IPAIT COMPREHENSIVE ANNUAL FINANCIAL REPORT
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIVERSIFIED FUND
DIRECT GOVERNMENT OBLIGATION FUND
FOR THE FISCAL YEAR ENDED
JUNE 30, 1997
<PAGE>
IOWA PUBLIC AGENCY INVESTMENT TRUST
(IPAIT)
FOR THE FISCAL YEAR ENDED
JUNE 30, 1997
PREPARED BY THE
IOWA PUBLIC AGENCY INVESTMENT TRUST
BOARD OF TRUSTEES
<PAGE>
TABLE OF CONTENTS
INTRODUCTORY SECTION..........................................................3
Letter from the Chair....................................................5
Management Report........................................................7
Board of Trustees........................................................8
Service Providers........................................................9
Organizational Chart....................................................11
INVESTMENT SECTION...........................................................13
Fund Facts Summary......................................................15
Diversified Fund Facts..............................................15
Direct Government Obligation Fund Facts.............................15
Diversified Fund and Direct Government Obligation Fund..................16
Introduction........................................................16
Risk Profile........................................................18
Portfolio Composition...............................................19
Performance Summary.................................................19
Past Fiscal Year Economic Summary...................................19
Economic Outlook for Fiscal Year 1998...............................20
IPAIT Investment Policy.................................................21
FINANCIAL SECTION............................................................29
Independent Auditor's Report............................................31
Financial Statements....................................................32
Financial Highlight.....................................................36
Notes to Financial Statements...........................................37
STATISTICAL SECTION..........................................................41
Growth in Fund Units - Diversified Fund and DGO Fund....................43
Monthly Comparative Yields - Diversified Fund and DGO Fund..............44
Annual Comparative Yields - Diversified Fund and DGO Fund...............45
Annual Investment Income - Diversified Fund and DGO Fund................45
Glossary of Investment Terms............................................46
<PAGE>
INTRODUCTORY SECTION
<PAGE>
IOWA PUBLIC AGENCY INVESTMENT TRUST 666 WALNUT, P.O. BOX 837
DES MOINES, IA 50304-0837
August 27, 1997
Dear Fellow IPAIT Participants:
The Iowa Pubic Agency Investment Trust (IPAIT) is pleased to submit to you this
Comprehensive Annual Financial Report for the Diversified Fund and the Direct
Government Obligation (DGO) Fund for the fiscal year ended June 30, 1997. This,
IPAIT's tenth year of serving participant needs, has been another excellent year
of operation for the IPAIT cash management program.
IPAIT was created pursuant to Iowa Code Chapter 28E in 1987 to enable eligible
Iowa public agencies to safely and effectively invest their available operating
and reserve funds. Both the Diversified and DGO portfolios have followed
established money market mutual fund investment parameters designed to maintain
a $1 per unit net asset value since inception and were registered with the
Securities and Exchange Commission (SEC) in accordance with 17 C.F.R. Section
270.2a-7 in May 1993. IPAIT was among the first local government investment
pools in the country to do so and has been formally regulated by the SEC since
that time.
The program continues to be focused upon its investment objectives as stated in
the IPAIT Investment Policy reproduced in the Investment Section elsewhere in
this report. These goals, in order of priority are safety of invested principal,
followed by maintenance of adequate liquidity, followed by evaluation of
available yield. Within these objectives, IPAIT strives to provide participants
with the best available rates of return for legally authorized investments.
As IPAIT approaches its second decade of operation, financial and operating
highlights from this past year include:
o Average combined daily investments in the Diversified and DGO portfolios
of $269,822,686, up 12.27 percent from last fiscal year.
o Placement of 72 portfolio certificates of deposit in Iowa financial
institutions, representing over $72,000,000.
o An authorized membership total of 335 public bodies, representing 148
municipalities, 84 counties, 69 municipal utilities and 34 other
eligible public agencies.
Use of the program's cash management services continued to expand dramatically
throughout the fiscal period, setting a number of new investment records for
total funds invested. Total funds invested in the program's Diversified Fund and
DGO Fund were higher for each respective day throughout the year than for any
previous year in the program's existence, with total funds invested reaching an
all-time high of $325,733,936 on April 10, 1997.
This report was prepared in its entirety by the Iowa Public Agency Investment
Trust and its various service providers. We take full responsibility for the
accuracy of the data and the completeness and fairness of the financial
statements, supporting schedules, investment performance statistics and
comparisons and various statistical tables found throughout the report.
COMPREHENSIVE ANNUAL FINANCIAL REPORT FORMAT AND CONTENTS
The report is presented in four sections as follows:
INTRODUCTION--contains the Table of Contents, Letter of Transmittal, Management
Report, IPAIT Organizational Chart and a listing of the IPAIT Board of Trustees
and service providers,
INVESTMENT--contains a comprehensive discussion of the Fund's investment
performance and operations including the following:
o Fund Facts--a summary of IPAIT's investment strategy, fund performance
comparison to other registered money market fund performance benchmarks
including the IBC Financial Data Money Fund Index, and an Economic
Environment Overview for the past fiscal year;
o Complete Portfolio Characteristics--portfolio composition and summaries
to include portfolio ownership analysis, weighted-average maturity
illustrations and comparisons, maturity analysis, portfolio distribution
by security type, historical portfolio asset growth; and
o The IPAIT Investment Policy.
FINANCIAL--contains IPAIT's financial statements and the report of independent
auditors, KPMG Peat Marwick LLP.
STATISTICAL--includes trend data for the past five years for various program
operating components, including total net asset value by type of participant,
monthly and annual yield highlights and comparisons, Summary of Operations, and
a glossary of investment terms.
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 and encourage you to contact us with comments and suggestions
regarding the operation of the program.
As we begin fiscal year 1997-98, we collectively pledge to continue working
together to safely increase interest income for every participant and to provide
helpful, convenient cash management related information. Look for us later this
year on the internet at www.ipait.org. We will see you there.
Respectfully,
Ken Alberts
Chair, Board of Trustees
IOWA PUBLIC AGENCY INVESTMENT TRUST
<PAGE>
MANAGEMENT'S REPORT
TO IPAIT PARTICIPANTS:
While IPAIT's financial statements and the related financial data contained in
this Annual Report have been prepared in conformity with generally accepted
accounting principles and such financial statements have been audited by the
Independent Auditor, KPMG Peat Marwick 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. Every three years, IPAIT is subjected to an
extensive review of all services and costs of operation by the IPAIT Board of
Trustees. This year's Comprehensive Annual Financial Report (CAFR) will be
submitted to the Government Finance Officers Association for consideration for a
Certificate of Achievement for Excellence in Financial Reporting.
In the Board's opinion, IPAIT's internal control structure is adequate to ensure
that the financial information in this report presents fairly IPAIT's operations
and financial condition.
Sincerely,
**Robert Haug
Secretary, Board of Trustees
IOWA PUBLIC AGENCY INVESTMENT TRUST
<PAGE>
BOARD OF TRUSTEES
CHAIR
MR. KEN ALBERTS,
DIRECTOR PLANNING & DEVELOPMENT
Cedar Falls Utilities
612 East 12th Street
P.O. Box 769
Cedar Falls, IA 50613-0769
(319) 266-1761
Fax (319) 266-8158
VICE CHAIR
MR. ROBERT HAGEY,
TREASURER
Sioux County Courthouse
210 Central Avenue, SW
P.O. Box 70
Orange City, IA 51041
(712) 737-3505
Fax: (712) 737-2537
SECOND VICE CHAIR
MR. TOM HANAFAN,
MAYOR
City Hall
209 Pearl Street
Council Bluffs, IA 51503
(712) 328-4601
Fax: (712) 328-2137
MR. ROBERT RASMUSSEN,
MAYOR
City Hall
118 South Main
Fairfield, IA 52556
(515) 472-6193
Fax 472-0698
MR. JODY SMITH,
FINANCE OFFICER
City of West Des Moines
P.O. Box 65320
West Des Moines, IA
50265-0320
(515) 222-3600
Fax (515) 222-3640
MR. JIM AHRENHOLTZ,
OFFICE MANAGER
Denison Municipal Utility
16th & 5th Avenue South
P.O. Box 518
Denison, IA 51442
(712) 263-4154
Fax: (712) 263-8767
MR. NORMAN KEHRBERG,
TREASURER
Plymouth County Courthouse
215 4th Avenue SE
LeMars, IA 51031
(712) 546-7078
Fax (712) 546-8796
MR. FLOYD MAGNUSSON,
SUPERVISOR
Webster County
Courthouse
703 Central Avenue
Ft. Dodge, IA 50501
(515) 573-7175
Fax: (515) 573-8228
MR. PAUL OLDHAM,
OFFICE MANAGER
Algona Municipal Utilities
104 West Call
P.O. Box 10
Algona, IA 50511
(515) 295-3584
Fax: (515) 295-3364
In addition to the IPAIT Board of Trustees above, the Executive Directors of the
Iowa League of Cities, Iowa State Association of Counties and the Iowa
Association of Municipal Utilities serve as Ex-Officio Members of the IPAIT
Board.
Shown above, from left to right, are Robert Haug, Executive Director, Iowa
Association of Municipal Utilities and IPAIT Secretary to the Board; William
Peterson, Executive Director, Iowa State Association of Counties and IPAIT
Assistant Secretary to the Board; and Thomas Bredeweg, Executive Director Iowa
League of Cities and IPAIT Treasurer to the Board.
<PAGE>
SERVICE PROVIDERS
SPONSORING ASSOCIATIONS
IOWA ASSOCIATION OF MUNICIPAL UTILITIES
6900 NE 14th St., Ste. 27
Ankeny, IA 50021-8997
Robert Haug, Executive Director
515-289-1999
Iowa League of Cities
317 Sixth Avenue
Suite 1400
Des Moines, IA 50309
Thomas G. Bredeweg, Executive Director
515-244-7282
IOWA STATE ASSOCIATION OF COUNTIES
701 East Court Avenue
Des Moines, IA 50309
William R. Peterson, Executive Director
515-244-7181
<PAGE>
SERVICE PROVIDERS (CONTINUED)
INVESTMENT
ADVISOR-ADMINISTRATOR
Investors Management Group
2203 Grand Avenue
Des Moines, IA 50312
MARK MCCLURG 515-245-9534
KATHRYN BEYER 515-245-9523
PAUL KRUSE 515-245-9532
CUSTODIAN AND BANK
TRUST SERVICES PROVIDER
Norwest Bank Iowa, N.A.
666 Walnut Street, P.O. Box 837
Des Moines, IA 50304
BRUCE KIELHORN 515-245-3200
JEAN LETH 515-245-3234
LEGAL COUNSEL
Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C.
100 Court Avenue, Suite 600
Des Moines, IA 50309
EDGAR BITTLE 515-246-0312
ELIZABETH GROB 515-246-0305
INDEPENDENT AUDITOR
KPMG Peat Marwick LLP
2500 Ruan Center
Des Moines, IA 50309
<PAGE>
ORGANIZATIONAL CHART
IOWA PUBLIC AGENCY INVESTMENT TRUST (IPAIT)
DIVERSIFIED FUND AND
DIRECT GOVERNMENT OBLIGATION FUND
ADMINISTRATION FLOW CHART
________________________________ ____________________________________
| IPAIT BOARD OF TRUSTEES | | SPONSORING ASSOCIATIONS |
| | | |
| Ken Albert, Chair | | |
| Robert Hagey, Vice Chair | | Iowa League of Cities |
| Tom Hanafan, Second Vice Chair |-----| Tom Bredeweg |
| Robert Rasmussen, Board Member | | Iowa State Association of Counties |
| Jody Smith, Board Member | | William Peterson |
| Jim Ahrenholtz, Board Member | | Iowa Association of |
| Norman Kehrberg, Board Member | | Municipal Utilities |
| Floyd Magnusson, Board Member | | Bob Haug |
| Paul Oldham, Board Member | | |
|________________________________| |____________________________________|
|
|
______________|_________________________________________________________
| | | | | | |
| _______|_________ | ________|__________ | ______________|____________ |
| | IPAIT CUSTODIAN ||| IPAIT BANK ||| IPAIT INVESTMENT ADVISOR ||
| | ||| TRUST SERVICES ||| ||
| |Norwest Bank Iowa||| Norwest Bank Iowa ||| Investors Management Group||
| | Jean Leth ||| Bruce Kiehorn ||| Paul Kruse ||
| |_________________|||___________________|||___________________________||
_|_________________ | _______|____________________ |
| LEGAL COUNSEL | | | IPAIT AUDITOR | |
| Ahlers, Cooney, | | | | |
| Dorweiler, Haynie, | | | KPMG Peat Marwick LLP | |
|Smith & Allbee, P.C.| | |CERTIFIED PUBLIC ACCOUNTANTS| |
| ATTORNEYS AT LAW | | | | |
| Edgar Bittle | | | | |
|____________________| | |____________________________| |
| |
______________|_______________ ____________________________|_
| IPAIT ADMINISTRATION | | IPAIT PROGRAM |
| | | DEVELOPMENT |
| Investors Management Group | | Investors Management Group |
| Mark McClurg | | Paul Kruse |
|______________________________| |______________________________|
<PAGE>
INVESTMENT SECTION
<PAGE>
FUND FACTS SUMMARY
<PAGE>
DIVERSIFIED FUND FACTS
AS OF JUNE 30, 1997
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: $199 million
BENCHMARKS: IBC U.S. Government & Agencies Money Fund Report Index, Iowa Code
Chapter 74A 32-89 day Public Funds Rates, and Iowa Code Chapter 74A 90-179
day Public Funds Rates.
PERFORMANCE OBJECTIVE: To provide the highest level of current income from
investment in a portfolio of U.S. government and agency securities 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 ADVISOR: Investors Management Group
MANAGEMENT FEES: Fifteen basis points (0.15%)
TOTAL EXPENSE RATIO: Fifty-six basis points (0.56%)
DIRECT GOVERNMENT OBLIGATION (DGO) FUND FACTS
AS OF JUNE 30, 1997
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 investment 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: $59 million
BENCHMARKS: IBC U.S. Treasury & Repo Money Fund Report Index, Iowa Code Chapter
74A 32-89 day Public Funds Rates, and Iowa Code Chapter 74A 90-179 day Public
Funds 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 ADVISOR: Investors Management Group
MANAGEMENT FEES: Fifteen basis points (0.15%)
TOTAL EXPENSE RATIO: Fifty-eight basis points (0.58%)
<PAGE>
DIVERSIFIED FUND AND
DIRECT GOVERNMENT OBLIGATION FUND
INVESTMENT RESULTS REVIEW
FISCAL YEAR ENDED JUNE 30, 1997
INTRODUCTION
The Diversified Fund and the Direct Government Obligation (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 federal Investment Company Act of 1940 and 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 until formal registration in 1993.
The Diversified Fund is made up of a professionally managed portfolio of U.S.
government and federal agency securities and collateralized certificates of
deposit of Iowa financial institutions and perfected repurchase agreements, each
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.
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 funds
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 securities trades for each Fund are provided monthly to the IPAIT Board
of Trustees for review.
Both portfolios have been managed by Investors Management Group, IPAIT's Des
Moines, Iowa based investment advisor, 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 generally repetitive. Ten
years of operating history create a very helpful tool to gauge necessary pool
liquidity needs.
Both the Diversified Fund and the DGO Fund follow a fundamental strategy of
investing when interest rates rise and fund cash flows provide liquidity for
purchases. In addition, the Diversified Fund actively monitors rates offered by
Iowa financial institutions for public funds certificates of deposit which are
collateralized according to Iowa statutory requirements. 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 IBC Financial Data average for all registered money market
funds. Presented in the previous column is the WAM for each Fund as compared to
the IBC Financial Data average for all similar registered money market funds for
the fiscal period.
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 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 Administrator-Advisor 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 and historically have never
exceeded 0.1 percent. Illustrated on the previous page are the amortized cost
versus market value per unit comparisons for the past three fiscal years for
each Fund.
The Diversified Fund's investment performance is regularly compared to three
established benchmarks, the IBC Financial Data average rate for all registered
Rule 2a-7 money market funds investing in U.S. government and federal agency
securities, the Iowa Code Chapter 74A rate for 32-89, and 90-179 day
certificates of deposit issued by Iowa financial institutions for public funds
in the state. The DGO Fund is similarly compared to the IBC Financial Data
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 the
Chapter 74A rates, IPAIT's Diversified Fund and DGO Fund typically offer rates
at or above the Chapter 74A benchmarks with complete daily liquidity.
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 365 days to maturity and
2. The weighted average maturity (WAM) 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 and perfected repurchase agreements collateralized by U.S. government
and federal agency securities and Iowa financial institution certificates of
deposit similarly collateralized. 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 short average maturities and extremely high-quality credit
instruments provides eligible Iowa public funds investors with a safe, effective
investment alternative.
PORTFOLIO COMPOSITION
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. As yields were declining through the first four
months of the fiscal period, each Fund's average maturity was somewhat longer
than on average. Each Fund's WAM was maintained shorter than the IBC Index for
the balance of the fiscal period in anticipation of increasing rates.
It is important to note that portfolio liquidity needs for the program must
control evaluation of alternative portfolio management opportunities at all
times. If historical cash flow analysis indicates that participants will need to
withdraw funds in the aggregate, material extension of either Fund's portfolio
is not a viable alternative.
PERFORMANCE SUMMARY
For the one-year period ended June 30, 1997, the Diversified Fund and DGO Fund
reported a ratio of net income to average net assets of 4.92 percent and 4.84
percent respectively, net of all operating expenses. This figure exceeded the
IBC Indices for each Fund, which returned 4.72 percent and 4.68 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 IBC Index as illustrated
below.
PAST FISCAL YEAR ECONOMIC SUMMARY
At the beginning of fiscal year 1997, fears of an overheating economy dominated
the fixed income horizon. Substantial gains in payroll employment triggered
concerns that inflationary pressures might be on the increase. Although
inflation had not shown signs of accelerating, many economists were concerned
that the Federal Reserve might raise short-term interest rates as a preemptive
measure to combat the possibility of developing inflationary pressures.
Historically, inflation has typically accelerated as the national economy
approaches full employment. Economic growth, however, actually moderated in the
third and fourth calendar quarters of the year, negating any need for the
Federal Reserve to take action. In the first few months of calendar 1997, the
economy began to surge ahead, led by consumer spending. The unemployment rate
continued to decline, falling below 5 percent; wages began to steadily rise; and
consumer confidence soared to record levels. In reaction to an economy that
appeared on the verge of dramatic expansion, the Federal Reserve did raise the
federal funds rate by 0.25 percent in March 1997. Concerns that increasing wage
pressures and excess consumer demand might trigger higher inflation finally
triggered action. Following the March increase, the economy once again slowed to
a more moderate pace.
ECONOMIC OUTLOOK FOR FISCAL YEAR 1998
Consumer fundamentals remain strong as we begin the new fiscal year. Employment
is robust, with unemployment rates below 5 percent and incomes rising faster
than inflation. Consumer spending may once again lead to a surge in economic
growth.
It is not always the speed of growth that leads to inflation, but the
composition of the growth. Over the last few years, much of our national
economic growth has resulted from business investment spending. Capital spending
tends to be deflationary, expanding production capacity and preventing supply
bottlenecks.
Investment spending to increase capital capacity is "good growth" from an
inflationary perspective. Conversely, high levels of consumer spending can
produce "bad growth". Increases in demand for goods and service inevitably lead
to bottlenecks as demand exceeds supply, triggering higher inflation.
If "bad growth" outweighs "good growth", the Federal Reserve may be forced again
to increase short-term interest rates to attempt to slow consumer spending.
Manufacturing indexes are beginning to show signs of backlogs developing and the
Fed is monitoring these and other measures of inflationary pressures closely.
Fed policy is already somewhat restrictive. Today's federal funds rate is 5.50
percent, more than twice the level of consumer price inflation. Although the Fed
may need to raise rates a bit more, one or two additional quarter percent moves
should cool any potential overheating.
Further Fed rate hikes are not currently priced into the market. Three-month and
six-month Treasury bills yield less than the federal funds rate. Until yields
more accurately reflect the potential for higher short-term rates, we plan to
keep the average maturity of the portfolio at approximately 40 days, somewhat
shorter than at other times.
As always, management of the Diversified Fund and the DGO Fund stresses the cash
management program's three fundamental investment objectives: 1.) safety of
invested principal, 2.) necessary liquidity, and 3.) competitive rates, in that
order of priority.
<PAGE>
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
and 12C.
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 con ducting 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 of more than 365 days from
the date of purchase not withstanding the provisions of Rule 2a-7
or any other provisions of state or federal law relating to the
operation of the Trust.
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 maturing 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
Advisor to the Board of Trustees. If such deviation exceeds 0.5
percent, the Advisor will consider what action, if any, should be
initiated to reason ably 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 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 IPAIT.
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 conform 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.
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 involve 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 therefrom.
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-Advisor, the Custodian and the Bank Trust Services provider (the
"Service Providers") pursuant to the Administrator-Advisor Agreement, the
Custodian Agreement and the Bank Trust Services 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 30 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:
o Obligations of the U.S. government, its agencies and instrumentalities.
o Certificates of deposit and other evidences of deposit at federally
insured Iowa depository institutions approved and secured pursuant to
chapter 12C.
o Repurchase agreements, provided that the underlying collateral consists
of obligations of the U.S. government, its agencies and
instrumentalities and that the Custodian takes delivery of the
collateral either directly or through an authorized custodian.
All instruments eligible for investment are further qualified by all other
provisions of this Investment Policy, including Section 8, Diversification and
Investment Maturity Limitations.
SECTION 7--DIVERSIFICATION AND INVESTMENT MATURITY LIMITATIONS
It is the policy of IPAIT to diversify portfolio investments in the Diversified
Portfolio and the Direct Government Obligation (DGO) Portfolio. As described in
the Information Statement, portfolio investments in the Diversified Portfolio
and the Direct Government Obligation Portfolio are limited to the following:
1. No individual investment may exceed 365 days in length.
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 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, 1993:
Passed and approved this 20th day of April, 1993.
IOWA PUBLIC AGENCY INVESTMENT TRUST
by ___/s/__Ken Alberts____________________
Ken Alberts, Chairman
Attest:
___/s/__Robert Haug____________________
Robert Haug
<PAGE>
FINANCIAL SECTION
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Unitholders
Iowa Public Agency Investment Trust:
We have audited the accompanying statements of net assets of the Diversified
Portfolio and the Direct Government Obligation Portfolio of the Iowa Public
Agency Investment Trust (the Trust Portfolios) as of June 30, 1997, and the
related statements of operations for the year then ended and the statements of
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 in the ten-year period ended
June 30, 1997 for the Diversifed Portfolio and the nine-year period ended June
30, 1997 for the Direct Government Obligation Portfolio. These financial
statements and the financial highlights are the responsibility of the Trust
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody are confirmed to us by the Custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Diversified Portfolio and
the Direct Government Obligation Portfolio of the Iowa Public Agency Investment
Trust as of June 30, 1997, and the results of their operations for the year then
ended and the changes in their 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 generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
August 1, 1997
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
IOWA PUBLIC AGENCY INVESTMENT TRUST -- DIVERSIFIED PORTFOLIO
STATEMENT OF NET ASSETS -- JUNE 30, 1997
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
PAR TIME OF AMORTIZED
VALUE DESCRIPTION PURCHASE DUE DATE COST
__________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
DISCOUNTED GOVERNMENT SECURITIES -- 0.78%
$ 1,545,000 Federal Home Loan Mtge Corp.-Disc. Note 5.67% 07/01/97 $ 1,545,000
-------------
TOTAL (cost-- $1,545,000) $ 1,545,000
-------------
COUPON SECURITIES -- 45.11%
$ 4,000,000 Federal Farm Credit Bank, 5.93% 5.51% 07/01/97 $ 4,000,000
695,000 Federal Farm Credit Bank, 5.93% 5.52% 07/01/97 695,000
1,000,000 Federal Home Loan Bank, 6.525% 5.71% 07/11/97 1,000,197
2,000,000 Federal Home Loan Mortgage Corp., 5.95% 5.69% 07/15/97 2,000,135
5,000,000 Federal Natl. Mtge. Assoc., Variable Rate,5.25%* 5.14% 07/16/97 4,999,885
1,000,000 Federal Home Loan Bank, 5.85% 5.57% 07/18/97 1,000,076
515,000 Federal National Mtge. Assoc., 8.80% 5.53% 07/25/97 516,070
1,000,000 Federal National Mtge. Assoc., 8.80% 5.52% 07/25/97 1,002,106
7,500,000 Fed. Nat'l Mtge. Assoc., Variable Rate, 5.25%* 5.28% 07/28/97 7,497,496
500,000 Federal Farm Credit Bank, 5.38% 5.89% 08/01/97 499,734
2,500,000 U.S. Treasury Note, 6.50% 6.05% 08/15/97 2,501,299
2,500,000 U.S. Treasury Note, 6.50% 5.45% 08/15/97 2,503,124
5,000,000 Federal Home Loan Bank, 9.20% 5.36% 08/25/97 5,028,412
7,500,000 Fed. Farm Credit Bank, Variable Rate, 5.36%* 5.34% 10/01/97 7,499,603
5,000,000 Fed. Farm Credit Bank, Variable Rate, 5.66%* 5.51% 10/01/97 4,999,719
5,000,000 Federal Home Loan Bank, Variable Rate, 5.52%* 5.34% 10/02/97 4,999,007
4,000,000 Federal Farm Credit Bank, 11.90% 5.85% 10/20/97 4,071,084
3,000,000 Federal National Mtge. Assoc., 5.53% 5.62% 10/29/97 2,998,988
3,000,000 Federal Home Loan Mortgage Corp., 5.52% 5.71% 11/06/97 2,997,973
7,500,000 Fed. Nat'l Mtge. Assoc., Variable Rate, 5.53%* 5.47% 12/03/97 7,497,830
1,000,000 Federal Home Loan Bank, Variable Rate, 5.67%* 5.36% 12/15/97 999,854
2,500,000 Federal Home Loan Bank, 5.81% 6.11% 01/23/98 2,495,023
1,500,000 Student Loan Marketing Assn, 7.00% 6.08% 03/03/98 1,508,801
2,500,000 Federal Farm Credit Bank, 5.45% 6.07% 03/03/98 2,489,971
2,000,000 Federal Home Loan Mortgage Corp., 5.19% 5.86% 03/11/98 1,990,800
1,000,000 Federal Home Loan Mortgage Corp., 5.40% 6.07% 03/16/98 995,452
1,000,000 Federal National Mtge. Assoc., 5.71% 5.88% 03/18/98 998,860
10,000,000 Federal Natl. Mtge. Assoc., Variable Rate, 5.58%* 5.84% 04/15/98 9,996,895
-------------
TOTAL (cost-- $89,783,394) $ 89,783,394
-------------
CERTIFICATES OF DEPOSIT-- 13.41%
$ 1,000,000 First State Bank, Conrad 5.80% 07/02/97 $ 1,000,000
2,000,000 Community First State Bank, Decorah 5.80% 07/07/97 2,000,000
250,000 Citizens Bank, Sac City 5.60% 07/08/97 250,000
1,000,000 First State Bank, Conrad 5.70% 07/16/97 1,000,000
500,000 Peoples State Bank, Elkader 5.65% 07/21/97 500,000
150,000 Community Bank, Preston 5.87% 07/21/97 150,000
1,000,000 Union State Bank, Monona 5.65% 07/23/97 1,000,000
1,000,000 First State Bank, Conrad 5.63% 07/24/97 1,000,000
500,000 Farmers State Bank, Hawarden 5.80% 08/04/97 500,000
1,000,000 Heritage Bank, Holstein 5.80% 08/11/97 1,000,000
2,500,000 Bankers Trust, Des Moines 5.75% 08/11/97 2,500,000
500,000 Peoples State Bank, Elkader 5.65% 08/18/97 500,000
500,000 Citizens Bank, Sac City 6.00% 08/21/97 500,000
250,000 Ft. Madison Bank & Trust, Ft. Madison 6.05% 08/21/97 250,000
500,000 First State Bank, Nora Springs 6.10% 08/29/97 500,000
*Denotes floating rate investment with interest rate as of June 30, 1997.
See accompanying notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<CAPTION>
IOWA PUBLIC AGENCY INVESTMENT TRUST -- DIVERSIFIED PORTFOLIO
STATEMENT OF NET ASSETS -- JUNE 30, 1997 (CONTINUED)
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
PAR TIME OF AMORTIZED
VALUE DESCRIPTION PURCHASE DUE DATE COST
__________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
$ 1,500,000 Mercantile Bank of Eastern Iowa, Mt. Pleasant 5.75% 09/15/97 $ 1,500,000
500,000 Peoples Bank & Trust, Rock Valley 5.75% 09/16/97 500,000
1,000,000 St. Ansgar State Bank, St. Ansgar 6.20% 09/19/97 1,000,000
1,000,000 First State Bank, Conrad 5.95% 09/30/97 1,000,000
2,500,000 Bankers Trust, Des Moines 5.95% 10/06/97 2,500,000
300,000 Miles Savings Bank, Miles 6.00% 10/17/97 300,000
150,000 Community Bank, Preston 5.97% 10/20/97 150,000
500,000 Mid-Iowa Savings Bank, Newton 6.01% 10/20/97 500,000
2,000,000 Heritage Bank, Holstein 5.95% 10/27/97 2,000,000
300,000 First State Bank, Ida Grove 5.95% 12/01/97 300,000
1,000,000 Peoples State Bank, Elma 5.95% 12/22/97 1,000,000
250,000 Ft. Madison Bank & Trust, Ft. Madison 6.10% 02/18/98 250,000
200,000 Northwestern State Bank, Orange City 5.90% 02/27/98 200,000
500,000 Union State Bank, Winterset 5.95% 02/27/98 500,000
500,000 First Bank & Trust, Rock Rapids 5.90% 03/04/98 500,000
1,000,000 St. Ansgar State Bank, St. Ansgar 6.05% 03/25/98 1,000,000
250,000 Citizens Bank, Sac City 6.30% 04/09/98 250,000
400,000 Exchange Bank, Collins 6.30% 04/15/98 400,000
200,000 Maxwell State Bank, Maxwell 6.25% 04/22/98 200,000
-------------
TOTAL (cost-- $26,700,000) $ 26,700,000
-------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) -- 40.10%
$ 39,912,000 Merrill Lynch, Repurchase Agreement 6.00% 07/01/97 $ 39,912,000
39,913,000 Smith Barney, Repurchase Agreement 6.03% 07/01/97 39,913,000
-------------
TOTAL (cost-- $79,825,000) $ 79,825,000
-------------
TOTAL INVESTMENTS-- 99.40% (cost-- $197,853,394) $ 197,853,394
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES-- .60%
(Includes $54,459 payable to IMG and $867,864
dividends payable to unitholders) $ 1,195,696
-------------
NET ASSETS-- 100%
Applicable to 199,049,090 outstanding units $ 199,049,090
=============
NET ASSET VALUE: $ 1.00
Offering and redemption price per unit ($199,049,090 =============
divided by 199,049,090 units outstanding)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IOWA PUBLIC AGENCY INVESTMENT TRUST -- DIRECT GOVERNMENT OBLIGATION PORTFOLIO
STATEMENT OF NET ASSETS -- JUNE 30, 1997
(SHOWING PERCENTAGE OF NET ASSETS)
YIELD AT
PAR TIME OF AMORTIZED
VALUE DESCRIPTION PURCHASE DUE DATE COST
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
COUPON SECURITIES --16.20%
$ 1,000,000 U.S. Treasury-Note, 8.50% 5.38% 07/15/97 $ 1,001,163
1,000,000 U.S. Treasury-Note, 5.88% 5.37% 07/31/97 1,000,396
1,500,000 U.S. Treasury-Note, 5.88% 5.45% 07/31/97 1,500,505
1,000,000 U.S. Treasury-Note, 5.88% 5.33% 07/31/97 1,000,422
1,500,000 U.S. Treasury-Note, 6.50% 6.03% 08/15/97 1,500,815
1,500,000 U.S. Treasury-Note, 7.25% 5.75% 02/15/98 1,513,574
1,000,000 U.S. Treasury-Note, 7.25% 5.84% 02/15/98 1,008,486
1,000,000 U.S. Treasury-Note, 6.13% 6.02% 03/31/98 1,000,774
------------
TOTAL (cost-- $9,526,135) $ 9,526,135
------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. Securities) -- 83.82%
$ 49,310,000 Smith Barney, Repurchase Agreement 5.96% 07/01/97 $49,310,000
------------
TOTAL (cost-- $49,310,000) $49,310,000
------------
TOTAL INVESTMENTS-- 100.02% (cost-- $58,836,135) $58,836,135
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES-- (.02%)
(Includes $15,790 payable to IMG and $236,300
dividends payable to unitholders) $ (10,455)
------------
NET ASSETS-- 100%
Applicable to 58,825,680 outstanding units $58,825,680
============
NET ASSET VALUE: $ 1.00
Offering and redemption price per unit ($58,825,680 ============
divided by 58,825,680 units outstanding)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Iowa Public Agency InvestmeNT TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
DIRECT GOVERNMENT
DIVERSIFIED PORTFOLIO OBLIGATION PORTFOLIO
INVESTMENT INCOME:
Interest $ 11,734,493 $ 3,033,698
------------ -----------
EXPENSES:
Investment advisory, administrative,
and program support fees 675,479 184,323
Custody and bank trust services fees 264,103 69,984
Distribution fees 213,836 55,987
Other fees and expenses 53,457 13,998
------------ -----------
TOTAL EXPENSES 1,206,875 324,292
------------ -----------
NET INVESTMENT INCOME $ 10,527,618 $ 2,709,406
============ ===========
<TABLE>
<CAPTION>
IOWA PUBLIC AGENCY INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30,
Direct Government
Diversified Portfolio Obligation Portfolio
1997 1996 1997 1996
_________________________________________________________________________
<S> <C> <C> <C> <C>
From Investment Activities:
Net investment income distributed
to unitholders $ 10,527,618 $ 9,810,282 $ 2,709,406 $ 2,429,570
============= ============== ============= =============
From Unit Transactions:
(at constant net asset value of $1 per unit)
Units sold $ 690,467,870 $ 791,179,123 $ 20,560,746 $ 33,201,098
Units issued in reinvestment
of dividends from net investment income 10,527,618 9,810,282 2,709,406 2,429,570
Units redeemed (694,397,980) (792,907,257) (29,762,357) (26,391,156)
------------- -------------- -------------- --------------
Net increase in net assets derived from
unit transactions 6,597,508 8,082,148 (6,492,205) (9,239,512)
Net assets at beginning of year 192,451,582 184,369,434 65,317,885 56,078,373
------------- -------------- -------------- -------------
Net assets at end of year $ 199,049,090 $ 192,451,582 $ 58,825,680 $ 65,317,885
============= ============== ============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SELECTED DATA FOR A UNIT OF EACH
PORTFOLIO OUTSTANDING THROUGH
EACH PERIOD ENDED JUNE 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIVERSIFIED PORTFOLIO
Net Asset Value,
Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net Investment Income .049 .051 .049 .029 .030 .047 .066 .077 .081 .069
Dividends Distributed (0.49) (.051) (.049) (.029) (.030) (.047) (.066) (.077) (.081) (.069)
---------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
===================================================================================================
Total Return 4.92% 5.11% 4.86% 2.88% 2.98% 4.67% 6.68% 7.73% 8.09% 6.90%
Ratio of Expenses to
Average Net Assets 0.56% 0.57% 0.57% 0.57% 0.57% 0.62% 0.66% 0.67% 0.65% 0.24%
Ratio of Net Income to
Average Net Assets 4.92% 5.11% 4.86% 2.88% 2.98% 4.67% 6.68% 7.73% 8.09% 6.90%
Net Assets,
End of Period (000 Omitted) $199,049 $192,452 $184,369 $164,149 $175,721 $182,899 $198,367 $129,980 $102,289 $ 69,324
</TABLE>
<TABLE>
<CAPTION>
SELECTED DATA FOR A UNIT OF EACH
PORTFOLIO OUTSTANDING THROUGH
EACH PERIOD ENDED JUNE 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989*
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IOWA PUBLIC AGENCY INVESTMENT TRUST
DIRECT GOVERNMENT OBLIGATION PORTFOLIO
Net Asset Value,
Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net Investment Income .048 .050 .048 .028 .028 .041 .066 .078 .083
Dividends Distributed (.048) (.050) (.048) (.028) (.028) (.041) (.066) (.078) (.083)
-----------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========================================================================================
Total Return 4.84% 5.03% 4.82% 2.77% 2.76% 4.06% 6.64% 7.77% 8.32%
Ratio of Expenses to
Average Net Assets 0.58% 0.58% 0.58% 0.58% 0.58% 0.61% 0.66% 0.65% 0.66%
Ratio of Net Income to
Average Net Assets 4.84% 5.03% 4.82% 2.77% 2.76% 4.06% 6.64% 7.77% 8.32%
Net Assets,
End of Period (000 Omitted) $ 58,826 $ 65,318 $ 56,078 $ 31,152 $ 19,026 $ 16,475 $ 7,441 $ 15,467 $ 800
</TABLE>
*From Commencement of Operations (September 1, 1988).
See accompanying notes to financial statements.
<PAGE>
(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 authorized Iowa public
agencies to jointly invest moneys pursuant to a joint investment
agreement. IPAIT is registered under the Investment Company Act of 1940.
IPAIT was established by the adoption of a Joint Powers Agreement and
Declaration of Trust as of October 1, 1987, and commenced operations on
November 13, 1987. The Joint Powers Agreement and Declaration of Trust
was amended September 1, 1988, and again on May 1, 1993. As amended,
IPAIT is authorized to operate and now operates three investment
programs: 1) the Diversified Portfolio, 2) the Direct Government
Obligation (DGO) Portfolio, and 3) the Fixed Term Automated (FTA)
Investment Program. These financial statements include activities of the
Diversified and DGO 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. The objective of the FTA Investment Program is to provide
individual public agency direct ownership of investments in legally
permissible individual securities which offer fixed rates of return and
fixed maturities. Norwest Bank Iowa, N.A., serves as the Custodian and
Bank Trust Services Provider, and Investors Management Group serves as
the Investment Advisor and Administrator.
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 increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
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
each portfolio.
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.
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.
Under Governmental Accounting Standards as to custodial credit risk,
IPAIT's investments in securities are classified as category one.
Category one is the most secure investment category description.
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.
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, 1997, the
securities purchased under overnight agreements to resell were
collateralized by government agency securities with market values of
$81,839,748 and $50,320,000 for the Diversified Portfolio and the Direct
Government Obligation Portfolio, respectively.
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 Advisor, Administrator and Program Support Provider, and
Norwest Bank, Iowa, N.A. (Norwest), the Custodian and Bank Trust Services
Provider, are paid an annual fee for operating the investment programs.
For each of the portfolios, IMG receives .230 percent of the average
daily net asset value up to $150 million, .185 percent from $150 to $300
million, and .140 percent exceeding $300 million for investment advisor
and administrative fees. In addition, IMG receives .10 percent of the
average daily net asset value up to $250 million for program support
fees. For the year ended June 30, 1997 the Diversified Portfolio and the
Direct Government Obligation Portfolio paid $675,479 and $184,323,
respectively to IMG for services provided. For each of the portfolios,
Norwest receives .050 percent of $150 million, .045 percent from $150 to
$300 million, and .040 percent exceeding $300 million for custodial
services. Norwest also receives .075 percent of the average daily net
asset value for bank trust services. For the year ended June 30, 1997,
the Diversified Portfolio and the Direct Government Obligation Portfolio
paid $264,103 and $69,984, respectively to Norwest for services provided.
Under a distribution plan the public agency associations collectively
receive an annual fee of .10 percent of the daily net asset value of the
portfolios. For the year ended June 30, 1997, the Diversified Portfolio
and the Direct Government Obligation Portfolio paid $117,582 and $49,451
respectively to the Iowa League of Cities, $24,847 and $6,536,
respectively to the Iowa Association of Municipal Utilities. For the year
ended June 30, 1997, the Diversified Portfolio paid $71,407 to the Iowa
State Association of Counties. IPAIT is responsible for other expenses
incurred directly by IPAIT. All fees
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the Diversified Portfolio and
Direct Government Obligation Portfolio aggregated $18,328,594,693 and
$9,645,477,625 respectively for the year ended June 30, 1997. Proceeds
from maturities of securities for the Diversified Portfolio and Direct
Government Obligation Portfolio aggregated $18,321,476,747 and
$9,651,583,000 respectively for the year ended June 30, 1997.
<PAGE>
STATISTICAL SECTION
<PAGE>
GROWTH IN FUND UNITS
GROWTH OF PARTICIPANTS ASSETS UNDER MANAGEMENT
DIVERSIFIED FUND AND
DIRECT GOVERNMENT OBLIGATION FUND
IPAIT ANNUAL IPAIT ANNUAL
DATE DIV FUND * GROWTH DGO FUND ** GROWTH
06/97 $ 199,049,090 3.43% $ 58,825,680 -9.94%
03/97 $ 240,303,292 6.54% $ 49,692,437 18.91%
12/96 $ 214,444,033 14.52% $ 55,091,929 21.40%
09/96 $ 206,557,219 12.61% $ 58,868,709 15.62%
06/96 $ 192,451,582 4.38% $ 65,317,885 16.48%
03/96 $ 225,543,440 14.49% $ 41,790,609 40.80%
12/95 $ 187,247,248 14.28% $ 45,378,898 61.99%
09/95 $ 183,419,433 8.79% $ 50,916,159 133.73%
06/95 $ 184,369,434 12.32% $ 56,078,373 80.01%
03/95 $ 196,998,830 7.33% $ 29,680,324 -24.24%
12/94 $ 163,844,838 -9.69% $ 28,012,748 -37.19%
09/94 $ 168,603,118 -0.03% $ 21,784,470 62.28%
06/94 $ 164,149,228 -6.59% $ 31,152,444 63.73%
03/94 $ 183,548,823 -14.30% $ 39,174,341 74.69%
12/93 $ 181,419,538 -1.02% $ 44,600,604 246.79%
09/93 $ 168,662,012 -15.21% $ 13,424,063 -8.52%
06/93 $ 175,721,378 -3.92% $ 19,026,307 15.48%
03/93 $ 214,180,229 4.68% $ 22,425,329 33.97%
12/92 $ 183,291,073 -4.35% $ 12,860,893 -29.31%
09/92 $ 198,907,983 -0.94% $ 14,675,037 67.15%
06/92 $ 182,899,353 -7.80% $ 16,475,476 121.42%
03/92 $ 204,603,904 -6.03% $ 16,739,378 105.45%
12/91 $ 191,625,582 8.01% $ 18,192,600 63.77%
09/91 $ 200,793,815 59.98% $ 8,779,691 -73.91%
06/91 $ 198,367,235 52.61% $ 7,440,794 -51.89%
03/91 $ 217,741,157 81.16% $ 8,147,861 -77.33%
12/90 $ 177,410,450 30.38% $ 11,108,759 -46.40%
09/90 $ 125,513,147 -1.24% $ 33,654,449 6.66%
* IPAIT Div Fund inception date 11/13/87
** IPAIT DGO Fund inception date 9/1/88
<PAGE>
MONTHLY COMPARATIVE YIELDS
DIVERSIFIED FUND
CODE CODE
DIV. FUND IBC US TREASURY CHAPTER 74A CHAPTER 74A
DATE RATE (1) & AGENCY INDEX (2) 32-89 DAY (3) 90-179 DAY (3)
________________________________________________________________________________
06/97 5.05 4.86 4.80 5.20
05/97 5.04 4.82 4.80 5.10
04/97 5.03 4.78 4.80 5.00
03/97 4.89 4.68 4.80 4.90
02/97 4.88 4.67 4.70 4.80
01/97 4.89 4.69 4.80 5.00
12/96 4.89 4.67 4.80 5.00
11/96 4.90 4.69 4.70 4.90
10/96 4.88 4.68 4.60 4.90
09/96 4.87 4.68 4.80 5.00
08/96 4.82 4.68 4.80 4.90
07/96 4.83 4.66 4.70 5.00
1) Actual earnings less expenses
2) IBC U.S. Government & Agencies Monthly Money Fund Report
3) Iowa Code Chapter 74A minimum public funds deposit rates
DIRECT GOVERNMENT OBLIGATION FUND
CODE CODE
DGO FUND IBC US TREASURY CHAPTER 74A CHAPTER 74A
DATE RATE (1) & REPO INDEX (2) 32-89 DAY (3) 90-179 DAY (3)
________________________________________________________________________________
06/97 4.79 4.80 4.80 5.20
05/97 4.76 4.77 4.80 5.10
04/97 4.76 4.76 4.80 5.00
03/97 4.76 4.63 4.80 4.90
02/97 4.86 4.64 4.70 4.80
01/97 4.90 4.68 4.80 5.00
12/96 4.86 4.68 4.80 5.00
11/96 4.81 4.71 4.70 4.90
10/96 4.83 4.62 4.60 4.90
09/96 4.83 4.61 4.80 5.00
08/96 4.89 4.63 4.80 4.90
07/96 4.93 4.61 4.70 5.00
1) Actual earnings less expenses
2) IBC U.S. Treasury and Repo Monthly Money Fund Report
3) Iowa Code Chapter 74A minimum public funds deposit rates
<PAGE>
ANNUAL COMPARATIVE YIELDS
IBC US GOV. IBC US TREASURY
DATE DIV FUND (1) & AGENCY INDEX (2) DGO FUND (1) & REPO INDEX (3)
________________________________________________________________________________
1997 4.92 4.72 4.84 4.68
1996 5.11 4.88 5.03 4.89
1995 4.86 4.72 4.82 4.65
1994 2.88 2.74 2.77 2.70
1993 2.98 2.83 2.76 2.68
1) Actual earnings less expenses
2) IBC U.S. Government and Agencies Money Fund Report
3) IBC U.S. Treasury and Repo Money Fund Report
ANNUAL NET INVESTMENT INCOME
DATE DIVERSIFIED FUND (1) DGO FUND (1)
_________________________________________________________________
1997 $ 10,527,618 $ 2,709,406
1996 9,810,282 2,429,570
1995 8,321,294 1,229,044
1994 4,979,118 756,594
1993 5,776,083 523,937
(1) Investment income less expenses
<PAGE>
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.
IBC - monthly and quarterly publications of IBC Financial Data, Inc.
illustrating money fund expense and performance data.
INVESTMENT ADVISOR - 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.
