-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N8gxERKwi1pVezZOF5ST1iWHk1/Sub0nvwD5NP1AnxTne2UFH92PiWzreM9ozQc4 gDuR2aO0lJp/m3EvIXXfVg== 0001026777-00-000041.txt : 20000307 0001026777-00-000041.hdr.sgml : 20000307 ACCESSION NUMBER: 0001026777-00-000041 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFL CIO HOUSING INVESTMENT TRUST CENTRAL INDEX KEY: 0000225030 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 526220193 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03493 FILM NUMBER: 559004 BUSINESS ADDRESS: STREET 1: 1717 K STREET NW STREET 2: STE 707 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2023318055 MAIL ADDRESS: STREET 1: 1717 K ST NW SUITE 707 CITY: WASHINGTON STATE: DC ZIP: 20006 N-30D 1 AFL-CIO Housing Investment Trust 1999 Annual Report 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 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 05
NET ASSETS YEAR DOLLAR VALUE (IN MILLIONS) --------------------------------------- 1989 $ 285 1991 529 1993 846 1995 1,167 1997 1,762 1999 2,149
PARTICIPANTS YEAR --------------------------------------- 1989 206 1991 283 1993 364 1995 387 1997 394 1999 415
HOUSING UNITS 1990-94 1995-99 - ---------------------------------------------- MULTI-FAMILY 9,993 21,916 SINGLE-FAMILY 2,037 3,606 TOTAL 12,030 25,522
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. 06
PERFORMANCE TOTAL GROSS RATE OF RETURN 1 YEAR 3 YEAR 5 YEAR 10 YEAR - ------------------------------------------------------------------------------ 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%
Returns for periods exceeding one year are annualized. Past performance does not mean that the Trust will achieve similar results in the future.
PORTFOLIO DISTRIBUTION MORTGAGE BACKED SECURITIES 68.0% FHA MORTGAGES 21.0% FHA CONSTRUCTION LOANS 7.0% LOCAL INITIATIVES 2.0% SHORT-TERM 2.0%
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. 07
LOAN PRODUCTION FINANCING COMMITMENTS YEAR DOLLAR VALUE (IN MILLIONS) SINGLE FAMILY MULTI-FAMILY TOTAL ---------------------------------------------------------------- 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
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. 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. 09 FINANCIAL STATEMENTS AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS HOUSING INVESTMENT TRUST WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS THEREON 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 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
SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999 (Dollars in thousands) FHA Mortgages (20.6%) Interest Maturity Face Amortized Value Rates Date Amount Cost -------- -------- ------ --------- ------ 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
See accompanying notes to financial statements. 12 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999(Dollars in thousands)
FHA MORTGAGES (20.6%) Continued Multi-family Interest Maturity Commitment Face Amortized Value Rates Date Amount Amount Cost -------- -------- -------- --------- ------ ----- 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
See accompanying notes to financial statements. 13 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999 (Dollars in thousands)
FHA CONSTRUCTION LOANS (6.9%) Interest Rates Maturity Commitment Face Amortized Value Perm Const Date* Amount Amount Cost ---- ----- ------- --------- -------- ---------- ----- 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
* Permanent mortgage maturity date. See accompanying notes to financial statements. 14 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999 (Dollars in thousands)
GNMA SECURITIES (22.0%) Interest Maturity Face Amortized Value Rate Date Amount Cost -------- -------- ------ --------- --------- 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 -------- -------- ---------- ------ --------- --------- 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.
15 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999 (Dollars in thousands)
GNMA CONSTRUCTION LOANS (5.5%) Interest Rates Maturity Commitment Face Amortized Value Perm Const Date* Amount Amount Cost ---- ----- ------- --------- ---------- ---------- ------- 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.
16 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999 (Dollars in thousands)
FANNIE MAE SECURITIES (29.4%) Interest Maturity Commitment Face Amortized Value Rates Date Amount Amount Cost -------- ------- ---------- ------- -------- -------- 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.
17 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999 (Dollars in thousands)
FREDDIE MAC SECURITIES (11.0%) Interest Maturity Face Amortized Value Rate Date Amount Cost -------- -------- ------ --------- ---------- 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
LOCAL INITIATIVES (2.4%) Interest Maturity Commitment Face Amortized Value Rates Date Amount Amount Cost ------- ------- ------- -------- ------ ------- 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.
18 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 1999 (Dollars in thousands)
SHORT-TERM INVESTMENTS (2.2%) Maturity Face Amortized Description Date Rate Amount Cost Value - ----------- -------- -------- -------- -------- --------- 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
TOTAL INVESTMENTS Face Amount Amortized Cost Value -------------- --------------- -------- $2,144,771 2,153,825 2,084,017 See accompanying notes to financial statements. 19 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST STATEMENT OF OPERATIONS Year ended December 31, 1999 (Dollars in thousands)
INVESTMENT INCOME: 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.
20 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST STATEMENT OF CHANGES IN NET ASSETS Years ended December 31, 1999 and 1998 (Dollars in thousands)
(DECREASE)INCREASE 1999 1998 IN NET ASSETS ------------ --------- FROM OPERATIONS 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. 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 22 FINANCIAL STATEMENTS - AFL-CIO HOUSING INVESTMENT TRUST
INVESTMENT TRANSACTIONS (dollars in thousands) FHA GNMA Fannie Freddie FHA Construction GNMA Construction Mae Mac Local Mortgages Loans Securities Loans Securities Securities Initiatives --------- ------------ ---------- ------------ --------- ---------- ----------- 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
$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. 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
PER SHARE DATA 1999 1998 1997 1996 1995 -------- ------ ------ ------- ------ 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
RATIOS 1999 1998 1997 1996 1995 ----- ------ ------ ------- ------ 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
See accompanying notes to financial statements. 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 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 -----END PRIVACY-ENHANCED MESSAGE-----