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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)
EDGAR H. BITTLE, ESQ.
AHLERS, COONEY, DORWEILER, HAYNIE,
SMITH & ALLBEE, P.C.
100 COURT AVENUE, SUITE 600, DES MOINES, IOWA 50309
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
AMY MITCHELL JOHN C. MILES, ESQ.
IOWA PUBLIC AGENCY INVESTMENT DONALD F. BURT, ESQ.
TRUST
1415 28TH STREET, SUITE 200 CLINE, WILLIAMS, WRIGHT, JOHNSON &
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: 06/30/04
DATE OF REPORTING PERIOD: 12/31/03
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ITEM 1 REPORTS TO UNITHOLDERS
IOWA PUBLIC AGENCY
INVESTMENT TRUST
INTERIM FINANCIAL REPORT
DECEMBER 31, 2003
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TRUSTEES' REPORT
To Iowa Public Agency Investment Trust Participants:
The Iowa Public Agency Investment Trust (IPAIT) is pleased to present this
semi-annual report of Trust operations for the period ending December 31, 2003.
During this six-month period we have seen a slight improvement in rates from
their June 2003 lows. The Federal Reserve, at their December 9, 2003 meeting,
decided to hold the federal funds target rate at 1 percent. They believe that
there is significant improvement in the economy in both productivity and the
labor market with no signs of near-term inflation risk. They believe an
"accommodative stance" is prudent at this time. The consumer continued to
provide a strong stimulus for the market. Their appetite for credit kept loan
demand at record levels.
While money market investment yields in IPAIT keep pace with like short-term
instruments, local banks became very competitive in the desire to attract public
funds. As a result, we saw redemptions out of our Funds, both the Diversified
Portfolio and the Direct Government Obligations Portfolio, into local bank
deposit accounts. We view this as the normal ebb and flow of the current
interest rate environment. We anticipate the Federal Reserve to tighten toward
the latter part of 2004 and we have positioned our portfolio to take advantage
of their actions. In addition, we feel that this is fulfilling the Board's
primary purpose for the formation of IPAIT: The ability to provide a competitive
rate for the investment of public funds. Back in the late 1980s many Iowa
financial institutions were not paying interest on checking accounts. The joint
28E agreement for Iowa cities, counties and municipal utilities establishing
IPAIT provided an investment alternative for public funds for their daily
liquidity needs. We continue our commitment in serving Iowa public entities.
As yields continue to remain at near historic lows, Treasurers have looked to
invest their cash reserves in longer-term instruments in order to pick up some
additional interest income. The IPAIT FTA program has been a successful
alternative to provide for longer maturities. We continue to actively recruit
additional banks to provide for our participants the best yields possible.
In our 2003 IPAIT Participant survey we found 93 percent of our participants
have a high level of overall satisfaction with IPAIT. We continually strive to
provide products and ease of access to our public entities to assist them in
their cash management needs.
The Board of Trustees is very pleased with the ongoing success of the IPAIT
programs, and as always, would welcome any comments or suggestions that you
might have.
Sincerely,
/s/ Donald W. Kerker
- ---------------------
Don Kerker, Chair
Board of Trustees
-1-
MANAGEMENT DISCUSSION
To Iowa Public Agency Investment Trust Participants:
The economy has finally responded to the fiscal and monetary stimulus injected
over the last 18 months. Reflationary fiscal and monetary policy worked despite
the skepticism from pessimists. The US expansion will likely continue in the
industrial sector, in response to sustained final demand, strong profits, low
cost of capital, low inventories, a weaker dollar and stimulus from bonus
depreciation for capital spending. The consumer should also support further
growth as household incomes are expected to rise on better job prospects.
Despite a recovering economy, money market yields have remained at 40 year lows
for almost a year now. The Federal Reserve has confirmed that economic output is
expanding and labor markets are improving. Regardless of these positive signs,
the Fed has remained accommodative. The Fed is waiting for signs of increasing
inflation and higher utilization of resources. These conditions should come to
pass in 2004 resulting in higher interest rates and a flatter yield curve. While
short-term interest rates remain stubbornly low, financial market indicators are
already pricing in a rise in the fed funds target rate by late this year. IPAIT
is positioned to benefit in this scenario.
Notwithstanding today's low yield environment, the IPAIT Diversified and Direct
Government Obligations Portfolio continue to provide a competitive yield
relative to other short-term investment opportunities.
As always, the IPAIT program emphasizes three elements: safety, liquidity, and
competitive rates, in that order. We look forward to continue serving your cash
management needs.
Sincerely,
/s/ Jeffrey D. Lorenzen
- -----------------------
Jeffrey D. Lorenzen, CFA
Chief Investment Officer
Investors Management Group
-2-
MANAGEMENT'S DISCUSSIONS & ANALYSIS
This section of the Iowa Public Agency Investment Trust (IPAIT) Diversified
Portfolio and Direct Government Obligation Portfolio semi-annual financial
statements presents management's discussion and analysis of the financial
position and results of operations for the interim period ending December 31,
2003. This information is being presented to provide additional information
regarding the activities of the Authority, pursuant to the requirements of
Governmental Accounting Standards Board Statement No. 34, Basic Financial
Statements - and Management's Discussion and Analysis - for State and Local
Governments, Statement No. 37, Basic Financial Statements - and Management's
Discussion and Analysis - for State and Local Governments: Omnibus, and
Statement No. 38, Certain Financial Statement Note Disclosures (Statements Nos.
34, 37, and 38). This discussion and analysis should be read in conjunction with
the financial statements and the accompanying notes.
In addition to the historical information, the Management's Discussion and
Analysis includes certain forward-looking statements which involve certain risks
and uncertainties. The actual results of IPAIT's Diversified Portfolio and
Direct Government Obligation Portfolio may differ materially from the results
expressed or implied in such forward-looking statements due to a wide range of
factors including changes in general economic conditions, fluctuations in
interest rates, and legislative changes.
IPAIT is primarily responsible for providing proactive cash management practices
and responsiveness to the unique needs of public agencies across the state.
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 operates both the Diversified Portfolio and Direct Government
Obligation Portfolio. The objective of the portfolios is to maintain a high
degree of liquidity and safety of principal through investment in short-term
securities as permitted for Iowa public agencies under Iowa law. Activities of
the Diversified Portfolio and the Direct Government Obligation Portfolio are
described in Management's Discussion and Analysis and accompanying financial
statements and notes to financial statements.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Management's Discussion and Analysis provides an introduction to and
overview of the basic financial statements of IPAIT's Diversified Portfolio and
Direct Government Obligation Portfolio. The following components comprise the
financial statements: 1) Statement of Net Assets, 2) Statement of Operations, 3)
Statement of Changes in Net Assets, 4) Financial Highlights, and 5) Notes to
Financial Statements.
- - The Statement of Net Assets shows the financial position (assets and
liabilities) of the portfolios as of December 31.
- - The Statement of Operations displays the results of operations (income and
expenses) of the portfolios for the interim period ending December 31.
-3-
MANAGEMENT'S DISCUSSIONS & ANALYSIS (CON'T)
- - The Statement of Changes in Net Assets portray participant/unitholder
activity (distributions, sales, reinvestments, redemptions) of the portfolios
for the interim period ending December 31.
- - The Financial Highlights depict per share/per unit information (net
investment income, dividends distributed, net asset value, total return,
ratios of expenses and net investment income to average net assets) and
summary total net assets of the portfolios for the five most recent years for
the interim period ending December 31.
- - The Notes to Financial Statements describe significant accounting policies
and disclose summary security transaction amounts of the portfolios.
CONDENSED FINANCIAL INFORMATION AND FINANCIAL ANALYSIS
Year-to-year variances in most financial statement amounts reported in IPAIT's
Diversified Portfolio and Direct Government Obligation Portfolio are caused by a
single variable - the level of average net assets (which fluctuates based on the
overall levels of participant/unitholder invested balances) in each portfolio.
Additionally, changes in the short-term interest rate environment (which follows
the general trend established by monetary policy set by the Federal Reserve)
contribute to year-over-year variances in the amount of investment income earned
by the portfolios.
The Diversified Portfolio experienced a 6.82 percent decrease in average net
assets from $265,719,090 (July 1, 2002 through December 31, 2002) to
$247,610,014 (July 1, 2003 through December 31, 2003).
The Direct Government Obligation Portfolio experienced a 28.80 percent decrease
in average net assets from $77,397,304 (July 1, 2002 through December 31, 2002)
to $55,103,373 (July 1, 2003 through December 31, 2003). By the end of the
interim period ending December 31, 2003, short-term interest rates began to rise
in expectation that the Federal Reserve may have to raise rates to control
inflation due to the economic recovery. The Federal Funds Rate remained
consistent at 1.00 percent during the interim period ending December 31, 2003
after the last rate cut in June, 2003.
Condensed financial information and variance explanations for interim periods
ending December 31, 2003 and December 31, 2002 follows.
DIVERSIFIED PORTFOLIO:
Balances as of Balances as of Percentage
December 31, 2003 December 31, 2002 Change
------------------------------------------------------
Total Investments $247,003,061 $296,480,204 -16.69%
Net Assets $247,626,021 $297,172,601 -16.67%
Investment Income $ 1,337,538 $ 2,272,474 -41.14%
Total Expenses $ 619,834 $ 749,973 -17.35%
Net Investment Income $ 717,704 $ 1,522,501 -52.86%
Units Sold 441,471,454 442,275,497 -0.18%
Units Redeemed 439,588,188 400,573,644 9.74%
-4-
MANAGEMENT'S DISCUSSIONS & ANALYSIS (CON'T)
Total investments and net assets declined 16.69 percent and 16.67 percent,
respectively, comparing interim period ending December 31, 2003 and December 31,
2002 amounts, due to lower aggregate participant balances at interim period
ending December 31, 2003. Investment income and net investment income decreased
41.14 percent and 52.86 percent, respectively, during interim period ending
December 31, 2003 compared to interim period ending December 31, 2002 primarily
due to the lower interest rate environment and partially due to lower average
net assets. Total expenses decreased 17.35 percent during interim period ending
December 31, 2003 compared to interim period ending December 31, 2002 due to
lower average net assets and a reduced fee structure to the fund. Units sold
decreased 0.18 percent and units redeemed increased 9.74 percent, caused by an
increase in participant gross outflows during interim period ending December 31,
2003 compared to interim period ending December 31, 2002.
DIRECT GOVERNMENT OBLIGATION PORTFOLIO:
Balances as of Balances as of Percentage
December 31, 2003 December 31, 2002 Change
-------------------------------------------------------
Total Investments $48,738,215 $77,370,629 -37.01%
Net Assets $48,744,871 $77,348,955 -36.98%
Investment Income $ 288,834 $ 640,495 -54.90%
Total Expenses $ 143,339 $ 226,297 -36.66%
Net Investment Income $ 145,495 $ 414,198 -64.87%
Units Sold 26,518,821 38,664,158 -31.41%
Units Redeemed 30,210,686 28,190,731 7.17%
Total investments and net assets declined 37.01 percent and 36.98 percent,
respectively, comparing interim period ending December 31, 2003 and December 31,
2002 amounts, due to lower aggregate participant balances at interim period
ending December 31, 2003. Investment income and net investment income decreased
54.90 percent and 64.87 percent, respectively, during interim period ending
December 31, 2003 compared to interim period ending December 31, 2002 primarily
due to the lower interest rate environment and partially due to lower average
net assets. Total expenses decreased 36.66 percent during interim period ending
December 31, 2003 compared to interim period ending December 31, 2002 due to
lower average net assets and a reduced fee structure to the fund. Units sold
decreased 31.41 percent and units redeemed increased 7.17 percent, caused by an
increase in participant gross outflows during the interim period ending December
31, 2003 compared to interim period ending December 31, 2002.
-5-
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIVERSIFIED PORTFOLIO
STATEMENT OF NET ASSETS (UNAUDITED)
DECEMBER 31, 2003
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
TIME OF AMORTIZED
PAR VALUE DESCRIPTION PURCHASE DUE DATE COST
--------- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES -- 2.82%
$4,000,000 Federal Home Loan Mortgage Corporation 1.09% 03/03/04 $ 3,992,629
3,000,000 Federal National Mortgage Association 1.14% 03/08/04 2,993,802
-----------
TOTAL (cost -- $6,986,431) $ 6,986,431
-----------
COUPON SECURITIES -- 20.14%
*$5,000,000 Federal Home Loan Bank, Variable Rate 1.03% 01/02/04 $ 4,999,992
5,000,000 Federal Home Loan Bank, 5.375% 1.03% 01/05/04 5,002,347
* 700,000 Student Loan Marketing Association, Variable Rate 1.27% 01/09/04 700,015
5,000,000 Federal Home Loan Mortgage Corporation, 5.00% 1.15% 01/15/04 5,007,291
4,200,000 Federal National Mortgage Association, 5.125% 1.04% 02/13/04 4,219,906
5,000,000 Federal Home Loan Bank, 5.40% 1.12% 03/01/04 5,034,881
3,000,000 Student Loan Marketing Association, 4.75% 1.18% 04/23/04 3,032,901
4,000,000 Federal National Mortgage Association, 3.00% 1.17% 06/15/04 4,033,041
5,000,000 Tennessee Valley Authority, 4.75% 1.19% 07/15/04 5,094,867
3,000,000 Federal National Mortgage Association, 6.50% 1.23% 08/15/04 3,097,347
3,000,000 Federal National Mortgage Association, 3.500% 1.40% 09/15/04 3,043,887
3,500,000 Federal Home Loan Bank, 3.625% 1.28% 10/15/04 3,563,988
3,000,000 Federal Home Loan Mortgage Corporation, 3.250% 1.50% 11/15/04 3,045,167
-----------
TOTAL (cost -- $49,875,630) $49,875,630
-----------
CERTIFICATES OF DEPOSIT -- 5.96%
$ 800,000 Exchange Bank, Collins 2.00% 01/07/04 $ 800,000
1,000,000 State Savings Bank, Baxter 2.00% 01/09/04 1,000,000
250,000 Ft. Madison Bank & Trust, Ft. Madison 2.00% 01/16/04 250,000
500,000 First Central State Bank, DeWitt 1.15% 01/20/04 500,000
250,000 Ft. Madison Bank & Trust, Ft. Madison 2.00% 01/22/04 250,000
1,000,000 Liberty Bank, West Des Moines 1.75% 02/04/04 1,000,000
See accompanying notes to financial statements.
*Denotes variable rate investment with interest rate as of December 31, 2003
-6-
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIVERSIFIED PORTFOLIO
STATEMENT OF NET ASSETS (UNAUDITED), CONTINUED
DECEMBER 31, 2003
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
TIME OF AMORTIZED
PAR VALUE DESCRIPTION PURCHASE DUE DATE COST
- --------- ----------- -------- -------- ----
250,000 Citizens Bank, Sac City 2.00% 02/10/04 250,000
1,000,000 St. Ansgar State Bank, St. Ansgar 1.80% 03/04/04 1,000,000
100,000 Maxwell State Bank, Maxwell 1.75% 03/22/04 100,000
250,000 Citizens Bank, Sac City 1.75% 04/01/04 250,000
250,000 Maquoketa State Bank, Maquoketa 1.35% 04/21/04 250,000
200,000 Maxwell State Bank, Maxwell 1.75% 04/23/04 200,000
500,000 Ft. Madison Bank & Trust, Ft. Madison 1.75% 04/30/04 500,000
500,000 Freedom Financial Bank, West Des Moines 1.35% 06/08/04 500,000
250,000 Citizens Bank, Sac City 1.35% 06/11/04 250,000
500,000 First Central State Bank, DeWitt 1.35% 06/21/04 500,000
500,000 First American Bank, Ames 1.35% 06/30/04 500,000
250,000 Citizens Bank, Sac City 1.40% 08/13/04 250,000
1,000,000 Peoples Savings Bank, Charles City 1.45% 08/16/04 1,000,000
500,000 Premier Bank, Rock Valley 1.40% 08/25/04 500,000
500,000 Premier Bank, Rock Valley 1.40% 08/30/04 500,000
1,500,000 Union State Bank, Winterset 1.55% 09/07/04 1,500,000
500,000 First American Bank, Ames 1.55% 09/14/04 500,000
500,000 Tri County Bank & Trust, Cascade 1.55% 10/18/04 500,000
900,000 First State Bank, Ida Grove 1.60% 11/25/04 900,000
1,000,000 Liberty Bank, West Des Moines 1.60% 12/08/04 1,000,000
-----------
TOTAL (cost -- $14,750,000) $14,750,000
-----------
See accompanying notes to financial statements.
-7-
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIVERSIFIED PORTFOLIO
STATEMENT OF NET ASSETS (UNAUDITED), CONTINUED
DECEMBER 31, 2003
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
TIME OF AMORTIZED
PAR VALUE DESCRIPTION PURCHASE DUE DATE COST
--------- ----------- -------- -------- ----
REPURCHASE AGREEMENTS (COLLATERALIZED BY U.S. GOVT. SECURITIES) -- 70.83%
$87,695,000 Merrill Lynch, Repurchase Agreement 0.90% 01/02/04 $ 87,695,000
87,696,000 UBS Warburg, Repurchase Agreement 0.98% 01/02/04 87,696,000
------------
TOTAL (cost -- $113,340,000) $175,391,000
------------
TOTAL INVESTMENTS - 99.75% (cost - $247,003,061)
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES -- .25% $247,003,061
(Includes $65,421 payable to IMG and $123,166
dividends payable to unitholders) $ 622,960
------------
NET ASSETS -- 100%
Applicable to 297,172,601 outstanding units $247,626,021
============
NET ASSET VALUE: $ 1.00
============
Offering and redemption price per unit ($247,626,021
divided by $247,626,021 units outstanding)
See accompanying notes to financial statements.
-8-
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIRECT GOVERNMENT OBLIGATION PORTFOLIO
STATEMENT OF NET ASSETS (UNAUDITED)
DECEMBER 31, 2003
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
TIME OF AMORTIZED
PAR VALUE DESCRIPTION PURCHASE DUE DATE COST
--------- ----------- -------- -------- ----
DISCOUNTED GOVERNMENT SECURITIES -- .66%
$ 325,000 Israel Government Trust Certificate 1.45% 11/15/04 $ 320,936
-----------
TOTAL (cost -- $320,936) $ 320,936
-----------
COUPON SECURITIES -- 13.59%
$ 1,000,000 United States Treasury, 3.375% 1.00% 04/30/04 $ 1,007,741
-----------
1,000,000 United States Treasury, 3.375% 1.07% 04/30/04 1,007,551
1,000,000 United States Treasury, 2.875% 1.06% 06/30/04 1,008,986
1,500,000 Private Export Funding, 6.31% 1.20% 09/30/04 1,556,702
1,000,000 United States Treasury, 1.875% 1.24% 09/30/04 1,004,692
1,000,000 United States Treasury, 5.875% 1.40% 11/15/04 1,038,607
-----------
TOTAL (cost -- $6,624,279) $ 6,624,279
-----------
REPURCHASE AGREEMENTS (COLLATERALIZED BY U.S. GOVT. SECURITIES) -85.74%
$41 ,793,000 UBS Warburg, Repurchase Agreement 0.84% 01/02/04 $41,793,000
-----------
TOTAL (cost -- $41,793,000) $41,793,000
-----------
TOTAL INVESTMENTS - 99.99% (cost - $48,738,215) $48,738,215
EXCESS OF TOTAL LIABILITIES OVER OTHER ASSETS - (.01%)
(Includes $14,396 payable to IMG and $21,976
dividends payable to unitholders) 6,656
-----------
NET ASSETS -- 100%
Applicable to 48,744,871 outstanding units 48,744,871
===========
NET ASSET VALUE: $ 1.00
===========
Offering and redemption price per unit ($48,744,871
divided by 48,744,871 units outstanding)
See accompanying notes to financial statements.
-9-
IOWA PUBLIC AGENCY INVESTMENT TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD JULY 1, 2003 TO DECEMBER 31, 2003
DIRECT GOVERNMENT
DIVERSIFIED PORTFOLIO OBLIGATION PORTFOLIO
--------------------- --------------------
INVESTMENT INCOME:
Interest $ 1,337,538 $ 288,834
--------------------- --------------------
EXPENSES:
Investment advisory, administrative,
and program support fees 425,692 99,687
Custody fees 59,951 13,889
Distribution fees 124,822 27,778
Other fees and expenses 9,369 1,985
--------------------- --------------------
TOTAL EXPENSES 619,834 143,339
--------------------- --------------------
NET INVESTMENT INCOME $ 717,704 $ 145,495
===================== ====================
IOWA PUBLIC AGENCY INVESTMENT TRUST
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE PERIOD JULY 1, 2003 TO DECEMBER 31, 2003
DIRECT GOVERNMENT
DIVERSIFIED PORTFOLIO OBLIGATION PORTFOLIO
--------------------- --------------------
FROM INVESTMENT ACTIVITIES:
Net investment income
distributed to unitholders $ 717,704 $ 145,495
===================== ====================
FROM UNIT TRANSACTIONS:
(at constant net asset value of $ 1
per unit)
Units sold $ 441,471,454 $ 26,518,821
Units issued in reinvestment of
dividends from net investment income $ 717,704 $ 145,495
Units redeemed (439,588,188) (30,210,686)
--------------------- --------------------
Net increase (decrease) in net assets
derived from unit transactions 2,600,970 (3,546,370)
NET ASSETS AT BEGINNING OF PERIOD 245,025,051 52,291,241
--------------------- --------------------
NET ASSETS AT END OF PERIOD $ 247,626,021 $ 48,744,871
===================== ====================
See accompanying notes to financial statements.
-10-
IOWA PUBLIC AGENCY INVESTMENT TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
DIVERSIFIED PORTFOLIO
SELECTED DATA FOR EACH UNIT OF
PORTFOLIO OUTSTANDING THROUGH EACH PERIOD* 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net Investment Income 0.006 0.011 0.028 0.060 0.048
Dividends Distributed (0.006) (0.011) (0.028) (0.060) (0.048)
------------------------------------------------------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 0.58% 1.14% 2.79% 6.02% 4.79%
Ratio of Expenses to Average Net Assets 0.50% 0.56% 0.56% 0.56% 0.57%
Ratio of Net Income to Average Net Assets 0.58% 1.14% 2.79% 6.02% 4.79%
Net Assets, End of Period (000 Omitted) $247,626 $297,173 $316,691 $238,635 $213,110
DIRECT GOVERNMENT OBLIGATION PORTFOLIO
SELECTED DATA FOR EACH UNIT OF PORTFOLIO
OUTSTANDING THROUGH EACH PERIOD* 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net Investment Income 0.005 0.011 0.024 0.059 0.046
Dividends Distributed (0.005) (0.011) (0.024) (0.059) (0.046)
------------------------------------------------------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 0.53% 1.07% 2.43% 5.92% 4.63%
Ratio of Expenses to Average Net Assets 0.52% 0.58% 0.58% 0.58% 0.58%
Ratio of Net Income to Average Net Assets 0.53% 1.07% 2.43% 5.92% 4.63%
Net Assets, End of Period (000 Omitted) $ 48,744 $ 77,349 $ 82,433 $ 67,438 $ 61,810
*For the six month period ending December 31, annualized.
See accompanying notes to financial statements.
-11-
IOWA PUBLIC AGENCY INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Iowa Public Agency Investment Trust (IPAIT) is a common law trust established
under Iowa law pursuant to Chapter 28E and Sections 331.555 and 384.21, Iowa
Code (1987), as amended, which authorizes Iowa public agencies to jointly invest
monies pursuant to a joint investment agreement. IPAIT is registered under the
Investment Company Act of 1940. IPAIT was established by the adoption of a Joint
Powers Agreement and Declaration of Trust as of October 1, 1987, and commenced
operations on November 13, 1987. The Joint Powers Agreement and Declaration of
Trust was amended September 1, 1988, and again on May 1, 1993. As amended, IPAIT
is authorized to operate investment programs, including the Diversified
Portfolio and Direct Government Obligation Portfolio. The accompanying financial
statements include activities of the Diversified and Direct Government
Obligation Portfolios. The objective of the portfolios is to maintain a high
degree of liquidity and safety of principal through investment in short-term
securities as permitted for Iowa public agencies under Iowa law. Wells Fargo
Bank Iowa N.A., serves as the Custodian, and Investors Management Group serves
as the Investment Adviser, Administrator and Program Support provider.
The preparation of financial statements in conformity with 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 period. Actual results
could differ from those estimates.
In reporting financial activity, IPAIT applies applicable Governmental
Accounting Standards Board (GASB) pronouncements, as well as all Financial
Accounting Standards Board and predecessor statements and interpretations not in
conflict with GASB pronouncements.
IPAIT is exposed to various risks in connection with operation of the
Diversified Portfolio and adheres to policies which mitigate market risk in the
portfolio and maintains insurance coverage for fidelity and errors and omissions
exposures. IPAIT has had no claims or settlements under its insurance coverage
since its organization in 1987.
INVESTMENTS IN SECURITIES
The Diversified and Direct Government Obligation Portfolios consist of cash and
short-term investments valued at amortized cost pursuant to Rule 2a-7 under the
Investment Company Act of 1940. This involves valuing a portfolio security at
its original cost on the date of purchase, and thereafter amortizing any premium
or discount on a straight-line basis to maturity. The amount of premium or
discount amortized to income under the straight-line method does not differ
materially from the amount which would be amortized to income under the interest
method. 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 on
the accrual basis.
IPAIT is authorized by investment policy and statute to invest public funds in
obligations of the U.S. government, its agencies and instrumentalities;
certificates of deposit and other evidences of deposit at federally insured Iowa
depository institutions approved and secured pursuant to Chapter 12 of the Code
of Iowa; and repurchase agreements, provided that the underlying collateral
consists of obligations of the U.S. government, its agencies and
instrumentalities and that IPAIT's custodian takes delivery of the collateral
either directly or through an authorized custodian.
-12-
IOWA PUBLIC AGENCY INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
In connection with transactions in repurchase agreements, it is IPAIT's policy
that its Custodian take possession of the underlying collateral securities, the
value of which exceeds the principal amount of the repurchase transaction,
including accrued interest at all times. If the seller defaults and the value of
the collateral declines, realization of the collateral by IPAIT may be delayed
or limited. At December 31, 2003, the securities purchased under overnight
agreements to resell were collateralized by government and government agency
securities with market values of $178,900,770 and $42,628,860 for the
Diversified and Direct Government Obligation Portfolios, respectively.
Certificates of deposit amounts in excess of the $100,000 federal deposit
insurance are collateralized with securities or letters of credit held by
IPAIT's custodian in IPAIT's name, or by the Iowa multiple financial institution
collateral pool in accordance with Chapter 12C of the Code of Iowa, which
provides for additional assessments against depositories to ensure there will be
no loss of public funds.
Under Governmental Accounting Standards as to custodial credit risk, IPAIT's
investments in securities are classified as category one. Category one consists
of insured or registered securities or securities held by IPAIT or its agent in
IPAIT's name and is the most secure investment category description.
UNIT ISSUES, REDEMPTIONS AND DISTRIBUTIONS
IPAIT determines the net asset value of each portfolio daily. Units are issued
and redeemed daily at the daily net asset value. Dividends from net investment
income for each portfolio are declared daily and distributed monthly.
INCOME TAXES
IPAIT is exempt from federal and state income tax.
FEES AND EXPENSES
Under separate agreements with IPAIT, Investors Management Group (IMG), the
Investment Adviser, Administrator and Program Support provider, and Wells Fargo
Bank Iowa, N.A. (Wells Fargo), the Custodian, are paid an annual fee for
operating the investment programs. For each of the portfolios, IMG receives .260
percent of the average daily net asset value up to $150 million, .215 percent
from $150 to $250 million, and .170 percent exceeding $250 million for
investment adviser and administrative fees. In addition, IMG receives .080
percent of the average daily net asset value for program support fees. For the
six month period ended December 31, 2003 the Diversified and Direct Government
Obligation Portfolios paid $425,692 and $99,687, respectively, to IMG for
services provided. For each of the portfolios, Wells Fargo receives .050 percent
of the average daily net asset value up to $150 million, .045 percent from $150
to $300 million, and .040 percent exceeding $300 million for custodial services.
For the six month period ended December 31, 2003 the Diversified and Direct
Government Obligation Portfolios paid $59,951 and $13,889, respectively, to
Wells Fargo for services provided. Under a distribution plan, the public agency
associations collectively receive an annual fee of. 100 percent of the daily net
asset value of the portfolios. For the six month period ended December 31, 2003
the Diversified and Direct Government Obligation Portfolios paid $79,913 and
$25,844, respectively, to the Iowa League of Cities, and $16,043 and $1,934,
respectively, to the Iowa Association of Municipal Utilities. For the six month
period ended December 31, 2003, the Diversified Portfolio paid $28,866 to the
Iowa State Association of Counties. IPAIT is responsible for operating expenses
incurred directly by IPAIT. All fees are computed daily and paid monthly.
-13-
IOWA PUBLIC AGENCY INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the Diversified and Direct Government
Obligation Portfolios aggregated $23,036,113,830 and $6,044,738,486,
respectively, for the six month period ended December 31, 2003. Proceeds from
maturities of securities for the Diversified and Direct Government Obligation
Portfolios aggregated $23,033,334,771 and $6,048,083,129, respectively, for the
six month period ended December 31, 2003.
-14-
BOARD OF TRUSTEES
DON KERKER, Director of Finance and Administrative Services, Muscatine Power and
Water, Chair and Trustee
DIANNE KIEFER, Treasurer, Wapello County, Second Vice Chair and Trustee
ROBERT HAGEY, Treasurer, Sioux County, Trustee
TOM HANAFAN, Mayor, Council Bluffs, Vice Chair and Trustee
LEON RODAS, General Manager, Spencer Municipal Utility, Trustee
FLOYD MAGNUSSON, Supervisor, Webster County, Trustee
SUSAN VAVROCH, City Treasurer, Cedar Rapids, Trustee
PAUL OLDHANI, Office Manager, Algona Municipal Utilities, Trustee
JODY E. SMITH, Director of Administrative Services, West Des Moines, Trustee
BOB HAUG, Executive Director, Iowa Association of Municipal Utilities,
Ex-Officio Member and Secretary
THOMAS BREDEWEG, Executive Director, Iowa League of Cities, Ex-Officio Member
and Treasurer
WILLIAM PETERSON, Executive Director, Iowa State Association of Counties,
Ex-Officio Member and Assistant Secretary
SERVICE PROVIDERS
ADMINISTRATOR-INVESTMENT
ADVISER - PROGRAM SUPPORT:
Investors Management Group
1415 28th Street, Suite 200
West Des Moines, IA 50266-1461
CUSTODIAN:
Wells Fargo Bank Iowa, N.A.
MAC N8200-034
666 Walnut Street, P.O. Box 837
Des Moines, IA50304-0837
LEGAL COUNSEL:
Ahlers & Cooney, P.C.
100 Court Avenue, Suite 600
Des Moines, IA 50309
INDEPENDENT AUDITORS:
KPMG LLP
2500 Ruan Center
Des Moines, IA50309
IOWA PUBLIC AGENCY INVESTMENT GROUP
www.ipait.org
1415 28th Street, Suite 200
West Des Moines, IA 50266-1461
(800) 872-4024
ITEM 2 N/A
ITEM 3 N/A
ITEM 4 N/A
ITEM 5 N/A
ITEM 6 N/A
ITEM 7 N/A
ITEM 8 N/A
ITEM 9 N/A
ITEM 10 N/A
ITEM 11 EXHIBITS
(a) N/A
(b) CERTIFICATIONS
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/ DONALD W. KERKER
-------------------------------------------
Donald W. Kerker, Chair and Trustee
Date: March 1, 2004
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
DONALD W. KERKER Iowa Public Agency Investment Trust, Chair and Trustee,
Donald W. Kerker, March 1, 2004