AFL-CIO Housing Investment Trust
1999 Annual Report
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<PAGE>
AFL-CIO HOUSING INVESTMENT TRUST
MESSAGE FROM THE AFL-CIO PRESIDENT
[Photograph of John J. Sweeney]
When the AFL-CIO boldly launched a program for pension investment in
housing 35 years ago, few could have envisioned the $2.1 billion economic force
that the AFL-CIO Housing Investment Trust has become. The Trust today fills a
vital stewardship role for labor's pension capital. It provides for the
retirement security of beneficiaries in industries ranging from construction to
the service sector, manufacturing, government, transportation, education, the
arts, and more. Through the years, the Trust has generated over 90 million
hours of union construction work. It has helped produced more than 60,000 units
of housing that have benefitted many times that number of individuals. It is a
strong partner in promoting the decent housing and good jobs that are essential
for a just society. Those activities are admirably depicted in the mural
reproduced on the cover.
In 1999, the AFL-CIO Executive Council initiated an extensive review of
investment products to analyze how well they serve the interests of working
people. Our review did not evaluate financial performance but looked at
collateral benefits to workers and their communities. I am pleased to report
that the Housing Investment Trust and its companion, the Building Investment
Trust, ranked at the very top.
With this strong record, the Trust has blazed an exemplary path into a new
century of investment, offering the "high road investments" that make a real
difference in the quality of life for working people.
/s/ John J. Sweeney
JOHN J. SWEENEY
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<PAGE>02
REPORT TO PARTICIPANTS
Message from the Chairman
[Photograph of Richard Ravitch]
The AFL-CIO Housing Investment Trust capped a decade of progress with a
year of extraordinary growth and performance in 1999. With more than $2.14
billion in assets under management at the close of the year, the Trust has
increased in size more than sevenfold during the 1990s. The number of
participating funds continues to grow, with 415 at year-end. The $444 million
in financing committed in 1999 will support 24 projects with over 3,600 housing
units.
Throughout the decade, the Trust demonstrated a consistent record of
generating highly competitive returns for participants. In 1999, its prudent
portfolio management strategy enabled it to outperform its industry benchmark
for the seventh consecutive year, helping maximize returns to participants in a
period of rising interest rates. Continuing investment in staff and systems has
built an efficient management structure that continues to be one of the most
cost-effective in the industry.
This impressive performance the provides the foundation for continued
success as the Trust enters the 2000s.
/s/ Richard Ravitch
RICHARD RAVITCH
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<PAGE>05
<TABLE>
<CAPTION>
NET ASSETS
YEAR DOLLAR VALUE (IN MILLIONS)
---------------------------------------
<C> <C>
1989 $ 285
1991 529
1993 846
1995 1,167
1997 1,762
1999 2,149
</TABLE>
<TABLE>
<CAPTION>
PARTICIPANTS
YEAR
---------------------------------------
<C> <C>
1989 206
1991 283
1993 364
1995 387
1997 394
1999 415
</TABLE>
<TABLE>
<CAPTION>
HOUSING UNITS
1990-94 1995-99
- ----------------------------------------------
<S> <C> <C>
MULTI-FAMILY 9,993 21,916
SINGLE-FAMILY 2,037 3,606
TOTAL 12,030 25,522
</TABLE>
decade of progress
Ten years of dramatic change in the 1990s have positioned the AFL-CIO
Housing Investment Trust for new levels of success in serving its participants'
investment goals in the years ahead. As its net assets climbed from $285
million at the beginning of the decade to more than $2.14 billion at the close,
the Trust attracted growing recognition as a financing resource-and as a leader
in structuring complex transactions tailored to meeting communities' housing
needs.
The $2.7 billion in financing committed during the 1990s supported over
37,000 housing units in 224 union-built projects. The annual number of housing
units more than tripled. This activity generated an estimated 36,000 jobs
during the decade, including some 30 million hours of union construction work.
In ten years, the number of funds participating in the Trust has more than
doubled, from 206 when 1990 began to 415 at year-end 1999-an indication of
investors' continuing confidence in the Trust.
1999 Growth
In the year just completed, the decade's strong growth patterns continued.
Contributing to the record level of total net assets reached at the close of
1999 was a total of more than $290 million in gross investment from
participants, including more than $163 million in new investment and more than
$127 million in reinvestment earnings. Participants continued to reinvest
earnings at the substantial rate of 91 percent-another indicator of strong
investor confidence. The 415 Taft-Hartley and public sector funds participating
in the Trust at year-end included 12 new participants that joined the Trust in
1999. The Trust instituted information system upgraded that strengthened its
underwriting and investment monitoring functions, as well as its communication
with participants, to assure a high level of services for its growing number of
participants.
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<PAGE>06
<TABLE>
<CAPTION>
PERFORMANCE
TOTAL GROSS RATE OF RETURN
1 YEAR 3 YEAR 5 YEAR 10 YEAR
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AFL-CIO HOUSING INVESTMENT TRUST 0.18% 6.47% 8.89% 8.31%
LEHMAN BROTHERS AGGREGATE BOND INDEX 0.82% 5.73% 7.73% 7.70%
</TABLE>
Returns for periods exceeding one year are annualized.
Past performance does not mean that the Trust will achieve similar results in
the future.
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION
<S> <C>
MORTGAGE BACKED SECURITIES 68.0%
FHA MORTGAGES 21.0%
FHA CONSTRUCTION LOANS 7.0%
LOCAL INITIATIVES 2.0%
SHORT-TERM 2.0%
</TABLE>
performance
Nineteen ninety-nine saw the sharpest increase in interest rates in five
years, a trend that negatively affected all fixed-income type investments.
Nevertheless, the Trust outperformed its industry benchmark by 64 basis points
for the year, assuring a highly competitive rate of return for Trust
participants. This impressive performance reflected the success of the Trust's
active approach to portfolio management in response to rising interest rates.
Strategic market analysis and timely portfolio rebalancing enabled the Trust to
minimize risk and maximize returns in this volatile environment.
The Trust's total gross one-year rate of return at December 31 was (0.18)
percent. This compared favorably to the Lehman Brothers Aggregate Bond Index
rate of (0.82) percent. Returns for the three-year, five-year, and ten-year
periods were 6.47 percent, 8.89 percent, and 8.31 percent, respectively. These
rates also outperformed the benchmark, as shown in the chart.
Participants held 2,075,197 units of participation at December 31. The net
asset value per unit was $1,035.72. This reflected an unrealized loss in value
of $78.36 per unit for the year, due to the impact of rising interest rates
during the period. The Trust's current yield on investments at year-end was
7.49 percent, 105 basis points over the ten-year Treasury rate.
The Trust continued to manage the portfolio to maximize returns on
participants' investments while maintaining the security of principal. In 1999,
with interest rates rising, the Trust worked to generate competitive yields
while limited exposure to changes in the interest rate by managing rate risk.
Contributing to the Trust's performance was its low short-term position,
enabling participants' funds to be fully invested. At year-end, the cash and
short-term investments were just 2 percent of net assets. Multi-family
securities accounted for 51 percent of the portfolio, single-family securities,
42 percent, and intermediate term securities, 5 percent.
The Trust continued to offer a high degree of security for its investors.
At year-end, over 97 percent of the Trust's long-term portfolio was insured or
guaranteed by the U.S. government or government-sponsored enterprises such as
Fannie Mae and Freddie Mac.
As in 1998, the Trust carried out its investment program with one of the
most cost-effective operating structures in the industry. Total operating
expenses were just 39 basis points, or 0.39 percent of average net assets.
<PAGE>
<PAGE>07
<TABLE>
<CAPTION>
LOAN PRODUCTION
FINANCING COMMITMENTS
YEAR DOLLAR VALUE (IN MILLIONS)
SINGLE FAMILY MULTI-FAMILY TOTAL
----------------------------------------------------------------
<C> <C> <C> <C>
1990 - $59 $59
1991 $26 85 111
1992 102 67 169
1993 42 103 145
1994 51 161 212
1995 70 258 328
1996 35 328 363
1997 65 286 351
1998 165 323 488
1999 105 339 444
</TABLE>
investment
The Trust throughout 1999 was successful in pursuing new investment
activity that is meeting diverse housing needs of communities around the
country. Key to this investment strategy was the broadening and strengthening
of labor's partnerships with public, private, and nonprofit housing groups, so
worthwhile projects could more readily be identified and implemented.
Trust financial commitments in 1999 exceeded $444 million for 24 projects
and over 3,600 housing units. These totals include more than 2,900 multi-family
units and 700 attractive mortgages for union members and municipal employees
under Homeownership Opportunity Initiative.
The Trust expanded its multi-family housing investment activity in 1999 to
a historic level of $339 million in new commitments. Contributing to this
success were innovative projects undertaken in cooperation with the AFL-CIO
Building Investment Trust, as well as new partnerships with state housing
finance agencies. Nearly half of the commitments issued in 1999 involved
non-FHA transactions, including investments in Fannie Mae securities backed by
mortgages on single-family and multi-family projects.
A sampling of Trust activities in 1999 demonstrates the widening scope of
investment activities and partnerships.
- Renovation of the Workman's Circle Multi-Care Center in the Bronx will
enable this historic labor-founded nursing facility to offer expanded
state-of-the art care to its residents. The Trust is providing over $51 million
the new Sub-Acute Care Center for the 524-bed home. The nursing center opening
in 1951 under the auspices of Workmen's Circle, a Jewish workers social service
organization, and has become one of the largest nonprofit nursing facilities in
the New York metropolitan area. The center's 600 union employees include
workers represented by the Office of Professional Employees International Union
and Local 119/SEIU, National Health and Human Service Employees Union.
- To help alleviate San Francisco's tight rental market, the Trust is
financing the construction of Alemany Plaza, a mixed-use housing and retail
development with 400 rental units in the city's Ocean View neighborhood. The
Housing Investment Trust issued a $60 million commitment to provide construction
and permanent financing, while the AFL-CIO Building Investment is providing
another $38 million in equity.
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<PAGE>08
future
- The South Waterfront Apartments in Hoboken is the latest in a series of
redevelopment projects through which the Trust has brought a total of $340
million to revitalize a blighted stretch of the New Jersey waterfront. The
Trust has committed more than $90 million for construction of this new 13-story
building, which will offer over 520 apartments and 60,000 square feet of
commercial space.
- Nearing completion in a designated Empowerment Zone in the heart of
Chicago, the Hearts United Apartments are helping transform a troubled
neighborhood. Built with more than $5 million from the Trust, Hearts United
offers 116 units of affordable housing to local families. One quarter of its
units are reserved for low-income families. Hearts United is part of a $10
million Trust effort to redevelop the community, with two earlier apartment
projects now completed and occupied.
- The Trust expanded its Homeownership Opportunity Initiative to serve the
entire metropolitan area of participating cities, bring affordable home
mortgages to more union members. The success of the program already underway in
Seattle resulted in an additional $25 million commitment for homebuyers in that
area. In New York City, the Trust initiated a special homeownership partnership
with the existing mortgage program of Local 1199.
The outstanding accomplishments of the 1990's culminating in the successful
year just completed, position the Trust for even greater success in the period
ahead. It has built an efficient operation with a record of prudent fund
management and competitive long-term returns. While it financed 37,000 housing
units in the '90s, the Trust is setting its sights on attaining $5 billion in
assets and financing 50,000 units in the next decade-firmly establishing its
position at the forefront of pension housing-finance. Working with its sister
program, the AFL-CIO Building Investment Trust, it will have unprecedented
opportunities to assume leadership in the community development coalitions that
are key to improving the quality of life for working families and retirees. All
of this provides the prospect of serving our participants' long-term investment
needs more effectively than ever, while making an even greater difference in the
communities where our investors' beneficiaries live and work.
<PAGE>
<PAGE>09
FINANCIAL
STATEMENTS
AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS HOUSING INVESTMENT TRUST
WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS THEREON
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<PAGE>10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE PARTICIPANTS AND TRUSTEES OF THE AMERICAN FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL ORGANIZATIONS HOUSING INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities of
the American Federation of Labor and Congress of Industrial Organizations
Housing Investment Trust (the "Trust"), including the schedule of portfolio
investments, as of December 31, 1999, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and the selected per share data and
ratios for each of the three years in the period then ended. These financial
statements and per share data and ratios are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and per share data and ratios based on our audits. The per share
data and ratios for each of the two years ended December 31,1996 were
audited by other auditors whose report dated January 29, 1997, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements and
per share data ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification by examination,
or confirmation by correspondence with the custodian, of securities owned as of
December 31, 1999. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material respects, the
financial position of the American Federation of Labor and Congress of
Industrial Organizations Housing Investment Trust as of December 31, 1999, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the selected
per share data and ratios for each of the three years in the period then ended,
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Vienna, VA
January 12, 2000
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<PAGE>11
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999 (Dollars in thousands unless noted)
ASSETS
Investments, at value (amortized cost $2,153,825) $2,084,017
Cash 1,015
Accrued interest receivable 14,859
Accounts receivable 2,191
Receivables - investments sold 49,939
Prepaid expenses and other assets 2,487
TOTAL ASSETS 2,154,508
LIABILITIES
Accounts payable and accrued expenses $1,357
Redemptions payable 25
Refundable deposits 2,418
Income distribution payable, net of dividends
reinvested of $12,016 1,381
TOTAL LIABILITIES 5,181
Net assets applicable to participants' equity -
certificates of participation;
authorized unlimited; outstanding
2,075,197 (note 5) $2,149,327
Net asset value per unit of participation
(in dollars) $1,035.72
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999 (Dollars in thousands)
FHA Mortgages (20.6%)
Interest Maturity Face Amortized Value
Rates Date Amount Cost
-------- -------- ------ --------- ------
<S> <C> <C> <C> <C> <C>
Single-Family 7.75% Jul-2021-Aug-2021 $ 881 881 899
8.00% Jul-2021 691 685 705
10.31% Feb-2016 74 74 74
1,646 1,640 1,678
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<PAGE>12
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999(Dollars in thousands)
<TABLE>
<CAPTION>
FHA MORTGAGES (20.6%)
Continued
Multi-family
Interest Maturity Commitment Face Amortized Value
Rates Date Amount Amount Cost
-------- -------- -------- --------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Multi-family 6.50% Aug-2004 12,983 12,983 12,396
6.75 Nov-2037-Feb 2039 4,725 4,270 4,399
7.00 Jun-2039 6,286 6,385 5,832
7.20 Aug-2039 3,268 3,268 3,075
7.25 Oct-2039 57,445 0 14 (2,036)
7.50 Nov-2022 7,395 7,461 7,149
7.55 Aug-2012-Nov-2037 10,030 10,042 9,730
7.63 Dec-2027-Jun-2037 77,998 77,787 75,998
7.70 Oct-2039 12,528 12,419 12,198
7.75 Jan-2038-Oct-2038 11,652 11,685 11,400
7.80 Dec-2038 21,721 21,732 21,303
7.85 Sep-2037 2,603 2,605 2,564
7.88 Mar-2034-Jul-2038 9,425 9,438 9,293
7.93 Jul-2035 19,495 19,503 19,342
8.00 Sep-2031-Jul-2038 23,166 23,000 23,070
8.13 Apr-2028-Apr-2038 23,002 23,022 23,005
8.18 Nov-2036 36,664 36,247 39,774
8.25 Feb-2026-Feb-2037 31,647 31,672 31,831
8.30 Nov-2027-Jun-2036 8,438 8,390 8,500
8.38 Jan-2027 16,069 16,074 16,196
8.40 Apr-2012 1,220 1,220 1,220
8.50 Apr-2012-Feb-2035 13,017 13,000 13,186
8.60 Jan-2028 2,026 2,028 2,040
8.63 Dec-2029 4,203 4,206 4,281
8.75 May-2036-Sep-2036 12,242 12,144 12,606
8.80 Oct-2032 5,608 5,610 5,699
8.88 Sep-2029-Jun-2036 10,320 10,239 10,635
9.13 May-2035 2,444 2,444 2,525
9.25 Feb-2029-Jun-2036 29,794 29,801 30,929
9.38 Jun-2034 1,861 1,889 1,916
9.50 Jul-2027 376 384 410
9.75 Apr-2031 3,580 3,559 3,652
10.00 May-2002-Mar-2031 5,832 5,832 5,910
10.45 Jan-2030 1,212 1,213 1,264
432,830 431,566 428,292
TOTAL FHA MORTGAGES 434,476 433,206 429,970
</TABLE>
See accompanying notes to financial statements.
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<PAGE>13
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999 (Dollars in thousands)
<TABLE>
<CAPTION>
FHA CONSTRUCTION LOANS (6.9%)
Interest Rates Maturity Commitment Face Amortized Value
Perm Const Date* Amount Amount Cost
---- ----- ------- --------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-family NA 6.50% May-2000 $5,700 688 688 663
6.45% 7.80 Jun-2041 17,604 4,692 3,569 2,665
6.50 6.50% Mar-2040 8,190 7,886 7,804 6,946
6.66 6.66 Apr-2040 6,000 6,000 6,000 5,348
6.75 6.75 Apr-2040 980 980 980 851
6.75 6.75 Apr-2040 4,667 4,667 4,655 4,072
6.80 6.95 Sep-2040 8,900 3,853 3,853 2,947
6.81 6.81 Jul-2040 35,503 29,680 29,686 26,060
6.88 7.13 Apr-2030 29,545 21,300 21,300 18,614
6.88 6.88 Jul-2040 23,426 20,200 20,200 17,923
6.93 7.25 May-2041 28,104 10,706 10,706 8,067
7.13 7.13 Apr-2039 8,200 7,501 7,509 6,825
7.17 7.17 Feb-2040 4,905 4,322 4,328 3,978
7.50 7.50 Nov-2037 10,145 9,062 9,097 8,736
8.75 8.80 Mar-2027 29,095 26,694 26,699 27,478
9.90 10.00 Oct-2032 2,262 2,160 2,172 2,217
TOTAL FHA CONSTRUCTION LOANS 160,391 159,246 143,390
</TABLE>
* Permanent mortgage maturity date.
See accompanying notes to financial statements.
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<PAGE>14
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999 (Dollars in thousands)
<TABLE>
<CAPTION>
GNMA SECURITIES (22.0%)
Interest Maturity Face Amortized Value
Rate Date Amount Cost
-------- -------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Single-Family 6.50% Jul-2028-Dec-2028 $ 2,052 $ 2,052 $ 1,926
7.00 Apr-2026-Dec-2028 93,342 95,034 90,106
7.50 Apr-2013-Apr-2029 165,359 169,577 164,285
8.00 Nov-2009-May-2028 75,089 77,356 75,964
8.50 Nov-2009-Dec-2024 23,401 24,002 24,144
9.00 May-2016-Jun-2025 9,024 9,310 9,483
9.50 May-2019-Sep-2021 2,429 2,468 2,578
10.00 Jun-2019 17 17 18
11.00 Oct-2015-Sep-2016 30 30 32
11.25 Oct-2015 86 86 94
12.00 Apr-2015-Jun-2015 52 52 58
13.00 Jul-2014 2 2 2
13.25 Dec-2014 5 5 6
13.50 Aug-2014 1 1 2
370,889 379,992 368,698
Interest Maturity Commitment Face Amortized Value
Rate Date Amount Amount Cost
-------- -------- ---------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Multi-family 6.75% Nov-2038 $15,221 $15,014 $14,203
7.50 Apr-2038 24,890 24,450 24,369
7.80 Jul-2039 19,181 19,194 19,112
7.88 Jul-2039 42,000 0 78 267
8.25 May-2032 4,571 4,571 4,573
8.50 Jul-2029 7,207 7,207 7,386
8.75 Dec-2026 4,325 4,325 4,376
9.00 Jun-2030 7,915 7,425 7,921
10.05 May-2026 1,244 1,244 1,249
12.55 Jun-2025 6,065 5,995 6,201
90,619 89,503 89,657
TOTAL GNMA SECURITIES 461,508 469,495 458,355
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>15
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999 (Dollars in thousands)
<TABLE>
<CAPTION>
GNMA CONSTRUCTION LOANS (5.5%)
Interest Rates Maturity Commitment Face Amortized Value
Perm Const Date* Amount Amount Cost
---- ----- ------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-family 6.24% 6.24% May-2040 $26,500 21,057 20,425 17,941
6.50 6.50 Apr-2040 3,600 3,084 3,086 2,712
6.50 6.50 Sep-2040 6,063 2,870 2,794 2,224
6.62 6.62 Jan-2040 10,010 3,408 3,410 2,461
6.75 6.75 Oct-2040 20,647 4,570 4,168 2,717
6.76 6.63 Nov-2040 5,632 3,955 3,943 3,491
6.98 6.98 Jan-2041 47,090 10,583 10,583 6,912
7.07 6.93 Sep-2039 8,460 7,991 7,991 7,431
7.10 7.10 Jul-2039 42,137 40,190 39,955 37,790
7.50 7.63 Apr-2041 19,440 3,919 3,919 3,138
7.70 7.70 Mar-2042 50,584 2,190 1,385 293
7.75 7.25 Feb-2031 51,076 6,316 6,057 4,888
7.76 7.33 Jan-2030 27,555 23,094 23,111 21,975
TOTAL GNMA CONSTRUCTION LOANS $133,227 130,827 113,973
*Permanent mortgage maturity date
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>16
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999 (Dollars in thousands)
<TABLE>
<CAPTION>
FANNIE MAE SECURITIES (29.4%)
Interest Maturity Commitment Face Amortized Value
Rates Date Amount Amount Cost
-------- ------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Single-family 5.50% Sep-2029 $ 237 $ 230 $ 211
6.00 Jun-2005-Aug-2029 95,521 94,795 87,943
6.50 Oct-2005-Nov-2029 81,842 82,725 77,669
6.91 Jun-2028 5,405 5,546 5,527
7.00 Jan-2004-Dec-2029 37,114 37,311 36,142
7.50 Jul-2004-Dec-2029 68,179 69,647 68,314
8.00 Jan-2007-Oct-2026 8,298 8,544 8,404
8.50 Nov-2009-Oct-2029 8,873 9,140 9,071
9.00 Jul-2009-May-2025 11,437 11,836 12,007
9.50 Aug-2004 4,182 4,302 4,305
321,088 324,076 309,593
Multi-family 6.06 Sep-2011 7,345 7,264 7,226
6.25 Dec-2013 2,731 2,793 2,483
6.38 Nov-2008 30,471 30,471 28,754
6.50 Nov-2015 $ 7,400 1.332 1,335 629
6.97 Jun-2007 51,134 51,159 50,623
7.09 Aug-2010 16,500 0 0 (147)
7.20 Apr-2010-Aug-2029 10,944 10,535 10,428
7.25 Nov-2011-Jul-2012 9,995 9,995 9,969
7.29 Jul-2003 1,733 1,760 1,735
7.30 Aug-2006 33,500 33,852 33,500
7.35 Dec-2009 29,355 29,501 29,318
7.38 Jun-2014-Oct-2015 5,641 5,281 5,289 5,186
7.41 Dec-2003 1,210 1,227 1,213
7.50 Dec-2014 2,690 2,697 2,628
7.54 Mar-2012 60,000 0 0 152
7.75 May-2012-Dec-2024 5,457 5,448 5,426
8.00 Nov-2019-May-2020 7,002 6,964 7,192
8.13 Sep-2012-May-2020 11,580 11,529 11,904
8.18 Apr-2001 1,383 1,406 1,392
8.40 May-2022 591 603 615
8.50 Jan-2007 414 408 430
8.63 Sep-2006-Sep-2028 7,914 7,912 8,357
9.00 Jan-2022 1,104 1,098 1,163
9.13 Sep-2015 4,006 3,974 4,309
9.25 Sep-2018-Sep-2026 6,749 6,720 7,315
233,921 233,940 231,800
Other 5.63 Mar-2001 30,000 30,032 29,727
5.65 Jun-2001-Sep-2001 16,529 16,371 16,321
5.65 Nov-2001 25,000 25,018 24,930
71,529 71,421 70,978
TOTAL FNMA SECURITIES 626,538 629,437 612,371
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>17
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999 (Dollars in thousands)
<TABLE>
<CAPTION>
FREDDIE MAC SECURITIES (11.0%)
Interest Maturity Face Amortized Value
Rate Date Amount Cost
-------- -------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Single-family 5.37% Aug-2029 $5,486 5,486 5,477
5.82 Oct-2029 7,337 7,314 7,321
5.85 Jul-2029 9,702 9,708 9,733
6.00 Mar-2005-Apr-2029 3,125 3,140 2,896
6.50 Dec-2006-Dec-2029 46,090 46,380 44,602
6.61 Apr-2023 3,923 4,025 3,993
7.00 May-2004-Dec-2029 48,743 49,566 48,136
7.50 Nov-2003-Dec-2029 33,731 34,514 33,984
8.00 May-2008-Nov-2018 23,242 23,951 23,583
8.25 Dec-2022 145 145 148
8.50 Jun-2010-Jun-2025 17,641 18,105 18,120
9.00% Sep-2010-Mar-2025 4,194 4,360 4,341
203,359 206,694 202,334
Multi-family 8.00 Feb-2009 7,387 7,396 7,394
Other 5.59 Mar-2001 15,000 14,895 14,849
5.69 Mar-2002 5,450 5,355 5,339
20,450 20,250 20,188
TOTAL FREDDIE MAC SECURITIES 231,196 234,340 229,916
</TABLE>
<TABLE>
<CAPTION>
LOCAL INITIATIVES (2.4%)
Interest Maturity Commitment Face Amortized Value
Rates Date Amount Amount Cost
------- ------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Multi-family 7.63% Jan-2008 $ 813 $ 811 $ 790
7.70 Jun-2006-Jun-2029 $41,094 39,871 39,874 38,592
8.00 May-2025 4,835 4,821 4,759
8.13 Jan-2005 1,016 793 780 789
8.25 Sep-2012 500 485 490 477
8.38 Feb-2007 889 928 891
8.63 Jun-2025 1,413 1,413 1,425
9.39 Dec-2023 958 954 1,008
9.50 Aug-2012-Apr-2024 2,144 2,153 2,263
TOTAL LOCAL INITIATIVES 52,201 52,224 50,994
TOTAL LONG-TERM INVESTMENTS $2,099,537 2,108,775 2,038,969
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>18
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999 (Dollars in thousands)
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (2.2%)
Maturity Face Amortized
Description Date Rate Amount Cost Value
- ----------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
REPURCHASE
AGREEMENTS
Bank of America Jan-2000 2.15% $4,974 4,974 4,974
Amalgamated Bank Mar-2000 4.90 2,000 2,000 2,000
6,974 6,974 6,974
COMMERCIAL PAPER
George Washington
University Jan-2000 6.00 5,000 5,000 5,000
Invensys PLC Jan-2000 6.00 5,000 4,992 4,992
Delaware Funding Jan-2000 5.96 2,260 2,256 2,256
GTE Funding, Inc. Jan-2000 5.85 4,000 3,984 3,984
Centric Capital Corp. Jan-2000 5.90 5,000 4,975 4,975
PREFCO Feb-2000 5.84 5,000 4,969 4,969
Yale University Feb-2000 5.85 5,000 4,961 4,961
Peacock Funding Mar-2000 5.89 5,000 4,939 4,937
36,260 36,076 36,074
CERTIFICATE OF
DEPOSIT
Shorebank Mar-2000 4.90 2,000 2,000 2,000
TOTAL SHORT-TERM INVESTMENTS 45,234 45,050 45,048
</TABLE>
TOTAL INVESTMENTS
Face Amount Amortized Cost Value
-------------- --------------- --------
$2,144,771 2,153,825 2,084,017
See accompanying notes to financial statements.
<PAGE>
<PAGE>19
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
STATEMENT OF OPERATIONS
Year ended December 31, 1999 (Dollars in thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
INTEREST:
FHA mortgages $ 45,730
FHA construction loans 9,511
Ginnie Mae securities 37,460
Ginnie Mae construction securities 9,857
Fannie Mae securities 30,611
Freddie Mac securities 13,148
Local initiatives 3,684
Short-term investments 3,560
Discount and (premium)amortization and
other income - net (6,197)
TOTAL INCOME 147,364
EXPENSES:
Salaries and fringe benefits 4,954
Legal fees 278
Consulting fees 185
Auditing and tax accounting fees 108
Insurance 110
Marketing and sales promotion 547
Investment management 376
Trustee expenses 35
General expenses 1,581
TOTAL EXPENSES 8,174
INVESTMENT INCOME - NET 139,190
Realized gain on sale of investments 646
Net change in unrealized depreciation
on investments (151,198)
NET LOSS ON INVESTMENTS (150,552)
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ($11,362)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>20
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
STATEMENT OF CHANGES IN NET ASSETS
Years ended December 31, 1999 and 1998 (Dollars in thousands)
<TABLE>
<CAPTION>
(DECREASE)INCREASE 1999 1998
IN NET ASSETS ------------ ---------
FROM OPERATIONS
<S> <C> <C>
Investment income - net $139,190 126,190
Net realized gain on sale of investments 646 3,978
Net change in unrealized
(depreciation) appreciation (151,198) 15,792
NET (DECREASE) INCREASE IN NET ASSETS (11,362) 145,960
RESULTING FROM OPERATIONS
Distribution paid to participants
or reinvested from:
Investment income - net (139,355) $(126,322)
Net realized gain on investments (646) (3,978)
NET DECREASE IN NET ASSETS FROM
DISTRIBUTIONS (140,001) (130,300)
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS
Proceeds from the sale of 151,889 and
210,757 units of participation in 1999
and 1998, respectively 163,146 234,115
Dividend reinvestment of 19,113 and
105,856 units of participation in
1999 and 1998, respectively 127,160 117,712
Payments for redemption of 11,990 and
14,284 units of participation in
1999 and 1998, respectively (12,987) (15,861)
NET INCREASE FROM SHARE TRANSACTIONS 277,319 335,966
TOTAL INCREASE IN NET ASSETS 125,956 351,626
Net Assets at the beginning of period 2,023,371 1,671,745
NET ASSETS AT END OF PERIOD $ 2,149,327 2,023,371
See accompanying notes to financial statements.
<PAGE>
<PAGE>21
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
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. For construction-only loans, the
outstanding principal balance of the loan is used to approximate value,
assuming no decline in credit quality.
Short-term investments, consisting of repurchase agreements 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 statements 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 year ended December 31, 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.
Receivables-Investments Sold
Receivables-Investments Sold represent securities that were sold prior to
December 31, 1999, which will settle in year 2000.
2. TRANSACTIONS WITH AFFILIATES
During the year ended December 31, 1999, the Trust provided certain services
to the AFL-CIO Building Investment Trust, a Maryland Group Trust, and the
Building Investment Trust Corporation, a D.C. non-profit corporation.
The total cost for these services and related expenses for the year
ended December 31, 1999, amounted to $1,627,386. The Trust was reimbursed for
$441,622 of these costs, with the remaining
<PAGE>
<PAGE>22
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT TRANSACTIONS
(dollars in thousands)
FHA GNMA Fannie Freddie
FHA Construction GNMA Construction Mae Mac Local
Mortgages Loans Securities Loans 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 &
construction
loan advances,
net of
discounts 3,855 101,791 74,283 98,549 347,508 207,990 16,094
Change in
Discounts &
(premiums) 2,436 (514) (2,537) (1,688) 1,759 758 70
Transfers (22,065) (67,084) 154,949 (65,800) 0 0 0
Principal
Reductions (113,185) (344) (293,589) (25,611) (102,302) (100,663) (1,569)
Balance,
December 31,
1999 $433,206 159,246 469,495 130,827 629,437 234,340 52,224
</TABLE>
$1,185,764 included 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 December 31, 1999, the Trust had
remaining unfunded commitments of approximately $433,400,000 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. As of
December 31, 1999, this segregated account held securities with a value of
approximately $1,325,500,000. The commitment amounts disclosed on the
Schedule of Portfolio Investments represents the original commitment amount,
which includes both funded and unfunded commitments.
4. INVESTMENT TRANSACTIONS
A summary of investment transactions for the separate instruments included in
the Trust's investment portfolio, at amortized cost, for the year ended
December 31, 1999, is shown in the Investment Transactions chart above.
5. PARTICIPANTS' EQUITY (dollars in thousands)
Participants' equity consisted of the following at
December 31, 1999:
Amount invested and reinvested by current participants $2,218,694
Accumulated undistributed appreciation in the
value of investments (69,808)
Accumulated undistributed investment
income - net 441
$2,149,327
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 a rate
approximating 15.4 percent of employees' salaries during the year ended
December 31, 1999. The Trust's total pension expense for the year ended
December 31, 1999 was approximately $605,000.
The Trust also participates in a 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 matched dollar for dollar the first $1,450 of employee
contributions. The Trust's 401(k) contribution for the year ended December
31, 1999 was approximately $76,000.
7. BANK LOANS
The Trust has a secured $12,500,000 bank line of credit. Borrowings under this
agreement bear interest at LIBOR plus one-half percent. One mortgage-backed
security with a value of $21,019,609 has been pledged as collateral for the
line of credit. In addition the Trust has a $12,500,000 uncommitted and
unsecured line of credit facility. As of December 31, 1999, the Trust had no
outstanding balances on either of these facilities. No compensating balances
are required.
<PAGE>
<PAGE>23
FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
SUPPLEMENTAL INFORMATION
Selected Per Share Data and Ratios for the Years Ended December 31, 1999,
1998, 1997, 1996, 1995
<TABLE>
<CAPTION>
PER SHARE DATA
1999 1998 1997 1996 1995
-------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Investment Income $75.86 81.89 83.77 84.10 86.50
Expenses (4.21) (4.41) (4.71) (4.99) (5.38)
-------- ------- ------- ------
Investment Income - net 71.65 77.48 79.06 79.06 81.12
Distribution from
investment income - net(71.74) (77.55) (79.10) (78.76) (80.77)
Distribution from
realized gain on
investments (.31) (1.30) (0.48) - -
Net asset value
Beginning of period 1,114.08 1,104.30 1,072.98 1,098.53 991.40
Net increase (decrease)
in net asset value (78.36) 9.78 31.32 (25.55) 107.13
END OF PERIOD $1,035.72 1,114.08 1,104.30 1,072.98 1098.53
</TABLE>
<TABLE>
<CAPTION>
RATIOS
1999 1998 1997 1996 1995
----- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets 0.39% 0.39% 0.43% 0.46% 0.51%
Ratio of net investment
income to average net
assets 6.7% 6.8% 7.2% 7.3% 7.6%
Portfolio turnover rate 31.7% 39.5% 15.3% 20.3% 31.2%
Number of outstanding
units at end of period 2,075,197 1,816,185 1,513,856 1,289,082 1,062,234
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<PAGE>24
[Diagram identifying persons depicted in cover painting]
"Union Yes: The March for Social Justice" was painted by Tracy Sugarman for
the AFL-CIO Housing and Building Investment Trusts. Mr. Sugarman is an artist
who is widely recognized for work that has documented important social changes
in American life.
The mural portrays American labor movement leaders who initiated,
supported, and led these investment programs as part of their broader support
of the social justice struggles of recent decades.
The housing projects and construction activity exemplify the Trusts'
impact on working families and their communities across the country. The
construction workers in all industries whose labor and pension investments
make this community revitalization work possible. Also shown are some of the
present and past leaders of the American labor movement who saw that pension
investment can be a vehicle for achieving broader social and economic goals.
The bottom on the mural depicts George Meany and Walter Reuther shaking
hands to mark the 1955 merger that created the modern AFL-CIO.
1. John Sweeney, President, AFL-CIO
2. Richard Trumka, Secretary-Treasurer, AFL-CIO
3. Linda Chavez-Thompson, Executive Vice President, AFL-CIO
4. Thomas R. Donahue, former President of the AFL-CIO
5. Lane Kirkland (1922-99), former President of the AFL-CIO
6. George Meany (1894-1979), former President of the AFL-CIO
7. Walter Reuther (1907-70), President of the CIO before its merger with
the AFL
8. A. Philip Randolph (1889-1979), founder of the Brotherhood of Sleeping Car
Porters
9. Cesar Chavez (1927-93), founder of the United Farm Workers
10. Floyd Hyde, former AFL-CIO Housing Investment Trust Chairman and CEO
<PAGE>
<PAGE>
EXECUTIVE OFFICERS
STEPHEN COYLE
Chief Executive Officer
MICHAEL M. ARNOLD
Executive Vice President
HELEN R. KANOVSKY
Executive Vice President
HARRY W. THOMPSON
Controller
PATTON H. ROARK, JR., CFA
Portfolio Manager
COUNSEL OF RECORD
Swidler Berlin Shereff Friedman LLP,
Washington, DC
CERTIFIED PUBLIC ACCOUNTANT
Arthur Andersen LLP, Vienna, VA
INVESTMENT ADVISER
Wellington Management Company LLP,
Boston, MA
VALUATION CONSULTANT
KPMG LLP, Washington, DC
CUSTODIAN BANK
Bankers Trust Company, New York, NY
TRUSTEES
Richard Ravitch, Chairman,* Principal, Ravitch, Rice and Company LLC
John J. Sweeney,* President, AFL-CIO
Richard L. Trumka, Secretary-Treasurer, AFL-CIO
Linda Chavez-Thompson, Executive Vice President, AFL-CIO
Jack E. Cullerton, Management Trustee, Central Pension Fund of the
International Union of Operating Engineers and Participating Employers
Terrence R. Duverney, Senior Partner, Duvernay & Brooks, LLC
Alfred J. Fleischer, Chairman, Fleischer-Seegar Construction Corporation
Robert A. Georgine, President, Building and Construction Trades Department,
AFL-CIO
Frank Hanley, President, International Union of Operating Engineers
Edwin D. Hill, International Secretary-Treasurer, International Brotherhood
of Electrical Workers
Frank Hurt, President, Bakery, Confectionery & Tobacco Workers International
Union
John T. Joyce, President, International Union of Bricklayers and Allied
Craftworkers
Walter M. Kardy, President, Specialty Contractors Management, Inc.
George Latimer, Distinguished Visiting Professor of Urban Studies, Macalester
College
Martin J. Maddaloni, General President, United Association of Journeymen
and Apprentices of the Plumbing and Pipefitting Industry of the United States
and Canada
Michael E. Monroe, General President, International Brotherhood of Painters
and Allied Trades
Marlyn J. Spear, Chief Investment Officer, Milwaukee & Vicinity Building
Trades United Pension Trust Fund
Tony Stanley,* Vice President, TransCon Builders, Inc.
Andrew L. Stern, President, Service Employees International Union
Patricia F. Wiegert, Retirement Administrator, Contra Costa County Employees'
Retirement Association
*Executive Committee Members
NATIONAL OFFICE
1717 K Street, NW, Suite 707, Washington, DC 20006; (202) 331-8055
REGIONAL OFFICES
WESTERN REGIONAL OFFICE
235 Montgomery Street, Suite 935, San Francisco, CA 94105; (415) 512-7418
