N-CSR 1 filingcopy603n-csr.txt N-CSR PERIOD ENDED JUNE 30, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number: 811-3493 American Federation of Labor - Congress of Industrial Organizations Housing Investment Trust (Exact name of registrant as specified in charter) 1717 K Street, N.W., Suite 707 Washington, D.C. 20036 (Address of principal executive offices) (Zip code) Kenneth G. Lore Swidler Berlin Shereff Friedman, LLP 3000 K Street, N.W. Suite 300, Washington, D.C. 20007 (Name and address of agent for service) (202) 331-8055 (Registrant's telephone number, including area code) Date of fiscal year end: December 30, 2002 Date of reporting period: June 30, 2003 ITEM 1. REPORTS TO STOCKHOLDERS A copy of the 2003 Semi-Annual Report (the "Report") of the AFL-CIO Housing Investment Trust (the "Trust") transmitted to Trust participants pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (17 CFR 270.30e-1) (the "Act"), is included herewith. ITEM 2. CODE OF ETHICS Not Applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT Not Applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Not Applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not Applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not Applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES (a) The Trust's Chief Executive Officer (the principal executive officer) and Executive Vice President-Finance and Administration (the principal financial officer) have concluded that the Trust's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c)), are effective to ensure that material information relating to the Trust is made known to them by appropriate persons, based on their evaluation of such controls and procedures as of a date within 90 days of the filing date of the Report. (b) There were no significant changes in the Trust's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those matters described in subparagraph (a) above, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS (a)(1) Not Applicable. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)). Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940. Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the AFL-CIO Housing Investment Trust has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 8th day of September, 2003. AFL-CIO HOUSING INVESTMENT TRUST By: /s/ Stephen Coyle --------------------------------- Name: Stephen Coyle Title: Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the AFL-CIO Housing Investment Trust in the capacities indicated, this 8th day of September, 2003. /s/ Stephen Coyle --------------------------------------- Stephen Coyle Chief Executive Officer (Principal Executive Officer) /s/ Erica Khatchadourian --------------------------------------- Erica Khatchadourian Executive Vice President-Finance and Administration (Principal Financial Officer) FORM N-CSR CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Stephen Coyle, certify that: 1. I have reviewed this report on Form N-CSR of the AFL-CIO Housing Investment Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant-s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. [Omitted] c. Evaluated the effectiveness of the registrant-s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (or the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Stephen Coyle --------------------------------------- Stephen Coyle Chief Executive Officer AFL-CIO Housing Investment Trust Date: September 8, 2003 FORM N-CSR CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Erica Khatchadourian, certify that: 1. I have reviewed this report on Form N-CSR of the AFL-CIO Housing Investment Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. [Omitted] c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (or the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Erica Khatchadourian ------------------------------------ Erica Khatchadourian Executive Vice President - Finance and Administration AFL-CIO Housing Investment Trust Date: September 8, 2003 (Other Exhibits) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 AFL-CIO Housing Investment Trust In connection with the Report on Form N-CSR (the "Report") of the AFL-CIO Housing Investment Trust for the period ended June 30, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Dated: September 8, 2003 /s/ Stephen Coyle ------------------------------------ Stephen Coyle, Chief Executive Officer AFL-CIO Housing Investment Trust A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the AFL-CIO Housing Investment Trust and will be retained by the AFL-CIO Housing Investment Trust and furnished to the Securities and Exchange Commission or its staff upon request. (Other Exhibits) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 AFL-CIO Housing Investment Trust In connection with the Report on Form N-CSR (the "Report") of the AFL-CIO Housing Investment Trust for the period ended June 30, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Dated: September 8, 2003 /s/ Erica Khatchadourian --------------------------------------- Erica Khatchadourian, Executive Vice President - Finance and Administration AFL-CIO Housing Investment Trust A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the AFL-CIO Housing Investment Trust and will be retained by the AFL-CIO Housing Investment Trust and furnished to the Securities and Exchange Commission or its staff upon request AFL-CIO HOUSING INVESTMENT TRUST SEMI-ANNUAL REPORT JUNE 30, 2003 REPORT TO PARTICIPANTS The AFL-CIO Housing Investment Trust (HIT) produced returns above its industry benchmark, the Lehman Brothers Aggregate Bond Index (Lehman Aggregate), in the first six months of 2003. The HIT strategy of overweighting in federally insured or guaranteed multifamily mortgage-backed securities (MBS) contributed to the Trust producing a six-month return of 4.00 percent. The rate of return for the Lehman Aggregate during this period was 3.93 percent. At June 30, the HIT reached $3.57 billion in total net assets, an 8.9 percent increase since December 31, 2002. Contributing to this growth was a total of $287.0 million in additional participant investments, which included a record mid-year level of $211.4 million in new investments and $75.6 million in reinvested dividends. The HIT's growth during this period also reflected a net realized return on investments of $49.2 million and $.3 million in unrealized gains. With seven new participants, the total number of investors rose to 426. Cash and short-term investments were 1.7 percent of net assets at mid-year. 2003 PARTICIPANTS MEETING The 2003 Annual Meeting of Participants was held in Washington, D.C., on Wednesday, May 28, 2003. The following matters were put to a vote of Participants at the meeting through the solicitation of proxies: Richard Ravitch was reelected to chair the Board of Trustees by a vote of 1,875,454.4585 for, 215.1182 against, 6,581.8280 abstentions, and 1,058,271.9075 votes not cast. The following Trustees were not up for election and their term of office continued after the date of the Annual Meeting: Linda Chavez-Thompson, Frank Hanley, Frank Hurt, George Latimer, Terence M. O'Sullivan, Tony Stanley, Andrew L. Stern, John J. Sweeney, Richard Trumka, and Patricia F. Wiegert. Ernst & Young, LLP was ratified as the HIT's Certified Public Accountants by a vote of 1,875,039.0752 for, 0.0000 against, 7,212.3295 abstentions, and 1,058,271.9075 votes not cast. The table below details votes pertaining to Trustees who were elected at the Annual Meeting: Trustee Votes For Votes Against Votes Abstaining ------------------------------------------------------------------------------ John J. Flynn 1,875,669.5767 0.0000 6,581.8280 Jeremiah O'Connor 1,875,669.5767 0.0000 6,581.8280 Edward C. Sullivan 1,808,060.4288 67,609.1479 6,581.8280 Marlyn J. Spear 1,809,457.4337 0.0000 72,793.9710 Stephen Frank 1,870,692.1980 0.0000 11,559.2067 Trustee Hanley resigned from the Board effective May 30, 2003. Votes Not Cast:1,058,271.9075 FINANCIAL STATEMENTS JUNE 30, 2003 (Unaudited) American Federation of Labor and Congress of Industrial Organizations Housing Investment Trust STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Dollars in thousands, unless otherwise noted; unaudited) Assets Investments, at fair value (amortized cost $3,320,758)* $ 3,530,090 Cash 58,934 Accrued interest receivable 20,218 Receivables-Investments sold 102,791 Accounts receivable 385 Prepaid expenses and other assets 2,751 ------------------------------------------------------------------------------ Total Assets $ 3,715,169 ------------------------------------------------------------------------------ Liabilities Accounts payable and accrued expenses 1,570 Payables-Investments purchased 136,330 Redemptions payable 506 Refundable deposits 957 Income distribution payable, net dividends reinvested of $12,025 1,251 ------------------------------------------------------------------------------ Total Liabilities $ 140,614 ------------------------------------------------------------------------------ Net Assets Applicable to Participants' Equity - Certificates of Participation - Authorized Unlimited; Outstanding 3,057,939 Units $ 3,574,555 ------------------------------------------------------------------------------ Net Asset Value Per Unit of Participation (in dollars) $ 1,168.94 ------------------------------------------------------------------------------ STATEMENT OF PARTICIPANTS' EQUITY June 30, 2003 (Dollars in thousands; unaudited) PARTICIPANTS' EQUITY Participants' equity consisted of the following: Amount invested and reinvested by current participants $ 3,336,952 Accumulated unrealized appreciation in the value of investments 209,332 Accumulated undistributed investment income - net 271 ------------------------------------------------------------------------------ Total Participants' Equity $ 3,574,555 ------------------------------------------------------------------------------ * The cost for Federal tax purposes approximates book cost. See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) FHA PERMANENT SECURITIES AND COMMITMENTS (8.3% OF NET ASSETS) Interest Maturity Commitment Face Amortized Value Rate Dates Amount Amount Cost ------------------------------------------------------------------------------ Single Family 7.75% Jul-2021-Aug-2021 $ $ 311 $ 311 $ 311 8.00% Jul-2021 209 209 209 10.31% Feb-2016 65 65 65 ------------------------------------------------------------------------------ 585 585 585 ------------------------------------------------------------------------------ Multifamily 6.50% May-2004 2,823 2,823 2,859 6.66% May-2040 5,897 5,905 6,566 6.70% Dec-2042 6,134 6,140 6,976 6.75% Nov-2037-Jul-2040 10,122 9,890 11,201 6.88% Apr-2030 29,881 29,503 34,075 7.00% Jun-2039 6,176 6,237 7,027 7.07% Sep-2039 8,232 8,236 8,836 7.13% Mar-2040 8,068 8,044 9,370 7.17% Feb-2040 4,845 4,849 5,245 7.20% Oct-2039 3,216 3,224 3,759 7.50% Sep-2032 1,688 1,694 2,004 7.55% Aug-2012 712 712 717 7.63% Dec-2027-Apr-2031 63,724 63,623 67,072 7.70% Oct-2039 12,341 12,277 14,307 7.75% Aug-2038-Oct-2038 4,405 4,407 4,612 7.80% Dec-2038 21,386 21,392 21,386 7.85% Sep-2037 2,558 2,558 2,672 7.88% Nov-2036-Jul-2038 9,269 9,277 10,586 7.93% Apr-2042 2,940 2,940 3,549 8.00% Oct-2031-Jun-2038 12,051 11,993 12,644 8.13% Jun-2028 4,764 4,764 5,033 8.25% Nov-2036 3,550 3,556 3,681 8.27% Jul-2042 2,567 2,567 3,097 8.40% Apr-2012 995 995 1,003 8.75% Jul-2036-Aug-2036 12,066 12,020 13,247 8.80% Oct-2032 5,496 5,496 5,547 8.88% May-2036 2,449 2,408 2,544 9.25% Jun-2036 19,838 19,843 19,838 9.50% Jul-2027 365 369 416 10.00% Mar-2031 5,705 5,705 5,769 ------------------------------------------------------------------------------ 274,263 273,447 295,638 ------------------------------------------------------------------------------ Forward Commitments 5.60% Jun-2038 2,979 - - 226 ------------------------------------------------------------------------------ 2,979 - - 226 ------------------------------------------------------------------------------ Total FHA Permanent Securities and Commitments $ 2,979 $ 274,848 $ 274,032 $ 296,449 ------------------------------------------------------------------------------ See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) FHA Construction Securities (0.4% of net assets)
Interest Rates* Maturity Commitment Face Amortized Value Permanent Construction Date** Amount Amount Cost ------------------------------------------------------------------------------------------------- Multifamily 7.05% 7.05% Mar-2043 $ 5,418 $ 5,418 $ 5,420 $ 6,237 7.20% 7.20% Sep-2033 7,150 7,150 7,150 8,271 ------------------------------------------------------------------------------------------------- Total FHA Construction Securities $ 12,568 $ 12,568 $ 12,570 $ 14,508
* Construction interest rates are the rates charged to the borrower during the construction phase of the project. The permanent interest rates are charged to the borrower during the amortization period of the loan, unless HUD requires that such rates be charged earlier. ** Permanent mortgage maturity date. See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) Ginnie Mae Securities and Commitments (22.2% of net assets)
Interest Maturity Commitment Face Amortized Value Rates Dates Amount Amount Cost ----------------------------------------------------------------------------------------- Single Family 5.50% Jan-2033 $ 14,588 $ 14,773 $ 15,222 6.00% Jan-2032-Jan-2033 22,218 22,897 23,301 6.50% Jul-2028-Jun-2032 42,318 43,332 44,437 7.00% Nov-2016-Jan-2030 43,670 44,507 46,310 7.50% Apr-2013-Aug-2030 35,336 36,208 37,850 8.00% Nov-2009-Dec-2030 21,830 22,349 23,550 8.50% Nov-2009-Aug-2027 11,672 11,945 12,763 9.00% May-2016-Jun-2025 2,704 2,783 3,012 9.50% May-2019-Sep-2030 1,175 1,208 1,319 10.00%-13.50% Jul-2014-Jun-2019 49 49 59 ------------------------------------------------------------------------------------------- 195,560 200,051 207,823 ------------------------------------------------------------------------------------------- Multifamily 4.46% Oct-2025 25,000 24,940 26,133 4.92% May-2034 40,000 40,073 41,684 5.05% Nov-2028 54,626 54,885 57,850 5.13% Jul-2024 5,000 5,112 5,429 5.35% Apr-2038 7,674 8,218 8,337 5.68% Jul-2027 30,152 31,438 33,369 5.86% Oct-2023 10,000 10,733 11,223 5.88% Nov-2011 15,000 15,000 16,875 6.00% Dec-2042 3,941 3,888 4,462 6.09% Jun-2021 5,000 5,000 5,668 6.11% Nov-2021 970 970 1,097 6.13% Sep-2042 25,268 25,274 28,698 6.34% Aug-2023 3,464 3,464 3,983 6.50% Dec-2039 3,531 3,531 4,016 6.56%* Jun-2037 38,760 39,286 44,602 6.63% Oct-2033 6,534 6,357 6,922 6.69% Jun-2040 5,546 5,539 6,379 6.75% Aug-2041 2,745 2,657 3,190 7.23% Jun-2041 8,105 7,864 9,577 7.25% Jun-2042 4,194 4,235 4,770 7.38% Mar-2042 6,659 6,687 7,932 7.45% Jun-2042 9,662 9,662 11,501 7.50% April-2038 32,350 31,925 37,742 7.57% Feb-2042 2,552 2,552 2,924 7.70% Mar-2042 35,760 35,284 42,977 7.80% Jul-2039 18,910 18,918 22,271 7.88% Nov-2036 885 885 958 8.15% Nov-2025 3,632 3,607 4,222 8.40% Nov-2041 8,681 8,649 8,855 8.75% Dec-2026 4,170 4,170 4,211 9.00% Jun-2030 7,722 7,499 7,802 12.55% Jun-2025 5,926 5,893 6,070 -------------------------------------------------------------------------------------------- 432,419 434,195 481,729 --------------------------------------------------------------------------------------------
* This security is held in a segregated account as collateral for the secured bank line of credit. See accompanying notes to financial statements. continued on next page SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) Ginnie Mae Securities and Commitments (22.2% of net assets), continued
Interest Maturity Commitment Face Amortized Value Rates Dates Amount Amount Cost ----------------------------------------------------------------------------------------- Forward Commitments 4.34% Mar-2034 - 94,990 95,201 94,463 5.55% Dec-2027-Jun-2036 51,903 - 124 4,585 6.63% December-2038 21,385 - - 2,825 7.50% April-2044 23,300 - - 932 ------------------------------------------------------------------------------------------ 96,588 94,990 95,325 102,805 ------------------------------------------------------------------------------------------ Total Ginnie Mae Securities and Commitments $ 96,588 $ 722,969 $ 729,571 $ 792,357 ------------------------------------------------------------------------------------------
See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) Ginnie Mae Construction Securities and Commitments (10.0% of net assets)
Interest Rates* Maturity Commitment Face Amortized Permanent Construction Dates** Amount Amount Cost Value ------------------------------------------------------------------------------------------ Multifamily 4.63% 4.63% Dec-2044 $ 6,178 $ 588 $ 592 $ 638 5.20% 3.45% Jan-2045 21,139 21,139 21,204 22,027 6.00% 6.00% Sep-2044 25,635 4,387 3,988 7,221 6.15% 6.28% May-2044 18,600 14,543 14,544 16,788 6.60% 6.60% May-2043 17,793 11,889 11,481 14,489 6.70% 6.70% Jan-2044 30,528 28,155 28,040 32,989 6.75% 6.75% Jun-2023-Jun-2043 3,899 3,634 3,521 4,252 6.93% 7.13% Mar-2044 33,136 27,651 27,689 31,938 7.00% 7.00% Jun-2043 66,552 61,242 61,247 70,953 7.24% 7.24% Dec-2042 51,242 47,544 47,548 49,338 7.33% 7.33% Dec-2042 11,893 10,644 10,637 12,440 7.75% 7.25% May-2033 51,779 44,497 44,242 54,348 N/A*** 6.33% Feb-2005**** 18,200 15,740 16,037 16,650 N/A*** 6.54% Dec-2004**** 13,620 12,596 13,039 13,277 N/A*** 8.75% May-2005**** 7,628 7,097 7,437 7,479 ------------------------------------------------------------------------------------------ 377,822 311,346 311,246 354,827 ------------------------------------------------------------------------------------------ Forward Commitments 4.88% 4.88% Jul-2046 35,000 - 175 1,029 4.95% 4.95% Jan-2045 11,200 - 181 420 ------------------------------------------------------------------------------------------ 46,200 - 356 1,449 ------------------------------------------------------------------------------------------ Total Ginnie Mae Construction Securities and Commitments $424,022 $311,346 $311,602 $356,276 ------------------------------------------------------------------------------------------
* Construction interest rates are the rates charged to the borrower during the construction phase of the project. The permanent interest rates are charged to the borrower during the amortization period of the loan, unless HUD requires that such rates be charged earlier. ** Permanent mortgage maturity date. *** Construction only securities. **** Date the HIT is required to sell securities to bond trustee. See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) Fannie Mae Securities and Commitments (42.1% of net assets)
Interest Maturity Commitment Face Amortized Value Rate Dates Amount Amount Cost ------------------------------------------------------------------------------------- Single Family 3.84% Jun-2033 $ $ 15,583 $ 16,026 $ 15,583 4.50% Jun-2018 24,862 25,620 25,403 5.00% Jul-2033 25,000 25,500 25,281 5.50% Jul-2017-Jun-2033 272,615 276,633 282,384 6.00% Jan-2006-Apr-2033 277,093 283,766 288,312 6.50% Nov-2016-Nov-2032 158,551 161,430 165,510 7.00% Nov-2013-Jun-2032 47,542 48,313 50,146 7.50% Jul-2004-Sep-2031 15,857 15,934 16,855 8.00% Jan-2007-May-2031 8,045 8,194 8,655 8.50% Nov-2009-Apr-2031 6,709 6,840 7,381 9.00% Jul-2009-May-2025 1,867 1,891 2,063 9.50% Aug-2004 33 33 34 -------------------------------------------------------------------------------------- 853,757 870,180 887,607 -------------------------------------------------------------------------------------- Multifamily 3.81% Nov-2012 9,726 9,726 10,054 4.49% Nov-2012 20,000 20,000 20,902 4.74% Jun-2013 14,350 14,457 15,159 4.77% Apr-2012 2,434 2,541 2,625 4.85% Jan-2013 23,430 25,495 24,352 4.88% Sep-2011 26,286 26,483 28,478 4.92% May-2013 25,981 27,594 27,166 5.14% Jan-2018 8,160 8,553 8,793 5.15% Sep-2017-Oct-2022 24,046 24,188 25,823 5.16% Dec-2011 13,466 13,511 14,739 5.23% Mar-2018-Apr-2021 5,020 5,212 5,445 5.24% Dec-2012 2,407 2,418 2,568 5.35% Dec-2012 6,027 6,054 6,575 5.43% May-2021 3,597 3,715 3,962 5.45% May-2033 3,422 3,478 3,688 5.58% Jan-2033 3,931 3,995 4,437 5.80% Dec-2032-Jan-2033 35,536 36,074 39,182 5.84% Aug-2010 8,746 9,077 9,662 5.88% Nov-2027 3,591 3,680 3,970 6.02% Nov-2010 2,735 2,735 3,170 6.09% May-2011 12,725 13,973 14,841 6.13% Dec-2016 4,775 5,221 5,441 6.15% Oct-2032 3,877 4,008 4,364 6.22% Aug-2032 1,984 2,069 2,240 6.25% Dec-2013 2,280 2,351 2,515 6.27% Jan-2012 2,221 2,280 2,546 6.35% Mar-2020 11,750* 11,750 11,750 13,324 6.35% Jun-2020-Aug-2032 22,105 23,233 25,287 6.44% Apr-2014 7,224 8,087 8,339 6.50% Jun-2016 3,453 3,458 3,888 6.52% Jul-2008 2,964 2,964 3,262 6.53% May-2030 11,920 11,965 13,507 6.63% Apr-2019 2,497 2,497 2,863 6.65% Aug-2007 625 632 674 6.74% Aug-2007 3,400 3,820 3,907
continued on next page SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited)
Fannie Mae Securities and Commitments (42.1% of net assets), continued Interest Maturity Commitment Face Amortized Value Rate Dates Amount Amount Cost ------------------------------------------------------------------------------------- Multifamily (continued) 6.80% Jul-2016 1,120 1,120 1,279 6.85% Mar-2029 8,000 8,924 9,299 6.90% Jun-2007 20,049 20,612 22,715 6.96% Aug-2007 8,561 8,829 9,815 7.01% Apr-2031 3,693 3,741 4,290 7.04% Jul-2014 7,418** 7,410 7,422 8,744 7.07% Feb-2031 18,674 19,165 21,764 7.16% Jan-2022 8,606 8,822 9,530 7.18% Aug-2016 681 681 788 7.20% Apr-2010-Aug-2029 10,325 10,008 11,984 7.25% Nov-2011-Jul-2012 9,543 9,543 10,078 7.27% Dec-2009 4,987 5,005 5,065 7.30% May-2010-Aug-2006 44,927 46,317 50,410 7.37% Jan-2013 1,084 1,104 1,159 7.38% Jun-2014 2,428 2,446 2,809 7.50% Dec-2014 2,325 2,334 2,708 7.71% Feb-2010 9,678 9,866 11,245 7.75% Dec-2012-Dec-2024 4,827 4,828 5,654 8.00% Nov-2019-May-2020 6,510 6,493 7,099 8.13% Sep-2012-Aug-2020 10,454 10,430 11,812 8.38% Jan-2022 1,043 1,048 1,216 8.40% Jul-2023 563 552 688 8.50% Sep-2006-Sep-2026 2,057 2,057 2,327 8.63% Sep-2028 7,104 7,104 8,682 9.13% Sep-2015 3,557 3,543 4,035 9.25% Jun-2018 4,823 4,812 5,619 -------------------------------------------------------------------------------------- 19,168 539,720 554,100 598,562 -------------------------------------------------------------------------------------- Forward Commitments 4.55% Sep-2033 - 5,400 5,470 5,370 4.66% Jul-2021-Aug-2033 - 9,060 9,257 9,161 5.60% Oct-2022 12,560*** - (282) 1,634 6.75% Mar-2010 22,000 - - 880 -------------------------------------------------------------------------------------- 34,560 14,460 14,445 17,045 Total Fannie Mae Securities and Commitments $53,728 $1,407,937 $1,438,725 $1,503,214 ---------------------------------------------------------------------------------------
* During construction, the investment is a participation in the construction loan which is secured by a repurchase guaranty from the Bank of America; the permanent financing will be a Fannie Mae MBS for which the Trust has issued its commitment to purchase. ** During construction, the investment is a participation in the construction loan which is secured by a letter of credit from the Federal Home Loan Bank of Des Moines; the permanent financing will be a Fannie Mae MBS for which the Trust has issued its commitment to purchase. *** During construction, the investment is a participation in the construction loan which is secured by a letter of credit from the LaSalle Bank National Association; the permanent financing will be a Fannie Mae MBS for which the Trust has issued its commitment to purchase. See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) Freddie Mac Securities (5.6% of net assets)
Interest Maturity Face Amortized Rate Dates Amount Cost Value ------------------------------------------------------------------------------ Single Family 5.50% Apr-2033 $ 24,673 $ 25,281 $ 25,489 6.00% Apr-2005-Jan-2033 93,423 95,288 96,923 6.50% Dec-2006-Jul-2032 24,487 24,447 25,611 7.00% Jun-2004-Mar-2030 14,173 14,210 15,029 7.50% Nov-2003-Apr-2031 14,261 14,244 15,185 8.00% May-2008-Feb-2030 7,448 7,513 7,924 8.25% Nov-2022 59 59 64 8.50% Jun-2010-Jan-2025 5,650 5,723 6,102 9.00% Sep-2010-Mar-2025 1,174 1,202 1,283 ---------------------------------------------------------------------------- 185,348 187,967 193,610 ---------------------------------------------------------------------------- Multifamily 8.00% Feb-2009 5,425 5,431 5,460 ---------------------------------------------------------------------------- 5,425 5,431 5,460 ---------------------------------------------------------------------------- Total Freddie Mac Securities $ 190,773 $ 193,398 $ 199,070 ---------------------------------------------------------------------------- Government Sponsored Entities Notes (1.2% of net assets) Interest Maturity Face Amortized Issuer Rate Date Amount Cost Value ----------------------------------------------------------------------------- Fannie Mae 2.25% May-2006 $ 15,045 $ 15,247 $ 15,247 Fannie Mae 5.50% Jul-2012 20,000 20,526 21,144 Freddie Mac 6.01% Dec-2005 6,000 6,072 6,626 ----------------------------------------------------------------------------- Total Government Sponsored Entities Notes $ 41,045 $ 41,845 $ 43,017 -----------------------------------------------------------------------------
See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) United States Treasury Notes (7.5% of net assets)
Interest Maturity Face Amortized Rate Date Amount Cost Value ---------------------------------------------------------------------- 0.00% Jul-2003 $ 7,215 $ 7,210 $ 7,210 1.63% Apr-2005 3,500 3,523 3,523 2.25% Jul-2004 6,530 6,614 6,614 2.63% May-2008 12,130 12,240 12,240 3.00% Feb-2008 15,000 15,193 15,436 3.25% Aug-2007 1,100 1,148 1,148 3.38% Apr-2004 1,250 1,275 1,275 3.50% Nov-2006 2,085 2,198 2,198 3.63% May-2013 32,445 33,213 32,698 3.88% Feb-2013 63,000 63,457 64,831 4.38% Aug-2012 55,000 56,624 58,970 4.88% Feb-2012 1,300 1,445 1,445 5.63% May-2008 15,000 16,504 17,198 5.75% Aug-2010 27,935 31,279 32,702 5.88% Nov-2004-Nov-2005 6,710 7,233 7,233 6.75% May-2005 1,900 2,100 2,100 10.75% Aug-2005 1,750 2,093 2,093 ---------------------------------------------------------------------- Total United States Treasury Notes $253,850 $263,349 $268,914 ----------------------------------------------------------------------
State Housing Finance Agency Securities (1.3% of net assets)
Interest Maturity Face Amortized Issuer Rate Dates Amount Cost Value ---------------------------------------------------------------------------------- Multifamily NJ Housing & Mortgage Finance Agency 7.63% Oct-2009 $ 653 $ 653 $ 708 Ulster County Industrial Development Agency 7.70% Jun-2006-Jun-2029 38,260 38,264 38,260 MA Housing Finance Agency 8.00% Jan-2026 4,620 4,613 4,855 NJ Housing & Mortgage Finance Agency 8.38% Feb-2007 579 601 630 MA Housing Finance Agency 8.63% Jan-2013 400 406 444 MA Housing Finance Agency 9.00% Jan-2025 923 923 959 ----------------------------------------------------------------------------------- Total State Housing Finance Agency Securities $45,435 $45,460 $45,856 -----------------------------------------------------------------------------------
See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited)
Other Multifamily Investments (0.2% of net assets) Interest Rates* Maturity Commitment Face Amortized Permanent Construction Dates** Amount Amount Cost Value ------------------------------------------------------------------------------------------ Multifamily Construction/Permanent Mortgages 8.13% N/A Aug-2005 $ 1,016 $ 348 $ 341 $ 348 8.63% N/A Jun-2025 1,352 1,352 1,352 9.50% N/A Aug-2012-Apr-2024 2,013 2,013 2,013 ------------------------------------------------------------------------------------------ 1,016 3,713 3,706 3,713 ------------------------------------------------------------------------------------------ Privately Insured Construction/Permanent Mortgage*** 5.95% 5.95% Mar-2044 4,400 4,400 4,400 4,616 ------------------------------------------------------------------------------------------ 4,400 4,400 4,400 4,616 ------------------------------------------------------------------------------------------ Other Multifamily Investments $ 5,416 $ 8,113 $ 8,106 $ 8,329 ------------------------------------------------------------------------------------------ Total Long-Term Investments $3,268,884 $3,318,658 $3,527,990 ------------------------------------------------------------------------------------------
* Construction interest rates are the rates charged to the borrower during the construction phase of the project. The permanent interest rates are charged to the borrower during the amortization period of the loan. ** Permanent mortgage maturity date. *** Loan insured by Ambac Assurance Corporation. See accompanying notes to financial statements. SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2003 (Dollars in thousands; unaudited) Short-Term Investments (0.5% of net assets)
Maturity Interest Face Amortized Description Date Rate Amount Cost Value --------------------------------------------------------------------------------- Repurchase Agreement Amalgamated Bank* Mar-2004 1.25% $ 2,000 $ 2,000 $ 2,000 --------------------------------------------------------------------------------- 2,000 2,000 2,000 --------------------------------------------------------------------------------- Certificate of Deposit Shore Bank-Pacific May-2004 2.11% 100 100 100 --------------------------------------------------------------------------------- 100 100 100 --------------------------------------------------------------------------------- Total Short-Term Investments $ 2,100 $ 2,100 $ 2,100 --------------------------------------------------------------------------------- Total Investments $3,270,984 $3,320,758 $3,530,090 ---------------------------------------------------------------------------------
* This instrument was purchased in March 2003. The Trust will receive $2.025 million upon maturity. The underlying collateral of the repurchase agreement is a Ginnie Mae security with a market value of $2.154 million. See accompanying notes to financial statements. STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2003 (Dollars in thousands; unaudited) Investment Income FHA permanent securities (including forward commitments) $ 12,420 FHA construction securities 764 Ginnie Mae securities (including forward commitments) 23,835 Ginnie Mae construction securities (including forward commitments) 9,700 Fannie Mae securities (including forward commitments) 31,831 Freddie Mac securities 5,545 Government-sponsored Entities Notes 1,001 United States Treasury Notes 3,102 State Housing Finance Agency Securities 1,778 Other multifamily investments 297 Short-term investments 344 ------------------------------------------------------------------------- Total Income $ 90,617 ------------------------------------------------------------------------- Expenses Officer salaries and fringe benefits $ 965 Other salaries and fringe benefits 2,927 Legal fees 227 Consulting fees 419 Auditing, tax and accounting fees 169 Insurance 138 Marketing and sales promotion (12b-1) 282 Investment management 212 Trustee expenses 19 Rental expenses 352 General expenses 842 ------------------------------------------------------------------------- Total Expenses $ 6,552 ------------------------------------------------------------------------- Investment Income-Net $ 84,065 ------------------------------------------------------------------------- Realized gain on investments $ 49,239 Net change in unrealized appreciation on investments 278 ------------------------------------------------------------------------- Realized and Unrealized Net Gains on Investments $ 49,517 ------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $ 133,582 ------------------------------------------------------------------------- See accompanying notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS (Dollars in thousands)
Six Months Year Ended Ended June 30, 2003 December 31, 2002 (unaudited) ------------------------------------------------------------------------------ Increase in Net Assets from Operations Investment income-net $ 84,065 $ 172,167 Realized gain on investments 49,239 14,815 Net change in unrealized appreciation on investments 278 141,142 ------------------------------------------------------------------------------ Net increase in net assets resulting from operations 133,582 328,124 ------------------------------------------------------------------------------ Decrease in Net Assets from Distributions Distributions paid to participants or reinvested from: Investment income-net (84,065) (172,167) Net realized gains on investments - (14,815) ------------------------------------------------------------------------------ Net decrease in net assets from distributions (84,065) (186,982) ------------------------------------------------------------------------------ Increase (Decrease) in Net Assets from Unit Transactions Proceeds from the sale of units of participation 211,354 341,676 Dividend reinvestment of units of participation 75,593 167,759 Payments for redemption of units of participation (43,672) (120,296) ------------------------------------------------------------------------------ Net increase from unit transactions 243,275 389,139 ------------------------------------------------------------------------------ Total increase in net assets 292,792 530,281 Net assets at beginning of period 3,281,763 2,751,482 ------------------------------------------------------------------------------ Net Assets at End of Period $ 3,574,555 $ 3,281,763 ------------------------------------------------------------------------------ Unit Information Units sold 182,047 300,736 Distributions reinvested 65,500 148,388 Units redeemed (37,610) (106,106) ------------------------------------------------------------------------------ Increase in Units Outstanding 209,937 343,018 ------------------------------------------------------------------------------
See accompanying notes to financial statements. NOTES TO FINANCIAL STATEMENTS, unaudited June 30, 2003 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 and Statement of Additional Information. Participation in the Trust is limited to eligible labor organizations and 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 Net asset value per share (NAV calculation) is calculated as of the close of business of the major bond markets in New York on the last business day of the month. Portfolio securities for which market quotations are readily available (single family MBS investments, US Agency debt and US Treasury securities) are valued by an independent pricing service, using published prices, market quotes and dealer bids. Portfolio investments for which market quotations are not readily available (multifamily MBS investments, mortgage securities, and construction mortgage securities) are valued at their fair value using dealer bids and discounted cash flow models. The respective cash flow models use market based discounts and prepayment rates developed for each investment category. The market-based discount rate is composed of a risk-free yield (i.e., a US Treasury Note) adjusted for an appropriate risk premium. The risk premium reflects actual premiums in the market place over the yield on US 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 and participation interests, value is determined based upon the total amount, funded and/or un-funded, of the commitment. The values have been determined in good faith under consistently applied procedures adopted by the Board of Trustees. The above process ensures that the valuation of the assets in the portfolio reflects the fair value of each investment, based on its unique characteristics. In accordance with the procedures adopted by the Board, a monthly third-party valuation is received and reviewed by management. Any adjustments arising from the review are subsequently reviewed and approved by the third party valuation firm employed by the Trust. Short-term investments with remaining maturities of sixty days or less are valued on the basis of amortized cost, which constitutes fair value under the procedures adopted by the Board. NOTES TO FINANCIAL STATEMENTS, unaudited 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. 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 participants. Therefore, no federal income tax provision is required. 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 automatically to reinvest their income distribution into Trust units of participation. Total reinvestment was 90 percent of distributable income for the six months ended June 30, 2003. 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 Trust investments are accounted for as an adjustment to the cost of the investment and amortized over the estimated life of the investment using the effective interest method. Realized gains and losses from investment transactions are recorded on the trade date using an identified cost basis. 12b-1 Plan of Distribution The Board of Trustees annually approves a 12b-1 Plan of Distribution to pay for marketing and sales promotion expenses incurred in connection with the offer and sale of units and related service and distribution activities (12b-1 expenses). For the year ended December 31, 2003, the Trust may pay for 12b-1 expenses in an amount up to $600,000 or 0.05 percent of its average monthly net assets on an annualized basis, whichever is greater. During the six months ended June 30, 2003, the Trust incurred approximately $282,000 of 12b-l expenses. Receivables-Investments Sold Receivables-Investments Sold represents investments that were sold prior to June 30, 2003, which settled subsequent to June 30, 2003. Payables-Investments Purchased Payables-Investments Purchased represents investments that were purchased prior to June 30, 2003, which settled subsequent to June 30, 2003. NOTES TO FINANCIAL STATEMENTS, unaudited Note 2. Investment Risks Interest Rate Risk As with any fixed-income investment, the market value of the Trust's investments will fall below the principal amount of those investments at times when market interest rates rise above the interest rates of the investments. Rising interest rates may also reduce prepayment rates, causing the average life of the Trust's investments to increase. This could in turn further reduce the value of the Trust's portfolio. Prepayment and Extension Risk The Trust invests in certain fixed income securities whose value is derived from an underlying pool of mortgage loans. Generally, the market value of the Trust's investments will rise at times when market interest rates fall below the interest rates on the investments. However, at such times, some borrowers may prepay the mortgage loans backing the Trust's securities more quickly than might otherwise be the case. In such event, the Trust may be required to reinvest the proceeds of such prepayments in other investments bearing lower interest rates. The majority of the Trust's securities backed by loans for multifamily projects include restrictions on prepayments for specified periods to mitigate this risk. When market interest rates rise above the interest rates of the Trust's investments, the prepayment rate of the mortgage loans backing the Trust's securities may decrease, causing the average maturity of the Trust's investments to lengthen. This may increase the Trust's portfolio's sensitivity to rising rates and its potential for price declines. Note 3. Transactions with Related Entities During the six months ended June 30, 2003, the Trust provided the time of certain personnel to the AFL-CIO Investment Trust Corporation (ITC), a D.C. non-profit corporation, on a cost-reimbursement basis. During the six months, certain employees of the Trust also served as officers of the ITC. The total cost for such personnel and related expenses for the six months ended June 30, 2003 amounted to approximately $800,000. During the six months ended June 30, 2003, the Trust was reimbursed for approximately $800,000 of current and prior year costs. As of June 30, 2003, approximately $230,000 is included within the accounts receivable in the accompanying financial statements for amounts outstanding under the arrangement. The ITC provided the time of certain personnel to the Trust on a cost-reimbursement basis. The total cost for such personnel and related expenses for the six months ended June 30, 2003 was approximately $81,000. During the six months ended June 30, 2003, the Trust paid the ITC approximately $63,000 of current costs. Note 4. Commitments Certain assets of the Trust are invested in short-term investments until they are required to fund purchase commitments for long-term investments. As of June 30, 2003, the Trust had outstanding unfunded purchase commitments of approximately $257.6 million. The Trust maintains a reserve, in the form of securities, no less than the total of the outstanding unfunded purchase commitments, less short-term investments. As of June 30, 2003, the value of the publicly traded mortgage-backed securities maintained for the reserve in a segregated account was approximately $2.7 billion. The commitment amounts disclosed on the Schedule of Portfolio Investments represent the original commitment amount, which includes both funded and unfunded commitments. NOTES TO FINANCIAL STATEMENTS, unaudited Note 5. Investment Transactions A summary of investment transactions (excluding short-term investments and US Treasury Notes) for the separate instruments included in the Trust's investment portfolio, at amortized cost, for the six months ended June 30, 2003, follows (dollars in thousands):
State Other Government Housing Multi- FHA FHA Ginnie Ginnie Mae Fannie Freddie sponsored Finance Family Permanent Construction Mae Construction Mae Mac Entities Agency Invest- Securities* Securities Securities* Securities* Securities* Securities Notes Securities ments ---------------------------------------------------------------------------------------------------------------- Balance, January 1, 2003 $ 347,310 $ 25,770 $ 793,473 $ 271,418 $ 1,260,206 $ 213,109 $ 63,561 $ 46,404 $ 3,809 Purchases and insured construction securities advances, net of discounts - 1,173 167,670 102,181 547,944 94,800 30,045 - 4,400 Change in discounts and (premiums) 255 (3) 110 49 10,517 1,127 (1,761) (3) - Transfers (6,650) (14,365) 54,465 (33,451) - - - - - Principal reductions/sales (66,883) (5) (286,147) (28,595) (379,942) (115,638) (50,000) (941) (103) ---------------------------------------------------------------------------------------------------------------- Balance, June 30, 2003 $274,032 $12,570 $729,571 $311,602 $1,438,725 $193,398 $41,845 $45,460 $8,106 ----------------------------------------------------------------------------------------------------------------
*Including forward commitments. NOTES TO FINANCIAL STATEMENTS, unaudited Note 6. Federal Taxes The information set-forth in this footnote is actual information as of December 31, 2002 and will be updated in the Annual Report for December 31, 2003 to coincide with the 2003 tax reporting year-end. The tax character of distributions paid during the twelve months ended December 31, 2002 was as follows (dollars in thousands): 2002 ---------------------------------------------------------------------------- Ordinary investment income - net $ 178,863 Long-term capital gains on investments 8,119 ---------------------------------------------------------------------------- Total net distributions paid to participants or reinvested $ 186,982 ---------------------------------------------------------------------------- As of December 31, 2002, the components of accumulated earnings on a tax basis were as follows (dollars in thousands): ---------------------------------------------------------------------------- Undistributed ordinary income $ 29 Unrealized appreciation 209,054 Other temporary differences 242 ---------------------------------------------------------------------------- Total accumulated earnings $ 209,325 ---------------------------------------------------------------------------- Note 7. 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 employee contributions, at rates approximating 12.4 percent of employees' salaries for the six months ended June 30, 2003. The total Trust pension expense for the six months ended June 30, 2003 was approximately $359,000. 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 $2,700 of employee contributions. The Trust's 401(k) contribution for the six months ended June 30, 2003 was approximately $112,000. Note 8. Bank Securities The Trust has a secured $12.5 million bank line of credit. A segregated account of Trust-owned securities serves as collateral for the line of credit. As of June 30, 2003, the value of the collateral in the account is approximately $44.6 million. 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 June 30, 2004. The Trust had no outstanding balance on either of these facilities during the period. No compensating balances are required. Selected Per Share Data and Ratios for the Six Months Ended June 30, 2003, and the Years Ended December 31, 2002, 2001, 2000 and 1999
Six Months Ended June 30, 2003 2002 2001 2000 1999 (unaudited) ------------------------------------------------------------------------------------------------------------- Per Share Data Net asset value, beginning of period $ 1,152.30 $ 1,098.40 $ 1,085.42 $ 1,035.72 $ 1,114.08 INCOME FROM INVESTMENT OPERATIONS: Net investment income 28.81 65.19 70.86 72.83 71.65 Net realized and unrealized gains (losses) on investments 16.64 59.15 16.24 49.70 (77.96) ------------------------------------------------------------------------------------------------------------- TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 45.45 124.34 87.10 122.53 (6.31) ------------------------------------------------------------------------------------------------------------- Less: Distribution from investment income- net (28.81) (65.19) (70.93) (72.83) (71.74) Distribution from realized gains on investments - (5.25) (3.19) - (0.31) ------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (28.81) (70.44) (74.12) (72.83) (72.05) ------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 1,168.94 $ 1,152.30 $ 1,098.40 $ 1,085.42 $ 1,035.72 ------------------------------------------------------------------------------------------------------------- Ratios Ratio of expenses to average net assets** 0.39% 0.36% 0.37% 0.38% 0.39% Ratio of net investment income to average net assets** 4.9% 5.8% 6.4% 6.9% 6.7% Portfolio turnover rate** 64.8% 64.3% 40.9% 25.9% 31.7% ----------------------------------------------------------------------------------------------------------- NUMBER OF OUTSTANDING UNITS AT END OF PERIOD 3,057,939 2,848,002 2,504,984 2,282,511 2,075,197 ----------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (IN THOUSANDS) $3,574,555 $3,281,763 $2,751,482 $2,477,482 $2,149,327 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN* 8.16% 11.64% 8.21% 12.31% (0.57%) -----------------------------------------------------------------------------------------------------------
* Net of fund expenses. Percent is annualized. ** Percents are annualized. See accompanying notes to financial statements. AFL-CIO Housing Investment Trust 1717 K Street, NW, Suite 707 Washington, DC 20036 202.331.8055 www.aflcio-hit.com