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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,
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: 12/31/2006
ITEM 1. REPORTS TO UNITHOLDERS.
Iowa Public Agency Investment Trust
www.IPAIT.org
Semi-Annual Financial Report
Diversified Fund
Direct Government Obligation Fund
December 31, 2006
Sponsored by the
Iowa Association of Municipal Utilities
Iowa State Association of Counties
Iowa League of Cities
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, 2006.
For the first time in 3 1/2 years, the Federal Reserve kept its overnight rate
constant for six consecutive months. The Federal Reserve's last move occurred on
June 29, and has since kept the base rate at 5.25 percent. This constant level
led to relatively consistent IPAIT fund yields with the Diversified Fund
offering a 7-day yield of 4.537 percent on June 30, and 4.757 percent on
December 31. The Direct Government Obligation Fund offered 4.349 and 4.524
percent during the same time period. It is anticipated that short-term interest
rates will remain constant the first half of 2007. While the portfolio was
constructed to take advantage of Federal Reserve rate increases in 2006, it is
now being managed to produce competitive yields in a more challenging, flat
interest rate environment. We encourage you to visit the website, www.IPAIT.org,
to compare IPAIT yields to those provided by your financial institution.
The IPAIT Fixed-Term Automated (FTA) program saw excellent activity. In the last
six months of 2006, IPAIT solicited 429 competitive bids on behalf of
participants, up from 310 in the same period last year. The FTA program ended
the year at a 2-year high, helped in large part by one of the biggest Flexible
Withdrawal Certificates (Flex-CD's) in program history, $50.3 million. While the
IPAIT FTA program did not always provide the highest bid, utilizing the program
helped insure many local public entities received a more competitive rate, the
principle on which IPAIT was founded.
In October, the Board of Trustees approved new service contracts with WB Capital
and Wells Fargo effective January 1, 2007. The new contracts reflect a 25
percent fee decrease, and include participation by all IPAIT service providers
and sponsors. This new fee structure will allow IPAIT to be more competitive,
and places total program fees well within the lower half of comparable
association-sponsored programs in the country. We appreciate this commitment
made by the service providers and program sponsors.
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
Tom Hanafan, ChairBoard
of Trustees
1
Management Report
To Iowa Public Agency Investment Trust Participants:
Since pausing in June, the Federal Reserve has expressed concern that inflation
pressures will increase even as economic growth is slowing. While recent Federal
Reserve meeting minutes reflect similar concerns, there is growing
acknowledgment that the inflation picture is improving. Declines in housing
activity have yet to affect consumer spending, which increases the probability
of continued economic expansion and thus range-bound interest rates.
Overnight rates remain at 5.25 percent, but market expectations for a near-term
rate cut have decreased. Although core inflation numbers have come off their
highs, they remain above Federal Reserve targets and will keep the Federal
Reserve's attention. The money market yield curve has flattened substantially
over the past year and will not likely change much until the Federal Reserve's
next move becomes clearer. Now that the Federal Reserve is on hold, there is
less incentive to remain in short maturity positions. As market opportunities
arise we will invest in some longer maturity assets to maintain an optimal
yield.
We appreciate your confidence in the IPAIT program and we work hard to preserve
that trust. Thank you for allowing us to serve you by providing good yield
within an investing framework that emphasizes the important tenets of safety and
liquidity. Here is to a prosperous 2007.
Sincerely,
/s/ Jeffrey D. Lorenzen
Jeffrey D. Lorenzen, CFAChief
Investment OfficerWB Capital Management Inc.
2
Management's Discussion & Analysis
This section of the IPAIT Diversified Portfolio's semi-annual financial report
presents management's discussion and analysis of the financial position and
results of operations during the six-month periods ended December 31, 2006 and
December 31, 2005. 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 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 basic financial statements: 1) Schedule of
Investments, 2) Statement of Net Assets, 3) Statements of Operations, 4)
Statements of Changes in Net Assets, and 5) Notes to Financial Statements.
o The Schedule of Investments lists each security held by the portfolio as of
December 31.
o The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolio as of December 31.
o The Statements of Operations display the results of operations (income and
expenses) of the portfolio for the six-month periods ended December 31,
2006 and December 31, 2005.
o The Statements of Changes in Net Assets display the results of additions
(net investment income, unit sales, and reinvestments) and deductions
(dividends and unit redemptions) of the portfolio for the six-month periods
ended December 31, 2006 and December 31, 2005.
o The Notes to Financial Statements describe significant accounting policies
and disclose summary security transaction amounts of the portfolio.
Condensed Financial Information and Financial Analysis
Year-over-year changes 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 six months, the Federal Reserve's Federal Open Market
Committee has not changed the Federal Funds target rate. In the preceding twelve
months, the Federal Funds target rate was increased eight times, from 3.25
percent to 5.25 percent.
Condensed financial information and changes explanations for the six-month
period ended December 31, 2006, as compared to the same period ended December
31, 2005 follows.
December 31, Percent December 31,
2006 Change 2005
Net Assets ------------- ------ ------------
Total Investments $245,236,083 1% $242,882,755
Excess of total liabilities over other assets (77,806) 68% (246,615)
------------- ------------
Net assets held in trust for pool
participants $245,158,277 1% $242,636,140
============= ============
3
Management's Discussion & Analysis (continued)
Diversified Portfolio
Total investments and net assets as of December 31, 2006 increased 1 and 1
percent, respectively, compared to December 31, 2005. During the six-month
period ended December 31, 2006, average net assets increased 1 percent to
$234,560,807 from average net assets of $233,119,144 during the same period in
the prior year.
December 31, Percent December 31,
Change in Net Asset for the periods ended 2006 Change 2005
------------- ------ ------------
Investment Income $6,219,811 42% $4,375,705
Total Expenses (569,781) -1% (577,853)
Dividends to unitholders from
net investment income (5,650,030) 49% (3,797,852)
Net increase (decrease) in assets
derived from unit transactions 41,676,736 21% 12,968,174
Net assets held in trust for pool
participants at beginning of period 203,481,541 -11% 229,667,966
-------------- -------------
Net assets held in trust for pool
participants at end of period $245,158,277 1% $242,636,140
============== =============
Investment income and net investment income increased 42 percent and 49 percent,
respectively, during the six-month period ended December 31, 2006 compared to
the same period in the prior year due to the higher interest rate environment.
With the increase in Fed Fund rates, money market fund returns improved during
2006. Total expenses are derived based on net assets held by the Fund. These
expenses decreased 1 percent during the six-month period ended December 31, 2006
compared to the same period in the prior year due to a reduction in the
investment adviser and administration fees effective November 1, 2005. During
the six-month period ended December 31, 2006 compared to the same period in the
prior year, units sold and redeemed increased 10 percent and 5 percent,
respectively.
4
Management's Discussion & Analysis (continued)
Condensed financial information and changes explanations for the six-month
period ended December 31, 2005, as compared to the same period ended December
31, 2004 follows.
December 31, Percent December 31,
2005 Change 2004
Net Assets ------------- ------ ------------
Total Investments $242,882,755 10% $221,088,413
Excess of total liabilities over other assets (246,615) -150% 493,757
------------- ------------
Net assets held in trust for pool
participants $242,636,140 10% $221,582,170
============= ============
Diversified Portfolio
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. 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.
December 31, Percent December 31,
Change in Net Asset for the periods ended 2005 Change 2004
------------- ------ ------------
Investment Income $4,375,705 142% $1,804,447
Total Expenses (577,853) 12% (514,287)
Dividends to unitholders from
net investment income (3,797,852) 194% (1,290,160)
Net increase (decrease) in assets
derived from unit transactions 12,968,174 139% (33,235,940)
Net assets held in trust for pool
participants at beginning of period 229,667,966 -10% 254,818,110
-------------- -------------
Net assets held in trust for pool
participants at end of period $242,636,140 10% $221,582,170
============== =============
Investment income and net investment income increased 142 percent and 194
percent, respectively, 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. 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
percent 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.
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.
5
Iowa Public Agency Investment Trust
Diversified Portfolio
Schedule of Investments (unaudited)
December 31, 2006
(Showing Percentage of Net Assets)
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES - 4.71%
$3,000,000 Federal Home Loan Bank 5.24% 10/05/07 $2,885,220
3,000,000 Federal Home Loan Bank 5.22% 10/05/07 2,885,221
3,000,000 Federal Home Loan Mortgage Corporation 5.22% 06/26/07 2,926,241
3,000,000 Federal Home Loan Mortgage Corporation 5.10% 12/11/07 2,860,938
------------
TOTAL (cost - $11,557,620) $11,557,620
------------
COUPON SECURITIES - 21.36%
$1,000,000 Federal Farm Credit Bank, 4.20% 5.18% 08/28/07 $993,748
500,000 Federal Home Loan Bank, 4.30% 5.32% 01/18/07 499,772
3,000,000 Federal Home Loan Bank, 2.62% 5.20% 02/07/07 2,992,468
4,000,000 Federal Home Loan Bank, 4.88% 5.56% 02/15/07 3,996,706
3,500,000 Federal Home Loan Bank, 4.25% 5.30% 04/16/07 3,489,653
3,000,000 Federal Home Loan Bank, 4.63% 5.18% 07/18/07 2,991,018
1,800,000 Federal Home Loan Bank, 2.30% 5.18% 07/24/07 1,771,861
1,000,000 Federal Home Loan Bank, 4.25% 5.18% 09/14/07 993,664
1,800,000 Federal Home Loan Bank, 3.95% 5.14% 09/24/07 1,784,944
500,000 Federal Home Loan Bank, 3.25% 5.30% 10/19/07 492,129
2,000,000 Federal Home Loan Bank, Step Coupon 5.16% 10/22/07 1,988,944
4,500,000 Federal Home Loan Bank, 4.63% 5.15% 10/24/07 4,481,478
1,000,000 Federal Home Loan Bank, 3.80% 5.18% 11/13/07 988,498
3,000,000 Federal Home Loan Mortgage Corporation, 4.88% 5.56% 03/15/07 2,995,955
2,500,000 Federal Home Loan Mortgage Corporation, 4.13% 5.39% 04/02/07 2,492,389
3,000,000 Federal Home Loan Mortgage Corporation, 5.25% 5.26% 04/27/07 2,999,952
500,000 Federal Home Loan Mortgage Corporation, 3.00% 5.28% 08/15/07 493,109
3,000,000 Federal Home Loan Mortgage Corporation, 4.00% 5.18% 08/17/07 2,978,590
3,000,000 Federal Home Loan Mortgage Corporation, 5.00% 5.14% 09/07/07 2,997,277
2,347,000 Federal Home Loan Mortgage Corporation, 3.00% 5.26% 09/18/07 2,310,426
2,150,000 Federal National Mortgage Association, 2.63% 5.16% 01/19/07 2,147,411
2,500,000 Federal National Mortgage Association, 3.63% 5.36% 03/15/07 2,491,490
3,000,000 Federal National Mortgage Association, 4.75% 5.27% 08/03/07 2,990,981
------------
TOTAL - (cost - $52,362,463) $52,362,463
------------
See accompanying notes to financial statements.
6
Iowa Public Agency Investment Trust
Diversified Portfolio
Schedule of Investments (unaudited)
December 31, 2006
(Showing Percentage of Net Assets)
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
CERTIFICATES OF DEPOSIT - 5.67%
900,000 First State Bank-Ida Grove 5.57% 02/20/07 $900,000
1,000,000 Union State Bank-Winterset 5.57% 02/21/07 1,000,000
200,000 Farmers State Bank-Hawarden 5.42% 03/19/07 200,000
1,000,000 Community State Bank-Ankeny 5.52% 03/26/07 1,000,000
1,000,000 Ft Madison Bank & Trust 5.48% 04/23/07 1,000,000
500,000 Farmers State Bank-Hawarden 5.43% 05/29/07 500,000
2,000,000 Community State Bank-Ankeny 5.44% 06/29/07 2,000,000
3,000,000 Freedom Bank-Elkader 5.78% 07/05/07 3,000,000
800,000 Exchange Bank-Collins 5.81% 07/06/07 800,000
1,000,000 St Ansgar State Bank 5.55% 09/07/07 1,000,000
1,500,000 Union State Bank-Winterset 5.55% 09/07/07 1,500,000
1,000,000 American Bank-LeMars 5.21% 12/06/07 1,000,000
------------
TOTAL (cost - $13,900,000) $13,900,000
------------
REPURCHASE AGREEMENTS
(collateralized by U.S. Govt. Securities) - 68.29%
58,416,000 Barclays Capital Inc. 5.25% 01/02/07 $58,416,000
53,000,000 Bear Stearns and Company Inc. 4.85% 01/02/07 53,000,000
56,000,000 J.P. Morgan Securities Inc. 5.15% 01/02/07 56,000,000
--------------
TOTAL (cost - $167,416,000) $167,416,000
--------------
TOTAL INVESTMENTS - 100.03% (cost - $245,236,083) $245,236,083
--------------
EXCESS OF TOTAL LIABILITIES OVER OTHER ASSETS - (0.03%) (77,806)
--------------
(Includes $64,147 payable to WB Capital and $992,665
dividends payable to unitholders)
NET ASSETS HELD IN TRUST FOR POOL PARTICIPANTS - 100% $245,158,277
==============
Applicable to 245,158,277 outstanding units
See accompanying notes to financial statements.
7
Iowa Public Agency Investment Trust
Diversified Portfolio
Statement of Net Assets (unaudited)
December 31, 2006
ASSETS:
Investments in securities at amortized cost:
Discounted Government Securities $ 11,557,620
Coupon Securities 52,362,463
Certificates of Deposit 13,900,000
Repurchase Agreements 167,416,000
Cash 806
Interest Receivable 1,014,092
---------------
Total Assets 246,250,981
---------------
LIABILITIES:
Investment advisory, administrative,
and program support fees payable 64,147
Custody fees payable 9,969
Distribution fees payable 20,739
Other fees and expenses payable 5,184
Dividends payable 992,665
Other accrued expenses ----
Securities payable ----
---------------
Total liabilities 1,092,704
---------------
NET ASSETS HELD IN TRUST FOR POOL PARTICIPANTS $ 245,158,277
===============
Shares of beneficial interest outstanding 245,158,277
===============
Net asset value - offering and redemption price per share $ 1.00
===============
See notes to accompanying basic financial statements.
8
Iowa Public Agency Investment Trust
Diversified Portfolio
Statements of Operations (unaudited)
For the Six Months ended December 31,
2006 2005
------------- -------------
INVESTMENT INCOME:
Interest $6,219,811 $4,375,705
------------- -------------
EXPENSES:
Investment advisory, administrative,
and program support fees 364,987 374,292
Custody fees 56,988 56,664
Distribution fees 118,244 117,518
Other fees and expenses 29,562 29,379
------------- -------------
Total expenses 569,781 577,853
------------- -------------
NET INVESTMENT INCOME $5,650,030 $3,797,852
============= =============
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31,
ADDITIONS: 2006 2005
-------------- -------------
From Investment Activities:
Net investment income $ 5,650,030 $ 3,797,852
From Unit Transactions:
(at constant net asset value of $1
per unit)
Units sold 629,111,121 574,115,709
Units issued in reinvestment
of dividends from net
investment income 5,169,169 3,410,886
-------------- --------------
TOTAL ADDITIONS 639,930,320 581,324,447
-------------- --------------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (5,650,030) (3,797,852)
From Unit Transactions:
Units redeemed (592,603,554) (564,558,421)
-------------- --------------
TOTAL DEDUCTIONS (598,253,584) (568,356,273)
Net decrease in net assets 41,676,736 12,968,174
Net assets held in trust for pool participants
at beginning of period 203,481,541 229,667,966
-------------- --------------
Net assets held in trust for pool participants
at end of period $245,158,277 $242,636,140
============== ==============
See accompanying notes to financial statements.
9
Iowa Public Agency Investment Trust
Diversified Portfolio
Notes to Financial Statements (unaudited)
(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 as required by Iowa Statute and files reports
with the Securities and Exchange Commission under Regulation S-X. 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, May 1,
1993, and again on September 1, 2005. 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 WB Capital Management Inc. (WB Capital)
serves as the Investment Adviser, Administrator, and Program Support Provider.
The preparation of financial statements, in conformity with U.S. generally
accepted accounting principles, 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 fair 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 an 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
10
Iowa Public Agency Investment Trust
Diversified Portfolio
Notes to Financial Statements (unaudited) (continued)
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, 2006 and December 31, 2005, the securities purchased
under overnight agreements to resell were collateralized by government agency
securities with a value of $172,010,789 and $166,820,199, 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 institution must comply with Iowa Code Section 12c.22 to insure
appropriate collateralization. As of December 31, 2006, public funds invested in
certificates of deposit not covered by FDIC insurance were $12,800,000. 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. As of
December 31, 2006, the Diversified Portfolio security credit ratings were 23.7
percent AAA, 5.7 percent not rated (representing all Certificates of Deposit
from Iowa financial institutions), and 70.6 percent NA. Securities which carry
an NA rating are government securities which are deemed to carry the equivalent
of A1+/P1 ratings by the IPAIT Board of Trustees.
IPAIT's exposure to interest rate risk is mitigated by the fact that securities
are limited under Rule 2a-7 as well as by investment policy and statute to
investments of high quality with durations not to exceed 397 days. Hence any
significant change in market interest rates would not present long term risk to
IPAIT.
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, WB Capital and Wells Fargo are paid an
annual fee for operating the investment program.
11
Iowa Public Agency Investment Trust
Diversified Portfolio
Notes to Financial Statements (unaudited) (continued)
During the period of July 1, 2006 to December 31, 2006, WB Capital received
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. WB Capital also received 0.080
percent of the average daily net asset value for program support fees. For the
six-month periods ended December 31, 2006 and 2005, the Diversified Portfolio
paid $364,987 and $374,292, respectively, to WB Capital for services provided.
Wells Fargo received 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 periods ended
December 31, 2006 and 2005, the Diversified Portfolio paid $56,988 and $56,664,
respectively, to Wells Fargo for services provided.
Under a distribution plan the public agency associations collectively received
an annual fee of 0.100 percent of the daily net asset value of the portfolio.
For the six-month periods ended December 31, 2006 and 2005, the Diversified
Portfolio paid $62,250 and $65,043 to the Iowa League of Cities, $39,910 and
$35,429 to the Iowa State Association of Counties, and $16,084 and $17,045 to
the Iowa Association of Municipal Utilities, respectively.
IPAIT is responsible for other fees and expenses incurred directly by IPAIT. The
other fees and expenses accrual is 0.025 percent on the average daily net asset
value, and amounted to $29,562 and $29,379, for the six-month periods ended
December 31, 2006 and December 31, 2005, respectively. All fees are computed
daily and paid monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the Diversified Portfolio aggregated
$20,148,179,850 and $19,490,575,000, for the six-month periods ended December
31, 2006 and December 31, 2005, respectively. Proceeds from maturities of
securities for the Diversified Portfolio aggregated $20,113,192,000 and
$19,477,474,000 for the six-month periods ended December 31, 2006 and December
31, 2005, respectively.
12
Iowa Public Agency Investment Trust
Diversified Portfolio
Financial Highlights (unaudited)
Six Months Ended
December 31, Year Ended June 30,
2006 -----------------------------------------------
(unaudited) 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.480 0.370 0.017 0.006 0.009 0.021
Dividends Distributed (0.480) (0.370) (0.017) (0.006) (0.009) (0.021)
-------------------------------------------------------------
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Total Return 2.43% * 3.76% 1.70% 0.60% 0.95% 2.14%
Ratio of Expenses to Average Net Assets 0.48% ** 0.49% 0.48% 0.48% 0.56% 0.56%
Ratio of Net Income to Average Net Assets 4.78% ** 3.70% 1.71% 0.59% 0.94% 2.07%
Net Assets, End of Period (000 Omitted) $245,158 $203,482 $229,668 $254,818 $245,025 $253,948
* Not Annualized
** Annualized
See accompanying notes to financial statements.
13
Management's Discussion & Analysis
This section of the IPAIT Direct Government Obligation Portfolio's semi-annual
Financial Report presents management's discussion and analysis of the financial
position and results of operations during the six-month periods ended December
31, 2006 and December 31, 2005. 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 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 Direct Government
Obligation Portfolio. The following components comprise the basic financial
statements: 1) Schedule of Investments, 2) Statement of Net Assets, 3)
Statements of Operations, 4) Statements of Changes in Net Assets, and 5) Notes
to Financial Statements.
o The Schedule of Investments lists each security held by the portfolio as of
December 31.
o The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolio as of December 31.
o The Statements of Operations display the results of operations (income and
expenses) of the portfolio for the six-month periods ended December 31,
2006 and December 31, 2005.
o The Statements of Changes in Net Assets display the results of additions
(net investment income, unit sales, and reinvestments) and deductions
(dividends and unit redemptions) of the portfolio for the six-month periods
ended December 31, 2006 and December 31, 2005.
o The Notes to Financial Statements describe significant accounting policies
and disclose summary security transaction amounts of the portfolio.
Condensed Financial Information and Financial Analysis
Year-over-year changes in most financial statement amounts reported in IPAIT's
Direct Government Obligation 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 six months, the Federal Reserve's Federal Open Market
Committee has not changed the Federal Funds target rate. In the preceding twelve
months, the Federal Funds target rate was increased eight times, from 3.25
percent to 5.25 percent.
14
Management's Discussion & Analysis (continued)
Condensed financial information and changes explanations for the six-month
period ended December 31, 2006, as compared to the same period ended December
31, 2005 follows.
December 31, Percent December 31,
2006 Change 2005
Net Assets ------------- ------ ------------
Total Investments $21,880,888 65% $13,295,032
Excess of total liabilities over other assets (7,230) 75% (28,851)
------------- ------------
Net assets held in trust for pool
participants $21,873,658 65% $13,266,181
============= ============
Direct Government Obligation Portfolio
Total investments and net assets as of December 31, 2006 increased 65 and 65
percent, respectively, compared to December 31, 2005. During the six-month
period ended December 31, 2006, average net assets increased 39 percent to
$20,834,458 from average net assets of $14,973,492 during the same period in the
prior year. The DGO portfolio experienced a net purchase of assets in this
six-month period partially due to the transfer of assets from the Diversified
portfolio.
December 31, Percent December 31,
Change in Net Asset for the periods ended 2006 Change 2005
------------- ------ ------------
Investment Income $540,108 101% $268,568
Total Expenses (53,039) 37% (38,612)
Dividends to unitholders from
net investment income (487,069) 112% (229,956)
Net increase (decrease) in assets
derived from unit transactions 4,924,503 422% (1,529,502)
Net assets held in trust for pool
participants at beginning of period 16,949,155 15% 14,795,683
-------------- -------------
Net assets held in trust for pool
participants at end of period $21,873,658 65% $13,266,181
============== =============
Investment income and net investment income increased 101 percent and 112
percent, respectively, during the six-month period ended December 31, 2006
compared to the same period in the prior year due to the higher interest rate
environment and higher average net assets. With the increase in Fed Fund rates,
money market fund returns have improved during 2006. Total expenses are derived
based on net assets held by the Fund. These expenses increased 37 percent during
the six-month period ended December 31, 2006 compared to the same period in the
prior year due to an increase in average net assets. During the six-month period
ended December 31, 2006 compared to the same period in the prior year, units
sold and redeemed decreased 14 percent and 42 percent, respectively.
15
Management's Discussion & Analysis (continued)
Condensed financial information and changes explanations for the six-month
period ended December 31, 2005, as compared to the same period ended December
31, 2004 follows.
December 31, Percent December 31,
2005 Change 2004
Net Assets ------------- ------ ------------
Total Investments $13,295,032 -40% $22,131,039
Excess of total liabilities over other assets (28,851) -211% 25,983
------------- ------------
Net assets held in trust for pool
participants $13,266,181 -40% $22,157,021
============= ============
Direct Government Obligation Portfolio
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. 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.
December 31, Percent December 31,
Change in Net Asset for the periods ended 2005 Change 2004
------------- ------ ------------
Investment Income $268,568 12% $238,792
Total Expenses (38,612) -50% (76,724)
Dividends to unitholders from
net investment income (229,956) 42% (162,068)
Net increase (decrease) in assets
derived from unit transactions (1,529,502) 90% (15,375,227)
Net assets held in trust for pool
participants at beginning of period 14,795,683 -61% 37,532,248
------------- -------------
Net assets held in trust for pool
participants at end of period $13,266,181 -40% $22,157,021
============= =============
Investment income and net investment income increased 12 percent and 42 percent,
respectively, during the six-month period ended December 31, 2005 compared to
the 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 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 December 31, 2005 compared to the same period in 2004.
Units redeemed decreased 12 percent during the six-month period ended December
31, 2005 compared to the same period in the prior year.
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.
16
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Schedule of Investments (unaudited)
December 31, 2006
(Showing Percentage of Net Assets)
Yield at
Par Time of Amortized
Value Description Purchase Due Date Cost
----- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES - 2.27%
250,000 United States Treasury Bill 5.10% 01/18/07 $249,420
250,000 United States Treasury Bill 5.17% 02/15/07 248,444
--------------
TOTAL (cost - $497,864) $497,864
--------------
COUPON SECURITIES - 32.50%
500,000 United States Treasury Note, 3.00% 5.03% 12/31/06 $500,000
250,000 United States Treasury Note, 6.25% 5.15% 02/15/07 250,327
200,000 United States Treasury Note, 2.25% 5.35% 02/15/07 199,262
300,000 United States Treasury Note, 2.25% 5.03% 02/15/07 298,996
400,000 United States Treasury Note, 2.25% 5.31% 02/15/07 398,538
300,000 United States Treasury Note, 3.75% 5.15% 03/31/07 298,994
300,000 United States Treasury Note, 3.63% 5.07% 04/30/07 298,618
300,000 United States Treasury Note, 3.63% 5.01% 06/30/07 297,999
200,000 United States Treasury Note, 3.63% 5.07% 06/30/07 198,604
200,000 United States Treasury Note, 3.63% 5.07% 06/30/07 198,604
300,000 United States Treasury Note, 3.88% 4.95% 07/31/07 298,174
600,000 United States Treasury Note, 3.88% 5.06% 07/31/07 595,995
300,000 United States Treasury Note, 6.13% 4.95% 08/15/07 302,105
300,000 United States Treasury Note, 3.25% 4.99% 08/15/07 296,859
300,000 United States Treasury Note, 4.00% 4.94% 09/30/07 297,981
300,000 United States Treasury Note, 4.00% 4.94% 09/30/07 297,962
500,000 United States Treasury Note, 4.00% 4.95% 09/30/07 496,565
300,000 United States Treasury Note, 4.25% 4.92% 10/31/07 298,399
600,000 United States Treasury Note, 4.25% 5.01% 10/31/07 596,336
200,000 United States Treasury Note, 3.00% 5.00% 11/15/07 196,640
500,000 United States Treasury Note, 3.00% 4.89% 11/15/07 492,066
--------------
TOTAL (cost - $7,109,024) $7,109,024
--------------
See accompanying notes to financial statements.
17
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Schedule of Investments (unaudited) (continued)
December 31, 2006
(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) - 65.26%
8,274,000 Barclays Capital, Inc. 4.80% 01/02/07 $8,274,000
6,000,000 Bear Stearns and Company, Inc. 4.60% 01/02/07 6,000,000
--------------
TOTAL (cost - $14,274,000) $14,274,000
--------------
TOTAL INVESTMENTS - 100.03% (cost - $21,880,888) $21,880,888
EXCESS OF TOTAL LIABILITIES OVER OTHER ASSETS - (0.03%) (7,230)
--------------
(Includes $6,268 payable to WB Capital and $88,374
dividends payable to unitholders)
NET ASSETS HELD IN TRUST FOR POOL PARTICIPANTS - 100% $21,873,658
==============
Applicable to 21,873,658 outstanding units
See accompanying notes to financial statements.
18
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Statement of Net Assets (unaudited)
December 31, 2006
ASSETS:
Investments in securities at amortized cost:
Discounted Government Securities $ 497,864
Coupon Securities 7,109,024
Repurchase Agreements 14,274,000
Cash 845
Interest Receivable 89,891
-------------
Total Assets 21,971,624
-------------
IABILITIES:
Investment advisory, administrative,
and program support fees payable 6,268
Custody fees payable 950
Distribution fees payable 1,899
Other fees and expenses payable 475
Dividends payable 88,374
Other accrued expenses ----
Securities payable ----
-------------
Total liabilities 97,966
-------------
NET ASSETS HELD IN TRUST FOR POOL PARTICIPANTS $ 21,873,658
=============
Shares of beneficial interest outstanding 21,873,658
=============
Net asset value - offering and redemption price per share $ 1.00
=============
See accompanying notes to financial statements.
19
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Statements of Operations (unaudited)
For the Six Months ended December 31,
2006 2005
------------- -------------
INVESTMENT INCOME:
Interest $540,108 $268,568
------------- -------------
EXPENSES:
Investment advisory, administrative,
and program support fees 34,659 25,403
Custody fees 5,251 3,774
Distribution fees 10,503 7,548
Other fees and expenses 2,626 1,887
------------- -------------
Total expenses 53,039 38,612
------------- -------------
NET INVESTMENT INCOME $487,069 $229,956
============= =============
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31,
ADDITIONS: 2006 2005
------------- -------------
From Investment Activities:
Net investment income $487,069 $229,956
From Unit Transactions:
(at constant net asset value of $1
per unit)
Units sold 16,546,916 19,166,726
Units issued in reinvestment
of dividends from net
investment income 460,255 219,212
------------- -------------
TOTAL ADDITIONS 17,494,240 19,615,894
------------- -------------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (487,069) (229,956)
From Unit Transactions:
Units redeemed (12,082,668) (20,915,440)
------------- -------------
TOTAL DEDUCTIONS (12,569,737) (21,145,396)
Net decrease in net assets 4,924,503 (1,529,502)
Net assets held in trust for pool participants
at beginning of period 16,949,155 14,795,683
------------- -------------
Net assets held in trust for pool participants
at end of period $21,873,658 $13,266,181
============= =============
See accompanying notes to financial statements.
20
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Notes to Financial Statements (unaudited)
(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 as required by Iowa Statute and files reports
with the Securities and Exchange Commission under Regulation S-X. 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, May 1,
1993, and again on September 1, 2005. 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 WB
Capital Management Inc. (WB Capital) serves as the Investment Adviser,
Administrator, and Program Support Provider.
The preparation of financial statements, in conformity with U.S. generally
accepted accounting principles, 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 fair 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 an accrual basis.
21
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Notes to Financial Statements (unaudited) (continued)
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.
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, 2006 and December 31, 2005, the securities purchased
under overnight agreements to resell were collateralized by government agency
securities with a value of $15,025,910 and $7,521,300, respectively.
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. As of
December 31, 2006, the Direct Government Obligation Portfolio security credit
ratings were 32.5 percent AAA, and 67.5 percent NA. Securities which carry an NA
rating are government securities which are deemed to carry the equivalent of
A1+/P1 ratings by the IPAIT Board of Trustees.
IPAIT's exposure to interest rate risk is mitigated by the fact that securities
are limited under Rule 2a-7 as well as by investment policy and statute to
investments of high quality with durations not to exceed 397 days. Hence any
significant change in market interest rates would not present long term risk to
IPAIT.
Unit Issues, Redemptions and Distributions
IPAIT determines the net asset value of the Direct Government Obligation
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, WB Capital and Wells Fargo are paid an
annual fee for operating the investment program.
22
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Notes to Financial Statements (unaudited) (continued)
During the period of July 1, 2006 to December 31, 2006, WB Capital received
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, WB Capital received
0.080 percent of the average daily net asset value for program support fees. For
the six-month periods ended December 31, 2006 and 2005, the DGO Portfolio paid
$34,659 and $25,403, respectively, to WB Capital for services provided.
Wells Fargo received 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 periods ended
December 31, 2006 and 2005, the DGO Portfolio paid $5,251 and $3,774,
respectively, to Wells Fargo for services provided.
Under a distribution plan the public agency associations collectively received
an annual fee of 0.100 percent of the daily net asset value of the portfolio.
For the six-month periods ended December 31, 2006 and 2005, the DGO Portfolio
paid $10,503 and $7,548 to the Iowa League of Cities, respectively.
IPAIT is responsible for other fees and expenses incurred directly by IPAIT. The
other fees and expenses accrual is 0.025 percent on the average daily net asset
value, and amounted to $2,626 and $1,887, for the six-month periods ended
December 31, 2006 and December 31, 2005, respectively. All fees are computed
daily and paid monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the DGO Portfolio aggregated
$1,739,158,835 and $1,156,777,000, for the six-month periods ended December 31,
2006 and December 31, 2005, respectively. Proceeds from maturities of securities
for the DGO Portfolio aggregated $1,735,485,000 and $1,158,273,000 for the
six-month periods ended December 31, 2006 and December 31, 2005, respectively.
(3) PARTICIPANT CONCENTRATION
As of December 31, 2006, two participants hold all outstanding units of the DGO
Portfolio.
23
Iowa Public Agency Investment Trust
Direct Government Obligation Portfolio
Financial Highlights (unaudited)
Six Months Ended
December 31, Year Ended June 30,
2006 --------------------------------------------
(unaudited) 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.460 0.035 0.015 0.005 0.009 0.018
Dividends Distributed (0.460) (0.035) (0.015) (0.005) (0.009) (0.018)
------------------------------------------------------------
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Total Return 2.35% * 3.58% 1.54% 0.53% 0.91% 1.85%
Ratio of Expenses to Average Net Assets 0.51% ** 0.51% 0.50% 0.51% 0.58% 0.58%
Ratio of Net Income to Average Net Assets 4.64% ** 3.58% 1.39% 0.53% 0.92% 1.79%
Net Assets, End of Period (000 Omitted) $21,874 $16,949 $14,796 $37,532 $52,291 $66,461
* Not Annualized
** Annualized
See accompanying notes to financial statements.
24
Iowa Public Agency Investment Trust
Additional Information (unaudited)
December 31, 2006
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 July 1, 2006 to December 31, 2006. 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 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
dated October 30, 2006.
Beginning Ending Expenses Paid Annualized
Account Value Account Value During Period* Expense
Example 7/1/2006 12/31/2006 7/1/06 to 12/31/06 Ratio
- -------------------------------------------------------------------------------------------------
Based on Actual Fund Return
IPAIT Diversified Fund $1,000.00 $1,024.31 $2.45 0.48%
IPAIT DGO Fund $1,000.00 $1,023.54 $2.60 0.51%
Based on Hypothetical 5 Percent Return
IPAIT Diversified Fund $1,000.00 $1,022.79 $2.45 0.48%
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.
25
Iowa Public Agency Investment Trust
Additional Information (unaudited) (continued)
December 31, 2006
Fees and Expenses
All fees are calculated by basis points per net assets
- ------------------------------------------------------------------------------
Entity Fee Type Fee
- ------------------------------------------------------------------------------
WB Capital Management Adviser 0.120% up to $100MM;
0.095% on $100 - $250MM;
0.070% on assets exceeding $250MM
- ------------------------------------------------------------------------------
WB Capital Management Administrator 0.130% up to $100MM;
0.120% on $100 - $250MM;
0.100% on assets exceeding $250MM
- ------------------------------------------------------------------------------
WB Capital Management Program Support 0.080%
- ------------------------------------------------------------------------------
Sponsoring Sponsoring 0.100%
Associations* Associations
- ------------------------------------------------------------------------------
Wells Fargo Custody 0.050% up to $150MM;
0.045% on $150 - $300MM;
0.040% on assets exceeding $300MM
- ------------------------------------------------------------------------------
Administration Other fees & expenses 0.025%
Fund
- ------------------------------------------------------------------------------
*Includes Iowa League of Cities, Iowa State Association of Counties, Iowa
Association of Municipal Utilities
For the six-month period ended December 31, 2006 actual expenses for the IPAIT
Diversified Fund and the DGO Fund were 0.48 percent and 0.51 percent,
respectively, based on a sliding fee scale.
Actual:
For the six-month period ended December 31, 2006, the following actual expenses
were incurred by the Funds:
Diversified DGO
----------- ---
Adviser $124,114 $12,603
Administrator 146,277 13,654
Program Support 94,596 8,402
Distribution 118,244 10,503
Custody 56,988 5,251
Other fees and expenses 29,562 2,626
----------- ---------
Total $569,781 $53,039
26
Iowa Public Agency Investment Trust
Additional Information (unaudited)(continued)
December 31, 2006
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.
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.
27
Annual Approval
of the Investment Adviser Agreement
by the Board of Trustees
Every year the Board considers the renewal of IPAIT's investment management
agreement (the "IM Agreement") and throughout each year, reviews and evaluates
the performance of and services provided by WB Capital Management Inc. (f/k/a
Investors Management Group, Ltd.) ("WB Capital" or the "Investment Adviser").
The Board assesses the nature, scope and quality of the services provided by the
personnel of the Investment Adviser and its affiliates, including administrative
services, and compliance with legal and regulatory requirements. The Board also
receives and assesses information regarding the services provided by certain
unaffiliated service providers.
At various times throughout the year, the Board also considers a range of
information in connection with its oversight of the services provided. Among the
matters considered throughout the year are: (a) fees (in addition to management
fees) paid to the Investment Adviser and its affiliates, such as fees for
marketing and distribution; (b) overall operating expenses; (c) the resources
devoted to and compliance reports relating to the investment objective, policies
and restrictions, and compliance with the Code of Ethics and the Investment
Adviser's compliance policies and procedures; and (d) the nature, cost and
character of any non-investment management services provided by the Investment
Adviser and its affiliates.
The Board considered the approval of the IM Agreement at two meetings in the
second half of 2006. The first consideration was at its meeting on August 30,
2006. At that meeting the IM Agreement which had been previously approved by
shareholders at the special meeting on December 9, 2005 was reviewed and
discussed in connection with a review of all of IPAIT's service providers. This
IM Agreement was to terminate as of December 31, 2006. At that meeting the Board
of Trustees tabled the approval and continuation of the IM Agreement for the
period after December 31, 2006 in consideration of further negotiation between
the parties on fees. At the October 26, 2006 meeting the Board reviewed and
approved the continuation of the IM Agreement for 2007, but with a fee
reduction. The Board of Trustees also approved a fee reduction with another
service provider.
In the period prior to and at the Board meetings, the Board considered a wide
range of information provided by WB Capital and the Board requested and received
materials specifically relating to IPAIT, the IM Agreement and WB Capital. These
materials included among other things (a) information on the investment
performance of IPAIT compared to a similar group of money market funds and
public programs; (b) information on fees and expenses of other funds of similar
asset size; (c) sales and redemption data; (d) a discussion by the WB Capital
management team regarding their experience, investment strategies and outlook;
and (e) information on the profitability to the Investment Adviser. The Board of
Trustees considered all factors deemed to be relevant to IPAIT and observed or
concluded that:
o the expectation that the operation of WB Capital and IPAIT's day-to-day
management, including the portfolio managers, will remain unchanged for the
foreseeable future;
o WB Capital and its personnel (including particularly those personnel with
responsibilities for providing services to IPAIT), resources and investment
process will remain unchanged;
o WB Capital will have access to the resources and personnel of West
Bancorporation and its other subsidiaries;
28
Annual Approval
of the Investment Adviser Agreement
by the Board of Trustees (continued)
o the financial viability of WB Capital will remain unchanged;
o the terms of the IM Agreement were the same as those of the previous IM
agreement, except for the fee reduction;
o the nature, extent and quality of the services that WB Capital provided
were reasonable and appropriate;
o the investment performance of IPAIT over various periods was comparable to
other similarly situated public money funds;
o the advisory fee rate payable to WB Capital by IPAIT and by other client
accounts managed by WB Capital as proposed was a reduction from previous
fees and was reasonable;
o the total expense ratio of IPAIT compared to similar funds managed by other
advisers was reasonable;
o compensation payable by IPAIT to WB Capital for other services was
reasonable;
o the profitability of the IM Agreement to WB Capital compared to the
profitability of the prior agreements when WB Capital was owned by AMCORE
and the projected profitability of the New IM Agreement to West
Bancorporation had declined substantially;
o economies of scale would be realized from the fee structure as IPAIT grows.
The Board considered the level and depth of knowledge of WB Capital. In
evaluating the quality of services provided by WB Capital, the Board took into
account its familiarity with WB Capital's management through board meetings,
conversations and reports since IPAIT's inception.
In considering the approval of the new Investment Management Agreement, the
Board did not identify any single factor as controlling. Based on the Board's
evaluation of all factors that it deemed to be relevant, the Board unanimously
approved the IM Agreement for the period commencing January 1, 2007 and ending
December 31, 2007.
29
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 Bob Haug, Executive Director, Iowa
and Trustee Association of Municipal Utilities,
Don Kerker, Director of Finance Ex-Officio Member and Secretary
and Administrative Services, Thomas Bredeweg, Executive Director,
Muscatine Power and Water, Trustee Iowa League of Cities, Ex-Officio
Richard heidloff, Treasurer, Lyon Member and Treasurer
County, Trustee William Peterson, Executive Director,
Floyd Magnusson, Supervisor, Iowa State Association of Counties,
Webster County, Trustee Ex-Officio Member and Assistant
Susan Vavroch, City Treasurer,
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 Custodian:
Adviser-Program Support: Wells Fargo Bank, N.A.
WB Capital Management Inc. MAC N8200-034
1415 28th Street, Suite 200 666 Walnut Street, P.O. Box 837
West Des Moines, IA 50266-1461 Des Moines, IA 50304-0837
Legal Counsel: Independent Registered Public
Ahlers & Cooney, P.C. Accounting Firm:
100 Court Avenue, Suite 600 KPMG LLP
Des Moines, IA 50309 2500 Ruan Canter
Des Moines, IA 50309
IOWA PUBLIC AGENCY INVESTMENT TRUST
www.IPAIT.org
1415 28th Street, Suite 200
West Des Moines, IA 50266-1461
30
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) NA
(D) NOT APPLICABLE.
(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. NOT APPPLICABLE.
(b)NOT APPPLICABLE.
(c)NOT APPPLICABLE.
(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. NOT APPPLICABLE.
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, 2007, 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: February 28, 2007
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, February 28, 2007
/s/ Amy Mitchell
- ---------------------------------------------------------
Amy Mitchell, Chief Financial Officer, February 28, 2007