IOWA SCHOOLS JOINT
INVESTMENT TRUST
INTERIM FINANCIAL REPORT
DECEMBER 31, 1998
SPONSORED BY THE
IOWA ASSOCIATION OF SCHOOL BOARDS
<PAGE>
TRUSTEES' REPORT
To Iowa Schools Joint Investment Trust Participants:
The Iowa Schools Joint Investment Trust (ISJIT) is pleased to present this
semi-annual report of Trust operations for the period ended December 31, 1998.
During 1998, market rates for short-term securities were relatively constant for
the first half of the year. Market rates declined in the second half of the year
as the Federal Reserve Board cut overnight rates on three separate occasions for
a total of 0.75 percent. ISJIT maintained a consistent focus upon its three
complementary investment objectives; protection of invested participant funds,
maintaining the necessary degree of liquidity to accommodate participant needs
and providing participants with an excellent market rate of return throughout
the year.
Participation in ISJIT's investment programs continues to grow and serve
additional participants. As of December 31, 1998, a total of 314 school
corporations and other eligible organizations formed under Iowa Code chapter 28E
were authorized to invest in ISJIT. During the semi-annual period, total assets
invested within the liquid funds ranged from a low of $129,103,985 to a high of
$280,469,199. When fixed term securities are included, the respective figures
range from a low of $272,780,528 to a high of $434,233,039. Total funds invested
in 1998 set several all-time records for fund invested, reaching a record high
of $474,343,181 on May 19, 1998.
The Board of Trustees is very pleased with the success of the ISJIT cash
management program and would welcome any comments or suggestions that you might
have. Our goal is to provide a cash management program that is always responsive
to its member's needs.
Respectfully,
Dean Borg, Chair
Board of Trustees
<PAGE>
MANAGEMENT DISCUSSION
During the first half of fiscal year 1998-99, short-term interest rates
declined. The Federal Reserve lowered the Federal Funds rate three times to
stabilize financial markets. Investors had become extremely risk averse as
financial turmoil that began in Southeast Asia spread to Russia and Latin
America.
The domestic economic growth continues to be strong, led by consumer and
construction spending. The global economic environment has begun to stabilize,
but remains questionable in certain regions. This combination of factors will
likely cause the Federal Reserve to leave interest rates unchanged for the next
several months.
The rate on the ISJIT Diversified Fund declined from 5.06 percent to 4.43
percent during the period. The Fund, however, consistently provided a rate
nearly 0.15 percent above the IBC Index of national money market funds.
The average maturity of the Fund was extended to 77 days during the period,
primarily by investing a portion of the portfolio in six to twelve month
Certificates of Deposit offered by Iowa financial institutions at rates above
5.00 percent.
The ISJIT program continues to emphasize three elements: safety, liquidity, and
competitive rates, in that order. We look forward to continuing to service your
cash management needs.
Sincerely,
Kathryn D. Beyer, CFA
Managing Director
Investors Management Group
<PAGE>
IOWA SCHOOLS JOINT INVESTMENT TRUST
DIVERSIFIED PORTFOLIO
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Yield at
Time of Amortized
Par Value Description Purchase Due Date Cost
- --------- ----------- -------- -------- ----
<S> <C> <C> <C> <C>
DISCOUNTED GOVERNMENT SECURITIES -- 26.88%
$ 7,500,000 Fed. Home Loan Mtge Corp.-Disc. Note 4.96% 02/01/99 $7,468,806
7,500,000 Fed. Home Loan Bank-Disc. Note 4.96% 02/16/99 7,453,808
5,000,000 Fed. Home Loan Mtge Corp.-Disc. Note 5.08% 02/23/99 4,963,710
4,715,000 Fed. Home Loan Mtge Corp.-Disc. Note 5.09% 03/03/99 4,675,293
6,920,000 Federal National Mtge. Assoc.-Disc. Note 5.01% 03/26/99 6,841,560
5,000,000 Fed. Home Loan Bank-Disc. Note 4.87% 04/30/99 4,922,485
5,000,000 Federal National Mtge. Assoc.-Disc. Note 5.04% 05/06/99 4,915,625
5,000,000 Federal National Mtge. Assoc.-Disc. Note 4.92% 06/18/99 4,889,633
5,500,000 Federal National Mtge. Assoc.-Disc. Note 4.92% 06/25/99 5,373,538
4,600,000 Federal National Mtge. Assoc.-Disc. Note 4.88% 08/20/99 4,461,862
------------
TOTAL (cost -- $55,966,320) $55,966,320
------------
COUPON SECURITIES -- 22.70%
$ 4,750,000 Student Loan Marketing Assoc., Variable Rate 5.71% 01/13/99 $4,749,537
5,000,000 Student Loan Marketing Assoc., Variable Rate 5.57% 02/08/99 4,999,092
5,000,000 Student Loan Marketing Assoc., Variable Rate 5.28% 02/18/99 4,997,057
4,000,000 Student Loan Marketing Assoc., Variable Rate 5.57% 02/22/99 3,998,996
1,000,000 Federal Farm Credit Bank, 4.64% 4.91% 05/03/99 999,081
5,525,000 Federal National Mtge. Assoc., 6.31% 4.98% 06/03/99 5,555,067
5,000,000 Federal National Mtge. Assoc., 6.19% 4.96% 06/07/99 5,025,669
1,000,000 Federal National Mtge. Assoc., 6.19% 5.01% 06/07/99 1,004,909
3,213,000 Federal National Mtge. Assoc., 6.45% 5.07% 07/01/99 3,234,272
1,000,000 Federal National Mtge. Assoc., 5.91% 5.04% 07/15/99 1,004,507
1,000,000 Federal Farm Credit Bank, 5.50% 4.88% 09/01/99 1,003,908
2,500,000 Federal National Mtge. Assoc., 5.08% 4.84% 09/24/99 2,504,034
1,000,000 Federal Home Loan Bank, 6.035% 4.96% 09/27/99 1,007,554
1,000,000 Federal National Mtge. Assoc., 6.07% 4.83% 10/18/99 1,009,485
5,000,000 Federal Home Loan Bank, 5.025% 5.03% 11/05/99 5,000,000
1,138,000 Federal National Mtge. Assoc., 8.35% 4.84% 11/10/99 1,171,080
------------
TOTAL (cost -- $47,264,248) $47,264,248
------------
CERTIFICATES OF DEPOSIT -- 15.37%
$ 250,000 Citizens Bank, Sac City 5.80% 01/04/99 $250,000
750,000 Farmers State Bank, Hawarden 5.30% 01/12/99 750,000
250,000 Cherokee State Bank, Cherokee 4.90% 01/20/99 250,000
2,000,000 Community First State Bank, Decorah 4.90% 01/21/99 2,000,000
5,000,000 NationsBank, Des Moines 4.90% 01/26/99 5,000,000
1,000,000 Ottumwa Savings Bank, Ottumwa 4.88% 02/04/99 1,000,000
300,000 Community Bank, Miles 5.80% 02/08/99 300,000
2,000,000 First State Bank, Conrad 5.30% 02/12/99 2,000,000
250,000 Ft. Madison Bank & Trust, Ft. Madison 5.87% 02/18/99 250,000
500,000 American Bank, LeMars 5.73% 02/19/99 500,000
500,000 Union State Bank, Winterset 6.00% 02/22/99 500,000
2,000,000 St. Ansgar State Bank, St. Ansgar 5.75% 03/08/99 2,000,000
300,000 Community Bank, Miles 5.25% 03/11/99 300,000
500,000 Peoples Bank & Trust, Rock Valley 5.65% 03/24/99 500,000
250,000 Citizens Bank, Sac City 5.35% 04/05/99 250,000
500,000 Citizens Bank, Sac City 5.30% 04/12/99 500,000
500,000 St. Ansgar State Bank, St. Ansgar 6.00% 04/20/99 500,000
100,000 Ackley State Bank, Ackley 4.90% 04/20/99 100,000
250,000 First State Bank, Huxley 4.95% 04/20/99 250,000
500,000 Tama State Bank, Tama 4.90% 04/20/99 500,000
250,000 United Bank of Iowa, Ida Grove 5.00% 04/21/99 250,000
200,000 Security Savings Bank, Gowrie 4.90% 04/21/99 200,000
500,000 American State Bank, Sioux Center 6.00% 04/23/99 500,000
5,000,000 Magna Bank, Waterloo 5.99% 06/16/99 5,000,000
1,000,000 Peoples Savings Bank, Elma 5.13% 06/21/99 1,000,000
2,500,000 First National Bank, Ames 4.90% 07/19/99 2,500,000
250,000 Ft. Madison Bank & Tr, Ft. Madison 6.00% 08/23/99 250,000
500,000 First American Bank, Ames 5.80% 09/20/99 500,000
500,000 DeWitt Bank & Trust, DeWitt 5.35% 10/13/99 500,000
1,000,000 DeWitt Bank & Trust, DeWitt 5.29% 10/22/99 1,000,000
250,000 Hardin County Savings Bank, Edlora 5.00% 10/22/99 250,000
1,000,000 Union State Bank, Winterset 5.40% 10/22/99 1,000,000
250,000 State Savings Bank, Baxter 5.35% 10/25/99 250,000
600,000 First State Bank, Ida Grove 5.13% 11/30/99 600,000
500,000 Peoples Bank & Trust, Rock Valley 5.00% 12/15/99 500,000
------------
TOTAL (cost -- $32,000,000) $32,000,000
------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. securities) -- 34.97%
$36,414,000 Merrill Lynch, Repurchase Agreement 5.00% 01/04/99 $36,414,000
36,403,000 Warburg, Repurchase Agreement 4.70% 01/04/99 36,403,000
------------
TOTAL (cost -- $72,817,000) $72,817,000
------------
TOTAL INVESTMENTS -- 99.92% (cost -- $208,047,568) $208,047,568
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES -- .08%
(Includes $42,957 payable to IMG and $774,960
dividends payable to unitholders) $157,030
------------
NET ASSETS -- 100%
Applicable to 208,204,598 outstanding units $208,204,598
============
NET ASSET VALUE: $1.00
Offering and redemption price per unit ($208,204,598 ============
divided by 208,204,598 units outstanding)
</TABLE>
<PAGE>
IOWA SCHOOLS JOINT INVESTMENT TRUST
DIRECT GOVERNMENT OBLIGATION PORTFOLIO
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Yield at
Time of Amortized
Par Value Description Purchase Due Date Cost
- --------- ----------- -------- -------- ----
<S> <C> <C> <C> <C>
COUPON SECURITIES -- 5.98%
$ 2,000,000 U. S. Treasury Note, 6.375% 4.72% 07/15/99 $2,017,139
------------
TOTAL (cost -- $2,017,139) $2,017,139
------------
REPURCHASE AGREEMENTS (collateralized by U.S. Govt. securities) -- 94.24%
$31,813,000 Warburg, Repurchase Agreement 4.70% 01/04/99 $31,813,000
------------
TOTAL (cost -- $31,813,000) $31,813,000
------------
TOTAL INVESTMENTS -- 100.22% (cost -- $33,830,139) $33,830,139
EXCESS OF TOTAL LIABILITIES OVER OTHER ASSETS -- (.22%)
(Includes $4,136 payable to IMG and $115,959
dividends payable to unitholders) ($75,302)
------------
NET ASSETS -- 100%
Applicable to 33,754,837 outstanding units $33,754,837
============
NET ASSET VALUE: $1.00
Offering and redemption price per unit ($33,754,837 ============
divided by 33,754,837 units outstanding)
</TABLE>
<PAGE>
IOWA SCHOOLS JOINT INVESTMENT TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 1, 1998 TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
DIVERSIFIED DIRECT GOVERNMENT
PORTFOLIO OBLIGATION PORTFOLIO
------------ --------------------
INVESTMENT INCOME:
Interest $4,194,338 $816,331
============ ====================
EXPENSES:
Investment advisory and
program support fees $195,502 $23,357
Custody and administrative fees 176,475 50,606
Distribution fees 79,302 15,571
Other fees and expenses 23,791 4,671
------------ --------------------
Total Expenses 475,070 94,205
------------ --------------------
NET INVESTMENT INCOME $3,719,268 $722,126
============ ====================
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period July 1, 1998 to December 31, 1998
- --------------------------------------------------------------------------------
DIVERSIFIED DIRECT GOVERNMENT
PORTFOLIO OBLIGATION PORTFOLIO
------------ --------------------
From Investment Activities:
Net investment income
distributed to unitholders $3,719,268 $722,126
============ ====================
From Unit Transactions:
(at constant net asset value of $1
per unit)
Units sold $566,407,263 $21,661,608
Units issued in reinvestment
of dividends from net
investment income 3,719,268 722,126
Units redeemed (567,849,085) (15,559,718)
------------ --------------------
Net increase (decrease) in net assets
derived from unit transactions 2,277,446 6,824,016
Net assets at beginning of period 205,927,152 26,930,821
------------ --------------------
Net assets at end of period $208,204,598 $33,754,837
============ ====================
<PAGE>
SELECTED DATA FOR A UNIT PORTFOLIO
OUTSTANDING THROUGH EACH PERIOD*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IOWA SCHOOLS JOINT 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 .047 .051 .049 .053 .043 .027 .031 .073 .073 .080
Dividends Distributed (.047) (.051) (.049) (.053) (.043) (.027) (.031) (.073) (.073) (.080)
------------------------------------------------------------------------------------------------------------
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 4.74% 5.08% 4.85% 5.31% 4.33% 2.68% 3.11% 7.26% 7.27% 8.05%
Ratio of Expenses
to Average Net Assets 0.60% 0.60% 0.60% 0.59% 0.59% 0.58% 0.58% 0.62% 0.66% 0.67%
Ratio of Net Income to
Average Net Assets 4.74% 5.08% 4.85% 5.31% 4.33% 2.68% 3.11% 7.26% 7.27% 8.05%
Net Assets,
End of Period
(000 Omitted) $208,205 $174,215 $161,217 $166,018 $128,985 $143,987 $143,378 $110,353 $103,212 $ 60,102
</TABLE>
*For the six month period ending December 31, annualized.
See Notes to Financial Statements.
<PAGE>
SELECTED DATA FOR A UNIT PORTFOLIO
OUTSTANDING THROUGH EACH PERIOD*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IOWA SCHOOLS JOINT 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 $ 1.000
Net Investment Income .046 .050 .047 .052 .042 .025 .030 .049 .073 .080
Dividends Distributed (.046) (.050) (.047) (.052) (.042) (.025) (.030) (.049) (.073) (.080)
------------------------------------------------------------------------------------------------------------
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 4.65% 4.99% 4.68% 5.21% 4.23% 2.54% 2.98% 4.93% 7.28% 8.05%
Ratio of Expenses
to Average Net Assets 0.61% 0.60% 0.60% .059% 0.59% 0.58% 0.58% 0.62% 0.65% 0.65%
Ratio of Net Income to
Average Net Assets 4.65% 4.99% 4.68% 5.21% 4.23% 2.54% 2.98% 4.93% 7.28% 8.05%
Net Assets,
End of Period
(000 Omitted) $33,755 $31,034 $25,781 $34,801 $27,742 $32,508 $28,713 $29,228 $27,443 $18,688
</TABLE>
*For the six month period ending December 31, annualized.
See Notes to Financial Statements.
<PAGE>
IOWA SCHOOLS JOINT INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Iowa Schools Joint Investment Trust (ISJIT) is a common law trust
established under Iowa law pursuant to Chapter 28E and Section 279.29, Iowa
Code (1985), as amended, which authorizes Iowa schools to jointly invest
moneys pursuant to a joint investment agreement. ISJIT is registered under
the Investment Company Act of 1940. ISJIT was established by the adoption
of a Joint Powers Agreement and Declaration of Trust as of October 1, 1986,
and commenced operations on December 16, 1986. The Joint Powers Agreement
and Declaration of Trust was amended September 22, 1988, and again on May
1, 1993. As amended, ISJIT is authorized and now operates three investment
programs: 1) the Diversified Portfolio, 2) the Direct Government Obligation
Portfolio, and 3) the Fixed Term Automated (FTA) Investment Program. 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 schools under Iowa law. The objective of the FTA
Investment Program is to provide individual public agency ownership of
investments in legally permissible individual securities that offer fixed
rates of return and fixed maturities. Norwest Bank Iowa, N.A., serves as
ISJIT's Administrator and Custodian, and Investors Management Group serves
as the Investment Advisor.
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 that 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.
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,
ISJIT'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 as required by Iowa law, including the
security provided by the State of Iowa's sinking fund for public deposits.
In connection with transactions in repurchase agreements, it is ISJIT'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 ISJIT may be delayed or limited. At December 31, 1998,
the securities purchased under overnight agreements to resell were
collateralized by government agency securities with market values of
$74,288,998 and $32,450,532 for the Diversified Portfolio and the Direct
Government Obligation Portfolio, respectively.
<PAGE>
IOWA SCHOOLS JOINT INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
UNIT ISSUES, REDEMPTIONS, AND DISTRIBUTIONS
ISJIT determines the net asset value of each portfolio account 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
ISJIT is exempt from federal and state income tax.
FEES AND EXPENSES
Under separate agreements with ISJIT, Investors Management Group (IMG), the
Investment Advisor and Program Support Provider, and Norwest Bank, Iowa,
N.A., (Norwest), the Custodian and Administrator are paid an annual fee for
operating the investment programs. For each of the portfolios, IMG receives
0.150 percent of the average daily net asset value up to $150 million and
0.125 percent exceeding $150 million for investment advisor fees. In
addition, IMG receives 0.10 percent of the average daily net asset value of
the Diversified Portfolio for program support fees. For the period ended
December 31, 1998, the Diversified Portfolio and the Direct Government
Obligation Portfolio paid $195,502 and $23,357, respectively, to IMG for
services provided. For each of the portfolios, Norwest receives 0.050
percent of the average daily net asset value up to $150 million, 0.045
percent from $150 to $200 million, and 0.040 percent exceeding $200 million
for custodial services. For the Diversified Portfolio, Norwest receives
0.175 percent of the average daily net asset value up to $150 million,
0.165 percent from $150 to $200 million, and 0.150 percent exceeding $200
million; for the Direct Government Obligation Portfolio, Norwest receives
0.275 percent of the average daily net asset value up to $150 million,
0.265 percent from $150 to $200 million, and 0.250 percent exceeding $200
million for administrative services. For the period ended December 31,
1998, the Diversified Portfolio and the Direct Government Obligation
Portfolio paid $176,475 and $50,606 respectively, to Norwest for services
provided. Under a distribution plan, the sponsoring association receives an
annual fee of 0.10 percent of the daily net asset value of the portfolios.
For the period ended December 31, 1998, the Diversified Portfolio and the
Direct Government Obligation Portfolio paid $79,302 and $15,571
respectively, to the Iowa Association of School Boards. ISJIT is
responsible for operating expenses incurred directly by ISJIT.
All fees are computed daily and paid monthly.
(2) SECURITIES TRANSACTIONS
Purchases of portfolio securities for the Diversified Portfolio and Direct
Government Obligation Portfolio aggregated $5,502,492,591 and
$3,734,779,094 respectively, for the six months ended December 31, 1998.
Proceeds from maturities of securities for the Diversified Portfolio and
Direct Government Obligation Portfolio aggregated $5,498,793,520 and
$3,727,997,000 respectively, for the six months ended December 31, 1998.
<PAGE>
BOARD OF TRUSTEES
DON WILLIAMS, CHAIR, Villisca
DEAN BORG, VICE CHAIRPERSON, Mount Vernon
GARY D. BENGSTEN, TREASURER, Carroll
BARB GROHE, TRUSTEE, Iowa City
RICHARD VANDE KIEFT, TRUSTEE, Cedar Falls
CAROLYN JONS, TRUSTEE, Ames
SERVICE PROVIDERS
INVESTMENT ADVISOR:
Investors Management Group
2203 Grand Avenue
Des Moines, IA 50312-5338
CUSTODIAN AND ADMINISTRATOR:
Norwest Bank Iowa, N.A.
666 Walnut, P.O. Box 837
Des Moines, IA 50304
LEGAL COUNSEL:
Ahlers, Cooney, Dorweiler, Haynie,
Smith & Allbee, P.C.
100 Court Avenue
Des Moines, IA 50309
INDEPENDENT AUDITORS:
KPMG Peat Marwick LLP
2500 Ruan Center
Des Moines, IA 50309
FOR INVESTMENT INFORMATION . . .
c/o Norwest Bank Iowa, N.A.
666 Walnut, P.O. Box 837
Des Moines, Iowa 50304
Toll Free (800) 872-0140 or (515) 245-3245
