to act as depositories or
agents; and
(n) To engage in and to prosecute, compound, compromise, abandon, or
adjust by arbitration or otherwise any actions, suits, proceedings, disputes,
claims, or demands relating to the Trust property to pay any debts, claims, or
expenses incurred in connection therewith, including those of litigation, upon
any evidence that the Trustees may deem sufficient (these powers to apply
whether or not the Trust is named as a party or any of the Trustees are named
individually); and
(o) To form corporations, partnerships, or trusts upon such terms and
conditions as the Trustees deem advisable; and
(p) To purchase, sell, and hold legal title to any securities or
other property including Certificates of Interest in the Trust upon such terms
and conditions as the Trustees deem advisable; and
(q) To purchase, lease, or rent suitable offices for the transaction
of the business of the Trust; and
(r) To appoint, employ, or contract with any person or persons as the
Trustees deem necessary or desirable for the transaction of the business of
the Trust, including any person who, under the supervision of the Trustees and
consistent with the Trustees' ultimate responsibility to supervise the affairs
of the Trust, may, among other things:
(i) Administer the day-to-day operations of the Trust;
(ii) Serve as the Trust's adviser and consultant in connection with
policy decisions made by the Trustees;
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(iii) Furnish reports to the Trustees and provide research, economic,
and statistical data to the Trustees; and
(iv) Act as accountants, correspondents, technical advisers,
attorneys, brokers, underwriters, fiduciaries, escrow agents, depositories,
insurers or insurance agents, transfer agents, or registrars for Units, or in
any other capacity deemed necessary or desirable by the Trustees; and
(s) To purchase, maintain and pay for entirely out of Trust property
insurance policies insuring any person who is or was a Trustee, officer,
employee, or agent of the Trust or who is or was serving at the request of the
Trust as a director, officer, employee or agent of another person individually
against any claim or liability of any nature asserted against him or incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Trust would otherwise have the power to indemnify such person against
such liability; and
(t) To execute and deliver as Trustees hereunder any and all deeds,
leases, mortgages, conveyances, contracts, waivers, releases, and other
instruments in writing necessary or proper for the accomplishment of the
purposes of the Trust; and
(u) To pay out of the funds of the Trust property any and all taxes
or liens imposed upon or against the Trust property or any part thereof, or
imposed upon any of the Trustees herein, individually or jointly, by reason of
the Trust property, or of the business conducted by the Trustees under the
terms of this Declaration of Trust; and
(v) To issue, purchase, or sell Units in the Trust either for cash or
for property whenever and in such amounts as the Trustees deem desirable, but
subject to the limitations specified below; and
(w) To make distributions of net income to Participants, in the
manner specified below; and
(x) To determine whether money or other assets received by the Trust
shall be charged to income or capital or allocated between income and capital;
and
(y) To determine conclusively the value of any of the Trust property
and of any services, securities, assets, or other consideration hereafter
acquired by the Trust, and to revalue Trust property; and
(z) To make, adopt, amend, and repeal such rules and regulations (not
inconsistent with the terms of this Declaration of Trust) as the Trustees deem
necessary or desirable for the management of the Trust and for the government
of themselves, their officers, agents, employees, and representatives; and
(aa) To issue new Units of the Trust in exchange for assets of the
AFL-CIO Mortgage Investment Trust ("Mortgage Trust") on the basis of relative
net asset values, provided that: the Board of Trustees of the Trust (including
a majority of the Trustees who are not interested persons of either the Trust
or the Mortgage Trust) find that the exchange is in the best interests of the
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Trust and that the interests of existing Participants in the Trust will not be
diluted as a result of its effecting the transactions; and provided further
that the United States Securities and Exchange Commission ("SEC") issues an
Order of Exemption under Section 17 of the Investment Company Act, having
found that: (1) the terms of the proposed transaction, including the
consideration to be paid or received, are reasonable and fair and do not
involve overreaching on the part of any person concerned; (2) the proposed
transaction is consistent with the policy of the Trust and the Mortgage Trust
as recited in their registration statements and reports filed with the SEC
under the Investment Company Act; and (3) the proposed transaction is
consistent with the general purposes of the Investment Company Act.
ARTICLE IV
Operations
Section 4.1. The principal office of the Trust shall be in Washington,
D.C., unless changed to another location by a majority vote of the Trustees.
The Trust may have such other office or places of business as the Trustees
determine necessary or expedient.
Section 4.2. The Chairman shall be the chairman of the Board of
Trustees. The Trustees may select from among themselves an Executive
Committee (chaired by the Chairman) to whom the Trustees may delegate
appropriate power to carry on the business of the Trust. The Trustees may
elect or appoint, from among their number or otherwise, or may authorize the
Chairman to appoint, such other officers or agents to perform functions on
behalf of the Trustees as the Trustees or Chairman deemed advisable.
Section 4.3. The Trustees shall meet at the Chairman's request or as
specified in rules and regulations of the Trustees, but in no event less than
once each year. Action by the Trustees may also be taken by them in writing.
A quorum for doing business shall be a majority of the Trustees entitled to
vote, but never less than three.
Section 4.4. The Trustees may authorize one or more of their number to
sign, execute, acknowledge, and deliver any note, deed, certificate, or other
instrument in the name of, and in behalf of, the Trust, and upon such
authorization such signature, acknowledgment, or delivery shall have full
force and effect as the act of all of the Trustees. The receipt of the
Trustees, or any of them, or any of the officers or agents thereunto
authorized, for money or property paid or delivered to them, or any of them,
shall be an effectual discharge therefor to the person paying or delivering
such money or property.
Section 4.5. This Declaration of Trust may be amended or altered by a
majority of the Trustees at any time. The Trust may be terminated at any time
by the Trustees after notice in writing to all Participants. Upon such
termination, the Trust shall carry on no business except for the purpose of
winding up its affairs, the Trustees shall return all powers given to them
under this Declaration of Trust until the Trust shall have been wound up, and,
after paying or adequately providing for the payment of all liabilities, the
Trustees shall distribute the Trust property to the Participants according to
their respective rights.
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Section 4.6. A majority of the Trustees may: (a) select or direct the
organization of a corporation, association, trust, or other organization to
take over the Trust property and carry on the affairs of the Trust; (b) sell,
convey, and transfer the Trust property to any such organization in exchange
for shares, securities, or beneficial interests therein, and the assumption by
such transferee of the liabilities of the Trust; and (c) thereupon terminate
the Trust and deliver such shares, securities, or beneficial interest
proportionately among the Participants in redemption of their Units.
Section 4.7. No Trustee shall be liable for having acted in good faith
in any transaction connected with the Trust or the administration of the
Trust. The Trustees shall be held harmless in acting upon any instrument,
certificate, or paper that they believe to be genuine and to be signed or
presented by the proper person or persons. The Trustees shall have no duty to
make any investigation or inquiry concerning any statement contained in any
such writing. No recourse shall be had at any time upon any note, bond,
contract, instrument, certificate, undertaking, obligation, covenant, or
agreement (whether oral or written) made, issued, or executed by the Trustees
in pursuance of the terms of this Declaration of Trust, or by any officer or
agent of the Trustees, against the Trustees or such officer or agent
individually by legal or equitable proceeding, except only to compel the
proper application or distribution of the Trust property, provided that no
Trustee shall be excused from liability for willful malfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office ("disabling conduct"). The Trustees shall not be liable for the
proper application of any part of the Trust property, provided that
distribution are made in accordance with directions provided in this
Declaration of Trust. Nothing contained in this Declaration of Trust shall be
construed as giving power to the Trustees to contract any debt or to do
anything that will bind any Participant personally. Any person, firm,
corporation, or association dealing with the Trustees shall be limited to
satisfying any obligation, liability, or covenant with the Trustees only out
of the Trust property, and not out of the personal property of any
Participant.
Section 4.8. The Trust shall indemnify each Trustee and officer and each
former Trustee and officer of the Trust against fines, judgments, amounts paid
in settlement and expenses, including attorneys' fees, actually and reasonably
incurred in connection with any pending or threatened criminal action, civil
suit or administrative or investigative proceeding (any "matter") against him
or her arising by reason of the fact that he or she is or was a trustee or
officer of the Trust, or by reason of actions taken by him or her as such
Trustee or officer, if it is found that his or her liability does not result
from disabling conduct. The finding that liability does not arise from
disabling conduct may be made in a final decision by a court or other body
before which the matter giving rise to the expense or liability was brought
or, in the absence of such a decision, by (a) the vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as
defined in Section 2(a)(19) of the Investment Company Act nor parties to such
matter ("disinterested non-party Trustees") or (b) an independent legal
counsel in a written opinion. Expenses of the kind eligible for
indemnification may be paid as incurred by a trustee or officer in advance of
final disposition of a matter upon receipt of an undertaking by the recipient
to repay such amount unless it is ultimately determined that he is entitled to
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indemnification hereunder if (a) the indemnitee provides security for his or
her undertaking, (b) the Trust is insured for losses arising by reason of any
lawful advances or (c) a majority of a quorum of disinterested non-party
Trustees or independent legal counsel (in a written opinion) determines, based
on a review of readily available facts, that there is reason to believe that
the indemnitee ultimately will be found entitled to indemnification. This
Section is intended to provide indemnification to Trustees and officers to the
full extent permitted by law and shall be construed and enforced to that
extent.
Section 4.9. The Trustees and any employee or agent of the Trustees
(except a bank or trust company) who handles funds or other property of the
Trust shall be bonded for the faithful discharge of his or her duties in such
amount and as otherwise required by applicable law. The expenses of such bond
shall be paid by the Trust.
Section 4.10. No person dealing with the Trustees shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made
by the Trustees, or be liable for the application of money or property paid,
loaned, or delivered. Every note, bond, contract, instrument, certificate, or
undertaking, and every other act or thing executed or done by any Trustee in
connection with the Trust, shall be conclusively taken to have been executed
or done only in his or her capacity as Trustee, and such Trustee shall not be
personally liable thereon. Every such note, bond, contract, certificate or
undertaking made or issued by the Trustees shall recite that it is executed or
made by them not individually, but as Trustees, and that the obligations of
any such instrument are not binding upon any of the Trustees individually, but
bind only the Trust property, and may contain any further recital that they
may deem appropriate, but the omission of such recital shall not operate to
bind the Trustees individually.
Section 4.11. The Trustees shall be reimbursed from the Trust property
for their expenses and disbursements, including expenses for clerks, transfer
agents, office hire, and counsel fees, and for all losses and liabilities by
them incurred in administering the Trust and for the payment of such expenses,
disbursements, losses, and liabilities, the Trustees shall have a lien on the
Trust property prior to any rights or interests of the Participants.
Section 4.12. This Declaration of Trust shall be construed, regulated,
and administered under the laws of the District of Columbia and in the courts
of the District of Columbia.
ARTICLE VI
Units and Distributions
Section 5.1. The beneficial interests of the Trust shall be divided into
equal portions ("Units"). In lieu of issuing certificates to evidence
ownership of such Units, the Trustees may establish a book-entry system
whereby Units may be issued and redeemed by bookkeeping entry and without
physical delivery of the securities. The number of Units shall be fixed from
time to time by the Trustees and such number may be increased or reduced by
them. Nothing herein shall be deemed a limitation on the rights of the
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Trustees to issue additional Units ranking with the same rights and privileges
as existing Units. The Trustees shall have the right to sell or exchange such
additional Units without offering the same to the holders of the
then-outstanding Units.
Section 5.2. Only Labor Organizations and Eligible Pension Plans as
defined in this section shall be eligible to own Units of the Trust or to hold
Units in the Trust. A "Labor Organization" means any organization of any
kind, any agency, employee representation committee, group, association or
plan in which employees participate directly or through affiliated
organizations, and which exists for the purpose, in whole or in part, of
dealing directly or through affiliated organizations with employers concerning
grievances, labor disputes, wages, rates of pay, hours or other terms or
conditions of employment and any employee benefit plan of such an
organization, or any other organization which is, in the discretion of the
Board of Trustees, affiliated with or sponsored by such an organization. An
"Eligible Pension Plan" is a pension plan constituting a qualified trust under
Section 401(a) of the Internal Revenue Code or any successor statute thereto
which has beneficiaries who are represented by a Labor Organization and the
management of which has the discretionary right to invest funds of
beneficiaries without the direct intervention or control of those
beneficiaries. Units will not be transferable or assignable. No holder of a
Unit will have the authority to pledge its Unit as collateral for any loan.
Section 5.3. The Trust shall be administered and invested as a unit and
shall be valued at fair values as determined by the Trustees as of the close
of business at the end of each calendar month (hereinafter "Valuation Dates").
On the basis of the valuation made on the Valuation Date, the beneficial
interest of each Participant shall be adjusted to reflect the effect of income
(collected or accrued), realized and unrealized gains and losses, expenses,
and all other transactions since the last preceding Valuation Date. Such
valuations and adjustments shall be made so as to preserve for each
Participant its beneficial interest in the Trust.
Section 5.4. The Trustees shall as of each Valuation Date declare
dividends of net income earned during each month. Such distributions will be
payable after the end of each calendar quarter and will be made in cash,
except that on written request of a Participant, distribution can be made in
Units of the Trust valued as of the distribution date provided that such
automatic reinvestment of income distribution does not subject the Trust to
adverse consequences in the opinion of legal counsel for the Trust.
Section 5.5. Notwithstanding anything to the contrary contained in this
Declaration of Trust or in any amendment thereto, no part of the Trust that
equitably belongs to any Participant (other than such part as is required to
pay the expenses of the Trust) shall be used for any purpose other than the
exclusive benefit of the Participant.
Section 5.6. The Trustees shall render from time to time an accounting
of the Trust's transactions. A copy of such accounting will be made available
to each Participant. No person other than a Participant may require an
accounting or bring any action against the Trustees with respect to the Trust
or because of any Trustee's actions on behalf of the Trust.
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Section 5.7. In case of the loss or destruction of any certificate, the
Trustees may, under such terms as they deem expedient, issue a new certificate
in place of the one so lost.
ARTICLE VI
Admissions to and Withdrawals from Trust
Section 6.1. No admission to or withdrawal from the Trust shall be
permitted except in Units. Units shall be issued and redeemed only as of a
Valuation Date and may be issued and redeemed in fractions of a Unit. A
request for issuance of Units must be received by the Trust before the
Valuation Date as of which they are to be issued. A request for redemption of
Units must be received by the Trust at least 15 days before the Valuation Date
as of which they are to be redeemed. No issue of Units will be made to any
new Participant having a value of less than Fifty Thousand Dollars ($50,000).
Any request for redemption of Units made between Valuation Dates will be
considered as having been made 15 days before the next ensuing Valuation Date
and will be honored only as of such date.
Section 6.2. Payment in satisfaction of a duly tendered request for
redemption shall be made as soon as practicable and in any event within seven
days after the net asset value of the Trust is ascertained for the Valuation
Date as of which redemption is effected.
Section 6.3. Upon the agreement of the redeeming Participant, the Trust
may give securities and/or mortgages or other Trust assets in partial or full
satisfaction of a duly tendered request for redemption. Such securities
and/or mortgages will be treated for redemption purposes as being the cash
equivalent of their value of the Valuation Date before the date on which
redemption was requested.
Exhibit 10
[Letterhead of Swidler & Berlin Chartered]
AFL-CIO Housing Investment Trust
1717 K Street, N.W.
Suite 707
Washington, D.C. 20006
Re: AFL-CIO Housing Investment Trust,
Units of Beneficial Interest
Ladies and Gentlemen:
You have requested our opinion with respect to the legality of the
securities being registered pursuant to the Registration Statement on Form
N-1A (Registration No. 2-78066), Post-Effective Amendment No. 27 under the
Securities Act of 1933 and Amendment No. 30 under the Investment Company Act
of 1940 ("Registration Statement"). At your request, this opinion is being
furnished as an exhibit to, and we consent to the filing of it with, the
Registration Statement. In giving such permission, we do not admit hereby
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules or regulations of the
Securities Exchange Commission thereunder.
In rendering this opinion, we have reviewed the Declaration of Trust of
the AFL-CIO Housing Investment Trust ("Trust") and applicable judicial
decisions interpreting the laws of the District of Columbia with respect to
common law business trusts. We have also reviewed the prospectus, statement
of additional information and statement of other information included in the
Registration Statement. We assume, for purposes of this opinion, that Units
of Beneficial Interest in the Trust ("Units") will be issued at a price equal
to the net asset value per Unit, as described in the Registration Statement
and as determined as of monthly valuation dates and in accordance with the
procedures approved by the Board of Trustees pursuant to Section 2(a)(41)
under the Investment Company Act of 1940, as amended.
Based upon the foregoing and upon such other investigation as we have
deemed necessary, we are of the opinion that, when offered and sold in
accordance with the Declaration of Trust and in the manner described in the
Registration Statement, the Units being registered under the Registration
Statement will when sold be legally issued, fully paid and non-assessable,
except that owners or holders of such Units may be liable for debts and other
obligations of the Trust in those states, such as, among others, Texas and
Kansas, that do not recognize so-called "business trusts" as separate legal
entities and hold beneficiaries of such trusts personally liable for actions
thereof.
Very truly yours,
SWIDLER & BERLIN, CHARTERED
EXHIBIT 5
AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT
AMENDED AND RESTATED AGREEMENT made this day of May 1997, by and
between American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust, a trust formed under the laws of the District of
Columbia (the "Trust"), and Wellington Management Company, LLP, a
Massachusetts limited liability partnership (the "Investment Advisor").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory services, as described herein, to the Trust, and the
Investment Adviser is willing to render such services;
WHEREAS, the Trust and Investment Adviser entered into an Investment
Advisory Agreement dated May 21, 1992; and
WHEREAS, the Trust and the Investment Adviser have determined it
advisable to amend that Agreement.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. Duties and Representations of the Investment Adviser.
a) Investment Advisory Services.
The following services shall be provided with respect to the Trust assets
that the Trust designates from time to time as being subject to this Agreement
(the "Short/Intermediate-Term Assets"), which may include the types of
securities listed on Schedule A to this Agreement. The Investment Adviser
shall manage the investment and reinvestment of the Short/Intermediate Term
Assets; continuously review, supervise, and administer the investment program
of the Trust with respect to the Short/Intermediate-Term Assets; determine in
its discretion the Short/Intermediate-Term Assets to be purchased, retained
and sold (and implement those decisions); render regular reports as required
to the Trust's officers and Trustees concerning the Investment Adviser's
discharge of the foregoing responsibilities, including causing to be provided
to the Trust's officers within two business days after each Valuation Date, as
defined in the Trust's prospectus, market prices as of the Valuation Date of
Short/Intermediate-Term Assets that mature more than 60 days after the
Valuation Date; develop and produce portfolio analysis reports, including
reports which may assist the Trust in determining the allocation of assets
within this portfolio; monitor portfolio investment characteristics; analyze
portfolio performance and provide to the Trust's officers within ten business
days after each calendar month end a report regarding such performance for
such month; provide analysis on markets and instruments; provide investment
overview and economic outlook forecasts; provide information and comment on
<PAGE>
<PAGE>
various relevant regulatory and legal issues; attend meetings of the Trust's
Executive Committee and Trustees as reasonably requested; and supply the
Trust's officers and Trustees with all statistical information and reports
reasonably required by them, including, without limitation, all information
required under Section 15(c) of the 1940 Act. The Investment Adviser shall
have no authority or responsibility with respect to any assets of the Trust
other than the Short/Intermediate-Term Assets.
b)Other Services.
From time to time, the Investment Adviser will also provide analysis to
the Trust which may be used in determining the risk profile of the Trust's
asset structure.
c) Discharge of Investment Adviser's Duties.
The Investment Adviser shall discharge the responsibilities set forth in
Section 1(a) subject to the oversight of the officers and Trustees of the
Trust and in compliance with such policies as the Trustees may from time to
time establish, and in compliance with the objectives, policies, and
limitations of the Trust set forth in the Trust's prospectus, statement of
additional information and declaration of trust, in each case as amended from
time to time, and with the Investment Company Act of 1940, as amended, the
Investment Advisers Act of 1940, as amended, and any other applicable laws and
regulations. The Investment Adviser agrees, at its own expense, to render the
services described herein and to provide the office space, furnishings and
equipment, and personnel required by it to perform those services on the terms
and for the compensation provided herein.
d) Representations of the Investment Adviser.
The Investment Adviser represents and warrants that (i) it is duly
registered as an investment adviser with the Securities and Exchange
Commission pursuant to the Investment Adviser Act of 1940, as amended and (ii)
it does not currently have an affiliated broker/dealer that is active in the
securities business. Failure of these representations and warranties shall
give the Trust the right to immediately terminate this Agreement.
e) Portfolio Transactions.
The Investment Adviser is authorized to arrange for the execution of the
Trust's portfolio transactions by selecting the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Trust and is
directed to use its best efforts to obtain the best net results, taking into
account such factors as price (including the applicable brokerage commission
or dealer spread), size of order, difficulty of execution and operational
facilities of the firm involved. The Investment Adviser may, in its
discretion, purchase and sell portfolio securities through brokers who provide
the Investment Adviser or the Trust with research, analysis, advice and
similar services, and the Investment Adviser may pay to these brokers, in
return for research and analysis, a higher commission than may be charged by
other brokers, provided that the Investment Adviser determines in good faith
that such commission is reasonable in terms either of that particular <PAGE>
<PAGE>
transaction or of the overall responsibility of the Investment Adviser, that
the total commission paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long-term, and that the total commission paid
by the Trust is consistent with commissions paid in comparable transactions.
On occasions when the Investment Adviser deems the purchase or sale of a
security to be in the best interest of the Trust as well as other clients, the
Investment Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligations to, aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction will be made by the Investment Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations.
3. Compensation of the Investment Adviser.
a) Investment Advisory Fee.
For the investment advisory services rendered by the Investment Adviser
as provided in Section 1(a) of this Agreement, the Trust shall pay to the
Investment Adviser a quarterly investment advisory fee at the annual rate of
0.16% of the market value of the Short/Intermediate-Term Assets, based on the
average monthly market value. The investment advisory fee shall be paid as
promptly as possible after the last day of each calendar quarter. Unless
otherwise directed by the Trust's Board of Trustees or a Trust officer, the
Investment Adviser shall not sell or otherwise liquidate the
Short/Intermediate-Term Assets for the purpose of being paid its investment
advisory fee.
b) Method of Payment.
The first payment of the investment advisory fee shall be made as
promptly as possible after the last day of the calendar quarter in which the
effective date of this Agreement falls, and shall constitute a full payment of
the fee due the Investment Adviser for all services rendered pursuant to this
Agreement prior to that date. In the event that the Investment Adviser's
right to such fee commences to accrue on a date other than the first day of
the quarter, the investment advisory fee shall be computed on the basis of the
period beginning on the first business day on which this Agreement is in
effect, subject to a pro rata adjustment based on the number of days in that
period as a percentage of the total number of days in such a period. In the
event of termination of this Agreement, the investment advisory fee shall be
computed on the basis of the period ending on the last business day on which
this Agreement is in effect, subject to a pro rata adjustment based on the
number of days elapsed in the current calendar quarter as a percentage of the
total number of days in such quarter. The market value of the
Short/Intermediate-Term assets shall in all cases be based only on those days
when the New York Stock Exchange is open for business, and shall be computed
as of the time of the regular close of Business of the New York Stock
Exchange, or such other time as may be determined by the Trust's Board of
Trustees. Each fee payment to the Investment Adviser shall be accompanied by
a report of the Trust which shall show the amount properly payable to the
Investment Adviser under this Agreement and the detailed computation thereof.
<PAGE>
<PAGE>
4. Reports.
The Trust and the Investment Adviser agree to furnish to each other, if
applicable, current prospectuses, statements of additional information,
registration statements, proxy statements, reports to shareholders and
certified copies of their financial statements, and, as each may reasonably
request, such other information with regard to their affairs.
5. Status of the Investment Adviser and the Trust.
The services of the Investment Adviser to the Trust are not to be deemed
exclusive, and the Investment Adviser shall be free to render similar services
to others so long as its services to the Trust are not impaired thereby. The
Investment Adviser shall be deemed to be an independent contractor and shall
have no authority to act for or represent the Trust in any way or otherwise be
deemed to be an agent of the Trust, except in performing its duties and
responsibilities under this Agreement. Nothing in this Agreement shall limit
or restrict the right of any partner, Trustee, officer or employee of the
Investment Adviser of the Trust to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of
any other business, whether of a similar nature or a dissimilar nature.
Nothing in this Agreement shall limit or restrict the right of the Trust to
retain other investment advisers.
6. Certain Records.
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the 1940 Act which
are prepared or maintained by the Investment Adviser on behalf of the Trust
are property of the Trust and will be surrendered promptly to the Trust on
request.
7. Liability of the Investment Adviser.
The Investment Adviser shall not be liable for any error of judgment or
for any loss suffered by the Trust in connection with performance of its
obligations under this Agreement, except a loss, resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of,
or from reckless disregard by it of its obligations an duties under, this
Agreement, or damages resulting from a breach of fiduciary duty with respect
to receipt of compensation for services or another breach of this Agreement.
<PAGE>
<PAGE>
8. Indemnification.
The Trust will indemnify the Investment Adviser for all liabilities and
reasonable expenses, including reasonable attorney's fees, in connection with
any litigation pertaining to the period prior to the Investment Advisor's
relationship with the Trust under the Investment Advisory Agreement dated May
21, 1992, other than liabilities resulting from willful misfeasance, bad faith
or gross negligence on the part of the Investment Adviser; however, the Trust
shall have the right to defend such litigation and to retain counsel that is
reasonably acceptable to the Investment Adviser.
9. Permissible Interests.
Partners, officers and agents of the Investment Adviser are or may be
interested in the Trust as Trustees, officers, shareholders or otherwise; and
the Investment Adviser (or any successor thereof)is or may be interested in
the Trust as a shareholder or otherwise.
10. Duration and Termination.
Unless sooner terminated as provided herein, this Agreement shall
continue until May , 1999, and thereafter for periods of one year, so long
as such continuance thereafter is specifically approved at least annually by
the vote of a majority of the Trustees of the Trust, including a majority of
the Trustees who are not parties to this Agreement or interested persons of
the Investment Adviser or any principal underwriter of the Trust, cast in
person at a meeting called for the purpose of voting on such approval or by
the vote of a majority of the outstanding voting securities of the Trust. The
foregoing requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder. This Agreement may be
terminated at any time without the payment of any penalty by the vote of a
majority of the Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Trust on 60 days' written notice to the
Investment Adviser or by the Investment Adviser at any time without the
payment of any penalty on 90 days' written notice to the Trust. This
Agreement will automatically and immediately terminate in the event of its
assignment. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office
of such party. As used in Section 10, the terms "assignment," "interested
person," and "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be granted by the
Securities and Exchange Commission under the 1940 Act.
11. Amendment; Waiver.
No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved
by the vote of the majority of the outstanding voting securities of the Trust.
<PAGE>
<PAGE>
12. Claims Against the Trust.
It is understood and expressly stimulated that none of the Trustees or
participants of the Trust shall be personally liable hereunder. Neither the
Trustees, officers, agents nor participants of the Trust assume any personal
liability for obligations entered into on behalf of the Trust. All persons
dealing with the Trust must look solely to the property of the Trust for the
enforcement of any claim against the Trust.
13. Governing Law; Severability; Counterparts.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. This Agreement
may be executed in any number of counterparts, each of which shall be deemed
to be an original, but such counterpart shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
AMERICAN FEDERATION OF LABOR
AND CONGRESS OF INDUSTRIAL
ORGANIZATIONS HOUSING INVESTMENT
WELLINGTON MANAGEMENT COMPANY, LLP TRUST
By: /s/ Duncan M. McFarland By: /s/ Helen Kanovsky
------------------------- ----------------------------
Duncan M. McFarland Helen Kanovsky
President General Counsel, AFL-CIO
Housing Investment Trust
<PAGE>
SCHEDULE A
The Investment Adviser may invest in the following types of securities,
and such other types of securities that the Trust's Board of Trustees may
authorize from time to time upon giving written notice to the Investment
Adviser, consistent with the Trust's Registration Statement. The duration of
any security in the Short/Intermediate-Term Assets shall not exceed 24 months.
1. United States Treasury issues;
2. Federal Agency issues;
3. Commercial bank time certificates of deposit of banks whose accounts are
insured by the Federal Deposit Insurance Corporation through its Bank
Insurance Fund ("BIF");
4. Savings bank deposits insured by the Federal Deposit Insurance Corporation
through BIF;
5. Savings and loan association deposits insured by the Federal Deposit
Insurance Corporation through its Savings Association Insurance Fund;
6. Bankers acceptances;
7. Commercial paper rated as category A-1 or P-1 by Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's");
8. Collateral loans (not including warehousing agreements) secured by Federal
Housing Administration or Veterans Administration guaranteed single-family
or multi-family mortgages;
9. Interests (including repurchase agreements) in United States Government
securities pledged by a bank or other borrower to secure short-term loans
from the Trust; and
10. Securities issued by an investment company registered under the Investment
Company Act of 1940, as amended, that invests predominantly in United
States Treasury issues or Federal agency issues.
EXHIBIT 11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We hereby consent to the incorporation by reference in this Form N-1A
registration statement of our report January 21, 1998, included in the AFL-CIO
Housing Investment Trust Annual Report for the year ended December 31, 1997
and to all references to our firm included in or made a part of this Form N-1A
registration statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Washington, D.C.
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Richard Ravitch
--------------------------
(signature)
Name: Richard Ravitch
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Linda Chavez-Thompson
--------------------------
(signature)
Name: Linda Chavez-Thompson
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Arthur A. Coia
--------------------------
(signature)
Name: Arthur A. Coia
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Robert A. Georgine
--------------------------
(signature)
Name: Robert A. Georgine
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Francis X. Hanley
--------------------------
(signature)
Name: Francis X. Hanley
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Frank Hurt
--------------------------
(signature)
Name: Frank Hurt
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ John T. Joyce
--------------------------
(signature)
Name: John T. Joyce
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ A.L. Monroe
--------------------------
(signature)
Name: A.L. Monroe
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Richard L. Trumka
--------------------------
(signature)
Name: Richard L. Trumka
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ John Sweeney
--------------------------
(signature)
Name: John Sweeney
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Terrence R. Duvernay
--------------------------
(signature)
Name: Terrence R. Duvernay
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Alfred J. Fleischer
--------------------------
(signature)
Name: Alfred J. Fleischer
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Walter Kardy
--------------------------
(signature)
Name: Walter Kardy
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ George Latimer
--------------------------
(signature)
Name: George Latimer
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ H.D. LaVere
--------------------------
(signature)
Name: H.D. LaVere
--------------------------
(please type or print)
Date:
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Tony Stanley
--------------------------
(signature)
Name: Tony Stanley
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Marlyn J. Spear
--------------------------
(signature)
Name: Marlyn J. Spear
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Patricia F. Wiegert
--------------------------
(signature)
Name: Patricia F. Wiegert
--------------------------
(please type or print)
Date:<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ John E. Cullerton
--------------------------
(signature)
Name: John E. Cullerton
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Edwin D. Hill
--------------------------
(signature)
Name: Edwin D. Hill
--------------------------
(please type or print)
Date:<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Martin J. Maddaloni
--------------------------
(signature)
Name: Martin J. Maddaloni
--------------------------
(please type or print)
Date:<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as a Trustee of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Andrew Stern
--------------------------
(signature)
Name: Andrew Stern
--------------------------
(please type or print)
Date:<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Officer of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as an Officer of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Stephen Coyle
--------------------------
(signature)
Name: Stephen Coyle
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Officer of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold and ElChino M.
Martin and each of them, either of whom may act without the joinder of the
other, as his/her true and lawful attorney-in-fact and agent, with full power
of substitution and re-substitution, to sign in his behalf, individually and
in his capacity as an Officer of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ James D. Campbell
--------------------------
(signature)
Name: James D. Campbell
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Officer of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold and James D.
Campbell and each of them, either of whom may act without the joinder of the
other, as his/her true and lawful attorney-in-fact and agent, with full power
of substitution and re-substitution, to sign in his behalf, individually and
in his capacity as an Officer of the Housing Trust, all amendments to the
Registration Statement on Securities and Exchange Commission Form N-1, Form
N-1A or otherwise, executed after the date of this Power of Attorney, which
amendments may make such changes and additions to the Registration Statement
as the attorney(s)-in-fact may deem necessary or appropriate, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
/s/ ElChino Martin
--------------------------
(signature)
Name: ElChino Martin
--------------------------
(please type or print)
Date: <PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Officer of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as an Officer of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Harry W. Thompson
--------------------------
(signature)
Name: Harry W. Thompson
--------------------------
(please type or print)
Date:
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned Officer of the AFL-CIO Housing Investment Trust ("Housing
Trust") hereby constitutes and appoints Michael M. Arnold, James D. Campbell
and ElChino M. Martin and each of them, either of whom may act without the
joinder of the other, as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, to sign in his behalf,
individually and in his capacity as an Officer of the Housing Trust, all
amendments to the Registration Statement on Securities and Exchange Commission
Form N-1, Form N-1A or otherwise, executed after the date of this Power of
Attorney, which amendments may make such changes and additions to the
Registration Statement as the attorney(s)-in-fact may deem necessary or
appropriate, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
/s/ Patton H. Roark, Jr.
--------------------------
(signature)
Name: Patton H. Roark, Jr.
--------------------------
(please type or print)
Date:
<TABLE> <S> <C>
<ARTICLE> 6
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,623,461,755
<INVESTMENTS-AT-VALUE> 1,689,060,844
<RECEIVABLES> 11,457,613
<ASSETS-OTHER> 2,102,854
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,702,621,311
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,876,452
<TOTAL-LIABILITIES> 30,876,452
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,513,856
<SHARES-COMMON-PRIOR> 1,289,082
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 55,000
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 65,599,088
<NET-ASSETS> 1,671,744,859
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 115,247,200
<OTHER-INCOME> 3,981
<EXPENSES-NET> 6,457,647
<NET-INVESTMENT-INCOME> 108,793,534
<REALIZED-GAINS-CURRENT> 751,132
<APPREC-INCREASE-CURRENT> 44,382,900
<NET-CHANGE-FROM-OPS> 153,927,567
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 108,793,534
<DISTRIBUTIONS-OF-GAINS> 733,219
<DISTRIBUTIONS-OTHER> 55,000
<NUMBER-OF-SHARES-SOLD> 171,967
<NUMBER-OF-SHARES-REDEEMED> 35,793
<SHARES-REINVESTED> 88,600
<NET-CHANGE-IN-ASSETS> 288,581,694
<ACCUMULATED-NII-PRIOR> 737,502
<ACCUMULATED-GAINS-PRIOR> (17,914)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 111,196
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,457,647
<AVERAGE-NET-ASSETS> 1,502,164,168
<PER-SHARE-NAV-BEGIN> 1072.98
<PER-SHARE-NII> 79.06
<PER-SHARE-GAIN-APPREC> 31.32
<PER-SHARE-DIVIDEND> 79.06
<PER-SHARE-DISTRIBUTIONS> 79.58
<RETURNS-OF-CAPITAL>0
<PER-SHARE-NAV-END> 1104.30
<EXPENSE-RATIO> .4
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 15
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
OF
THE AFL-CIO HOUSING INVESTMENT TRUST
WHEREAS, the AFL-CIO Housing Investment Trust (the "Trust") operates as an
open-end investment company registered under the Investment Company Act of
1940, as amended, (the "Act") and accordingly is subject to the regulatory
authority of the Securities and Exchange Commission ("SEC");
WHEREAS, the Trust offers Units of Participation ("Units") to labor
organizations and eligible pension plans at a price based on the net asset
value per unit as of the monthly valuation date following receipt of an order
to purchase units;
WHEREAS, Rule 12b-1 permits registered investment companies to bear certain
expenses associated with the distribution of their shares;
WHEREAS, the Trust intends to act as distributor of the Units and desires to
adopt a plan of distribution (the "Plan") pursuant to Rule 12b-1 under the Act
and the Board of Trustees of the Trust ("Trustees") has determined that a Plan
to pay expenses involved in distributing units of the Trust and the servicing
or maintenance of accounts is beneficial to the Trust and its participants.
NOW THEREFORE, the Trustees hereby adopts the following Plan on behalf of the
Trust in accordance with Rule 12b-1 of the Act.
1. Payment of Expenses. The Trust may pay for Distribution Expenses (as
defined herein), as determined from time to time by the Trustees, in an amount
up to $550,000 or 0.05 percent of its average monthly net assets on an
annualized basis each fiscal year, whichever is greater.
2. Distribution Expenses. For purposes hereof, "Distribution Expenses"
shall include all expenses which are incurred in connection with the offer and
sale of Units, and all related services and distribution activities which may
consist of, but are not limited to: advertising, telephone charges, office
expenses, salaries; the printing of prospectuses, statements of additional
information and reports for other than existing Trust participants; and the
preparation and distribution of advertising materials and sales literature,
and the allocable indirect expenses of the Trust relating to distribution.
3. Reports to the Board of Trustees. At least quarterly in each year
that the Plan remains in effect, the Trust shall prepare and furnish to the
Trustees, and the Trustees shall review, a written report of the amounts
expended and the purposes for which such expenditures were made.
4. Approval of the Plan. This Plan shall become effective immediately
upon the approval of the Plan by the vote of: (a) a majority of the Trust's
outstanding units, and (b) a majority of the Trustees and a majority of the
<PAGE>
<PAGE>
Trustees who are not interested persons of the Trust within the meaning of
Section 2(a)(19) of the Act and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan
("Independent Trustees"), cast in person at a meeting called for the purpose
of voting on the Plan.
5. Term. This Plan shall remain in effect for one year from the date of
its effectiveness and may continue thereafter only if the Plan is approved at
least annually by a majority of the Trustees and a majority of the
Independent.
6. Termination. The Plan can be terminated at any time by vote of a
majority of the disinterested Trustees or by vote of a majority of the
outstanding Units of the Trust on not more than 60 days written notice to any
other party to the Plan.
7. Amendments. (a) Any material amendment to the Plan must be approved
by a vote of a majority of the Trustees and a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
amendment to the Plan.
(b) This Plan may not be amended to increase materially the amount of
Distribution Expense borne by the Trust without a majority vote of the Trust's
outstanding Units.
8. Nomination of Trustees. While this Plan is in effect, the selection
and nomination of the Trustees who are not interested persons of the Trust
within the meaning of Section 2(a)(19) of the Act shall be committed to the
discretion of the Trustees then in office who are not interested persons of
the Trust.
9. Treatment of expenses. It is the opinion of the Board of Trustees
that the following expenses are not intended primarily to result in the sale
of Units issued by the Trust: (a) the costs associated with the preparation,
printing and mailing of proxy materials, all required reports and notices to
participants and reports of Units held, irrespective of whether such reports
or notices contain or are accompanied by material intended to result in the
sale of Units; (b) costs of providing participant services; (c) costs of
responding to telephone or mail inquiries of participants or prospective
participants; or (d) any legal, accounting or other professional fees and
expenses.
