N-30D 1 aflcio.txt ANNUAL REPORT FOR YEAR ENDED 12/31/2001 [Letterhead of AFL-CIO Housing Investment Trust] March 5, 2002 MEMORANDUM ---------- TO: Participants, AFL-CIO Housing Investment Trust FROM: Mike Arnold, Senior Executive Vice President SUBJECT: 2001 Annual Report ------------------------------------------------------------------------------ I am pleased to enclose the 2001 Annual Report for the AFL-CIO Housing Investment Trust. The report includes audited financial statements and the report of the independent auditor for the year ended December 31, 2001. The Trust had a highly successful year in 2001, with assets reaching $2.751 billion and continuing strong performance, despite the national recession. The Trust issued financing commitments of $237 million for 13 multi-family projects and $54 million in financing of single-family mortgages. For the ninth consecutive calendar year, the Trust's total gross rate of return outperformed its industry benchmark, the Lehman Brothers Aggregate Bond Index, achieving a total gross rate of return of 8.60 percent, compared to 8.44 percent for the Index. I would like to express our deep appreciation for your support and the contribution your participation made in making 2001 an exceptional year for the Trust. If you have any questions or need additional copies of the Annual Report, please do not hesitate to contact me. MA/spt opeiu #2, afl-cio Enclosure 1717 K Street, N.W., Suite 707, Washington, D.C. 20036 202/331-8055; fax 202/296-4028 AFL-CIO HOUSING INVESTMENT TRUST 2001 Annual Report AFL-CIO Housing Investment Trust Who We Are ----------------------------- A fixed-income investment fund specializing in multi-family and single-family housing finance with thirty-six years experience in the pension investment industry. What We Do ------------------------------ Meet the retirement security needs of America's working men and women by seeking to provide a competitive rate of return and protecting investors' capital. We also work to increase the supply and availability of livable, affordable housing for working families, generate union jobs, and strengthen communities across the United States. 2001 A Year Of: Performance Growth Innovation - Continued record of competitive returns. - Net assets in excess of $2.7 billion. - $157 million in reinvested earnings, representing a 90% reinvestment rate. - Expense ratio at a record low. - $237 million in new financing commitments for over 1,900 units of multi-family housing. - Production of affordable mortgages for union families. - HIT HOME mortgage program expanded to 17 cities and communities. - New initiatives developed, including the $750 million New York City Community Investment Initiative and $1 billion National Housing Production Program. MESSAGE FROM AFL-CIO PRESIDENT JOHN J. SWEENEY During a year that included both tragedy and economic uncertainty, the AFL-CIO Housing Investment Trust demonstrated again in 2001 the strength of its investment strategies and its commitment to improving the lives of working families in their local communities. In no area of Trust activity was this more evident than in New York City. In 2001 the Trust introduced the New York City Community Investment Initiative, an unprecedented $750 million labor-led effort involving pension funds, local government, community organizations, lenders and developers. These participants have joined in a shared mission of expanding affordable housing, increasing homeownership, and promoting community and economic development in the City. The New York Initiative is indicative of alliances the Trust is actively forming around the country, where it is working in concert with AFL-CIO state and local organizations and numerous public and private entities to address housing needs of working families. In 2001 the Trust forged exciting new relationships with nationally prominent organizations in the field of housing finance, including Fannie Mae, Lend Lease Mortgage Capital and Countrywide Homes Loans. Through these relationships, the Trust expects to leverage more than $1 billion for housing production and provide new homeownership opportunities for union members and municipal employees across America. The labor movement is proud of the important work being done by our brothers and sisters at the Housing Investment Trust and as we look to the coming year, the Trust's continuing growth holds promise for even greater service to investors and local communities. /s/ John J. Sweeney John J. Sweeney -3- [photograph of Richard Ravitch] Richard Ravitch Chairman of the Board AFL-CIO Housing Investment Trust MESSAGE FROM THE CHAIRMAN Solid growth and performance have become a hallmark of the AFL-CIO Housing Investment Trust. The past year was no exception as net assets climbed to $2.7 billion and strong performance allowed the Trust to achieve competitive returns compared to the relevant industry benchmark. Prudent portfolio management and the expertise of Trust staff are key factors in the high level of investor confidence, as evidenced by $170 million in new investments and $157 million in reinvestment of dividends by participants. In addition, annual operating expenses as a percentage of average net assets fell to 37 basis points, the lowest expense ratio in the Trust's history. In 2001, the Trust provided over $300 million in multi- and single-family commitments while opening the door to new collaborative initiatives designed to increase investment opportunities and enhance returns. By stimulating more housing production, these innovative initiatives will benefit not only Trust participants but also the many American families who will be able to take advantage of greater housing opportunities in communities across the country. These achievements further solidify the Trust's status as a premier housing investment program and an attractive opportunity for our investors, both now and in the coming year. /s/ Richard Ravitch Richard Ravitch -4- 2001 REPORT TO PARTICIPANTS PERFORMANCE SETTING THE STANDARD In 2001, the AFL-CIO Housing Investment Trust continued its strong record of performance, producing attractive rates of return for its participants. While interest rate volatility in the financial markets continued to affect fixed- income investments as a class, the Trust maintained strong performance, achieving a total net rate of return of 8.21 percent for the year ended December 31. The Trust's total gross rate of return for the year was 8.60 percent, while the Lehman Brothers Aggregate Bond Index rate was 8.44 percent. The Trust's gross returns have been higher than the Lehman Aggregate Bond Index total returns for nine consecutive years. While such single-year returns are notable, earning competitive long-term returns for participants remains the Trust's principal focus. As illustrated in the performance chart, the Trust's total net returns for the three-year, five-year, and tenyear periods were 6.51 percent, 7.70 percent, and 7.47 percent, respectively. Total gross returns for these same periods were 6.92 percent, 8.12 percent, and 7.96 percent, respectively. Participants held 2,504,984 units of participation at December 31 with a net asset value per unit of $1,098.40. [Graph indicating total gross and net rates of return]
Performance Total Gross and Net Rates of Return (1) 1 Year 3 Years 5 Years 10 Years ----------------------------------------------------------------------------- AFL-CIO HOUSING INVESTMENT TRUST (GROSS) 8.60% 6.92%* 8.12%* 7.96%* AFL-CIO HOUSING INVESTMENT TRUST (NET) 8.21 6.51 7.70 7.47 LEHMAN BROS. AGGREGATE BOND INDEX 8.44 6.28 7.43 7.23 [ ] Gross (2) [ ] Net [ ] Lehman Bros. Aggregate Bond Index
* Returns for periods exceeding one year are annualized. (1) The performance data shown here representsast performance and does not mean that the Trust will achieve similar results in the future. The investment return and principal value of an investment in the Trust will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. A Prospectus containing more complete information may be obtained from the Trust by contacting the Marketing and Investor Relations Department. The Prospectus sets forth information about the Trust that an investor should read carefully before investing. (2) Gross Returns are calculated before the deduction of Trust expenses. Note: Returns shown reflect the growth of an investment for the specified periods. -5- GROWTH [Graph of Net Assets]
NET ASSET GROWTH YEAR DOLLAR VALUE (IN MILLIONS) --------------------------------------- 1991 $ 529 1992 662 1993 846 1994 935 1995 1,167 1996 1,383 1997 1,672 1998 2,023 1999 2,149 2000 2,477 2001 2,751
REACHING NEW HEIGHTS The Trust's decade-long record of growth continued in 2001 with net assets reaching a record level of $2.7 billion at year-end. Contributing to this increase was more than $327 million in gross investment from participants, including $170 million in new investment and over $157 million in reinvested earnings. The Trust's dividend reinvestment rate of 90 percent is indicative of the strong confidence of its 409 participants. These Taft-Hartley and public sector plans included nine new participants who joined the Trust during 2001. PERFORMING FOR INVESTORS By active and prudent portfolio management, the Trust weathered volatile interest rate market conditions in 2001, and continued to meet its objective of providing competitive returns to investors. Despite a recession in the U.S. economy, which prompted eleven rate reductions by the Federal Reserve, the overall economic outlook began to brighten by year-end. The Trust was diligent in positioning the portfolio to maximize total returns and reduce portfolio risk, consistent with tracking relevant benchmark indices. The mortgage market experienced significant prepayments as refinancings hit an all-time high. As a result, residential mortgage-backed securities returns were generally constrained. However, the Trust's specialization in multi-family mortgage-backed securities, which have significant prepayment protection features, allowed Trust investors to realize higher returns as compared to the relevant mortgage indices. In the first months of 2002, mortgage-backed investments continue to pay generous yield spreads above Treasury securities due to the volatility experienced after the events of September 11 and the uncertainty of market direction. As volatility declines, mortgage-backed investments frequently benefit from price appreciation. It is important to note that at year-end 2001, ninety-eight percent of the Trust's long-term portfolio consisted of government securities and securities issued or [Graph re: Portfolio Distribution] PORTFOLIO DISTRIBUTION * Single-family Mortgage-backed Securities 31.6% Multi-family Mortgage-backed Securities 35.2% Multi-family Construction Mortgage Backed Securities 23.6% State Housing Agenty Securities 1.7% Federal Agency Securities & US Treasury Debt Securities 6.5% Cash & Short-term Investments 1.6% *Includes unfunded commitment amounts -6- Retirement Security [photograph of Stephen Coyle] Stephen Coyle Chief Executive Officer AFL-CIO Housing Investment Trust Retirement Security "Investing the retirement savings of working people carries important duties and responsibilities. The investments must be sound and secure, the returns must be competitive, and the interests of those we serve must be our number one priority." -7- Union Job Creation [photograph of Frank Hanley] Frank Hanley General President International Union of Operating Engineers Union Job Creation "Through the Trust, our pension funds are being put to work creating tremendous opportunities for America's working men and women by generating good jobs and increasing union market share in the construction industry." -8- guaranteed by governmental agencies or government sponsored enterprises, which are viewed as "safe havens" for investors in a crisis environment. This is particularly relevant in view of the impact of September 11, a prime example of "event risk," on the market. At the time of this report, the market's focus on corporate accounting concerns has negatively impacted the corporate bond sector (a portion of the fixed-income market which the Trust does not hold in its portfolio). All these factors are expected by the Trust to create a favorable environment for the Trust in 2002, as compared to other fixed-income investments. From an expense perspective, strict management over time has contributed to a sustained decrease in the Trust's expense ratio. In 2001, the total annual operating expenses were 37 basis points of average net assets. This was a decrease of one basis point from the prior year and the lowest expense ratio in Trust history. [graph re: expense ratio] EXPENSE RATIO Percent of average net assets 1996 .46 1997 .45 1998 .39 1999 .39 2000 .38 2001 .37 BUILDING COMMUNITIES With a prudent and forward-looking investment program, the Trust remains at the forefront of the housing finance industry. Its carefully selected investments have enabled the Trust to achieve competitive returns while utilizing union capital to finance housing in communities nationwide, stimulate employment, leverage additional investment capital and advance local economies. Building on the considerable expertise of its professional staff, the Trust issued $237 million in multi-family and generated $54 million in single-family mortgage finance in 2001. With the addition of 1,900 units of multi-family housing in 2001, the Trust total for the financing of new construction of multi-family housing since 1991 exceeds 35,000 units, nearly $2.4 billion of investment. -9- HOUSING INVESTMENT COMMITMENTS 1991-2001 (in Millions of Dollars) Multi-family $2,396 Single-family $726 -------------------------- Total $3,122 CREATING MULTI-FAMILY INITIATIVES Commitments in 2001 represent one of the highest levels for multi-family loan production in the Trust's history; a three-fold increase from a decade ago. In 2001 the Trust laid the groundwork for future growth of its investment activities by implementing new initiatives to expand its investment products. These initiatives are designed to offer alternatives to the FHA multi-family insurance programs, whose availability was increasingly limited during 2001. The FHA insurance programs, in fact, were shut down for six months during 2001 while awaiting appropriations from Congress. The new Trust initiatives announced during 2001 include: - Correspondent Lending: This new national housing production relationship with Lend Lease Mortgage Capital and Fannie Mae is designed to leverage $1 billion of investment capital for housing production over the next five years. The initiative is expected to finance 5,000 to 7,000 housing units nationwide, 30 percent of which will be targeted to low- and moderate-income households. - Private Mortgage Insurance: Through an exciting relationship with the Illinois Housing Development Authority, the Trust will direct $250 million for production of thousands of units of mixed-income rental housing in Illinois over the next five years. This program, featuring private mortgage insurance from the Ambac Assurance Corporation, will serve as a model for Trust involvement with other state housing finance agencies. EXPANDING SINGLE-FAMILY MORTGAGES The Trust's single-family program continued to demonstrate the benefits of pension investment in competitive home mortgage products while also leveraging additional resources to help working families achieve homeownership. Over the past year, marketing efforts of both HIT HOME and the Homeownership Opportunity Initiative (HOI) intensified and production levels accelerated. These programs have been especially successful in helping minority union members and single heads of household achieve the dream of homeownership. - HIT HOME mortgage program, a joint effort with Countrywide Home Loans and Fannie Mae, expanded significantly in 2001, generating almost 300 mortgages. By year-end, HIT HOME was available to union members and municipal employees in 15 cities as well as two states, generating over $28 million in single- family mortgages. - The Homeownership Opportunity Initiative (HOI) provided working families with $26 million in mortgage financing in 2001. In the Pacific Northwest and Hawaii, the HOI program is part of a larger venture with HomeStreet Bank that supports mortgage opportunities for union members and municipal employees. This venture provided an additional $69 million in mortgage finance and savings for 700 union members, averaging $1,000 per borrower. The HOI venture also leveraged participation for the Trust and HomeStreet Bank with LINK, a union sponsored non-profit in Portland, Oregon, which has developed a downtown condominium project being built with 100 percent union labor. The venture arranged for $420,000 in housing finance assistance to seven union members and municipal employees buying units in this development. -10- Homeownership Patricia Graham Oregon AFSCME Local 88 (Multnomah County) Homeownership "Owning a home is really a dream come true for me and my family. I never would have been able to take that first step without the help of the homeownership program available to me through my union membership." -11- REBUILDING LIVES AND LIVELIHOODS IN NEW YORK CITY Also in 2001, the Trust participated in the launch of an ambitious $750 million New York City Community Investment Initiative. In the wake of the tragic events of September 11, this initiative is designed to increase homeownership and housing availability for working men and women and provide a stimulus to the New York economy. The Initiative will: - Target $250 million over the next five years for production or substantial rehabilitation of rental housing for New York's working families. - Offer $250 million in competitive HIT HOME single-family mortgage loans for municipal workers and union families. - Assist in coordinating the diverse financing, subsidy, and social service resources necessary to produce housing for homeless and special needs populations. - Create jobs in construction and related industries. - Address New York City's rebuilding efforts with $250 million for commercial real estate development through the AFL-CIO Building Investment Trust and the newly formed AFL-CIO Urban Development Fund. To facilitate the successful execution of the New York City Community Investment Initiative, the Trust has opened an office in the City. CONTINUING THE MOMENTUM Entering 2002, the Trust's mission remains unchanged. The scope of this mission, however, has widened as the achievements of the past year open the door to opportunities in the coming year and beyond. Last year's achievements include: - Competitive returns. - A well-diversified portfolio of fixed-income securities. - Continuing responsiveness to the needs of investors. - Bold investment initiatives in an increasingly complex housing-finance industry. - Greater service to plan beneficiaries and local communities through expanded housing production and homeownership programs. - Continued reduction in the Trust's expense ratio. These are the building blocks for continuing success. This success is measured first by financial performance and then by the pride Trust participants can take in an investment that promotes union jobs, affordable housing, homeownership and the rebuilding of communities in which they live and work. -12- [photograph of Michael M. Arnold] Michael M. Arnold Senior Executive Vice President AFL-CIO Housing Investment Trust Building Communities "Our continuing success is largely attributable to the relationships the Trust has forged with communities. By working creatively with public, private, and community organizations, the Trust has demonstrated the impact unions and pension funds can have on housing production. In the future, the Trust will build on this experience as we seek new alliances to address housing needs of working families." Building Communities -13- Financial Statements American Federal of Labor and Congress of Industrial Organizations Housing Investment Trust With Report of Independent Public Accountants Thereon Independent Auditor's Report 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 investments, as of December 31, 2001, 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 financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination, or by confirmation with the custodian of the securities owned as of December 31, 2001. 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 financial highlights referred to above present fairly, in all material respects, the financial position of the Trust as of December 31, 2001, 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 financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Vienna, VA January 8, 2002
STATEMENT OF ASSETS AND LIABILITIES December 31, 2001 (Dollars in thousands, unless noted) ----------------------------------------------------------------------------------------- Assets Investments, at fair value (amortized cost $2,665,038) $ 2,732,950 Cash 329 Accrued interest receivable 18,017 Receivables-investments sold 10,049 Accounts receivable 2,482 Prepaid expenses and other assets 2,771 ----------------------------------------------------------------------------------------- Total Assets 2,766,598 ----------------------------------------------------------------------------------------- Liabilities Accounts payable and accrued expenses 4,756 Redemptions payable 6,700 Refundable deposits 1,584 Income distribution payable, net dividends reinvested of $20,000 2,076 ----------------------------------------------------------------------------------------- Total Liabilities 15,116 ----------------------------------------------------------------------------------------- Net assets applicable to participants' equity certificates of participation authorized unlimited; outstanding 2,504,984 units (note 5) $ 2,751,482 ----------------------------------------------------------------------------------------- Net asset value per unit of participation (in dollars) $ 1,098.40 ----------------------------------------------------------------------------------------- See accompanying notes to financial statements.
-15- Schedule of Portfolio Investments December 31, 2001 (Dollars in thousands) ------------------------------------------------------------------------------
FHA SECURITIES (15.3% OF TOTAL PORTFOLIO) Interest Maturity Face Amortized Value Rate Date Amount Cost ------------------------------------------------------------------------------ Single-family: 7.75% Jul-2021 Aug-2021 $437 $437 $437 8.00% Jul-2021 425 425 425 10.31% Feb-2016 70 70 70 ------------------------------------------------------------------------------ 932 932 932 ------------------------------------------------------------------------------ Multi-family: 6.50% May-2004 7,440 7,440 7,447 6.66% Apr-2040 5,950 5,960 5,862 6.75% Nov-2037 Jul 2040 10,243 9,951 10,208 6.88% Aug-2041 2,766 2,659 2,763 7.00% Jun-2039 6,227 6,304 6,280 7.13% Mar-2040 8,133 8,150 8,217 7.17% Feb-2040 4,881 4,886 4,967 7.20% Aug-2039 Sep-2039 11,540 11,554 11,783 7.50% Nov-2022 Nov-2037 17,098 17,163 17,514 7.55% Aug-2012 Nov-2037 9,861 9,871 10,209 7.63% Dec-2027 Jun-2037 76,665 76,532 79,779 7.70% Oct-2039 12,428 12,344 13,026 7.75% Jan-2038 Oct-2038 11,548 11,568 12,105 7.80% Dec-2038 21,541 21,549 22,659 7.85% Sep-2037 2,581 2,581 2,711 7.88% Nov-2036 Jul-2038 9,343 9,354 9,833 8.00% Oct-2031 Jun-2038 12,214 12,133 12,774 8.13% Apr-2028 Aug-2037 18,816 18,827 19,863 8.18% Nov-2036 36,333 36,068 38,173 8.25% Feb-2026 Nov-2036 31,033 31,053 32,370 8.38% Dec-2027 15,762 15,766 16,136 8.40% Apr-2012 Nov-2041 9,819 9,779 9,998 8.50% Oct-2027 4,170 4,152 4,310 8.63% Aug-2029 4,144 4,144 4,102 8.75% Jul-2036 Aug-2036 12,146 12,082 12,979 8.80% Oct-2032 5,546 5,546 5,661 8.88% May-2036 2,466 2,409 2,582 9.25% Jun-2036 19,966 19,970 20,715 9.38% Feb-2034 1,845 1,864 1,887 9.50% Jul-2027 370 375 412 9.75% Apr-2031 3,541 3,528 3,563 10.00% Mar-2031 5,757 5,757 5,795 10.45% Jan-2030 1,200 1,200 1,210 ------------------------------------------------------------------------------ 403,373 402,519 417,893 ------------------------------------------------------------------------------ Total FHA Securities 404,305 403,451 418,825 ------------------------------------------------------------------------------ See accompanying notes to financial statements.
-16- Schedule of Portfolio Investments December 31, 2001 (Dollars in thousands) ------------------------------------------------------------------------------
FHA CONSTRUCTION SECURITIES (2.1% OF TOTAL PORTFOLIO) Interest Rates* Maturity Commitment Face Amortized Value Permanent Construction Date* Amount Amount Cost ------------------------------------------------------------------------------------------------- Multi-family: 6.70% 6.70% Jun-2042 $6,150 $6,150 $6,154 $5,951 6.88% 7.13% Apr-2030 29,545 28,097 28,017 27,878 7.05% 7.05% Jan-2043 5,418 5,418 5,418 5,279 7.33% 7.33% Dec-2042 14,370 6,805 6,808 6,823 7.50% 7.50% Mar-2032 1,700 1,700 1,705 1,748 7.50% 7.50% May-2042 6,693 3,853 3,879 4,058 7.93% 7.93% Dec-2041 2,952 2,952 2,952 3,155 8.27% 8.27% Apr-2042 2,575 2,575 2,577 2,770 ------------------------------------------------------------------------------------------------- Total FHA Construction Securities 69,403 57,550 57,510 57,662 -------------------------------------------------------------------------------------------------
* Construction interest rates are the rates charged to the borrower during the construction phase of the project. The permanent interest rates are effective upon commencement of operations of a project, subject to the achievement of certain criteria. ** Permanent mortgage maturity date. See accompanying notes to financial statements. -17- Schedule of Portfolio Investments December 31, 2001 (Dollars in thousands)
------------------------------------------------------------------------------ GINNIE MAE SECURITIES (21.1% OF TOTAL PORTFOLIO) Interest Maturity Face Amortized Value Rate Date Amount Cost ------------------------------------------------------------------------------ Single-family 6.50% Jul-2028 Dec-2028 $1,743 $1,743 $1,749 7.00% Apr-2026 Jan-2030 86,756 87,826 88,623 7.50% Apr-2013 Feb-2031 101,230 103,939 105,456 8.00% Nov-2009 Dec-2030 57,882 59,329 60,709 8.50% Nov-2009 Oct-2030 35,479 36,506 37,843 9.00% May-2016 Jun-2025 5,301 5,464 5,723 9.50% May-2019 Sep-2030 2,109 2,183 2,301 10.00% 13.50% Aug-2014 Jun-2019 64 64 74 ------------------------------------------------------------------------------ 290,564 297,054 302,478 ------------------------------------------------------------------------------ Multi-family 5.20% Oct-2014 2,012 2,012 2,024 6.09% Jun-2021 5,000 5,000 5,044 6.11% Nov-2021 970 970 976 6.34% Aug-2023 3,464 3,464 3,462 6.38% Jan-2025 23,506 23,506 23,480 6.50% Dec-2039 3,562 3,562 3,586 6.63% Oct-2033 6,626 6,394 6,731 6.67% Sep-2040 8,862 8,868 8,991 6.69% Jun-2040 5,591 5,583 5,685 6.70% Jul-2040 23,265 23,271 23,643 6.75% Jan-2039 Feb-2041 35,633 35,149 36,343 6.78% May-2041 28,028 28,033 28,617 7.00% Apr-2040 12,120 11,891 12,555 7.23% Jun-2041 8,159 7,869 8,610 7.50% Apr-2038 Apr-2044 24,556 24,231 26,288 7.80% Jul-2039 19,035 19,046 20,498 7.88% Nov-2036 892 892 953 8.15% Nov-2025 3,710 3,675 4,017 8.50% Mar-2027 Jul-2029 33,435 33,444 36,148 8.75% Dec-2026 4,242 4,242 4,279 9.00% Jun-2030 7,810 7,500 7,860 12.55% Jun-2025 5,994 5,947 6,120 ------------------------------------------------------------------------------ 266,472 264,549 275,910 ------------------------------------------------------------------------------ Total Ginnie Mae Securities 557,036 561,603 578,388 ------------------------------------------------------------------------------ See accompanying notes to financial statements.
-18- Schedule of Portfolio Investments December 31, 2001 (Dollars in thousands)
------------------------------------------------------------------------------ Ginnie Mae Construction Securities (9.7% of total portfolio) Interest Rates* Maturity Commitment Face Amortized Permanent Construction Date** Amount Amount Cost Value ------------------------------------------------------------------------------------------------- Multi-family 6.00% 6.00% Mar-2043 $3,950 $ $(59) $(304) 6.50% 6.50% Apr-2043 21,099 1,692 1,683 811 6.54% 6.54% Mar-2043 13,620 (520) 6.60% 6.60% Mar-2043 17,793 (571) 6.62% 6.62% Jan-2040 10,010 9,822 9,825 9,822 6.70% 6.70% Apr-2044 55,528 (139) (2,419) 6.98% 6.98% Jan-2041 47,090 44,353 44,357 45,499 7.00% 7.00% Jun-2043 66,552 10,496 10,501 9,427 7.24% 7.24% Dec-2042 51,242 19,960 19,963 21,033 7.25% 7.25% Jun-2042 4,211 1,710 1,730 1,867 7.33% 7.76% Jan-2030 27,555 24,713 24,730 26,027 7.33% 7.33% Jan-2043 11,946 (113) 363 7.45% 7.45% Jun-2042 9,700 6,705 6,708 7,247 7.50% 7.63% Apr-2041 19,440 18,355 18,364 19,594 7.50% 7.63% Jan-2042 8,126 6,969 6,975 7,441 7.50% 7.88% Jul-2042 25,150 13,577 13,584 14,836 7.57% 7.57% Nov-2041 2,565 1,833 1,835 1,995 7.70% 7.70% Mar-2042 50,584 45,835 45,005 49,375 7.75% 7.25% Feb-2031 51,076 28,953 28,698 32,460 7.75% 7.75% Jul-2042 30,808 21,553 20,945 23,811 ------------------------------------------------------------------------------------------------- Total Ginnie Mae 528,045 256,526 254,592 267,794 Construction Securities -------------------------------------------------------------------------------------------------
* Construction interest rates are the rates charged to the borrower during the construction phase of the project. The permanent interest rates are effective upon commencement of operations of a project, subject to the achievement of certain criteria. ** Permanent mortgage maturity date. See accompanying notes to financial statements. -19- Schedule of Portfolio Investments December 31, 2001 (Dollars in thousands)
------------------------------------------------------------------------------ FANNIE MAE SECURITIES (30.8% OF TOTAL PORTFOLIO) (including construction securities) Interest Maturity Commitment Face Amortized Value Rate Date Amount Amount Cost ------------------------------------------------------------------------------ Single-family 5.50% Jul-2016 Sep-2029 $9,827 $9,649 $9,654 6.00% Jan-2006 Dec-2031 82,941 82,887 82,528 6.50% Dec-2005 Dec-2031 130,220 131,575 131,167 7.00% Jan-2004 Sep-2031 101,833 103,737 104,324 7.50% Jul-2004 Sep-2031 56,818 57,355 58,759 8.00% Jan-2007 May-2031 22,630 23,041 23,709 8.50% Nov-2009 Apr-2031 15,035 15,335 16,031 9.00% Jul-2009 May-2025 4,326 4,425 4,611 9.50% Aug-2004 688 688 717 ------------------------------------------------------------------------------ 424,318 428,692 431,500 ------------------------------------------------------------------------------ Multi-family 4.88% Sep-2011 29,706 29,991 28,955 5.43% Aug-2010 16,500 (124) (872) 6.02% Nov-2010 42,735 42,768 43,151 6.06% Sep-2011 1,564 1,547 1,567 6.12% May-2014 4,178 4,115 4,306 6.25% Dec-2013 2,487 2,570 2,514 6.30% Dec-2015 1,850 1,832 1,914 6.38% Jan-2009 8,479 8,479 8,777 6.40% Mar-2012 60,000 4 1,423 6.50% Jun-2016 3,680 3,686 3,737 6.52% Jul-2008 3,647 3,641 3,974 6.53% May-2030 11,920 11,974 12,052 6.63% Apr-2019 2,535 2,535 2,602 6.65% Aug-2007 750 762 786 6.75% Mar-2010 22,000 1,210 6.80% Jul-2016 1,191 1,191 1,233 6.90% Jun-2007 20,469 21,257 21,606 6.96% Aug-2007 9,401 9,775 9,777 6.97% Jun-2007 16,358 16,364 16,677 7.01% Apr-2031 3,744 3,798 3,845 7.04% Jul-2014 7,418 176 7.07% Feb-2031 18,945 19,497 19,548 7.14% Sep-2002 2,918 2,914 2,934 7.15% Oct-2009 516 540 533 7.16% Jan-2022 8,605 8,946 9,169 7.18% Aug-2016 721 721 763 7.20% Apr-2010 Aug-2029 10,611 10,240 11,016 7.25% Nov-2011 Jul-2012 9,752 9,752 10,072 7.27% Dec-2009 19,723 19,882 20,622 7.29% Jul-2003 1,694 1,711 1,737 7.30% Aug-2006 May-2010 57,166 59,478 61,518 7.37% Jan-2013 1,784 1,825 1,897 7.38% Jun-2014 Mar-2015 3,200 2,619 2,640 2,793 7.48% Oct-2006 27,872 27,958 29,675 7.50% Dec-2014 2,495 2,504 2,668 7.71% Feb-2010 9,798 10,062 10,410 7.75% Dec-2012 Dec-2024 5,120 5,121 5,518 7.88% Mar-2007 2,770 2,803 2,840 8.00% Nov-2019 May-2020 6,741 6,716 7,037 8.13% Sep-2012 Aug-2020 10,982 10,947 11,705 8.38% Jan-2022 1,073 1,079 1,156 8.40% Jul-2023 576 586 643 8.50% Sep-2006 Sep-2026 2,288 2,288 2,452 8.63% Sep-2028 7,198 7,201 8,122 8.70% Feb-2005 4,511 4,625 4,711 9.13% Sep-2015 3,768 3,748 4,073 9.25% Jun-2018 5,015 4,999 5,513 ------------------------------------------------------------------------------ 109,118 389,955 394,948 408,535 ------------------------------------------------------------------------------ Total Fannie Mae Securities 109,118 814,273 823,640 840,035 ------------------------------------------------------------------------------ See accompanying notes to financial statements.
-20- Schedule of Portfolio Investments December 31, 2001 (Dollars in thousands)
------------------------------------------------------------------------------ FREDDIE MAC SECURITIES (9.9% OF TOTAL PORTFOLIO) Interest Maturity Face Amortized Rate Date Amount Cost Value ------------------------------------------------------------------------------ Single-family 6.00% Apr-2005 Apr-2029 $58,175 $58,760 $58,408 6.50% Dec-2006 Aug-2031 46,955 46,765 47,714 7.00% Jun-2004 Mar-2030 71,132 72,061 73,586 7.50% Nov-2003 Apr-2031 38,901 39,047 40,545 8.00% May-2008 Aug-2030 25,594 25,789 26,825 8.25% Nov-2022 139 139 148 8.50% Jun-2010 Jan-2025 11,683 11,898 12,462 9.00% Sep-2010 Mar-2025 2,202 2,268 2,348 ------------------------------------------------------------------------------ 254,781 256,727 262,036 ------------------------------------------------------------------------------ Multi-family 8.00% Feb-2009 6,357 6,365 6,376 ------------------------------------------------------------------------------ 6,357 6,365 6,376 ------------------------------------------------------------------------------ Total Freddie Mac Securities 261,138 263,092 268,412 ------------------------------------------------------------------------------
------------------------------------------------------------------------------ FEDERAL AGENCY NOTES (5.1% OF TOTAL PORTFOLIO) Interest Maturity Face Amortized Rate Date Amount Cost Value ------------------------------------------------------------------------------ 3.50% Sep-2004 $20,000 $20,113 $19,816 5.13% Oct-2008 25,000 25,464 24,684 5.38% May-2006 14,000 13,925 14,278 6.00% May-2008 15,000 15,644 15,585 6.01% Dec-2005 6,000 6,116 6,293 6.50% Nov-2005 10,000 10,381 10,658 6.88% Jan-2005 45,000 48,591 48,474 ------------------------------------------------------------------------------ Total Federal Agency Notes 135,000 140,234 139,788 ------------------------------------------------------------------------------
------------------------------------------------------------------------------ UNITED STATES TREASURY NOTES (2.4% OF TOTAL PORTFOLIO) Interest Maturity Face Amortized Rate Date Amount Cost Value ------------------------------------------------------------------------------ 4.75% Nov-2008 $45,000 $46,037 $44,782 6.63% May-2007 10,000 11,013 10,984 7.50% Feb-2005 7,500 8,312 8,296 ------------------------------------------------------------------------------ Total United States Treasury Notes 62,500 65,362 64,062 ------------------------------------------------------------------------------ See accompanying notes to financial statements.
-21- Schedule of Portfolio Investments December 31, 2001 (Dollars in thousands)
------------------------------------------------------------------------------ STATE HOUSING FINANCE BONDS (1.9% OF TOTAL PORTFOLIO) Interest Maturity Commitment Face Amortized Rates Date Amount Amount Cost Value ------------------------------------------------------------------------------------------------- Multi-family 7.63% Oct-2009 $813 $753 $753 $766 7.70% Jun-2006 Jun-2029 41,094 39,755 39,760 41,497 8.00% Jan-2026 4,715 4,706 4,970 8.13% Aug-2005 1,016 554 546 579 8.38% Feb-2007 718 718 749 752 8.63% Jan-2013 Jun-2025 500 1,826 1,830 1,926 9.00% Jan-2025 1,045 938 938 1,005 9.50% Aug-2012 Apr-2024 2,074 2,080 2,297 ------------------------------------------------------------------------------------------------- Total State Housing Finance Bonds 45,186 51,333 51,362 53,792 ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- Total Long-term Investments $2,599,661 $2,620,846 $2,688,758 -------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS (1.7% OF TOTAL PORTFOLIO) Maturity Face Amortized Description Date Rate Amount Cost Value ------------------------------------------------------------------------------------------------- Repurchase Agreements Amalgamated Bank* Jan-2002 2.35% $2,000 $2,000 $2,000 ------------------------------------------------------------------------------------------------- 2,000 2,000 2,000 ------------------------------------------------------------------------------------------------- Commercial Paper Phillip Morris Company Jan-2002 1.68% 9,845 9,845 9,845 Ford Motor Credit Corporation Jan-2002 2.53% 15,000 15,001 15,001 Prefco Receivables Jan-2002 1.80% 6,000 5,995 5,995 Sysco Corporation Jan-2002 1.80% 6,000 6,000 6,000 ------------------------------------------------------------------------------------------------- 36,845 36,841 36,841 ------------------------------------------------------------------------------------------------- Agency Federal Home Loan Mortgage Company Mar-2002 1.80% 5,070 5,051 5,051 ------------------------------------------------------------------------------------------------- 5,070 5,051 5,051 ------------------------------------------------------------------------------------------------- Certificates of Deposit Shore Bank Chicago Jan-2002 1.68% 100 100 100 Shore Bank Cleveland Jan-2002 1.80% 100 100 100 Shore Bank Pacific May-2002 2.60% 100 100 100 ------------------------------------------------------------------------------------------------- 300 300 300 ------------------------------------------------------------------------------------------------- Total Short-Term Investments 44,215 44,192 44,192 ------------------------------------------------------------------------------------------------- Total Investments $2,643,876 $2,665,038 $2,732,950 -------------------------------------------------------------------------------------------------
* This instrument was purchased in October 2001. The Trust will receive $2,011,589 upon maturity. The underlying collateral of the repurchase agreement is a FHLMC security. See accompanying notes to financial statements. -22- Statement of Operations For the Year Ended December 31, 2001 (Dollars in thousands) ------------------------------------------------------------------------------ Investment Income FHA securities $36,942 FHA construction securities 5,059 Ginnie Mae securities 43,907 Ginnie Mae construction securities 14,573 Fannie Mae securities (including construction securities) 49,541 Freddie Mac securities 21,512 Federal Agency Notes 2,497 United States Treasury Notes 758 State Housing Finance Bonds 4,153 Short-term investments 2,055 Net premium amortization (4,680) Other Income 291 ------------------------------------------------------------------------------ Total Income 176,608 ------------------------------------------------------------------------------ Expenses Officer salaries and fringe benefits 1,393 Other salaries and fringe benefits 4,767 Legal fees 268 Consulting fees 135 Auditing and tax accounting fees 127 Insurance 108 Marketing and sales promotion 549 Investment management 279 Trustee expenses 34 General expenses 1,980 ------------------------------------------------------------------------------ Total Expenses 9,640 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Investment income net 166,968 ------------------------------------------------------------------------------ Realized gains on investments 12,384 Net change in unrealized appreciation on investments 22,970 ------------------------------------------------------------------------------ Realized and unrealized net gains on investments 35,354 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Net increase in net assets resulting from operations $202,322 ------------------------------------------------------------------------------ See accompanying notes to financial statements. -23- STATEMENT OF CHANGES IN NET ASSETS For the Years Ended December 31, 2001 and 2000 (Dollars in thousands) 2001 2000 ------------------------------------------------------------------------------ Increase In Net Assets Investment income net $ 166,968 $ 157,380 From Operations Net realized and unrealized gains on investments 35,354 110,240 --------------------------------------------------- Net increase in net assets resulting from operations 202,322 267,620 --------------------------------------------------- Distributions paid to partici- pants or reinvested from: Investment income net (167,136) (157,423) Net realized gains on investments (7,875) --------------------------------------------------- Net decrease in net assets from distributions (175,011) (157,423) ------------------------------------------------------------------------------ Increase In Net Proceeds from the sale of Assets From Unit units of participation 170,286 143,454 Transactions Dividend reinvestment of units of participation 157,440 140,885 Payments for redemption of units of participation (81,037) (66,381) --------------------------------------------------- Net increase from unit transactions 246,689 217,958 --------------------------------------------------- Total increase in net assets 274,000 328,155 --------------------------------------------------- Net assets at beginning of period 2,477,482 2,149,327 --------------------------------------------------- Net assets at end of period $2,751,482 $2,477,482 ------------------------------------------------------------------------------ Unit Information Units Sold 153,290 136,509 Distributions reinvested 142,628 134,243 Units redeemed (73,445) (63,439) --------------------------------------------------- Increase in units outstanding 222,473 207,313 ------------------------------------------------------------------------------ See accompanying notes to financial statements. -24- NOTES TO FINANCIAL STATEMENTS NOTE 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 accounting principles generally accepted in the United States. Investment Valuation Investments are presented at fair market value. Fair market value determinations are summarized by specific category of investment as follows: Long-term investments, consisting of mortgage-backed securities, agency securities, and insured construction and permanent mortgage securities are valued using published prices, dealer bids or discounted cash flow models using market-based discount and prepayment rates, developed for each investment category. The market-based discount rate is composed of a risk-free yield (i.e., a U.S. Treasury Note) 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 investments for which the Trust finances the construction and permanent securities, value is determined based upon the total amount of the commitment for the term of the construction securities plus the permanent securities. For insured construction-only securities, the outstanding principal balance of the securities is used to approximate value, assuming no decline in credit quality. Other long-term investments such as agency securities and U.S. Treasury debt obligations are valued based on readily available market quotes. 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. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 period. Actual results could differ from those estimates. -25- 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. At December 31, 2000, the Trust had a capital loss carryforward of approximately $4.5 million as a result of sales of investments during the year. This capital loss carryforward was used to offset $12.4 million in capital gains in 2001. Therefore, the net distribution of capital gains to participants for 2001 was $7.9 million. 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 that allows current participants to automatically reinvest their income distribution into Trust units of participation. Total reinvestment was 90 percent of distributable income for the year ended December 31, 2001. 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 securities 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 securities or mortgage-backed security using the effective interest method. Realized gains and losses from investment transactions are recorded on the trade date using an identified cost basis. Receivables-Investments Sold Receivables-Investments Sold represents an investment that was sold prior to December 31, 2001, which settled subsequent to December 31, 2001. NOTE 2. TRANSACTIONS WITH AFFILIATES During the year ended December 31, 2001, the Trust provided certain services to the AFL-CIO Investment Trust Corporation (formerly known as the Building Investment Trust Corporation), a D.C. non-profit corporation on a cost- reimbursement basis. The total cost for these services and related expenses for the year ended December 31, 2001, amounted to approximately $1.8 million. During the year ended December 31, 2001, the Trust was reimbursed for approximately $1.2 million of current and prior year costs. At December 31, 2001, approximately $1.5 million is included within the accounts receivable in the accompanying financial statements for amounts outstanding. -26- NOTE 3. COMMITMENTS Certain assets of the Trust are invested in short-term investments until they are required to fund purchase commitments for insured construction securities, mortgage-backed securities or permanent mortgages. At December 31, 2001, the Trust had outstanding unfunded purchase commitments of approximately $417.5 million, of which approximately $120.7 million represented insured construction securities and approximately $296.8 million represented 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, 2001, this segregated account held securities with a value of approximately $1.9 billion. The commitment amounts disclosed on the Schedule of Portfolio Investments represent the original commitment amount, which includes both funded and unfunded commitments. NOTE 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, 2001, follows:
INVESTMENT TRANSACTIONS (Dollars in Thousands) State FHA Ginnie Ginnie Mae Fannie Freddie Federal US Housing FHA Construction Mae Construction Mae Mac Agency Treasury Finance Securities Securities Securities Securities Securities* Securities Notes Bonds Bonds ---------------------------------------------------------------------------------------------------------------- Balance, January 1, 2001 $500,362 $122,721 $507,681 $168,219 $678,693 $304,939 $9,070 $ $52,145 Purchases and insured const- ruction securities advances, net of discounts 32,636 116,209 168,102 508,168 159,943 190,725 117,500 Change in discounts and (premiums) 49 881 (1,536) 1,026 871 3,661 15,234 2,862 1 Transfers (15,484) (92,648) 164,870 (56,738) Principal reductions/ sales (81,476) (6,080) (225,621) (26,017) (364,092) (205,451) (74,795)(55,000) (784) ---------------------------------------------------------------------------------------------------------------- Balance, December 31, 2001 $403,451 $57,510 $561,603 $254,592 $823,640 $263,092 $140,234 $65,362 $51,362 ---------------------------------------------------------------------------------------------------------------- *including construction securities
-27- NOTE 5. PARTICIPANTS' EQUITY (DOLLARS IN THOUSANDS) Participants' equity consisted of the following at December 31, 2001: Amount invested and reinvested by current participants $ 2,683,340 Accumulated unrealized appreciation in the value of investments 67,912 Accumulated undistributed investment income net 230 ------------------------------------------------------------------------------ $ 2,751,482 ------------------------------------------------------------------------------ NOTE 6. RETIREMENT AND DEFERRED COMPENSATION PLANS The Trust participates in the AFL-CIO Staff Retirement Plan, which is a multiple employer-defined benefit pension plan, covering substantially all employees. This plan was funded by employer contributions, at rates approximating 11.1 percent of employees' salaries for the year ended December 31, 2001. The total Trust pension expense for the year ended December 31, 2001 was approximately $523,000. The Trust also participates in a deferred compensation plan, referred to as a 401(k) plan, covering substantially all employees. This plan permits an employee to defer the lesser of 100 percent of their total compensation or the applicable IRS limit. The Trust matches dollar for dollar the first $1,550 of employee contributions. The Trust's 401(k) contribution for the year ended December 31, 2001 was approximately $89,000. NOTE 7. BANK SECURITIES The Trust has a secured $12.5 million bank line of credit. One mortgage-backed security with a value of approximately $20.7 million (as of December 31, 2001) has been pledged as collateral for the line of credit. In addition, the Trust has a $12.5 million uncommitted and unsecured line of credit facility. Borrowings under these agreements bear interest at LIBOR plus one-half percent. Both lines of credit mature on May 31, 2002. As of December 31, 2001, the Trust had no outstanding balance on either of these facilities. No compensating balances are required. -28- FINANCIAL HIGHLIGHTS Selected Per Share Data and Ratios for the Years Ended December 31, 2001, 2000, 1999, 1998 and 1997
2001 2000 1999 1998 1997 ------------------------------------------------------------------------------------------------------------- Per Share Data Net Asset Value, Beginning of Period $ 1,085.42 $ 1,035.72 $ 1,114.08 $ 1,104.30 $ 1,072.98 Net Investment Income 70.86 72.83 71.65 77.48 79.06 Net realized and unrealized gains (losses) on investments 16.24 49.70 (77.96) 11.15 31.84 Distribution from investment income net (70.93) (72.83) (71.74) (77.55) (79.10) Distribution from realized gain on investments (3.19) (0.31) (1.30) (0.48) -------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period 1,098.40 1,085.42 1,035.72 1,114.08 1,104.30 -------------------------------------------------------------------------------------------------------------- Ratios Ratio of expenses to average net assets 0.37% 0.38% 0.39% 0.39% 0.43% Ratio of net investment income to average net assets 6.4% 6.9% 6.7% 6.8% 7.2% Portfolio turnover rate 40.9% 25.9% 31.7% 39.5% 15.3% Number of outstanding units at end of period 2,504,984 2,282,511 2,075,197 1,816,185 1,513,856 Net Assets, End of Period $2,751,482 $2,477,482 $2,149,327 $2,023,371 $1,671,745 Total Return 8.21% 12.31% (0.57%) 8.28% 10.74% See accompanying notes to financial statements.
-29- TRUSTEES Overall responsibility for the management of the AFL-CIO Housing Investment Trust, the establishment of policies and the overseeing of activities is vested in its Board of Trustees. The list below provides the following information for each of the trustees: name, age, address, term of office, length of time served, principal occupations during the past 5 years and other directorships held.* The Trust's Statement of Additional information includes additional information about the trustees and is available, without charge, upon request, by placing a collect call directed to Stephanie Turman at (202) 331-8055. Richard Ravitch**, age 68; 610 5th Avenue, Ste. 420, New York, NY 10020; Chairman of the Board; term commenced 1991, expires 2002; Principal, Ravitch, Rice and Co. LLC; Director, Parsons Brinckerhoff Inc; formerly President and Chief Executive Officer, Player Relations Committee of Major League Baseball; formerly, Chairman, Aquarius Management Corporation (limited profit housing project management). John J. Sweeney**, age 67; 815 16th Street, Washington, DC 20006; Union Trustee; term commenced 1981, expires 2004; President, AFL-CIO. Richard L. Trumka, age 52; 815 16th Street, Washington, DC 20006; Union Trustee; term commenced 1995, expires 2002; Secretary-Treasurer, AFL-CIO. Linda Chavez-Thompson, age 57; 815 16th Street, Washington, DC 20006; Union Trustee; term commenced 1996, expires 2002; Executive Vice President, AFL-CIO. Alfred J. Fleischer, age 86; 5725 Manchester, St. Louis, MO 63110; Management Trustee; term commenced 1991, expires 2003; Chairman, Fleischer-Seeger Construction Corporation; formerly Director, National Corporation for Housing Partnerships of Washington, DC. John J. Flynn, age 67; 815 15th Street, NW, Washington, DC 20006; Union Trustee; term commenced 2000, expires 2003; President, International Union of Bricklayers and Allied Craftworkers (BAC); formerly Secretary-Treasurer, BAC. Frank Hanley, age 71; 1125 17th Street, NW, Washington, DC 20036; Union Trustee; term commenced 1990,expires 2002; General President, International Union of Operating Engineers. Frank Hurt, age 63; 10401 Connecticut Avenue, Kensington, MD 20895; Union Trustee; term commenced 1993, expires 2004; President, Bakery, Confectionery & Tobacco Workers and Grain Millers International Union. Walter M. Kardy, age 73; 4932 Sentinel Drive, Apt. 106, Bethesda, MD, 20816; Management Trustee; term commenced 1996, expires 2002; President of Specialty Contractors Management, Inc. George Latimer, age 66; 1600 Grand Avenue, St. Paul, MN 55105; Management Trustee; term commenced 1996, expires 2002; Chief Executive Officer of the National Equity Fund (a tax credit investment company); Distinguished Visiting Professor of Urban Land Studies at Macalester College; Director, Visionics Corporation; formerly Director, Special Actions Office, Department of Housing and Urban Development. Martin J. Maddaloni, age 62; 901 Massachusetts Avenue, NW, Washington, DC 20001; Union Trustee; term commenced 1998, expires 2003; President, United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada. Michael E. Monroe, age 51; 1750 New York Avenue, NW, Washington, DC 20006; Union Trustee; term commenced 1998, expires 2004; General President, International Union of Painters and Allied Trades of the United States and Canada (IUPAT); formerly General Vice President, IUPAT. Jeremiah O'Connor, age 67; 1125 15th Street, NW, Washington, DC 20005; Union Trustee; term commenced 2001, expires 2003; Secretary-Treasurer, International Brotherhood of Electrical Workers (IBEW); formerly International Vice President, 6th District, IBEW. Terence M. O'Sullivan, age 46; 905 16th Street, NW, Washington, DC 20006; Union Trustee; term commenced 2000, expires 2004; General President, Laborers' International Union of North America (LIUNA); formerly Vice President, Mid- Atlantic Regional Manager and Assistant to the General President, LIUNA. Marlyn J. Spear, age 48; 500 Elm Grove Road, Elm Grove, WI 53122; Management Trustee; term commenced 1995, expires 2003;Chief Investment Officer, Milwaukee and Vicinity Building Trades United Pension Trust Fund; formerly Investment Coordinator, Milwaukee and Vicinity Building Trades. Tony Stanley**, age 68; 25250 Rockside Road, Cleveland, OH 44146; Management Trustee, term commenced 1983, expires 2004; Executive Vice President and Director, TransCon Builders, Inc. Andrew Stern, age 51; 1313 L Street, NW, Washington, DC 20005; Union Trustee; term commenced 1998, expires 2002; President, Service Employees International Union, AFL-CIO. Edward C. Sullivan, age 58; 815 16th Street, NW, Suite 600, Washington, DC 20006; Union Trustee; term commenced 2000, expires 2003; President, Building and Construction Trades Department, AFL-CIO; formerly, General President, International Union of Elevator Constructors. Patricia Wiegert, age 55; 1355 Willow Way, Suite 221, Concord, CA 94520; Management Trustee; term commenced 1995, expires 2004; Retirement Administrator, Contra Costa County Employee's Retirement Association. * Only directorships in a corporation or trust having securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the requirements of Section 15(d) of such Act, or a company registered as an investment company under the Investment Company Act of 1940, as amended, are listed. ** Executive Committee member -30- EXECUTIVE OFFICERS All officers of the Trust are located at 1717 K Street, NW, Suite 707, Washington, DC 20036 and were elected to a one-year term that began on January 1, 2002 and expires on December 31, 2002, or until their respective successors are appointed and qualify. Unless otherwise indicated below, all officers of the Trust are serving their first term in the indicated office.* Stephen F. Coyle, age 56; Chief Executive Officer since 1992; AFL-CIO Housing Investment Trust. Michael M. Arnold, age 62; Senior Executive Vice President Marketing, Investor and Labor Relations, AFL-CIO Housing Investment Trust; formerly Executive Vice President-Marketing, Investor and Labor Relations and Director of Investor Relations, AFL-CIO Housing Investment Trust. Helen R. Kanovsky, age 50; Chief Operating Officer, AFL-CIO Housing Investment Trust; Chief Operating Officer, AFL-CIO Investment Trust Corporation; formerly Executive Vice President-Finance and Administration, AFL-CIO Housing Investment Trust; Chief of Staff for U.S. Senator John F. Kerry; General Counsel, AFL-CIO Housing Investment Trust. Patton H. Roark, Jr.,CFA, age 35; Executive Vice President Investment/Senior Portfolio Manager since 2001; Portfolio Manager since 1993, AFL-CIO Housing Investment Trust. Erica Khatchadourian, age 34; Executive Vice President Finance and Administration, AFL-CIO Housing Investment Trust; formerly Controller, Chief of Staff and Director of Operations, AFL-CIO Housing Investment Trust. Walter Kamiat, age 47; General Counsel, AFL-CIO Housing Investment Trust; formerly General Counsel, AFL-CIO Investment Trust Corporation; Senior Counsel and Special Assistant to the CEO, AFL-CIO Housing Investment Trust. Eileen Fitzgerald, age 39; Chief Investment Officer Single Family Finance since 2001, AFL-CIO Housing Investment Trust; formerly Acting Administrator and Associate Administrator of the Rural Housing Service at the U.S. Department of Agriculture. Stephanie Wiggins, age 36; Chief Investment Officer Multi-family Finance, AFL-CIO Housing Investment Trust; formerly Director, Prudential Mortgage Capital Company; Vice President/Multifamily Transaction Manager, WMF Capital Corporation. * No officer of the Trust serves as a trustee or director in any corporation or trust having securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the requirements of Section 15(d) of such Act, or any company registered as an investment company under the Investment Company Act of 1940, as amended. -31- Counsel of Record Swidler Berlin Shereff Friedman LLP, Washington, DC Independent 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 National Office 1717 K Street, NW, Suite 707, Washington, DC 20036; (202) 331-8055 New York Office 31 W. 15th Street, New York, NY 10011; (212) 414-8500 Western Regional Office 235 Montgomery Street, Suite 935, San Francisco, CA 94104; (415) 433-3044 AFL-CIO Housing Investment Trust 1717 K Street, N.W. Suite 707 Washington, D.C. 20036