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09-30-2012 Investment Performance ReviewVillage of North Palm Beach, Florida Investment Advisors Steven Alexander, CTP, CGFO, Managing Director Gregg Manjerovic, CFA, Portfolio Manager D. Scott Stitcher, CFA, Senior Managing Consultant Rebecca Geyer, CTP, Senior Analyst Investment Performance Review Quarter Ended September 30, 2012 r,. North MR- firf_ 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, Florida Investment Report - Quarter Ended September 30, 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 September 30, 2012 Tab III. September 30, 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, Florida Investment Report - Quarter Ended September 30, 2012 TAB I Village of North Palm Beach, Florida Summary During the third quarter, further easing measures by central banks around the world spurred investors' demand for riskier assets, resulting in strong performance for corporate bonds, mortgage - backed securities, and equities. While the U.S. housing recovery seemed to be building momentum, manufacturing activity and job growth have continued to show persistent weakness. The domestic economy will likely continue its sluggish recovery, despite uncertainties about the U.S. election and the looming fiscal Cliff. Economic Snapshot • The unemployment rate fell to 7.8% in September. The economy added 437,000 jobs in the third quarter, up from 200,000 in the prior period. • The S &P Case - Shiller Index of home prices for July marked a year - over -year increase that was more than consensus predicted, reflecting a continued housing recovery. • The Institute for Supply Management's manufacturing survey fell slightly below 50 for June, July, and August, indicating a weakening of the important manufacturing base, but rose to 51.5 in September, suggesting slow growth (A measure above 50 is the dividing point between growth and expansion.) • The Consumer Price Index increased by 0.6% in August on a seasonally adjusted basis, its largest gain since June 2009; this was primarily due to increases in food and energy prices. • Most economists expect U.S. gross domestic product (GDP) to grow by only 1.8% to 2% for the year. Investment Report — Quarter Ended September 30, 2012 Interest Rates Interest rates ended the quarter modestly lower, while yield spreads on Federal Agencies, corporates, and mortgage- backed securities (MBS) tightened significantly. Long -term Treasury yields experienced significant intra - quarter volatility, while two -year Treasury yields remained in a tight range of 0.20% to 0.30% for the quarter. The Federal Reserve announced that it will keep short -term rates at extremely low levels through mid -2015. It also initiated a third round of Quantitative Easing (QE3), a new program to purchase $40 billion in agency MBS each month until economic conditions improve. Sector Performance • Accommodative measures by global central banks gave investors confidence in the prospects for economic growth. The resulting shift from Treasuries and Agencies to high - quality corporate bonds helped corporate bonds to outperform. Bonds issued by financial firms did particularly well, outpacing those in the industrial and utility sectors. • Supported by the new QE3 purchase program, Agency MBS performed well, but returns were tempered as a result of increased pre - payments, which shortened their average lives. • While the Municipal sector lagged the corporate sector, it generated returns in excess of Treasuries and Agencies, and offered the additional value of diversification. • Supply reductions should keep Agency spreads narrow, as Fannie Mae and Freddie Mac reduce their retained portfolios by 15% per year, as mandated by the Treasury Department. 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. PFM Asset Management LLC Section A -1 Village of North Palm Beach, Florida Economic Snaashot Investment Report - Quarter Ended September 30, 2012 Labo 12 Sep 211111 Unemployment Rate Sep 7.8% 8.2% 9.0% Unemployment Rate (left) vs. Change!n Nonfarm Payrol Is (right) 11.0% 600K Change In Non -Farm Payrolls 10.0% 400K Average Hourly Earnings (YoY) Sep 1.8% 2.0% 2.0% 9.0% 200K 8.0% 0 Personal Income (YoY) Aug 7.0% -200K 6.0% -400K Initial Jobless Claims Oct 12 388,000 376,000 402,000 9/30/09 3/31/10 9/30/10 4/30/11 10/31/11 4/30/12 • 0 1 Real GDP (QoQ) Real GDP (QoQ SAAR) Q2 1./0 3 2.0 /0 1.3% 5.0 GDP Personal Consumption (QoQ SAAR) Q2 NJ 3.0% Retail Sales (YoY) Sep 5.4% 3.5% 8.3% 2.0% 1.0% ISM Manufacturing Survey Sep 51.5 49.7 52.5 I 0.0% 1.0% Existing Home Sales (millions) Sep 4.75 4.37 4.28 6/30/09 12/31/09 6/30/10 12/31/10 6/30/11 12/31/11 6/30/12 Inflation • 0 0 o Personal Consumption Expenditures (YoY) Aug 12 1./0 5 1.5/0 2.9/0 Consumer Price Index 5.0 Consumer Price Index (YoY) Sep 12 2.0% 4.0% 3.0 2.0 Consumer Price Index Core (YoY) Sep 12 2.1% 0.7% 7.0% 1.0% 0.0 r0 il Futures (WTI, per barrel) Sep 30 $92.19 $7 1.0% -CPI (YoY) -CPI Core (YoY) Gold Futures (oz) Sep 30 $1,771 $1,604 $1,620 8/31/09 2/28/10 8/31/10 3/31/11 9/30/11 3/31/12 1. Data as of First Quarter 2012 Note: YoY = year over year, QoQ = quarter over quarter, SAAR = seasonally adjusted annual rate, WTI = West Texas Intermediate crude oil Source: Bloomber PFM Asset Management LLC Section A -2 Village of North Palm Beach, Florida 3.0% 2.5% 2.0% v 6 1.5% 5- 1.0% 0.5% 0.0% 9/30/11 11/30/11 — — 2 -Yea U.S. Treasury Note Yields Investment Report — Quarter Ended September 30, 2012 Interest Rate Overview 1/31/12 3/31/12 5/31/12 7/31/12 9/30/12 r .•••••• 5 -Year 10 -Year U.S. Treasury Note Yields 3 -month i 0.12% i 0.11% Change Quarter 0.00% 9130111 0.02% over Year 0.09% 1 -year 0.16% 0.26% (0.10 %) 0.17% (0.02 %) 2 -year 0.25% 0.32% (0.08 %) 0.28% (0.04 %) 5 -year 0.63% 0.75% (0.11%) 0.96% (0.33 %) 10 -year 1.70% 1.73% (0.04 %) 2.01% (0.31%) 30 -year 2.82% 2.78% 0.04% 2.95% (0.13 %) Source: Bloomber U.S. Treasury Note Yield Curve 4% 3% -- -- -- - - - - -- --- - - - - -- _ 1% 0% 361 2 3 5 7 10 30 mnyyy y y y y Maturity September 30, 2012 June 30, 2012 September 30, 2011 Yield Curves as of 9/30/12 4% i } 2% - -� - - - -- ---' s� - - - - - - - -- - - - - - -- -------------------------- 1 % _ f� 0% 361 2 3 5 7 10 25 30 mny y y y y y y y Maturity U.S. Treasury Federal Agency Industrial Corporates, A Rated PFM Asset Management LLC Section A -3 Village of North Palm Beach, Florida Investment Report - Quarter Ended September 30, 2012 B of A Merrill Lynch Index Returns As of 9/30/2012 Periods Ended 9/30/2012 Year • U.S. Treasury gency Duration 1.89 1.60 Yield 0.25% 0.31% 3 Month 0.26% 1 Year 0.56% 3 Years 1.43% 1.58% 0.92% U.S. Corporates, A -AAA Rated 1.98 1.02% 1.50% 4.10% 3.63% Age 0 to 3 years) 1.78 0.87% 2.29% 3.78% Municipals 1.84 0.52% 0.33% 1.33% 1.75% Year • U.S. Treasury 2.74 0.34% 0.47% 1.29% 2.58% Federal AMi 0.42% 0.46% 1.53% 2.29% U.S. Corporates, A -AAA Rated 2.79 1.26% 2.18% 5.92% 4.98% Age nBS (0 to 5 years) 0.91% 1.08% 3.63% 4.73% Municipals 2.59 0.71% 0.62% 2.23% 2.65% Master • - U.S. Treasury 6.05 0.91% 0.58% 3.19% 5.46% enc 0.79% 2.83% 3.95% 9.97% 8.26% U.S. Corporates, A -AAA Rated 6.78 2.38% 3.53% MB W. 0.92% 1.■ IN - Municipals 7.39 2.48% 2.51% 8.96% 6.20% Returns for periods greater than one year are annualized 3 Month return is periodic Source: Bloomber PFM Asset Management LLC Section A -4 Village of North Palm Beach, Florida Investment Report - Quarter Ended September 30, 2012 TAB II Village of North Palm Beach, Florida Investment Report - Quarter Ended September 30, 2012 Quarterly Summary Report Total Portfolio Value'' September 30,2012' June 30, 2012 Market Value $8,311,077.27 $8,289,853.88 Amortized Cost $8.280.301.18 $8.262.416.12 1.00% 0.75% 0.50% 0.25% 0.00% -0.25% 0.50 Quarter Total Return Comparison Quarter Ended 09/30/12 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 0.50 Total Return Comparison Since Inception as of Quarter Ended 09/30/12 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) Quarterly Return Annualized Last Last Since Inception Total Return'2' 4's1'' September 30, 2012 Quarter 12 Months 24 Months June 30, 2009 Investment Portfolio 0.26% 1.02% 0.65% 0.86% 1.51% Merrill Lynch 1 -3 Year U.S. Treasury Index 0.26% 1.02% 0.56% 0.88% 1.56% Total Current Quarter Previous Quarter Total Current Quarter Previous Quarter Effective Duration(Years) ° September 30, 2012 June 30, 2012 Yields September 30, 2012 June 30, 2012 Investment Portfolio 1.82 1.80 Yield at Market 0.25% 0.33% Merrill Lynch 1 -3 Year U.S. Treasury Index 1.82 1.83 Yield at Cost 0.50% 0.58% Portfolio Duration % of Benchmark Duration 100% 99% 1.00% 0.75% 0.50% 0.25% 0.00% -0.25% 0.50 Quarter Total Return Comparison Quarter Ended 09/30/12 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 0.50 Total Return Comparison Since Inception as of Quarter Ended 09/30/12 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) 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 September 30, 2012 June 30, 2012 Fiscal Year Interest Income Year to Date Year to Date Investment Portfolio $10,908.74 $24,817.77 Investment Portfolio $82,633.24 $96,644.68 TD Bank Money Market Fund 0.96 1.34 TD Bank Money Market Fund 5.47 34.78 Total $10,909.70 $24,819.11 Total $82,638.71 $96,679.46 Current Quarter Previous Quarter Fiscal Year 2012 Fiscal Year 2011 Quarterly Realized Gain /Loss on Cost September 30, 2012 June 30, 2012 Fiscal Year Realized Gain /Loss on Cost Year to Date Year to Date Investment Portfolio $6,018.77 $11,166.28 Investment Portfolio $19,132.88 $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, Florida Investment Report - Quarter Ended September 30, 2012 Executive Summary PORTFOLIO STRATEGY ➢ The Village's Investment Portfolio is of high credit quality and invested in U.S. Treasury and Federal Agency securities. ➢ PFM continued to actively manage the Investment Portfolio during the third quarter and found value in the market, taking advantage of market inefficiencies or changes in economic outlook. As a result the Portfolio realized over $6,800 in gains on sales during the quarter. PFM is continually in the market monitoring for opportunities to add value to the Portfolio. ➢ The Investment Portfolio's quarterly total return performance was 0.26 %, performing in -line with the benchmark's performance of 0.26 %. Over the past year, the Portfolio earned 0.65 %, versus 0.56% for the benchmark. ➢ Bond yields remained highly correlated with headlines out of Europe. Weakening economic conditions in the Eurozone triggered a flight -to- quality that drove intermediate -term Treasury yields to new all -time record lows in July. The development of an European Central Bank ( "ECB ") sovereign debt purchase program reversed the trend, causing yields to rebound sharply. Despite several periods of sharp temporary yield movements, Treasury yields ended the quarter only modestly lower in most maturities. ➢ Agency notes received a boost during the quarter when the Treasury Department accelerated the wind down of Fannie Mae's and Freddie Mac's investment portfolio holdings, an action which will shrink Agency bond and discount note supply by $1 trillion over the next few years. ➢ With the ECB's sovereign debt support program in place, we are turning our attention away from Europe and focusing on domestic issues, such as U.S. economic conditions, the upcoming election and the looming fiscal cliff, and other global issues, like the troubling slowdown in China and turmoil in the Middle East. These conditions create uncertainties that are hard to handicap, and virtually impossible to predict with any degree of certainty. ➢ Since all of these factors have more downside risk to economic growth than upside potential, and thus a greater chance of keeping yields low in Q4, we plan to keep the portfolio's duration generally in line with benchmark's duration. ➢ With central banks around the globe pumping an unprecedented amount of liquidity into the market and embarking on new large scale bond purchase programs, we are faced with a scenario of more dollars chasing fewer assets. As a result, our outlook for most "spread sectors" remains positive. We anticipate relatively low volatility in yields and expect income to be a major component of total returns in the upcoming quarter. ➢ As always, we strive to maintain safety of principal and appropriate liquidity, while seeking opportunities to add value through active management. 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, Florida Investment Report - Quarter Ended September 30, 2012 Investment Portfolio Composition and Credit Quality Characteristics Security Type September 30, 2012 % of Portfolio June 30, 2012 % of Portfolio U.S. Treasuries $6,930,825.46 83.4% $6,562,395.05 79.2% Federal Agencies 1,333,316.97 16.0% 1,690,903.92 20.4% 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% 0.00 0.0% Mortgage Backed 0.00 0.0% 0.00 0.0% Money Market Fund /Cash 46,934.84 0.6% 36,554.91 0.4% Totals $8,311,077.27 100.0% $8,289,853.88 100.0% U.S. Treasuries 83% Portfolio Composition as of 09/30/12 Federal Agency Obligations 16% �y Market id /Cash 0.56% 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 09/30/12 AA+ 100% PFM Asset Management LLC Section B - 2 Village of North Palm Beach, Florida Investment Report - Quarter Ended September 30, 2012 loo °% o Investment Portfolio Maturity Distribution Maturity Distribution' September 30, 2012 June 30, 2012 Overnight (Monedy Market Fund) $46,934.84 $36,554.91 Under 6 Months 0.00 0.00 6 - 12 Months 186,431.57 349,319.10 1 - 2 Years 4,476,496.45 4,484,517.42 2 - 3 Years 2,897,193.09 3,419,462.45 3 - 4 Years 704,021.32 0.00 4 - 5 Years 0.00 0.00 5 Years and Over 0.00 0.00 Totals $8,311,077.27 $8,289,853.88 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' loo °% o 90% []September 30, 2012 80% ■June 30, 2012 0 70% a 60% 54% 54% is 50% 0 41% 40% 35% 0 30% c� c 20% 0 8 /0 d 10% 2% 4% 1% 0%-: 0% 0% 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, Florida Investment Report - Quarter Ended September 30, 2012 Investment Portfolio Maturity Distribution versus the Benchmark' 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 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 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, Florida' Asset Allocation as of September 30, 2012* Security Type September 30, 2012 September 30, 2012 Notes Permitted by Policy Florida SBA Prime Fund and Fund B 489,028.68 3.03% 2 25% United States Treasury Securities 6,912,670.39 42.84% 100% United States Government Agency Securities - 0.00% 100% Federal Instrumentalities 1,320,695.95 8.18% 50% Mortgage - Backed Securities - 0.00% 50% Certificates of Deposit - 0.00% 100% Repurchase Agreements - 0.00% 0% Commercial Paper - 0.00% 0% Corporate Notes - 0.00% 25% Bankers' Acceptances - 0.00% 0% Money Market Mutual Funds 193,551.96 1.20% 50% Intergovernmental Investment Pool - 0.00% 25% Interest Bearing Checking or Savings Account 7,220,164.70 44.75% 2 100% Village Managed $7,709,193.38 47.78% PFM Managed $8,233,366.34 51.02% Total $15,942,559.72 98.80% Individual Issuer Breakdown September 30, 2012 September 30, 2012 Notes Permitted by Policy Individual Issuer Breakdown September 30, 2012 September 30, 2012 Notes Permitted by Policy Government National Mortgage Association (GNMA) - 0.00% 100% Interest Bearing Checking or Savings Account - Wells Fargo 4,215,934.83 26.13% 2 50% US Export-Import Bank(Ex -Im) - 0.00% 100% Interest Bearing Checking or Savings Account - Chase 3,004,229.87 18.62% 50% Farmers Home Administration (FMHA) - 0.00% 100% Money Market Fund - TD Bank Sweep Account 42,653.59 0.26% 33% Federal Financing Bank - 0.00% 100% Money Market Fund - Wells Fargo Advantage Fund 150,898.37 0.94% 2 33% Federal Housing Administration (FHA) - 0.00% 100% Florida Prime 279,875.39 1.73% 2 25% General Services Administration - 0.00% 100% SBA Fund 209,153.29 1.30% 2 N/A 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) 273,148.87 1.69% 10 Federal Home Loan Bank (FHLB) 341,357.49 2.12% 10% Federal National Mortgage Association (FNMA) 304,762.88 1.89% 10% Federal Home Loan Mortgage Corporation (FHLMC) 401,426.71 2.49% 10% Notes: 1. All Assets. 2. These Accounts are managed by the Village. *PFM managed securities are shown on Amortized Cost plus Accrued Interest basis. PFM Asset Management LLC Section C - 1 Village of North Palm Beach, Florida Investment Report - Quarter Ended September 30, 2012 TAB III Village of North Palm Beach, Florida Investment Report - Quarter Ended September 30, 2012 Insert Month End Statement here to complete the report. Statements are available online at www.pfm.com login and click on the link to "Monthly Statements" on the left side of the screen. x A.. , Customer Service PO Box 11813 Harrisburg, PA 17108 -1813 ACCOUNT STATEMENT Client Management Team 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 Cove r /Disclosu res Summary Statement Individual Accounts Accounts included in Statement NORTH PALM BEACH INVESTMENT PORTFOLIO VILLAGE OF NORTH PALM BEACH SAMIA JANJUA 501 US HIGHWAY 1 NORTH PALM BEACH, FL 33408 Online Access http: / /www.pfm.com Customer Service 1- 717 - 232 -2723 �PFM Y 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 noted 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 September 30, 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 AccountA 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 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Summary - Managed Account Opening Market Value $8,250,462.80 Maturities/Calls Principal Dispositions Principal Acquisitions Unsettled Trades Change in Current Value Closing Market Value 0.00 (387,246.18) 385,312.50 0.00 (5,170.02) $8,243,359.10 For the Month Ending September 30, 2012 Maturities /Calls Sale Proceeds Coupon /Interest /Dividend Income Principal Payments Security Purchases Net Cash Contribution Reconciling Transactions Earnings Reconciliation (Cash Basis) - Managed Account Cash Balance Interest /Dividends /Coupons Received 9,765.47 Closing Cash Balance Less Purchased Interest Related to Interest /Coupons (2,087.60) Plus Net Realized Gains /Losses 793.41 Total Cash Basis Earnings $8,471.28 Ending Amortized Value of Securities 8,212,583.01 Ending Accrued Interest 20,783.33 Plus Proceeds from Sales 388,676.95 Plus Proceeds of Maturities /Calls /Principal Payments 0.00 Plus Coupons /Dividends Received 8,334.70 Less Cost of New Purchases (387,400.10) Less Beginning Amortized Value of Securities (8,215,639.98) Less Beginning Accrued Interest (22,194.75) Total Accrual Basis Earnings $5,143.16 0.00 388,676.95 8,334.70 0.00 (387,400.10) 0.00 0.00 $46,934.84 Account Page 1 PFM Asset Management LLC PFM' Portfolio Summary and Statistics NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Description Par Value Market Value Percent U.S. Treasury Bond / Note 6,840,000.00 6,916,831.78 83.91 Federal Agency Bond / Note 1,305,000.00 1,326,527.32 16.09 Managed Account Sub -Total 8,145,000.00 8,243,359.10 100.00% Accrued Interest 1 20,783.33 Total Portfolio 8,145,000.00 8,264,142.43 Unsettled Trades Maturity Distribution 2.26% 0.00% - _ 0 - 6 Months 6 - 12 Months 1 - 2 Years 2 - 3 Years 0.00 0.00 0.00% 0.00% 0.00% 3- 4 Years 4- 5 Years Over 5 Years US TSY Bond / 83.91% For the Month Ending September 30, 2012 Fed Agy Bond / Note 16.09% Characteristics Yield to Maturity at Cost 0.50% Yield to Maturity at Market 0.25% Duration to Worst 1.82 Weighted Average Days to Maturity 673 Account Page 2 PFM Asset Management LLC ., Managed Account Issuer Summary NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Total =PFM' qu PFM Asset Management LLC $8,243,359.10 100.000/0 AA+ 100.00% For the Month Ending September 30, 2012 Account Page 3 A P.a,, Managed Account Detail of Securities Held For the Month Ending September 30, 2012 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Security Type/ Description S &P Moody's Trade Settle Original If TM 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 525,000.00 AA+ Aaa 06/27/12 06/29/12 524,528.32 0.41 87.02 524,573.15 526,271.48 DTD 03/15/2012 0.375% 03/15/2015 -%I= Account Page 4 WF PFM Asset Management LLC Managed Account Detail of Securities Held For the Month Ending September 30, 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 U.S. Treasury Bond / Note CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value US TREASURY NOTES 375,000.00 AA+ Aaa 09/06/12 09/10/12 385,312.50 0.34 12.88 385,118.27 385,400.25 DTD 09/30/2010 1.250% 09/30/2015 Security Type Sub -Total Federal Agency :. Note 6,840,000.00 6,907,974.43 0.42 13,993.68 6,898,676.71 6,916,831.78 FANNIE MAE GLOBAL NOTES 120,000.00 AA+ Aaa 04/17/12 04/19/12 119,653.20 0.59 206.67 119,703.70 120,371.52 DTD 04/19/2012 0.500% 05/27/2015 Security Type Sub -Total 1,305,000.00 1,324,325.45 0.90 6,789.65 1,313,906.30 1,326,527.32 Managed Account Sub -Total 8,145,000.00 8,232,299.88 0.50 20,783.33 8,212,583.01 8,243,359.10 Securities Sub -Total $8,145,000.00 $8,232,299.88 0.50% $20,783.33 $8,212,583.01 $8,243,359.10 Accrued Interest $20,783.33 Total Investments $8,264,142.43 r �PF r1 Account Page 5 WPFM Asset Management LLC � N- Managed Account Fair Market Value & Analytics For the Month Ending September 30, 2012 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Security Type/ Description Next Call Market Market Unreal G/L Unreal G/L Effective Duration YTM Dated Date /Coupon /Maturity U.S. Treasury :. Note CUSIP Par Broker Date Price Value On Cost Amort Cost Duration to Worst at Mkt US TREASURY NOTES 375.000.00 MERRILL 102.77 385,400.25 87.75 281.98 2.95 2.95 0.32 DTD 09/30/2010 1.250% 09/30/2015 -V1 Account Page 6 qu PFM Asset Management LLC r PFX1 Managed Account Fair Market Value & Analytics For the Month Ending September 30, 2012 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Security Type/ Description Next Call Market Market Unreal G/L Unreal G/L Effective Duration YTM Dated Date /Coupon /Maturity CUSIP Par Broker Date Price Value On Cost Amort Cost Duration to Worst at Mkt Security Type Sub -Total Federal Agency :. Note 6,840,000.00 6,916,831.78 8,857.35 18,155.07 1.87 1.87 0.25 FANNIE MAE GLOBAL NOTES 120,000.00 CITIGRP 100.31 120,371.52 718.32 667.82 2.63 2.63 0.38 DTD 04/19/2012 0.500% 05/27/2015 Security Type Sub -Total 1,305,000.00 1,326,527.32 2,201.87 12,621.02 1.60 1.60 0.26 Managed Account Sub -Total 8,145,000.00 8,243,359.10 11,059.22 30,776.09 Securities Sub -Total $8,145,000.00 $8,243,359.10 $11,059.22 $30,776.09 Accrued Interest $20,783.33 Total Investments $8,264,142.43 1.82 1.82 0.25 1.82 1.82 0.25% Account Page 7 PFM Asset Management LLC PFN'I, Managed Account Security Transactions & Interest NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Type Principal Accrued Trade Settle Security Description CUSIP Par Proceeds Interest Total For the Month Ending September 30, 2012 Realized G/L Realized G/L Sale Cost Amort Cost Method 09/06/12 09/10/12 US TREASURY NOTES 375,000.00 (385,312.50) (2,087.60) (387,400.10) DTD 09/30/2010 1.250% 09/30/2015 Transaction Type Sub -Total INTEREST 375,000.00 (385,312.50) (2,087.60) (387,400.10) I 09/04/12 09/04/12 MONEY MARKET FUND 310,000.00 0.00 1.937.50 1,937.50 DTD 09/30/2010 1.250% 09/30/2015 Transaction Type Sub -Total 2,295,000.00 0.00 8,334.70 8,334.70 09/06/12 09/10/12 US TREASURY NOTES 40,000.00 40,320.40 185.56 40,505.96 427.20 363.58 SPEC LOT DTD 08/06/2010 1.000% 09/23/2013 Transaction Type Sub -Total 385,000.00 387,246.18 1,430.77 388,676.95 793.41 1,753.20 Managed Account Sub -Total 1,933.68 7,677.87 9,611.55 793.41 1,753.20 Account Page 8 PFM Asset Management LLC -Miii Managed Account Security Transactions & Interest NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Total Security Transactions For the Month Ending September 30, 2012 $1,933.68 $7,677.87 $9,611.55 $793.41 $1,753.20 i Account Page 9 PFM Asset Management LLC