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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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, JOHNSON &
WEST DES MOINES, IOWA 50266 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:12/31/2005
ITEM 1. REPORTS TO UNITHOLDERS.
SEMI-ANNUAL FINANCIAL REPORT
DIVERSIFIED FUND
DIRECT GOVERNMENT OBLIGATION FUND
DECEMBER 31, 2005
Trustees' Report
To Iowa Public Agency Investment Trust Participants:
The Iowa Public Agency Investment Trust (IPAIT) is pleased to present this
semi-annual report of IPAIT operations for the six-month period ended December
31, 2005. Over the past six months, short-term interest rates have continued
their upward climb. This has a direct impact on how the IPAIT program operates
and serves its participants.
The Federal Reserve chose to raise rates four times in the second half of 2005,
moving the Federal Reserve Fund's overnight rate from 3.25 percent at the
beginning of the period to 4.25 percent as of December 31, 2005. The Federal
Reserve's actions helped boost the rates in the Diversified Fund from 2.804
percent on June 30, to 3.740 percent on December 31. The Direct Government
Obligation Fund also benefited by the rate moves, increasing from 2.376 to 3.086
percent for the same time period. It is anticipated that short-term interest
rates will move slightly higher in the first half of 2006, but not to the extent
they have recently. The portfolio construction is designed to take advantage of
Federal Reserve rate increases anticipated in 2006. We encourage you to visit
the website, www.IPAIT.org, to compare IPAIT yields to those provided by your
financial institution.
Balances within IPAIT continued their migration to fixed-term investments, as
public finance officers looked for ways to maximize returns. The IPAIT
Fixed-Term Automated (FTA) program produced very high activity again. In the
last six months of 2005, IPAIT solicited 310 competitive bids on behalf of
participants, up from 225 in the first six months. IPAIT was able to
successfully place 29 percent of these bids. While IPAIT's FTA program did not
always provide the highest bid, utilizing the program helped insure local public
funds received a more competitive rate. We continue to add Iowa financial
institutions to our bidding process to provide a competitive rate environment,
one of IPAIT's founding principles.
In August the shareholders elected the Board of Trustees, selected KPMG to
continue as IPAIT's auditors, and approved changes to and a restatement of the
Joint Powers Agreement for IPAIT. In December, a special shareholder meeting
resulted in approval of a new investment advisory agreement with Investors
Management Group. The new agreement was required due to the sale of IMG from
Amcore to West Bancorporation, an Iowa bank.
The Board of Trustees is very pleased with the ongoing success of the IPAIT
program and the benefits it provides. As always, we welcome any comments or
suggestions that you may have.
Sincerely,
/s/ Tom Hanafan, Chair
Board of Trustees
1
Management Report
To Iowa Public Agency Investment Trust Participants:
With sustainable growth and mild inflation, the U.S. economy is operating in an
ideal environment. However, the transition to a new Federal Reserve Chairman and
the potential for rising inflation will keep investors alert in the coming year.
The Federal Reserve raised overnight rates 2.00 percent in 2005 and was faced
with the "conundrum" that longer rates remained relatively unchanged. Foreign
central banks played a significant role in keeping long rates low, but the
Federal Reserve is also fighting its own credibility since the market seems
convinced that the Federal Reserve can keep inflation in check. A few more rate
increases can be expected in 2006 to keep growth and inflation in balance.
The money market yield curve has shifted upward along with Federal Reserve rate
hikes. The curve remains relatively flat and there is little incentive to buy
longer maturities. In this environment, the IPAIT Diversified and Direct
Government Obligation Portfolios are maintaining relatively short maturity
positions. However, as the Federal Reserve's rate cycle nears completion there
will be opportunity to add longer investments and increase the maturity of the
portfolios.
We remain committed to providing the best possible rate while emphasizing safety
and liquidity above all else. We appreciate the opportunity to meet your cash
management needs and thank you for your continued support of the IPAIT program.
Sincerely,
/s/ Jeffrey D. Lorenzen, CFA
Chief Investment Officer
Investors Management Group
2
Management's Discussion & Analysis
This section presents management's discussion and analysis of the IPAIT
Diversified Portfolio and Direct Government Obligation Portfolio financial
performance during the six-month period ended December 31, 2005, and is
presented as a narrative overview and analysis in conjunction with IPAIT's
Trustee and Management Reports. The Management's Discussion and Analysis should
be read in conjunction with the financial statements of IPAIT and the
accompanying notes.
In addition to the historical information, the Management's Discussion and
Analysis includes certain forward-looking statements that involve certain risks
and uncertainties. The actual results of IPAIT's Diversified Portfolio and
Direct Government Obligation Portfolio may differ materially from the results
expressed or implied in such forward-looking statements due to a wide range of
factors including changes in general economic conditions, fluctuations in
interest rates, and legislative changes.
IPAIT is primarily responsible for providing proactive cash management practices
and responsiveness to the unique needs of public agencies across the State of
Iowa. 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 moneys pursuant to a joint
investment agreement. IPAIT operates both the Diversified Portfolio and Direct
Government Obligation Portfolio. The objective of the portfolios 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.
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 and
Direct Government Obligation Portfolio. The following components comprise the
financial statements:
o The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolios as of December 31.
o The Statement of Operations displays the results of operations (income
and expenses) of the portfolios for the six-month period ended
December 31.
o The Statement of Changes in Net Assets portray participant/unitholder
activity (distributions, sales, reinvestments, redemptions) of the
portfolios for the six-month period ended December 31.
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 portfolios for the five
most recent fiscal years and for the six-month period ended December
31.
o The Notes to Basic Financial Statements describe significant
accounting policies and disclose summary security transaction amounts
of the portfolios.
Condensed Financial Information and Financial Analysis
Year-over-year variances with financial statement amounts are impacted by the
level of average net assets, which fluctuate based on the overall levels of
participants' invested balances in each portfolio. 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
portfolios.
3
Management's Discussion & Analysis (continued)
Condensed financial information as of and for the six-month periods ended
December 31, 2005 and 2004 along with variance explanations follows.
Diversified Portfolio
Net Assets Percent
December 31, 2005 December 31, 2004 Change
----------------- ----------------- ------
Total Investments $242,882,755 $221,088,413 10%
Excess of other liabilities over other assets $246,615 $493,757 -150%
---------------- ----------------
Net assets held in fund for pool participants $242,636,140 $221,582,170 10%
================ ================
During the six-month period ended December 31, 2005, average net assets
increased 9 percent, compared to the average net assets for the same period in
the prior year. Total investments and net assets as of December 31, 2005
increased 10 percent and 10 percent, respectively, compared to December 31,
2004, due to an increase in aggregate participant balances.
Change in Net Asset for the periods ended, December 31, 2005 December 31, 2004 Change
----------------- ----------------- ------
Investment income $4,375,705 $1,804,447 142%
Total expenses ($577,853) ($514,287) 12%
Dividends to unitholders from
net investment income ($3,797,852) ($1,290,160) 194%
Net (decrease) increase in net assets
derived from unit transactions $12,968,174 ($33,235,940) 139%
Net assets at beginning of period $229,667,966 $254,818,110 -10%
---------------- ----------------
Net assets at end of period $242,636,140 $221,582,170 10%
================ ================
Investment income increased 142 percent during the six-month period ended
December 31, 2005 compared to the same period in 2004 due to increased balances
and rising market rates resulting in a higher rate of return on assets. Net
investment income increased 194 percent during the six-month period ended
December 31, 2005 compared to the same period in 2004 primarily due to the
portfolio generating a higher rate of return on assets. Total expenses are
derived based on net assets held by the Fund. Total expenses increased 12
percent during the six-month period ended December 31, 2005 compared to same
period in 2004 due to an increase in average net assets. Units sold and redeemed
increased 9 and 1 percent, respectively, caused by an increase in participant
gross inflows and outflows during the six-month period ending December 31, 2005
compared to the same period in 2004.
4
Management's Discussion & Analysis (continued)
Direct Government Obligation Portfolio
Net Assets Percent
December 31, 2005 December 31, 2004 Change
----------------- ----------------- ------
Total Investments $13,295,032 $22,131,039 -40%
Excess of other liabilities over other assets $28,851 $25,982 -211%
----------------- ------------------
Net assets held in fund for pool participants $13,266,181 $22,157,021 -40%
================= ==================
During the six-month period ended December 31, 2005, average net assets
decreased 52 percent compared to the average net assets for the same period in
the prior year. Total investments and net assets as of December 31, 2005
declined 40 percent and 40 percent, respectively, compared to December 31, 2004,
due to lower aggregate participant balances.
Percent
Change in Net Asset for the periods ended, December 31, 2005 December 31, 2004 Change
----------------- ----------------- ------
Investment income $268,568 $238,792 12%
Total expenses ($38,612) ($76,724) -50%
Dividends to unitholders from
net investment income ($229,956) ($162,068) 42%
Net (decrease) increase in net assets
derived from unit transactions ($1,529,502) ($15,375,227) -90%
Net assets at beginning of period $14,795,683 $37,532,248 -61%
----------------- ------------------
Net assets at end of period $13,266,181 $22,157,021 -40%
================= ==================
Investment income and net investment income increased 12 and 42 percent
respectively, during the six-month period ended December 31, 2005 compared to
same period in 2004 primarily due to realizing a higher rate of return on assets
and lower average net assets resulting in a decrease to expenses. Total expenses
are derived based on net assets held by the Fund. Total expenses decreased 50
percent during the six-month period ended December 31, 2005 compared to the same
period in 2004 due to lower average net assets. Units sold increased 135
percent, caused by an increase in participant gross inflows during the six-month
period ended December 31, 2005 compared to the same period in 2004. Units
redeemed decreased 12 percent during the six-month period ended December 31,
2005.
Contacting the Portfolios' Financial Management
This financial report is designed to provide IPAIT participants and prospective
investors with a general overview of the Funds' finances and to demonstrate the
Funds' 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 www.IPAIT.org.
5
Iowa Public Agency Investment Trust
Diversified Portfolio
Statement of Net Assets (Unaudited)
December 31, 2005
(Showing Percentage of Net Assets)
- --------------------------------------------------------------------------------------------------
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES - 6.57%
$2,500,000 Federal National Mortgage Association, Discount Note 3.63% 01/04/06 $2,499,258
1,500,000 Federal Home Loan Mortgage Corporation, Discount Note 3.70% 01/10/06 1,498,638
5,000,000 Federal National Mortgage Association, Discount Note 3.87% 01/18/06 4,991,122
2,000,000 Federal Home Loan Mortgage Corporation, Discount Note 3.94% 02/07/06 1,992,147
2,000,000 Federal Home Loan Mortgage Corporation, Discount Note 4.40% 03/07/06 1,984,472
3,000,000 Federal Home Loan Mortgage Corporation, Discount Note 4.10% 04/10/06 2,967,289
------------
TOTAL (cost - $15,932,926) $15,932,926
------------
COUPON SECURITIES - 19.21%
$1,000,000 Federal Home Loan Mortgage Corporation, 2.375% 3.48% 01/23/06 $999,349
4,193,000 Federal National Mortgage Association, 2.28% 4.08% 01/30/06 4,187,055
3,000,000 Federal National Mortgage Association, 2.03% 3.98% 02/09/06 2,993,918
4,185,000 Federal Home Loan Mortgage Corporation, 2.00% 4.28% 02/23/06 4,171,298
3,000,000 Federal Home Loan Bank, 5.125% 4.34% 03/06/06 3,003,815
4,000,000 Federal Home Loan Bank, 2.10% 3.99% 03/16/06 3,984,818
3,000,000 Federal National Mortgage Association, 2.15% 4.13% 04/13/06 2,983,680
4,244,000 Federal National Mortgage Association, 2.125% 4.30% 04/15/06 4,218,145
1,000,000 Federal Home Loan Mortgage Corporation, 2.26% 4.60% 06/09/06 989,962
2,000,000 Federal National Mortgage Association, 2.50% 4.61% 06/15/06 1,981,275
2,000,000 Federal National Mortgage Association, 2.125% 4.62% 06/15/06 1,977,871
5,000,000 Federal National Mortgage Association, 5.25% 4.51% 06/15/06 5,016,342
1,000,000 Federal National Mortgage Association, 1.75% 4.61% 06/16/06 987,239
1,000,000 Federal Home Loan Mortgage Corporation, 2.00% 4.65% 06/30/06 987,200
4,000,000 Federal National Mortgage Association, 3.30% 4.57% 07/14/06 3,973,394
520,000 Federal National Mortgage Association, 3.125% 4.60% 07/15/06 515,964
500,000 Federal Home Loan Bank Step Cpn, 3.02% 4.46% 07/21/06 496,130
2,235,000 Federal National Mortgage Association, 2.75% 4.29% 08/11/06 2,214,571
940,000 Federal Home Loan Mortgage Corporation, 2.75% 4.60% 10/15/06 926,803
------------
TOTAL - (cost - $46,608,829) $46,608,829
------------
See accompanying notes to basic financial statements.
6
Iowa Public Agency Investment Trust
Diversified Portfolio (continued)
Statement of Net Assets (Unaudited)
December 31, 2005
(Showing Percentage of Net Assets)
- --------------------------------------------------------------------------------------------------
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
CERTIFICATES OF DEPOSIT - 6.92%
$250,000 Ft. Madison Bank & Trust-Ft. Madison,3.95% 3.95% 01/09/06 $250,000
250,000 Citizens Bank-Sac City, 3.55% 3.55% 02/10/06 250,000
500,000 Union State-Winterset, 3.80% 3.80% 02/21/06 500,000
500,000 Premier Bank-Rock Valley, 4.20% 4.20% 02/22/06 500,000
900,000 First State-Ida Grove, 4.20% 4.20% 02/23/06 900,000
500,000 Premier Bank-Rock Valley, 4.15% 4.15% 02/28/06 500,000
1,000,000 St. Ansgar State Bank-St. Ansgar, 4.06% 4.06% 03/06/06 1,000,000
500,000 First American-Ames, 3.90% 3.90% 03/13/06 500,000
2,500,000 West Bank-West Des Moines, 4.16% 4.16% 03/21/06 2,500,000
100,000 Maxwell State Bank-Maxwell, 3.90% 3.90% 03/22/06 100,000
250,000 Ft. Madison Bank & Trust-Ft. Madison, 4.50% 4.50% 04/17/06 250,000
500,000 Ft. Madison Bank & Trust-Ft. Madison, 4.50% 4.50% 04/17/06 500,000
200,000 Maxwell State Bank-Maxell, 3.80% 3.80% 04/24/06 200,000
1,000,000 Premier Bank-Dubuque, 4.25% 4.25% 05/01/06 1,000,000
800,000 Exchange Bank-Collin, 4.20% 4.20% 07/06/06 800,000
1,000,000 Premier Bank-Dubuque, 4.10% 4.10% 07/10/06 1,000,000
500,000 Ft. Madison Bank & Trust-Ft. Madison, 4.67% 4.67% 07/24/06 500,000
500,000 Ft. Madison Bank & Trust Ft-Madison, 4.64% 4.64% 07/24/06 500,000
300,000 Farmers State-Hawarden, 4.35% 4.35% 07/25/06 300,000
1,500,000 Union State-Winterset, 4.26% 4.26% 09/07/06 1,500,000
1,000,000 Community State-Ankeny, 4.85% 4.85% 09/26/06 1,000,000
250,000 Citizens Bank-Sac City, 4.61% 4.61% 10/02/06 250,000
2,000,000 Community State-Ankeny, 4.87% 4.87% 12/29/06 2,000,000
------------
TOTAL (cost - $16,800,000) $16,800,000
------------
See accompanying notes to basic financial statements.
7
Iowa Public Agency Investment Trust
Diversified Portfolio (continued)
Statement of Net Assets (Unaudited)
December 31, 2005
(Showing Percentage of Net Assets)
- ---------------------------------------------------------------------------------------------------
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) - 67.40%
$51,000,000 J.P. Morgan Securities, Inc., 4.15% 4.15% 01/03/06 $51,000,000
54,541,000 Seattle-Northwest Securities Corporation, 4.20% 01/03/06 54,541,000
58,000,000 UBS Securities LLC, 4.23% 4.23% 01/03/06 58,000,000
--------------
TOTAL (cost - $163,541,000) $163,541,000
--------------
TOTAL INVESTMENTS - 100.10% (cost - $242,882,755) $242,882,755
--------------
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES - (.10%) ($246,615)
--------------
(Includes $61,023 payable to IMG and $726,251
dividends payable to unitholders)
NET ASSETS HELD IN FUND FOR POOL PARTICIPANTS - 100% $242,636,140
==============
Applicable to 242,636,140 outstanding units
NET ASSET VALUE: $1.00
==============
Offering and redemption price per unit ($242,636,140
divided by 242,636,140 units outstanding)
See accompanying notes to basic financial statements.
8
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Statement of Net Assets (Unaudited)
December 31, 2005
(Showing Percentage of Net Assets)
- -------------------------------------------------------------------------------------------
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES - 29.58%
$250,000 United States Treasury Bill 3.38% 01/05/06 $249,909
250,000 United States Treasury Bill 3.57% 01/12/06 249,734
500,000 United States Treasury Bill 3.71% 01/19/06 499,100
500,000 United States Treasury Bill 3.80% 02/09/06 498,007
250,000 United States Treasury Bill 3.75% 02/16/06 248,838
250,000 United States Treasury Bill 3.71% 02/16/06 248,848
250,000 United States Treasury Bill 3.78% 03/09/06 248,296
200,000 United States Treasury Bill 3.92% 03/16/06 198,425
300,000 United States Treasury Bill 3.98% 03/16/06 297,620
500,000 United States Treasury Bill 4.05% 04/06/06 494,835
500,000 United States Treasury Bill 4.20% 04/20/06 493,831
200,000 United States Treasury Bill 4.29% 06/15/06 196,200
------------
TOTAL (cost - $3,923,643) $3,923,643
------------
COUPON SECURITIES - 15.06%
$500,000 United States Treasury Note, 1.875% 3.42% 12/31/05 $500,000
450,000 United States Treasury Note, 2.25% 3.93% 04/30/06 447,573
500,000 Private Export Funding, 7.65% 4.35% 05/15/06 505,931
250,000 United States Treasury Note, 2.75% 4.33% 06/30/06 248,085
300,000 United States Treasury Note, 2.375% 4.03% 08/31/06 296,800
------------
TOTAL (cost - $1,998,389) $1,998,389
------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) - 55.58%
$3,600,000 Lehman Brothers, Inc., 3.25% 3.25% 01/03/06 $3,600,000
3,773,000 UBS Securities LLC, 3.47% 3.47% 01/03/06 3,773,000
-----------
TOTAL (cost $7,373,000) $7,373,000
-----------
See accompanying notes to basic financial statements.
9
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio (continued)
Statement of Net Assets (Unaudited)
December 31, 2005
(Showing Percentage of Net Assets)
- --------------------------------------------------------------------------------------------
Par Amortized
Value Description Cost
----- ----------- ----
TOTAL INVESTMENTS - 100.22% (cost - $13,295,032) $13,295,032
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES (.22%) ($28,851)
------------
(includes $3,946 payable to IMG and $41,856
dividends payable to unitholders)
NET ASSETS HELD IN FUND FOR POOL PARTICIPANTS - 100% $13,266,181
============
Applicable to 13,266,181 outstanding units
NET ASSET VALUE: $1.00
============
Offering and redemption price per unit ($13,266,181
divided by 13,266,181 units outstanding)
See accompanying notes to basic financial statements.
10
Iowa Public Agency Investment Trust
Statement of Operations (unaudited)
For the Six Months Ended December 31, 2005
- -----------------------------------------------------------------------------
Direct Government
Diversified Obligation
Portfolio Portfolio
------------- ---------------
INVESTMENT INCOME:
Interest $4,375,705 $268,568
------------- -------------
EXPENSES:
Investment advisory, administrative,
and program support fees 374,292 25,403
Custody fees 56,664 3,774
Distribution fees 117,518 7,548
Other fees and expenses 29,379 1,887
------------- -------------
Total Expenses 577,853 38,612
------------- -------------
NET INVESTMENT INCOME $3,797,852 $229,956
============= =============
See accompanying notes to basic financial statements.
Iowa Public Agency Investment Trust
Statement of Changes in Net Assets
For the Six Months Ended December 31, 2005
- -------------------------------------------------------------------------------
Direct Government
Diversified Obligation
Portfolio Portfolio
-------------- -----------------
From Investment Activities:
Net investment income
distributed to unitholders $3,797,852 $229,956
============== ================
From Unit Transactions:
(at constant net asset value of $1
per unit)
Units sold $574,115,709 $19,166,726
Units issued in reinvestment
of dividends from net
investment income 3,410,886 219,212
Units redeemed (564,558,421) (20,915,440)
-------------- ----------------
Net increase (decrease) in net assets
derived from unit transactions 12,968,174 (1,529,502)
Net assets at beginning of period 229,667,966 14,795,683
-------------- ----------------
Net assets at end of period $242,636,140 $13,266,181
============== ================
See accompanying notes to basic financial statements.
11
Iowa Public Agency Investment Trust
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------
Six Months
Ended
December 31, 2005
-------------------------------------------------------------------
Diversified Portfolio (unaudited) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.032 0.017 0.006 0.009 0.021 0.053
Dividends Distributed (0.032) (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 $1.000
Total Return 1.63% * 1.70% 0.60% 0.95% 2.14% 5.34%
Ratio of Expenses to Average Net Assets 0.49% ** 0.48% 0.48% 0.56% 0.56% 0.56%
Ratio of Net Income to Average Net Assets 3.23% ** 1.71% 0.59% 0.94% 2.07% 5.34%
Net Assets, End of Period (000 Omitted) $242,636 $229,668 $254,818 $245,025 $253,948 $265,091
Six Months
Ended
December 31, 2005
-------------------------------------------------------------------
Direct Government Obligation Portfolio (unaudited) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.030 0.015 0.005 0.009 0.018 0.052
Dividends Distributed (0.030) (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 $1.000
Total Return 1.54% * 1.54% 0.53% 0.91% 1.85% 5.16%
Ratio of Expenses to Average Net Assets 0.51% ** 0.50% 0.51% 0.58% 0.58% 0.58%
Ratio of Net Income to Average Net Assets 3.04% ** 1.39% 0.53% 0.92% 1.79% 5.16%
Net Assets, End of Period (000 Omitted) $13,266 $14,796 $37,532 $52,291 $66,461 $59,976
* Not Annualized
** Annualized
See accompanying notes to basic financial statements.
12
Notes to Basic Financial Statements (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The 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 and further amended as of September 1, 2005. As amended, IPAIT is
authorized to operate investment programs, including the Diversified Portfolio
and Direct Government Obligation Portfolio. The accompanying financial
statements include activities of the Diversified and Direct Government
Obligation Portfolios. The objective of the portfolios 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 period. 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 Direct Government Obligation Portfolio and adheres to
policies which mitigate market risk in the portfolios 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 and Direct Government Obligation Portfolios consist of cash and
short-term investments valued at amortized cost 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.
13
Notes to Basic Financial Statements (unaudited), continued
Security transactions are accounted for on the trade date. Interest income,
including the accretion of discount and amortization of premium, is recorded 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 December 31, 2005, the securities purchased under overnight
agreements to resell were collateralized by government and government agency
securities with market values of $166,820,199 and $7,521,300 for the Diversified
and Direct Government Obligation Portfolios, respectively.
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 institutions 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 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 each portfolio daily. Units are issued
and redeemed daily at the daily net asset value. Dividends from net investment
income for each portfolio are declared daily and distributed monthly.
Income Taxes
IPAIT is exempt from both federal income taxes pursuant to Section 115 of the
internal revenue code and state income taxes.
14
Notes to Basic Financial Statements (unaudited), continued
Fees and Expenses
Under separate agreements with IPAIT, IMG, the Investment Adviser, Administrator
and Program Support Provider, and Wells Fargo, the Custodian, are paid an annual
fee for operating the investment programs.
During the period of July 1, 2005 to October 31, 2005, for each of the
portfolios, IMG received 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 adviser and administrative fees. IMG also
received 0.080 percent of the average daily net asset value for program support
fees. By contract amendment, fees were reduced beginning November 1, 2005 to the
following: IMG receives 0.250 percent of the average daily net asset value up to
$100 million, 0.215 percent from $100 to $250 million, and 0.170 percent
exceeding $250 million for investment adviser and administrative fees. In
addition, IMG receives 0.080 percent of the average daily net asset value for
program support fees. For the six month period ended December 31, 2005 the
Diversified and Direct Government Obligation Portfolios paid $374,293 and
$25,403, respectively, to IMG for services provided.
For each of the portfolios, Wells Fargo receives 0.050 percent of the average
daily net asset value up to $150 million, 0.045 percent from $150 to $300
million, and 0.040 percent exceeding $300 million for custodial services. For
the six month period ended December 31, 2005 the Diversified and Direct
Government Obligation Portfolios paid $56,664 and $3,774, respectively, to Wells
Fargo for services provided.
Under a distribution plan, the public agency associations collectively receive
an annual fee of 0.100 percent of the daily net asset value of the portfolios.
For the six month period ended December 31, 2005 the Diversified and Direct
Government Obligation Portfolios paid $65,043 and $7,548, respectively, to the
Iowa League of Cities, and $17,045, to the Iowa Association of Municipal
Utilities. For the six month period ended December 31, 2005, the Diversified
Portfolio paid $35,429 to the Iowa State Association of Counties.
IPAIT is authorized to accrue .025 percent for operating expenses incurred
directly by IPAIT. All fees are computed daily and paid monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the Diversified and Direct Government
Obligation Portfolios aggregated $19,490,575,000 and $1,156,777,000,
respectively, for the six month period ended December 31, 2005. Proceeds from
maturities of securities for the Diversified and Direct Government Obligation
Portfolios aggregated $19,477,474,000 and $1,158,273,000 respectively, for the
six month period ended December 31, 2005.
15
Additional Information (unaudited)
December 31, 2005
Fund Expenses
It is important for you to understand the impact of costs on your investment.
All mutual funds have operating expenses. As a participant in the Fund, you
incur ongoing costs, including management fees, distribution 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 the 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 shown and held for
the entire period. The expense table illustrates your Fund's costs in two ways:
o 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 a participant who invested $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.
o 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 units were bought or sold during the period. Your actual costs may
have been higher or lower, depending on the amount of your investment and the
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
participant costs, please refer to the Information Statement dated October 29,
2005.
16
Six Months Ended December 31, 2005
Beginning Ending Expenses Paid Annualized
Account Value Account Value During Period* Expense
7/1/2005 12/31/2005 7/1/05 to 12/31/05 Ratio
- -------------------------------------------------------------------------------------------------
Based on Actual Fund Return
IPAIT Diversified Fund $1,000.00 $1,016.31 $2.49 0.49%
IPAIT DGO Fund $1,000.00 $1,015.37 $2.59 0.51%
Based on Hypothetical 5 Percent Return
IPAIT Diversified Fund $1,000.00 $1,022.74 $2.50 0.49%
IPAIT DGO Fund $1,000.00 $1,022.63 $2.60 0.51%
* 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
184, the number of days in the most recent fiscal half-year, divided by 365,
to reflect the one-half year period.
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 $100MM;
0.095% on $100 - $250MM;
0.07% on assets exceeding $250MM
- ------------------------------------------------------------------------------
IMG Administrator** 0.13% up to $100MM;
0.12% on $100 - $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 Other fees & expenses 0.025%
Fund
- ------------------------------------------------------------------------------
*Includes Iowa League of Cities, Iowa State Association of Counties,
Iowa Association of Utilities
**By contract amendment, Adviser and Administrator fees for IMG were reduced
beginning November 1, 2005. For the period of July 1, 2005 thru October 31,
2005, Adviser and Administrator fees for IMG were the following:
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
For the six-month period ended December 31, 2005, the actual expense for the
IPAIT Diversified Fund and DGO Fund was 0.49 percent and 0.51 percent,
respectively based on a sliding fee scale.
17
Actual:
For the six-month period ended December 31, 2005, the following actual expenses
were incurred by the Funds:
Diversified DGO
----------- ---
Adviser $127,912.22 $9,057.93
Administrator $152,366.30 $10,306.48
Program Support $94,014.08 $6,038.62
Distribution $117,517.61 $7,548.28
Custody $56,663.76 $3,774.15
Other fees and expenses $29,379.39 $1,887.06
---------------- ---------------
Total $577,853.36 $38,612.52
Statement of Additional Information (SAI)
The SAI has additional information about the Funds' Trustees 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. It is available at 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. Portfolio
holdings are also available monthly on the IPAIT website, www.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 investments 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. Form N-PX
is available at 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.
18
Other Information
Units of IPAIT's Diversified Portfolio and Direct Government Obligation
Portfolio are not insured by the FDIC or the U.S. Government. 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.
BOARD OF TRUSTEES
Tom Hanafan, Mayor, Council Bluffs, Craig Hall, Manager, Brooklyn
Chair and Trustee Municipal Utility, Trustee
Dianne Kiefer, Treasurer, Wapello Jody Smith, Director of
County, Vice Chair and Trustee Administrative Services, City of
Leon Rodas, General Manager, Spencer West Des Moines, Trustee
Municipal Utility, Second Vice Chair and Bob Haug, Executive Director, Iowa
Trustee Don Kerker, Director of Finance Association of Municipal Utilities,
and Administrative Services, Ex-Officio Member and Secretary
Muscatine Power and Water, Trustee Thomas Bredeweg, Executive Director,
Robert Hagey, Treasurer, Sioux Iowa League of Cities, Ex-Officio
County, Trustee Member and Treasurer
Floyd Magnusson, Supervisor, William Peterson, Executive Director,
Webster County, Trustee Iowa State Association of Counties,
Susan Vavroch, City Treasurer, Ex-Officio Member and Assistant
Cedar Rapids, Trustee
The Board of Trustees are not compensated for Board service. Expenses incurred
in attending meetings are paid by the Trust.
SERVICE PROVIDERS
Administrator-Investment
Adviser-Program Support: Custodian:
Investors Management Group Wells Fargo Bank, N.A.
1415 28th Street, Suite 200 MAC N8200-034
West Des Moines, IA 50266-1461 666 Walnut Street, P.O. Box 837
Des Moines, IA 50304-0837
Legal Counsel:
Ahlers & Cooney, P.C. Independent Auditors:
100 Court Avenue, Suite 600 KPMG LLP
Des Moines, IA 50309 2500 Ruan Center
Des Moines, IA 50309
IOWA PUBLIC AGENCY INVESTMENT TRUST
www.IPAIT.org
1415 28th Street, Suite 200
West Des Moines, IA 50266-1461
(800) 872-4024
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 5. NOT APPLICABLE.
ITEM 6. 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. NOT APPLICABLE.
ITEM 10. 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. a meeting of security holders was
held on December 9, 2005. The matters before the securities holders included
approval of a new Advisor Agreement with Investors Management Group, Ltd. to be
effective upon the closing of the acquisition of Investors Management Group,
Ltd. by West Bancorporation, Inc. All proposals were approved.
ITEM 11. 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 FEBRUARY 28, 2006, A
DATE WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT.
(B) THERE WERE NO SIGNIFICANT CHANGES IN REGISTRANT'S INTERNAL CONTROL OVER
FINANCIAL REPORTING THAT OCCURRED DURING THE PERIOD COVERED BY THIS REPORT THAT
HAS MATERIALLY AFFECTED, OR IS REASONABLY LIKELY TO MATERIALLY AFFECT, THE
REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING.
ITEM 12. 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: March 2, 2006
Pursuant to the requirements of the Investment Company Act of 1940, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature and Title
/s/ Jeff Lorenzen
- --------------------------------
Jeff Lorenzen, Chief Executive Officer, March 2, 2006
/s/ Amy Mitchell
- --------------------------------
Amy Mitchell, Chief Financial Officer, March 2, 2006