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03-31-2012 Investment Performance ReviewInvestment Advisors Steven Alexander, CTP, CGFO, Managing Director David Jang, CTP, Senior Managing Consultant Gregg Manjerovic, CFA, Portfolio Manager D. Scott Stitcher, CFA, Senior Managing Consultant Rebecca Dole, CTP, Consultant Jan Anguel, Consultant Village of North Palm Beach Investment Performance Review Quarter Ended March 31, 2012 r,. North MR- fir. �1 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 March 31, 2012 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 March 31, 2012 Tab III. March 31, 2012 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 March 31, 2012 TAB I Village of North Palm Beach Investment Report - Quarter Ended March 31, 2012 Summary During the first quarter, short- to intermediate - duration portfolios with diversified fixed - income holdings (including Agencies and corporate bonds) outpaced those that were invested solely in Treasuries. Increased optimism about the U.S. economic recovery, specifically a brighter outlook in the labor markets, contributed to a general reduction in risk premiums across asset classes. PFM Asset Management obtained value for clients by rotating into Treasuries, as well as into select corporates where appropriate, while moving away from Agencies and callable securities after their exceptional recent performance. Economic News Moderate economic growth in the U.S. continued for the quarter, while troubles in Europe were mitigated for the time being. Gross domestic product (GDP) in the U.S. for the fourth quarter of 2011 was up 3.0 %, reflecting modest growth. This quarter was marked by a continuation of loose monetary policy worldwide. After Europe announced another round of long -term refinancing operations (LTRO) at the end of February to help stabilize its financial markets, other central banks followed suit, including the Bank of England and Bank of Japan, which announced further quantitative easing efforts during the quarter. In addition, China reduced its reserve ratio by 50 basis points. U.S. job market conditions improved during the quarter, as the unemployment rate fell to 8.3 %. The labor force participation rate was reported at 63.8% in March, still well below 65.8 %, the average level since 1980. The housing market remains lackluster, with home prices at low levels and foreclosures still in the pipeline, but there have been gradual improvements. For example, homebuilder Lennar reported that new orders were up 33.3% in its earnings report released on March 27. Oil prices rose to record levels during the quarter, but began to drop somewhat by the end of March. Consumer confidence and consumer spending had healthy results over the quarter, and manufacturing and services activity reflected continued expansion. Demand for riskier assets increased as a result of these positive developments, which led to the S &P 500 Index having its strongest first - quarter performance since 1998, as shown below. Total Returns of Various Asset Classes ,Quarter endedMarch 39, 2092 16.0% F % 12.0% 8.5% 8.0% 4.0% 0.0% -4.0% ■ Quarterly Return 11.0% 8.4% ■Annual Return 3 .7% 2.3% 4.l0% 0 3 2.7% 0.3 %. I -0.2% Sources: Bank ofAmerica Merrill Lynch, Citigroup, Bloomberg -5.3% - 8.o °% o S &p500Index MSCI Citigroup 1 -5 Year 1 -5 Year 1 -5 Year Total Return EAFE Emo A -AAA Federal Treasury (Domestic Total Return Bond Index Corporate Agency Index Equity) (International Index Index Equity) Sources: Bank ofAmerica Merrill Lynch, Citigroup, Bloomberg Village of North Palm Beach Investment Report - Quarter Ended March 31, 2012 Interest Rates Short -term interest rates remained near zero, as the Federal Reserve (Fed) announced in January that it remains committed to keeping interest rates at low levels until at least late 2014. During the Federal Open Market Committee (FOMC) meeting in March, the FOMC's economic outlook was relatively brighter. While another round of bond - buying efforts (or quantitative easing) was not ruled out, the stronger economic reports during the quarter suggest that it is considerably less likely. Core inflation remained steady and in line with the Fed's target limits. Improvements in the U.S. economy pushed yields upward for Treasuries across maturities of six months and beyond, and the yield curve steepened notably. 2 -Year, 5 -Year, and 10 -Year U.S. Treasury Note Yields March 37 2077 through Macrh 31, 2012 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% I I I I I f Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 2 -Year TSY 5 -Year TSY 10 -Year TSY Source: Bloomberg The improvement in the jobs picture suggested the likelihood of fewer mortgage defaults, and therefore less risk for Fannie Mae and Freddie Mac. In addition, the federal housing agencies continued to reduce their debt issuance. As a result, Agencies generally performed well, as spreads to Treasuries narrowed markedly. Corporate bonds outperformed both Treasuries and Agencies, as optimism about the continued economic recovery and stronger corporate balance sheets drove demand. Agency spreads narrowed from already low levels, and corporate spreads narrowed across the curve, especially on the front end. However, PFM Asset Management believes there is little value left in these sectors, as the yields that they provide are not enough of a trade -off in most cases to justify investments in these securities compared with Treasuries. The European debt crisis and the resolution of U.S. housing policy remain as risks to the outlook for the bond market. U.S. Treasury Yields — Quarter and Year - over -Year Changes 31- Mar -12 0.07% 0.17% 0.33% 1.04% 2.21% 3.34% 31- Dec -11 0.01% 0.10% 0.24% 0.83% 1.88% 2.89% Change over Quarter 0.06% 0.07% 00.09% 0.21% 0.33% 0.44% 31- Mar -11 0.09% 0.27% 0.82% 2.28% 3.47% 4.51% Change over Year -0.03% -0.11% -1.17% Source data: Bloomberg Village of North Palm Beach Investment Report - Quarter Ended March 31, 2012 PFM Outlook While the economy shows signs of strengthening, uncertainties remain regarding the severity of the downturn in the European economy and the potential for slower growth in China. Interest rates are still range- bound, but the yield curve has steepened sharply. Currently, we do not believe that rates will head higher as the Fed is maintaining a loose monetary policy and inflation remains within the Fed's mandate of 2% for core personal consumption expenditures. Oil prices are higher, but as yet they do not seem to be adversely impacting manufacturing activity or consumer spending, and the mild winter has contributed to this being less of a threat to growth. Returns for 2 -Year, 5 -Year and 10 -Year Treasuries ,Quarter ended March 39, 2092 Core inflation has remained mostly stable, driven by a lack of wage pressure. The Fed continues to discuss the possibility of another round of quantitative easing, but as the U.S. economic recovery seems to be on track, further Fed action looks less likely. Because of some uncertainty surrounding federal housing policy and ongoing litigation over mortgage originations, we believe that mortgage- backed securities have some degree of event risk at this time. In the money market sector, we expect that short rates will drift lower as seasoned Treasury bills mature, LIBOR stabilizes, and bank deposit issuers resort to alternative financing. Since corporate spreads have tightened significantly over the quarter, we do not see value in this space now. Our feeling about Agencies is similar, so we are focusing on the value that the Treasury space represents. Duration - Adjusted Returns for Fixed - Income Securities ,Quarter endedMarch 39, 2092 16.0% 14.92% 3.0% 12.0% 2.0% 8.64% 8.0% 1.0% 4.0% 1.38% 0.0% 0.0% - 0.10% - 0.52% u -1.0% -4.0% - 2.24% 2 Year U.S. Treasury 5 Year U.S. Treasury 10 Year U.S. Treasury Index Index Index ■ Quarter ended 3/31/2012 ■ 12 Months ended 3/31/2012 Source: Bloomberg U.S. Treasury Federal Agency AA/AAA Corporate Source: Bloomberg ❑ Current Quarter ■ Past 12 Months 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 March 31, 2012 TAB II Village of North Palm Beach Current Quarter Previous Quarter Current Quarter Previous Quarter Investment Report - Quarter Ended March 31, 2012 March 31, 2012 December 31, 2011 Yields March 31, 2012 December 31, 2011 Investment Portfolio 1.80 Quarterly Summary Report 0.36% 0.29% Merrill Lynch 1 -3 Year U.S. Treasury Index 1.82 1.81 Yield at Cost Total Portfolio Value'' March 31,2012' December 31, 2011 99% 95% 34.78 Market Value $8,273,977.63 $8,273,215.37 Total $46,909.90 $96,679.46 Amortized Cost $8,240,313.29 $8,217,035.94 Fiscal Year 2012 Fiscal Year 2011 Quarterly Realized Gain /Loss on Cost March 31, 2012 December 31, 2011 Fiscal Year Realized Gain /Loss on Cost Year to Date Quarterly Return Annualized Last Last Since Inception Total Return'2' 4's1'' March 31, 2012 Quarter 12 Months 24 Months June 30, 2009 Investment Portfolio 0.009% 0.04% 1.38% 1.45% 1.62% Merrill Lynch 1 -3 Year U.S. Treasury Index -0.08% -0.34% 1.44% 1.55% 1.68% 0.50% 0.25% E a) 0.00% ry -0.25% -0.50% 0.50 Quarter Total Return Comparison Quarter Ended 03/31/12 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 03/31/12 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) e Current Quarter Previous Quarter Current Quarter Previous Quarter Effective Duration(Years) ° March 31, 2012 December 31, 2011 Yields March 31, 2012 December 31, 2011 Investment Portfolio 1.80 1.73 Yield at Market 0.36% 0.29% Merrill Lynch 1 -3 Year U.S. Treasury Index 1.82 1.81 Yield at Cost 0.70% 0.81% Portfolio Duration % of Benchmark Duration 99% 95% 34.78 Total $15,101.73 $31,808.17 Total $46,909.90 $96,679.46 0.50% 0.25% E a) 0.00% ry -0.25% -0.50% 0.50 Quarter Total Return Comparison Quarter Ended 03/31/12 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 03/31/12 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 March 31, 2012 December 31, 2011 Fiscal Year Interest Income Year to Date Year to Date Investment Portfolio $15,100.19 $31,806.54 Investment Portfolio $46,906.73 $96,644.68 TD Bank Money Market Fund 1.54 1.63 TD Bank Money Market Fund 3.17 34.78 Total $15,101.73 $31,808.17 Total $46,909.90 $96,679.46 Current Quarter Previous Quarter Fiscal Year 2012 Fiscal Year 2011 Quarterly Realized Gain /Loss on Cost March 31, 2012 December 31, 2011 Fiscal Year Realized Gain /Loss on Cost Year to Date Year to Date Investment Portfolio 3,164.76 (1,216.93) Investment Portfolio 1,947.83 $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 March 31, 2012 ➢ The Village's Investment Portfolio is of high credit quality and invested in U.S. Treasury and Federal Agency securities. ➢ In the first quarter, the so called "risk -on" trade benefited investors across the board – and to a general extent, the riskier the asset, the better the performance. As risk aversion waned in the first quarter, spreads narrowed considerably. As a result, spread product, such as corporates, performed exceptionally well. Because rates rose in the quarter, most U.S. Treasuries indices posted negative returns, making them the poorest performing sector and ending the three quarter streak in which Treasuries outperformed Agencies. ➢ For most of the first quarter, Treasury yields stayed within the established ranges they had been in since August 2011. However, in mid - March, yields moved sharply higher to 8 -month highs. Despite the move higher, we concluded that this did not represent a fundamental change in the marketplace nor did it warrant a significant change in strategy. The Federal Reserve has committed to keep low rates through late 2014, and economic conditions continue to reflect only moderate growth. We used higher rates as an opportunity to modestly extend portfolio durations. ➢ Yield spreads on Federal Agencies relative to U.S. Treasuries of comparable maturities narrowed sharply during the quarter. In maturities of three years and less, Agencies now offer only a few basis points of additional yield advantage. As this reduced the relative attractiveness of Agencies, PFM began to reallocate investments from the Agency sector into Treasuries, either by concentrating new investments in Treasuries, or by actively selling Agencies to swap into Treasuries. The Investment Portfolio realized over $8,000 in gains on sales during the quarter as a result of active management. ➢ The Investment Portfolio's quarterly total return performance of 0.009% outperformed the benchmark performance of -0.08% by 0.089 %. This is attributed to the continued pay -off from agency positions and intra - quarter management of durations which capitalized on the rate rise. ➢ Several months of stronger economic news has improved the outlook for the U.S. economy, but we expect interest rates to remain range -bound due to the Federal Reserve's loose monetary policy, lingering worries about Europe and China, and moderate levels of inflation in core prices. In particular, the fed funds target rate —set at 0.00% to 0.25% since December 2008 — creates a strong anchor, holding down short- and intermediate -term rates for the foreseeable future. ➢ With short -term investments pegged near zero and interest rates likely to stay within a range, investments with longer maturities are attractive for their higher income generation and roll -down potential. Roll -down has remained a significant contributor to performance over time, and we believe that will continue in the second quarter. We plan to keep portfolio durations near that of the benchmark, with just a slightly conservative posture to provide flexibility. We are a bit more cautious on maturities beyond five years, which have much greater sensitivity to yield changes. ➢ As always, we strive to maintain the safety of principal, while at the same time seeking opportunities to add value. 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 March 31, 2012 Investment Portfolio Composition and Credit Quality Characteristics Security Type March 31, 2012 % of Portfolio December 31, 2011 % of Portfolio U.S. Treasuries $6,324,857.55 76.4% $5,685,738.12 68.7% Federal Agencies 1,881,283.07 22.7% 2,101,504.41 25.4% 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 0.00 0.0% 404,157.33 4.9% Mortgage Backed 0.00 0.0% 0.00 0.0% Money Market Fund /Cash 67,837.01 0.8% 81,815.51 1.0% Totals $8,273,977.63 100.0% $8,273,215.37 100.0% U.S. Treasuries 76% Portfolio Composition as of 03/31/12 Federal Agency Obligations 23% (Money Market Fund /Cash 0.82% 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 03/31/12 AA+ - 100% 1 i PFM Asset Management LLC Section B - 2 Village of North Palm Beach Investment Report - Quarter Ended March 31, 2012 Investment Portfolio Maturity Distribution Maturity Distribution' March 31, 2012 December 31, 2011 Overnight (Monedy Market Fund) $67,837.01 $81,815.51 Under 6 Months 0.00 404,157.33 6 - 12 Months 1,100,241.92 201,948.31 1 - 2 Years 4,169,038.16 5,532,828.75 2 - 3 Years 2,936,860.54 2,052,465.47 3 - 4 Years 0.00 0.00 4 - 5 Years 0.00 0.00 5 Years and Over 0.00 0.00 80% 70% 0 60% 0 0 50% a 40% 0 H 0 30% a) ca 20% c a� 10% a 0% Totals $8,273,977.63 $8,273,215.37 13% 5% 2% 1% 1% 0% 1 Overnight Under 6 Months 6 - 12 Months Portfolio Maturity Distribution' 50% 35% 25% ❑March 31, 2012 ■December 31, 2011 0% 0% 0% 0% 0% 0% 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 March 31, 2012 Investment Portfolio Maturity Distribution versus the Benchmark' 35.0° 3 U -UO-0 25.0% r 4U.VlV Y J 15.0N Ffl . . . F. 1 11.414'ii .0 0�•a 0.0% 0 y54 ;1 rals to Nat LLRty © Im,estment poitfolio ❑ Merrill Lvnch 1 3 Year L:_8- Treasuiv 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 March 31, 2012* Security Type March 31, 2012 March 31, 2012 Notes Permitted by Policy Florida SBA Prime Fund and Fund B 1,287,422.64 6.38% 2 25% United States Treasury Securities 6,310,793.58 31.27% 100% United States Government Agency Securities - 0.00% 100% Federal Instrumentalities 1,861,682.70 9.23% 50% Certificates of Deposit - 0.00% 100% Repurchase Agreements - 0.00% 0% Commercial Paper - 0.00% 0% Corporate Notes - 0.00% 25% Mortgage - Backed Securities - 0.00% 0% Bankers' Acceptances - 0.00% 0% Money Market Mutual Funds 1,218,727.20 6.04% 50% Intergovernmental Investment Pool - 0.00% 25% Interest Bearing Checking or Savings Account 9,500,393.26 47.08% 2 100% Village Managed $11,938,706.09 59.16% PFM Managed $8,240,313.29 40.84% Total $20,179,019.38 100.00 Individual Issuer Breakdown March 31, 2012 March 31, 2012 Notes Government National Mortgage Association (GNMA) - 0.00 US Export-Import Bank (Ex -Im) - 0.00 Farmers Home Administration (FMHA) - 0.00 Federal Financing Bank - 0.00% Federal Housing Administration (FHA) - 0.00 General Services Administration - 0.00 New Communities Ad Debentures - 0.00 US Public Housing Notes & Bonds - 0.00 US Dept. of Housing and Urban Development - 0.00 Federal Farm Credit Bank (FFCB) 277,232.72 1.37 Federal Home Loan Bank (FHLB) 341,284.84 1.69 Federal National Mortgage Association (FNMA) 539,287.30 2.67 Federal Home Loan Mortgage Corporation (FHLMC) 703,877.84 3.49 Student Loan Marketing Association (SLMA) 1W - 0.00 1. All Assets. 2. These Accounts are managed by the Village. *PFM managed securities are shown on Amortized Cost plus Accrued Interest basis. Permitted by Policy Individual Issuer Breakdown March 31, 2012 March 31, 2012 Notes Permitted bi 100% CD - BankA - 0.00% 33% 100% CD- Bank B - 0.00% 33% 100% Interest Bearing Checking or Savings Account - Wells Fargo 9,500,393.26 47.08% 2 50% 100% Interest Bearing Checking or Savings Account - B - 0.00% 50% 100% Corporate Notes - A - 0.00% 33 100% Corporate Notes B - 0.00% 33% 100% Corporate Notes C - 0.00% 33% 100% Corporate Notes D - 0.00% 33% 100% Corporate Notes E - 0.00% 33% 10% Money Market Fund - TD Bank Sweep Account 67,837.01 0.34% 33% 10% Money Market Fund - Wells Fargo Advantage Fund 1,150,890.19 5.70% 2 33% 10% Florida Prime 1,052,926.68 5.22% 2 25% 10% SBA Fund 234,495.96 1.16% 2 N/A 0% PFM Asset Management LLC Section C - 1 Customer Service PO Box 11813 Harrisburg, PA 17108 -1813 ACCOUNT STATEMENT Client Management Team Contents 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 Cover /Disclosures Summary Statement Individual Accounts Accounts included in Statement 61350001 NORTH PALM BEACH INVESTMENT PORTFOLIO Online Access www.pfm. corn VILLAGE OF NORTH PALM BEACH SAMIA JANJUA 501 US HIGHWAY 1 NORTH PALM BEACH, FL 33408 Customer Service 1- 717 - 232 -2723 W �r 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 March 31, 2012 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, on an annualized basis. 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 remaining until maturity, stated as a percentage, on an annualized basis. Managed Account A 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 Managed Account Summary Statement For the Month Ending March 31, 2012 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Summary - Managed Account Cash Transactions Summary - Managed Account Opening Market Value $8,204,428.30 Maturities /Calls 0.00 Maturities /Calls 0.00 Sale Proceeds 371,370.44 Principal Dispositions (371,162.40) Coupon /Interest Income 6,750.40 principal Payments 0.00 Principal Acquisitions 362,268.75 Unsettled Trades 0.00 Security Purchases (363,047.60) Net Cash Contribution 0.00 Change in Current Value (8,951.60) Reconciling Transactions 0.00 Closing Market Value $8,186,583.05 Earnings Reconciliation (Cash Basis) - Managed Account Cash Balance Interest /Coupons Received 6,958.44 Closing Cash Balance $67,837.01 Less Purchased Interest Related to Interest /Coupons (778.85) Plus Net Realized Gains /Losses 1,392.03 Total Cash Basis Earnings $7,571.62 Earnings Reconciliation (Accrual Basis) Total Ending Amortized Value of Securities 8,152,918.71 Ending Accrued Interest 19,557.57 Plus Proceeds from Sales 371,370.44 Plus Proceeds of Maturities /Calls /Principal Payments 0.00 Plus Coupons Received 6,750.40 Less Cost of New Purchases (363,047.60) Less Beginning Amortized Value of Securities (8,161,568.08) Less Beginning Accrued Interest (19,798.87) Total Accrual Basis Earnings $6,182.57 Account 61350001 Page 1 1"W t- PFM Asset Management LLC: V: Portfolio Summary and Statistics For the Month Ending March 31, 2012 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Account Summary Sector Allocation Description Par Value Market Value Percent U.S. Treasury Bond / Note 6,290,000.00 6,314,209.77 77.13 Federal Agency Bond / Note 1,840,000.00 1,872,373.28 22.87 Managed Account Sub -Total 8,130,000.00 8,186,583.05 100.00% Accrued Interest 19,557.57 Total Portfolio 8,130,000.00 8,206,140.62 Unsettled Trades 13.42% 50.75% 0.00 0.00 Maturity Distribution 7 35.83% 0.00% 0 - 6 Months 6 - 12 Months 1 - 2 Years 2 - 3 Years 0.00% 0.00% 0.00% 3- 4 Years 4- 5 Years Over 5 Years US TSY Bond / 77.13% Fed Agy Bond / Note 22.87% Yield to Maturity at Cost 0.70% Yield to Maturity at Market 0.36% Duration to Worst 1.80 Weighted Average Days to Maturity 665 PF NI Account 61350001 Page 2 PFM .Asset Management LLC Managed Account Issuer Summary NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Total I'F�tI� � , W Y PFM Asset Management LLC $8,186,583.05 100.000/0 AA+ 100.00% For the Month Ending March 31, 2012 Account 61350001 Page 3 Market Value Issuer of Holdings Percent FANNIE MAE 545,105.16 6.66 FEDERAL FARM CREDIT BANKS 273,548.08 3.34 FEDERAL HOME LOAN BANKS 347,245.74 4.24 FREDDIE MAC 706,474.30 8.63 UNITED STATES TREASURY 6,314,209.77 77.13 Total I'F�tI� � , W Y PFM Asset Management LLC $8,186,583.05 100.000/0 AA+ 100.00% For the Month Ending March 31, 2012 Account 61350001 Page 3 Managed Account Detail of Securities Held For the Month Ending March 31, 2012 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. Treasury Bond Note US TREASURY NOTES 450,000.00 AA+ Aaa 01/23/12 01/26/12 448,277.34 0.38 237.98 448,382.13 447,047.10 DTD 01/17/2012 0.250% 01/15/2015 =11PFNI Account 61350001 Page 4 iv PFM Asset Management LLC Managed Account Detail of Securities Held NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Security Type/ Description S &P Moody's Trade Settle Original YTM Dated Date /Coupon /Maturity CUSIP U.S. Treasury :. Note Par Rating Rating Date Date Cost at Cost 20110.750% 09/22/2014 Security Type Sub -Total 1,840,000.00 1,858,304.40 1.08 8,909.79 1,852,772.91 1,872,373.28 Managed Account Sub -Total 8,130,000.00 8,158,483.71 0.70 19,557.57 8,152,918.71 8,186,583.05 Securities Sub -Total $8,130,000.00 $8,158,483.71 0.70% $19,557.57 $8,152,918.71 $8,186,583.05 Accrued Interest $19,557.57 Total Investments i P F, L1 PFM Asset Management LLC $8,206,140.62 Account 61350001 Page 5 Managed Account Fair Market Value & Analytics For the Month Ending March 31, 2012 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 Bond / Note CUSIP Par Broker Date Price Value On Cost Amort Cost to Worst at Mkt US TREASURY NOTES 580,000.00 BARCLAYS 99.34 576,194.04 (1,608.30) (1,741.98) 2.78 0.49 DTD 01/17/2012 0.250% 01/15/2015 tAccount 61350001 Page 6 PFM Asset Management LLB: Managed Account Fair Market Value & Analytics For the Month Ending March 31, 2012 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 U.S. Treasury Bond / Note US TREASURY N/B 150,000.00 CITIGRP 99.62 149,425.78 (70.31) (78.13) 2.94 0.51 DTD 03/15/2012 0.375% 03/15/2015 Security Type Sub -Total 6,290,000.00 6,314,209.77 14,030.46 14,063.97 1.83 0.35 Security Type Sub -Total 1,840,000.00 1,872,373.28 14,068.88 19,600.37 1.73 0.39 Managed Account Sub -Total 8,130,000.00 8,186,583.05 28,099.34 33,664.34 1.80 0.36 Securities Sub -Total $8,130,000.00 $8,186,583.05 $28,099.34 $33,664.34 1.80 0.36% Accrued Interest $19,557.57 Total Investments $8,206,140.62 U N 1. Account 61350001 Page 7 PFM Asset Management LLC 05/20110.750% 09/22/2014 Security Type Sub -Total 1,840,000.00 1,872,373.28 14,068.88 19,600.37 1.73 0.39 Managed Account Sub -Total 8,130,000.00 8,186,583.05 28,099.34 33,664.34 1.80 0.36 Securities Sub -Total $8,130,000.00 $8,186,583.05 $28,099.34 $33,664.34 1.80 0.36% Accrued Interest $19,557.57 Total Investments $8,206,140.62 U N 1. Account 61350001 Page 7 PFM Asset Management LLC Managed Account Security Transactions & Interest NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Type Principal Accrued Trade Settle Security Description CUSIP Par Proceeds Interest 03/13/12 03/15/12 US TREASURY N/B DTD 05/16/2011 1.000% 05/15/2014 For the Month Ending March 31, 2012 Realized G/L Realized G/L Sale Total Cost Amort Cost Method 150,000.00 (149,496.09) 0.00 (149,496.09) 210,000.00 (212,772.66) (778.85) (213,551.51) Transaction Type Sub -Total INTEREST 360,000.00 (362,268.75 (778.85) (363,047.60) 03/01/12 03/01/12 MONEY MARKET FUND 540,000.00 0.00 2,700.00 2,700.00 DTD 08/06/2010 1.000% 09/23/2013 Transaction Type Sub -Total 1,850,000.00 0.00 6,750.40 6,750.40 03/13/12 03/15/12 US TREASURY NOTES 220,000.00 220,629.20 94.72 220,723.92 935.00 834.79 SPEC LOT DTD 07/21/20110.500% 08/28/2013 Transaction Type Sub -Total 370,000.00 371,162.40 208.04 371,370.44 1,392.03 1,334.25 Managed Account Sub -Total 8,893.65 6,179.59 15,073.24 1,392.03 1,334.25 PFI' Account 61350001 Page 8 PFM Asset Matiagement LLC . PFM` W5Managed Account Security Transactions & Interest NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Total Security Transactions For the Month Ending March 31, 2012 $8,893.65 $6,179.59 $15,073.24 $1,392.03 $1,334.25 �— e 9 Account 61350001 Pa 9 PFM Asset Management LLC