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12-31-2011 VNPB Investment Performance ReviewInvestment Advisors Steven Alexander, CTP, CGFO, Managing Director David Jang, CTP, Senior Managing Consultant Gregg Manjerovic, CFA, Portfolio Manager Rebecca Dole, CTP, Consultant Jan Anguel, Consultant Village of North Palm Beach Investment Performance Review Quarter Ended December 31, 2011 North Pal s* 4 PFM Asset Management LLC 300 S. Orange Avenue, Suite 1170 One Keystone Plaza, Suite 300 Orlando, FL 32801 North Front & Market Streets (407) 648 -2208 Harrisburg, PA 1 71 01 -2044 (407) 648 -1323 fax 717- 232 -2723 717 - 233 -6073 fax Village of North Palm Beach Investment Report - Quarter Ended December 31, 2011 Table of Contents Tab I. Section A Market Review Tab II. Section A Quarterly Summary Report Section B Investment Portfolio & Performance Section C Asset Allocation Chart as of December 31, 2011 Tab III. December 31, 2011 PFM Month -End Statement (statements are available online at www.pfm.com) This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. Table of Contents Section i Village of North Palm Beach Investment Report — Quarter Ended December 31, 2011 Summary • Quarterly returns for fixed income were positive but failed to beat returns on domestic equities. • For the quarter, short- to intermediate- duration portfolios with diversified fixed - income holdings outpaced money market accounts that avoided European exposure, including Libor -based time deposits. • PFM strives to maintain the safety of principal while at the same time positioning for growth and searching for tactical opportunities to enhance return. Economic News Growth in the U.S. has improved while the uncertainty surrounding Europe continues. Gross domestic product (GDP) in the U.S. has shown steady increases over the first three quarters of 2011, coming in at 0.4 %, 1.3% and 1.8 %, respectively. Most projections for fourth - quarter GDP growth are near 3 %. Although much of the economic expansion can be attributed to the release of pent -up demand for autos and a restocking of inventories by businesses, positive signals have emerged, showing more stabilization and a fundamental strengthening of the domestic economic recovery. While signs of tentative recovery are now occurring in the housing market, there is still a significant amount of foreclosures in the pipeline, suggesting a higher inventory of unoccupied houses. A massive downward revision to earlier existing -home sales data showed that the housing market suffered a larger loss than many previously thought. Sales from 2007 onward have had significant downward revisions of 14% on average. Recently, though, there have been positive trends in home sales, with the October - November average annual rate of home sales up 20% from the third quarter. In November, existing -home sales rose 4.0 %, significantly above the consensus of 2.2 %, while new -home sales rose by 1.6% and housing starts increased by 9.3 %. Indicators are showing improvement in labor market conditions, but there is still much that needs to be resolved in this arena as well. The unemployment rate fell to a 21/2-year low of 8.5% in December; however, much of this outcome has to do with the fact that the labor force participation rate has reached a two -year low. Market participants continue to wait for the abatement of excess slack in the labor market. Results for the Conference Board's Consumer Confidence Survey reflected an increase in positive sentiment, with the number of respondents reporting that jobs are currently "hard to get" falling to 41.8 %, the lowest level of the recovery. This development, along with other strong economic releases in the fourth quarter, led to robust quarterly performance for U.S. equities. The S &P 500 Index increased 11.8% in the fourth quarter, erasing the losses in the previous two quarters. U.S. Treasury Yields — Quarter and Year - over -Year Changes Date 3-month 1-year 2-year 5-year i i 31- Dec -11 0.01% 0.10% 0.24% 0.83% 1.88% 2.89% 30- Sep-11 0.02% 0.10% 0.24% 0.95% 1.92% 2.91% Changeover Quarter -0.01% 0.00% 0.00% -0.12% -0.04% -0.02% 31- Dec -10 0.12% 0.26% 0.59% 2.01% 3.29% 4.33% Change over Year -0.11% -0.16% -0.35% -1.18% -1.41% -1.44% Source data: Bloomberg Village of North Palm Beach Investment Report — Quarter Ended December 31, 2011 Interest Rates U.S. Treasuries fluctuated within a narrow range, finishing the quarter close to where they began. Short -term rates remained near zero due to the Federal Reserve's ( Fed's) continued commitment to keep the target rate between zero and 0.25% until at least mid 2013. Meanwhile, intermediate- and long -term rates have stabilized due to the offsetting forces of positive economic data in the U.S., a flight -to- quality reaction to the European debt crisis and the Fed's Operation Twist program, where the U.S. central bank purchases longer -dated securities while selling shorter -dated securities in an effort to keep longer -term interest rates down. 2 -Year, 5 -Year, and 10 -Year U.S. Treasury Note Yields December 31, 2010 through December 31, 2011 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% +_ Dec 10 Feb 11 Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 2 -Year TSY 5 -Year TSY 10 -Year TSY Source: Bloomberg Bond Markets Although signs point towards a stronger economy in the U.S., continued uncertainty in the global economic outlook has resulted in investors becoming more cautious and gravitating towards securities that are perceived to be less risky. Assets have flowed out of prime money market funds into government funds on concerns of the funds' potential exposure to the sovereign debt of struggling European nations. Treasuries have benefitted from this need for safety, posting positive performance for the quarter. Treasury yields are still hovering around their record lows. Agency spreads widened during the fourth quarter, while corporate spreads tightened. Both sectors offered value for investors. 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Total Returns of Various Asset Classes Quarter ended December 3 9, 2011 11.8% 0 0 2.1% 3.4% . 0 2.4% 0.6% 0.4% 0.3% ■ Quarterly Return ■ Annual Return -11.7% S &P500 Index MSCI 1 -5 Year 1 -5 Year 1 -5 Year Citigroup Total Return EAFE A -AAA Treasury Federal Euro (Domestic Total Return Corporate Index Agency Bond Index Equity) (International Index Index Equity) Sources: Bank ofAmerica Merrill Lynch, Citigroup, Bloomberg The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC (PFMAM) at the time of distribution and are subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, PFMAM cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. Village of North Palm Beach Investment Report - Quarter Ended December 31, 2011 Quarterly Summary Report Total Portfolio Value'' December 31,20111 September 30, 2011 Market Value $8,273,215.37 $8,257,389.21 Fiscal Year 2012 Fiscal Year 2011 Amortized Cost $8,217,035.94 $8,194,212.86 Fiscal Year Interest Income Year to Date Year to Date Investment Portfolio Quarterly Return Annualized Last Last Since Inception Total Return'2' 4's1'' December 31, 2011 Quarter 12 Months 24 Months June 30, 2009 Investment Portfolio 0.19% 0.76% 1.43% 1.78% 1.78% Merrill Lynch 1 -3 Year U.S. Treasury Index 0.20% 0.78% 1.55% 1.95% 1.88% Quarterly Realized Gain /Loss on Cost Current Quarter Previous Quarter Fiscal Year Realized Gain /Loss on Cost Current Quarter Previous Quarter Effective Duration(Years) ° December 31, 2011 September 30, 2011 Yields December 31, 2011 September 30, 2011 Investment Portfolio 1.73 1.71 Yield at Market 0.29% 0.34% Merrill Lynch 1 -3 Year U.S. Treasury Index 1.81 1.81 Yield at Cost 0.81% 0.89% Portfolio Duration % of Benchmark Duration 95% 95% 1.00% 0.75% E a) 0.50% ry 0.25% 0.00% 0.50 Quarter Total Return Comparison Quarter Ended 12/31/11 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) 3.50 3.00% 2.50% 2.00% 1.50% 1.00% 0.50 Total Return Comparison Since Inception as of Quarter Ended 12/31/11 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) e Notes: 1. In order to comply with GASB accrual accounting reporting requirements. 2. End of quarter trade -date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute's Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on an unannuali -c! basis. 6. Includes money market fund /cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section A - 1 Current Quarter Previous Quarter Fiscal Year 2012 Fiscal Year 2011 Quarterly Interest Income December 31, 2011 September 30, 2011 Fiscal Year Interest Income Year to Date Year to Date Investment Portfolio $31,806.54 $17,351.28 Investment Portfolio $31,806.54 $96,644.68 TD Bank Money Market Fund 1.63 1.17 TD Bank Money Market Fund 1.63 34.78 Total $31,808.17 $17,352.45 Total $31,808.17 $96,679.46 Current Quarter Previous Quarter Fiscal Year 2012 Fiscal Year 2011 Quarterly Realized Gain /Loss on Cost December 31, 2011 September 30, 2011 Fiscal Year Realized Gain /Loss on Cost Year to Date Year to Date Investment Portfolio ($1,216.93) $6,023.12 Investment Portfolio ($1,216.93) $24,540.42 Notes: 1. In order to comply with GASB accrual accounting reporting requirements. 2. End of quarter trade -date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute's Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on an unannuali -c! basis. 6. Includes money market fund /cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section A - 1 Village of North Palm Beach Executive Summary PORTFOLIO STRATEGY Investment Report - Quarter Ended December 31, 2011 ➢ The Village's Investment Portfolio is of high credit quality and invested in U.S. Treasury, Federal Agency, and U.S. Government Supported Corporate Notes securities. ➢ For the third quarter in a row, Treasuries outperformed Agencies, while Corporates out - performed both Treasuries and Agencies for the quarter, reversing a portion of the large sell -off in Third Quarter. In the corporate sector, non - financials (average rating A -) out - performed financials (average rating A +) for the quarter and the year by a wide margin. ➢ The near -zero net change in yields belies the volatility seen intra - quarter. We used this movement in spreads to take profits on individual corporate, treasury and agency holdings, and to reset those positions on sell -offs in risky assets. On several occasions, both agencies and corporate spreads tightened on expectations of a possible solution to the European debt crisis, only to widen again when various proposals disappointed. ➢ With interest rates falling to historic lows, we maintained a slightly conservative duration posture at around 95% of the benchmark's duration to retain flexibility. Even though short -term rates have remained near 0% for over three years, the portfolio earned a total return of 1.43% over the past year. ➢ In an environment of range bound yields, performance can be enhanced by holding longer maturities, which have higher initial yields and benefit from "roll down." PFM employed this strategy, rolling treasury, agencies, and coporates with shorter maturities into higher yielding 2 -3 year maturities. ➢ The Fed could well seek to provide further support for the U.S. economy by communicating the intention to maintain its extraordinarily accommodative monetary policy far into the future, or by establishing specific employment and inflation hurdles that would have to be breached before it changes its current policy stance. This supports the view that rates will remain low longer than the market current anticipates. ➢ The yield curve is likely to remain positively sloped, anchored for the foreseeable future by the near -zero federal funds rate. In this environment, lengthening duration should provide value, although longer duration investments have greater price risk if interest rates should rise. ➢ Europe remains a highly fluid and problematic situation, as Italy and Spain appear headed for recession. Sovereign credit ratings are under pressure, and large European banks are being forced to shed assets and raise large amounts of capital. A clear solution appears elusive. We continue to avoid sensitive issuers and geographical regions. ➢ As always, we strive to maintain the safety of principal while at the same time positioning the Investment Portfolio for growth and searching for tactical opportunities to enhance return. In these changing times, our strategy will remain flexible and may change in response to changes in interest rates, economic data, market outlook or specific opportunities that arise. PFM Asset Management LLC Section B - 1 Village of North Palm Beach Investment Report - Quarter Ended December 31, 2011 Investment Portfolio Composition and Credit Quality Characteristics Security Type December 31, 2011 % of Portfolio September 30, 2011 % of Portfolio U.S. Treasuries $5,685,738.12 68.7% $4,741,652.00 57.4% Federal Agencies 2,101,504.41 25.4% 2,569,126.28 31.1% Commercial Paper 0.00 0.0% 0.00 0.0% Certificates of Deposit 0.00 0.0% 0.00 0.0% Bankers Acceptances 0.00 0.0% 0.00 0.0% Repurchase Agreements 0.00 0.0% 0.00 0.0% Municipal Obligations 0.00 0.0% 0.00 0.0% Corporate Notes /Bonds 0.00 0.0% 0.00 0.0% Corporate Notes /Bonds - FDIC Insured 404,157.33 4.9% 907,643.30 11.0% Mortgage Backed 0.00 0.0% 0.00 0.0% Money Market Fund /Cash 81,815.51 1.0% 38,967.63 0.5% Totals $8,273,215.37 100.0% $8,257,389.21 100.0% U.S. Treasuries 69% Portfolio Composition as of 12/31/11 Federal Agency _Obligations 25% Corporate Notes /Bonds - FDIC Insured 5% 9oney Market Fund /Cash 0.99% Notes: 1. End of quarter trade -date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund /LGIP. Standard & Poor's is the source of the credit ratings. Credit Quality Distribution as of 12/31/11 AA+ -- __ /100% 1 PFM Asset Management LLC Section B - 2 Village of North Palm Beach Investment Report - Quarter Ended December 31, 2011 80% Investment Portfolio Maturity Distribution Maturity Distribution' December 31, 2011 September 30, 2011 Overnight (Monedy Market Fund) $81,815.51 $38,967.63 Under 6 Months 404,157.33 0.00 6 - 12 Months 201,948.31 1,440,988.82 1 - 2 Years 5,532,828.75 3,394,318.79 2 - 3 Years 2,052,465.47 3,383,113.97 3 - 4 Years 0.00 0.00 4 - 5 Years 0.00 0.00 5 Years and Over 0.00 0.00 Totals $8,273,215.37 $8,257,389.21 Notes: 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section B - 3 Portfolio Maturity Distribution' 80% 70% 67% []December 31, 2011 ■September 30, 2011 60% 0 0 50% 0 41% 41% 40% 0 30% 0 25% a� ca 20% 17% c a� 10% o 5 % d 0% 1 % 0% 0% 2% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years 5 Years and Over Notes: 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section B - 3 Village of North Palm Beach Investment Report - Quarter Ended December 31, 2011 Investment Portfolio Maturity Distribution versus the Benchmark' 35.0% 1 30.0% - 25.0% 20.0% x a 15.0% - 10.0% 5.0% 0.0% 1 L) h0 1�) oo oo '1`' ho Do ho ^`' Qo ^) o0 00 0 Z. o ti. ti ti ti 11V ti 1,1 ^)- ^, ^,- N_ I�K 1:1) - Years to Maturity ❑ Investment Portfolio ❑Merrill Lynch 1 -3 Year U.S. Treasury Note Index Notes: 1. Due to the nature of the security, Mortgage- Backed Securities are represented based on their average life maturity rather than their final maturity. PFM Asset Management LLC Section B - 4 Village of North Palm Beach' Asset Allocation as of December 31, 2011* Security Type December 31, 2011 December 31, 2011 Notes Permitted by Policy Florida SBA Prime Fund and Fund B 786,863.56 3.82% 2 25% United States Treasury Securities 5,652,065.72 27.44% 100% United States Government Agency Securities - 0.00% 100% Federal Instrumentalities 2, 081, 003.04 10.10% 50% Certificates of Deposit - 0.00% 100% Repurchase Agreements - 0.00% 0% Commercial Paper - 0.00% 0% Corporate Notes 402,151.67 1.95% 25% Mortgage - Backed Securities - 0.00% 0% Bankers' Acceptances - 0.00% 0% Money Market Mutual Funds 1,232,676.74 5.98% 50% Intergovernmental Investment Pool - 0.00% 25% Interest Bearing Checking or Savings Account 10,444,653.33 50.70% 2 100% Village Managed $12,382,378.12 60.11% Notes Permitted by Policy PFM Managed $8,217,035.94 39.89% 33% Total $20,599,414.06 100.00% 33% Individual Issuer Breakdown December 31, 2011 December 31, 2011 Notes Permitted by Policy Government National Mortgage Association (GNMA) - 0.00% 100% US Export-Import Bank (Ex -Im) - 0.00% 100% Farmers Home Administration (FMHA) - 0.00% 100% Federal Financing Bank - 0.00% 100% Federal Housing Administration (FHA) - 0.00% 100% General Services Administration - 0.00% 100% New Communities Ad Debentures - 0.00% 100% US Public Housing Notes & Bonds - 0.00% 100% US Dept. of Housing and Urban Development - 0.00% 100% Federal Farm Credit Bank(FFCB) 276,744.74 1.34% 10% Federal Home Loan Bank (FHLB) 560,215.21 2.72% 10% Federal National Mortgage Association (FNMA) 540,496.98 2.62% 10% Federal Home Loan Mortgage Corporation (FHLMC) 703,546.11 3.42% 10% Student Loan Marketing Association (SLMA) - 0.00% 0% 1. All Assets. 2. These Accounts are managed by the Village. *PFM managed securities are shown on Amortized Cost plus Accrued Interest basis. Asset Allocation as of December 31, 2011 Money Market Mutual Funds Corporate Notes 5.98% 1.95 Interest Bearing Checking Federal Instrumentalities or Savings Account 10.10% . - - - - -- 50.70% United States Treasury - Securities Florida SBA Prime Fund 27.44% and Fund B 3.82% Individual Issuer Breakdown December 31, 2011 December 31, 2011 Notes Permitted by Policy CD - BankA - 0.00% 33% CD - BankB - 0.00% 33% Interest Bearing Checking or Savings Account - Wells Fargo 10,444,653.33 50.70% 2 50% Interest Bearing Checking or Savings Account - B - 0.00% 50% Bank of America Corporate Notes - FDIC insured 402,151.67 1.95% 33% Corporate Notes B - 0.00% 33% Corporate Notes C - 0.00% 33% Corporate Notes D - 0.00% 33% Corporate Notes E - 0.00% 33% Money Market Fund - TD Bank Sweep Account 81,815.51 0.40% 33% Money Market Fund - Wells Fargo Advantage Fund 1,150,861.23 5.59% 2 33% Florida Prime 543,249.81 2.64% 25% SBA Fund B 243,613.75 1.18% N/A PFM Asset Management LLC Section C - 1 Add � -1- -I Customer Service PO Box 11813 Harrisburg, PA 17108 -1813 ACCOUNT STATEMENT Client Management Team Mel Hamilton Senior Managing Consultant 300 South Orange Avenue, Suite 1170 Orlando, FL 32801 407 -648 -2208 hamiltonm @pfm.com Steven Alexander, CTP, CGFO Managing Director 300 South Orange Avenue, Suite 1170 Orlando, FL 32801 407 -648 -2208 alexanders @pfm.com Gregg Manjerovic, CFA Senior Portfolio Manager One Keystone Plaza, Suite 300 Harrisburg, PA 17101 717- 232 -2723 manjerovicg @pfm.com Rebecca Dole, CTP Consultant 300 South Orange Street, Suite 1170 Orlando, FL 32801 407 -648 -2208 doler @pfm.com Contents Cover /Disclosures Summary Statement Individual Accounts Accounts included in Statement NORTH PALM BEACH INVESTMENT PORTFOLIO Online Access www.pfm.com VILLAGE OF NORTH PALM BEACH SAMIA JANJUA 501 US HIGHWAY 1 NORTH PALM BEACH, FL 33408 Customer Service 1- 717 - 232 -2723 Mn WF Important Disclosures This statement is for general information purposes only and is not intended to provide specific advice or recommendations. PFM Asset Management LLC ( "PFM ") is an investment advisor registered with the Securities and Exchange Commission, and is required to maintain a written disclosure statement of our background and business experience. If you would like to receive a copy of our current disclosure statement, please contact Service Operations at the address below. Proxy Voting PFM does not normally receive proxies to vote on behalf of its clients. However, it does on occasion receive consent requests. In the event a consent request is received the portfolio manager contacts the client and then proceeds according to their instructions. PFM's Proxy Voting Policy is available upon request by contacting Service Operations at the address below. Questions About an Account PFM's monthly statement is intended to detail our investment advisory activity as well as the activity of any accounts held by clients in pools that are managed by PFM. The custodian bank maintains the control of assets and executes (i.e., settles) all investment transactions. The custodian statement is the official record of security and cash holdings and transactions. PFM recognizes that clients may use these reports to facilitate record keeping; therefore the custodian bank statement and the PFM statement should be reconciled and differences resolved. Many custodians use a settlement date basis which may result in the need to reconcile due to a timing difference. Account Control PFM does not have the authority to withdraw funds from or deposit funds to the custodian. Our clients retain responsibility for their internal accounting policies; implementing and enforcing internal controls and generating ledger entries or otherwise recording transactions. Market Value Generally, PFM's market prices are derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, Bloomberg or Telerate. Where prices are not available from generally recognized sources the securities are priced using a yield -based matrix system to arrive at an estimated market value. Prices that fall between data points are interpolated. Non - negotiable FDIC - insured bank certificates of deposit are priced at par. Although PFM believes the prices to be reliable, the values of the securities do not always represent the prices at which the securities could have been bought or sold. Explanation of the valuation methods for money market and TERM funds is contained in the appropriate fund information statement. Amortized Cost The original cost of the principal of the security is adjusted for the amount of the periodic reduction of any discount or premium from the purchase date until the date of the report. Discount or premium with respect to short term securities (those with less than one year to maturity at time of issuance) is amortized on a straightline basis. Such discount or premium with respect to longer term securities is amortized using the constant yield basis. Important Disclosures Tax Reporting Cost data and realized gains / losses are provided for informational purposes only. Please review for accuracy and consult your tax advisor to determine the tax consequences of your security transactions. PFM does not report such information to the IRS or other taxing authorities and is not responsible for the accuracy of such information that may be required to be reported to federal, state or other taxing authorities. Financial Situation In order to better serve you, PFM should be promptly notified of any material change in your investment objective or financial situation. Callable Securities Securities subject to redemption prior to maturity may be redeemed in whole or in part before maturity, which could affect the yield represented. Portfolio The securities in this portfolio, including shares of mutual funds, are not guaranteed or otherwise protected by PFM, the FDIC (except for certain non - negotiable certificates of deposit) or any government agency. Investment in securities involves risks, including the possible loss of the amount invested. Rating Information provided for ratings is based upon a good faith inquiry of selected sources, but its accuracy and completeness cannot be guaranteed. Shares of some money market and TERM funds are marketed through representatives of PFM's wholly owned subsidiary, PFM Fund Distributors, Inc. PFM Fund Distributors, Inc. is registered with the SEC as a broker /dealer and is a member of the Financial Industry Regulatory Authority ( "FINRA ") and the Municipal Securities Rulemaking Board ( "MSRB "). You may reach the FINRA by calling the FINRA Regulator Public Disclosure Hotline at 1 -888- 289 -9999 or at the FINRA Regulation Internet website address www.nasd.com. A brochure describing the FINRA Regulation Public Disclosure Program is also available from the FINRA upon request. Key Terms and Definitions Dividends on money market funds consist of interest earned, plus any discount ratably amortized to the date of maturity, plus all realized gains and losses on the sale of securities prior to maturity, less ratable amortization of any premium and all accrued expenses to the fund. Dividends are accrued daily and may be paid either monthly or quarterly. The monthly earnings on this statement represent the estimated dividend accrued for the month for any program that distributes earnings on a quarterly basis. There is no guarantee that the estimated amount will be paid on the actual distribution date. Current Yield is the net change, exclusive of capital changes and income other than investment income, in the value of a hypothetical fund account with a balance of one share over the seven -day base period including the statement date, expressed as a percentage of the value of one share (normally $1.00 per share) at the beginning of the seven -day period. This resulting net change in account value is then annualized by multiplying it by 365 and dividing the result by 7. The yields quoted should not be considered a representation of the yield of the fund in the future, since the yield is not fixed. Account Statement For the Month Ending December 31, 2011 Average maturity represents the average maturity of all securities and investments of a portfolio, determined by multiplying the par or principal value of each security or investment by its maturity (days or years), summing the products, and dividing the sum by the total principal value of the portfolio. The stated maturity date of mortgage backed or callable securities are used in this statement. However the actual maturity of these securities could vary depending on the level or prepayments on the underlying mortgages or whether a callable security has or is still able to be called. Monthly distribution yield represents the net change in the value of one share (normally $1.00 per share) resulting from all dividends declared during the month by a fund expressed as a percentage of the value of one share at the beginning of the month. This resulting net change is then annualized by multiplying it by 365 and dividing it by the number of calendar days in the month. YTM at Cost The yield to maturity at cost is the expected rate of return, based on the original cost, the annual interest receipts, maturity value and the time period from purchase date to maturity, stated as a percentage. YTM at Market The yield to maturity at market is the rate of return, based on the current market value, the annual interest receipts, maturity value and the time period from purchase date to maturity, stated as a percentage. Managed Account portfolio of investments managed discretely by PFM according to the client's specific investment policy and requirements. The investments are directly owned by the client and held by the client's custodian. Unsettled Trade A trade which has been executed however the final consummation of the security transaction and payment has not yet taken place. Please review the detail pages of this statement carefully. If you think your statement is wrong, missing account information, or if you need more information about a transaction, please contact PFM within 60 days of receipt. If you have other concerns or questions regarding your account you should contact a member of your client management team or PFM Service Operations at the address below. PFM Asset Management LLC Attn: Service Operations One Keystone Plaza, Suite 300 N. Front & Market Sts Harrisburg, PA 17101 .y : Managed Account Summary Statement For the Month Ending December 31, 2011 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Summary - Managed Account Cash Transactions Summary - Managed Account Opening Market Value $8,184,331.27 Maturities /Calls 0.00 Maturities /Calls 0.00 Sale Proceeds 825,280.66 Principal Dispositions (824'178'27) Coupon /Interest Income 7,838.04 Principal Payments 0.00 Principal Acquisitions 817,846.88 Unsettled Trades 0.00 Security Purchases (820,734.99) Change in Current Value (2,855.68) Net Cash Contribution 0.00 Reconciling Transactions 0.00 Closing Market Value $8,175,144.20 Earnings Reconciliation (Cash Basis) - Managed Account Cash Balance Interest /Coupons Received 8,940.43 Closing Cash Balance $81,815.51 Less Purchased Interest Related to Interest /Coupons (2,888.11) Plus Net Realized Gains /Losses (3,296.17) Total Cash Basis Earnings $2,756.15 Ending Amortized Value of Securities 8,118,964.77 Ending Accrued Interest 16,255.66 Plus Proceeds from Sales 825,280.66 Plus Proceeds of Maturities /Calls /Principal Payments 0.00 Plus Coupons Received 7,838.04 Less Cost of New Purchases (820,734.99) Less Beginning Amortized Value of Securities (8,123,825.27) Less Beginning Accrued Interest (15,322.00) Total Accrual Basis Earnings $8,456.87 � NI Account 61350001 Page 1 WF PFM Asset Management LLC =` Nt Portfolio Summary and Statistics NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Description Par Value Market Value Percent U.S. Treasury Bond / Note 5,630,000.00 5,677,385.16 69.44 U.S. Government Supported Corporate 400,000.00 402,734.00 4.93 Debt Federal Agency Bond / Note 2,060,000.00 2,095,025.04 25.63 Managed Account Sub -Total 8,090,000.00 8,175,144.20 100.00% Accrued Interest 16,255.66 Total Portfolio 8,090,000.00 8,191,399.86 Unsettled Trades Maturity Distribution 0.00 0.00 0 - 6 Months 6 - 12 Months 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years Over 5 Years US TSY Bond / Note 69.44% For the Month Ending December 31, 2011 Fed Agy Bond / Note 25.63% JS Govt Supported Corp Debt 4.93% Yield to Maturity at Cost 0.81% Yield to Maturity at Market 0.29% Duration to Worst 1.73 Weighted Average Days to Maturity 637 A=PFLI` Account 61350001 Page 2 uPFM Asset Management LLC �ff W-T Managed Account Issuer Summary NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Issuer Market Value of Holdings Percent BANK OF AMERICA CORP TLGP 402,734.00 4.93 FANNIE MAE 545,586.30 6.67 FEDERAL FARM CREDIT BANKS 275,869.88 3.37 FEDERAL HOME LOAN BANKS 567,101.66 6.94 FREDDIE MAC 706,467.20 8.64 UNITED STATES TREASURY 5,677,385.16 69.45 Total $8,175,144.20 100.000/0 AA+ 100.00% For the Month Ending December 31, 2011 PFM Asset Management LLC Account 61350001 Page 3 Managed Account Detail of Securities Held For the Month Ending December 31, 2011 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Security Type/ Description S &P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date /Coupon /Maturity U.S. Treasury :. Note CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value US TREASURY NOTES 330,000.00 AA+ Aaa 10/27/11 10/31/11 330,141.80 0.49 351.64 330,133.66 331,366.53 DTD 10/15/20110.500% 10/15/2014 Security Type Sub -Total 5,630,000.00 5,643,068.77 0.68 8,352.96 5,643,712.76 5,677,385.16 Supported U.S. Government . .. PF'I1, Account 61350001 Page 4 PFM Asset Management LLC Managed Account Detail of Securities Held For the Month Ending December 31, 2011 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Security Type/ Description S &P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date /Coupon /Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value U.S. Government Supported Corporate Debt BANK OF AMERICA CORP (FDIC) GLOBAL 400,000.00 AA+ Aaa 12/29/09 12/30/09 405,171.20 1.53 1,423.33 400,728.34 402,734.00 MTN DTD 01/30/2009 2.100% 04/30/2012 Security Type Sub -Total Federal Agency :. Note 2,060,000.00 400,000.00 1.03 6,479.37 2,074,523.67 2,095,025.04 405,171.20 1.53 1,423.33 400,728.34 402,734.00 05/20110.750% 09/22/2014 Security Type Sub -Total 2,060,000.00 2,077,998.60 1.03 6,479.37 2,074,523.67 2,095,025.04 Managed Account Sub -Total 8,090,000.00 8,126,238.57 0.81 16,255.66 8,118,964.77 8,175,144.20 Securities Sub -Total $8,090,000.00 $8,126,238.57 0.81% $16,255.66 $8,118,964.77 $8,175,144.20 Accrued Interest $16,255.66 Total Investments $8,191,399.86 PFII. Account 61350001 Page 5 WF PFM Asset Management LLC � 1FN, Managed Account Fair Market Value & Analytics For the Month Ending December 31, 2011 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Security Type/ Description Next Call Market Market Unreal G/L Unreal G/L Duration YTM Dated Date /Coupon /Maturity U.S. Treasury :. Note CUSIP Par Broker Date Price Value On Cost Amort Cost to Worst at Mkt US TREASURY NOTES 330,000.00 BARCLAYS 100.41 331,366.53 1,224.73 1,232.87 2.77 0.35 DTD 10/15/20110.500% 10/15/2014 Security Type Sub -Total 5,630,000.00 5,677,385.16 34,316.39 33,672.40 1.75 0.24 Supported U.S. Government .. D•. -%I:- - �PFNI` Account 61350001 Page 6 PFM Asset Management LLC PFM'. Managed Account Fair Market Value & Analytics For the Month Ending December 31, 2011 NORTH PALM BEACH INVESTMENT PORTFOLIO 61350001 Security Type/ Description Next Call Market Market Unreal G/L Unreal G/L Duration YTM Dated Date /Coupon /Maturity CUSIP Par Broker Date Price Value On Cost Amort Cost to Worst at Mkt Supported U.S. Government .. D•. BANK OF AMERICA CORP (FDIC) GLOBAL 400,000.00 BARCLAYS 100.68 402,734.00 (2,437.20) 2,005.66 0.33 0.05 MTN DTD 01/30/2009 2.100% 04/30/2012 Security Type Sub -Total 400,000.00 402,734.00 (2,437.20) 2,005.66 0.33 0.05 Federal Agency :. Note 05/20110.750% 09/22/2014 Security Type Sub -Total Managed Account Sub -Total 2,060,000.00 8,090,000.00 2,095,025.04 17,026.44 8,175,144.20 48,905.63 20,501.37 1.94 0.45 56,179.43 1.73 0.29 Securities Sub -Total $8,090,000.00 $8,175,144.20 $48,905.63 $56,179.43 1.73 0.29% Accrued Interest $16,255.66 Total Investments $8,191,399.86 Account 61350001 Page 7 PFM Asset Management LLC Managed Account Security Transactions & Interest For the Month Ending December 31, 2011 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Type Principal Accrued Realized G/L Realized G/L Sale Trade Settle Security Description CUSIP Par Proceeds Interest Total Cost Amort Cost Method 12/02/11 12/06/11 US TREASURY NOTES 490,000.00 0.00 3,675.00 3,675.00 DTD 12/31/2008 1.500% 12/31/2013 Transaction Type Sub -Total 1,500,000.00 0.00 7,838.04 7,838.04 12/02/11 12/06/11 FFCB BONDS (FLOATING) 490,000.00 493,964.10 1,041.25 495,005.35 (3,577.00) 2,659.60 SPEC LOT DTD 01/30/2009 2.125% 04/30/2012 Transaction Type Sub -Total 820,000.00 824,178.27 1,102.39 825,280.66 (3,296.17) 2,885.44 Managed Account Sub -Total 6,331.39 6,052.32 12,383.71 (3,296.17) 2,885.44 Total Security Transactions $6,331.39 $6,052.32 $12,383.71 ($3,296.17) $2,885.44 41' Account 61350001 Page 8 PFM Asset Management LLC: