-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BM+juF6HToluqk1XkkYfn1Fhv/Bc6vIjkMcl8OoIuh5D97Wbtq7eTOAYEtPwquQD k7SHPJs76Cj9UkMDOV2TBg== 0001169232-04-004840.txt : 20040908 0001169232-04-004840.hdr.sgml : 20040908 20040908161849 ACCESSION NUMBER: 0001169232-04-004840 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040908 DATE AS OF CHANGE: 20040908 EFFECTIVENESS DATE: 20040908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFL CIO HOUSING INVESTMENT TRUST CENTRAL INDEX KEY: 0000225030 IRS NUMBER: 526220193 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03493 FILM NUMBER: 041020910 BUSINESS ADDRESS: STREET 1: 1717 K STREET NW STREET 2: STE 707 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2023318055 MAIL ADDRESS: STREET 1: 1717 K ST NW SUITE 707 CITY: WASHINGTON STATE: DC ZIP: 20006 N-CSRS 1 d60673_n-csrs.txt FORM N-CSRS 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 31 Date of reporting period: June 30, 2004 Item 1. Reports to Stockholders. A copy of the 2004 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. SEMI-ANNUAL REPORT [LOGO] AFL-CIO HOUSING INVESTMENT TRUST JUNE 30, 2004 2004 Semi-Annual Report [LOGO] REPORT TO PARTICIPANTS The AFL-CIO Housing Investment Trust (HIT or the Trust) achieved a total net return of 0.19% for the first six months of 2004. The HIT outperformed its industry benchmark, the Lehman Brothers Aggregate Bond Index (Lehman Aggregate), by 4 basis points for the period. At June 30, the HIT had $3.59 billion in total net assets under management for 421 participants. Investments from participants totaled $135.6 million during the period, of which $63.9 million were new investments and $71.7 million were dividends reinvested by participants. GENERATING COMPETITIVE RETURNS The first half of 2004 was a challenging period for the fixed-income sector as the market anticipated rising short-term interest rates and the end of accommodative monetary policy. Interest rates rose across the board. The HIT executed a portfolio management strategy emphasizing its specialization in the Agency-insured multifamily mortgage-backed securities (MBS) sector and its application of prudent risk management policies. The HIT portfolio continued to generate - -------------------------------------------------------------------------------- Comparison of $50,000 Investment in HIT and Lehman Aggregate (1) [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] ($ Thousands) ------------- AFL-CIO Housing Investment Trust $106,210 Lehman Brothers Aggregate Bond Index (2) $101,970 Average Annual Total Return (%) (1) [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
YTD 1 Year 3 Years 5 Years 10 Years - ----------------------------------------------------------------------------------------- AFL-CIO Housing Investment Trust 0.19 -0.03 6.70 7.15 7.82 Lehman Brothers Aggregate Bond Index (2) 0.15 0.32 6.36 6.95 7.39
(1) Past performance is no guarantee of future results. Economic and market conditions change, and both will cause investment return, principal value, and yield to fluctuate so that a participant's units when redeemed may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.aflcio-hit.com. (2) The Lehman Brothers Aggregate Bond Index is an unmanaged index. It is not available for direct investment; therefore, its performance does not reflect the expenses associated with active management of an actual portfolio. Investors should consider the HIT's investment objectives, risks and expenses carefully before investing. A prospectus containing more complete information may be obtained from the HIT by calling the Marketing and Investor Relations Department collect at 202-331-8055. The prospectus should be read carefully before investing. Page 1 [LOGO] AFL-CIO Housing Investment Trust competitive returns relative to the Lehman Aggregate while reflecting better credit risk and similar interest rate risk. During the first six months of the year, over 98% of the portfolio had a Government or Agency credit quality. The HIT managed the duration of the portfolio slightly short of the Lehman Aggregate. This enabled the Trust to reduce the negative impact of rising interest rates consistent with its policy of maintaining duration within a range of plus or minus six months of the Lehman Aggregate. The emphasis on Agency-insured multifamily MBS provided prepayment protection while capturing additional yield spreads over other Government or Agency bonds without taking additional credit risk. The "Portfolio Distribution" chart presents a profile of the HIT's holdings at June 30, 2004. Portfolio Distribution (%)* [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Cash and Short-term Investments 1.9% Single Family Mortgage-backed Securities 27.3% State Housing Finance Agency Securities 0.2% Multifamily Permanent Mortgage-backed Securities 44.8% Multifamily Construction Mortgage-backed Securities 10.7% Construction and Permanent Mortgages 0.3% U.S. Treasury and Government-sponsored Entities 14.8% * Includes funded and unfunded commitments. MULTIFAMILY HOUSING The HIT issued commitments of $109.4 million for multifamily investments in nine projects in the first two quarters of 2004, an increase of 17% over the funds committed in the comparable period a year earlier. This financing will create over 860 units of housing and provide for the construction of a Ginnie Mae-insured hospital and clinic. Sixty percent of the housing units will be affordable to low- or moderate-income households. The total development costs of these projects will exceed $190 million. Representative projects are described briefly below. Grand Itasca Clinic and Hospital: With a commitment of $42.1 million, the HIT is helping to finance a $59 million, 64-bed hospital and outpatient care facility to serve the community of Grand Rapids, Minnesota. The 182,000 square foot, state-of-the-art facility will replace an older hospital and rehabilitation clinic. The existing collective bargaining agreements between the hospital and the hospital workers will remain in place. The four unions representing these workers are the United Food and Commercial Workers; American Federation of State, County and Municipal Employees; United Steelworkers of America; and Minnesota Nurses Association. Grand Itasca Clinic and Hospital Grand Rapids, MN [PHOTO] Page 2 2004 Semi-Annual Report [LOGO] Focus on Mixed-Income Senior Housing: Three projects representing $19 million in HIT financing will create 317 units of mixed-income housing for independent seniors. These senior housing projects, with total development costs of more than $44 million, are the North Center Senior Apartments and Roosevelt Towers (Phase I) in Chicago and the Blaine Town Square Senior Housing development outside Minneapolis/St. Paul. [PHOTO] Blaine Town Square Blaine, MN [PHOTO] North Center Senior Apartments Chicago, IL Heritage Park III: A $3.9 million commitment from the HIT is helping to finance the $19.9 million third phase of Heritage Park, a $225 million development of mixed-income housing currently under construction in Minneapolis. This phase will consist of a 17-building apartment complex offering 95 units of housing to people of various income levels. Heritage Park is designed as an affordable urban neighborhood close to the downtown Minneapolis business district. HOMEOWNERSHIP The nationwide HIT HOME homeownership program, carried out in cooperation with Countrywide Home Loans and Fannie Mae, originated more than 1,500 mortgage loans for union members and municipal employees during this six-month period, with total loan volume of $227.9 million. Year-to-date production brought the program's cumulative results to more than 7,000 mortgage loans for working persons, with a loan volume of $994.7 million, since HIT HOME began operation in 2000. The program's strategy of focusing on new purchase loans proved successful in the first six months of 2004. During this period more than 50% of the HIT HOME loan volume was for home purchases. Page 3 [LOGO] AFL-CIO Housing Investment Trust 2004 PARTICIPANTS MEETING The 2004 Annual Meeting of Participants was held in Washington, D.C., on Thursday, June 10, 2004. 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 2,257,437.406 for, none against, 117,266.388 abstentions and 831,229.425 votes not cast. Tony Stanley was reelected to the Board of Trustees for a three-year term by a vote of 2,261,279.679 for, none against, 113,424.114 abstentions and 831,229.425 votes not cast. John J. Sweeney was reelected to the Board of Trustees for a three-year term by a vote of 2,255,351.997 for, 184.607 against, 119,167.189 abstentions and 831,229.425 votes not cast. Frank Hurt was reelected to the Board of Trustees for a three-year term by a vote of 2,261,279.679 for, none against, 113,424.114 abstentions and 831,229.425 votes not cast. The following Trustees were not up for election and their terms of office continued after the date of the Annual Meeting: Linda Chavez-Thompson, John J. Flynn, Stephen Frank, George Latimer, Jeremiah O'Connor, Marlyn J. Spear, Andrew Stern, Edward C. Sullivan and Richard L. Trumka. Trustee Patricia Wiegert's term expired in 2004 and she did not seek reelection. Ernst & Young LLP was ratified as the HIT's Independent Auditor by a vote of 2,261,517.659 for, none against, 113,186.135 abstentions and 831,229.425 votes not cast. AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE Beginning in November 2004, the Trust will file its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on new Form N-Q. The Trust's Forms N-Q will thereafter be available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. (information relating to the hours and operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330). Participants may also obtain copies of the Trust's Forms N-Q, without charge, upon request, by calling the Trust collect at 202-331-8055. PROXY VOTING RECORD The Trust invests exclusively in non-voting securities and has not deemed it necessary to adopt policies and procedures for the voting of portfolio securities. During the most recent twelve-month period ended June 30, the Trust held no voting securities in its portfolio and has reported this information in its most recent filing with the SEC on new Form N-PX. The Trust's proxy voting report on Form N-PX for the most recent twelve-month period ended June 30, 2004, is available on the SEC's website at www.sec.gov. Participants may also obtain a copy of the Trust's report on Form N-PX, without charge, upon request, by calling the Trust collect at 202-331-8055. Page 4 2004 Semi-Annual Report [LOGO] EXPENSE EXAMPLE Participants of the Trust incur ongoing expenses related to the management and distribution activities of the Trust, as well as certain other expenses. This Example is intended to help participants understand the ongoing costs (in dollars) of investing in the Trust and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $50,000 invested at the beginning of the period, January 1, 2004, and held for the entire period ending June 30, 2004. Actual Expenses: The first line of the table below provides information about actual account values and actual expenses. Participants may use the information in this line, together with the amount they invested, to estimate the expenses that they paid over the period. Simply divide the account value by $50,000 (for example, an $800,000 account value divided by $50,000 = 16), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses paid on a particular account during this period. Hypothetical Expenses (for Comparison Purposes Only): The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Trust's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Trust's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses a participant paid for the period. Participants may use this information to compare the ongoing costs of investing in the Trust and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the Trust charges no transactional costs, such as sales charges (loads), redemption fees or exchange fees. Expense Example Table
Beginning Ending Expenses Paid Account Value Account Value During the Period January 1, 2004 June 30, 2004 Ended June 30, 2004 - -------------------------------------------------------------------------------------------- Actual Expenses $50,000 $50,093 $95 - -------------------------------------------------------------------------------------------- Hypothetical Expenses (1) (5% return before expenses) $50,000 $51,139 $96
(1) Expenses are equal to the Trust's annualized expense ratio of 0.38%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). Page 5 [LOGO] AFL-CIO Housing Investment Trust Trustees Richard Ravitch, Chairman* Principal, Ravitch, Rice & Co. LLC John J. Sweeney* President, AFL-CIO Richard L. Trumka Secretary-Treasurer, AFL-CIO Linda Chavez-Thompson Executive Vice President, AFL-CIO John J. Flynn President, International Union of Bricklayers and Allied Craftworkers Stephen Frank Independent Consultant; formerly Vice President and Chief Financial Officer, The Small Business Funding Corporation Frank Hurt President, Bakery, Confectionery & Tobacco Workers and Grain Millers International Union George Latimer Distinguished Visiting Professor of Urban Studies, Macalester College Jeremiah O'Connor International Secretary-Treasurer, International Brotherhood of Electrical Workers Marlyn J. Spear, CFA Chief Investment Officer, Building Trades United Pension Trust Fund, Milwaukee Tony Stanley* Executive Vice President and Director, TransCon Builders, Inc. (retired) Andrew Stern President, Service Employees International Union, AFL-CIO Edward C. Sullivan President, Building and Construction Trades Department, AFL-CIO * Executive Committee member. Leadership Stephen Coyle, Chief Executive Officer Michael M. Arnold, Senior Executive Vice President - Marketing, Investor and Labor Relations Helen R. Kanovsky, Chief Operating Officer Erica Khatchadourian, Chief Financial Officer John Hanley, Executive Vice President - Portfolio Management and Investments Chang Suh, Chief Portfolio Manager Mary C. Moynihan, General Counsel Stephanie H. Wiggins, Chief Investment Officer - Multifamily Finance Marcie Cohen, Senior Vice President Mara C. Riggins, Controller Nicholas C. Milano, Associate General Counsel and Chief Compliance Officer Carol Nixon, Director of New York City Office Aaron Prince, Director of Western Regional Office - -------------------------------------------------------------------------------- Corporate Counsel Swidler Berlin Shereff Friedman, LLP, Washington, DC Securities Counsel Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC Independent Auditor Ernst & Young LLP, Philadelphia, PA Investment Adviser Wellington Management Company, LLP, Boston, MA Transfer Agent PFPC Inc., Wilmington, DE Custodian PFPC Trust Company, Philadelphia, PA Page 6 FINANCIAL STATEMENTS June 30, 2004 (Unaudited) American Federation of Labor and Congress of Industrial Organizations Housing Investment Trust [LOGO] AFL-CIO Housing Investment Trust Statement of Assets and Liabilities June 30, 2004 (Dollars in thousands, unless otherwise noted; unaudited) Assets Investments, at fair value (amortized cost $3,499,481)* $ 3,552,659 Cash 10,401 Accrued interest receivable 18,168 Receivables for investments sold 63,486 Accounts receivable 146 Prepaid expenses and other assets 2,470 - --------------------------------------------------------------------------------------------------- Total Assets 3,647,330 - --------------------------------------------------------------------------------------------------- Liabilities Accounts payable and accrued expenses 1,747 Payables for investments purchased 48,733 Redemptions payable 1,100 Refundable deposits 850 Income distribution payable, net of dividends reinvested of $11,614 1,308 - --------------------------------------------------------------------------------------------------- Total Liabilities 53,738 - --------------------------------------------------------------------------------------------------- Net Assets Applicable to Participants' Equity -- Certificates of Participation -- Authorized Unlimited; Outstanding 3,258,519 Units $ 3,593,592 =================================================================================================== Net Asset Value Per Unit of Participation (in dollars) $ 1,102.83 =================================================================================================== Participants' Equity Participants' equity consisted of the following: Amount invested and reinvested by current participants $ 3,539,819 Net unrealized appreciation of investments 53,178 Undistributed net investment income 307 Undistributed net realized gain on investments 288 =================================================================================================== Total Participants' Equity $ 3,593,592 ===================================================================================================
* The cost for Federal tax purposes approximates book cost. See accompanying notes to financial statements. Page 8 2004 Semi-Annual Report [LOGO] Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) FHA Permanent Securities (5.1% of net assets)
Interest Face Amortized Rate Maturity Dates Amount Cost Value ============================================================================================================= Single Family 7.75% Jul-2021-Aug-2021 $ 166 $ 166 $ 166 8.00% Jul-2021 81 81 81 10.31% Feb-2016 62 62 62 - ------------------------------------------------------------------------------------------------------------- 309 309 309 - ------------------------------------------------------------------------------------------------------------- Multifamily* 5.25% Mar-2024 5,536 5,578 5,442 5.60% Jun-2038 2,956 2,963 2,995 5.62% Jun-2014 900 900 917 5.65% Oct-2038 2,262 2,343 2,273 5.87% Jun-2044 2,000 2,000 2,034 6.66% May-2040 5,856 5,863 6,236 6.70% Dec-2042 6,102 6,107 6,573 6.75% Jul-2036-Jul-2040 10,036 9,847 10,640 6.88% Apr-2031 29,549 29,230 31,980 7.00% Jun-2039 6,139 6,189 6,633 7.05% Jul-2043 5,397 5,397 5,923 7.07% Sep-2039 8,183 8,183 8,613 7.13% Mar-2040 8,021 8,000 8,840 7.17% Feb-2040 4,818 4,822 5,078 7.20% Nov-2033-Oct-2039 10,309 10,321 11,414 7.50% Sep-2032 1,672 1,677 1,897 7.70% Oct-2039 12,280 12,228 13,580 7.75% Oct-2038 1,416 1,410 1,550 7.88% Nov-2036-Jul-2038 9,216 9,220 9,867 7.93% Apr-2042 2,928 2,928 3,399 8.00% Sep-2034 3,856 3,856 3,879 8.25% Nov-2036 3,530 3,535 3,618 8.27% Jul-2042 2,558 2,558 2,960 8.38% Feb-2007 476 494 503 8.40% Apr-2012 913 913 919 8.75% Jul-2036-Aug-2036 12,003 11,966 12,641 8.80% Oct-2032 5,453 5,453 5,453 8.88% May-2036 2,436 2,403 2,502 9.50% Jul-2027 362 365 393 10.00% Mar-2031 5,665 5,665 5,718 - ------------------------------------------------------------------------------------------------------------- $ 172,828 $ 172,414 $ 184,470 - ------------------------------------------------------------------------------------------------------------- Total FHA Permanent Securities: $ 173,137 $ 172,723 $ 184,779 =============================================================================================================
* Multifamily MBS securities are valued by the fair value procedures adopted by the Trust's Board of Trustees. Refer to Note 1 of the financial statements for further information. See accompanying notes to the financial statements. Page 9 [LOGO] AFL-CIO Housing Investment Trust Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) FHA Construction Securities and Commitments (0.2% of net assets)
Interest Rates (1) Commitment Face Amortized Permanent Construction Maturity Date (2) Amount Amount Cost Value ======================================================================================================================= Multifamily (3) 6.02% 6.02% Jun-2035 $ 7,243 $ 7,243 $ 7,246 $ 7,345 - ----------------------------------------------------------------------------------------------------------------------- Total FHA Construction Securities and Commitments $ 7,243 $ 7,243 $ 7,246 $ 7,345 =======================================================================================================================
(1) 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. (2) Permanent mortgage maturity date. (3) Multifamily MBS securities are valued by the fair value procedures adopted by the Trust's Board of Trustees. Refer to Note 1 of the financial statements for further information. Ginnie Mae Securities and Commitments (29.9% of net assets)
Commitment Face Amortized Interest Rate Maturity Dates Amount Amount Cost Value ==================================================================================================================== Single Family 3.50% Aug-2033-Oct-2033 $ $ 25,717 $ 25,950 $ 25,772 3.75% Dec-2033 24,580 24,456 24,598 4.00% Feb-2033 10,231 10,316 10,341 4.50% Nov-2032 22,997 23,249 23,262 5.50% Jan-2033-Aug-2033 21,177 21,442 21,216 6.00% Jan-2032 - Jun-2033 11,884 12,331 12,201 6.50% Jul-2028-Jun-2032 11,809 12,228 12,390 7.00% Nov-2016-Jan-2030 20,092 20,611 21,470 7.50% Apr-2013-Aug-2030 19,542 20,076 21,116 8.00% Nov-2009-Dec-2030 10,762 11,058 11,743 8.50% Nov-2009-Aug-2027 6,756 6,919 7,401 9.00% May-2016-Jun-2025 1,735 1,782 1,906 9.50% Sep-2021-Sep-2030 723 744 805 10.00% Jun-2019 3 3 4 12.00% May-2015 - Jun-2105 1 1 2 13.00% Jul-2014 1 1 2 13.25% Dec-2014 1 1 1 - -------------------------------------------------------------------------------------------------------------------- 188,011 191,168 194,230 - -------------------------------------------------------------------------------------------------------------------- Multifamily (3) 2.91% Aug-2020 9,908 9,902 9,516 4.25% Feb-2031 6,000 5,967 5,802 4.43% Jun-2034 75,000 75,152 68,005 4.59% May-2033 15,000 15,000 14,616 4.78% Apr-2034 34,840 36,639 34,902 4.92% May-2034 40,000 40,066 38,131 5.01% Dec-2025 12,200 12,093 12,126
See accompanying notes to financial statements. (Continued) Page 10 2004 Semi-Annual Report [LOGO] Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) Ginnie Mae Securities and Commitments (29.9% of net assets), continued
Commitment Face Amortized Interest Rate Maturity Dates Amount Amount Cost Value ========================================================================================================================= Multifamily (3) 5.05% Nov-2028 $ $ 32,000 $ 32,135 $ 31,533 5.13% Jul-2024 5,000 5,095 5,098 5.18% May-2028 30,000 29,898 29,939 5.30% Apr-2039 55,000 54,050 53,863 5.32% Aug-2030 35,000 34,845 35,266 5.45% Jun-2038 7,288 7,240 7,500 5.50% Jul-2033-Aug-2038 62,113 64,269 62,623 5.68% Jul-2027 5,152 5,350 5,244 5.79% May-2005 (1) 7,589 7,700 7,751 5.86% Oct-2023 10,000 10,617 10,556 5.88% Nov-2011 15,000 15,000 15,858 6.00% Dec-2042 3,919 3,872 4,176 6.09% Jun-2021 5,000 5,000 5,343 6.11% Nov-2021 970 970 1,034 6.15% Jan-2044 18,559 18,566 19,888 6.33% Feb-2005 (1) 18,128 18,212 18,128 6.34% Aug-2023 3,464 3,464 3,709 6.50% Dec-2039 3,507 3,507 3,771 6.54% Dec-2004 (1) 13,552 13,744 13,750 6.56% Jun-2037 (2) 38,286 38,754 41,797 6.63% Oct-2033-Dec-2038 27,711 27,566 29,949 6.69% Jun-2040 5,514 5,507 5,992 6.70% Jan-2044 30,439 30,327 33,798 6.75% Jun-2023-Jul-2043 18,404 19,606 20,391 6.93% Mar-2044 33,100 33,144 35,866 7.00% Jun-2043 66,259 66,258 73,147 7.23% Jun-2041 8,066 7,857 9,066 7.38% Mar-2042 6,630 6,655 7,539 7.45% Jun-2042 9,622 9,622 10,951 7.50% Apr-2038-Jan-2042 32,104 31,761 35,652 7.57% Feb-2042 2,541 2,541 2,790 7.70% Mar-2042 20,719 20,472 23,755 7.80% Jul-2039 18,817 18,825 21,049 7.88% Nov-2036 879 879 901 8.15% Nov-2025 3,575 3,555 3,945 8.75% Dec-2026 4,116 4,116 4,147 - ------------------------------------------------------------------------------------------------------------------------- 850,971 855,798 878,863 - ------------------------------------------------------------------------------------------------------------------------- Forward Commitments 5.85% Nov-2036 4,413 -- -- 226 7.50% Apr-2044 23,300 -- 67 233 - ------------------------------------------------------------------------------------------------------------------------- 27,713 -- 67 459 - ------------------------------------------------------------------------------------------------------------------------- Total Ginnie Mae Securities and Commitments $ 27,713 $1,038,982 $1,047,033 $1,073,552 =========================================================================================================================
(1) Date the HIT is required to sell securities to bond trustee. (2) This security is held in a segregated account as collateral for the Trust's secured bank line of credit. (3) Multifamily MBS securities are valued by the fair value procedures adopted by the Trust's Board of Trustees. Refer to Note 1 of the financial statements for further information. See accompanying notes to financial statements. Page 11 [LOGO] AFL-CIO Housing Investment Trust Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) Ginnie Mae Construction Securities and Commitments (5.2% of net assets)
Interest Rates (1) Commitment Permanent Construction Maturity Date (2) Amount Face Amount Amortized Cost Value ========================================================================================================================== Multifamily (3) 5.10% 2.25% Sep-2045 $ 7,230 $ 7,230 $ 7,243 $ 6,902 5.20% 3.45% Jan-2045 21,139 21,139 21,215 20,667 4.63% 4.63% Dec-2044 6,178 5,790 5,832 5,409 4.88% 4.88% Jul-2046 35,000 11,718 11,898 10,086 4.95% 4.95% Jan-2045 11,200 5,936 6,121 5,533 4.65% 5.00% (4) Oct-2045 28,901 8,582 7,333 7,065 5.18% 5.18% Mar-2045 6,000 3,959 3,981 3,878 5.19% 5.19% Oct-2045 11,880 2,479 2,538 2,169 5.21% 5.21% Jan-2045 5,842 2,117 2,121 2,043 5.35% 5.35% Dec-2044 8,800 8,800 8,809 8,827 5.55% 5.55% Mar-2045 9,279 2,979 2,981 3,010 5.71% 5.71% Apr-2045 7,530 5,179 5,181 5,351 5.25% 5.95% Feb-2031 42,100 8,278 8,176 6,786 6.00% 6.00% Sep-2044 25,635 18,983 18,601 20,255 6.60% 6.60% May-2043 17,793 16,296 15,888 17,892 7.75% 7.25% Aug-2033 51,779 51,780 51,532 60,097 - -------------------------------------------------------------------------------------------------------------------------- 296,286 181,245 179,450 185,970 - -------------------------------------------------------------------------------------------------------------------------- Forward Commitments 5.35% 5.35% Sep-2045 11,400 -- 174 (283) 5.75% 5.75% Jan-2046 28,083 -- (85) 223 6.22% 5.75% Aug-2033 14,599 -- -- 705 5.85% 5.85% Jun-2046 2,250 -- -- 30 6.00% 6.00% May-2046 3,909 -- -- 98 - -------------------------------------------------------------------------------------------------------------------------- 60,241 -- 89 773 - -------------------------------------------------------------------------------------------------------------------------- Total Ginnie Mae Construction Securities and Commitments $ 356,527 $ 181,245 $ 179,539 $ 186,743 ==========================================================================================================================
(1) 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. (2) Permanent mortgage maturity date. (3) Multifamily MBS securities are valued by the fair value procedures adopted by the Trust's Board of Trustees. Refer to Note 1 of the financial statements for further information. (4) Prior to December 20, 2005, this investment is a mortgage-backed security guaranteed by the Government National Mortgage Association ("GNMA-MBS"). From and after December 20, 2005, the investment will be a tax-exempt bond collateralized by the GNMA-MBS. See accompanying notes to financial statements. Page 12 2004 Semi-Annual Report [LOGO] Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) Fannie Mae Securities and Commitments (34.0% of net assets)
Interest Rate Maturity Dates Face Amount Amortized Cost Value ====================================================================================================================== Single Family 3.13% Sep-2033 $ 7,658 $ 7,587 $ 7,633 3.39% Sep-2033 3,595 3,634 3,596 3.75% Aug-2033 21,450 21,015 21,190 4.00% Jul-2033 21,253 21,432 21,148 4.30% Feb-2033-Aug-2033 24,131 24,171 24,226 4.34% May-2033 14,690 14,798 14,746 4.50% Jun-2018-May-2033 37,713 38,353 37,383 5.00% Jul-2018-Jan-2019 76,572 77,824 76,744 5.50% Jul-2017-Jun-2034 174,244 176,641 174,651 6.00% Jan-2006-Jul-2034 123,706 126,874 127,897 6.50% Nov-2016-Nov-2032 58,094 59,629 60,707 7.00% Nov-2013-Jun-2032 21,413 21,733 22,678 7.50% Nov-2016-Sep-2031 6,426 6,384 6,901 8.00% Jan-2007-May-2031 4,913 4,994 5,253 8.50% Nov-2009-Apr-2031 3,464 3,539 3,720 9.00% Jul-2009-May-2025 1,171 1,182 1,269 9.50% Aug-2004 -- -- 1 - ---------------------------------------------------------------------------------------------------------------------- 600,493 609,790 609,743 - ---------------------------------------------------------------------------------------------------------------------- Multifamily (1) 3.81% Nov-2012 8,935 8,935 8,711 4.10% Jun-2027 2,498 2,498 2,357 4.55% Oct-2033 5,353 5,417 5,010 4.66% Jul-2021-Sep-2033 8,972 9,129 8,464 4.77% Apr-2012 3,280 3,394 3,333 4.78% Aug-2018 3,956 4,018 3,721 4.88% Sep-2011 23,889 24,044 24,444 4.90% Jul-2033 5,188 5,301 4,796 5.14% Jan-2018 8,065 8,430 7,887 5.15% Sep-2017-Oct-2022 23,745 23,879 23,226 5.16% Dec-2011 14,085 14,243 14,531 5.23% Mar-2018-Apr-2021 4,961 5,140 4,885 5.24% Dec-2012 2,213 2,223 2,305 5.34% Apr-2012 310 323 317 5.35% Dec-2012 5,960 5,985 6,187 5.43% May-2021 3,558 3,668 3,567 5.44% Sep-2013 2,128 2,166 2,206 5.45% May-2033 3,382 3,434 3,285 5.58% Jan-2021 3,883 3,943 3,917 5.60% Oct-2022 (2) 9,726 9,444 9,937 5.63% Nov-2033 20,055 20,122 19,828 5.70% May-2011 847 902 891 5.77% Nov-2021 16,884 17,122 17,229 5.80% Jan-2033 35,146 35,647 35,422 5.84% Aug-2010 5,304 5,548 5,539 5.85% Oct-2008 972 1,035 1,021 5.88% Nov-2027 3,536 3,619 3,598 5.96% Jan-2029 512 524 521 6.13% Dec-2016 3,828 4,241 4,035 6.15% Oct-2032 3,841 3,963 3,984 6.22% Aug-2032 1,965 2,044 2,049 6.25% Dec-2013 2,128 2,192 2,301 6.27% Jan-2012 2,199 2,250 2,400 6.35% Mar-2020 (3) 11,750 11,757 12,290 6.35% Jun-2020-Aug-2032 27,766 29,297 29,450 6.39% Apr-2019 1,070 1,170 1,148 6.41% Aug-2013 2,046 2,219 2,179 6.42% Apr-2011-Aug-2013 7,381 8,053 7,888
Footnotes appear at end of table. (Continued) See accompanying notes to financial statements. Page 13 [LOGO] AFL-CIO Housing Investment Trust Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) Fannie Mae Securities and Commitments (34.0% of net assets), continued
Interest Rate Maturity Dates Face Amount Amortized Cost Value ================================================================================================================= Multifamily (1) 6.44% Apr-2014-Dec-2018 $ 48,888 $ 49,668 $ 53,307 6.50% Jun-2016 3,288 3,292 3,604 6.52% Jul-2008 2,463 2,463 2,604 6.53% May-2030 10,752 10,788 11,347 6.63% Jun-2018-Apr-2019 2,887 2,920 3,135 6.65% Aug-2007 520 524 550 6.70% Jan-2011 2,572 2,807 2,804 6.74% Aug-2007 3,400 3,721 3,657 6.80% Jul-2016 1,068 1,068 1,187 6.85% Mar-2029 8,000 8,832 8,458 6.90% Jun-2007 14,967 15,423 16,044 6.94% Aug-2007 8,430 8,646 9,150 7.01% Apr-2031 3,655 3,700 4,004 7.04% Jun-2014 (4) 7,418 7,431 8,384 7.07% Feb-2031 18,475 18,927 20,282 7.16% Jan-2022 5,406 5,536 5,686 7.18% Aug-2016 652 652 736 7.20% Apr-2010-Aug-2029 10,114 9,831 11,172 7.25% Nov-2011-Jul-2012 9,389 9,389 9,829 7.30% May-2010 22,905 23,703 25,202 7.37% Jan-2013 398 404 408 7.38% Jun-2014-Nov-2018 32,286 34,894 34,649 7.46% Aug-2029 10,083 11,618 11,292 7.50% Dec-2014-Feb-2024 24,437 26,988 26,484 7.71% Feb-2010 9,592 9,744 10,537 7.75% Dec-2012-Dec-2024 4,609 4,611 5,159 8.00% Nov-2019-May-2020 6,339 6,324 6,501 8.13% Sep-2012-Aug-2020 10,056 10,036 10,790 8.38% Jan-2022 1,022 1,025 1,122 8.40% Jul-2023 553 544 645 8.50% Sep-2006-Sep-2026 6,441 6,996 7,423 8.63% Sep-2028 7,034 7,034 8,293 9.13% Sep-2015 3,398 3,387 3,595 9.25% Jun-2018 4,679 4,670 5,106 - ----------------------------------------------------------------------------------------------------------------- 597,493 614,915 628,005 - ----------------------------------------------------------------------------------------------------------------- Forward Commitments 5.50% Various (5) (15,000) (14,829) (14,953) - ----------------------------------------------------------------------------------------------------------------- (15,000) (14,829) (14,953) - ----------------------------------------------------------------------------------------------------------------- Total Fannie Mae Securities and Commitments $ 1,182,986 $ 1,209,876 $ 1,222,795 =================================================================================================================
(1) Multifamily MBS securities are valued by the fair value procedures adopted by the Trust's Board of Trustees. Refer to note 1 of the financial statements for further information. (2) During construction the investment is a participation in the construction loan which is secured by a letter of credit from LaSalle Bank National Association; the permanent financing will be a Fannie Mae MBS for which the Trust has issued its commitment to purchase. (3) 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. (4) During construction the investment is a participation in the construction loan which is secured by a letter of credit from 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. (5) Represents to be announced ("TBA") securities, securities the Trust agreed to sell for which the specific securities have not yet been identified. See accompanying notes to financial statements. Page 14 2004 Semi-Annual Report [LOGO] Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) Freddie Mac Securities (6.8% of net assets)
Interest Rate Maturity Dates Face Amount Amortized Cost Value ========================================================================================================= Single Family 4.30% Jun-2033 $ 8,820 $ 8,786 $ 8,793 4.50% Aug-2018-Feb-2019 33,155 33,342 32,441 5.00% Jan-2019-Feb-2019 21,884 22,464 21,939 5.50% Oct-2017-Apr-2033 11,489 12,024 11,768 6.00% Apr-2005-Feb-2034 112,287 115,724 114,973 6.50% Dec-2006-Aug-2032 24,523 24,853 25,713 7.00% Mar-2011-Mar-2030 7,073 7,048 7,525 7.50% Jul-2010-Apr-2031 7,195 7,154 7,718 8.00% May-2008-Feb-2030 4,183 4,195 4,433 8.50% Jun-2010-Jan-2025 3,101 3,132 3,312 9.00% Sep-2010-Mar-2025 695 710 747 - --------------------------------------------------------------------------------------------------------- 234,405 239,432 239,362 - --------------------------------------------------------------------------------------------------------- Multifamily (1) 8.00% Feb-2009 4,732 4,737 4,766 - --------------------------------------------------------------------------------------------------------- 4,732 4,737 4,766 - --------------------------------------------------------------------------------------------------------- Total Freddie Mac Securities $ 239,137 $ 244,169 $ 244,128 =========================================================================================================
(1) Multifamily MBS securities are valued by the fair value procedures adopted by the Trust's Board of Trustees. Refer to Note 1 of the financial statements for further information. Government Sponsored Entities Notes (2.7% of net assets)
Issuer Interest Rate Maturity Date Face Amount Amortized Cost Value ========================================================================================================= Fannie Mae 2.25% May-2006 $ 15,045 $ 15,179 $ 14,865 Fannie Mae 2.50% Jun-2006 45,000 44,649 44,590 Fannie Mae 4.13% Apr-2014 5,000 4,540 4,603 Fannie Mae 4.38% Jul-2013 15,000 14,997 14,060 Fannie Mae 5.50% Jul-2012 20,000 20,395 20,149 - --------------------------------------------------------------------------------------------------------- Total Government Sponsored Entities Notes $ 100,045 $ 99,760 $ 98,267 =========================================================================================================
United States Treasury Notes (12.8% of net assets)
Interest Rate Maturity Dates Face Amount Amortized Cost Value ========================================================================================================= 1.13% Jun-2005 $ 20,000 $ 19,859 $ 19,816 1.50% Jul-2005 45,000 44,994 44,698 1.63% Mar-2005-Oct-2005 130,000 129,894 129,249 1.75% Dec-2004 40,000 40,008 40,006 1.88% Dec-2005-Jan-2006 60,000 60,221 59,444 2.00% May-2006 15,000 14,925 14,824 2.25% Apr-2006-Feb-2007 40,000 40,162 39,476 2.63% Mar-2009 15,000 14,664 14,273 3.13% Apr-2009 48,000 48,238 47,216 3.25% Aug-2007 21,100 21,426 21,120 3.50% Nov-2006 2,085 2,165 2,112 4.00% Feb-2014 2,000 1,881 1,906 6.75% May-2005 1,900 1,997 1,977 7.50% Feb-2005 20,000 20,702 20,703 10.75% Aug-2005 1,750 1,938 1,916 - --------------------------------------------------------------------------------------------------------- Total United States Treasury Notes $ 461,835 $ 463,074 $ 458,736 =========================================================================================================
See accompanying notes to financial statements. Page 15 [LOGO] AFL-CIO Housing Investment Trust Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) State Housing Finance Agency Securities (0.2% of net assets)
Issuer Interest Rate Maturity Date Face Amount Amortized Cost Value =============================================================================================================== Multifamily (1) MA Housing Finance Agency 8.00% Jan-2026 $ 4,550 $ 4,545 $ 4,713 MA Housing Finance Agency 8.63% Jan-2013 370 375 411 MA Housing Finance Agency 9.00% Jan-2025 908 908 933 - --------------------------------------------------------------------------------------------------------------- Total State Housing Finance Agency Securities $ 5,828 $ 5,828 $ 6,057 ===============================================================================================================
(1) Multifamily MBS securities are valued by the fair value procedures adopted by the Board. Refer to Note 1 of the financial statements for further information. Other Mutifamily Investments and Commitments(1) (0.1% of net assets)
Interest Rates (2) Commitment Permanent Construction Maturity Dates (3) Amount Face Amount Amortized Cost Value ================================================================================================================== Multifamily Construction/Permanent Mortgages 7.63% N/A Jan-2011 $ 813 $ 579 $ 579 $ 617 8.13% N/A Aug-2005 1,016 195 190 195 8.63% N/A Jun-2025 -- 1,331 1,331 1,331 9.50% N/A Aug-2012 - Apr-2024 -- 1,966 1,966 1,966 - ------------------------------------------------------------------------------------------------------------------ 1,829 4,071 4,066 4,109 - ------------------------------------------------------------------------------------------------------------------ Privately Insured Construction/Permanent Mortgage 5.95% 5.95% Mar-2044 4,400 (4) 4,400 4,418 4,314 6.15% 6.15% Feb-2045 1,600 (4) 1,600 1,600 1,684 - ------------------------------------------------------------------------------------------------------------------ 6,000 6,000 6,018 5,998 - ------------------------------------------------------------------------------------------------------------------ Total Other Multifamily Investments and Commitments $ 7,829 $ 10,071 $ 10,084 $ 10,107 ================================================================================================================== ================================================================================================================== Total Long-Term Investments $ 3,400,509 $ 3,439,332 $ 3,492,509 ==================================================================================================================
(1) Multifamily MBS securities are valued by the fair value procedures adopted by the Trust's Board of Trustees. Refer to Note 1 of the financial statements for further information. (2) 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. (3) Permanent mortgage maturity date. (4) Loan insured by Ambac Assurance Corporation. See accompanying notes to financial statements. Page 16 2004 Semi-Annual Report [LOGO] Schedule of Portfolio Investments June 30, 2004 (Dollars in thousands; unaudited) Short-term Investments (1.7% of net assets)
Description Maturity Date Interest Rate Face Amount Amortized Cost Value =========================================================================================================== Repurchase Agreement Amalgamated Bank (1) July 2004 1.00% $ 2,000 $ 2,000 $ 2,000 - ----------------------------------------------------------------------------------------------------------- 2,000 2,000 2,000 - ----------------------------------------------------------------------------------------------------------- Commercial Paper Discount Paper Various (2) Various (3) 58,060 58,049 58,050 - ----------------------------------------------------------------------------------------------------------- 58,060 58,049 58,050 - ----------------------------------------------------------------------------------------------------------- Certificate of Deposit Shore Bank - Pacific July 2004 1.77% 100 100 100 - ----------------------------------------------------------------------------------------------------------- 100 100 100 - ----------------------------------------------------------------------------------------------------------- =========================================================================================================== Total Short-Term Investments $ 60,160 $ 60,149 $ 60,150 =========================================================================================================== =========================================================================================================== Total Investments $3,460,669 $3,499,481 $3,552,659 ===========================================================================================================
(1) This instrument was purchased in June 2004. The Trust will receive $2,001,644 upon maturity. The underlying collateral of the repurchase agreement is a Ginnie Mae security with a market value of $2,065,077. (2) The Trust holds commercial paper with varying maturity dates as part of its short-term cash management strategy. At June 30, 2004, the maturity dates ranged from July 1, 2004 - July 21, 2004. (3) The Trust's commercial paper holdings are discount paper with no stated interest rates; yields on the investments ranged between 1.15% and 1.45% as of June 30, 2004. See accompanying notes to financial statements. Page 17 [LOGO] AFL-CIO Housing Investment Trust Statement of Operations For the Six Months Ended June 30, 2004 (Dollars in thousands; unaudited)
Investment Income FHA permanent securities $ 6,960 FHA construction securities 210 Ginnie Mae securities 26,453 Ginnie Mae construction securities* 5,611 Fannie Mae securities* 35,488 Freddie Mac securities 5,822 Government Sponsored Entities Notes 1,412 United States Treasury Notes 2,759 State Housing Finance Agency securities 248 Other multifamily investments 361 Short-term investments 632 - ------------------------------------------------------------------------------------------------------------ Total Income $ 85,956 - ------------------------------------------------------------------------------------------------------------ Expenses Officer salaries and fringe benefits $ 1,174 Other salaries and fringe benefits 3,245 Legal fees 198 Consulting fees 120 Auditing, tax and accounting fees 130 Insurance 174 Marketing and sales promotion (12b-1) 284 Investment management 243 Trustee expenses 24 Rental expenses 334 General expenses 899 - ------------------------------------------------------------------------------------------------------------ Total Expenses $ 6,825 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ Net Investment Income $ 79,131 - ------------------------------------------------------------------------------------------------------------ Net realized gain on investments $ 288 Net change in unrealized appreciation (depreciation) on investments (71,534) - ------------------------------------------------------------------------------------------------------------ Realized and Unrealized Net Losses on Investments $ (71,246) ============================================================================================================ Net Increase in Net Assets Resulting from Operations $ 7,885 ============================================================================================================
* Including forward commitments. See accompanying notes to financial statements. Page 18 2004 Semi-Annual Report [LOGO] Statements of Changes in Net Assets (Dollars in thousands)
Six Months Ended June 30, 2004, Year Ended unaudited December 31, 2003 ================================================================================================================================== Increase In Net Assets From Operations Net investment income $ 79,131 $ 163,446 Net realized gain on investments 288 48,588 Net change in unrealized appreciation (depreciation) on investments (71,534) (84,342) - ------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 7,885 127,692 - ------------------------------------------------------------------------------------------------------------------------------- Decrease In Net Assets From Distributions Distributions paid to participants or reinvested from: Net investment income (79,131) (163,446) Net realized gains on investments -- (48,588) - ------------------------------------------------------------------------------------------------------------------------------- Net decrease in net assets from distributions (79,131) (212,034) - ------------------------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Net Assets From Unit Transactions Proceeds from the sale of units of participation 63,871 290,936 Dividend reinvestment of units of participation 71,696 191,791 Payments for redemption of units of participation (78,868) (72,009) - ------------------------------------------------------------------------------------------------------------------------------- Net increase from unit transactions 56,699 410,718 - ------------------------------------------------------------------------------------------------------------------------------- Total (decrease) increase in net assets (14,547) 326,376 Net assets at beginning of period 3,608,139 3,281,763 =============================================================================================================================== Net Assets at End of Period $ 3,593,592 $ 3,608,139 =============================================================================================================================== Unit Information Units sold 57,142 252,914 Distributions reinvested 63,992 168,434 Units redeemed (69,241) (62,724) =============================================================================================================================== Increase in Units Outstanding 51,893 358,624 ===============================================================================================================================
See accompanying notes to financial statements. Page 19 [LOGO] AFL-CIO Housing Investment Trust Notes to Financial Statements; unaudited Note 1. Summary of Significant Accounting Policies The American Federation of Labor and Congress of Industrial Organizations 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 generally accepted U.S. accounting principles. 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 City on the last business day of the month. Portfolio securities for which market quotations are readily available (single family mortgage-backed securities investments, U.S. Agency debt and U.S. 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 mortgage-backed securities investments, mortgage securities and construction mortgage securities) are valued at their fair value determined in good faith under consistently applied procedures adopted by the Board of Trustees 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 U.S. Treasury Note) adjusted for an appropriate risk premium. The risk premium reflects actual premiums in the market place 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 or participation interests, value is determined based upon the total amount, funded and/or un-funded, of the commitment. The Trust has retained an independent firm to determine the fair market value of such securities. In accordance with the procedures adopted by the Board, the monthly third-party valuation is reviewed by the Trust staff to determine whether valuation adjustments are appropriate based on any material impairments in value arising from specific facts and circumstances of the investment (e.g., mortgage defaults). All such adjustments must be reviewed and approved by the independent valuation firm prior to incorporation in the NAV. Short-term investments with remaining maturities of sixty days or less are valued on the basis of amortized cost, which constitutes fair value. Cash and cash equivalents include overnight money market funds which are also carried at cost. Use of Estimates The preparation of financial statements in conformity with generally accepted U.S. accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Page 20 2004 Semi-Annual Report [LOGO] Notes to Financial Statements; unaudited 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 permits current participants automatically to reinvest their income distribution into Trust units of participation. Total reinvestment was over 90 percent of distributable income for the six months ended June 30, 2004. Investment Transactions and Income Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income which includes amortization of premium and accretion of discount on debt securities is accrued as earned. 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, 2004, 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, 2004, the Trust incurred approximately $284,000 of 12b-l expenses. Receivables for Investments Sold Receivables for Investments Sold represents investments that were sold prior to June 30, 2004, which settled subsequent to June 30, 2004. Payables for Investments Purchased Payables for Investments Purchased represents investments that were purchased prior to June 30, 2004, which settled subsequent to June 30, 2004. Page 21 [LOGO] AFL-CIO Housing Investment Trust 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 reduce the value of the Trust's portfolio. Note 3. Transactions with Related Entities During the six months ended June 30, 2004, 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, 2004 amounted to approximately $772,000. During the six months ended June 30, 2004, the Trust was reimbursed for approximately $644,000 of current year costs. As of June 30, 2004, approximately $128,000 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, 2004 was approximately $17,000. During the six months ended June 30, 2004, the Trust paid the ITC approximately $15,000 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, 2004, the Trust had outstanding unfunded purchase commitments of approximately $205.8 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, 2004, the value of the publicly traded mortgage-backed securities maintained for the reserve in a segregated account was approximately $3.2 billion. The commitment amounts disclosed on the Schedule of Portfolio Investments represent the original commitment amount, which includes both funded and unfunded commitments. Page 22 2004 Semi-Annual Report [LOGO] Notes to Financial Statements; unaudited Note 5. Investment Transactions A summary of investment transactions (excluding short-term investments and U.S. Treasury Notes) for the separate instruments included in the Trust's investment portfolio, at amortized cost, for the six months ended June 30, 2004, follows (dollars in thousands):
State Government Housing Other FHA FHA Ginnie Ginnie Mae Fannie Freddie Sponsored Finance Multi- Permanent Construction Mae Construction Mae Mac Entities Agency family Securities Securities Securities Securities* Securities* Securities Notes Securities Investments ==================================================================================================================================== Balance, January 1, 2004 $221,425 $ -- $ 913,624 $ 198,682 $ 1,464,438 $ 169,477 $ 56,688 $ 7,068 $ 8,016 Purchases and insured construction securities advances, net of discounts 22,664 7,243 164,014 83,401 395,133 155,237 95,000 -- 1,600 Change in discounts and (premiums) 331 3 1,407 (300) (6,934) 2,476 (928) (20) 2 Transfers (56,838) -- 152,647 (95,298) -- -- -- (1,115) 604 Principal reductions/Sales (14,859) -- (184,659) (6,946) (642,761) (83,021) (51,000) (105) (138) - --------------------------------------------------------------------------------------------------------------------------------- Balance, June 30, 2004 $172,723 $7,246 $ 1,047,033 $ 179,539 $ 1,209,876 $ 244,169 $ 99,760 $ 5,828 $ 10,084 =================================================================================================================================
* Including forward commitments. Note 6. Federal Taxes The information set-forth in this footnote is actual information as of December 31, 2003 and will be updated in the Annual Report for December 31, 2004 to coincide with the 2004 tax reporting year-end. The tax character of distributions paid during the twelve months ended December 31, 2003 was as follows (dollars in thousands): 2003 ================================================================================ Ordinary investment income - net $ 163,446 Long-term capital gains on investments 48,588 - -------------------------------------------------------------------------------- Total net distributions paid to participants or reinvested $ 212,034 ================================================================================ As of December 31, 2003, the components of accumulated earnings on a tax basis were as follows (dollars in thousands): Undistributed ordinary income $ 559 Unrealized appreciation 124,712 Other temporary differences (252) - -------------------------------------------------------------------------------- Total accumulated earnings $ 125,019 ================================================================================ Page 23 [LOGO] AFL-CIO Housing Investment Trust Notes to Financial Statements; unaudited 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 employer contributions, at rates approximating 16.12% percent of employees' salaries for the six months ended June 30, 2004. The total Trust pension expense for the six months ended June 30, 2004 was approximately $496,000. The Trust also participates in a deferred compensation plan, referred to as a 401(k) plan, covering substantially all employees. This plan permits employees to defer the lesser of 100 percent of their total compensation or the applicable IRS limit. The Trust matches dollar for dollar the first $2,900 of each employee's contribution. The Trust's 401(k) contribution for the six months ended June 30, 2004 was approximately $148,000. 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, 2004, the value of the collateral in the account was approximately $41.8 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, 2005. The Trust had no outstanding balance on either of these facilities during the period. No compensating balances are required. Note 9. Contractual Obligations In the ordinary course of business, the Trust enters into contracts that contain a variety of indemnifications. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk or loss to be remote. Page 24 2004 Semi-Annual Report [LOGO] Financial Highlights Selected Per Share Data and Ratios for the Six Months Ended June 30, 2004 and the Years Ended December 31, 2003, 2002, 2001, 2000 and 1999
Six Months Ended June 30, 2004, unaudited 2003 2002 2001 2000 1999 ================================================================================================================================== Per Share Data Net asset value, beginning of period $ 1,125.21 $ 1,152.30 $ 1,098.40 $ 1,085.42 $ 1,035.72 $ 1,114.08 Income from investment operations: Net investment income 24.63 54.26 65.19 70.86 72.83 71.65 Net realized and unrealized gains (losses) on investments (22.38) (11.69) 59.15 16.24 49.70 (77.96) - ---------------------------------------------------------------------------------------------------------------------------------- Total Income (Loss) from Investment Operations 2.25 42.57 124.34 87.10 122.53 (6.31) - ---------------------------------------------------------------------------------------------------------------------------------- Less distributions from: Investment income-- net (24.63) (54.26) (65.19) (70.93) (72.83) (71.74) Realized gains on investments -- (15.40) (5.25) (3.19) -- (0.31) - ---------------------------------------------------------------------------------------------------------------------------------- Total Distributions (24.63) (69.66) (70.44) (74.12) (72.83) (72.05) ================================================================================================================================== Net Asset Value, End of Period $ 1,102.83 $ 1,125.21 $ 1,152.30 $ 1,098.40 $ 1,085.42 $ 1,035.72 ================================================================================================================================== Ratios Ratio of expenses to average net assets 0.38%** 0.37% 0.36% 0.37% 0.38% 0.39% Ratio of net investment income to average net assets 4.4%** 4.7% 5.8% 6.4% 6.9% 6.7% Portfolio turnover rate 66.8%** 73.1% 64.3% 40.9% 25.9% 31.7% ================================================================================================================================== Number of Outstanding Units at End of Period 3,258,519 3,206,626 2,848,002 2,504,984 2,282,511 2,075,197 ================================================================================================================================== Net Assets, End of Period (in thousands) $ 3,593,592 $ 3,608,139 $ 3,281,763 $ 2,751,482 $ 2,477,482 $ 2,149,327 ================================================================================================================================== Total Return* 0.19%** 3.78% 11.64% 8.21% 12.31% (0.57%) ==================================================================================================================================
* Net of fund expenses. ** Amounts are annualized. See accompanying notes to financial statements. Page 25 [LOGO] AFL-CIO Housing Investment Trust 1717 K Street, NW, Suite 707 Washington, DC 20036 202-331-8055 www.aflcio-hit.com Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not Applicable. Item 6. Schedule of Investments. Not Applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not Applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not Applicable. Item 9. Submission of Matters to a Vote of Security Holders. No material changes have been made to the procedures by which participants may recommend nominees to the Board of Trustees of the Trust, where those changes were implemented after the Trust last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item 9. Item 10. Controls and Procedures. (a) The Trust's Chief Executive Officer (the principal executive officer) and Chief Financial Officer (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 June 30, 2004. (b) There was no change in the Trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17CFR 270.30a-3(d)) that occurred during the Trust's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. Item 11. Exhibits. (a) (1) Not applicable. (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)). (3) Not Applicable. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)). 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. AFL-CIO HOUSING INVESTMENT TRUST By: /s/ Stephen Coyle ------------------------------ Name: Stephen Coyle Title: Chief Executive Officer Date: September 8, 2004 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 and in the capacities and on the dates indicated. /s/ Stephen Coyle - ------------------------------ Stephen Coyle Chief Executive Officer (Principal Executive Officer) Date: September 8, 2004 /s/ Erica Khatchadourian - ------------------------------ Erica Khatchadourian Chief Financial Officer (Principal Financial Officer) Date: September 8, 2004 EX-99.CERT 2 d60673_ex99-cert.txt SECTION 302 CERTIFICATION 99.cert Exhibit (a)(2) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 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, 2004 99.cert Exhibit (a)(2) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 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 Chief Financial Officer AFL-CIO Housing Investment Trust Date: September 8, 2004 EX-99.906CERT 3 d60673_ex99-906cert.txt 99.906cert Exhibit (b) 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 of the AFL-CIO Housing Investment Trust 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, 2004 /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. 99.906cert Exhibit (b) 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 of the AFL-CIO Housing Investment Trust 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, 2004 /s/ Erica Khatchadourian -------------------------------- Erica Khatchadourian, Chief Financial 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 -----END PRIVACY-ENHANCED MESSAGE-----