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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 CLINE, WILLIAMS, WRIGHT, JOHNSON
1415 28th STREET, SUITE 200 & OLDFATHER
WEST DES MOINES, IOWA 50266 1900 U.S. BANK BUILDING, 233 S. 13TH STREET
LINCOLN, NEBRASKA 68508
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (515) 244-5426
DATE OF FISCAL YEAR END: 06/30
DATE OF REPORTING PERIOD: 6/30/2007
ITEM 1. REPORTS TO UNITHOLDERS.
IOWA PUBLIC AGENCY INVESTMENT TRUST
Diversified Fund
Comprehensive Annual
Financial Report
Direct Government Obligation Fund
Comprehensive Annual
Financial Report
Fiscal Year Ending
June 30, 2007
The Funds are distributed by WB Capital Management.
Shares of the Funds are NOT INSURED BY THE FDIC. Investment products involve
investment risk, including the possible loss of principal. Past performance is
not predictive of future results, and the composition of each Fund's portfolio
is subject to change.
THIS ANNUAL REPORT IS NOT AUTHORIZED FOR DISTRIBUTION UNLESS ACCOMPANIED OR
PRECEDED BY A CURRENT INFORMATION STATEMENT ALSO KNOWN AS A PROSPECTUS. AN
INVESTOR SHOULD CONSIDER THE FUNDS' INVESTMENT OBJECTIVES, RISKS, AND CHARGES
AND EXPENSES CAREFULLY BEFORE INVESTING OR SENDING MONEY. THIS AND OTHER
IMPORTANT INFORMATION ABOUT THE INVESTMENT COMPANY CAN BE FOUND IN THE FUND'S
INFORMATION STATEMENT. TO OBTAIN MORE INFORMATION, PLEASE CALL 800-872-4024 OR
VISIT THE WEBSITE: IPAIT.ORG. PLEASE READ THE INFORMATION STATEMENT CAREFULLY
BEFORE INVESTING.
IOWA PUBLIC AGENCY INVESTMENT TRUST
Diversified Fund
Comprehensive Annual Financial Report
IPAIT
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIRECT GOVERNMENT OBLIGATION FUND
Comprehensive Annual Financial Report
For the Fiscal Year
Ended June 30, 2007 www.ipait.org
Prepared by the
Iowa Public Agency Investment Trust
Board of Trustees
2
IPAIT TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INTRODUCTORY SECTION
Letter from the Chair.................................................6
Management Report.....................................................9
Board of Trustees....................................................10
Service Providers....................................................12
Organization Chart...................................................13
Certificate of Achievement...........................................14
FINANCIAL SECTION
DIVERSIFIED PORTFOLIO:
Management's Discussion and Analysis.................................16
Report of Independent Registered Public Accounting Firm..............19
Financial Statements.................................................20
Notes to Financial Statements........................................24
Financial Highlights.................................................26
DIRECT GOVERNMENT OBLIGATION PORTFOLIO:
Management's Discussion and Analysis.................................27
Report of Independent Registered Public Accounting Firm..............30
Financial Statements.................................................31
Notes to Financial Statements........................................34
Financial Highlights.................................................36
INVESTMENT SECTION
Fund Facts Summary...................................................38
Diversified Fund and Direct Government Obligation Fund...............39
Introduction.........................................................39
Risk Profile.........................................................41
Performance Summary..................................................42
Fund Expenses........................................................43
Investment Commentary................................................46
IPAIT Investment Policy..............................................47
Investing and Non-Investing Participants.............................51
STATISTICAL SECTION
Statistical Information..............................................54
Changes in Fund Units................................................55
Monthly Comparative Yields...........................................56
Annual Comparative Yields ...........................................57
Annual Net Investment Income.........................................57
Changes in Net Asset.................................................58
Glossary of Investment Terms.........................................60
4
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INTRODUCTORY
SECTION
IPAIT
5
IPAIT LETTER FROM THE CHAIR
- --------------------------------------------------------------------------------
August 10, 2007
Dear Fellow IPAIT Participants:
The Iowa Pubic Agency Investment Trust (IPAIT) is pleased to submit the
Diversified Fund and Direct Government Obligation Fund (DGO) Comprehensive
Annual Financial Reports for the fiscal year ended June 30, 2007. The IPAIT
Board of Trustees and service providers are responsible for the content of the
reports.IPAIT has been serving participants' needs since 1987 in accordance with
Iowa Code. Fiscal year 2006-2007 was marked with the Federal Reserve holding
interest rate levels steady, which continued throughout the year. The IPAIT
Diversified and DGO Funds maintained yields comparable to other money market
funds during this time, while being an educational resource for IPAIT
participants. For a detailed review of the Funds, please refer to the
Management's Discussion and Analysis of each Fund located in the Financial
Section.
IOWA ECONOMY
Although the national economy has experienced a slowdown in economic growth,
Iowa has fared well. The state's GDP grew 5.4 percent in 2006 while the national
GDP grew 2.5 percent. Personal income growth estimates in Iowa for 2007 have
been revised downward from 5.4 percent to 4.4 percent, but Iowa's low
unemployment rate and strong payroll growth, support good consumer spending
expectations.
While the national rate of unemployment has held steady at 4.5 percent, Iowa's
rate at 3.8 percent remains well below national levels and compares well to its
Midwest neighbors. Although Nebraska and South Dakota have lower unemployment
rates, Iowa competes well against Minnesota (4.5 percent), Illinois (5.1
percent), and Kansas (4.8 percent). Unemployment claims have fallen 6.4 percent
year-over-year supporting the low unemployment rate. Iowa continues to see
strong payroll growth with 17,500 non-farm jobs added to payrolls since last
June which represented a 1.2 percent increase. Trade, transportation, and
utilities represent Iowa's largest employment sector.
Inflation remains higher than the Federal Reserve's range of comfort. Headline
CPI inflation year-over-year was 2.7 percent for the Midwest Region mirroring
the national rate at 2.7 percent. On a positive note, wage pressures in the
Midwest are less than elsewhere with the employment cost index for the Midwest
at only 2.5 percent growth versus a national increase of 3.2 percent.
Deterioration in the national housing markets is also reflected in Iowa's
markets. In the first quarter of 2007, single family home permits dropped 32
percent year-over-year although the home price index rose 3.8 percent on the
heels of last year's increase of 3.9 percent. Farm values have also risen 13
percent year-over-year (as of year-end) with land in the western part of the
state showing the strongest growth.
The Midwest typically enjoys less volatility in most aspects of the economy, and
this year has been no different. Our less-volatile housing market has resulted
in more stable growth and a strong labor market. Although Iowa projects 4.4
percent growth in income, rising education and healthcare costs will continue to
weigh on budgets.
INVESTMENT POLICIES AND STRATEGIES
IPAIT was created pursuant to Iowa Code Chapter 28E in 1987 to enable eligible
Iowa public agencies to invest their available operating and reserve funds in a
competitive rate environment, safely and effectively. Both the Diversified and
DGO Funds have followed established money market mutual fund investment
parameters designed to maintain a $1 per unit net asset value since inception.
INVESTMENT SAFEGUARDS
Both Funds continue to be focused on their investment objectives as stated in
the IPAIT Investment Policy. These goals, in order of priority are: safety of
invested principal, maintenance of liquidity, and maximum yield. Within these
objectives, each Fund strives to provide participants with the best available
rates of return for legally authorized investments. All security settlements
within either Fund are settled on a delivery-versus-payment (DVP) basis. DVP
settlements greatly reduce the possibility of inappropriate transmission of
funds or securities.
6
IPAIT LETTER FROM THE CHAIR
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RELIABILITY OF INVESTMENT SECTION
All commentary and displays in the Investment Section were prepared by IPAIT's
service provider, WB Capital Management Inc. (WB Capital), the program's
Investment Adviser, Administrative Services Provider, and Program Support
Provider. WB Capital has provided services to the IPAIT program since the
program's inception in 1987. All services provided by IPAIT to participants are
subject to rigorous and regular verification. WB Capital and IPAIT have designed
internal controls and procedures to ensure that material information is made
known to the principal executive officers, Jeff Lorenzen (Chief Executive
Officer), Vera Lichtenberger (Chief Compliance Officer), and Amy Mitchell (Chief
Financial Officer), respectively during the reporting period for the semi-annual
and annual report to shareholders. These individuals are required to report any
deficiencies and any fraud to the Fund Auditor and to the Audit Committee
immediately upon discovery.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ending June 30, 2007 (FY 06/07) and the fiscal year ending
June 30, 2006 (FY 05/06) total interest earned, total operating expenses, and
net investment income for the IPAIT Diversified and the DGO Funds were as
follows:
Interest Earned Expenses Net Investment Income
--------------- -------- ---------------------
Diversified Fund
FY 05/06 $12,944,292 $1,037,120 $11,907,172
FY 06/07 $ 9,590,801 $1,118,335 $ 8,472,466
DGO Fund
FY 05/06 $1,087,816 $93,621 $994,195
FY 06/07 $ 647,800 $80,459 $567,341
The increase in year-over-year interest earned for the Funds is primarily
attributed to higher yields and increased Fund balances in FY 06/07.
Total Fund expenses were slightly lower from FY 05/06 to 06/07. This is
partially due to a fee concession made by the service providers and sponsoring
associations. The decrease in fees was made to add to the competitive position
of IPAIT, placing it among the most competitively priced Local Government
Investment Pools in the country.
IPAIT operates pursuant to Service Provider agreements for all aspects of
operation. Every agreement specifies the fees to be charged for each component
of IPAIT services. Financial and operating highlights from this past year
include:
o Receipt of a tenth consecutive Certificate of Achievement for
Excellence in Financial Reporting by the Government Finance Officers
Association (GFOA),
o Average combined daily investments in the Diversified and DGO Funds of
$267,010,219 up from $245,101,870 in the last fiscal year,
o Placement of 27 portfolio certificates of deposit in Iowa financial
institutions by the Diversified Fund representing over $35,000,000,
o An authorized membership total of 413 public bodies representing 186
municipalities, 83 counties, 93 municipal utilities, and 51 other
eligible public agencies, and
o Total funds invested in IPAIT's investment alternatives peaked for the
fiscal year at $500,781,971 on April 11, 2007.
The GFOA awarded a tenth consecutive Certificate of Achievement for Excellence
in Financial Reporting to the Iowa Public Agency Investment Trust for its
Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30,
2006. The Certificate of Achievement is a prestigious national award,
recognizing conformance with the highest standards for preparation of state and
local government financial reports. In order to be awarded a Certificate of
Achievement, a government unit must publish an easily readable and efficiently
organized CAFR, whose contents conform to program standards. The CAFR must
satisfy both generally accepted accounting principles and applicable legal
requirements. A Certificate of Achievement is valid for a period of one year
only. We believe our current report continues to conform to the Certificate of
Achievement program requirements, and we are submitting it to the GFOA.
PARTICIPANTS MEETINGS
The participants had two participant meetings (proxy votes) this year, details
of which can be found on page 45 of this report. The participants elected the
Board of Trustees and ratified the selection of auditors.
7
IPAIT LETTER FROM THE CHAIR
- --------------------------------------------------------------------------------
SUMMARY
On behalf of IPAIT's Board of Trustees, sponsoring associations and service
providers, we thank you for your continued support of the Iowa Public Agency
Investment Trust. We encourage you to contact us with comments and suggestions
regarding any improvements to the operation of IPAIT. Your involvement in IPAIT
is essential in its ability to provide a competitive investment alternative, and
ongoing program opportunities for association members. As we begin fiscal year
2007-2008, IPAIT will continue to be guided by its objectives of safety,
liquidity, and competitive return. In addition, IPAIT will be an excellent
resource as a user-friendly investment alternative and also an educational
resource. The website provides monthly updates as well as access to the secure
IPASonlineTM system. We collectively pledge to continue working together to
provide a safe source of interest income for every participant.
Respectfully,
/S/ Tom Hanafan
Tom Hanafan
Chair, Board of Trustees
8
IPAIT MANAGEMENT REPORT
- --------------------------------------------------------------------------------
TO IPAIT PARTICIPANTS:
While IPAIT's Diversified Fund and Direct Government Obligation (DGO) Fund
financial statements and the related financial data contained in these
Comprehensive Annual Financial Reports (CAFR's) have been prepared in conformity
with U.S. generally accepted accounting principles and have been audited by
IPAIT's Independent Registered Public Accounting Firm, KPMG LLP, the ultimate
accuracy and validity of this information is the responsibility of the
management of the Iowa Public Agency Investment Trust Board of Trustees.
To carry out this responsibility, the Board of Trustees maintains financial
policies, procedures, accounting systems and internal controls which the Board
believes provide reasonable, but not absolute, assurance that accurate financial
records are maintained and investment assets are safeguarded.
In addition, the three ex-officio trustees meet with the Program's service
providers and legal counsel to review all aspects of IPAIT performance each
month. The Board of Trustees meets quarterly to similarly review Program
performance and compliance. In addition, the IPAIT Board of Trustees regularly
subjects IPAIT to a comprehensive review of all services and costs of operation.
Fiscal Year 2005/06 CAFRs were submitted to the GFOA and received their tenth
consecutive Certificates of Achievement for Excellence in Financial Reporting
for fiscal year ended June 2006.
In the Board's opinion, IPAIT's internal controls are adequate to ensure that
the financial information in this report presents fairly the IPAIT Diversified
and DGO Fund operations and financial condition.
Sincerely,
/S/ Robert D. Haug
Robert D. Haug
Secretary, Board of Trustees
Iowa Public Agency Investment Trust
9
IPAIT BOARD OF TRUSTEES
Photos
- --------------------------------------------------------------------------------
The Trustees and officers are not compensated for Board service.
Expenses incurred in attending meetings are paid by the Trust.
10
IPAIT BOARD OF TRUSTEES
- --------------------------------------------------------------------------------
================== ====================== ==== =========== ========= ======= ================= ========== =============
NUMBER OF
LENGTH PRINCIPAL PORTFOLIOS
POSITION OF OCCUPATION OVERSEEN
HELD WITH TERM OF TIME DURING PAST BY OUTSIDE
NAME ADDRESS AGE IPAIT OFFICE SERVED FIVE YEARS TRUSTEE DIRECTORSHIPS
================== ====================== ==== =========== ========= ======= ================= ========= =============
Richard Heidloff 206 Second Ave. 62 Trustee Term Since Lyon County 2 None
Rock Rapids, IA Ending 2006 Treasurer
51246 2008
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Thomas Hanafan 209 Pearl Street 58 Trustee, Term Since Council Bluffs 2 None
Council Bluffs, IA Chair Ending 1992 Mayor
51503 2009
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Donald Kerker 3205 Cedar Street 56 Trustee Term Since Director, 2 None
Muscatine, IA 52761 Ending 1999 Finance &
2008 Administrative
Services,
Muscatine Power
and Water
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Wapello County
Treasurer,
101 W. Fourth Street Trustee, Term Since College
Dianne Kiefer Ottumwa, IA 52501 57 Vice Chair Ending 2000 Instructor, 2 None
2010 Buena Vista
University
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Wayne Northey 13750 240th Ave 73 Trustee Term Since Dickinson County 2 None
Spirit Lake, IA 51360 Ending 2007 Supervisor
2009
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Craig Hall 138 Jackson Street 55 Trustee Term Since Manager, 2 None
Brooklyn, IA 52211 Ending 2004 Brooklyn
2010 Municipal
Utilities
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Leon Rodas 712 North 55 Trustee, Term Since General 2 None
Grand Second 2009 Ending Manager,
P.O. Box 222 Vice Chair 2003 Spencer
Spencer, IA 51301 Municipal
Utility
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Jody Smith P.O. Box 65320 54 Trustee Term Since Director of 2 None
West Des Moines, IA Ending 1994 Administrative
50265 2010 Services/City
Clerk, West Des
Moines
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Susan Vavroch 50 Second Ave. 48 Trustee Term Since Cedar Rapids 2 None
Bridge Cedar Ending 2003 City Treasurer
Rapids, IA 52401 2008
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Alan Kemp 317 Sixth Avenue, 46 Since Iowa League of
Ste 1400 2007 Cities
Des Moines, IA 50309 Acting Executive
Director
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
William Peterson 501 SW Seventh St, 56 IPAIT Since Iowa State
Ste Q Treasurer & 1994 Association of
Des Moines, IA 50309 Assistant Counties
Secretary Executive
Director
- ------------------ ---------------------- ---- ----------- --------- ------- ----------------- --------- -------------
Robert Haug 1735 NE 70th 59 IPAIT Since Iowa
Avenue Secretary 1987 Association of
Ankeny, IA 50021 Municipal
Utilities
Executive
Director
================== ====================== ==== =========== ========= ======= ================= ========= =============
11
IPAIT SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Sponsoring Associations
Iowa Association of Municipal Utilities
1735 NE 70th Avenue
Ankeny, IA 50021-9353
Robert Haug, Executive Director
orbhaug@iamu.org
515-289-1999
Iowa State Association of Counties
501 SW 7th Street, Suite Q
Des Moines, IA 50309
William Peterson, Executive Director
bpeterson@iowacounties.org
515-244-7181
Iowa League of Cities
317 Sixth Avenue, Suite 800
Des Moines, IA 50309
Alan Kemp, Acting Executive Director
alankemp@iowaleague.org
515-244-7282
Legal Counsel
AHLERS & COONEY, P.C.
100 Court Avenue, Suite 600
Des Moines, IA 50309
Elizabeth Grob 515-246-0305
egrob@ahlerslaw.com
Investment Adviser
Administrator
Program Support
WB Capital Management
Century II Building
1415 28th Street, Suite 200
West Des Moines, IA 50266-1461
Jeff Lorenzen 515-224-2718
jlorenzen@wbcap.net
Ron Shortenhaus 515-224-2724
rshortenhaus@wbcap.net
Bryant Sheriff 515-224-2763
bsheriff@wbcap.net
Anita Tracy 515-224-2725
atracy@wbcap.net
Vera Lichtenberger 515-224-2764
vlichtenberger@webcap.net
Custodian
Wells Fargo Bank, N.A.
MAC N8200-034
666 Walnut Street, P.O. Box 837
Des Moines, IA 50304-0837
Kristi Boyce 515-245-8504
kristi.j.boyce@wellsfargo.com
Teresa Smith 515-245-3245
teresa.a.smith@wellsfargo.com
Independent Registered Public Accounting Firm
KPMG LLP
2500 Ruan Center
666 Grand Avenue
Des Moines, IA 50309
Sean Vicente 515-697-1108
msvicente@kpmg.com
12
IPAIT ORGANIZATION CHART
- --------------------------------------------------------------------------------
IPAIT Board of Sponsoring
Trustees Associations
-------- ------------
Tom Hanafan, Chair Iowa League of Cities
Dianne Kiefer, Vice Chair Alan Kemp
Leon Rodas, Second Vice Chair
Donald Kerker, Board Member Iowa State Association of Counties
Richard Heidloff, Board Member William Peterson
Craig Hall, Board Member
Wayne Northey, Board Member Iowa Association of Municipal Untilities
Jody Smith, Board Member Robert Haug
Susan Vavroch, Board Member
IPAIT Custodian IPAIT Investment Adviser
--------------- ------------------------
Wells Fargo Bank, N.A. WB Capital
Kristi Boyce Investors Management Group
Jeff Lorenzen
IPAIT
Independent
IPAIT Registered Public IPAIT IPAIT
Legal Counsel Accounting Firm Administration Program Support
- ------------- --------------- -------------------- --------------------
Ahlers & KPMG LLP WB Capital WB Capital
Cooney, P.C. Sean Vicente Management Inc. Management Inc.
Elizabeth Grob Vera Lichtenberger Ron Shortenhaus
Anita Tracy Bryant Sheriff
13
IPAIT CERTIFICATE OF ACHIEVEMENT
- --------------------------------------------------------------------------------
CERTIFICATE OF ACHIEVEMENT
FOR EXCELLENCE
IN FINANCIAL REPORTING
Presented to
Iowa Public Agency Investment
Turst Diversified Fund/Direct
Government Obligation Fund
A Certificate of Achievement of Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada
to government units and public employee retirement
reports (CAFRs) achieve the highest
standards in government accounting and
financial reporting.
14
FINANCIAL SECTION
IPAIT
15
IPAIT MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
This section of the IPAIT Diversified Portfolio's annual Financial Report
presents management's discussion and analysis of the financial position and
results of operations for the fiscal years ended June 30, 2007 (FY 07) and 2006
(FY 06). 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 Report of
Independent Registered Public Accounting Firm, KPMG LLP, the Financial
Statements, and the accompanying notes.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Management's Discussion and Analysis provides an introduction to and
overview of the basic financial statements of IPAIT's Diversified Portfolio. The
following components comprise the financial statements: 1) 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 the date of current fiscal year end.
o The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolio as of the date of the current fiscal
year end.
o The Statements of Operations display the results of operations (income
and expenses) of the portfolio for the two most recent fiscal years.
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
two most recent fiscal years.
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 twelve months, the Federal Reserve's Federal Open
Market Committee has not changed the Fed Funds target rate of 5.25 percent. In
the preceeding twelve months, the Fed Funds target was increased eight times,
from 3.25 percent to 5.25 percent.
16
IPAIT MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)
- --------------------------------------------------------------------------------
Condensed financial information and variance explanations for FY 07, as compared
to FY 06 follows.
PERCENT
NET ASSETS JUNE 30, 2007 CHANGE JUNE 30, 2006
------------- ------- --------------
Total investments $240,230,576 15% $209,699,643
Excess of other assets over total liabilities 103,667 102% (6,218,102)
------------- --------------
Net assets held in trust for pool participants 240,334,243 18% 203,481,541
============= ==============
Average Net Assets $245,847,573 7% $229,267,241
------------- --------------
Total investments and net assets increased 15 and 18 percent, respectively,
comparing June 30, 2007 and June 30, 2006 amounts. During FY 07, average net
assets increased 7 percent to $245,847,573 from average net assets of
$229,267,241 during FY 06. The significant decrease in excess of total
liabilities over other assets was due to a liability for securities purchased on
June 30, 2006 and settled on July 3, 2006 in the amount of $6,235,663. The
Diversified portfolio experienced a net increase of assets in FY 07 due to a
more favorable interest rate environment for the entire 12-month period compared
to the prior 12-month period. Also, the Diversified portfolio's investment rate
was more favorable than alternative investments, such as bank certificates of
deposit.
PERCENT
CHANGE IN NET ASSET FOR THE YEARS ENDED JUNE 30, 2007 CHANGE JUNE 30, 2006
-------------- --------- --------------
Investment Income $ 12,944,292 35% $ 9,590,801
Total Expenses (1,037,120) -7% (1,118,335)
Dividends to unitholders from net
investment income (11,907,172) 41% (8,472,466)
Net increase (decrease) in assets derived
from unit transactions 36,852,702 241% (26,186,425)
Net assets at beginning of year 203,481,541 -11% 229,667,966
-------------- --------------
Net assets at end of year $240,334,243 18% $203,481,541
============== ==============
Investment income and dividends to unitholders from net investment income
increased 35 percent and 41 percent, respectively, during FY 07 compared to FY
06 due to the higher interest rate environment for the entire 12-month period.
Total expenses are derived based on net assets held by the Fund. These expenses
decreased 7 percent during FY 07 compared to FY 06 due to a reduction in fees
effective January 2, 2007. During FY 07 compared to FY 06, units sold and
redeemed increased 8 percent and 3 percent, respectively.
17
IPAIT MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)
- --------------------------------------------------------------------------------
Condensed financial information and changes explanations for FY 06 as compared
to the fiscal year ended June 30, 2005 (FY 05) follows.
PERCENT
NET ASSETS JUNE 30, 2006 CHANGE JUNE 30, 2005
------------- ------- --------------
Total Investments $209,699,643 -9% $229,759,603
Excess of total liabilities over other assets (6,218,102) -6686% (91,637)
-------------- --------------
Net assets held in fund for pool participants 203,481,541 -11% 229,667,966
============== ==============
Average Net Assets $229,267,241 5% $218,666,940
-------------- --------------
Total investments and net assets decreased 9 and 11 percent, respectively,
comparing June 30, 2006 and June 30, 2005 amounts. During FY 06, average net
assets increased 5 percent to $229,267,241 from average net assets of
$218,666,940 during FY 05. The significant increase in excess of total
liabilities over other assets was due to a liability for securities purchased on
June 30, 2006 and settled on July 3, 2006 in the amount of $6,235,663. No such
liability existed on June 30, 2005. The Diversified portfolio experienced a net
redemption of assets in FY 06 due to investors withdrawals of assets out of the
Diversified portfolio for other investment opportunities. During FY 06, bank
investment options, specifically certificates of deposit continued to be
appealing versus money market funds.
PERCENT
CHANGE IN NET ASSET FOR THE YEARS ENDED JUNE 30, 2006 CHANGE JUNE 30, 2005
------------- -------- --------------
Investment Income $ 9,590,801 100% $ 4,792,152
Total Expenses (1,118,335) 6% (1,058,235)
Dividends to unitholders from net investment
income (8,472,466) 127% (3,733,917)
Net increase (decrease) in assets derived (26,186,425) -4% (25,150,144)
from unit transactions
Net assets at beginning of year 229,667,966 -10% 254,818,110
------------- --------------
Net assets at end of year $203,481,541 -11% $229,667,966
============= ==============
Investment income and dividends to unitholders from net investment income
increased 100 percent and 127 percent, respectively, during FY 06 compared to FY
05 due to the higher interest rate environment. With the increase in Fed Fund
rates, money market fund returns have improved during FY 06. Total expenses are
derived based on net assets held by the Fund. These expenses increased 6 percent
during FY 06 compared to FY 05 due to higher average net assets throughout FY
06. Also, the other fees and expenses accrual of 0.025 percent had been
temporarily suspended for the 16 month period ended December 31, 2004 and
reinstated at 0.02 percent January 1, 2005 through June 30, 2005. These full
fees and expenses applied for the entire FY 06. The accrual was at the full
0.025 percent for the entire FY 06. During FY 06 compared to FY 05, units sold
and redeemed increased 9 percent and 9 percent, respectively.
CONTACTING THE PORTFOLIO'S FINANCIAL MANAGEMENT
This financial report is designed to provide IPAIT participants and prospective
investors with a general overview of the Fund's finances and to demonstrate the
Fund's accountability for the resources it receives and manages. If you have
questions about the report or need additional financial information, contact
IPAIT at 800-872-4024 or visit the website at IPAIT.org.
18
IPAIT INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT
- --------------------------------------------------------------------------------
KPMG LLP
2500 Ruan Center
666 Grand Avenue
Des Moines, IA 50309
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Unitholders
Iowa Public Agency Investment Trust:
We have audited the accompanying statement of net assets, including schedule of
investments, of the Diversified Portfolio of the Iowa Public Agency Investment
Trust (the Portfolio) as of June 30, 2007, and the related statements of
operations, and changes in net assets for each of the years in the two-year
period then ended, and financial highlights for each of the years in the
five-year period then ended. These financial statements and the financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board and the standards applicable to financial audits
contained in GOVERNMENT AUDITING STANDARDS issued by the Comptroller General of
the United States. Those standards require that we plan and perform our audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Diversified Portfolio of
the Iowa Public Agency Investment Trust at June 30, 2007, and the results of its
operations and its changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years presented,
in conformity with U.S. generally accepted accounting principles.
In accordance with GOVERNMENT AUDITING STANDARDS, we have also issued our report
dated August 20, 2007 on our compliance with certain provisions of laws,
regulations, and other matters. The purpose of that report is to describe the
scope of our testing, and not to provide an opinion on the internal control over
financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with GOVERNMENT AUDITING STANDARDS and should be
read in conjunction with this report in considering the results of our audits.
Our audit was performed for the purpose of forming an opinion on the Portfolio's
financial statements. The introductory section, other supplementary information,
investment section and statistical section are presented for the purpose of
additional analysis and are not a required part of the financial statements. The
introductory section, other supplementary information, investment section and
statistical section have not been subjected to the auditing procedures applied
by us in the audit of the financial statements and, accordingly, we express no
opinion on them.
The management's discussion and analysis on pages 16 to 18 is not a required
part of the financial statements but is supplementary information required by
U.S. generally accepted accounting principles. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the management discussion and
analysis information. However, we did not audit the information and express no
opinion on it.
/s/ KPMG LLP
Des Moines, Iowa
August 20, 2007
19
IPAIT FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Iowa Public Agency Investment Trust - Diversified Portfolio
Schedule of Investments - June 30, 2007
(Showing Percentage of Total Investments)
Yield at
Par Time of
Value Description Purchase Due Date Amortized Cost
----- ----------- -------- -------- --------------
DISCOUNTED GOVERNMENT SECURITIES -- 4.50%
$ 3,000,000 Federal Home Loan Bank Discount Note 5.24% 10/05/07 $ 2,960,221
3,000,000 Federal Home Loan Bank Discount Note 5.22% 10/05/07 2,960,220
2,000,000 Federal Home Loan Mortgage Corporation Discount Note 5.27% 11/13/07 1,962,126
3,000,000 Federal Home Loan Mortgage Corporation Discount Note 5.10% 12/11/07 2,934,107
----------------
TOTAL (cost -- $10,816,674) $ 10,816,674
----------------
COUPON SECURITIES -- 24.94%
$ 3,000,000 Federal Home Loan Bank, 4.63% 5.18% 07/18/07 $ 2,999,228
1,800,000 Federal Home Loan Bank, 2.30% 5.18% 07/24/07 1,796,828
3,000,000 Federal National Mortgage Association, 4.75% 5.27% 08/03/07 2,998,609
500,000 Federal Home Loan Mortgage Corporation, 3.00% 5.28% 08/15/07 498,628
3,000,000 Federal Home Loan Mortgage Corporation, 4.00% 5.18% 08/17/07 2,995,585
1,000,000 Federal Farm Credit Bank, 4.20% 5.18% 08/28/07 998,483
3,000,000 Federal Home Loan Mortgage Corporation, 5.00% 5.14% 09/07/07 2,999,256
1,000,000 Federal Home Loan Bank, 4.25% 5.18% 09/14/07 998,144
2,347,000 Federal Home Loan Mortgage Corporation, 3.00% 5.26% 09/18/07 2,335,887
1,800,000 Federal Home Loan Bank, Step Coupon 5.14% 09/24/07 1,795,189
500,000 Federal Home Loan Bank, 3.25% 5.30% 10/19/07 497,025
2,000,000 Federal Home Loan Bank, Step Coupon 5.16% 10/22/07 1,995,750
4,500,000 Federal Home Loan Bank, 4.63% 5.15% 10/24/07 4,492,803
1,000,000 Federal Home Loan Bank, 3.80% 5.18% 11/13/07 995,086
4,000,000 Federal National Mortgage Association, 5.15% 5.16% 11/21/07 3,999,768
2,000,000 Federal Home Loan Bank, 4.88% 5.28% 11/23/07 1,996,760
2,150,000 Federal Home Loan Mortgage Corporation, 4.15% 5.26% 12/07/07 2,139,941
5,000,000 Federal Home Loan Mortgage Corporation, 4.15% 5.18% 12/07/07 4,978,218
4,525,000 Federal Farm Credit Bank, 3.10% 5.26% 01/22/08 4,472,022
3,000,000 Federal National Mortgage Association, 5.75% 5.25% 02/15/08 3,008,836
2,000,000 Federal Home Loan Mortgage Corporation, 4.63% 5.16% 02/21/08 1,993,351
4,000,000 Federal Home Loan Bank, 2.75% 5.13% 03/14/08 3,935,589
5,000,000 Federal Home Loan Bank, 5.00% 5.20% 03/19/08 4,992,916
----------------
TOTAL (cost -- $59,913,902) $ 59,913,902
----------------
See accompanying notes to financial statements (Continued)
20
IPAIT FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Iowa Public Agency Investment Trust - Diversified Portfolio
Schedule of Investments - June 30, 2007
(Showing Percentage of Total Investments)
Yield
Par Time of
Value Description Purchase Due Date Amortized Cost
----- ----------- -------- -------- --------------
CERTIFICATES OF DEPOSIT -- 5.58%
$ 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 American State Bank-Sioux Center 5.45% 07/13/07 1,000,000
1,000,000 American State Bank-Sioux Center 5.46% 07/24/07 1,000,000
900,000 First State Bank-Ida Grove 5.46% 08/23/07 900,000
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
200,000 Farmers State Bank-Hawarden 5.44% 09/17/07 200,000
1,000,000 American State Bank-Sioux Center 5.48% 10/10/07 1,000,000
1,000,000 American Bank-LeMars 5.21% 12/06/07 1,000,000
2,000,000 Community State Bank-Ankeny 5.49% 12/28/07 2,000,000
----------------
TOTAL (cost -- $13,400,000) $ 13,400,000
----------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) -- 64.98%
$ 54,100,000 Barclays Capital Inc. 5.25% 07/02/07 $ 54,100,000
50,000,000 Bear Stearns and Company Inc. 5.10% 07/02/07 50,000,000
52,000,000 J.P. Morgan Securities Inc. 5.15% 07/02/07 52,000,000
----------------
TOTAL (cost -- $156,100,000) $ 156,100,000
----------------
TOTAL INVESTMENTS -- 100% (cost -- $240,230,576) $ 240,230,576
================
See accompanying notes to financial statements
21
IPAIT FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Iowa Public Agency Investment Trust - Diversified Portfolio
Statement of Net Assets - June 30, 2007
ASSETS
Investments in securities at amortized cost:
Discounted Government Securities $ 10,816,674
Coupon Securities 59,913,902
Certificates of Deposit 13,400,000
Repurchase Agreements 156,100,000
Cash 621
Interest Receivable 1,196,585
----------------
Total Assets 241,427,782
----------------
LIABILITIES
Investment advisory, administrative,
and program support fees payable 49,270
Custody fees payable 6,236
Distribution fees payable 15,588
Other fees and expenses payable 5,196
Dividends payable 1,017,249
----------------
Total liabilities 1,093,539
----------------
NET ASSETS HELD IN TRUST FOR POOL PARTICIPANTS $ 240,334,243
================
Units of beneficial interest outstanding 240,334,243
================
Net asset value - offering and redemption price per share $ 1.00
================
See accompanying notes to financial statements.
22
IPAIT FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
IOWA PUBLIC AGENCY INVESTMENT TRUST - DIVERSIFIED PORTFOLIO
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,
2007 2006
-------------- --------------
INVESTMENT INCOME:
Interest $12,944,292 $9,590,801
-------------- --------------
EXPENSES:
Investment advisory, administrative,
and program support fees 666,152 721,082
Custody Fees 95,391 110,670
Distribution fees 214,115 229,267
Other fees and expenses 61,462 57,316
-------------- --------------
TOTAL EXPENSES 1,037,120 1,118,335
-------------- --------------
NET INVESTMENT INCOME $11,907,172 $8,472,466
============== ==============
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30,
2007 2006
-------------- --------------
ADDITIONS:
From Investment Activities:
Net Investment income $11,907,172 $8,472,466
From Unit Transactions:
(at constant net asset value of $1
per unit)
Units sold 1,246,520,563 1,151,719,716
Units issued in reinvestment
of dividends from net
investment income 11,054,958 7,815,349
-------------- --------------
TOTAL ADDITIONS 1,269,482,693 1,168,007,531
-------------- --------------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (11,907,172) (8,472,466)
From Unit Transactions:
Units redeemed (1,220,722,819) (1,185,721,490)
-------------- --------------
TOTAL DEDUCTIONS (1,232,629,991) (1,194,193,956)
-------------- --------------
Net decrease in net assets 36,852,702 (26,186,425)
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 $240,334,243 $203,481,541
============== ==============
See accompanying notes to financial statements.
23
IPAIT NOTES TO BASIC FINANCIAL STATEMENTS
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(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 attempt to 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 due to the short-term nature of
investments held. Procedures are followed to maintain a constant net asset
value of $1.00 per unit for the portfolio.
Security transactions are accounted for on the trade date. Interest income,
including the accretion of discount and amortization of premium, is recorded
daily on the accrual basis.
IPAIT is authorized by investment policy and statute to invest public funds
in obligations of the U.S. government, its agencies and instrumentalities;
certificates of deposit and other evidences of deposit at federally insured
Iowa depository institutions approved and secured pursuant to Chapter 12B of
the Code of Iowa; and repurchase agreements, provided that the underlying
collateral consists of obligations of the U.S. government, its agencies and
instrumentalities and that IPAIT's custodian takes delivery of the
collateral either directly or through an authorized custodian.
In connection with transactions in repurchase agreements, it is IPAIT's
policy that its custodian take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest at all times. If the
seller defaults and the value of the collateral declines, realization of the
collateral by IPAIT may be delayed or limited. At June 30, 2007 and 2006,
the securities purchased under overnight agreements to resell were
collateralized by government agency securities with a value of $159,357,940
and $134,409,317, 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 June 30, 2007, public funds invested in
certificates of deposit not covered by FDIC insurance were $12,500,000.
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.
24
IPAIT NOTES TO BASIC FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
Under Governmental Accounting Standards as to custodial credit risk, IPAIT's
investments in securities in the Diversified Portfolio held securities whose
S&P credit ratings were 27.4 percent AAA, 5.6 percent not rated
(representing all Certificates of Deposit from Iowa financial institutions),
and 67.0 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.
Management attempts to limit IPAIT's exposure to interest rate risk and
believes this is addressed 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 it is not expected that
any significant change in market interest rates would 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.
During the period of July 1, 2006 to January 1, 2007, 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.
By contract amendment, fees were reduced beginning January 2, 2007 to the
following: WB Capital receives 0.190 percent of the average daily net asset
value up to $150 million, 0.160 percent from $150 to $250 million and 0.130
percent exceeding $250 million for investment adviser and administrative
fees. In addition, WB Capital receives 0.060 percent of the average daily
net asset value for program support fees. For the years ended June 30, 2007
and 2006, the Diversified Portfolio paid $666,152 and $721,082,
respectively, to WB Capital for services provided.
During the period of July 1, 2006 to January 1, 2007, 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. By contract amendment, fees were reduced beginning
January 2, 2007 to 0.030 percent of the average daily net asset value of the
portfolio. For the years ended June 30, 2007 and 2006, the Diversified
Portfolio paid $95,391 and $110,670, respectively, to Wells Fargo for
services provided.
During the period of July 1, 2006 to January 1, 2007, 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. By contract
amendment, fees were reduced beginning January 2, 2007 to 0.075 percent of
the average daily net asset value. For the years ended June 30, 2007 and
2006, the Diversified Portfolio paid $111,849 and $121,928 to the Iowa
League of Cities, $72,058 and $74,269 to the Iowa State Association of
Counties, and $30,208 and $33,070 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 of the average daily
net asset value, and amounted to $61,462 and $57,316 for the years ended
June 30, 2007 and 2006, respectively. All fees are computed daily and paid
monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the Diversified Portfolio aggregated
$41,708,651,027 and $37,888,478,441 for the years ended June 30, 2007 and
2006, respectively. Proceeds from maturities of securities for the
Diversified Portfolio aggregated $41,679,257,000 and $37,909,798,000 for the
years ended June 30, 2007 and 2006, respectively.
25
IPAIT FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
IOWA PUBLIC AGENCY INVESTMENT TRUST - DIVERSIFIED
SELECTED DATA FOR EACH UNIT OF PORTFOLIO
OUTSTANDING THROUGH EACH YEAR ENDED
JUNE 30 2007 2006 2005 2004 2003
--------- -------- ---------- -------- --------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.048 0.037 0.017 0.006 0.009
Dividends Distributed (0.048) (0.037) (0.017) (0.006) (0.009)
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000
Total Return* 4.95% 3.76% 1.70% 0.60% 0.95%
Ratio of Expenses to Average Net Assets** 0.42% 0.49% 0.48% 0.48% 0.56%
Ratio of Net Investment Income to Average Net Assets 4.84% 3.70% 1.71% 0.59% 0.94%
Net Assets, End of Period (000 Omitted) $240,334 $203,482 $229,668 $254,818 $245,025
* Total return is calculated by taking the ending value of an initial $1,000
investment including monthly reinvested dividends, minus the initial
investment, divided by the initial $1,000 investment.
** A portion of Other Fees and Expenses was reduced beginning September 1, 2004
through June 30, 2005.
See accompanying Report of Independent Registered Public Accounting Firm.
26
IPAIT MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
This section of the IPAIT DGO Portfolio's annual Financial Report presents
management's discussion and analysis of the financial position and results of
operations for the fiscal years ended June 30, 2007 (FY 07) and 2006 (FY 06).
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 Report of Independent Registered
Public Accounting Firm, KPMG LLP, the Financial Statements, and the accompanying
notes.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Management's Discussion and Analysis provides an introduction to and
overview of the basic financial statements of IPAIT's DGO Portfolio. The
following components comprise the financial statements: 1) Schedule of
Investments, 2) Statement of Net Assets, 3) Statement 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 the date of current fiscal year end.
o The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolio as of the date of the current fiscal
year end.
o The Statements of Operations display the results of operations (income
and expenses) of the portfolio for the two most recent fiscal years.
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
two most recent fiscal years.
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
DGO Portfolio are most significantly impacted by the level of average net assets
(which fluctuates based on the overall levels of participant/unitholder invested
balances). Additionally, changes in the short-term interest rate environment
(which follows the general trend established by monetary policy set by the
Federal Reserve) contribute to year-over-year variances in the amount of
investment income earned by the portfolio. Over the last twelve months, the
Federal Reserve's Federal Open Market Committee has not changed the Fed Funds
target rate of 5.25 percent. In the preceeding twelve months, the Fed Funds
target was increased eight times, from 3.25 percent to 5.25 percent.
27
IPAIT MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)
- --------------------------------------------------------------------------------
Condensed financial information and variance explanations for FY 07 as compared
to FY 06 follows.
PERCENT
NET ASSETS JUNE 30, 2007 CHANGE JUNE 30, 2006
------------- --------- --------------
Total Investments $15,104,438 -14% $17,646,380
Excess of other assets over total liabilities 32,932 105% (697,225)
-------------- --------------
Net assets held in fund for pool participants 15,137,370 -11% 16,949,155
============== ==============
Average Net Assets $21,162,647 34% $15,834,629
-------------- --------------
Total investments and net assets decreased 14 percent and 11 percent,
respectively, comparing June 30, 2007 and June 30, 2006 amounts. During FY 07,
average net assets increased 34 percent to $21,162,647 from average net assets
of $15,834,629 during FY 06. The significant decrease in excess of total
liabilities over other assets was due to a liability for securities purchased on
June 30, 2006 and settled on July 3, 2006 in the amount of $701,296. The DGO
portfolio experienced a net redemption of assets in FY 07 due to the transfer of
assets to the Diversified portfolio.
PERCENT
CHANGE IN NET ASSET FOR THE YEARS ENDED JUNE 30, 2007 CHANGE JUNE 30, 2006
-------------- ---------- --------------
Investment Income $1,087,816 68% $647,800
Total Expenses (93,621) 16% (80,459)
Dividends to unitholders from net investment
income (994,195) 75% (567,341)
Net increase (decrease) in assets derived
from unit transactions (1,811,785) -184% 2,153,472
Net assets at beginning of year 16,949,155 15% 14,795,683
-------------- --------------
Net assets at end of year $15,137,370 -11% $16,949,155
============== ==============
Investment income increased 68 percent during FY 07 compared to FY 06 due to the
higher interest rate environment for the entire 12-month period and higher
average net assets. Dividends to unitholders from net investment income
increased 75 percent during FY 07 compared to FY 06. Total expenses are derived
based on net assets held by the Fund. These expenses increased 16 percent during
FY 07 compared to FY 06 due to higher average net assets for FY 07. Fees were
reduced effective January 2, 2007. During FY 07 compared to FY 06, units sold
decreased 24 percent and units redeemed decreased 12 percent, respectively.
28
IPAIT MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)
- --------------------------------------------------------------------------------
Condensed financial information and changes explanations for FY 06 as compared
to the fiscal year ended June 30, 2005 (FY 05) follows.
PERCENT
NET ASSETS JUNE 30, 2006 CHANGE JUNE 30, 2005
--------------- --------- --------------
Total Investments $17,646,380 19% 14,805,041
Excess of total liabilities over other assets (697,225) -7351% (9,358)
--------------- --------------
Net assets held in fund for pool participants 16,949,155 15% 14,795,683
=============== ==============
Average Net Assets $15,834,629 -37% $25,125,734
--------------- --------------
Total investments and net assets increased 19 percent and 15 percent,
respectively, comparing June 30, 2006 and June 30, 2005 amounts. During FY 06,
average net assets decreased 37 percent to $15,834,629 from average net assets
of $25,125,734 during FY 05 for the DGO portfolio. The significant increase in
excess of total liabilities over other assets was due to a liability for
securities purchased on June 30, 2006 and settled on July 3, 2006 in the amount
of $701,296. The DGO portfolio experienced a net increase of assets in FY 06
partially due to the transfer of assets from the Diversified portfolio.
PERCENT
CHANGE IN NET ASSET FOR THE YEARS ENDED JUNE 30, 2006 CHANGE JUNE 30, 2005
-------------- ---------- -------------
Investment Income $647,800 36% $475,110
Total Expenses (80,459) -36% (125,123)
Dividends to unitholders from net investment
income (567,341) 62% (349,987)
Net increase (decrease) in assets derived 2,153,472 109% (22,736,565)
from unit transactions
Net assets at beginning of year 14,795,683 -61% 37,532,248
-------------- -------------
Net assets at end of year $16,949,155 15% $14,795,683
============== =============
Investment income increased 36 percent during FY 06 compared to FY 05 due to the
higher interest rate environment. With the increase in Fed Fund rates, money
market fund returns improved during FY 06. Dividends to unitholders from net
investment income increased 62 percent during FY 06 compared to FY 05. Total
expenses are derived based on net assets held by the Fund. These expenses
decreased 36 percent during FY 06 compared to FY 05 due to lower average net
assets throughout FY 06. Units sold increased 77 percent and units redeemed
decreased 20 percent from FY 05 to FY 06.
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.
29
IPAIT INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT
- --------------------------------------------------------------------------------
KPMG LLP
2500 Ruan Center
666 Grand Avenue
Des Moines, IA 50309
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Unitholders
Iowa Public Agency Investment Trust:
We have audited the accompanying statement of net assets, including schedule of
investments, of the Direct Government Obligation Portfolio of the Iowa Public
Agency Investment Trust (the Portfolio) as of June 30, 2007, and the related
statements of operations and changes in net assets for each of the years in the
two-year period then ended, and financial highlights for each of the years in
the five-year period then ended. These financial statements and the financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board and the standards applicable to financial audits
contained in GOVERNMENT AUDITING STANDARDS issued by the Comptroller General of
the United States. Those standards require that we plan and perform our audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Direct Government
Obligation Portfolio of the Iowa Public Agency Investment Trust at June 30,
2007, and the results of its operations and its changes in net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years presented, in conformity with U.S. generally accepted
accounting principles.
In accordance with GOVERNMENT AUDITING STANDARDS, we have also issued our report
dated August 20, 2007 on our compliance with certain provisions of laws,
regulations, and other matters. The purpose of that report is to describe the
scope of our testing, and not to provide an opinion on the internal control over
financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with GOVERNMENT AUDITING STANDARDS and should be
read in conjunction with this report in considering the results of our audits.
Our audit was performed for the purpose of forming an opinion on the Portfolio's
financial statements. The introductory section, other supplementary information,
investment section and statistical section are presented for the purpose of
additional analysis and are not a required part of the financial statements. The
introductory section, other supplementary information, investment section and
statistical section have not been subjected to the auditing procedures applied
by us in the audit of the financial statements and, accordingly, we express no
opinion on them.
The management's discussion and analysis on pages 27 to 29 is not a required
part of the financial statements but is supplementary information required by
U.S. generally accepted accounting principles. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the management discussion and
analysis information. However, we did not audit the information and express no
opinion on it.
/S/ KPMG LLP
Des Moines, Iowa
August 20, 2007
30
IPAIT FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Iowa Public Agency Investment Trust - Direct Government Obligation Portfolio
Schedule of Investments - June 30, 2007
(Showing Percentage of Total Investments)
Yield at
Par Time of
Value Description Purchase Due Date Amortized Cost
----- ----------- -------- -------- --------------
COUPON SECURITIES -- 47.55%
$ 300,000 United States Treasury Note, 3.63% 5.01% 06/30/07 $ 300,000
200,000 United States Treasury Note, 3.63% 5.07% 06/30/07 200,000
200,000 United States Treasury Note, 3.63% 5.07% 06/30/07 200,000
300,000 United States Treasury Note, 3.88% 4.95% 07/31/07 299,740
600,000 United States Treasury Note, 3.88% 5.06% 07/31/07 599,430
300,000 United States Treasury Note, 6.13% 4.99% 08/15/07 300,418
300,000 United States Treasury Note, 3.25% 4.95% 08/15/07 299,375
300,000 United States Treasury Note, 4.00% 4.94% 09/30/07 299,326
300,000 United States Treasury Note, 4.00% 4.94% 09/30/07 299,317
500,000 United States Treasury Note, 4.00% 4.95% 09/30/07 498,851
300,000 United States Treasury Note, 4.25% 4.92% 10/31/07 299,355
600,000 United States Treasury Note, 4.25% 5.01% 10/31/07 598,524
200,000 United States Treasury Note, 3.00% 5.00% 11/15/07 198,553
500,000 United States Treasury Note, 3.00% 4.89% 11/15/07 496,582
200,000 United States Treasury Note, 3.00% 5.13% 11/15/07 198,453
200,000 United States Treasury Note, 4.38% 4.91% 12/31/07 199,483
500,000 United States Treasury Note, 4.38% 5.05% 12/31/07 498,348
300,000 United States Treasury Note, 4.38% 4.97% 12/31/07 299,118
300,000 United States Treasury Note, 4.38% 5.04% 12/31/07 299,021
200,000 United States Treasury Note, 4.63% 5.04% 02/29/08 199,457
300,000 United States Treasury Note, 4.63% 4.88% 03/31/08 299,440
300,000 United States Treasury Note, 4.88% 5.01% 04/30/08 299,647
--------------
TOTAL (cost -- $7,182,438) $ 7,182,438
--------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) -- 52.45%
$ 4,922,000 Barclays Capital Inc. 4.05% 07/02/07 $ 4,922,000
3,000,000 Bear Stearns and Company Inc. 4.00% 07/02/07 3,000,000
--------------
TOTAL (cost -- $7,922,000) $ 7,922,000
--------------
TOTAL INVESTMENTS -- 100% (cost -- $15,104,438) $ 15,104,438
==============
See accompanying notes to financial statements.
31
IPAIT FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Iowa Public Agency Investment Trust - Direct Government Obligation Portfolio
Statement of Net Assets June 30, 2007
ASSETS
Investments in securities at amortized cost:
Coupon Securities $ 7,182,438
Repurchase Agreements 7,922,000
Cash 892
Interest Receivable 98,166
--------------
Total Assets 15,203,496
--------------
LIABILITIES
Investment advisory, administrative,
and program support fees payable 3,307
Custody fees payable 397
Distribution fees payable 992
Other fees and expenses payable 330
Dividends payable 61,100
--------------
Total liabilities 66,126
--------------
NET ASSETS HELD IN TRUST FOR POOL PARTICIPANTS $ 15,137,370
==============
Units of beneficial interest outstanding 15,137,370
==============
Net asset value - offering and redemption price per share $ 1.00
==============
See accompanying notes to financial statements.
32
IPAIT FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
IOWA PUBLIC AGENCY INVESTMENT TRUST - DIRECT GOVERNMENT OBLIGATION PORTFOLIO
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,
2007 2006
------------- -------------
INVESTMENT INCOME:
Interest $1,087,816 $647,800
------------- -------------
EXPENSES:
Investment advisory, administrative,
and program support fees 61,357 52,748
Custody Fees 8,461 7,917
Distribution fees 18,513 15,835
Other fees and expenses 5,290 3,959
------------- -------------
TOTAL EXPENSES 93,621 80,459
------------- -------------
NET INVESTMENT INCOME $994,195 $567,341
============= =============
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30,
2007 2006
------------- -------------
ADDITIONS:
From Investment Activities:
Net Investment income $994,195 $567,341
From Unit Transactions:
(at constant net asset value of $1
per unit)
Units sold 28,226,682 36,963,154
Units issued in reinvestment
of dividends from net
investment income 994,655 536,894
------------- -------------
TOTAL ADDITIONS 30,215,532 38,067,389
------------- -------------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (994,195) (567,341)
From Unit Transactions:
Units redeemed (31,033,122) (35,346,576)
------------- -------------
TOTAL DEDUCTIONS (32,027,317) (35,913,917)
------------- -------------
Net (decrease)/increase in net assets (1,811,785) 2,153,472
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 $15,137,370 $16,949,155
============= =============
See accompanying notes to financial statements.
33
IPAIT NOTES TO BASIC FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Iowa Public Agency Investment Trust (IPAIT) is a common law trust
established under Iowa law pursuant to Chapter 28E and Sections 331.555 and
384.21, Iowa Code (1987), as amended, which authorizes Iowa public agencies
to jointly invest monies pursuant to a joint investment agreement. IPAIT is
registered under the Investment Company Act of 1940 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 attempt to
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 due to
the short-term nature of investments held. Procedures are followed to
maintain a constant net asset value of $1.00 per unit for the portfolio.
Security transactions are accounted for on the trade date. Interest income,
including the accretion of discount and amortization of premium, is recorded
daily on the accrual basis.
IPAIT is authorized by investment policy and statute to invest public funds
in obligations of the U.S. government, its agencies and instrumentalities;
and repurchase agreements, provided that the underlying collateral consists
of obligations of the U.S. government, its agencies and instrumentalities
and that IPAIT's custodian takes delivery of the collateral either directly
or through an authorized custodian.
In connection with transactions in repurchase agreements, it is IPAIT's
policy that its custodian take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest at all times. If the
seller defaults and the value of the collateral declines, realization of the
collateral by IPAIT may be delayed or limited. At June 30, 2007 and 2006,
the securities purchased under overnight agreements to resell were
collateralized by government agency securities with a value of $8,844,049
and $10,211,923, respectively.
Under Governmental Accounting Standards as to custodial credit risk, IPAIT's
investments in securities in the Direct Government Obligation Portfolio held
securities whose S&P credit ratings were 47.6 percent AAA and 52.4 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.
Management attempts to limit IPAIT's exposure to interest rate risk and
believes this is addressed 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 it is not expected that
any significant change in market interest rates would present long term risk
to IPAIT.
34
IPAIT NOTES TO BASIC FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
UNIT ISSUES, REDEMPTIONS AND DISTRIBUTIONS
IPAIT determines the net asset value of the DGO Portfolio daily. Units are
issued and redeemed daily at the daily net asset value. Dividends from net
investment income are declared daily and distributed monthly.
INCOME TAXES
IPAIT is exempt from both state and federal income taxes pursuant to Section
115 of the Internal Revenue Code.
FEES AND EXPENSES
Under separate agreements with IPAIT, WB Capital and Wells Fargo are paid an
annual fee for operating the investment programs.
During the period of July 1, 2006 to January 1, 2007, 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.
By contract amendment, fees were reduced beginning January 2, 2007 to the
following: WB Capital receives 0.190 percent of the average daily net asset
value up to $150 million, 0.160 percent from $150 to $250 million and 0.130
percent exceeding $250 million for investment adviser and administrative
fees. In addition, WB Capital receives 0.060 percent of the average daily
net asset value for program support fees. For the years ended June 30, 2007
and 2006, the DGO Portfolio paid $61,357 and $52,748, respectively, to WB
Capital for services provided.
During the period of July 1, 2006 to January 1, 2007, 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. By contract amendment, fees were reduced beginning
January 2, 2007 to 0.030 percent of the average daily net asset value of the
portfolio. For the years ended June 30, 2007 and 2006, the DGO Portfolio
paid $8,461 and $7,917, respectively, to Wells Fargo for services provided.
During the period of July 1, 2006 to January 1, 2007, 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. By contract
amendment, fees were reduced beginning January 2, 2007 to 0.075 percent of
the average daily net asset value. For the years ended June 30, 2007 and
2006, the DGO Portfolio paid $18,513 and $15,835 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 of the average daily
net asset value, and amounted to $5,290 and $3,959 for the years ended June
30, 2007 and 2006, respectively. All fees are computed daily and paid
monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the DGO Portfolio aggregated
$3,565,434,386 and $2,489,623,074 for the years ended June 30, 2007 and
2006, respectively. Proceeds from maturities of securities for the DGO
Portfolio aggregated $3,568,074,000 and $2,486,901,000 for the years ended
June 30, 2007 and 2006, respectively.
(3) PARTICIPANT CONCENTRATION
As of June 30, 2007, two participants hold all outstanding units of the DGO
Portfolio.
35
IPAIT FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
IOWA PUBLIC AGENCY INVESTMENT TRUST - DIRECT GOVERNMENT OBLIGATION PORTFOLIO
SELECTED DATA FOR EACH UNIT OF PORTFOLIO
OUTSTANDING THROUGH EACH YEAR ENDED
JUNE 30 2007 2006 2005 2004 2003
--------- --------- --------- --------- ---------
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000
Net Investment Income 0.047 0.035 0.015 0.005 0.009
Dividends Distributed (0.047) (0.035) (0.015) (0.005) (0.009)
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000
Total Return* 4.79% 3.58% 1.54% 0.53% 0.91%
Ratio of Expenses to Average Net Assets** 0.44% 0.51% 0.50% 0.51% 0.58%
Ratio of Net Investment Income to Average Net Assets 4.70% 3.58% 1.39% 0.53% 0.92%
Net Assets, End of Period (000 Omitted) $15,137 $16,949 $14,796 $37,532 $52,291
* Total return is calculated by taking the ending value of an initial $1,000
investment including monthly reinvested dividends, minus the initial
investment, divided by the initial $1,000 investment.
** A portion of Other Fees and Expenses was reduced beginning September 1, 2004
through June 30, 2005.
See accompanying Report of Independent Registered Public Accounting Firm.
36
- --------------------------------------------------------------------------------
INVESTMENT SECTION
IPAIT
37
IPAIT FUND FACTS SUMMARY
- --------------------------------------------------------------------------------
DIVERSIFIED FUND FACTS
AS OF JUNE 30, 2007
INVESTMENT STRATEGY/GOALS: To provide a safe, liquid, effective investment
alternative for the operating and reserve funds for Iowa's municipalities,
counties, municipal utilities and other eligible public agencies by jointly
investing participant funds in a professionally managed portfolio of short-term,
high-quality, legally authorized marketable securities.
DATE OF INCEPTION: November 13, 1987
TOTAL NET ASSETS: $240 million
BENCHMARKS: iMoneyNet U.S. Government & Agencies Money Fund ReportTM, Iowa Code
Chapter 74A 32-89 day Public Fund Rates, and Iowa Code Chapter 74A 90-179 day
Public Fund Rates.
PERFORMANCE OBJECTIVE: To provide the highest level of current income from
investment in a portfolio of U.S. government and agency securities, certificates
of deposit in Iowa financial institutions, and other authorized securities
collateralized by U.S. government and agency securities as is consistent with,
in order of priority, preservation of principal and provision of necessary
liquidity.
INVESTMENT ADVISER:
WB Capital Management Inc.
MANAGEMENT FEES:
Sliding scale from nine basis points (0.09%) to five and one-half basis points
(0.055%)
TOTAL EXPENSE RATIO:
Sliding scale from thirty-eight basis points (0.38%) to thirty-two basis points
(0.32%)
DGO FUND FACTS
AS OF JUNE 30, 2007
INVESTMENT STRATEGY/GOALS: To provide a safe, liquid, effective investment
alternative for the bond proceeds, operating and reserve funds for Iowa's
municipalities, counties, municipal utilities and other eligible public agencies
that are limited to investments in only direct obligations of the U.S.
government by jointly investing participant funds into a professionally managed
portfolio of short-term, eligible marketable securities.
DATE OF INCEPTION: September 1, 1988
TOTAL NET ASSETS: $15 million
BENCHMARKS: iMoneyNet U.S. Treasury & Repo Money Fund ReportTM, Iowa Code
Chapter 74A 32-89 day Public Fund Rates, and Iowa Code Chapter 74A 90-179 day
Public Fund Rates.
PERFORMANCE OBJECTIVE: To provide the highest level of income from investment in
a portfolio of U.S. government securities as is consistent with, in order of
priority, preservation of principal and provision of necessary liquidity.
INVESTMENT ADVISER: WB Capital Management Inc.
MANAGEMENT FEES:
Sliding scale from nine basis points (0.09%) to five and one-half basis points
(0.055%)
TOTAL EXPENSE RATIO:
Sliding scale from thirty-eight basis points (0.38%) to thirty-two basis points
(0.32%)
38
IPAIT DIVERSIFIED FUND AND DIRECT GOVERNMENT OBLIGATION FUND
- --------------------------------------------------------------------------------
INTRODUCTION
The Diversified Fund and the DGO Fund are each short-term investment pools of
high-quality money market instruments. Each pool has been registered since May
of 1993 with the Securities and Exchange Commission (SEC) under the Investment
Company Act of 1940. Each is operated in accordance with 17 C.F.R. Section
270.2a-7 (Rule 2a-7). Each pool complied voluntarily with all Rule 2a-7 money
market fund operating guidelines from inception.
The Diversified Fund is made up of a professionally managed portfolio of U.S.
government and federal agency securities, certificates of deposit issued by Iowa
financial institutions, and perfected repurchase agreements, the latter
collateralized by U.S. government and federal agency securities. The Diversified
Fund is typically used for the investment of all public funds subject to the
Iowa public funds statutory provisions invested by a participant unless other
participant-specific investment restrictions exist.
OWNERSHIP ANALYSIS AS OF JUNE 30, 2007
IPAIT Diversified Fund and DGO Fund
Other 28E Entities Municipal Utilities Counties Cities
- ------------------ ------------------- -------------- --------------
$9,406,135 $29,788,043 $74,768,754 $141,508,681
3.68% 11.66% 29.27% 55.39%
The DGO Fund is identical in every respect to the Diversified Fund except that
it is invested exclusively in direct U.S. government obligations and repurchase
agreements collateralized by direct U.S. government obligations. The DGO Fund is
typically used to invest those public funds of a participant that are subject to
more stringent investment restrictions than those provided by Iowa public fund
statutes, for example bond proceeds whose investment alternatives may be limited
to the types of securities found in the DGO Fund.
The investment objective of both the Diversified Fund and the DGO Fund is to
provide as high a level of current income as is consistent with preservation of
invested principal and provision of adequate liquidity to meet participants'
daily cash flow needs. As a general policy, all purchased securities will be
held until they mature. However, in an effort to increase yields, IPAIT may sell
securities and realize capital gains when there are perceived disparities
between maturities for various categories of authorized investments. Summaries
of all security trades for each Fund are provided quarterly to the IPAIT Board
of Trustees for review.
Historical Portfolio Cash Flow (expressed in millions)
IPAIT Diversified Fund
2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
--------- --------- --------- --------- ---------
July $254 $243 $240 $220 $206
August 244 227 196 214 204
September 245 245 196 206 214
October 281 279 228 268 277
November 282 251 214 256 260
December 285 238 211 231 244
January 280 237 198 226 235
February 257 220 195 205 224
March 248 235 198 211 251
April 271 278 261 252 305
May 316 288 256 238 273
June 254 237 223 216 252
IPAIT DGO Fund
2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
--------- --------- --------- --------- ---------
July 63 51 36 14 16
August 60 47 33 13 15
September 82 60 31 14 20
October 90 62 31 16 24
November 87 58 29 17 26
December 79 49 23 14 22
January 76 48 21 12 22
February 68 47 19 11 21
March 66 46 18 18 24
April 65 46 18 20 24
May 64 45 20 20 19
June 55 40 15 17 16
Both portfolios have been managed by WB Capital Management Inc., IPAIT's Des
Moines, Iowa-based investment adviser, since inception. Aggregate cash flows for
each Fund are monitored daily and compared to respective Fund cash flow patterns
of previous periods. Fund cash flow patterns throughout the fiscal period, as
compared to previous years, have traditionally been repetitive. Nineteen years
of operating history create a very helpful tool to gauge necessary pool
liquidity needs.
The Diversified Fund actively monitors rates offered by Iowa financial
institutions for public fund certificates of deposit. Institutions experiencing
strong loan demand typically offer rates that are at or above those available
for marketable securities, presenting a helpful portfolio investment
alternative.
To assure adequate liquidity for anticipated and unanticipated participant
withdrawals, IPAIT continually monitors the weighted average maturity (WAM) of
both the Diversified Fund and the DGO Fund. Each Fund's WAM is similarly
compared to the iMoneyNet Money Fund Report(TM) average for registered money
market funds. Presented next is the WAM for each Fund as compared to the
iMoneyNet Money Fund Report(TM) average for all similar registered money market
funds for the fiscal period.
39
IPAIT DIVERSIFIED FUND AND DIRECT GOVERNMENT OBLIGATION FUND (CONT.)
- --------------------------------------------------------------------------------
Weighted Average Maturity (WAM) Comparison
July 2006 - June 2007
IPAIT Diversified Fund vs. iMoneyNet Money Fund
Report TM - US Government & Agency
IMONEYNET
DATE IPAIT MONEY FUND
---------------------------------
Jul-06 39 31
Aug-06 36 29
Sep-06 42 31
Oct-06 58 35
Nov-06 58 32
Dec-06 62 32
Jan-07 64 35
Feb-07 58 34
Mar-07 51 31
Apr-07 56 30
May-07 50 30
Jun-07 47 32
IPAIT DGO Fund vs. iMoneyNet Money Fund Report TM -
US Treasury & Repo
IMONEYNET
DATE IPAIT DGO MONEY FUND
----------------------------------
Jul-06 DAYS 35 9
Aug-06 36 6
Sep-06 42 6
Oct-06 57 6
Nov-06 49 6
Dec-06 66 5
Jan-07 57 5
Feb-07 59 4
Mar-07 53 4
Apr-07 59 4
May-07 51 4
Jun-07 58 4
Each Fund accrues interest income daily and pays accrued income monthly to
participant accounts. Interest is paid on the first business day of the month
following accrual. Daily income amounts and investment returns are calculated by
the amortized cost method. Under this method, a security is initially valued at
cost on the date of purchase and, thereafter, any premium or discount is
amortized on a straight-line basis to maturity.
The IPAIT Adviser values each Fund's portfolio weekly at current market value,
based upon actual market quotations. Each Fund's current market valuation is
compared to that Fund's current amortized cost basis. In accordance with the
established operating parameters of Rule 2a-7 and IPAIT's internal controls and
procedures, any deviation in net asset value based upon available market
quotations from each Fund's $1.00 amortized cost per unit is carefully
monitored. Deviations may never exceed 0.5 percent. Illustrated next are the
amortized cost versus market value per unit comparisons for the past three
fiscal years for each Fund.
Amortized Cost vs. Market Value Per Share
July 1, 2004 - June 30, 2007
IPAIT Diversified Fund
Date Per Share
6/30/2004 0.99964
7/31/2004 0.99968
8/31/2004 0.99975
9/30/2004 0.99978
10/31/2004 0.99980
11/30/2004 0.99975
12/31/2004 0.99978
1/31/2005 0.99981
2/28/2005 0.99975
3/31/2005 0.99979
4/30/2005 0.99986
5/31/2005 0.99992
6/30/2005 0.99986
7/31/2005 0.99986
8/31/2005 0.99990
9/30/2005 0.99989
10/31/2005 0.99984
11/30/2005 0.99989
12/31/2005 0.99992
1/31/2006 0.99984
2/28/2006 0.99980
3/31/2006 0.99982
4/30/2006 0.99980
5/31/2006 0.99980
6/30/2006 0.99978
7/31/2006 0.99984
8/31/2006 0.99996
9/30/2006 1.00001
10/31/2006 0.99997
11/30/2006 1.00008
12/31/2006 0.99993
1/31/2007 0.99981
2/28/2007 0.99994
3/31/2007 0.99997
4/30/2007 0.99997
5/31/2007 0.99987
6/30/2007 0.99981
IPAIT DGO Fund
6/30/2004 0.99954
7/31/2004 0.99957
8/31/2004 0.99972
9/30/2004 0.99968
10/31/2004 0.99965
11/30/2004 0.99963
12/31/2004 0.99959
1/31/2005 0.99960
2/28/2005 0.99945
3/31/2005 0.99959
4/30/2005 0.99973
5/31/2005 0.99985
6/30/2005 0.99978
7/31/2005 0.99968
8/31/2005 0.99980
9/30/2005 0.99993
10/31/2005 0.99970
11/30/2005 0.99984
12/31/2005 0.99993
1/31/2006 0.99972
2/28/2006 0.99962
3/31/2006 0.99985
4/30/2006 0.99984
5/31/2006 0.99980
6/30/2006 0.99975
7/31/2006 0.99985
8/31/2006 0.99994
9/30/2006 1.00005
10/31/2006 1.00001
11/30/2006 1.00003
12/31/2006 0.99989
1/31/2007 0.99979
2/28/2007 0.99992
3/31/2007 0.99993
4/30/2007 0.99997
5/31/2007 1.00007
6/30/2007 1.00005
The Diversified Fund's investment performance is regularly compared to three
established benchmarks, the iMoneyNet Money Fund Report(TM) average rate for all
registered Rule 2a-7 money market funds investing in U.S. government and federal
agency securities and the Iowa Code Chapter 74A rate for 32-89, and 90-179 day
certificates of deposit issued by Iowa financial institutions for public funds
in the state.
The DGO Fund is similarly compared to the iMoneyNet Money Fund Report(TM)
average rate for all Rule 2a-7 money market funds that invest in only direct
obligations of the U.S. government as well as the Iowa Code Chapter 74A rates
for 32-89 and 90-179 day certificates of deposit.
The Iowa Code Chapter 74A rates are distributed monthly by the state Treasurer's
office for various investment periods and are intended to be the minimum rates
at which Iowa financial institutions can accept public funds for timed deposits.
While a public body must commit funds for minimum periods of time to access
Chapter 74A rates, IPAIT's Diversified Fund and the DGO Fund may offer rates at
or above the Chapter 74A benchmarks with complete daily liquidity.
40
IPAIT DIVERSIFIED FUND AND DIRECT GOVERNMENT OBLIGATION FUND (CONT.)
- --------------------------------------------------------------------------------
IPAIT Diversified Fund vs. Iowa Chapter 74A (90-179 & 32-89 Day)
& iMoneyNet Money Fund Report TM
US Government & Agency Fund July 2006 - June 2007
iMoneyNet Money Fund Report TM
Date Diversified 74A 90-179 74A 32-89 US Gov't & Agency Fund
---- ----------- ---------- --------- ----------------------
Jul-06 4.69% 3.20% 3.00% 4.47%
Aug-06 4.74% 3.30% 3.00% 4.52%
Sep-06 4.81% 3.25% 2.95% 4.54%
Oct-06 4.80% 3.30% 2.95% 4.53%
Nov-06 4.83% 3.30% 2.85% 4.55%
Dec-06 4.79% 3.25% 2.85% 4.56%
Jan-07 4.88% 3.25% 2.85% 4.55%
Feb-07 4.99% 3.25% 2.85% 4.56%
Mar-07 4.90% 3.25% 2.85% 4.55%
Apr-07 4.92% 3.25% 2.85% 4.54%
May-07 4.85% 3.25% 2.85% 4.53%
Jun-07 4.90% 3.25% 2.95% 4.55%
IPAIT DGO Fund vs. Iowa Chapter 74A (90-179 & 32-89 Day) &
iMoneyNet Money Fund Report TM US Treasury & Repo Fund July 2006 - June 2007
iMoneyNet Money Fund Report TM
Date DGO 74A 90-179 74A 32-89 US Treasury & Repo Fund
---- --- ---------- --------- -----------------------
Jul-06 4.49% 3.20% 3.00% 4.37%
Aug-06 4.57% 3.30% 3.00% 4.42%
Sep-06 4.65% 3.25% 2.95% 4.45%
Oct-06 4.68% 3.30% 2.95% 4.46%
Nov-06 4.71% 3.30% 2.85% 4.49%
Dec-06 4.65% 3.25% 2.85% 4.50%
Jan-07 4.78% 3.25% 2.85% 4.45%
Feb-07 4.80% 3.25% 2.85% 4.47%
Mar-07 4.81% 3.25% 2.85% 4.49%
Apr-07 4.78% 3.25% 2.85% 4.49%
May-07 4.71% 3.25% 2.85% 4.38%
Jun-07 4.62% 3.25% 2.95% 4.38%
RISK PROFILE
Both the Diversified Fund and the DGO Fund are low in risk profile. Both Funds
limit portfolio investments to:
1. No single portfolio investment may exceed the 397 days to maturity as
outlined in Rule 2a-7.
2. The weighted average maturity of the portfolio may never exceed 90 days.
In addition to the above investment maturity restrictions common to both Funds,
the Diversified Fund limits itself to U.S. government and federal agency
securities, perfected repurchase agreements collateralized by U.S. government
and federal agency securities, and Iowa financial institution certificates of
deposit. The DGO Fund further limits itself to only direct obligations of the
U.S. government and perfected repurchase agreements collateralized by direct
obligations of the U.S. government. This combination of those average maturities
and extremely high-quality credit instruments provides eligible Iowa public fund
investors with a safe, effective investment alternative.
Maturity Analysis as of June 30, 2007
IPAIT Diversified Fund and DGO Fund
Diversified DGO
----------- ---
Maturity days % of Portfolio Maturity days % of Portfolio
- ------------- --------------- ------------- ---------------
0-30 days 69% 0-30 days 63%
31-90 days 8% 31-90 days 11%
91-180 days 15% 91-180 days 21%
180+ days 8% 180+ days 5%
----- -----
100% 100%
As noted previously, both the Diversified Fund and the DGO Fund carefully limit
themselves to high credit-quality securities. In addition, IPAIT monitors a
broad array of economic indicators as well as activities of the Federal Reserve
Board to be able to position each Fund's WAM to take advantage of projected
interest rate environments.
Distribution by Security Type as of June 30, 2007
IPAIT Diversified Fund
Collateralized Repos 65%
Certificate's of Deposit 6%
Federal Agency Coupon Securities 25%
Federal Agency Discount Securities 4%
------
100%
IPAIT DGO Fund
US Treasury Coupon Securities 48%
US Treasury Discount Securities 52%
-------
100%
41
IPAIT DIVERSIFIED FUND AND DIRECT GOVERNMENT OBLIGATION FUND (CONT.)
- --------------------------------------------------------------------------------
It is important to note that portfolio liquidity needs for the IPAIT must
control evaluation of alternative portfolio management opportunities at all
times. For example, if historical cash flow analysis indicates that participants
will need to withdraw funds, material extension of either Fund's portfolio is
not a viable alternative.
Participation membership by affiliation concentration for both the Diversified
and DGO Portfolios are illustrated in the following graphs.
Participant Membership
IPAIT Diversified Fund and DGO Fund
Municipalities 186%
Municipal Utilities 93%
Counties 83%
Other 51%
PERFORMANCE SUMMARY
For the one-year period ended June 30, 2007 the Diversified Fund and DGO Fund
reported a ratio of net investment income to average net assets of 4.84 percent
and 4.70 percent, respectively, net of all operating expenses. These figures
exceeded the iMoneyNet Money Fund Report(TM) averages for each Fund, which
returned 4.54 percent and 4.45 percent respectively for the fiscal
period.
Although both the Diversified Fund and the DGO Fund are liquidity pools, their
performance over time has consistently exceeded the iMoneyNet Money Fund
Report(TM) as illustrated below.
Annual Total Returns
IPAIT Diversified Fund vs. iMoneyNet Fund Report(TM)
US Government & Agency
iMoneyNet Money Fund Report
Year Diversified Fund US Government & Agency
---- ---------------- ----------------------
98 5.10% 4.90%
99 4.61% 4.47%
00 5.13% 4.94%
01 5.33% 5.26%
02 2.11% 1.87%
03 0.95% 0.80%
04 0.59% 0.37%
05 1.69% 1.41%
06 3.70% 3.43%
07 4.84% 4.54%
Annual Total Returns
IPAIT DGO Fund vs. iMoneyNet Fund Report(TM)
US Treasury & Repo
iMoneyNet Money Fund Report
Year DGO Fund US Treasury & Repo
---- -------- ------------------
98 4.98% 4.85%
99 4.43% 4.35%
00 4.98% 4.78%
01 5.15% 5.06%
02 1.83% 1.76%
03 0.90% 0.74%
04 0.52% 0.31%
05 1.48% 1.35%
06 3.53% 3.33%
07 4.69% 4.45%
Also illustrated below are the historical returns for both the Diversified Fund
and the DGO Fund for the most recent one, three, and five year periods.
Annualized Total Returns
IPAIT Diversified Fund vs. iMoneyNet Money Fund Report TM
US Government & Agency
iMoneyNet Money Fund Report
Diversified Fund US Government & Agency
---------------- ----------------------
1 year 4.84% 4.54%
3 year 3.41% 3.13%
5 year 2.35% 2.11%
IPAIT DGO Fund vs. iMoneyNet Money Fund Report(TM)
US Treasury & Repo
iMoneyNet Money Fund Report
DGO Fund US Treasury & Repo
-------- ------------------
1 year 4.69% 4.45%
3 year 3.23% 3.04%
5 year 2.22% 2.03%
42
IPAIT DIVERSIFIED FUND AND DIRECT GOVERNMENT OBLIGATION FUND (CONT.)
- --------------------------------------------------------------------------------
FUND EXPENSES
It is important for you to understand the impact of costs on your investment.
All mutual funds have operating expenses. As a shareholder of the fund, you
incur ongoing costs, including management fees, distribution and service fees,
and other fund expenses. Expenses, which are deducted from a fund's investment
income, directly reduce the investment return of the fund.
A fund's expenses are expressed as a percentage of its average net assets. This
figure is known as the expense ratio. The following examples are intended to
help you understand the ongoing costs (in dollars) of investing in your fund and
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period and held for the
entire period from January 1, 2007 to June 30, 2007. 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.
Account Value Account Value During Period* Expense
Example 1/1/2007 6/30/2007 1/1/07 to 6/30/07 Ratio*
- ---------------------------------------------------------------------------------------------
BASED ON ACTUAL FUND RETURN
IPAIT Diversified Fund $1,000.00 $1,024.57 $1.86 0.37%
IPAIT DGO Fund $1,000.00 $1,023.78 $1.91 0.38%
BASED ON HYPOTHETICAL 5 PERCENT RETURN
IPAIT Diversified Fund $1,000.00 $1,022.96 $1.86 0.37%
IPAIT DGO Fund $1,000.00 $1,022.91 $1.91 0.38%
*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
181, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
43
IPAIT DIVERSIFIED FUND AND DIRECT GOVERNMENT OBLIGATION FUND (CONT.)
- --------------------------------------------------------------------------------
Fees and Expenses
All fees are calculated by basis points per net assets.
- -------------------------------------------------------------------------------
Entity Fee Type Fee
- ------ -------- ---
WB Capital Management Inc. Adviser 0.090% up to $150MM;
0.070% on $150 - $250MM;
0.055% on assets exceeding
$250MM
WB Capital Management Inc. Administrator 0.100% up to $150MM;
0.090% on $150 - $250MM;
0.075% on assets exceeding
$250MM
WB Capital Management Inc. Program Support 0.060%
Sponsoring Associations* Sponsoring Associations 0.075%
Wells Fargo Custody 0.030%
Administration Fund Other fees & expenses 0.025%
- -------------------------------------------------------------------------------
*Includes Iowa League of Cities, Iowa State Association of Counties, Iowa
Association of Municipal Utilities
This fiscal year's actual expense for the IPAIT Diversified Fund and DGO Fund
were 0.42 percent and 0.44 percent of average net assets, respectively based on
a sliding fee scale.
Actual:
For the fiscal year ended June 30, 2007, the following actual expenses were
incurred by the Funds:
Diversified DGO
Adviser $227,290 $22,215
Administrator 267,570 24,332
Program Support 171,292 14,810
Distribution 214,115 18,513
Custody 95,391 8,461
Other fees and expenses 61,462 5,290
------------ ---------
Total $1,037,120 $93,621
============ =========
44
IPAIT DIVERSIFIED FUND AND DIRECT GOVERNMENT OBLIGATION FUND (CONT.)
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
The SAI has additional information about the Funds and is available without
charge, upon request, by calling 800-872-4024.
SCHEDULE OF PORTFOLIO HOLDINGS
A complete schedule of portfolio holdings is filed with the SEC for the first
and third quarters on Form N-Q. The portfolio holding for the second and fourth
quarter are available in the semi-annual and annual reports. It is available at
www.sec.gov, or by phone at 800-SEC-0330, or by mail at Public Reference Section
/ SEC / Washington / DC / 20549 (duplicating fee required) or upon request from
IPAIT at 800-872-4024 or at IPAIT.org.
PROXY VOTING
The SEC requires an annual report of the proxy voting record of the Trust.
Because the investments allowable under Iowa law restrict the investment for
IPAIT to securities to which proxy voting does not apply, IPAIT does not have a
proxy voting policy and will report no proxy votes on the Form N-PX. The law
requires the filing of the Form N-PX, and this disclosure, even though the Form
N-PX will contain no votes. Form N-PX is available 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.
PARTICIPANT MEETING RESULTS
On August 30, 2006, a participant meeting was held at the Wakonda Club in Des
Moines Iowa.
All proposals were approved by the participants of both funds.
IPAIT DIVERSIFIED Total Units 202,905,482.38
- --------------------------------------------------------------------------------
Proposal 1 Response Proposal 2 Response
56.4% Units 56.4% Units
------------------- --------------------
For votes 114,517,526.15 114,413,528.60
Against votes --- ---
Abstain votes 609.85 104,607.40
Not signed by Authorized User 785,291.11 785,291.11
235 Proxies Distributed, 95 Responses
IPAIT DGO Total Units 15,406,948.94
- --------------------------------------------------------------------------------
Proposal 1 Response Proposal 2 Response
100.0% Units 100.0% Units
------------------- -------------------
For votes 15,406,948.94 15,406,948.94
Against votes --- ---
Abstain votes --- ---
Not signed by Authorized User --- ---
2 Proxies Distributed, 2 Responses
45
IPAIT INVESTMENT COMMENTARY
- --------------------------------------------------------------------------------
The completion of the Federal Reserve rate hike campaign last June did little to
remove uncertainty in the markets. With the overnight rate pegged at 5.25
percent, the markets were free to speculate on the timing of the first rate cut
despite the Fed's pronouncements to the contrary. The Fed has made it clear they
are more concerned about inflation than economic growth at this point, and they
are biased to raise rates. However, investors have simply vacillated between
many imminent rate cuts and no imminent rate cuts. As we stand today, the market
is in a holding pattern with no visible rate change expectations as growth has
slowed and inflation remains above the Fed's comfort zone.
Economic growth softened as expected in the first quarter of 2007 as the housing
and auto sectors continued their declines. First quarter real GDP growth came in
at a mere 0.7 percent for the quarter and 1.9 percent year-over-year, the
slowest quarterly growth in four years. Despite the slowdown we believe there is
plenty of underlying strength that will provide stronger growth in the second
half of the year.
Dissecting the economy provides an interesting perspective on economic growth.
If one were to carve out housing from the economic data, one would see the
remaining 95 percent is generating almost 3 percent year-over-year growth. It is
the 5 percent of the economy comprised by housing that is dragging economic data
lower, with a year-over-year real GDP decline of almost 17 percent. The decline
in residential construction alone has shaved 1 percent off real GDP growth in
the last year.
Unfortunately housing sector concerns will likely continue for the foreseeable
future. Headwinds still loom as mortgage lenders tighten lending standards, and
builders have yet to fully correct the mismatch between housing demand and
supply. With unsold homes representing 6.5 months demand, builders must cut
construction significantly to bring balance back to this sector.
Outside of the housing sector the economy remains strong. The consumer remains
active in light of higher gasoline prices and rising inflation. We continue to
see the availability of jobs as the driving factor for the consumer. As long as
jobs are plentiful and wages are rising we believe the consumer will continue to
spend and support growth. Supporting the jobs market is a sustainable
improvement in exports. Booming economic growth abroad and a weaker dollar are
boosting exports. The increase in exports will continue to foster domestic job
growth and give economic growth to an area that has been a drag for two decades.
Market concerns about sub-prime mortgages and private equity activity continue
to pressure performance of all bond sectors outside of Treasurys. Even equity
market elation over the same issues is turning toward concern about market
liquidity. While we do not expect the current problems to result in recession,
the situation confirms our adherence to diversification principles. Even
low-volatility money market portfolios require discipline in terms of maturity
and exposure diversification, and we continue to manage the IPAIT portfolios
with a strong market discipline in this regard.
/S/ Jeffrey D. Lorenzen
Jeffrey D. Lorenzen, CFA
WB Capital Management Inc.
46
IPAIT IPAIT INVESTMENT POLICY
- --------------------------------------------------------------------------------
SECTION 1 - SCOPE OF INVESTMENT POLICY
The Investment Policy of the Iowa Public Agency Investment Trust (IPAIT) shall
apply to all funds invested on behalf of participants accounted for in the IPAIT
financial statements. Each investment made pursuant to this Investment Policy
must be authorized by applicable law and this written Investment Policy.
This Investment Policy is intended to comply with Iowa Code chapters 28E, 12B,
12C and sections 331.555 and 384.21.
Upon passage and upon future amendment, if any, copies of this Investment Policy
shall be delivered to all of the following:
1. The IPAIT Board of Trustees.
2. All IPAIT depository institutions or fiduciaries.
3. The auditor engaged to audit any fund of IPAIT.
SECTION 2 - FUNDAMENTAL INVESTMENT RESTRICTIONS
A. UNLESS OTHERWISE SPECIFIED BELOW, NONE OF THE PORTFOLIOS WILL:
1. Invest more than 5 percent of the value of their total assets in the
securities of any one federally insured Iowa depository institution
(other than securities of the U.S.
government or its agencies or instrumentalities).
2. Invest 25 percent or more of the value of their total assets in the
securities of issuers conducting their principal business activities
in any one industry, including financial institutions. This
restriction does not apply to securities of the U.S. Government or
its agencies and instrumentalities and repurchase agreements relating
thereto.
3. Issue any senior securities (as defined in the Investment Company Act
of 1940, as amended).
4. Mortgage, pledge or hypothecate their assets.
5. Make short sales of securities or maintain a short position.
6. Purchase any securities on margin.
7. Write, purchase or sell puts, calls or combinations thereof.
8. Purchase or sell real estate or real estate mortgage loans.
9. Invest in restricted securities or invest more than 10 percent of the
Portfolio's net assets in repurchase agreements with a maturity of
more than seven days, and other liquid assets, such as securities
with no readily available market quotation.
10. Underwrite the securities of other issuers.
11. Invest in any securities in contravention of the provisions of Rule
2a-7 of the Investment Company Act of 1940 as it presently exists or
as it may hereafter be amended.
B. PROHIBITED INVESTMENTS
Assets of IPAIT shall not be invested in the following:
1. Reverse repurchase agreements.
2. Futures and options contracts.
3. Any security with a remaining maturity exceeding 397 days as provided
in Rule 2a-7.
47
IPAIT IPAIT INVESTMENT POLICY
- --------------------------------------------------------------------------------
C. PROHIBITED INVESTMENT PRACTICES
The following investment practices are prohibited:
1. Trading of securities for speculation or the realization of
short-term trading gains.
2. Investing pursuant to a contract providing for the compensation of an
agent or fiduciary based upon the performance of the invested assets.
3. If a fiduciary or other third party with custody of public investment
transaction records of IPAIT fails to produce requested records when
requested by IPAIT or its agents within a reasonable time, IPAIT
shall make no new investment with or through the fiduciary or third
party and shall not renew maturity investments with or through the
fiduciary or third party.
D. MANAGEMENT POLICIES AND PROCEDURES
Following are the fundamental management policies and procedures for IPAIT. All
investments shall be maintained in separate IPAIT custodial accounts, segregated
by Portfolio on behalf of IPAIT Participants.
1. Each purchase or sale of a security must be handled on a delivery
versus payment (DVP) basis. Funds for the purchase of an investment
shall not be released to the seller until the security is delivered
to the IPAIT Custodian. Conversely, a sold security shall not be
released to the buyer until funds for the purchase price of the
security have been received by the IPAIT Custodian.
2. "Free delivery" transactions are prohibited. The Custodian shall
never release assets from the IPAIT custodial accounts until the
funds for the investment are delivered.
3. Any material deviation (greater than 0.5 percent) from the amortized
cost of investments shall be promptly reported by the Adviser to the
Board of Trustees. If such deviation exceeds 0.5 percent, the Adviser
will consider what action, if any, should be initiated to reasonably
eliminate or reduce material dilution or other unfair results to
Participants. Such action may include redemption of Trust Units in
kind, selling portfolio securities prior to maturity, withholding
distributions or utilizing a net asset value per Trust Unit based
upon available market quotations.
4. The frequent trading of securities, including day trading for the
purpose of realizing short-term gains, the purchase and sale of
futures and options to buy or sell authorized investments, reverse
repurchase agreements, and other similar speculative transactions are
expressly prohibited
5. IPAIT may not make any investment other than Permitted Investments
authorized by the provisions of the law applicable to the investment
of funds by the Participants, as such laws may be amended from time to
time.
6. IPAIT may not purchase any Permitted Investment if the effect of such
purchase by IPAIT would be to make the average dollar weighted
maturity of a portfolio greater than ninety (90) days.
7. IPAIT may not borrow money or incur indebtedness whether or not the
proceeds thereof are intended to be used to purchase Permitted
Investments.
8. IPAIT may not make loans, provided that IPAIT may make Permitted
Investments.
9. IPAIT may not purchase securities or shares of investment companies or
any entities similar to PAIT.
The restrictions set forth above are fundamental to the operation and activities
of IPAIT and may not be changed without the affirmative approval, in writing, of
a majority of the Participants entitled to vote, except that such restrictions
may be changed by the Trustees so as to make them more restrictive when
necessary to confirm the investment program and activities of IPAIT to the laws
of the State of Iowa and the United States of America as they may from time to
time be amended.
The above investment restrictions shall not be changed without the vote of a
majority of the Participants in a Portfolio. "Majority" means the lesser of (a)
67 percent of the Trust's or a Portfolio's outstanding Trust Units voting at a
meeting of the Participants at which more than 50 percent of the outstanding
Trust Units are represented in person or by proxy or (b) a majority of the
Trust's or a Portfolio's outstanding Trust Units.
48
IPAIT IPAIT INVESTMENT POLICY
- --------------------------------------------------------------------------------
MANAGEMENT POLICIES AND PROCEDURES (Continued)
Provided, however, the Trust may invest Portfolio assets pursuant to the maximum
extent possible by Iowa law governing investments by public agencies and Rule
2a-7 and any change in the restrictions of the Iowa law governing investments by
public agencies and Rule 2a-7 shall be deemed to be adopted by the Trust, and
such change shall not require the approval of the Participants.
Any investment restrictions or limitations referred to above which involves a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after an
acquisition of securities or utilization of assets and results there from.
SECTION 3 - DELEGATION OF AUTHORITY
The responsibility for conducting IPAIT investment transactions resides with the
IPAIT Board of Trustees. Certain responsibilities have been delegated to the
Administrator, the Adviser, and the Custodian (the "Service Providers") pursuant
to the Administrator Agreement, the Adviser Agreement, the Custodian Agreement,
with amendments as may be adopted from time to time, and the current Information
Statement (the "Documents").
Each Service Provider shall individually notify the IPAIT Board of Trustees in
writing within thirty days of receipt of all communications from the auditor of
any Service Provider or any regulatory authority of the existence of a material
weakness in internal control structure of the Service Provider or regulatory
orders or sanctions regarding the type of services being provided to IPAIT by
the Service Provider.
The records of investment transactions made by or on behalf of IPAIT are public
records and are the property of IPAIT whether in the custody of IPAIT or in the
custody of a fiduciary or other third party.
SECTION 4 - OBJECTIVES OF INVESTMENT POLICY
The primary objectives, in order of priority, of all investment activities
involving the financial assets of IPAIT shall be the following:
1. SAFETY: Safety and preservation of principal in the overall portfolio
is the foremost investment objective.
2. LIQUIDITY: Maintaining the necessary liquidity to match expected
liabilities is the second investment objective.
3. RETURN: Obtaining a reasonable return is the third investment
objective.
SECTION 5 - PRUDENCE
The Board of Trustees, when providing for the investment of deposit of public
funds in the IPAIT program, shall exercise the care, skill, prudence, and
diligence under the circumstances then prevailing that a person acting in a like
capacity and familiar with such matters would use to attain the Section 4
investment objectives.
SECTION 6 - INSTRUMENTS ELIGIBLE FOR INVESTMENT
Assets of IPAIT may be invested in the following, all as more fully described in
the IPAIT Information Statement:
-- Obligations of the United States government, its agencies and
instrumentalities.
-- Certificates of deposit and other evidences of deposit at federally
insured Iowa depository institutions approved and secured pursuant to
chapter 12C.
-- Repurchase agreements, provided that the underlying collateral
consists of obligations of the United States government, its agencies
and instrumentalities and that the Custodian takes delivery of the
collateral either directly or through an authorized custodian.
All instruments eligible for investment are further qualified by all other
provisions of this Investment Policy, including Section 8, Diversification and
Investment Maturity Limitations.
49
IPAIT IPAIT INVESTMENT POLICY
- --------------------------------------------------------------------------------
SECTION 7 - DIVERSIFICATION AND INVESTMENT MATURITY LIMITATIONS
It is the policy of IPAIT to diversify portfolio investments in the Diversified
Portfolio and the Direct Government Obligation (DGO) Portfolio. As described in
the Information Statement, portfolio investments in the Diversified Portfolio
and the Direct Government Obligation Portfolio are limited to the following:
1. No individual investment with maturity in excess of 397 days as
provided in Rule 2a-7.
2. The maximum average maturity of all portfolio investments may not
exceed 90 days. Pursuant to IPAIT policies as disclosed in the
Documents, Participants may also individually invest in Fixed Term
Program investments.
SECTION 8 - SAFEKEEPING AND CUSTODY
All invested assets of Participants in the Portfolios or in the Fixed Term
Program shall be held in accordance with the Custodian Agreement.
All invested assets eligible for physical delivery shall be secured by having
them held at a third party custodian. All purchased investments shall be held
pursuant to a written third party custodial agreement requiring delivery versus
payment. No assets may be delivered out of the IPAIT account without full
payment (no "free deliveries" shall be permitted).
SECTION 9 - REPORTING
The Service Providers shall submit all reports required in the Documents.
SECTION 10 - INVESTMENT POLICY REVIEW AND AMENDMENT
This Investment Policy shall be reviewed annually or more frequently as
appropriate. Notice of amendments to the Investment Policy shall be promptly
given to all parties noted in Section 1.
SECTION 11 - EFFECTIVE DATE
This Investment Policy shall be effective as of May 1, 1993. Passed and approved
this 20th day of April, 1993.
Amended effective November 1, 2003.
50
IPAIT INVESTING AND NON-INVESTING PARTICIPANTS
DIVERSIFIED AND DIRECT GOVERNMENT OBLIGATION FUNDS
- --------------------------------------------------------------------------------
$1-$50,000 ASSETS INVESTED
- --------------------------
Cascade Municipal Utilities
City of Ames
City of Badger
City of Burlington
City of Callender
City of Earlham
City of Earlville
City of Elk Run Heights
City of Evansdale
City of Fairbank
City of Fairfield
City of Grand Mound
City of Grimes
City of Grundy Center
City of Jefferson
City of Keystone
City of Letts
City of Martensdale
City of Massena
City of Melcher-Dallas
City of Middletown
City of Moulton
City of Murray
City of New Virginia
City of Orange City
City of Panora
City of Ringsted
City of Spragueville
City of Springbrook
City of Storm Lake
City of Walnut
City of Wesley
City of Westfield
City Utility of Dike
City Utility of Epworth
City Utility of Harlan
City Utility of Mallard
City Utility of Martensdale
City Utility of Murray
City Utility of New Hampton
City Utility of Orange City
City Utility of Orient
City Utility of Pella
City Utility of Prairie City
Clayton County
Corning Municipal Utilities
County of Chickasaw
County of Fremont
County of Greene
County of Hardin
County of Howard
County of Ringgold
County of Sac
Dallas County Hospital
Fontanelle Municipal Utility
Gilbertville Community Day, Inc.
Gowrie Municipal Utilities
Johnson Township
Barnum Community Fire Department
Lamoni Municipal Utilities
Muscatine Power and Water
North Central Reg. Emerg. Resp. Com.
Southeast Iowa Regional Planning Commission
Stuart Municipal Utilities
Stuart Municipal Utilities
Waterloo Water Works
Waverly Health Center
Waverly Health Center
Webster County Solid Waste Commission
Webster County Telecommunications Board
$50,000-$250,000 ASSETS INVESTED
- --------------------------------
Buena Vista County Solid Waste Commission
City of Ackley
City of Agency
City of Albert City
City of Bondurant
City of Boone
City of Brandon
City of Dike
City of Indianola
City of Lamont
City of Lewis
City of Lovilia
City of Mallard
City of Maynard
City of Montezuma Fire Department
City of Morning Sun
City of Nora Springs
City of Parnell
City of Readlyn
City of Red Oak
City of Urbana
City Utility of Corydon
City Utility of Eagle Grove
City Utility of Fredericksburg
City Utility of Laurens
City Utility of Melcher-Dallas
City Utility of Middletown
City Utility of Urbandale
County of Boone
County of Buena Vista
County of Carroll
County of Crawford
County of Franklin
County of Kossuth
County of Plymouth
Denison Municipal Utilities
Des Moines Area MPO
Evansdale Water Works
Geode Resource Conserv. & Develp., Inc.
Ida County
Iowa Stored Energy Plant Agency
IPAIT Administration Fund
IPPA Administrative
IPPA MMTG Lakewood Benefited Rec. Lake District
Manning Municipal Gas Department
Poweshiek Water Association
Southwest Iowa Planning Council
Villisca Municipal Power Plant
Warren County
North Iowa Area Council of Govts.
Palo Alto County Hospital
South Iowa Detention Service Agency
Southwest Iowa Planning Council
Villisca Municipal Power Plant
Warren County
Warren Lakewood Benefitted Rec. Lake Dist.
$250,000-$500,000 ASSETS INVESTED
- ---------------------------------
Brooklyn Municipal Utilities
City of Algona
City of Ankeny
City of Coralville
City of Corning
City of Dayton
City of Early
City of Elk Horn
City of Epworth
City of Griswold
City of Monroe
City of Orleans
City of Pella
City of Riverdale
City of Sageville
City of Shenandoah
City of Spencer
City of Windsor Heights
City Utility of Readlyn
County of Adair
County of Cedar
County of Des Moines
County of Osceola
Grundy Center Municipal Utilities
Hiawatha Water Department
North Iowa Area Council of Govts.
Page County Landfill Association
South Iowa Area Crime Commission
South Iowa Detention Service Agency
Urbandale Sanitary Sewer District
$500,000-$1,000,000 ASSETS INVESTED
- -----------------------------------
Algona Municipal Utilities
City of Adel
City of Corydon
City of Eagle Grove
City of Forest City
City of La Porte City
City of Lake Mills
City of Mason City
City of Oskaloosa
City of Prairie City
City of Shelby
City of Traer
City of Van Meter
City Utility of Lake Mills
City Utility of Montezuma
City Utility of Shelby
City Utility of Traer
County of Cass
County of Grundy
County of Linn
County of Mills
County of Pocahontas
County of Union
County of Washington
Knoxville Utility
La Porte City Utility
Montezuma Municipal Light and Power
Northwest Iowa Area Solid Waste Agency
Second Judicial Dist Dept. of Correct
Waverly Light and Power
West Des Moines Water Works
Xenia Rural Water District
$1,000,000-$5,000,000 ASSETS INVESTED
- -------------------------------------
Broadlawns Medical Center
Cedar Falls Utilities
City of Altoona
City of Clinton
City of Council Bluffs
City of Davenport
City of Denison
City of Fort Dodge
City of Gilbertville
City of Iowa City
City of Keokuk
City of Knoxville
City of Marion
City of Mitchellville
City of Montezuma
City of Mount Pleasant
City of Muscatine
City of Ottumwa
City of Polk City
City of Sioux City
City of Washington
City of Waterloo
City of Waverly
City Utility of Lenox
City Utility of Maquoketa
Clay County
County of Appanoose
County of Audubon
County of Black Hawk
County of Buchanan
County of Calhoun
County of Clarke
County of Decatur
County of Dickinson
County of Emmet
County of Hamilton
County of Henry
County of Jackson
County of Louisa
County of Lyon
County of Madison
County of Monona
County of O'Brien
County of Poweshiek
County of Sioux
County of Story
County of Tama
County of Wapello
County of Wayne
County of Webster
County of Winneshiek
County of Wright
Dallas County
Fifth Judicial District
IAMU Insurance Trust
IMWCA Group C
Lucas County
NIMECA
North Central Iowa Regional SWA
Orange City Area Health System
Resale Power Group of Iowa
SIMECA
Spencer Municipal Utility
OVER $5,000,000 ASSETS INVESTED
- -------------------------------
City of Cedar Rapids
City of Hiawatha
City of Johnston
City of West Des Moines
51
IPAIT INVESTING AND NON-INVESTING PARTICIPANTS
DIVERSIFIED AND DIRECT GOVERNMENT OBLIGATION FUNDS
- --------------------------------------------------------------------------------
NON-INVESTING PARTICIPANTS
- --------------------------
Audubon County Memorial Hospital
Cass County Environment Control Agency
Cedar Rapids/Linn County SWA
Central IA Juvenile Detention
Commission
City of Alton
City of Anamosa
City of Anthon
City of Atlantic
City of Audubon
City of Bellevue
City of Bettendorf
City of Bloomfield
City of Bussey
City of Camanche
City of Carlisle
City of Carson
City of Carter Lake
City of Cedar Falls
City of Center Point
City of Centerville
City of Charles City
City of Cherokee
City of Clarinda
City of Clive
City of Colfax
City of Colo
City of Creston
City of Denver
City of Des Moines
City of Dubuque
City of Dunkerton
City of Eldon
City of Eldridge
City of Ellsworth
City of Fort Madison
City of Grand River
City of Greenfield
City of Grinnell
City of Harlan
City of Hawarden
City of Hazleton
City of Hudson
City of Humboldt
City of Huxley
City of Independence
City of Lehigh
City of Lenox
City of Leon
City of Lisbon
City of Lohrville
City of Manchester
City of Manning
City of Maquoketa
City of Marble Rock
City of Marshalltown
City of Mount Vernon
City of Nevada
City of New Hampton
City of New London
City of Newton
City of Oelwein
City of Osage
City of Ossian
City of Peosta
City of Perry
City of Pleasant Hill
City of Pleasantville
City of Pocahontas
City of Prescott
City of Preston
City of Rockwell City
City of Sac City
City of Sheldon
City of Slater
City of Spirit Lake
City of St. Charles
City of Sumner
City of Tipton
City of Urbandale
City of Villisca
City of Vinton
City of Webster City
City of Wilton
City of Woodbine
City Utility of Alton
City Utility of Ames
City Utility of Anamosa
City Utility of Anthon
City Utility of Aplington
City Utility of Bloomfield
City Utility of Colfax
City Utility of Coon Rapids
City Utility of Creston
City Utility of Denver
City Utility of Fairbank
City Utility of Graettinger
City Utility of Hawarden
City Utility of LeClaire
City Utility of Lohrville
City Utility of Preston
City Utility of Sac City
City Utility of Sanborn
City Utility of Slater
City Utility of St. Charles
City Utility of Story City
City Utility of Vinton
City Utility of Wahpeton
Clear Lake Sanitary District
Council Bluffs Airport Authority
County of Butler
County of Cerro Gordo
County of Clinton
County of Davis
County of Dubuque
County of Floyd
County of Greene-Medical Center
County of Hancock
County of Harrison
County of Iowa
County of Jasper
County of Johnson
County of Jones
County of Marion
County of Marshall
County of Mitchell
County of Monroe
County of Muscatine
County of Page
County of Polk
County of Scott
County of Winnebago
County of Worth
Crawford County Memorial Hospital
Des Moines Metropolitan Transit Authority
Des Moines Utility
Eighth Judicial Dist. Dept. of Correct.
Fort Madison Utility
Greenfield Municipal Utilities
Heart of Iowa Reg. Transit Agency
Iowa Lakes Regional Water
Iowa Northland Reg. Council of Gov.
Iowa Public Employer Health Care Cover
IPPA CMMPA
IPPA IMTG
IPPA MMUA
Jefferson County Hosp. Foundation, Inc.
Jefferson County Hospital
Lee County
Manilla Municipal Gas Dept.
Manning Municipal Utilities
Midas Council of Governments
Mid-Iowa Development Association COG
Mid-Iowa Regional Housing Authority
Missouri River Energy Services
Mitchell County Regional Health Center
Monroe County Hospital
Mt. Pleasant Municipal Utilities
Newton Waterworks
Ogden Municipal Utility
Palo Alto County Hospital
Plymouth County Solid Waste Agency
Pottawattamie County
Seventh Judicial District
Third Judicial District
Van Buren County Hospital
Washington County Hospital
Winterset Municipal Utilities
52
- --------------------------------------------------------------------------------
STATISTICAL INFORMATION
IPAIT
53
IPAIT STATISTICAL INFORMATION
- --------------------------------------------------------------------------------
MAJOR PARTICIPANTS
Top Ten Participants Top Twenty Participants Top Fifty Participants
Diversified Percent Total Assets Percent Total Assets Percent Total Assets
- ----------- ------- ------------ ------- ------------ ------- ------------
2007 37% 88,409,383 50% 120,897,069 75% 179,823,065
2006 32% 65,432,579 47% 95,702,772 75% 152,227,092
2005 48% 112,257,335 63% 144,716,918 83% 191,099,445
2004 59% 151,601,053 72% 182,708,595 88% 225,109,501
2003 56% 137,395,976 68% 166,268,864 85% 209,040,889
2002 47% 120,630,674 61% 157,746,696 81% 207,622,556
2001 43% 115,107,270 58% 152,529,065 79% 208,785,428
Top Ten Participants
DGO Percent Total Assets
- --- ------- ------------
2007 100% 15,137,370
2006 100% 16,949,155
2005 100% 14,795,683
2004 100% 37,532,248
INVESTMENT ADVISER
WB Capital Management Inc. has served as the sole Investment Adviser to all
investment alternatives within IPAIT since the program's inception in 1987. As
of June 30, 2007 WB Capital Management Inc. had a total of $4.4 billion in
assets under management, representing a diverse group of institutional and
individual clients.
CONSULTANTS
IPAIT does not employ the use of any professional consultants beyond those
service providers detailed in the Notes to Financial Statement Section.
BROKERS
IPAIT does not employ the use of brokers in the operation of its various
investment alternatives.
54
IPAIT CHANGES IN FUND UNITS
- --------------------------------------------------------------------------------
Changes in Participant Assets Under Management
Diversified Fund and
Direct Government Obligation Fund
Annual Annual
Date IPAIT Div Fund * Change IPAIT DGO Fund ** Change
- ------------------------------------------------------------------------------
06/07 $240,334,243 18.11% $15,137,370 -10.69%
03/07 $293,556,937 23.79% $24,726,426 25.66%
12/06 $245,158,277 1.04% $21,873,658 64.88%
09/06 $256,375,849 2.48% $22,759,470 48.47%
06/06 $203,481,541 -11.40% $16,949,155 14.55%
03/06 $237,141,015 -1.43% $19,677,059 3.74%
12/05 $242,636,140 9.50% $13,266,181 -40.13%
09/05 $250,171,968 13.12% $15,329,259 -51.02%
06/05 $229,667,966 -9.87% $14,795,683 -60.58%
03/05 $240,589,826 -12.58% $18,967,804 -58.52%
12/04 $221,582,170 -10.52% $22,157,021 -54.54%
09/04 $221,163,016 -18.75% $31,294,779 -49.15%
06/04 $254,818,110 -1.84% $37,532,248 -28.22%
03/04 $275,215,747 10.58% $45,727,070 -40.88%
12/03 $247,626,021 -16.67% $48,744,871 -25.40%
09/03 $272,187,641 7.83% $61,548,710 17.70%
06/03 $259,601,282 2.23% $52,291,241 -21.32%
03/03 $248,884,686 -10.42% $77,348,955 2.26%
12/02 $297,172,601 -6.16% $65,341,840 -20.73%
09/02 $252,426,230 -4.62% $52,291,241 -44.28%
06/02 $253,948,247 -4.20% $66,461,330 10.81%
03/02 $277,835,614 -8.83% $75,641,831 19.10%
12/01 $316,690,866 32.71% $82,432,865 22.23%
09/01 $264,646,237 2.53% $93,847,685 30.47%
06/01 $265,090,819 22.47% $59,975,661 32.20%
03/01 $304,760,387 22.97% $63,510,582 16.53%
12/00 $238,634,980 11.98% $67,438,029 9.11%
09/00 $258,112,751 22.59% $71,931,497 -1.98%
06/00 $216,459,830 14.80% $45,366,390 -48.21%
03/00 $247,826,392 4.02% $54,500,308 -21.87%
12/99 $213,110,138 10.58% $61,810,064 -15.01%
09/99 $210,543,469 10.06% $73,381,984 -5.63%
06/99 $188,558,836 6.52% $87,596,381 5.71%
03/99 $238,242,744 24.18% $69,752,928 48.18%
12/98 $192,712,021 19.02% $72,730,352 39.38%
09/98 $191,295,081 2.07% $77,758,459 35.23%
06/98 $177,018,714 -11.07% $82,865,033 40.87%
03/98 $191,859,267 -20.16% $47,073,726 -5.27%
12/97 $161,914,498 -24.50% $52,182,763 -5.28%
09/97 $187,412,776 -9.27% $57,501,838 -2.32%
*IPAIT Div Fund inception date 11/13/87
**IPAIT DGO Fund inception date 9/1/88
55
IPAIT MONTHLY COMPARATIVE YIELDS
- --------------------------------------------------------------------------------
DIVERSIFIED FUND
Diversified
Fund iMoneyNet U.S. Govt. Chapter 74A Chapter 74A
Date Rate (1) & Agency Index (2) 32-89 Day (3) 90-179 Day (3)
---- -------- ------------------ ------------- --------------
06/07 4.90 4.55 2.95 3.35
05/07 4.85 4.53 2.85 3.25
04/07 4.92 4.54 2.85 3.25
03/07 4.90 4.55 2.85 3.25
02/07 4.99 4.56 2.85 3.25
01/07 4.88 4.55 2.85 3.25
12/06 4.79 4.56 2.85 3.25
11/06 4.83 4.55 2.85 3.30
10/06 4.80 4.53 2.95 3.30
09/06 4.81 4.54 2.95 3.25
08/06 4.74 4.52 3.00 3.30
07/06 4.69 4.47 3.00 3.20
(1) Actual earnings less expenses
(2) iMoneyNet U.S. Government & Agencies Monthly Money Fund Report TM
(3) Iowa Code Chapter 74A minimum public funds deposit rates
DGO FUND
DGO Fund iMoneyNet US Treasury Chapter 74A Chapter 74A
Date Rate (1) & Repo Index (2) 32-89 Day (3) 90-179 Day (3)
---- -------- ---------------- ------------- --------------
06/07 4.81 4.49 2.95 3.35
05/07 4.80 4.47 2.85 3.25
04/07 4.78 4.49 2.85 3.25
03/07 4.78 4.45 2.85 3.25
02/07 4.71 4.49 2.85 3.25
01/07 4.71 4.39 2.85 3.25
12/06 4.68 4.46 2.85 3.25
11/06 4.65 4.50 2.85 3.30
10/06 4.65 4.45 2.95 3.30
09/06 4.62 4.38 2.95 3.25
08/06 4.57 4.42 3.00 3.30
07/06 4.49 4.37 3.00 3.20
(1) Actual earnings less expenses
(2) iMoneyNet U.S. Treasury & Repo Monthly Money Fund Report TM
(3) Iowa Code Chapter 74A minimum public funds deposit rates
56
IPAIT ANNUAL COMPARATIVE YIELDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL YIELD FOR THE FISCAL YEARS ENDED JUNE 30,
iMoneyNet U.S.
Diversified iMoneyNet U.S. Govt. Treasury
Fund (1) & Agency Index (2) DGO Fund (1) & Repo Index (3)
-------- ------------------ ------------ ----------------
2007 4.84 4.54 4.70 4.45
2006 3.70 3.43 3.58 3.33
2005 1.71 1.41 1.39 1.35
2004 0.59 0.37 0.53 0.31
2003 0.94 0.80 0.92 0.74
2002 2.11 1.87 1.83 1.76
2001 5.33 5.26 5.15 5.06
2000 5.13 4.94 4.98 4.78
1999 4.61 4.47 4.43 4.35
1998 5.10 4.90 4.98 4.85
(1) Actual earnings less expenses
(2) iMoneyNet U.S. Government & Agencies Money Fund Report TM
(3) iMoneyNet U.S. Treasury and Repo Money Fund Report TM
Annual Net Investment Income
TOTAL NET INVESTMENT INCOME
for the Fiscal Year Ended June 30,
Diversified Fund (1) DGO Fund (1)
-------------------- ------------
2007 11,907,172 994,195
2006 8,472,466 567,341
2005 3,733,917 349,987
2004 1,477,818 265,254
2003 2,531,693 658,073
2002 5,854,955 1,381,159
2001 13,455,641 3,216,209
2000 11,001,463 3,199,662
1999 8,975,481 3,374,792
1998 9,260,578 2,723,297
(1) Actual earnings less expenses
57
IPAIT CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
(dollars in thousands)
DIVERSIFIED PORTFOLIO
2007 2006 2005 2004 2003
----------- ----------- ----------- ----------- -----------
ADDITIONS:
From Investment Activities:
Net Investment income $11,907 $8,472 $3,734 $1,478 $2,532
From Unit Transactions:
Units sold 1,246,520 1,151,720 1,055,083 941,862 912,308
Units issued in reinvestment
of dividends from net
investment income 11,055 7,815 3,596 1,478 2,532
----------- ----------- ----------- ----------- -----------
TOTAL ADDITIONS 1,269,482 1,168,007 1,062,413 944,818 917,372
----------- ----------- ----------- ----------- -----------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (11,907) (8,472) (3,734) (1,478) (2,532)
From Unit Transactions:
Units redeemed (1,220,723) (1,185,721) (1,083,829) (933,547) (923,763)
----------- ----------- ----------- ----------- -----------
TOTAL DEDUCTIONS (1,232,630) (1,194,193) (1,087,563) (935,025) (926,295)
----------- ----------- ----------- ----------- -----------
Changes in net assets 36,852 (26,186) (25,150) 9,793 (8,923)
Net assets at beginning of period 203,482 229,668 254,818 245,025 253,948
----------- ----------- ----------- ----------- -----------
Net assets at end of period $240,334 $203,482 $229,668 $254,818 $245,025
=========== =========== =========== =========== ===========
DIRECT GOVERNMENT OBLIGATION PORTFOLIO
2007 2006 2005 2004 2003
----------- ----------- ----------- ----------- -----------
ADDITIONS:
From Investment Activities:
Net Investment income $994 $567 $350 $265 $658
From Unit Transactions:
Units sold 28,227 36,963 20,938 30,121 43,658
Units issued in reinvestment
of dividends from net
investment income 994 537 350 265 658
----------- ----------- ----------- ----------- -----------
TOTAL ADDITIONS 30,215 38,067 21,638 30,651 44,974
----------- ----------- ----------- ----------- -----------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (994) (567) (350) (265) (658)
From Unit Transactions:
Units redeemed (31,033) (35,347) (44,024) (45,145) (58,486)
----------- ----------- ----------- ----------- -----------
TOTAL DEDUCTIONS (32,027) (35,914) (44,374) (45,410) (59,144)
----------- ----------- ----------- ----------- -----------
Changes in net assets (1,812) 2,153 (22,736) (14,759) (14,170)
Net assets at beginning of period 16,949 14,796 37,532 52,291 66,461
----------- ----------- ----------- ----------- -----------
Net assets at end of period $15,137 $16,949 $14,796 $37,532 $52,291
=========== =========== =========== =========== ===========
58
IPAIT CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
(dollars in thousands)
DIVERSIFIED PORTFOLIO
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
ADDITIONS:
From Investment Activities:
Net Investment income $5,855 $13,456 $11,002 $8,975 $9,261
From Unit Transactions:
Units sold 895,986 1,024,910 1,032,835 912,337 735,508
Units issued in reinvestment
of dividends from net
investment income 5,855 13,456 11,002 8,975 9,261
----------- ----------- ----------- ----------- -----------
TOTAL ADDITIONS 907,696 1,051,822 1,054,839 930,287 754,030
----------- ----------- ----------- ----------- -----------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (5,855) (13,456) (11,002) (8,975) (9,261)
From Unit Transactions:
Units redeemed (912,984) (989,735) (1,015,936) (909,772) (766,799)
----------- ----------- ----------- ----------- -----------
TOTAL DEDUCTIONS (918,839) (1,003,191) (1,026,938) (918,747) (776,060)
----------- ----------- ----------- ----------- -----------
Changes in net assets (11,143) 48,631 27,901 11,540 (22,030)
Net assets at beginning of period 265,091 216,460 188,559 177,019 199,049
----------- ----------- ----------- ----------- -----------
Net assets at end of period $253,948 $265,091 $216,460 $188,559 $177,019
=========== =========== =========== =========== ===========
DIRECT GOVERNMENT OBLIGATION PORTFOLIO
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
ADDITIONS:
From Investment Activities:
Net Investment income $1,381 $3,216 $3,200 $3,375 $2,723
From Unit Transactions:
Units sold 48,029 38,973 12,830 38,064 53,493
Units issued in reinvestment
of dividends from net
investment income 1,381 3,216 3,200 3,375 2,723
----------- ----------- ----------- ----------- -----------
TOTAL ADDITIONS 50,791 45,405 19,230 44,814 58,939
----------- ----------- ----------- ----------- -----------
DEDUCTIONS:
Dividends to unitholders from:
Net investment income (1,381) (3,216) (3,200) (3,375) (2,723)
From Unit Transactions:
Units redeemed (42,924) (27,580) (58,260) (36,708) (32,177)
----------- ----------- ----------- ----------- -----------
TOTAL DEDUCTIONS (44,305) (30,796) (61,460) (40,083) (34,900)
----------- ----------- ----------- ----------- -----------
Changes in net assets 6,486 14,609 (42,230) 4,731 24,039
Net assets at beginning of period 59,975 45,366 87,596 82,865 58,826
----------- ----------- ----------- ----------- -----------
Net assets at end of period $66,461 $59,975 $45,366 $87,596 $82,865
=========== =========== =========== =========== ===========
59
IPAIT GLOSSARY OF INVESTMENT TERMS
- --------------------------------------------------------------------------------
Accrued interest - interest accumulated on all securities in a portfolio since
the most recent payment date for each security.
Administrator - entity that carries out IPAIT policies and provides participant
recordkeeping services.
Amortized Cost - method of accounting that gradually reduces a security's
discount or premium on a straight-line basis.
Assets - items in financial statement with current market value owned by IPAIT.
Certificate of Deposit - debt instrument issued by a financial institution with
an interest rate set by competitive forces in the marketplace.
Collateral - U.S. government or agency securities pledged to IPAIT until
investment is repaid. For instance, the security for a collateralized
certificate of deposit issued by an Iowa financial institution.
Compound Rate - interest calculation based upon investment of principal plus
reinvestment of interest earned from previous period(s). IPAIT portfolio
interest is compounded or reinvested monthly.
Custodian - bank that maintains custody of all IPAIT assets.
Discount - the dollar amount by which the par value of a bond exceeds its market
price.
Diversified - spreading of risk by investing assets in several different
categories of investment and assorted maturities within those categories.
Investment Adviser - Securities and Exchange Commission registered firm that
provides investment advice to IPAIT.
Iowa Code Chapter 74A Rates - Minimum rates at which Iowa financial institutions
may accept deposits of public funds for various periods.
Liabilities - claims on the assets of IPAIT.
Market Value - the current price or value of a security.
Net Investment Income - income from IPAIT investments distributed to
participants after payment of program operating expenses.
Nominal Rate - simple interest calculation based only upon the principal amount
invested without reinvestment of earned interest.
Par Value - value of IPAIT investments at maturity.Portfolio - all investments
owned by IPAIT.
Premium - the dollar amount by which the market price of a bond exceeds its par
value.
Redemptions - withdrawal of funds by participants from IPAIT.
Repurchase Agreement - agreement between IPAIT and a seller of U.S. government
securities, whereby the seller agrees to repurchase the securities at an agreed
upon price at a stated time. The transaction is collateralized by U.S.
government or U.S. agency securities with a market value of at least 102% of the
value of the repurchase agreement.
Straight-Line - conservative accounting procedure to reduce a security's premium
or discount in equal daily increments over its remaining period to maturity.
U.S. Government Agencies - securities issued by U.S. government sponsored
corporations such as the Federal Home Loan Bank and Federal National Mortgage
Association.
U.S. Government Securities - direct obligations of the U.S. government, such as
Treasury bills, notes and bonds.
Yield Curve - graph plotting yields of securities of similar quality on vertical
axis and maturities ranging from shortest to longest on horizontal axis.
60
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
audit committee financial expert.
ITEM 4.
(A) AUDIT FEES
June 30, 2007 $16,900
June 30, 2006 $18,970
(B) NOT APPLICABLE.
(C) TAX FEES
June 30, 2007 $1,085
June 30, 2006 $1,055
(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. NOT APPLICABLE.
ITEM 8. NOT APPLICABLE.
ITEM 9. NOT APPLICABLE.
ITEM 10.NOT APPLICABLE.
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 September 4, 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: September 4, 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, September 4, 2007
/s/ Amy Mitchell
- ----------------------------------------------
Amy Mitchell, Chief Financial Officer, September 4, 2007