AFL-CIO HOUSING INVESTMENT TRUST
SEMI-ANNUAL REPORT JUNE 30, 1999
<PAGE>
<PAGE>00
REPORT TO PARTICIPANTS
THE AFL-CIO HOUSING INVESTMENT TRUST CONTINUED TO BRING ITS PARTICIPANTS
HIGHLY COMPETITIVE RETURNS IN THE FIRST SIX MONTHS OF 1999 AS IT REACHED
RECORD LEVELS OF GROWTH. IN A PERIOD OF CONSIDERABLE VOLATILITY IN THE
FINANCIAL MARKETS, THE TRUST MAXIMIZED RETURNS THROUGH ACTIVE MANAGEMENT OF
THE PORTFOLIO, PRODUCING RETURNS FAVORABLE TO INDUSTRY BENCHMARKS, AS SHOWN IN
THIS REPORT. WITH ITS STEADILY INCREASING ASSETS AND AN INVESTMENT STRATEGY
THAT GIVES ORGANIZED LABOR UNPRECEDENTED PROMINENCE IN OUR NATION'S HOUSING
AND COMMUNITY DEVELOPMENT EFFORTS, THE TRUST IS POISED TO MAKE THIS ANOTHER
HIGHLY SUCCESSFUL YEAR.
<PAGE>
<PAGE>01
GROWTH AND PERFORMANCE
Total net assets topped $2.098 billion at June 30 as the Trust continued its
robust expansion. During this period, total net assets grew by 4 percent.
The Trust continued to enjoy strong investor confidence, as evidenced by the
$105 million in new investment made during this period. A further indicator
of investor confidence was the 91 percent reinvestment rate as participants
reinvested $60 million in earnings.
Nine new participants joined the Trust during the first and second quarters,
bringing the total number of investors to 416 at June 30.
The Trust's gross rates of return were highly competitive with the industry
benchmark, as shown in the accompanying table. Despite the sharp increase in
interest rates during the six months, the Trust's gross rate of return was 84
basis points above its primary benchmark, the Lehman Brothers Aggregate Bond
Index. Over the longer term, the Trust's performance also continued to
compare favorably with that Index.
This steady performance reflected the success achieved in managing the
portfolio to minimize market risk and maximize returns, through careful
analysis and balancing of investments as discussed below. At the same time,
effective cash management and new operational efficiencies enabled the Trust
to maintain a high percentage of assets in higher yielding investments.
The number of outstanding units of participation held by participants was
1,958,757.70 units at June 30, with a net asset value per unit of $1,071.25.
AS with other fixed income investments, the Trust experienced an unrealized
loss in value due to rising interest rates, amounting to $43.83 per unit
during the six month period.
[photograph of union worker]
<TABLE>
<CAPTION>
PERFORMANCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING INVESTMENT TRUST GROSS RETURNS 3.65% 8.24% 8.97% 8.86%
LEHMAN BROTHERS AGGREGATE BOND INDEX 3.15% 7.23% 7.83% 8.15%
</TABLE>
Note: Returns for the periods exceeding one year are annualized.
<PAGE>
<PAGE>02
LOAN PRODUCTION
The Trust's loan production activity during this period focused on enhancing
value. The Trust was successful in maintaining increased exposure in the area
of single-family investments, which had the effect of lowering the duration of
the portfolio and preserving value as interest rates increased. The
production of new loans and strategic repositioning of the portfolio resulted
in a total of $382 million in new investment funding in the first two
quarters.
The Trust committed $174.4 million year to date to finance housing in areas
ranging from New Jersey to Kentucky to California. The majority of these
commitments, $119.4 million, will finance the construction of nine multi-
family projects with over 1,200 units of housing. The Trust's expanding
single-family program accounted for the remaining $55.0 million in new
commitments, as it made its affordable homeownership mortgages available for
the first time to union members and municipal employees in Atlanta, Detroit,
Las Vegas, New York and Philadelphia. These cities joined Boston, Chicago,
Columbus, Minneapolis, New Orleans, Oakland, St. Paul, San Francisco and
Seattle, where the mortgage program has been underway.
PORTFOLIO DISTRIBUTION
The Trust remained a significant player in the FHA multi-family markets. At
the same time, it strengthened its role in other single-family and multi-
family product lines through its partnerships with Fannie Mae, Freddie Mac,
and a growing number of city and state housing finance agencies.
The portfolio distribution at June 30 is shown in the accompanying chart. The
portfolio offered a high degree of security to pension investors, as over 97
percent of its long-term investments at June 30 were insured or guaranteed by
the U.S. government or government-sponsored enterprises such as Fannie Mae and
Freddie Mac.
<TABLE>
<CAPTION>
PORTFOLIO
<S> <C>
FHA MORTGAGES 29.2%
GNMA CONSTRUCTION LOANS 7.1%
FHA CONSTRUCTION LOANS 5.6%
MORTGAGE-BACKED SECURITIES 54.0%
SHORT-TERM 1.7%
LOCAL INITIATIVES 2.4%
</TABLE>
<PAGE>
<PAGE>03
To obtain the competitive returns it achieved in this changing interest rate
environment, the Trust continued to closely monitor portfolio yield, duration
and convexity and to make appropriate adjustments as market conditions
warranted. This enabled the Trust to minimize the unrealized losses in value
which were widely experienced in the fixed income markets during this period.
The Trust's active cash management strategy also showed dramatic results in
reducing investments in short-term instruments, thereby increasing overall
yields. The implementation of new policies and procedures on intermediate
investments, as approved by participants last year, also helped enhance yield
from funds under management.
Continuing upgrades of the financial management information systems also
contributed to efficiencies in trust operations. During this period, the
Trust took steps to begin the implementation of its new participants database
system. The system expedites the production of month-end financial reports
and increases the Trust's ability to provide accurate and timely information
to participants on their investments.
The opening of the Trust's new web site, www.aflcio-hit.com, created another
means of delivering information to participants and others about Trust
performance and investment activities.
To assure readiness for the Year 2000, the Trust engaged Booz-Allen & Hamilton
to conduct an independent verification and validation of all information
systems. This assessment concluded that the Trust's mission critical
information systems are Y2K compliant. The Trust expects to complete work on
all remaining compliance issues by September 30, so participants can be
confident that services will continue smoothly at the new year.
The ratio of expenses to average net assets again ranked among the lowest in
the industry, at 37 basis points (0.37 percent) for the year ended June 30.
[photograph of union worker]
<PAGE>
<PAGE>04
INVESTMENT INITIATIVES
The growing number of Trust-financed housing developments across the country
stand as tangible symbols of unions' dedication to strong communities.
Through projects like the ones described here, labor organizations play
central roles in housing and community development.
The Trust started the year with a groundbreaking in Jefferson Parish,
Louisiana, where union workers are now engaged in extensive renovation of the
Jefferson Place Apartments. The Trust is providing $4.3 million in financing
and $8.5 million in Section 8 rental assistance through its partnership with
HUD to create attractive, affordable residences for 112 families.
AFL-CIO President John Sweeney and Philadelphia Mayor Edward Rendell led a
festive ribbon-cutting for the historic Carl Mackley Apartments (right). The
high profile community event celebrated the renovation of apartments built in
1934 by the Full Fashion Hosiery Workers Union. The Trust provided $9.2
million in construction and permanent financing and $12.7 million in Section 8
authority.
A competitive bidding process selected the Trust to provide construction
financing for the $54 million Southampton at Newport in Jersey City, New
Jersey. This 35-story apartment building is a key component of the city's
riverfront renewal. It will join three other residential towers along the
Hudson, two of which, Towers of America East and West (left), were built with
Trust financing.
With construction nearly completed on the Homestead at Montvale (below),
apartments are being leased at this seniors development in an enterprise zone
in Springfield, Illinois. Working with the Illinois Housing and Development
Authority, the Trust provided $6 million in financing for this 160 unit, mixed
income development.
More union homebuyers will be able to take advantage of the Homeownership
Opportunity Initiative's attractive mortgages as a result of recent changes
adopted by the Trust and its partner, Fannie Mae. New relationships forged
with one of the country's largest residential lenders, and with the home
mortgage program created by Local 1199 in New York City, provide a foundation
for expanding the program beyond the 14 cities currently participating.
[photographs and renderings of Trust projects]
<PAGE>
<PAGE>05
FUTURE OUTLOOK
Growing assets and recognized technical expertise make the Trust a highly
sought partner in community development. The Trust will offer even greater
financing capacity in the period ahead as a result of charter amendments
expanding its authority to securitize loans with insurance from private
investors and to finance state and local government-sponsored projects that
meet specified underwriting criteria.
The new authority enables the Trust to pursue a wider range of financing
options with state and local governments and community organizations, without
materially increasing risk. That flexibility is important because traditional
sources of credit enhancement-FHA, Fannie Mae, and Freddie Mac-face statutory
limits that restrict the investment opportunities available to the Trust. The
new authority creates exciting opportunities for partnerships with city and
state housing officials, community organizations, and developers. A vehicle
for these investments will be the Family Housing Initiative that is one
cornerstone of the Trust's Urban Investment 2000 strategy-the blueprint for
Trust investments in coming years.
The Trust's expanded financing authority will complement the further expansion
of single-family initiatives and a strong pipeline of multi-family housing
projects, providing a basis for continued investment success in the period
ahead. Guided by proven portfolio management policies that have consistently
provided investors with high security and competitive returns, the Trust
continues to be an attractive option for pension plans.
[signature of Stephen Coyle]
Stephen Coyle
Chief Executive Officer
[signature of Michael M. Arnold] [photograph of union worker]
Michael M. Arnold
Executive Vice President
[signature of ElChino M. Martin]
ElChino M. Martin
General Counsel
<PAGE>
<PAGE>06
1999 PARTICIPANTS MEETINGS
A Special Meeting of Participants was held in Washington, DC, on January 29,
1999. The purpose of the meeting was to consider amendments to the Trust's
Charter to modify certain of the underwriting criteria for state and local
government-sponsored projects on which the Trust is authorized to invest. At
the meeting, Participants approved the amendments by a vote of 1,278,062.3862
for, 39.3460 against, 0.0000 abstentions, and 497,716.7751 votes not cast.
The 1999 Annual Meeting of Participants was held in Washington, DC, on June 4,
1999. The following matters were put to a vote of Participants, through the
solicitation of proxies, at the meeting.
Richard Ravitch was reelected to chair the Board of Trustees by a vote of
1,134,991.4076 for, 0.0000 against, 507.8599 abstentions, and 758,884.1156
votes not cast.
The table below details votes pertaining to Trustees who were elected at the
Annual Meeting.
The following Trustees were not up for election because their terms continued
after the date of the Annual Meeting: Arthur Coia, John Cullerton, Terrance
Duvernay, Alfred Fleischer, Robert Georgine, Edwin Hill, Frank Hurt, John
Joyce, Martin Maddaloni, Michael E. Monroe, Marlyn Spear, Tony Stanley, John
Sweeney, and Patricia Wiegert.
Participants considered amendments to the Trust's Charter to modify certain of
the criteria for state and local government-related projects and privately
collateralized loans in which the Trust us authorized to invest. Participants
approved the amendments by a vote of 1,134,853.6137 for, 321.799 against,
323.8539 abstentions, and 758,884.1156 votes not cast.
Arthur Andersen LLP was ratified as the Trust's Public Accountants by a vote
of 1,135,379.2336 for, 120.0339 against, 0.0000 abstentions, and 758,884.1156
votes not cast.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Votes Votes Votes Votes
Trustee For Against Abstained Not Cast
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Linda Chavez-
Thompson 1,135,499.2675 0.0000 0.0000 758,884.1156
Frank Hanley 1,135,499.2675 0.0000 0.0000 758,884.1156
Andrew Stern 1,135,399.2675 0.0000 0.0000 758,884.1156
Richard Trumka 1,135,499.2675 0.0000 0.0000 758,884.1156
Walter Kardy 1,134,386.4674 215.8964 896.9037 758,884.1156
George Latimer 1,134,386.4674 215.8964 896.9037 758,884.1156
</TABLE>
<PAGE>
<PAGE>07
AMERICAN FEDERATION OF LABOR
AND CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
FINANCIAL STATEMENTS
JUNE 30,1999
<PAGE>
<PAGE>08
AFL-CIO HOUSING INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Dollars in thousands unless noted; unaudited)
ASSETS
Investments, at value (amortized cost $2,078,076) $2,078,721
Cash 761
Accrued interest receivable 13,825
Accounts receivable 5,445
Prepaid expenses and other assets 2,632
----------
TOTAL ASSETS $2,101,384
LIABILITIES
Accounts payable and accrued expenses $827
Redemptions payable 75
Refundable deposits 1,254
Income distribution payable, net of dividends
reinvested of $10,322 918
----------
TOTAL LIABILITIES $3,074
----------
Net assets applicable to participants' equity -
certificates of participation;
authorized unlimited; outstanding
1,958,758 units (note 5) $2,098,310
----------
----------
Net asset value per unit of participation
(in dollars) $1,071.25
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999 (Dollars in thousands; unaudited)
FHA Mortgages (29.2%)
Interest Maturity Face Amortized Value
Rate Date Amount Cost
<S> <C> <C> <C> <C>
Single-Family
7.75% Jul-2021 $1,009 1,009 1,029
8.00% Jul-2021 1,133 758 773
10.31% Feb-2016 75 75 75
11.31% Mar-2016 87 87 87
----------------------------------------
1,929 1,922 1,965
</TABLE>
<PAGE>
<PAGE>09
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999(Dollars in thousands; unaudited)
<TABLE>
<CAPTION>
FHA MORTGAGES (29.2%)
Interest Maturity Face Amortized Value
Rate Date Amount Cost
<S> <C> <C> <C> <C>
Multi-Family
6.50% Aug-2004 14,268 14,268 14,115
6.75% Nov-2037 3,644 3,186 3,474
7.13% Nov-2038 7,498 7,424 7,307
7.20% Aug-2039 0 0 (46)
7.25% Oct-2039 0 0 (1,324)
7.50% Nov-2022 7,454 7,538 7,486
7.55% Aug-2012-Nov-2037 10,069 9,916 10,149
7.63% Dec-2027-Jun-2037 78,301 78,071 79,240
7.70% Apr-2038-Oct-2039 97,592 95,673 99,379
7.75% Nov-2034-Oct-2038 25,423 25,457 25,980
7.80% Dec-2038 21,762 21,769 22,292
7.85% Sep-2037 2,609 2,609 2,677
7.88% Mar-2034-Mar-2037 16,469 16,654 16,908
7.93% Jul-2035 19,542 19,551 19,997
7.97% Jul-2038 4,121 4,038 4,270
8.00% Sep-2031-Jun-2038 23,290 23,113 23,807
8.13% Apr-2028-Apr-2038 23,057 23,075 23,950
8.18% Nov-2036 36,739 36,295 38,326
8.25% Feb-2026-Feb-2037 37,008 37,036 38,582
8.30% Nov-2027-Jun-2036 11,144 11,093 11,613
8.31% Mar-2038 22,927 22,605 24,206
8.38% Jan-2027 16,137 16,144 16,691
8.40% Apr-2012-Jan-2024 12,495 12,240 12,909
8.50% Apr-2012-Feb-2035 13,069 12,963 13,614
8.60% Jan-2028 2,034 2,037 2,103
8.63% Dec-2029 4,218 4,221 4,416
8.75% May-2036-Sep-2036 12,263 12,161 13,090
8.80% Oct-2032 5,621 5,624 5,843
8.88% Sep-2029-Jun-2036 10,350 10,263 10,922
9.13% Dec-2033-May-2035 7,568 7,568 7,890
9.25% Feb-2029-Jun-2036 29,848 29,854 31,285
9.38% Jun-2034 1,864 1,894 1,966
9.50% Jul-2027 377 386 415
9.75% Apr-2031 3,588 3,567 3,731
10.00% May-2002-Mar-2031 5,845 5,845 6,024
10.45% Jan-2030 1,215 1,215 1,271
------------------------------
$589,410 585,352 604,557
- --------------------------------------------------------------------
TOTAL FHA MORTGAGES $591,339 587,274 606,522
</TABLE>
<PAGE>
<PAGE>10
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999 (Dollars in thousands; unaudited)
<TABLE>
<CAPTION>
FHA CONSTRUCTION LOANS (5.6%)
Interest Rates Maturity Commitment Face Amortized Value
Perm Const Date* Amount Amount Cost
<S> <C> <C> <C> <C> <C> <C>
Multi-family
NA 6.50% May-2000 $5,700 $0 0 (44)
6.50% 6.50% Jul-2040 8,190 3,928 3,843 3,301
6.66% 6.66% Apr-2040 6,000 6,000 6,000 5,481
6.75% 6.75% May-2040 980 826 826 756
6.75% 6.75% Jun-2040 1,103 813 784 758
6.75% 6.75% Jun-2040 4,667 4,667 4,655 4,319
6.80% 6.95% Dec-2040 8,900 1,355 1,355 811
6.81% 6.81% Jul-2040 35,503 17,367 17,367 15,209
6.88% 7.13% Nov-2030 29,545 10,714 10,714 9,216
6.88% 6.88% Jul-2040 23,426 14,703 14,703 13,224
6.93% 7.25% May-2041 28,104 4,183 4,183 2,895
7.00% 7.00% Apr-2039 6,044 6,053 6,100 5,841
7.13% 7.13% Apr-2039 8,200 7,501 7,509 7,267
7.17% 7.17% Oct-2038 4,905 2,558 2,558 2,407
7.50% 7.50% May-2037 10,145 9,095 9,095 8,993
7.88% 7.88% Nov-2038 5,282 4,126 4,132 4,249
8.75% 8.80% Mar-2037 29,095 26,830 26,836 28,862
9.90% 10.00% Oct-2032 2,262 2,164 2,174 2,249
- -----------------------------------------------------------------
TOTAL FHA CONSTRUCTION LOANS $122,881 122,833 115,794
</TABLE>
* Permanent mortgage maturity date.
<PAGE>
<PAGE>11
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999(Dollars in thousands; unaudited)
<TABLE>
<CAPTION>
GINNIE MAE SECURITIES (23.1%)
Interest Maturity Face Amortized Value
Rate Date Amount Cost
<S> <C> <C> <C> <C>
SINGLE FAMILY
6.50% Jul-2028-Dec-2028 $2,070 2,070 1,991
7.00% Apr-2026-Dec-2028 97,751 99,578 96,404
7.50% Apr-2013-Apr-2029 181,110 185,927 183,265
8.00% Dec-2009-May-2028 80,158 82,756 82,435
8.50% Jun-2022-Dec-2024 22,448 23,004 23,564
9.00% May-2016-Jun-2025 10,697 11,052 11,389
9.50% May-2019-Sep-2021 2,989 3,041 3,209
10.00% Jun-2019 21 21 22
11.00% Oct-2015-Sep-2016 38 38 42
11.25% Oct-2015 86 86 94
12.00% Apr-2015-Jun-2015 56 56 62
12.25% Apr-2015 4 4 4
13.00% Jul-2014 2 2 2
13.25% Dec-2014 6 6 7
13.50% Aug-2014 2 2 2
- --------------------------------------------------------------
$397,439 407,644 402,493
MULTI-FAMILY
6.75% Nov-2038 $15,256 15,033 14,880
7.50% Jul-2037-Nov-2037 13,331 13,345 13,608
7.70% Jul-2036 8,989 9,032 9,310
7.88% Jan-2033-Jul-2039 2,622 2,622 4,172
8.25% May-2032-Sep-2036 7,534 7,534 7,719
8.50% Jul-2029 7,232 7,232 7,608
8.75% Dec-2026 4,344 4,344 4,398
9.00% Jun-2030 7,938 7,416 8,019
10.05% May-2026 1,249 1,249 1,254
12.55% Jun-2025 6,081 6,005 6,223
-----------------------------
$74,574 73,811 77,192
- -------------------------------------------------------------
TOTAL GINNIE MAE SECURITIES $472,013 481,455 479,685
</TABLE>
<PAGE>
<PAGE>12
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999 (Dollars in thousands; unaudited)
<TABLE>
<CAPTION>
GINNIE MAE CONSTRUCTION LOANS (7.1%)
Interest Rates Maturity Commitment Face Amortized Value
Perm Const Date* Amount Amount Cost
<C> <C> <C> <C> <C> <C> <C>
MULTI-FAMILY
6.24% 6.24% Jan-2040 $26,500 11,285 10,649 9,164
6.50% 6.50% Apr-2040 3,600 1,316 1,316 1,095
6.50% 6.50% Sep-2040 6,063 25 (5) (365)
6.62% 6.62% Jan-2040 10,010 2,478 2,478 1,954
6.63% 6.76% Jun-2040 5,632 351 326 50
6.75% 6.90% Oct-2040 20,647 0 0 0
6.93% 7.07% Jan-2040 8,460 7,493 7,493 7,245
6.98% 6.98% Jan-2041 47,090 5,038 5,038 3,519
7.10% 7.10% Oct-2039 42,137 35,293 35,134 34,627
7.33% 7.76% Nov-2029 27,555 17,721 17,726 17,838
7.80% 8.00% Jan-2039 54,238 49,993 50,026 51,923
8.04% 7.88% Jan-2039 20,958 20,087 20,213 21,195
- -----------------------------------------------------------------
TOTAL GINNIE MAE CONSTRUCTION LOANS $151,080 150,394 147,725
*Permanent mortgage maturity date
</TABLE>
<PAGE>
<PAGE>13
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999 (Dollars in thousands; unaudited)
FANNIE MAE SECURITIES (20.2%)
<TABLE>
<CAPTION>
Interest Maturity Commitment Face Amortized Value
Rates Date Amount Amount Cost
<S> <C> <C> <C> <C> <C>
SINGLE-FAMILY
6.00% Jun-2005-Dec-2028 $98,792 98,039 93,802
6.50% Oct-2005-Jun-2029 94,345 95,345 91,845
7.00% Jan-2004-Jul-2028 32,060 32,145 31,972
7.50% Dec-2007-Aug-2028 57,939 59,494 58,932
8.00% Nov-2012-Oct-2026 4,521 4,698 4,645
8.25% Oct-2021 83 83 86
8.50% Dec-2021 93 93 97
9.00% Jan-2024-May-2025 962 1,002 1,015
-----------------------------
$288,796 290,899 282,394
MULTI-FAMILY
5.94% Aug-2010 $16,500 0 0 (282)
6.25% Dec-2013 - 2,787 2,802 2,618
6.38% Nov-2008 - 30,626 30,626 30,000
6.50% Nov-2015 7,400 662 662 280
7.25% Nov-2011-Jul-2012 - 10,050 10,050 10,248
7.38% Mar-2015 3,200 0 0 112
7.50% Jan-2015 3,030 6,813 6,820 6,998
7.63% Jun-2008-Feb-2013 4,073 1,183 1,168 1,368
7.75% Sep-2006-Jan-2025 6,170 3,901 3,887 4,159
7.88% Jan-2007 - 434 428 452
8.00% Nov-2019-May-2020 - 7,061 7,019 7,466
8.13% Sep-2012-May-2020 - 11,714 11,660 12,470
8.25% Sep-2001-Sep-2025 10,939 9,812 9,812 10,359
8.40% May-2022 - 594 606 649
8.63% Sep-2028 - 7,327 7,331 8,206
9.00% Jan-2022 - 1,111 1,105 1,213
9.13% Sep-2015 - 4,058 4,025 4,508
9.25% Jun-2018-Sep-2026 - 6,801 6,769 7,585
------------------------------
$104,933 104,769 108,439
OTHER
5.63% Mar-2001 $30,000 30,037 29,955
------------------------------
$30,000 30,037 29,955
- ------------------------------------------------------------------------------
TOTAL FANNIE MAE SECURITIES $423,729 425,705 420,788
</TABLE>
<PAGE>
<PAGE>14
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999(Dollars in thousands)
<TABLE><CAPTION>
FREDDIE MAC SECURITIES (10.7%)
Interest Maturity Face Amortized Value
Rate Date Amount Cost
<S> <C> <C> <C> <C>
SINGLE-FAMILY
6.00% Mar-2005-Apr-2029 $2,702 $2,719 2,547
6.50% Mar-2013-Oct-2028 47,196 47,509 46,470
7.00% May-2004-Mar-2028 51,874 52,828 52,044
7.50% Nov-2003-Aug-2024 38,664 39,623 39,343
8.00% May-2008 9,668 10,055 9,881
8.25% Dec-2022 146 145 151
8.50% Jul-2024-Jun-2025 4,680 4,712 4,889
9.00% Mar-2025 352 352 371
---------------------------------
116,014 118,391 118,620
MULTI-FAMILY
8.00% Feb-2009 $7,626 7,635 7,641
--------------------------------
$7,626 7,635 7,641
OTHER
5.00% Feb-2001 $30,000 29,695 29,643
5.75% Jun-2001 30,000 29,910 29,973
----------------------------------
$60,000 59,605 59,616
- ----------------------------------------------------------------
TOTAL FREDDIE MAC SECURITIES $222,908 225,183 222,953
</TABLE>
<TABLE><CAPTION>
LOCAL INITIATIVES (2.4%)
Interest Maturity Commitment Face Amortized Value
Rate Date Amount Amount Cost
<C> <C> <C> <C> <C> <C>
MULTI-FAMILY
7.70% Jun-2006-Jun-2029 $41,094 36,648 36,648 36,251
8.00% May-2025 4,860 4,845 4,921
8.25% Jan-2025-Sep-2012 1,516 1,343 1,323 1,353
8.38% Feb-2007-Jan-2008 1,674 1,732 1,722 1,770
8.63% Jun-2025 1,421 1,421 1,476
9.13% May-2017 682 687 682
9.39% Dec-2023 963 959 1,030
9.50% Aug-2012-Apr-2024 2,158 2,168 2,309
- -----------------------------------------------------------------------
TOTAL LOCAL INITIATIVES $49,807 49,772 49,794
TOTAL LONG-TERM INVESTMENTS $2,033,757 2,042,616 2,043,261
</TABLE>
<PAGE>
<PAGE>15
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1999(Dollars in thousands)
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (1.7%)
Maturity Face Amortized
Description Date Rate Amount Cost Value
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS
Amalgamated Bank Jul-1999 5.00% $2,000 2,000 2,000
----------------------------
$2,000 2,000 2,000
COMMERCIAL PAPER
George Washington
University Jul-1999 5.00% $5,010 5,010 5,010
Hubbell, Inc. Jul-1999 5.55% 5,550 5,550 5,550
Gillette, Inc. Jul-1999 5.70% 5,000 5,000 5,000
Morgan Stanley Jul-1999 5.75% 5,900 5,900 5,900
Xerox Credit Corp. Jul-1999 5.75% 5,000 5,000 5,000
Goldman Sachs Jul-1999 5.75% 5,000 5,000 5,000
---------------------------
$31,460 31,460 31,460
CERTIFICATES OF DEPOSIT
Shorebank Sep-1999 4.3% $2,000 2,000 2,000
----------------------------
$2,000 2,000 2,000
- ---------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS $35,460 35,460 35,460
</TABLE>
TOTAL INVESTMENTS $2,069,217 2,078,076 2,078,721
See accompanying notes to financial statements.
<PAGE>
<PAGE>16
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999 (Dollars in thousands; unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
INTEREST:
FHA mortgages $24,155
FHA construction loans 4,419
Ginnie Mae securities 23,514
Fannie Mae securities 13,726
Freddie Mac securities 5,343
Local Initiatives 1,594
Short-term investments 1,053
Discount and (premium) amortization and other income - net (4,440)
-----------
TOTAL INCOME $69,364
EXPENSES
Salaries and fringe benefits $2,274
Legal fees 135
Consulting fees 90
Auditing and tax accounting fees 47
Insurance 61
Marketing and sales promotion 293
Investment management 153
Trustee expenses 25
General expenses 752
---------
TOTAL EXPENSES $3,830
---------
Investment Income - net $65,534
Realized gain on sale of investments 188
Net change in unrealized depreciation on investments (80,746)
----------
Net Loss on Investments (80,558)
-----------
Net Decrease in net assets resulting from operations ($15,024)
-----------
-----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>17
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended June 30, 1999 (Dollars in thousands; unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
<S> <C>
Investment income - net $65,534
Net realized gain on sale of investments 188
Net change in unrealized appreciation (80,746)
---------
Net decrease in net assets resulting from operations (15,024)
Distribution paid to participants or reinvested from:
Investment income - net (65,534)
Net decrease in net assets from distributions (65,534)
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS
Proceeds from the sale of 51,813 units of participation 105,381
Dividend reinvestment of 45,171 units of participation 59,873
Payments for redemption of 8,833 units of participation (9,757)
----------
Net increase from unit transactions 155,497
Total increase in net assets 74,939
Net assets, beginning of period 2,023,371
Net assets, end of period $2,098,310
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>18
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The American Federation of Labor and Congress of Industrial Organizations
(AFL-CIO) Housing Investment Trust (the Trust) is a common law trust created
under the laws of the District of Columbia and is registered under the
Investment Company Act of 1940 as a no-load, open-end investment company. The
Trust has obtained certain exemptions from the requirements of the Investment
Company Act of 1940 that are described in the Trust's prospectus.
Participation in the Trust is limited to labor organizations and eligible
pension, welfare and retirement plans that have beneficiaries who are
represented by labor organizations.
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
INVESTMENT VALUATION
Investments are presented at value. Value determinations are summarized by
specific category of investment as follows:
Long-term investments, consisting of permanent mortgages, mortgage-backed
securities, construction loans and participation certificates, are valued
using published prices, dealer bids, or cash flow models discounted using
market-based discount and prepayment rates, developed individually for each
security. 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 comparable risk and maturity to the security being
valued as adjusted for other market considerations. On loans for which the
Trust finances the construction and permanent mortgage, value is determined
based upon the total amount of the commitment for the term of the construction
loan plus the permanent mortgage loan.
Short-term investments, consisting of repurchase agreements, certificates of
deposit and commercial paper that mature less than sixty days from the balance
sheet date, are valued at amortized cost, which approximates value.
Short-term investments maturing more than sixty days from the balance sheet
date are valued at the last reported sales price on the last business day of
the month or the mean between the reported bid and ask price if there was no
sale. Short-term investments maturing more than sixty days from the balance
sheet date for which there are no quoted market prices are valued to reflect
current market yields for securities with comparable terms and interest rates.
Additional information relative to investment terms and credit risks are
described more fully in the Trust's prospectus.
USE OF ESTIMATES
The preparation of financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
FEDERAL INCOME TAXES
The Trust's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
all of its taxable income to its shareholders. Therefore, no federal income
tax provision is required.
The total cost of the portfolio of investments for federal income tax purposes
approximates the cost of all investments for financial statement purposes.
DISTRIBUTIONS TO PARTICIPANTS
At the end of each calendar month, pro rata distribution is made to
participants of the net investment income earned during the preceding month.
Amounts distributable, but not disbursed, as of the balance sheet date are
classified as income distribution payable.
Participants redeeming their investments are paid their pro rata share of
undistributed net income accrued through the month-end of redemption.
The Trust offers an income reinvestment plan which allows current participants
to automatically reinvest their income distribution into Trust units of
participation. Total reinvestment approximated 91 percent of distributable
income for the six months ended June 30,1999.
INVESTMENT INCOME
Interest income is recognized on an accrual basis. Commitment fees, points
and other discounts or premiums resulting from the funding or acquisition of
mortgage loans or mortgage-backed securities are accounted for as an
adjustment to the cost of the investment and amortized over the estimated life
of the mortgage loan or mortgage-backed security. Realized gains and losses
from investment transactions are recorded on the trade date using an
identified cost basis.
2. TRANSACTIONS WITH AFFILIATES
During the six months ended June 30,1999, certain members of the Trust's staff
provided services to the AFL-CIO Building Investment Trust, a Maryland Group
Trust and the Building Investment Trust Corporation, a DC non-profit
corporation. The total cost for these services and related expenses for the
six months ended June 30, 1999, amounted to $896,000. This amount remains
within accounts receivable in the accompanying financial statements.
3. COMMITMENTS
The assets of the Trust are invested in short-term investments until they are
required to fund commitments for construction loans, mortgage-backed
securities or permanent mortgages. At June 30, 1999, the Trust had unfunded
commitments of approximately $553,000,000 to fund construction and permanent
mortgages, and other investments. The Trust is required to maintain a
segregated account of securities in an amount no less than the total unfunded
commitments less short-term investments.
4. INVESTMENT TRANSACTIONS
A summary of investment transactions for the separate instruments included in
the Trust's investment portfolio, at amortized cost, for the six months ended
June 30,1999 is shown in the Investment Transactions chart on the next page.
<PAGE>
<PAGE>19
<TABLE>
<CAPTION>
INVESTMENT TRANSACTIONS
(Dollars in thousands)
FHA Ginnie Ginnie Mae Fannie Freddie
FHA Construction Mae Construction Mae Mac Local
Mortgages Securities Loans Securities Securities Securities Initiatives
--------- ------------ ---------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1999 $562,165 125,397 536,389 125,377 382,472 126,255 37,629
Purchases and
construction
loan advances,
net of
discounts 584 51,443 64,529 38,657 92,653 122,258 12,282
Change in
Discounts and
(premiums) (357) 583 (1,082) 26 837 (112) 12
Transfers 57,698 (54,423) 8,333 (11,608) 0 0 0
Principal
Reductions (32,816) (167) (126,714) (2,058) (50,257) (23,218) (151)
Balance,
June 30, 1999 $587,274 122,833 481,455 150,394 425,705 225,183 49,772
</TABLE>
For the six months ended June 30, 1999, the Trust had net unrealized
depreciation in value of investments of $80,746,000. The accumulated
unrealized net appreciation in the value of investments of securities was
$645,000 as of June 30, 1999.
5. PARTICIPANTS' EQUITY (dollars in thousands)
Participants' equity consisted of the following at June 30, 1999:
Amount invested and reinvested by current participants $2,098,931
(Gain)loss on redemption of units of participation (2,060)
Accumulated net unrealized appreciation in the value
of investments 645
Accumulated undistributed net realized gain on investments 88
Accumulated undistributed investment income - net 606
---------
NET PARTICIPANTS' EQUITY $2,098,310
---------
---------
6. RETIREMENT AND DEFERRED COMPENSATION PLANS
The Trust participates in the AFL-CIO Staff Retirement Plan, which is a
multi-employer defined benefit pension plan, covering substantially all
employees. This plan was funded by employer contributions, at rates
approximating 17.4 percent of employees' salaries during the six months ended
June 30, 1999. The Trust's total pension expense for the six months ended
June 30, 1999 was approximately $69,000.
The Trust has a tax deferred compensation plan, referred to as a 401(k) plan,
covering substantially all employees. This plan permits employees to defer the
lesser of 15 percent of their annual salary or the applicable IRS limit. The
Trust matches dollar for dollar the first $1,450 in contributions. The Trust's
401(k) contribution for the six months ended June 30, 1999 was approximately
$69,000.
7. BANK LOANS
The Trust has a secured $25,000,000 bank line of credit. Borrowings under this
agreement bear interest at LIBOR plus one-half percent. Five mortgage-backed
securities have been pledged as collateral for the line of credit. As of June
30, 1999, the Trust had no outstanding balance on this line of credit. No
compensating balances are required.
<PAGE>
<PAGE>20
SUPPLEMENTAL INFORMATION
Selected Per Share Data and Ratios for the Six Months Ended June 30, 1999 and
the Years Ended December 31, 1998, 1997, 1996, and 1995
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Investment Income $37.13 81.89 83.77 84.10 86.50
Expenses (2.05) (4.41) (4.71) (4.99) (5.38)
-------------------------------------------------------
Investment Income
- net 35.08 77.48 79.06 79.11 81.12
Distribution from
investment income
- net (35.08) (77.55) (79.10) (78.76) (80.77)
Distribution from
realized gain on
investments 0.00 (1.30) (0.48) 0.00 0.00
NET ASSET VALUE
Beginning of period 1,114.08 1,104.30 1,072.98 1,098.53 991.40
Net realized and
unrealized gains
(losses) on
investments
Net increase
(decrease)
in net asset value (42.83) 9.78 31.32 (25.55) 107.13
--------------------------------------------------------
END OF PERIOD 1,071.25 1,114.08 1,104.30 1,072.98 1,098.53
RATIOS
Ratio of expenses to
average net assets 0.37%(1) 0.39% 0.43% 0.46% 0.51%
Ratio of net investment
income to average net
assets 6.4%(1) 6.8% 7.2% 7.3% 7.6%
Portfolio turnover rate 23.5%(1) 39.5% 15.3% 20.3% 31.2%
NUMBER OF OUTSTANDING
UNITS AT END OF PERIOD 1,958,748 1,816,185 1,513,856 1,289,082 1,062,234
</TABLE>
See accompanying notes to financial statements.
(1) Percents are annualized.
