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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
REGISTRATION NO.
811-07696
IOWA PUBLIC AGENCY INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1415 28th STREET, SUITE 200
WEST DES MOINES, IOWA 50266
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Elizabeth Grob, Esq.
Ahlers & Cooney, P.C.
100 Court Avenue, Suite 600, Des Moines, Iowa 50309
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
Vera Lichtenberger JOHN C. MILES, ESQ.
IOWA PUBLIC AGENCY INVESTMENT TRUST DONALD F. BURT, ESQ.
1415 28th STREET, SUITE 200 CLINE, WILLIAMS, WRIGHT,
WEST DES MOINES, IOWA 50266 JOHNSON & OLDFATHER
1900 U.S. BANK BUILDING,
233 S. 13TH STREET
LINCOLN, NEBRASKA 68508
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (515) 244-5426
DATE OF FISCAL YEAR END:06/30
DATE OF REPORTING PERIOD:6/30/2005
ITEM 1. REPORTS TO UNITHOLDERS.
- --------------------------------------------------------------------------------
IOWA PUBLIC AGENCY INVESTMENT TRUST
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
DIRECT GOVERNMENT OBLIGATION FUND
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FISCAL YEAR ENDING
JUNE 30, 2005
The Funds are distributed by Investors Management Group.
Shares of the Funds are NOT INSURED BY THE FDIC. Investment products involve
investment risk, including the possible loss of principal. Past performance is
not predictive of future results, and the composition of each Fund's portfolio
is subject to change.
Information not authorized for distribution unless accompanied or preceded by a
current Information Statement also known as a prospectus. An investor should
consider the Funds' investment objectives, risks, and charges and expenses
carefully before investing or sending money. This and other important
information about the investment company can be found in the Fund's Information
Statement. To obtain more information, please call 800-872-4024 or visit the
website: IPAIT.org. Please read the Information Statement carefully before
investing.
Iowa Public Agency Investment Trust
Diversified Fund
Comprehensive Annual Financial Report
Iowa Public Agency Investment Trust
Direct Government Obligation Fund
Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30, 2005
Prepared by the
Iowa Public Agency Investment Trust
Board of Trustees
Table of Contents
INTRODUCTORY SECTION
Letter from the Chair.................................................3
Management Report.................................................7
Board of Trustees.................................................8
Service Providers....................................................10
Organization Chart...................................................11
Certificate of Achievement...........................................12
FINANCIAL SECTION
Diversified Portfolio:
Independent Auditors' Report.........................................14
Management's Discussion and Analysis.................................15
Financial Statements.................................................17
Financial Highlights.................................................20
Notes to Basic Financial Statements..................................21
Direct Government Obligation Portfolio:
Independent Auditors' Report.........................................23
Management's Discussion and Analysis.................................24
Financial Statements.................................................26
Financial Highlights.................................................28
Notes to Basic Financial Statements..................................29
INVESTMENT SECTION
Fund Facts Summary...................................................32
Diversified Fund and Direct Government Obligation Fund...............33
Introduction................................................33
Risk Profile................................................35
Performance Summary.........................................36
Fund Expenses...............................................37
Investment Commentary................................................40
IPAIT Investment Policy..............................................41
Investing and Non-Investing Participants....................46
STATISTICAL SECTION
Statistical Information..............................................49
Changes in Fund Units................................................50
Monthly Comparative Yields...........................................51
Annual Comparative Yields ...........................................52
Annual Net Investment Income.........................................52
Glossary of Investment Terms.........................................53
August 26, 2005
Dear Fellow IPAIT Participants:
The Iowa Pubic Agency Investment Trust (IPAIT) is pleased to submit the
Diversified Fund and Direct Government Obligation Fund (DGO) Annual Financial
Report for the fiscal year ended June 30, 2005.
IPAIT has been serving participants' needs since 1987. Fiscal year 2004-2005
continued to pose challenges for our participants during this period of
historically low interest rates. The Federal Reserve, however, did begin raising
interest rates during this period, which continued throughout the year. The
IPAIT Diversified and DGO Funds maintained yields comparable to other money
market funds during this time while being an educational resource for IPAIT
participants. For a detailed review of the Funds, please refer to the
Management's Discussion and Analysis of each Fund located in the Financial
Section. IPAIT appreciates the efforts of the individuals involved in the
preparation of this report.
Iowa Economy
Iowa has historically struggled with lackluster job growth and the "brain drain"
where young people are educated in the state and then leave for greener
pastures. This has abated recently, and the pace of Iowa's job growth over the
next few years is expected to be stronger than other Midwestern states, though
it is expected to lag the nation. The state's economy has demonstrated
resiliency by producing income growth despite its historically tight labor
market, and diversity of employment is increasing.
Iowa's May unemployment rate was 4.8 percent, higher than many neighboring
states but lower than its southeastern neighbors with Illinois reporting 5.8
percent unemployment and Missouri at 5.6 percent. Iowa's unemployment rate
remains below the national average of 5.1 percent. After four months of growth,
Iowa non-farm payrolls declined slightly in May led by a drop in construction
employment during a rainy month. Average hourly earnings are up year over year,
along with the national population.
Midwest housing prices have been rising along with the rest of the country.
However, Iowa prices have not seen the dramatic increases that east and west
coast cities have enjoyed. The flip side of this situation is that Iowa
homeowners should not experience drastic price declines when mortgage rates rise
and demand cools. Year over year, new Iowa residential housing permits are up
3.5 percent, higher than the Midwest regional average of 2.9 percent and the
national average of 1.6 percent.
Iowa has also experienced less inflation recently than the national average. The
year over year increase in CPI was 2.6 percent compared to the national average
of 2.9 percent. The Federal Reserve remains active in fighting potential
inflation and will remain engaged for the foreseeable future.
The state of Iowa is enjoying a pick up in tax revenues and expects to end
fiscal year 2005 with a general fund surplus. As the national economy improves,
Iowa's outlook improves, and the state's conservative fiscal position provides a
springboard to growth for the remainder of the year.
Investment Policies and Strategies
IPAIT was created pursuant to Iowa Code Chapter 28E in 1987 to enable eligible
Iowa public agencies to invest their available operating and reserve funds in a
competitive rate environment, safely and effectively. Both the Diversified and
DGO Funds have followed established money market mutual fund investment
parameters designed to maintain a $1 per unit net asset value since inception.
Investment Safeguards
Both Funds continue to be focused on their investment objectives as stated in
the IPAIT Investment Policy. These goals, in order of priority are safety of
invested principal, maintenance of adequate liquidity, and maximum yield. Within
these objectives, each Fund strives to provide participants with the best
available rates of return for legally authorized investments. All security
settlements within either Fund are settled on a delivery-versus-payment (DVP)
basis. DVP settlements greatly reduce the possibility of inappropriate
transmission of funds or securities.
Reliability of Investment Section
All commentary and displays in the Investment Section were prepared by IPAIT's
service provider, Investors Management Group (IMG), the program's Investment
Adviser, Administrative Services Provider, and Program Support Provider. IMG has
provided services to the IPAIT program since the program's inception in 1987.
All services provided by IPAIT to participants are subject to rigorous and
regular verification.
Statement of Changes in Net Assets
For fiscal year 2004-2005 (FY 04/05) and fiscal year 2003-2004 (FY 03/04) total
interest earned, total operating expenses, and net investment income for the
IPAIT Diversified and the DGO Funds were as follows:
Interest Earned Expenses Net Investment Income
Diversified Fund
FY 04/05. $4,792,152 $1,058,235 $3,733,917
FY 03/04. $2,680,795 $1,202,977 $1,477,818
DGO Fund
FY 04/05. $475,110 $125,123 $349,987
FY 03/04. $520,560 $255,306 $265,254
The increase in year-over-year interest earned for the Diversified Fund is
primarily attributed to the higher interest rate environment throughout the
year. The DGO Fund earnings decrease is attributed to redemptions by a large
participant seeking higher fixed-term rates. Expenses were lower in FY 04/05
versus FY 03/04 due to a voluntary reduction in fees charged by the investment
adviser and administrator, and lower net assets of the Funds. IPAIT operates
pursuant to Service Provider agreements for all aspects of operation. Every
agreement specifies the fees to be charged for each component of IPAIT services.
Financial and operating highlights from this past year include:
o Receipt of an eighth consecutive Certificate of Achievement for Excellence
in Financial Reporting by the Government Finance Officers Association
(GFOA).
o Average combined daily investments in the Diversified and DGO Funds of
$243,819,674 down from $299,261,038 in the last fiscal year.
o Placement of 38 portfolio certificates of deposit in Iowa financial
institutions by the Diversified Fund representing over $25,250,000.
o An authorized membership total of 410 public bodies representing 185
municipalities, 82 counties, 92 municipal utilities, and 51 other eligible
public agencies.
o Total funds invested in IPAIT's investment alternatives peaked for the
fiscal year at $411,934,471 on April 28, 2005.
Comprehensive Annual Financial Report Format and Contents
The report is presented in four sections as follows:
o Introduction - Contains the Letter of Transmittal, Management Report, a
listing of the IPAIT Board of Trustees and Service Providers and the IPAIT
Organizational Chart.
o Financial - Contains the report of independent auditors, KPMG LLP, the
Management Discussion and Analysis forthe Diversified Fund and DGO Fund,
and the Diversified Fund and DGO Fund financial statements.
o Investment - Contains a comprehensive discussion of each Fund's investment
performance and operations including the following:
Fund Facts - a summary of IPAIT's Diversified Fund and DGO Fund
investment strategy, individual fund performance comparison to other
registered money market fund performance benchmarks including the
iMoneyNet Money Fund Report TM and an Economic Environment Overview for
the past fiscal year;
Complete Portfolio Characteristics portfolio composition and summaries
for each Fund to include portfolio ownership analysis, weighted average
maturity illustrations and comparisons, maturity analysis, portfolio
distribution by security type, historical portfolio asset growth; and
The IPAIT Diversified Fund and DGO Fund Investment Policy.
o Statistical - Includes trend data for the past five years for various
program operating components, including total net asset value for each Fund
by type of participant, monthly and annual yield highlights and
comparisons, summary of operations, and a glossary of investment terms.
The GFOA awarded an eighth consecutive Certificate of Achievement for
Excellence in Financial Reporting to the Iowa Public Agency Investment
Trust for its comprehensive annual financial report (CAFR) for the fiscal
year ended June 30, 2004. The Certificate of Achievement is a prestigious
national award, recognizing conformance with the highest standards for
preparation of state and local government financial reports.
In order to be awarded a Certificate of Achievement, a government unit must
publish an easily readable and efficiently organized CAFR, whose contents
conform to program standards. The CAFR must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We
believe our current report continues to conform to the Certificate of
Achievement program requirements, and we are submitting it to the GFOA.
IPAIT has adopted GASB Statement No. 34, Basis Financial Statements - and
Management's Discussion and Analysis - for State and Local Governments:
Omnibus, as amended by Statement No. 37, Basic Financial Statements - and
Management's Discussion and Analysis - for State and Local Governments:
Omnibus, and modified by Statement No. 38, Certain Financial Statement Note
Disclosures, (Statements Nos. 34, 37, and 38) effective July 1, 2002.
Adoption of Statement Nos., 34, 37, and 38 had no impact on the net assets
of the Diversified and the DGO Funds of IPAIT. IPAIT's annual report has
added a section for Management's Discussion and Analysis as required.
Approval of the Investment Advisory Contract
At the meeting of the Board of Trustees on October 27, 2004, the trustees
assessed the investment adviser to determine if the contract should be
continued. In performing this assessment and evaluation the Board of Trustees
asked IMG to provide a wide array of information about (i) the quality and
nature of IMG's services, including the qualification and experience of IMG
investment management and administrative staff, IPAIT's investment performance
compared to other similar funds, data regarding the investment advisory fees,
other administrative fees and overall fees paid by IPAIT compared to other
comparable investment alternatives and other comparable public fund pools in
other states.
With respect to the quality and nature of IMG's services, the information
indicated that the IMG service team had worked on IPAIT for more than ten years
and that seven employees spent a significant portion of their time working on
IPAIT services. Furthermore, it was noted that IMG employees are cross-trained
to provide service redundancy. A complete overview of the education and
experience of IMG's principal employees and compliance personnel was provided.
With respect to the performance of the Diversified and DGO Funds, the
information provided demonstrated that both Funds performed better than the
benchmark indices against which they were compared for the period from September
of 2003 through September of 2004. This included comparisons of performance
against the corresponding iMoneyNet Money Fund ReportTM averages. iMoneyNet is a
national organization that compiles and publishes yield and operating data on
mutual funds.
With respect to the advisory and other fees paid by IPAIT to IMG and its other
service providers, information was provided that compared IPAIT fees against
public fund programs operated in other states that had similar characteristics.
Total fees of the public fund programs ranged from 0.265 percent to 0.67
percent. The total expenses for IPAIT for fiscal year 2004 were 0.49 percent for
Diversified and 0.51 percent for DGO. The total fees for the IPAIT funds were
roughly comparable to those funds operated in other states.
As to the specific advisory fees paid to IMG, information was provided comparing
the advisory fees of similar programs operating in other states. The advisory
fees paid in the other programs ranged from 0.06 percent to 0.22 percent. For FY
04 the Diversified Fund and the DGO Fund paid IMG 15 basis points (0.15 percent)
for assets under $150 million declining to 8 basis points (0.08 percent) for
assets over $300 million and in FY 04 the new fee was 12 basis points (0.12
percent) for assets under $150 million declining to 7 basis points (0.07
percent) for assets over $250 million. The actual advisory fees paid in FY 2004
were 0.12 percent for Diversified and 0.12 percent for DGO. These fees were
within the range of the other programs presented.
After consideration of this information, the Board of Trustees concluded that
the compensation payable under the Adviser Agreement was fair and reasonable
with respect to the Diversified Fund and the DGO Fund and their unitholders in
light of the services provided and that the continuation of the Adviser
Agreement between IPAIT and IMG was approved. The Board annually reviews the
contribution of the Adviser Agreement and will reassess the investment adviser
at the August 26, 2005 Board meeting.
Summary
On behalf of IPAIT's Board of Trustees, sponsoring associations and service
providers, we thank you for your continued support of the Iowa Public Agency
Investment Trust. We encourage you to contact us with comments and suggestions
regarding any improvements to the operation of IPAIT. Your involvement in IPAIT
is essential in its ability to provide a competitive investment alternative, and
ongoing program opportunities for association members.
As we begin fiscal year 2005-2006, IPAIT will continue to be guided by its
objectives of: safety, liquidity, and competitive return. In addition, IPAIT
will be an excellent resource as a user-friendly investment alternative and also
an educational resource. The website provides monthly updates as well as access
to the secure IPASonlineTM system. We collectively pledge to continue working
together to provide a safe source of interest income for every participant.
Respectfully,
/s/ Donald W. Kerker
Donald W. Kerker
Chair, Board of Trustees
Management Report
TO IPAIT PARTICIPANTS:
While IPAIT's Diversified Fund and DGO Fund financial statements and the related
financial data contained in these CAFR have been prepared in conformity with
generally accepted accounting principles and have been audited by IPAIT's
Independent Auditor, KPMG LLP, the ultimate accuracy and validity of this
information is the responsibility of the management of the Iowa Public Agency
Investment Trust Board of Trustees. To carry out this responsibility, the Board
of Trustees maintains financial policies, procedures, accounting systems and
internal controls, which the Board believes provide reasonable, but not
absolute, assurance that accurate financial records are maintained and
investment assets are safeguarded.
In addition, the three ex-officio trustees meet with the Program's service
providers and legal counsel to review all aspects of IPAIT performance each
month. The Board of Trustees meets quarterly to similarly review IPAIT's
performance and compliance. In addition, the IPAIT Board of Trustees regularly
subjects IPAIT to a comprehensive review of all services and costs of operation.
During the fiscal year 2004, the Board authorized waiving 2.5 basis points of
administrative fees to help improve yields during a period of historically low
interest rates. On January 1, 2005, 2.0 basis points of those fees were
reinstated, with the remaining 0.5 basis points reinstated on July 1, 2005.
Additionally, this year's CAFR will be submitted to the GFOA for consideration
for a Certificate of Achievement for Excellence in Financial Reporting following
receipt of an eighth consecutive Certificate of Achievement for the fiscal year
ended June 30, 2004 CAFR.
In the Board's opinion, IPAIT's internal controls are adequate to ensure that
the financial information in this report presents fairly the IPAIT Diversified
and DGO Fund operations and financial condition.
Sincerely,
/s/ Robert D. Haug
Robert D. Haug
Secretary, Board of Trustees
Iowa Public Agency Investment Trust
Board of Trustees
=============== ===================== ======= =========== ============== ============ ================== ============ ==============
Length of Principal Number of
Position Time Occupation Portfolios
held with Term of Served During Past Five Overseen Outside
Name Address Age IPAIT Office Since Years by Trustee Directorships
=============== ===================== ======= =========== ============== ============ ================== ============ ==============
Robert Hagey 210 Central Ave. SW 54 Trustee Term Ending Since Sioux County 2 None
Orange City, IA 2005, up for 1993 Treasurer
51041 reelection
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Thomas Hanafan 209 Pearl 56 Trustee, Term Ending Since Council Bluffs 2 None
Street Vice Chair 2006 1992 Mayor
Council Bluffs, IA
51503
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Donald Kerker 3205 Cedar 54 Trustee, Term Ending Since Director, 2 None
Chair 2005, up for 1999 Finance &
reelection Administrative
Services,
Street Muscatine Power
Muscatine, IA 52761 and Water
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Wapello County
Treasurer
101 W. Fourth Trustee, Term Ending Since College
Dianne Kiefer Street 55 Second 2007 2000 Instructor, 2 None
Ottumwa, IA 52501 Vice Chair Buena Vista
University
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Floyd 703 Central 78 Trustee Term Ending Since Webster County 2 None
Avenue 2006 2000 Supervisor
Magnusson Fort Dodge, IA
50501
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Manager,
138 Jackson Term Ending Since Brooklyn
Craig Hall Street 53 Trustee 2007 2004 Municipal 2 None
Brooklyn, IA 52211 Utilities
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Leon Rodas 712 North 53 Trustee Term Ending Since General Manager, 2 None
Grand 2006 2003 Spencer
P.O. Box Municipal Utility
222
Spencer, IA 51301
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
P.O. Box Administrative Director of
Jody Smith 65320 52 Trustee Term Ending Since Services/City 2 None
West Des Moines, 2007 1994 Clerk, West Des
IA 50265 Moines
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
50 Second Ave.
Bridge Term Ending Since Cedar Rapids
Susan Vavroch Cedar Rapids, IA 46 Trustee 2005, up for 2003 City Treasurer 2 None
52401 reelection
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Thomas 317 Sixth Avenue, 57 IPAIT Since Iowa League of
Bredeweg Ste 1400 Des Treasurer 1992 Cities
Moines, IA 50309 Executive Director
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Iowa State
501 SW Seventh St, IPAIT Association of
William Ste Q Des Moines, IA 54 Assistant Since Counties
Peterson 50309 Secretary 1979 Executive
Director
- --------------- --------------------- ------- ----------- -------------- ------------ ------------------ ------------ --------------
Robert Haug 1735 NE 70th 57 IPAIT Since Iowa Association
Avenue Secretary 1986 of Municipal
Ankeny, IA 50021 Utilities
Executive
Director
=============== ===================== ======= =========== ============== ============ ================== ============ ==============
SERVICE PROVIDERS
Sponsoring Associations
IOWA
ASSOCIATION OF MUNICIPAL
UTILITIES
Iowa Association of Municipal Utilities
1735 NE 70th Avenue
Ankeny, IA 50021-9353
Robert Haug, Executive Director
bhaug@iamu.org
515-289-1999
Iowa League of Cities
317 Sixth Avenue
Suite 800
Des Moines, IA 50309
Thomas G. Bredeweg, Executive Director
tombredeweg@iowaleague.org
515-244-7282
Iowa State Association of Counties
501 SW 7th Street, Suite Q
Des Moines, IA 50309
William R. Peterson, Executive Director
bpeterson@iowacounties.org
515-244-7181
Investment Adviser - Administrator - Program Support
Investors Management Group
1415 28th Street, Suite 200
West Des Moines, IA 50266-1461
Lynn Maaske 515-224-2759
lynn.maaske@amcore.com
Jeff Lorenzen 515-224-2718
jeff.lorenzen@amcore.com
Ron Shortenhaus 515-224-2724
ron.shortenhaus@amcore.com
Anita Tracy 515-224-2725
anita.tracy@amcore.com
Custodian
Wells Fargo Bank, N.A.
MAC N8200-034
666 Walnut Street, P.O. Box 837
Des Moines, IA 50304-0837
MJ Dolan 515-244-8326
m.j.dolan@wellsfargo.com
Teresa Smith 515-245-3245
teresa.a.smith@wellsfargo.com
Legal Counsel
AHLERS & COONEY, P.C.
Ahlers & Cooney, P.C.
100 Court Avenue, Suite 600
Des Moines, IA 50309
Edgar Bittle 515-246-0312
ebittle@ahlerslaw.com
Elizabeth Grob 515-246-0305
egrob@ahlerslaw.com
Independent Auditor
KPMG LLP
2500 Ruan Center
Des Moines, IA 50309
ORGANIZATION CHART
IOWA PUBLIC AGENCY INVESTMENT TRUST (IPAIT)
Diversified Fund and
Direct Government Obligation Fund
Administration Flow Chart
IPAIT Board of Sponsoring
Trustees Associations
-------- ------------
Donal Kerker, Chair Iowa League of Cities
Tom Hanafan, Vice Chair Tom Bredeweg
Dianne Diefer, Second Vice Chair
Rober Hagey, Board Member Iowa State Association of Counties
Craig Hall, Board Member William Peterson
Floyd Magnusson, Board Member
Loen Rodas, Board Member Iowa Association of Municipal Untilities
Jody Smith, Board Member Robery Haug
Susan Vavrock, Board Member
IPAIT Custodian IPAIT Investment Adviser
--------------- ------------------------
Wells Fargo Bank, N.A. Investor Managment Group
Kristi Boyce Jeff Lorenzen
Legal Counsel IPAIT Auditor IPAIT Administration IPAIT Program Support
- ------------- ------------- -------------------- ---------------------
Ahlers & KPMG LLP Investors Management Investors Management
Cooney, P.C. Certified Public Group Group
Elizabeth Grob Accountants Vera Lichtenberger Ron Stortenhaus
Anita Tracy
KPMG LLP
2500 Ruan Center
666 Grand Avenue
Des Moines, IA 50309
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Unitholders
Iowa Public Agency Investment Trust:
We have audited the accompanying statement of net assets of the Diversified
Portfolio of the Iowa Public Agency Investment Trust (the Portfolio) as of June
30, 2005, and the related statements of operations and changes in net assets for
each of the years in the two-year period then ended, and financial highlights
for each of the years in the five-year period then ended. These financial
statements and the financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board. Those standards require that we plan and perform our
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Investment securities held in custody are confirmed to us by the Custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Diversified Portfolio of
the Iowa Public Agency Investment Trust at June 30, 2005, and the results of its
operations and changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years presented,
in conformity with accounting principles generally accepted in the United States
of America.
The management's discussion and analysis on pages 17 to 18 is not a required
part of the basic financial statements but is supplementary information required
by accounting principles generally accepted in the United States of America. We
have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of
the supplementary information. However, we did not audit the information and
express no opinion on it.
/s/ KPMG LLP
July 29, 2005
Management's Discussion & Analysis
This section of the IPAIT Diversified Portfolio's annual Financial Statements
presents management's discussion and analysis of the financial position and
results of operations for the fiscal year ended June 30, 2005 (FY 05). This
information is being presented to provide additional information regarding the
activities of IPAIT, pursuant to the requirements of Governmental Accounting
Standards Board Statement No. 34, Basic Financial Statements - and Management's
Discussion and Analysis - for State and Local Governments, Statement No. 37,
Basic Financial Statements - and Management's Discussion and Analysis - for
State and Local Governments: Omnibus, and Statement No. 38, Certain Financial
Statement Note Disclosures (Statements Nos. 34, 37, and 38). This discussion and
analysis should be read in conjunction with the Independent Auditor's Report of
KPMG LLP, the Financial Statements, and the accompanying notes.
Overview of the Financial Statements
The Management's Discussion and Analysis provides an introduction to and
overview of the basic financial statements of IPAIT's Diversified Portfolio. The
following components comprise the financial statements: 1) Statement of Net
Assets, 2) Statements of Operations and Changes in Net Assets, 3) Financial
Highlights, and 4) Notes to Financial Statements.
o The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolio as of the date of the current fiscal year
end.
o The Statements of Operations and Changes in Net Assets displays the results
of operations (income and expenses) and participant/unitholder activity
(distributions, sales, reinvestments, redemptions) of the portfolio for the
two most recent fiscal years.
o The Financial Highlights depict per share/per unit information (net
investment income, dividends distributed, net asset value, total return,
ratios of expenses and net investment income to average net assets) and
summary total net assets of the portfolio for the five most recent fiscal
years.
o The Notes to Basic Financial Statements describe significant accounting
policies and disclose summary security transaction amounts of the
portfolio.
Condensed Financial Information and Financial Analysis
Year-over-year variances in most financial statement amounts reported in IPAIT's
Diversified Portfolio are most significantly impacted by the level of average
net assets (which fluctuates based on the overall levels of
participant/unitholder invested balances). Additionally, changes in the
short-term interest rate environment (which follows the general trend
established by monetary policy set by the Federal Reserve) contribute to
year-over-year variances in the amount of investment income earned by the
portfolio. Over the last twelve months, the Federal Reserve's Federal Open
Market Committee increased the Fed Funds target rate nine times, from 1.00
percent to 3.25 percent. Despite a cumulative increase of 225 basis points in
the past year, the Fed Funds rate is still far below nominal GDP growth.
Management's Discussion & Analysis Cont.
Condensed financial information and variance explanations for FY 05 and FY 04
follows.
Diversified Portfolio
Net Assets
Percent
June 30, 2005 June 30, 2004 Change
-------------- --------------- --------
Total Investments $229,759,603 $254,078,254 -10%
Excess of other liabilities over other assets $(91,637) $739,856 -112%
-------------- ---------------
Net assets held in fund for pool participants $229,667,966 $254,818,110 -10%
============== ===============
Total investments and net assets decreased 10 percent and 10 percent,
respectively, comparing June 30, 2005 and June 30, 2004 amounts. During FY 05,
average net assets decreased 12 percent to $218,666,940 from average net assets
of $248,770,769 during the fiscal year ended June 30, 2004 (FY 04). The
Diversified portfolio experienced a net redemption of asset in FY 05 due to
assets being transferred out of the Diversified portfolio to other investment
options. During FY 05, bank investment options, specifically certificates of
deposit, were exceptionally appealing versus money market funds.
Percent
Change in Net Asset for the years ended, June 30, 2005 June 30, 2004 Change
------------- ------------- ------
Investment income $4,792,152 $2,680,795 79%
Total expenses $(1,058,235) $(1,202,977) -12%
Dividends to unitholders from net investment income $(3,733,917) $(1,477,818) 153%
Net (decrease) increase in assets derived from unit transactions $(25,150,144) $9,793,059 -357%
Net assets at beginning of year $254,818,110 $245,025,051 4%
--------------- ---------------
Net assets at end of year $229,667,966 $254,818,110 -10%
=============== ===============
Investment income and net investment income increased 79 percent and 153
percent, respectively, during FY 05
compared to FY 04 due to the higher interest rate environment. With the increase
in Fed Fund rates, money market fund returns have improved during FY 05 and will
continue into the next period. Total expenses are derived based on net assets
held by the Fund. These expenses decreased 12 percent during FY 05 compared to
FY 04 due to lower net assets throughout FY 05. Also, the other fees and
expenses accrual of 0.025 percent had been temporarily suspended for the 16
month period ended December 31, 2004 and reinstated at 0.02 percent January 1,
2005 through June 30, 2005. During FY 05 compared to FY 04, units sold and
redeemed increased 12 percent and 16 percent, respectively.
Contacting the Portfolio's Financial Management
This financial report is designed to provide IPAIT participants and prospective
investors with a general overview of the Fund's finances and to demonstrate the
Fund's accountability for the resources it receives and manages. If you have
questions about the report or need additional financial information, contact
IPAIT at 800-872-4024 or visit the website at IPAIT.org.
Financial Statements
Iowa Public Agency Investment Trust - Diversified Portfolio
Statement of Net Assets - June 30, 2005
(Showing Percentage of Net Assets)
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES -- 17.61%
$3,000,000 Federal National Mortgage Association, Discount Note 3.02% 07/20/05 $2,995,250
3,764,000 Federal National Mortgage Association, Discount Note 3.02% 07/22/05 3,757,413
4,000,000 Federal Home Loan Mortgage Corporation, Discount Note 3.08% 08/16/05 3,984,410
4,000,000 Federal National Mortgage Association, Discount Note 3.08% 08/17/05 3,984,073
2,000,000 Federal Home Loan Mortgage Corporation, Discount Note 3.22% 09/13/05 1,986,947
6,000,000 Federal National Mortgage Association, Discount Note 3.23% 09/16/05 5,959,575
1,495,000 Federal National Mortgage Association, Discount Note 3.24% 10/05/05 1,482,263
3,000,000 Federal Home Loan Mortgage Corporation, Discount Note 3.35% 11/08/05 2,964,250
1,500,000 Federal National Mortgage Association, Discount Note 3.32% 11/10/05 1,482,070
3,000,000 Federal Home Loan Mortgage Corporation, Discount Note 3.36% 11/15/05 2,962,782
3,000,000 Federal Home Loan Mortgage Corporation, Discount Note 3.37% 11/15/05 2,962,142
3,000,000 Federal National Mortgage Association, Discount Note 3.39% 11/16/05 2,961,647
3,000,000 Federal National Mortgage Association, Discount Note 3.41% 11/23/05 2,959,521
--------------
TOTAL (cost -- $40,442,343) $40,442,343
--------------
COUPON SECURITIES -- 11.57%
$3,000,000 Federal Home Loan Bank, 1.43% 2.34% 07/08/05 $2,999,480
3,000,000 Federal Home Loan Mortgage Corporation, 7.00% 2.56% 07/15/05 3,005,056
3,180,000 Federal Home Loan Bank, 1.50% 2.59% 08/19/05 3,175,403
500,000 United States Treasury, 2.00% 2.56% 08/31/05 499,542
1,000,000 Federal Home Loan Bank, 1.70% 3.40% 09/09/05 996,776
1,000,000 Federal National Mortgage Association, 2.32% 3.44% 09/12/05 997,810
2,000,000 Federal Home Loan Mortgage Corporation, 2.875% 2.85% 09/15/05 2,000,070
3,000,000 Federal National Mortgage Association, 1.875% 3.25% 09/15/05 2,991,567
500,000 Private Export Funding, 6.62% 3.45% 10/01/05 503,871
3,880,000 Federal Home Loan Bank, 7.248% 2.90% 10/19/05 3,929,862
500,000 Federal National Mortgage Association, Step Coupon 3.46% 11/18/05 498,877
3,000,000 Federal Home Loan Bank, 2.80% 3.54% 12/16/05 2,989,989
1,000,000 Federal Home Loan Bank, 2.875% 3.51% 12/21/05 997,063
1,000,000 Federal Home Loan Mortgage Corporation, 2.375% 3.48% 01/23/06 993,894
--------------
TOTAL (cost -- $26,579,260) $26,579,260
--------------
CERTIFICATES OF DEPOSIT -- 7.51%
$800,000 Exchange Bank, Collins 2.98% 07/06/05 $800,000
250,000 Ft. Madison Bank & Trust, Ft. Madison 3.00% 07/13/05 250,000
300,000 Farmers State Bank, Hawarden 3.30% 07/25/05 300,000
1,000,000 Premier Bank, Dubuque 3.10% 08/04/05 1,000,000
250,000 Citizens Bank, Sac City 2.55% 08/12/05 250,000
500,000 Premier Bank, Rock Valley 3.30% 08/24/05 500,000
900,000 First State Bank, Ida Grove 2.90% 08/25/05 900,000
500,000 Premier Bank, Rock Valley 3.30% 09/01/05 500,000
1,000,000 St. Ansgar State Bank, St. Ansgar 3.35% 09/06/05 1,000,000
1,000,000 Great River Bank & Trust, Princeton 3.50% 09/06/05 1,000,000
1,500,000 Union State Bank, Winterset 2.55% 09/07/05 1,500,000
1,000,000 West Bank, West Des Moines 3.54% 09/20/05 1,000,000
500,000 American Bank, LeMars 3.45% 09/26/05 500,000
500,000 American Bank, LeMars 3.45% 09/26/05 500,000
1,000,000 American Bank, LeMars 2.65% 09/27/05 1,000,000
400,000 Farmers State Bank, Hawarden 3.40% 09/30/05 400,000
250,000 Citizens Bank, Sac City 3.45% 09/30/05 250,000
500,000 Ft. Madison Bank & Trust, Ft. Madison 3.45% 10/17/05 500,000
250,000 Ft. Madison Bank & Trust, Ft. Madison 3.25% 10/18/05 250,000
500,000 Ft. Madison Bank & Trust, Ft. Madison 3.25% 10/24/05 500,000
300,000 Farmers State Bank, Hawarden 3.55% 10/24/05 300,000
500,000 Ft. Madison Bank & Trust, Ft. Madison 3.55% 10/26/05 500,000
1,000,000 Premier Bank, Dubuque 3.00% 11/21/05 1,000,000
1,000,000 Liberty Bank, West Des Moines 3.71% 12/05/05 1,000,000
250,000 Citizens Bank, Sac City 3.55% 02/10/06 250,000
500,000 Union State Bank, Winterset 3.80% 02/21/06 500,000
500,000 First American Bank, Ames 3.90% 03/13/06 500,000
100,000 Maxwell State Bank, Maxwell 3.90% 03/22/06 100,000
200,000 Maxwell State Bank, Maxwell 3.80% 04/24/06 200,000
--------------
TOTAL (cost -- $17,250,000) $17,250,000
--------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) -- 63.35%
$45,488,000 Bear, Stearns & Company Inc. 3.25% 07/01/05 $45,488,000
50,000,000 Seattle-Northwest Securities Corporation 3.32% 07/01/05 50,000,000
50,000,000 UBS Securities LLC 3.30% 07/01/05 50,000,000
--------------
TOTAL (cost -- $145,488,000) $145,488,000
--------------
TOTAL INVESTMENTS -- 100.04% (cost -- $229,759,603) $229,759,603
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES -- (.04%) (Includes
$59,681 payable to IMG and $470,475
dividends payable to unitholders) ($91,637)
--------------
NET ASSETS HELD IN FUND FOR POOL PARTICIPANTS -- 100%
Applicable to 229,667,966 outstanding units $229,667,966
==============
NET ASSET VALUE: $1.00
==============
Offering and redemption price per unit ($229,667,966
divided by 229,667,966 units outstanding)
Financial Statements
Iowa Public Agency Investment Trust
Statements of Operations and Changes in Net Assets - Diversified Portfolio
For the Years Ended June 30,
2005 2004
------------------ ----------------
INVESTMENT INCOME:
Interest $4,792,152 $2,680,795
------------------ ----------------
EXPENSES:
Investment advisory, administrative,
and program support fees $711,837 $824,382
Custody Fees $105,900 $119,774
Distribution fees $218,667 $249,452
Other fees and expenses $21,831 $9,369
------------------ ----------------
Total Expenses $1,058,235 $1,202,977
------------------ ----------------
NET INVESTMENT INCOME $3,733,917 $1,477,818
------------------ ----------------
DIVIDENDS TO UNITHOLDERS FROM:
Net investment income $(3,733,917) $(1,477,818)
------------------ ----------------
FROM UNIT TRANSACTIONS:
(at constant net asset value of $1 per unit)
Units sold $1,055,083,090 $941,862,304
Units issued in reinvestment
of dividends from net
investment income $3,596,059 $1,477,818
Units redeemed $(1,083,829,293) $(933,547,063)
------------------ ----------------
Net (decrease) increase in net assets
derived from unit transactions $(25,150,144) $9,793,059
NET ASSETS AT BEGINNING OF YEAR $254,818,110 $245,025,051
------------------ ----------------
NET ASSETS AT END OF YEAR $229,667,966 $254,818,110
================== ================
Financial Statements
Iowa Public Agency Investment Trust - Diversified
Selected Data for Each Unit of Portfolio
Outstanding Through Each Year Ended
June 30, 2005 2004 2003 2002 2001
-------- ---------- --------- --------- ---------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.017 0.006 0.009 0.021 0.053
Dividends Distributed (0.017) (0.006) (0.009) (0.021) (0.053)
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000
Total Return 1.70% 0.60% 0.95% 2.14% 5.34%
Ratio of Expenses to Average Net Assets 0.48% 0.48% 0.56% 0.56% 0.56%
Ratio of Net Investment Income to Average Net Assets 1.71% 0.59% 0.94% 2.07% 5.34%
Net Assets, End of Period (000 Omitted) $229,668 $254,818 $245,025 $253,948 $265,091
See accompanying notes to basic financial statements.
Notes to Basic Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Iowa Public Agency Investment Trust (IPAIT) is a common law trust
established under Iowa law pursuant to Chapter 28E and Sections 331.555 and
384.21, Iowa Code (1987), as amended, which authorizes Iowa public agencies
to jointly invest monies pursuant to a joint investment agreement. IPAIT is
registered under the Investment Company Act of 1940. IPAIT was established
by the adoption of a Joint Powers Agreement and Declaration of Trust as of
October 1, 1987, and commenced operations on November 13, 1987. The Joint
Powers Agreement and Declaration of Trust was amended September 1, 1988,
and again on May 1, 1993. As amended, IPAIT is authorized to operate and
now operates investment programs, one of which is the Diversified
Portfolio. The accompanying financial statements include activities of the
Diversified Portfolio. The objective of the portfolio is to maintain a high
degree of liquidity and safety of principal through investment in
short-term securities as permitted for Iowa public agencies under Iowa law.
Wells Fargo Bank, N.A. (Wells Fargo), serves as the Custodian, and
Investors Management Group (IMG) serves as the Investment Adviser,
Administrator, and Program Support Provider.
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of net investment income during the year. Actual results could
differ from those estimates.
In reporting financial activity, IPAIT applies applicable Governmental
Accounting Standards Board (GASB) pronouncements, as well as all Financial
Accounting Standards Board and predecessor statements and interpretations
not in conflict with GASB pronouncements.
IPAIT is exposed to various risks in connection with operation of the
Diversified Portfolio and adheres to policies which mitigate market risk in
the portfolio and maintains insurance coverage for fidelity and errors and
omissions exposures. IPAIT has had no claims or settlements under its
insurance coverage since its organization in 1987.
Investments in Securities
The Diversified Portfolio consists of cash and short-term investments
valued at amortized cost, which approximates market value, pursuant to Rule
2a-7 under the Investment Company Act of 1940. This involves valuing a
portfolio security at its original cost on the date of purchase, and
thereafter amortizing any premium or discount on a straight-line basis to
maturity. The amount of premium or discount amortized to income under the
straight-line method does not differ materially from the amount which would
be amortized to income under the interest method. Procedures are followed
to maintain a constant net asset value of $1.00 per unit for the portfolio.
Security transactions are accounted for on the trade date. Interest income,
including the accretion of discount and amortization of premium, is
recorded daily on the accrual basis.
IPAIT is authorized by investment policy and statute to invest public funds
in obligations of the U.S. government, its agencies and instrumentalities;
certificates of deposit and other evidences of deposit at federally insured
Iowa depository institutions approved and secured pursuant to Chapter 12 of
the Code of Iowa; and repurchase agreements, provided that the underlying
collateral consists of obligations of the U.S. government, its agencies and
instrumentalities and that IPAIT's custodian takes delivery of the
collateral either directly or through an authorized custodian.
In connection with transactions in repurchase agreements, it is IPAIT's
policy that its Custodian take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest at all times. If the
seller defaults and the value of the collateral declines, realization of
the collateral by IPAIT may be delayed or limited. At June 30, 2005, the
securities purchased under overnight agreements to resell were
collateralized by government agency securities with a market value of
$148,431,013.
Notes to Basic Financial Statements Cont.
Certificate of deposit amounts up to $100,000 are insured by the Federal
Depository Insurance Company (FDIC). For public funds deposited in Iowa
financial institutions in excess of the $100,000 FDIC insurance, the local
financial institution must comply with Iowa Code Section 12c.22 to insure
appropriate collateralization. Public funds not covered by FDIC or
collateralization are covered by the state sinking fund in accordance with
Chapter 12C of the Code of Iowa, which provides for additional assessments
against depositories to ensure there will be no loss of public funds.
Under Governmental Accounting Standards as to custodial credit risk,
IPAIT's investments in securities are classified as category one. Category
one consists of insured or registered securities or securities held by
IPAIT or its agent in IPAIT's name and is the most secure investment
category description.
Unit Issues, Redemptions and Distributions
IPAIT determines the net asset value of the Diversified Portfolio daily.
Units are issued and redeemed daily at the daily net asset value. Dividends
from net investment income are declared daily and distributed monthly.
Income Taxes
IPAIT is exempt from both state and federal income taxes pursuant to
Section 115 of the Internal Revenue Code.
Fees and Expenses
Under separate agreements with IPAIT, IMG and Wells Fargo are paid an
annual fee for operating the investment program.
IMG receives .260 percent of the average daily net asset value up to $150
million, .215 percent from $150 to $250 million, and 0.170 percent
exceeding $250 million for investment advisory and administrative fees. In
addition, IMG received 0.080 percent of the average daily net asset value
for program support fees. For the year ended June 30, 2005 the Diversified
Portfolio paid $711,837 to IMG for services provided.
Wells Fargo receives .050 percent of the average daily net asset value up
to $150 million, .045 percent from $150 to $300 million, and 0.040 percent
exceeding $300 million for custodial services. For the year ended June 30,
2005, the Diversified Portfolio paid $105,900 to Wells Fargo for services
provided.
Under a distribution plan the public agency associations collectively
receive an annual fee of .100 percent of the daily net asset value of the
portfolio. For the year ended June 30, 2005, the Diversified Portfolio paid
$129,271 to the Iowa League of Cities, $57,372 to the Iowa State
Association of Counties, and $32,024 to the Iowa Association of Municipal
Utilities.
IPAIT is responsible for other fees and expenses incurred directly by
IPAIT. The other fees and expenses accrual of 0.025 percent had been
temporarily suspended for the 16 month period ended December 31, 2004 and
reinstated at 0.02 percent January 1, 2005 through June 30, 2005 and
reinstated fully to 0.025 percent on July 1, 2005. Other fees and expenses
are accrued on the average daily net asset value, and amounted to $21,831
for the year ended June 30, 2005. All fees are computed daily and paid
monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the Diversified Portfolio aggregated
$35,918,040,369 for the year ended June 30, 2005. Proceeds from maturities
of securities for the Diversified Portfolio aggregated $35,941,769,240 for
the year ended June 30, 2005.
KPMG LLP
2500 Ruan Center
666 Grand Avenue
Des Moines, IA 50309
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Unitholders
Iowa Public Agency Investment Trust:
We have audited the accompanying statement of net assets of the Direct
Government Obligation Portfolio of the Iowa Public Agency Investment Trust (the
Portfolio) as of June 30, 2005, and the related statements of operations and
changes in net assets for each of the years in the two-year period then ended,
and financial highlights for each of the years in the five-year period then
ended. These financial statements and the financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board. Those standards require that we plan and perform our
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Investment securities held in custody are confirmed to us by the Custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Direct Government
Obligation Portfolio of the Iowa Public Agency Investment Trust at June 30,
2005, and the results of its operations and changes in net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years presented, in conformity with accounting principles generally
accepted in the United States of America.
The management's discussion and analysis on pages 26 to 27 is not a required
part of the basic financial statements but is supplementary information required
by accounting principles generally accepted in the United States of America. We
have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of
the supplementary information. However, we did not audit the information and
express no opinion on it.
/s/ KPMG LLP
July 29, 2005
Management's Discussion & Analysis
This section of the IPAIT DGO Portfolio's annual Financial Statements presents
management's discussion and analysis of the financial position and results of
operations for the fiscal year ended June 30, 2005 (FY05). This information is
being presented to provide additional information regarding the activities of
the IPAIT, pursuant to the requirements of Governmental Accounting Standards
Board Statement No. 34, Basic Financial Statements - and Management's Discussion
and Analysis - for State and Local Governments, Statement No. 37, Basic
Financial Statements - and Management's Discussion and Analysis - for State and
Local Governments: Omnibus, and Statement No. 38, Certain Financial Statement
Note Disclosures (Statements Nos. 34, 37, and 38). This discussion and analysis
should be read in conjunction with the Independent Auditor's Report of KPMG LLP,
the Financial Statements, and the accompanying notes.
Overview of the Financial Statements
The Management's Discussion and Analysis provides an introduction to and
overview of the basic financial statements of IPAIT's DGO Portfolio. The
following components comprise the financial statements: 1) Statement of Net
Assets, 2) Statements of Operations and Changes in Net Assets, 3) Financial
Highlights, and 4) Notes to Financial Statements.
o The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolio as of the date of the current fiscal
year end.
o The Statements of Operations and Changes in Net Assets displays the
results of operations (income and expenses) and participant/unitholder
activity (distributions, sales, reinvestments, redemptions) of the
portfolio for the two most recent fiscal years.
o The Financial Highlights depict per share/per unit information (net
investment income, dividends distributed, net
o asset value, total return, ratios of expenses and net investment
income to average net assets) and summary totalnet assets of the
portfolio for the five most recent fiscal years.
o The Notes to Basic Financial Statements describe significant
accounting policies and disclose summary security
o transaction amounts of the portfolio.
Condensed Financial Information and Financial Analysis
Year-over-year variances in most financial statement amounts reported in IPAIT's
DGO Portfolio are most significantly impacted by the level of average net assets
(which fluctuates based on the overall levels of participant/unitholder invested
balances). Additionally, changes in the short-term interest rate environment
(which follows the general trend established by monetary policy set by the
Federal Reserve) contribute to year-over-year variances in the amount of
investment income earned by the portfolio. Over the last twelve months, the
Federal Reserve's Federal Open Market Committee increased the Fed Funds target
rate nine times, from 1.00 percent to 3.25 percent. Despite a cumulative
increase of 225 basis points in the past year, the Fed Funds rate is still far
below nominal GDP growth.
Management's Discussion & Analysis Cont.
Condensed financial information and variance explanations for FY 05 and FY 04
follows.
Direct Government Obligation Portfolio
Net Assets
Percent
June 30, 2005 June 30, 2004 Change
------------- ------------- ------
Total investments $14,805,041 $37,465,472 -61%
Excess of other liabilities over other assets $(9,358) $66,776 -114%
--------------- --------------
Net assets held in fund for pool participants $14,795,683 $37,532,248 -61%
=============== ==============
Total investments and net assets declined 61 percent and 61 percent,
respectively, comparing June 30, 2005 and June 30, 2004 amounts. During FY 05,
average net assets decreased 50 percent to $25,125,734 from average net assets
of $50,490,269 during the fiscal year ended June 30, 2004 (FY 04) for the DGO
portfolio. The DGO portfolio experienced a net redemption of assets in FY 05 due
to a combination of the transfer of assets to the Diversified portfolio and
transfer of assets to other investment options. During FY 05, bank investment
options, specifically certificates of deposit, were exceptionally appealing
versus money market funds.
Percent
Change in Net Asset for the years ended, June 30, 2005 June 30, 2004 Change
------------- ------------- ------
Investment income $475,110 $520,560 -9%
Total expenses $125,123 $255,306 -51%
Dividends to unitholders from net investment income $(349,987) $(265,254) 32%
Net (decrease) increase in assets derived from unit transacations $(22,736,565) $(14,758,993) -54%
Net assets at beginning of year $37,532,248 $52,291,241 -28%
-------------- --------------
Net assets at end of year $14,795,683 $37,532,248 -61%
============== ==============
Investment income decreased 9 percent during FY 05 compared to FY 04. Although
the interest rate environment was higher in FY 05 than FY 04, the reduction in
net assets of the DGO portfolio caused a decrease in investment income. Net
investment income increased 32 percent during FY 05 compared to FY 04 due to the
higher interest rate environment. With the increase in Fed Fund rates, money
market fund returns have improved during FY 05 and will continue into the next
period. Total expenses are derived based on net assets held by the Fund. These
expenses decreased 51 percent during FY 05 compared to FY 04 due to lower net
assets. Also, the other fees and expenses accrual of 0.025 percent had been
temporarily suspended for the 16 month period ended December 31, 2004 and
reinstated at 0.02 percent January 1, 2005 through June 30, 2005. Both units
sold and units redeemed decreased 30 percent and 2 percent.
Contacting the Portfolio's Financial Management
This financial report is designed to provide IPAIT participants and prospective
investors with a general overview of the Fund's finances and to demonstrate the
Fund's accountability for the resources it receives and manages. If you have
questions about the report or need additional financial information, contact
IPAIT at 800-872-4024 or visit the website at IPAIT.org.
Financial Statements
Iowa Public Agency Investment Trust - Direct Government Obligation Portfolio
Statement of Net Assets - June 30, 2005
(Showing Percentage of Net Assets)
For the Years Ended June 30
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES -- 52.05%
$5,000,000 United States Treasury Bill 2.80% 07/07/05 $4,997,700
500,000 United States Treasury Bill 2.91% 08/11/05 498,383
225,000 United States Treasury Bill 3.03% 09/08/05 223,726
500,000 United States Treasury Bill 3.08% 09/15/05 496,833
500,000 United States Treasury Bill 3.10% 10/06/05 495,933
500,000 United States Treasury Bill 3.15% 11/03/05 494,687
250,000 United States Treasury Bill 3.11% 11/03/05 247,377
250,000 United States Treasury Bill 3.15% 11/17/05 247,046
-------------
TOTAL (cost -- $7,701,685) $7,701,685
-------------
COUPON SECURITIES -- 18.65%
$500,000 United States Treasury, 1.50% 2.38% 07/31/05 $499,640
500,000 United States Treasury, 2.00% 3.00% 08/31/05 499,159
500,000 United States Treasury, 1.625% 2.58% 09/30/05 498,832
500,000 Private Export Funding, 6.62% 2.28% 10/01/05 505,368
500,000 Private Export Funding, 6.62% 3.45% 10/01/05 503,871
250,000 United States Treasury, 5.875% 3.16% 11/15/05 252,486
-------------
TOTAL (cost -- $2,759,356) $2,759,356
-------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) -- 29.36%
$4,344,000 UBS Securities LLC 2.90% 07/01/05 $4,344,000
-------------
TOTAL (cost -- $4,344,000) $4,344,000
-------------
TOTAL INVESTMENTS -- 100.06% (cost -- $14,805,041) $14,805,041
EXCESS OF OTHER LIABILITIES OVER OTHER ASSETS -- (.06%) (Includes
$4,416 payable to IMG and $31,112
dividends payable to unitholders) ($9,358)
-------------
NET ASSETS HELD IN FUND FOR POOL PARTICIPANTS -- 100%
Applicable to 14,795,683 outstanding units $14,795,683
=============
NET ASSET VALUE: $1.00
=============
Offering and redemption price per unit ($14,795,683
divided by 14,795,683 units outstanding)
Financial Statements
Iowa Public Agency Investment Trust
Statements of Operations and Changes in Net Assets
Direct Government Obligation Portfolio
For the Years Ended June 30,
2005 2004
-------------- --------------
INVESTMENT INCOME:
Interest $475,110 $520,560
-------------- --------------
EXPENSES:
Investment advisory, administrative,
and program support fees $85,519 $177,379
Custody fees $12,576 $25,314
Distribution fees $25,153 $50,629
Other fees and expenses $1,875 $1,984
-------------- --------------
Total Expenses $125,123 $255,306
-------------- --------------
NET INVESTMENT INCOME $349,987 $265,254
-------------- --------------
DIVIDENDS TO UNITHOLDERS FROM:
Net investment income $(349,987) $(265,254)
-------------- --------------
FROM UNIT TRANSACTIONS:
(at constant net asset value of $1
per unit)
Units sold $20,937,983 $30,120,495
Units issued in reinvestment
of dividends from net
investment income $349,987 $265,254
Units redeemed $(44,024,535) $(45,144,742)
-------------- --------------
Net (decrease) increase in net assets
derived from unit transactions $(22,736,565) $(14,758,993)
NET ASSETS AT BEGINNING OF YEAR $37,532,248 $52,291,241
-------------- --------------
NET ASSETS AT END OF YEAR $14,795,683 $37,532,248
============== ==============
Financial Highlights
Iowa Public Agency Investment Trust - Direct Government Obligation Portfolio
Selected Data for Each Unit of Portfolio
Outstanding Through Each Year Ended
June 30, 2005 2004 2003 2002 2001
--------- --------- --------- ---------- ----------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.015 0.005 0.009 0.018 0.052
Dividends Distributed (0.015) (0.005) (0.009) (0.018) (0.052)
--------- --------- --------- ---------- ----------
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000
Total Return 1.54% 0.53% 0.91% 1.85% 5.16%
Ratio of Expenses to Average Net Assets 0.50% 0.51% 0.58% 0.58% 0.58%
Ratio of Net Income to Average Net Assets 1.39% 0.53% 0.92% 1.79% 5.16%
Net Assets, End of Period (000 Omitted) $14,796 $37,532 $52,291 $66,461 $59,976
See accompanying notes to basic financial statements.
Notes to Basic Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Iowa Public Agency Investment Trust (IPAIT) is a common law trust
established under Iowa law pursuant to Chapter 28E and Sections 331.555 and
384.21, Iowa Code (1987), as amended, which authorizes Iowa public agencies
to jointly invest monies pursuant to a joint investment agreement. IPAIT is
registered under the Investment Company Act of 1940. IPAIT was established
by the adoption of a Joint Powers Agreement and Declaration of Trust as of
October 1, 1987, and commenced operations on November 13, 1987. The Joint
Powers Agreement and Declaration of Trust was amended September 1, 1988,
and again on May 1, 1993. As amended, IPAIT is authorized to operate and
now operates investment programs, one of which is the Direct Government
Obligation Portfolio. The accompanying financial statements include
activities of the Direct Government Obligation Portfolio. The objective of
the portfolio is to maintain a high degree of liquidity and safety of
principal through investment in short-term securities as permitted for Iowa
public agencies under Iowa law. Wells Fargo Bank, N.A. (Wells Fargo),
serves as the Custodian, and Investors Management Group (IMG) serves as the
Investment Adviser, Administrator, and Program Support Provider.
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of net investment income during the year. Actual results could
differ from those estimates.
In reporting financial activity, IPAIT applies applicable Governmental
Accounting Standards Board (GASB) pronouncements, as well as all Financial
Accounting Standards Board and predecessor statements and interpretations
not in conflict with GASB pronouncements.
IPAIT is exposed to various risks in connection with operation of the
Direct Government Obligation Portfolio and adheres to policies which
mitigate market risk in the portfolio and maintains insurance coverage for
fidelity and errors and omissions exposures. IPAIT has had no claims or
settlements under its insurance coverage since its organization in 1987.
Investments in Securities
The Direct Government Obligation Portfolio consists of cash and short-term
investments valued at amortized cost, which approximates market value,
pursuant to Rule 2a-7 under the Investment Company Act of 1940. This
involves valuing a portfolio security at its original cost on the date of
purchase, and thereafter amortizing any premium or discount on a
straight-line basis to maturity. The amount of premium or discount
amortized to income under the straight-line method does not differ
materially from the amount which would be amortized to income under the
interest method. Procedures are followed to maintain a constant net asset
value of $1.00 per unit for the portfolio.
Security transactions are accounted for on the trade date. Interest income,
including the accretion of discount and amortization of premium, is
recorded daily on the accrual basis.
IPAIT is authorized by investment policy and statute to invest public funds
in obligations of the U.S. government, its agencies and instrumentalities;
and repurchase agreements, provided that the underlying collateral consists
of obligations of the U.S. government, its agencies and instrumentalities
and that IPAIT's custodian takes delivery of the collateral either directly
or through an authorized custodian.
Investments in Securities Continued
In connection with transactions in repurchase agreements, it is IPAIT's
policy that its Custodian take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest at all times. If the
seller defaults and the value of the collateral declines, realization of
the collateral by IPAIT may be delayed or limited. At June 30, 2005, the
security purchased under an overnight agreement to resell was
collateralized by government securities with a market value of $4,431,730.
Notes to Basic Financial Statements Cont.
Under Governmental Accounting Standards as to custodial credit risk,
IPAIT's investments in securities are classified as category one. Category
one consists of insured or registered securities or securities held by
IPAIT or its agent in IPAIT's name and is the most secure investment
category description.
Unit Issues, Redemptions and Distributions
IPAIT determines the net asset value of the DGO Portfolio daily. Units are
issued and redeemed daily at the daily net asset value. Dividends from net
investment income are declared daily and distributed monthly.
Income Taxes
IPAIT is exempt from both state and federal income taxes pursuant to
Section 115 of the Internal Revenue Code.
Fees and Expenses
Under separate agreements with IPAIT, IMG and Wells Fargo are paid an
annual fee for operating the investment programs.
IMG receives 0.260 percent of the average daily net asset value up to $150
million, 0.215 percent from $150 to $250 million, and 0.170 percent
exceeding $250 million for investment advisory and administrative fees . In
addition, IMG received 0.080 percent of the average daily net asset value
for program support fees. For the year ended June 30, 2005 the DGO
Portfolio paid $85,519 to IMG for services provided.
Wells Fargo receives 0.050 percent of the average daily net asset value up
to $150 million, .045 percent from $150 to $300 million, and 0.040 percent
exceeding $300 million for custodial services. For the year ended June 30,
2005, the DGO Portfolio paid $12,576 to Wells Fargo for services provided.
Under a distribution plan the public agency associations collectively
receive an annual fee of .100 percent of the daily net asset value of the
portfolio. For the year ended June 30, 2005, the DGO Portfolio paid $23,258
to the Iowa League of Cities and $1,895 to the Iowa Association of
Municipal Utilities.
IPAIT is responsible for other fees and expenses incurred directly by
IPAIT. The other fees and expenses accrual of 0.025 percent had been
temporarily suspended for the 16 month period ended December 31, 2004 and
reinstated at 0.020 percent January 1, 2005 through June 30, 2005 and
reinstated fully to 0.025 percent on July 1, 2005. Other fees and expenses
are accrued on the average daily net asset value, and amounted to $1,875
for the year ended June 30, 2005. All fees are computed daily and paid
monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the DGO Portfolio aggregated
$3,733,248,538 for the year ended June 30, 2005. Proceeds from maturities
of securities for the DGO Portfolio aggregated $3,755,763,650 for the year
ended June 30, 2005.
Fund Facts Summary
Diversified Fund Facts
as of June 30, 2005
Investment Strategy/Goals: To provide a safe, liquid, effective investment
alternative for the operating and reserve funds for Iowa's municipalities,
counties, municipal utilities and other eligible public agencies by jointly
investing participant funds in a professionally managed portfolio of short-term,
high-quality, legally authorized marketable securities.
Date of Inception: November 13, 1987
Total Net Assets: $230 million
Benchmarks: iMoneyNet U.S. Government & Agencies Money Fund
ReportTM, Iowa Code Chapter 74A 32-89 day Public Fund Rates, and Iowa Code
Chapter 74A 90-179 day Public Fund Rates.
Performance Objective: To provide the highest level of current income from
investment in a portfolio of U.S. government and agency securities, certificates
of deposit in Iowa financial institutions, and other authorized securities
collateralized by U.S. government and agency securities as is consistent with,
in order of priority, preservation of principal and provision of necessary
liquidity.
Investment Adviser:
Investors Management Group
Management Fees:
Sliding scale from twelve basis
points (0.12%) to seven basis points (0.07%)
Total Expense Ratio:
Sliding scale from forty-one and
one-half basis points (0.415%) to fifty-one and one-half basis points (0.515%)
DGO Fund Facts
as of June 30, 2005
Investment Strategy/Goals: To provide a safe, liquid, effective investment
alternative for the bond proceeds, operating and reserve funds for Iowa's
municipalities, counties, municipal utilities and other eligible public agencies
that are limited to investments in only direct obligations of the U.S.
government by jointly investing participant funds into a professionally managed
portfolio of short-term, eligible marketable securities.
Date of Inception: September 1, 1988
Total Net Assets: $15 million
Benchmarks: iMoneyNet U.S. Treasury & Repo Money Fund ReportTM, Iowa Code
Chapter 74A 32-89 day Public Fund Rates, and Iowa Code Chapter 74A 90-179 day
Public Fund Rates.
Performance Objective: To provide the highest level of income from investment in
a portfolio of U.S. government securities as is consistent with, in order of
priority, preservation of principal and provision of necessary liquidity.
Investment Adviser: Investors Management Group
Management Fees: Sliding Scale from twelve basis points (0.12%) to seven basis
points (0.07%)
Total Expense Ratio: Sliding scale from forty-one and one-half basis points
(0.415%) to fifty-one and one-half basis points (0.515%)
Diversified Fund and Direct Government Obligation Fund
Introduction
The Diversified Fund and the DGO Fund are each
short-term investment pools of high-quality money market instruments. Each pool
has been registered since May of 1993 with the Securities and Exchange
Commission (SEC) under the Investment Company Act of 1940. Each is operated in
accordance with 17 C.F.R. Section 270.2a-7 (Rule 2a-7). Each pool complied
voluntarily with all Rule 2a-7 money market fund operating guidelines from
inception.
The Diversified Fund is made up of a professionally
managed portfolio of U.S. government and federal agency
securities, certificates of deposit issued by Iowa financial institutions, and
perfected repurchase agreements, the latter collateralized by U.S. government
and federal agency securities. The Diversified Fund is typically used for the
investment of all public funds subject to the Iowa public funds statutory
provisions invested by a participant unless other participant-specific
investment restrictions exist.
Ownership Analysis as of June 30, 2005
IPAIT Diversified Fund and DGO Fund
[GRAPHIC OMITTED]
Countries Other 28E Entities Municipal Utilities Municipalities
- --------- ---------------- ------------------- --------------
$50,654,829 $9,856688 $29,232,811 154,719,321
20.72% 4.03% 11.96% 63.29%
The DGO Fund is identical in every respect to the
Diversified Fund except that it is invested exclusively in direct U.S.
government obligations and repurchase agreements collateralized by direct U.S.
government obligations. The DGO Fund is typically used to invest those public
funds of a participant that are subject to more stringent investment
restrictions than those provided by Iowa public fund statutes, for example bond
proceeds whose investment alternatives may be limited to the types of securities
found in the DGO Fund.
The investment objective of both the Diversified Fund and the DGO Fund is to
provide as high a level of current income as is consistent with preservation of
invested principal and provision of adequate liquidity to meet participants'
daily cash flow needs. As a general policy, all purchased securities will be
held until they mature. However, in an effort to increase yields, IPAIT may sell
securities and realize capital gains when there are perceived disparities
between maturities for various categories of authorized investments. Summaries
of all security trades for each Fund are provided quarterly to the IPAIT Board
of Trustees for review.
Historical Portfolio Cash Flow
(expressed in millions)
IPAIT Diversified Fund
[GRAPHIC OMITTED]
IPAIT DGO Fund
[GRAPHIC OMITTED]
Diversified Fund and Direct Government Obligation Fund (Cont.)
Both portfolios have been managed by IMG, IPAIT's Des Moines, Iowa-based
investment adviser, since inception. Aggregate cash flows for each Fund are
monitored daily and compared to respective Fund cash flow patterns of previous
periods. Fund cash flow patterns throughout the fiscal period, as compared to
previous years, have traditionally been repetitive. Eighteen years of operating
history create a very helpful tool to gauge necessary pool liquidity needs.
The Diversified Fund actively monitors rates offered by Iowa financial
institutions for public fund certificates of deposit. Institutions experiencing
strong loan demand typically offer rates that are at or above those available
for marketable securities, presenting a helpful portfolio investment
alternative.
To assure adequate liquidity for anticipated and
unanticipated participant withdrawals, IPAIT continually monitors the weighted
average maturity (WAM) of both the Diversified Fund and the DGO Fund. Each
Fund's WAM is similarly compared to the iMoneyNet Money Fund Report TM average
for registered money market funds. Presented below is the WAM for each Fund as
compared to the iMoneyNet Money Fund Report TM average for all similar
registered money market funds for the fiscal period.
Weighted Average Maturity (WAM) Comparison
July 2004 - July 2005
IPAIT Diversified Fund vs. iMoneyNet Money Fund
Report TM - US Government & Agency
[GRAPHIC OMITTED]
IPAIT DGO. Fund vs. iMoneyNet Money Fund Report TM - US Treasury & Repo
[GRAPHIC OMITTED]
Diversified Fund and Direct Government Obligation Fund (Cont.)
Each Fund accrues interest income daily and pays
accrued income monthly to participant accounts. Interest is paid on the first
business day of the month following accrual. Daily income amounts and investment
returns are calculated by the amortized cost method. Under this method, a
security is initially valued at cost on the date of purchase and, thereafter,
any premium or discount is amortized on a straight-line basis to maturity.
The IPAIT Adviser values each Fund's portfolio weekly at current market value,
based upon actual market quotations. Each Fund's current market valuation is
compared to that Fund's current amortized cost basis. In accordance with the
established operating parameters of Rule 2a-7 and IPAIT's internal controls and
procedures, any deviation in net asset value based upon available market
quotations from each Fund's $1.00 amortized cost per unit is carefully
monitored. Deviations may never exceed 0.5 percent. Illustrated below are the
amortized cost versus market value per unit comparisons for the past three
fiscal years for each Fund.
Amortized Cost vs. Market Value Per Share
July 1, 2002 - June 30, 2005
IPAIT Diversified Fund
[GRAPHIC OMITTED]
IPAIT DGO Fund
[GRAPHIC OMITTED]
The Diversified Fund's investment performance is
regularly compared to three established benchmarks, the iMoneyNet Money Fund
ReportTM average rate for all registered Rule 2a-7 money market funds investing
in U.S. government and federal agency securities, the Iowa Code Chapter 74A rate
for 32-89 and 90-179 day certificates of deposit issued by Iowa financial
institutions for public funds in the state.
Diversified Fund and Direct Government Obligation Fund (Cont.)
The DGO Fund is similarly compared to the iMoneyNet Money Fund ReportTM average
rate for all Rule 2a-7 money market funds that invest in only direct obligations
of the U.S. government as well as the Iowa Code Chapter 74A rates for 32-89 and
90-179 day certificates of deposit.
The Iowa Code Chapter 74A rates are distributed monthly by the state Treasurer's
office for various investment periods and are intended to be the minimum rates
at which Iowa financial institutions can accept public funds for timed deposits.
While a public body must commit funds for minimum periods of time to access
Chapter 74A rates, IPAIT's Diversified Fund and the DGO Fund may offer rates at
or above the Chapter 74A benchmarks with complete daily liquidity.
IPAIT Diversified Fund vs. Iowa Chapter 74A (90-179 & 32-89 Day) & iMoneyNet
Money Fund Report TM US Government & Agency Fund July 2004 - June 2005
[GRAPHIC OMITTED]
IPAIT DGO Fund vs. Iowa Chapter 74A (90-179 & 32-89 Day) & iMoneyNet Money Fund
Report TM US Treasury & Repo Fund July 2004 - June 2005
[GRAPHIC OMITTED]
Risk Profile
Both the Diversified Fund and the DGO Fund are low in risk profile. Both Funds
limit portfolio investments to:
No single portfolio investment may exceed the 397 days to maturity as outlined
in Rule 2a-7.
The weighted average maturity of the portfolio may never exceed 90 days. In
addition to the above investment maturity restrictions common to both Funds, the
Diversified Fund limits itself to U.S. government and federal agency securities,
perfected repurchase agreements collateralized by U.S. government and federal
agency securities, and Iowa financial institution certificates of deposit. The
DGO Fund further limits itself to only direct obligations of the U.S. government
and perfected repurchase agreements collateralized by direct obligations of the
U.S. government. This combination of those average maturities and extremely
high-quality credit instruments provides eligible Iowa public fund investors
with a safe, effective investment alternative.
Diversified Fund and Direct Government Obligation Fund (Cont.)
Maturity Analysis as of June 30, 2005
IPAIT Diversified Fund and DGO Fund
[GRAPHIC OMITTED]
Diversified DGO
----------- ---
0-30 days 69.46% 66.47%
31-90 days 16.05% 14.97%
91-180 days 13.38% 18.55%
180+ days 1.11% 0%
As noted previously, both the Diversified Fund and the DGO Fund carefully limit
themselves to high credit-quality securities. In addition, IPAIT monitors a
broad array of economic indicators as well as activities of the Federal Reserve
Board to be able to position each Fund's WAM to take advantage of projected
interest rate environments.
Distribution by Security Type as of June 30, 2005
IPAIT Diversified Fund
[GRAPHIC OMITTED]
Certificate's of Federal Agency Federal Agency
Collateralized Deposit Coupon Securities Discount Securities
- -------------- ------------------ ----------------- -------------------
62% 8% 12% 18%
IPAIT DGO Fund
[GRAPHIC OMITTED]
Federal Agency US Treasury US Treasury
Discount Securities Collateralized Repo Coupon Securities
- ------------------- -------------------- -------------------
52% 29% 19%
Diversified Fund and Direct Government Obligation Fund (Cont.)
It is important to note that portfolio liquidity needs for IPAIT must control
evaluation of alternative portfolio management opportunities at all times. For
example, if historical cash flow analysis indicates that participants will need
to withdraw funds, material extension of either Fund's portfolio is not a viable
alternative.
Participation membership by affiliation concentration for both the Diversified
and DGO Portfolios are illustrated in the following graph.
Participant Membership
IPAIT Diversified Fund and DGO Fund
[GRAPHIC OMITTED]
Countries Other Municipal Utilities Municipalities
- --------- ---------------- ------------------- --------------
82 51 92 185
Performance Summary
For the one-year period ended June 30, 2005 the Diversified Fund and DGO Fund
reported a ratio of net investment income to average net assets of 1.71 percent
and 1.39 percent respectively, net of all operating expenses. These figures
exceeded the iMoneyNet Money Fund ReportTM averages for each Fund, which
returned 1.41 percent and 1.35 percent respectively for the fiscal period.
Although both the Diversified Fund and the DGO Fund are liquidity pools, their
performance over time has consistently exceeded the iMoneyNet Money Fund
ReportTM as illustrated below.
Annual Total Returns
IPAIT Diversified Fund vs. iMoneyNet Fund Report TM
US Government & Agency
Annual Total Returns
IPAIT DGO Fund vs. iMoneyNet Fund ReportTM
US Treasury & Repo
[GRAPHIC OMITTED]
Total Returns
Year Diversified Fund iMoneyNet DGO Fund iMoneyNet
---- ---------------- --------- -------- ---------
88 6.90% 6.64%
89 8.09% 7.82% 8.32% 7.76%
90 7.73% 7.47% 7.77% 7.45%
91 6.68% 6.40% 6.64% 6.38%
92 4.67% 4.51% 4.06% 3.91%
93 2.98% 2.83% 2.76% 2.68%
94 2.88% 2.74% 2.77% 2.70%
95 4.86% 4.72% 4.82% 4.65%
96 5.11% 4.88% 5.03% 4.89%
97 4.92% 4.72% 4.84% 4.68%
98 5.10% 4.90% 4.98% 4.85%
99 4.61% 4.47% 4.43% 4.35%
00 5.13% 4.94% 4.98% 4.78%
01 5.33% 5.26% 5.15% 5.06%
02 2.11% 1.87% 1.83% 1.76%
03 0.95% 0.80% 0.90% 0.74%
04 0.59% 0.37% 0.52% 0.31%
05 1.69% 1.41% 1.48% 1.35%
Diversified Fund and Direct Government Obligation Fund (Cont.)
Also illustrated below are the historical returns for both the Diversified Fund
and the DGO Fund for the most recent one, three, and five year periods.
Annualized Total Returns
IPAIT Diversified Fund vs. iMoneyNet Money Fund Report TM
US Government & Agency
[GRAPHIC OMITTED]
IPAIT DGO Fund vs. iMoneyNet Money Fund Report TM
US Treasury & Repo
[GRAPHIC OMITTED]
Diversified Fund and Direct Government Obligation Fund (Cont.)
Fund Expenses
It is important for you to understand the impact of costs on your investment.
All mutual funds have operating expenses. As a shareholder of the fund, you
incur ongoing costs, including management fees, distribution and service fees,
and other fund expenses. Expenses, which are deducted from a fund's investment
income, directly reduce the investment return of the fund.
A fund's expenses are expressed as a percentage of its average net assets. This
figure is known as the expense ratio. The following examples are intended to
help you understand the ongoing costs (in dollars) of investing in your fund and
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period and held for the
entire period from January 1, 2005 to June 30, 2005. The table illustrates your
fund's costs in two ways:
1. Based on actual fund return. This section helps you to estimate the actual
expenses that you paid over the period. The "Ending Account Value" shown is
derived from the fund's actual return, and the third column shows the dollar
amount that would have been paid by an investor who started with $1,000 in the
fund. You may use the information here, together with the amount you invested,
to estimate the expenses that you paid over the period.
2. Based on hypothetical 5 percent return. This section is intended to help you
compare your fund's costs with those of other mutual funds. It assumes that the
fund had a return of 5 percent before expenses during the period shown, but that
the expense ratio is unchanged. In this case, because the return used is not the
fund's actual return, the results do not apply to your investment. The example
is useful in making comparisons because the Securities and Exchange Commission
requires all mutual funds to calculate expenses based on a 5 percent return. You
can assess your fund's costs by comparing this hypothetical example with the
hypothetical examples that appear in shareholder reports of other funds.
Your fund does not carry a "sales load" or transaction fee. The calculations
assume no shares were not bought or sold during the period. Your actual costs
may have been higher or lower, depending on the amount of your investment and
timing of any purchases or redemptions.
You can find more information about the fund's expenses, including annual
expense ratios for the past five years, in the Financial Highlights section of
this report. For additional information on operating expenses and other
shareholder costs, please refer to the appropriate fund Information Statement.
Beginning Ending Expenses Paid Annualized
Account Value Account Value During Period* Expense
Example 1/1/2005 6/30/2005 1/1/05 to 6*30/05 Ratio*
- ------- -------- --------- ----------------- ------
Based on Acutal Fund Return
IPAIT Diversified Fund $1,000.00 $1,017.01 $2.41 0.48%
IPAIT DGO Fund $1,000.00 $1,015.38 $2.51 0.50%
Based on Hypothetical 5 Percent Return
IPAIT Diversified Fund $1,000.00 $1,022.54 $2.42 0.48%
IPAIT DGO Fund $1,000.00 $1,022.44 $2.52 0.50%
* Expenses are equal to the fund's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
Diversified Fund and Direct Government Obligation Fund (Cont.) IPAIT Diversified
Fund/IPAIT DGO Fund - Fees and Expenses All fees are calculated by basis points
per net assets.
====================== ======================== ================================
Entity Fee Type Fee
- ---------------------- ------------------------ --------------------------------
IMG Adviser 0.12% up to $150MM;
0.095% on $150 - $250MM;
0.07% on assets exceeding $250MM
- ---------------------- ------------------------ --------------------------------
IMG Administrator 0.14% up to $150MM;
0.12% on $150 - $250MM;
0.10% on assets exceeding $250MM
- ---------------------- ------------------------ --------------------------------
IMG Program Support 0.08%
- ---------------------- ------------------------ --------------------------------
Sponsoring Sponsoring Associations 0.10%
Associations*
- ---------------------- ------------------------ --------------------------------
Wells Fargo Custody 0.05% up to $150MM;
0.045% on $150 - $300MM;
0.04% on assets exceeding $300MM
- ---------------------- ------------------------ --------------------------------
Administration Fund** Other fees & expenses 0.025%
====================== ======================== ================================
* Includes Iowa League of Cities, Iowa State Association of Counties, Iowa
Association of Utilities
** The Administration Fund accrual of 0.025 percent was suspended on August 28,
2003. On January 1, 2005, 0.02 percent was reinstated, and on July 1, 2005,
the full 0.025 percent was reinstated.
This fiscal year's actual expense for the IPAIT Diversified Fund and DGO Fund
was 0.48 percent and 0.50 percent, respectively based on a sliding fee scale;
Actual:
For the fiscal year ended June 30, 2005, the following actual expenses were
incurred by the Funds:
Fee Type Diversified DGO Fund
Adviser $244,828 $30,183
Administrator $292,076 $35,214
Program Support $174,933 $20,122
Distribution $218,667 $25,153
Custody $105,900 $12,576
Other fees and expenses $21,831 $1,875
------------ -----------
Total $1,058,235 $125,123
Diversified Fund and Direct Government Obligation Fund Cont.
Statement of Additional Information (SAI)
The SAI has additional information about the Funds and is available without
charge, upon request, by calling 800-872-4024.
Schedule of Portfolio Holdings
A complete schedule of portfolio holdings is filed with the SEC for the first
and third quarters on Form N-Q. The portfolio holding for the second and fourth
quarter are available in the semi-annual and annual reports. It is available at
www.sec.gov, or by phone at 1/800-SEC-0330, or by mail at Public Reference
Section/SEC/Washington/DC/20549 (duplicating fee required) or upon request from
IPAIT at 800-872-4024 or at IPAIT.org.
Proxy Voting
The SEC requires an annual report of the proxy voting record of the Trust.
Because the investments allowable under Iowa law restrict the investment for
IPAIT to securities to which proxy voting does not apply, IPAIT does not have a
proxy voting policy and will report no proxy votes on the Form N-PX. The law
requires the filing of the Form N-PX, and this disclosure, even though the Form
N-PX will contain no votes. Form N-PX is available to www.sec.gov, or by phone
at 800-SEC-0330, or by mail at Public Reference Section/SEC/Washington/DC/20549
(duplicating fee required) or upon request from IPAIT at 800-872-4024.
Investment Commentary
As expected, the Federal Reserve's Federal Open Market Committee raised rates at
the June meeting and gave no indication of an end to the strategy of moving
slowly but steadily back to neutral. Over the last twelve months, we have seen
the Fed increase the Fed Funds target rate nine times, from 1 percent to 3.25
percent. Despite a cumulative increase of 225 basis points in the past year, the
Fed Funds rate is still far below nominal GDP growth. Meanwhile, bank lending
continues to grow at a strong rate and the housing market continues to
appreciate. There is no evidence that liquidity conditions have tightened
meaningfully. With this in mind, we see the Fed targeting 3.75 percent to 4
percent on the Fed Funds target rate by year-end.
Despite the Fed's initiative, the economy continues to navigate through powerful
crosscurrents. Economic data continues to teeter from positive to negative and
back. While most data is susceptible to variations on a monthly basis, we remain
focused on data trends rather data points. While recent data points have
softened, we remain optimistic in the trends that continue to point toward
moderate growth.
Economic growth remains strong even on the heels of higher short-term rates and
rising oil prices. Consumer confidence is near a four year high consistent with
recent strong retail sales data. Higher oil prices have yet to scare the
consumer, however they have frightened investors. Wages continue to outpace
inflation providing for positive real income growth. While financial assets have
lingered, real estate prices have provided the consumer with improvement to net
worth. We are confident the consumer will remain strong for the foreseeable
future providing the foundation for further economic growth.
During the last quarter the manufacturing sector has shown signs of weakening.
Most manufacturing surveys have drifted lower, but remain positive. The
manufacturing sector saw such a strong recovery in 2003 and 2004 that some
tapering should be expected. Manufacturers are still suffering from increasing
trade deficits as domestic demand is being exported. If the trade deficit sees
any signs of improvement, manufacturers will be pressed to meet domestic
demands. Human resources are already scarce and plant capacity is tight.
Manufacturers are currently operating at 80 percent of capacity accompanied by a
5 percent unemployment rate. This scenario could quickly lead to higher
inflation.
Thus far inflation has remained in check. While inflation has risen during the
last year, it remains manageable near 3 percent. Commodity prices have rolled
over as the manufacturing sector shows signs of weakness and general inflation
measures have topped. Inflation has currently waned but we remain cautious
considering the economy is approaching full capacity, the dollar has weakened
year-over-year, and the employment picture remains attractive. All of these can
quickly alter the pace of inflationary pressure.
Overall we still believe the economy can continue to grow at a moderate pace
even with higher short-term rates. The consumer shows little sign of slowing,
even with oil at $60/barrel. The strength in employment continues to support our
notion that the consumer will remain active. As long as jobs remain plentiful
and wage growth is outpacing inflation, the consumer should be strong. The
weakness in the manufacturing sector is likely just a temporary soft patch. We
expect manufacturers to remain in an expansion phase but yet at a slower pace.
In the meantime concerns of a housing bubble, ballooning deficits, high oil
prices, and political instability are driving long-term rates lower and
restraining stock market growth. Today the markets are betting inflation remains
low and the economy slows. A stagnant stock market and 4 percent ten-year yields
imply investors believe the economic recovery is over. We disagree. We think we
are positioned for a stronger stock market and higher long-term yields.
Investors have become overly pessimistic regarding economic growth. Real
ten-year yields are historically low relative to inflation and in no other Fed
cycle have long-term rates declined when the Fed is raising short-term rates. We
continue to look for long rates to rise and mid to high single digit returns in
stocks for the remainder of the year. We also look for short-term rates to
continue to rise through the rest of 2005.
Jeffrey D. Lorenzen, CFA
Investors Management Group
IPAIT Investment Policy
SECTION 1 - SCOPE OF INVESTMENT POLICY
The Investment Policy of the Iowa Public Agency Investment Trust (IPAIT) shall
apply to all funds invested on behalf of participants accounted for in the IPAIT
financial statements. Each investment made pursuant to this Investment Policy
must be authorized by applicable law and this written Investment Policy.
This Investment Policy is intended to comply with Iowa Code chapters 28E, 12B,
12C and sections 331.555 and 384.21.
Upon passage and upon future amendment, if any, copies of this Investment Policy
shall be delivered to all of the following:
1. The IPAIT Board of Trustees.
2. All IPAIT depository institutions or fiduciaries.
3. The auditor engaged to audit any fund of IPAIT.
SECTION 2 - FUNDAMENTAL INVESTMENT RESTRICTIONS
A. Unless otherwise specified below, none of the portfolios will:
1. Invest more than 5% of the value of their total assets in the
securities of any one federally insured Iowa depository
institution (other than securities of the U.S. government or its
agencies or instrumentalities).
2. Invest 25% or more of the value of their total assets in the
securities of issuers conducting their principal business
activities in any one industry, including financial institutions.
This restriction does not apply to securities of the U.S.
Government or its agencies and instrumentalities and repurchase
agreements relating thereto.
3. Issue any senior securities (as defined in the Investment Company
Act of 1940, as amended).
4. Mortgage, pledge or hypothecate their assets.
5. Make short sales of securities or maintain a short position.
6. Purchase any securities on margin.
7. Write, purchase or sell puts, calls or combinations thereof.
8. Purchase or sell real estate or real estate mortgage loans.
9. Invest in restricted securities or invest more than 10% of the
Portfolio's net assets in repurchase agreements with a maturity
of more than seven days, and other liquid assets, such as
securities with no readily available market quotation.
10. Underwrite the securities of other issuers.
11. Invest in any securities in contravention of the provisions of
Rule 2a-7 of the Investment Company Act of 1940 as it presently
exists or as it may hereafter be amended.
IPAIT Investment Policy
B. Prohibited Investments
Assets of IPAIT shall not be invested in the following:
1. Reverse repurchase agreements.
2. Futures and options contracts.
3. Any security with a remaining maturity exceeding 397 days as
provided in Rule 2a-7.
C. Prohibited Investment Practices
The following investment practices are prohibited:
1. Trading of securities for speculation or the realization of
short-term trading gains.
2. Investing pursuant to a contract providing for the compensation
of an agent or fiduciary based upon the performance of the
invested assets.
3. If a fiduciary or other third party with custody of public
investment transaction records of IPAIT fails to produce
requested records when requested by IPAIT or its agents within a
reasonable time, IPAIT shall make no new investment with or
through the fiduciary or third party and shall not renew maturity
investments with or through the fiduciary or third party.
D. Management Policies and Procedures
Following are the fundamental management policies and procedures for IPAIT. All
investments shall be maintained in separate IPAIT custodial accounts, segregated
by Portfolio on behalf of IPAIT Participants.
1. Each purchase of sale of a security must be handled on a delivery
versus payment (DVP) basis. Funds for the purchase of an
investment shall not be released to the seller until the security
is delivered to the IPAIT Custodian. Conversely, a sold security
shall not be released to the buyer until funds for the purchase
price of the security have been received by the IPAIT Custodian.
2. "Free delivery" transactions are prohibited. The Custodian shall
never release assets from the IPAIT custodial accounts until the
funds for the investment are delivered.
3. Any material deviation (greater than .5%) from the amortized cost
of investments shall be promptly reported by the Adviser to the
Board of Trustees. If such deviation exceeds .5%, the Adviser
will consider what action, if any, should be initiated to
reasonable eliminate or reduce material dilution or other unfair
results to Participants. Such action may include redemption of
Trust Units in kind, selling portfolio securities prior to
maturity, withholding distributions or utilizing a net asset
value per Trust Unit based upon available market quotations.
4. The frequent trading of securities, including day trading for the
purpose of realizing short-term gains, the purchase and sale of
futures and options to buy or sell authorized investments,
reverse repurchase agreements, and other similar speculative
transactions are expressly prohibited.
5. IPAIT may not make any investment other than Permitted
Investments authorized by the provisions of the law applicable to
the investment of funds by the Participants, as such laws may be
amended from time to time.
6. IPAIT may not purchase any Permitted Investment if the effect of
such purchase by IPAIT would be to make the average dollar
weighted maturity of a portfolio greater than ninety (90) days.
7. IPAIT may not borrow money or incur indebtedness whether or not
the proceeds thereof are intended to be used to purchase
Permitted Investments.
IPAIT Investment Policy
8. IPAIT may not make loans, provided that IPAIT may make Permitted
Investments.
9. IPAIT may not purchase securities or shares of investment
companies or any entities similar to PAIT.
The restrictions set forth above are fundamental to the operation and activities
of IPAIT and may not be changed without the affirmative approval, in writing, of
a majority of the Participants entitled to vote, except that such restrictions
may be changed by the Trustees so as to make them more restrictive when
necessary to confirm the investment program and activities of IPAIT to the laws
of the State of Iowa and the United States of America as they may from time to
time be amended.
The above investment restrictions shall not be changed without the vote of a
majority of the Participants in a Portfolio. "Majority" means the lesser of (a)
67% of the Trust's or a Portfolio's outstanding Trust Units voting at a meeting
of the Participants at which more than 50% of the outstanding Trust Units are
represented in person or by proxy or (b) a majority of the Trust's or a
Portfolio's outstanding Trust Units.
Provided, however, the Trust may invest Portfolio assets pursuant to the maximum
extent possible by Iowa law governing investments by public agencies and Rule
2a-7 and any change in the restrictions of the Iowa law governing investments by
public agencies and Rule 2a-7 shall be deemed to be adopted by the Trust, and
such change shall not require the approval of the Participants.
Any investment restrictions or limitations referred to above which involves a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after an
acquisition of securities or utilization of assets and results there from.
Section 3 - DELEGATION OF AUTHORITY
The responsibility for conducting IPAIT investment transactions resides with the
IPAIT Board of Trustees. Certain responsibilities have been delegated to the
Administrator, the Adviser, and the Custodian (the "Service Providers") pursuant
to the Administrator Agreement, the Adviser Agreement, the Custodian Agreement,
with amendments as may be adopted from time to time, and the current Information
Statement (the "Documents").
Each Service Provider shall individually notify the IPAIT Board of Trustees in
writing within thirty days of receipt of all communications from the auditor of
any Service Provider or any regulatory authority of the existence of a material
weakness in internal control structure of the Service Provider or regulatory
orders or sanctions regarding the type of services being provided to IPAIT by
the Service Provider.
The records of investment transactions made by or on behalf of IPAIT are public
records and are the property of IPAIT whether in the custody of IPAIT or in the
custody of a fiduciary or other third party.
IPAIT Investment Policy
Section 4 - OBJECTIVES OF INVESTMENT POLICY
The primary objectives, in order of priority, of all investment activities
involving the financial assets of IPAIT shall be the following:
1. Safety: Safety and preservation of principal in the overall
portfolio is the foremost investment objective.
2. Liquidity: Maintaining the necessary liquidity to match expected
liabilities is the second investment objective.
3. Return: Obtaining a reasonable return is the third investment
objective.
Section 5 - PRUDENCE
The Board of Trustees, when providing for the investment of deposit of public
funds in the IPAIT program, shall exercise the care, skill, prudence and
diligence under the circumstances then prevailing that a person acting in a like
capacity and familiar with such matters would use to attain the Section 4
investment objectives.
Section 6 - INSTRUMENTS ELIGIBLE FOR INVESTMENT
Assets of IPAIT may be invested in the following, all as more fully described in
the IPAIT Information Statement:
-- Obligations of the United States government, its agencies and
instrumentalities.
-- Certificates of deposit and other evidences of deposit at federally
insured Iowa depository institutions approved and secured pursuant
to chapter 12C.
-- Repurchase agreements, provided that the underlying collateral
consists of obligations of the United States government, its
agencies and instrumentalities and that the Custodian takes delivery
of the collateral either directly or through an authorized
custodian.
All instruments eligible for investment are further qualified by all other
provisions of this Investment Policy, including Section 8, Diversification and
Investment Maturity Limitations.
Section 7 - DIVERSIFICATION AND INVESTMENT MATURITY LIMITATIONS
It is the policy of IPAIT to diversify portfolio investments in the Diversified
Portfolio and the Direct Government Obligation (DGO) Portfolio. As described in
the Information Statement, portfolio investments in the Diversified Portfolio
and the Direct Government Obligation Portfolio are limited to the following:
1. No individual investment with maturity in excess of 397 days as
provided in Rule 2a-7.
2. The maximum average maturity of all portfolio investments may not
exceed 90 days. Pursuant to IPAIT policies as disclosed in the
Documents, Participants may also individually invest in Fixed
Term Program investments.
IPAIT Investment Policy
Section 8 - SAFEKEEPING AND CUSTODY
All invested assets of Participants in the Portfolios or in the Fixed Term
Program shall be held in accordance with the Custodian Agreement.
All invested assets eligible for physical delivery shall be secured by having
them held at a third party custodian. All purchased investments shall be held
pursuant to a written third party custodial agreement requiring delivery versus
payment. No assets may be delivered out of the IPAIT account without full
payment (no "free deliveries" shall be permitted).
Section 9 - REPORTING
The Service Providers shall submit all reports required in the Documents.
Section 10 - INVESTMENT POLICY REVIEW AND AMENDMENT
This Investment Policy shall be reviewed on or before December 31, 2005 or more
frequently as appropriate. Notice of amendments to the Investment Policy shall
be promptly given to all parties noted in Section 1.
Section 11 - EFFECTIVE DATE
This Investment Policy shall be effective as of May 1, 1993. Passed and approved
this 20th day of April, 1993.
Amended effective September 1, 2004.
Investing and Non-Investing Participants
Diversified and Direct Government Obligation Funds
$0-$50,000 Assets Invested
- --------------------------
Cascade Municipal Utilities
Cass County Environment Control Agency
City of Ames - DGO
City of Badger
City of Burlington
City of Callender
City of Corydon
City of Dayton
City of Earlham
City of Earlville
City of Evansdale
City of Fairbank
City of Fairfield
City of Grand Mound
City of Grimes
City of Grundy Center
City of Jefferson
City of Letts
City of Lovilia
City of Mallard
City of Maquoketa
City of Martensdale
City of Massena
City of Melcher-Dallas
City of Middletown
City of Moulton
City of New Virginia
City of Orange City
City of Panora
City of Red Oak
City of Ringsted City of Spragueville
City of Springbrook
City of Walnut
City of Wesley
City of Westfield
City Utility of Epworth
City Utility of Fredericksburg
City Utility of Harlan
City Utility of Mallard
City Utility of Martensdale
City Utility of Murray
City Utility of New Hampton
City Utility of Orange City
City Utility of Pella
City Utility of Prairie
City Clayton
County Corning Municipal Utilities
County of Adair
County of Cedar
County of Chickasaw
County of Clarke
County of Dickinson
County of Fremont
County of Greene
County of Hardin
County of Howard
County of Sac
County of Union
Dallas County Hospital
Fontanelle Municipal Utility
Geode Resource Conserv. &
Develp., Inc.
Gilbertville Community
Day, Inc.
Gowrie Municipal Utilities
IPPA Administrative
IPPA CMMPA
IPPA IMTG
IPPA ISEP
IPPA MMUA
Johnson Township Barnum
Community Fire
Department
Lamoni Municipal Utilities
Manilla Municipal Gas Dept.
Manning Municipal Gas
Department
North Central Reg.
Emerg. Resp. Com. Northwest Iowa Area Solid
Waste Agency
Stuart Municipal Utilities
Waverly Health Center
Webster County Solid Waste
Commission
Webster County
Telecommunications
Board
$50,000-$250,000 Assets Invested
- --------------------------------
Brooklyn Municipal Utilities
Buena Vista County Solid
Waste Commission
Central IA Juvenile Detention
Commission
City of Ackley
City of Agency
City of Albert City
City of Bondurant
City of Boone
City of Brandon
City of Corning City of Dike
City of Fort Dodge
City of Grinnell
City of Griswold
City of Knoxville
City of Lake Mills
City of Lewis
City of Maynard
City of Montezuma Fire
Department
City of Morning Sun
City of Murray
City of Nora Springs
City of Parnell
City of Readlyn
City of Urbana
City Utility of Corydon
City Utility of Dike
City Utility of Eagle Grove
City Utility of Melcher-Dallas
City Utility of Middletown
City Utility of Orient
City Utility of Urbandale
County of Boone
County of Buena Vista
County of Carroll
County of Crawford
County of Des Moines
County of Franklin
County of Jasper
County of Kossuth
County of Plymouth
County of Washington
County of Wright
Denison Municipal Utilities
Des Moines Area MPO
Evansdale Water Works
Hiawatha Water Department
IPAIT Administration Fund
IPPA MMTG
North Iowa Area Council of
Govts.
Palo Alto County Hospital
Poweshiek Water Association
South Iowa Detention Service
Agency
Southwest Iowa Planning
Council
Villisca Municipal Power Plant
Warren County
Warren Lakewood Benefitted
Rec. Lake Dis
$250,000-$500,000 Assets Invested
- ---------------------------------
City of Algona
City of Early
City of Epworth
City of Keystone
City of Mount Pleasant
City of Orleans
City of Pella
City of Polk City
City of Prairie City
City of Shelby
City of Shenandoah
City of Spencer
City of Windsor Heights
City Utility of Lake Mills
City Utility of Readlyn
City Utility of Shelby
County of Audubon
County of Mills
County of Ringgold
County of Tama
Grundy Center Municipal
Utilities
La Porte City Utility
Second Judicial Dist Dept. of
Correct
SIMECA
South Iowa Area Crime
Commission
Urbandale Sanitary Sewer
District
$500,000-$1,000,000 Assets Invested
- -----------------------------------
Algona Municipal Utilities
City of Adel
City of Altoona
City of Denison
City of Eagle Grove
City of Gilbertville
City of Keokuk
City of La Porte City
City of Mason City
City of Riverdale
City of Van Meter
City Utility of Maquoketa
City Utility of Montezuma
City Utility of Traer
County of Calhoun
County of Emmet
County of Hamilton
County of Linn
County of Madison
County of O'Brien
County of Osceola
County of Winneshiek
IAMU Insurance Trust
Knoxville Utility
NIMECA
Orange City Hospital and
Clinic
Resale Power Group of Iowa
Waverly Light and Power
Xenia Rural Water District
$1,000,000-$5,000,000 Assets Invested
- -------------------------------------
Bluestem Solid Waste Agency
Broadlawns Medical Center
Cedar Falls Utilities
City of Ankeny
City of Council Bluffs
City of Davenport
City of Forest City
City of Iowa City
City of Marion
City of Mitchellville
City of Montezuma
City of Muscatine
City of Oskaloosa
City of Sioux City
City of Traer
City of Washington City of Waterloo
City of Waverly
City Utility of Lenox Clay County
County of Appanoose
County of Black Hawk
ountyof Buchanan
County of Cass
County of Decatur
County of Henry
County of Jackson
County of Louisa
County of Lyon
County of Monona
County of Poweshiek
County of Sioux
County of Wapello
County of Wayne
County of Webster
Dallas County
Fifth Judicial District
IMWCA Group C
Lucas County
Montezuma Municipal Light and Power
North Central Iowa Regional SWA
West Des Moines Water Works
Over $5,000,000 Assets Invested
- -------------------------------
City of Bettendorf
City of Cedar Rapids
City of Cedar Rapids - DGO
City of Clinton
City of Coralville
Investing and Non-Investing Participants
Diversified and Direct Government Obligation Funds
City of Hiawatha
City of Johnston
City of West Des Moines
Spencer Municipal Utility
Non-Investing Participants
Audubon County Memorial Hospital
City of Alton City
of Ames City of Anamosa
City of Anthon City of Atlantic
City of Audubon City of
Bellevue City of Bloomfield
City of Bussey
City of Camanche
City of Carlisle
City of Carson
City of Carter Lake
City of Cedar Falls
City of Center Point
City of Centerville
City of Charles City
City of Cherokee
City of Clarinda
City of Clive
City of Colfax
City of Colo
City of Creston
City of Denver
City of Des Moines
City of Dubuque
City of Dunkerton
City of Eldon
City of Eldridge
City of Elk Run Heights
City of Ellsworth
City of Fort Madison
City of Grand River
City of Greenfield
City of Harlan
City of Hawarden
City of Hazleton
City of Hudson
City of Humboldt
City of Huxley
City of Independence
City of Indianola
City of Lamont
City of Lehigh
City of Lenox
City of Leon
City of Lisbon
City of Lohrville
City of Manchester
City of Manning
City of Marble Rock
City of Marshalltown
City of Monroe
City of Mount Vernon
City of Nevada
City of New Hampton
City of New London
City of Newton
City of Oelwein
City of Osage
City of Ossian
City of Ottumwa
City of Peosta
City of Perry
City of Pleasant Hill
City of Pleasantville
City of Pocahontas
City of Prescott
City of Preston
City of Rockwell
City City of Sac City
City of Sheldon
City of Slater
City of Spirit Lake
City of St. Charles
City of Storm Lake
City of Sumner
City of Tipton
City of Urbandale
City of Villisca
City of Vinton
City of Webster City
City of Wilton
City of Woodbine
City Utility of Alton
City Utility of Ames
City Utility of Anamosa
City Utility of Anthon
City Utility of Aplington
City Utility of Bloomfield
City Utility of Colfax
City Utility of Coon Rapids
City Utility of Creston
City Utility of Denver
City Utility of Fairbank
City Utility of Graettinger
City Utility of Hawarden
City Utility of Laurens
City Utility of LeClaire
City Utility of Lohrville
City Utility of Preston
City Utility of Sac City
City Utility of Sanborn
City Utility of Slater
City Utility of St. Charles
City Utility of Story City
City Utility of Vinton
City Utility of Wahpeton
ClayRegional Water District
Clear Lake Sanitary District
Council Bluffs Airport Authority
County of Butler
County of Cerro Gordo
County of Clinton
County of Davis
County of Dubuque
County of Floyd
County of Greene-Medical Center
County of Grundy
County of Hancock
County of Harrison
County of Iowa
County of Johnson
County of Jones
County of Marion
County of Marshall
County of Mitchell
County of Monroe
County of Muscatine
County of Page
County of Polk
County of Scott
County of Story
County of Winnebago
County of Worth Crawford
County Memorial Hospital
Des Moines Metropolitan Transit Authority
Des Moines Utility
Eighth Judicial Dist.
Dept. of Correct.
Fort Madison Utility
Greenfield Municipal Utilities
Heart of Iowa Reg. Transit Agency
Iowa Northland Reg. Council of Gov.
Iowa Public Employer Health Care Cover
Jefferson County Hosp. Foundation, Inc.
Jefferson County Hospital Lee County
Manning Municipal Utilities
Midas Council of Governments
Mid-Iowa Development Association
COG
Mid-Iowa Regional Housing Authority
Missouri River Energy Services
Mitchell County Regional Health Center
Monroe County Hospital
Mt. Pleasant Municipal Utilities
Muscatine Power and Water
Newton Waterworks
Ogden Municipal Utility
Page County Landfill Association
Plymouth County Solid Waste Agency
Pottawattamie County
Seventh Judicial District
Third Judicial District
Van Buren County Hospital
Washington County Hospital
Winterset Municipal Utilities
Statistical Information
MAJOR PARTICIPANTS
Diversified Percent Total Assets
Top Ten Participants 48% $112,257,335
Top Twenty Participants 63% $144,716,918
Top Fifty Participants 83% $191,099,445
DGO Percent Total Assets
Top Ten Participants 100% $14,795,683
INVESTMENT ADVISER
Investors Management Group (IMG) has served as the sole Investment Adviser to
all investment alternatives within the Iowa Public Agency Investment Trust since
the program's inception in 1987. As of June 30, 2005, IMG had a total of $4.7
billion in assets under management, representing a diverse group of
institutional clients.
CONSULTANTS
IPAIT does not employ the use of any professional consultants beyond those
service providers detailed in the Notes to Financial Statements Section.
BROKERS
IPAIT does not employ the use of brokers in the operation of its various
investment alternatives.
Changes In Fund Units
Changes in Participant Assets Under Management
Diversified Fund and
Direct Government Obligation Fund
IPAIT Annual Annual
Date Diversified Fund Change IPAIT DGO Fund Change
- ------------ ---------------------- ----------- ------------------ -------------
06/05 $229,667,966 -9.87% $14,795,683 -60.58%
03/05 $240,589,826 -12.58% $18,967,804 -58.52%
12/04 $221,582,170 -10.52% $22,157,021 -54.54%
09/04 $221,163,016 -18.75% $31,294,779 -49.15%
06/04 $254,818,110 -1.84% $37,532,248 -28.22%
03/04 $275,215,747 10.58% $45,727,070 -40.88%
12/03 $247,626,021 -16.67% $48,744,871 -25.40%
09/03 $272,187,641 7.83% $61,548,710 17.70%
06/03 $259,601,282 2.23% $52,291,241 -21.32%
03/03 $248,884,686 -10.42% $77,348,955 2.26%
12/02 $297,172,601 -6.16% $65,341,840 -20.73%
09/02 $252,426,230 -4.62% $52,291,241 -44.28%
06/02 $253,948,247 -4.20% $66,461,330 10.81%
03/02 $277,835,614 -8.83% $75,641,831 19.10%
12/01 $316,690,866 32.71% $82,432,865 22.23%
09/01 $264,646,237 2.53% $93,847,685 30.47%
06/01 $265,090,819 22.47% $59,975,661 32.20%
03/01 $304,760,387 22.97% $63,510,582 16.53%
12/00 $238,634,980 11.98% $67,438,029 9.11%
09/00 $258,112,751 22.59% $71,931,497 -1.98%
06/00 $216,459,830 14.80% $45,366,390 -48.21%
03/00 $247,826,392 4.02% $54,500,308 -21.87%
12/99 $213,110,138 10.58% $61,810,064 -15.01%
09/99 $210,543,469 10.06% $73,381,984 -5.63%
06/99 $188,558,836 6.52% $87,596,381 5.71%
03/99 $238,242,744 24.18% $69,752,928 48.18%
12/98 $192,712,021 19.02% $72,730,352 39.38%
09/98 $191,295,081 2.07% $77,758,459 35.23%
06/98 $177,018,714 -11.07% $82,865,033 40.87%
03/98 $191,859,267 -20.16% $47,073,726 -5.27%
12/97 $161,914,498 -24.50% $52,182,763 -5.28%
09/97 $187,412,776 -9.27% $57,501,838 -2.32%
Monthly Comparative Yields
IPAIT Diversified Fund
Monthly Average Yields
Diversified
Fund iMoneyNet U.S. Govt. Chapter 74A Chapter 74A
Date Rate (1) & Agency Index (2) 32-89 Day (3) 90-179 Day (3)
---- -------- ------------------ ------------- --------------
06/05 2.58% 2.30% 1.70% 2.00%
05/05 2.48% 2.21% 1.65% 1.80%
04/05 2.28% 2.00% 1.50% 1.75%
03/05 2.09% 1.83% 1.40% 1.60%
02/05 1.96% 1.63% 1.35% 1.45%
01/05 1.73% 1.47% 1.25% 1.35%
12/04 1.62% 1.33% 1.10% 1.20%
11/04 1.41% 1.14% 1.05% 1.10%
10/04 1.28% 0.99% 0.95% 0.85%
9/04 1.09% 0.82% 0.75% 0.85%
8/04 0.95% 0.70% 0.85% 1.05%
7/04 0.83% 0.53% 1.00% 1.20%
(1) Actual earnings less expenses
(2) iMoneyNet U.S. Government & Agencies Monthly Money Fund Report TM (3) Iowa
Code Chapter 74A minimum public funds deposit rates
IPAIT DGO Fund
Monthly Average Yields
DGO Fund iMoneyNet US Treasury Chapter 74A Chapter 74A
Date Rate (1) & Repo Index (2) 32-89 Day (3) 90-179 Day (3)
---- -------- ---------------- ------------- --------------
06/05 2.40% 2.24% 1.70% 2.00%
05/05 2.28% 2.16% 1.65% 1.80%
04/05 2.06% 1.92% 1.50% 1.75%
03/05 1.93% 1.75% 1.40% 1.60%
02/05 1.81% 1.57% 1.35% 1.45%
01/05 1.52% 1.32% 1.25% 1.35%
12/04 1.40% 1.26% 1.10% 1.20%
11/04 1.29% 1.09% 1.05% 1.10%
10/04 1.14% 0.92% 0.95% 0.85%
09/04 0.96% 0.78% 0.75% 0.85%
08/04 0.86% 0.66% 0.85% 1.05%
07/04 0.72% 0.49% 1.00% 1.20%
(1) Actual earnings less expenses
(2) iMoneyNet U.S. Treasury & Repo Monthly Money Fund Report TM
(3) Iowa Code Chapter 74A minimum public funds deposit rates
Annual Comparative Yields
Average Annual Yield for the Fiscal Years Ended June 30,
iMoneyNet U.S.
Diversified iMoneyNet U.S. Govt. Treasury
Fund (1) & Agency Index (2) DGO Fund (1) & Repo Index (3)
-------- ------------------ ------------ ----------------
2005 1.69 1.41 1.48 1.35
2004 0.59 0.37 0.52 0.31
2003 0.95 0.80 0.90 0.74
2002 2.11 1.87 1.83 1.76
2001 5.33 5.26 5.15 5.06
2000 5.13 4.94 4.98 4.78
1999 4.61 4.47 4.43 4.35
1998 5.10 4.90 4.98 4.85
1996 5.11 4.88 5.03 4.89
1995 4.86 4.72 4.82 4.65
1994 2.88 2.74 2.77 2.70
1993 2.98 2.83 2.76 2.68
(1) Actual earnings less expenses
(2) iMoneyNet U.S. Government & Agencies Money Fund Report TM
(3) iMoneyNet U.S. Treasury and Repo Money Fund Report TM
Total Net Investment Income
for the Fiscal Year Ended June 30,
Diversified Fund (1) DGO Fund (1)
-------------------- ------------
2005 3,733,917 349,987
2004 1,477,818 265,254
2003 2,531,693 658,073
2002 5,854,955 1,381,159
2001 13,455,641 3,216,209
(1) Actual earnings less
expenses
Glossary of Investment Terms
Accrued interest - interest accumulated on all securities in a portfolio since
the most recent payment date for each security.
Administrator - entity that carries out IPAIT policies and provides participant
recordkeeping services.
Amortized Cost - method of accounting that gradually reduces a security's
discount or premium on a straight-line basis.
Assets - items in financial statement with current market value owned by IPAIT.
Certificate of Deposit - debt instrument issued by a financial institution with
an interest rate set by competitive forces in the marketplace.
Collateral - U.S. government or agency securities pledged to IPAIT until
investment is repaid. For instance, the security for a collateralized
certificate of deposit issued by an Iowa financial institution.
Compound Rate - interest calculation based upon investment of principal plus
reinvestment of interest earned from previous period(s). IPAIT portfolio
interest is compounded or reinvested monthly.
Custodian - bank that maintains custody of all IPAIT assets.
Discount - the dollar amount by which the par value of a bond exceeds its market
price.
Diversified - spreading of risk by investing assets in several different
categories of investment and assorted maturities within those categories.
Investment Adviser - Securities and Exchange Commission registered firm that
provides investment advice to IPAIT.
Iowa Code Chapter 74A Rates - Minimum rates at which Iowa financial institutions
may accept deposits of public funds for various periods.
Liabilities - claims on the assets of IPAIT.
Market Value - the current price or value of a security.
Net Investment Income - income from IPAIT investments distributed to
participants after payment of program operating expenses.
Nominal Rate - simple interest calculation based only upon the principal amount
invested without reinvestment of earned interest.
Par Value - value of IPAIT investments at maturity.
Portfolio - all investments owned by IPAIT.
Premium - the dollar amount by which the market price of a bond exceeds its par
value.
Redemptions - withdrawal of funds by participants from IPAIT.
Repurchase Agreement - agreement between IPAIT and a seller of U.S. government
securities, whereby the seller agrees to repurchase the securities at an agreed
upon price at a stated time. The transaction is collateralized by U.S.
government or U.S. agency securities with a market value of at least 102% of the
value of the repurchase agreement.
Straight-Line - conservative accounting procedure to reduce a security's premium
or discount in equal daily increments over its remaining period to maturity.
U.S. Government Agencies - securities issued by U.S. government sponsored
corporations such as the Federal Home Loan Bank and Federal National Mortgage
Association.
U.S. Government Securities - direct obligations of the U.S. government, such as
Treasury bills, notes and bonds.
Yield Curve - graph plotting yields of securities of similar quality on vertical
axis and maturities ranging from shortest to longest on horizontal axis.
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
(A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO THE REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER, PRINCIPAL ACCOUNTING
OFFICER OR CONTROLLER, OR PERSONS PERFORMING SIMILAR FUNCTIONS, REGARDLESS OF
WHETHER THESE INDIVIDUALS ARE EMPLOYED BY THE REGISTRANT OR A THIRD PARTY.
(B) NO COMMENT REQUIRED.
(C) THERE WAS NO AMENDMENT TO THE CODE OF ETHICS DURING THE REPORTING PERIOD.
(D) THERE WAS NO WAIVER GRANTED UNDER THE CODE OF ETHICS DURING THE REPORTING
PERIOD.
(E) NOT APPLICABLE.
(F)(1) NOT APPLICABLE.
(F)(2) NOT APPLICABLE.
(F)(3) TO REQUEST A FREE COPY OF THE IOWA PUBLIC AGENCY INVESTMENT TRUST CODE OF
ETHICS, PLEASE CALL 1-800-438-6375.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board of directors has determined that the registrant
has at least one audit committee financial expert serving on its audit
committee. (a)(2) Donald W. Kerker is the independent director named as the only
audit committee financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)The aggregate fees for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
are listed below. These numbers include professional services for the
preparation of the Registrant's tax returns.
June 30, 2005 $16,775
June 30, 2004 $15,995
(b)NOT APPPLICABLE.
(c)SEE ITEM 4(A)
(D)NOT APPLICABLE.
(E)NOT APPLICABLE.
(F)NOT APPLICABLE.
(G)NOT APPLICABLE.
(H)NOT APPLICABLE.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGMENT INVESTMENT COMPANIES. NOT APPLICABLE.
ITEM 8. NOT APPLICABLE.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. A MEETING OF
SECURITY HOLDERS WAS HELD ON AUGUST 26, 2005. THE MATTERS BEFORE THE SECURITIES
HOLDERS INCLUDED ELECTION OF THE BOARD OF TRUSTEES, APPROVAL OF THE SELECTION OF
THE AUDITOR, AND APPROVAL OF AMENDMENTS TO THE RESTATED JOINT POWERS AGREEMENT.
ALL PROPOSALS WERE APPROVED.
ITEM 10. CONTROLS AND PROCEDURES.
(A) THE PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS CONCLUDED THAT THE
REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES ARE EFFECTIVE BASED ON THEIR
EVALUATION OF THE DISCLOSURE CONTROLS AND PROCEDURES AS OF SEPTEMBER 1, 2005, A
DATE WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT. THE PRINCIPAL EXECUTIVE
AND FINANCIAL OFFICERS RECOGNIZE, HOWEVER, THAT GIVEN THE NEWNESS OF SUCH
DISCLOSURE CONTROLS AND PROCEDURES, THE REGISTRANT WILL BE REVIEWING AND
REVISING SUCH DISCLOSURE CONTROLS AND PROCEDURES ON A REGULAR BASIS.
(B) THERE WERE NO SIGNIFICANT CHANGES IN REGISTRANT'S INTERNAL CONTROLS OR IN
OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT THESE CONTROLS SUBSEQUENT TO THE
DATE OF THEIR EVALUATION, INCLUDING ANY CORRECTIVE ACTIONS WITH REGARD TO
SIGNIFICANT DEFICIENCIES AND MATERIAL WEAKNESSES.
ITEM 11. EXHIBITS.
(A) A CERTIFICATION FROM THE CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCIAL
OFFICER IS ATTACHED AS EXHIBIT A.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934 and the Investment
Company Act of 1940, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IOWA PUBLIC AGENCY INVESTMENT TRUST
By /s/ Tom Hanafan
- -----------------------
Tom Hanafan, Chair and Trustee
Date: January 31, 2006
Pursuant to the requirements of the Securities Act of 1934 and the Investment
Company Act of 1940, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Signature and Title
/s/ Jeff Lorenzen
- ----------------------
Jeff Lorenzen, Chief Executive Officer, January 31, 2006
/s/ Amy Mitchell
- ----------------------
Amy Mitchell, Chief Financial Officer, January 31, 2006