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06-30-2010 VNPB Investment Performance ReviewVillage of North Palm Beach, Florida Investment Advisors Steven Alexander, CTP, CGFO, Managing Director Mel Hamilton, Senior Managing Consultant David Jang, CTP, Senior Managing Consultant Gregg Manjerovic, CFA, Portfolio Manager Rebecca Dole, Consultant Investment Performance Review Quarter Ended June 30, 2010 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 17101 -2044 (407) 648 -1323 fax 717- 232 -2723 717 - 233 -6073 fax Village of North Palm Beach Investment Report - Quarter Ended June 30, 2010 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 June 30, 2010 Tab III. June 30, 2010 PFM Month -End Statement 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 Market Update July 5, 2010 PFM Asset Management LLC 300 S. Orange Avenue, Ste. 1170 Orlando, FL 32801 (407) 648 -2208 800 Yes -2 -PFM David Jang, CTP - Author David Freeland - Analyst Melissa Lindman - Editor www.pfm.com • Nonfarm payrolls fell by the expected 125,000 jobs in June as 225,000 of the workers hired temporarily for the 2010 census were no longer needed. Private payrolls increased by 83,000, but this fell short of the expected 105,000 increase. Private service- providing jobs increased by 91,000, but private payrolls were pulled lower by 8,000 jobs lost in the private goods - producing sector. • Surprisingly, the unemployment rate dropped from 9.7% to 9.5 %. However, it reflects a decrease in the labor force rather than an increase in employment. Change in Non -Farm Payrolls/ Unemployment Rate June 2004 — June 2010 800 ,n 600 0 400 n. E 200 ca � c 0 0 0 z� c (200) m R (400) L) (600) (800) Jun '04 2010 PFM Asset Management LLC Bloomberg Jun '05 Jun '06 Jun '07 Jun '08 Jun '09 12% 10% c 0 8% 0 6% CD 0 4% 0 2% 0% Jun '10 • 2 -year U.S. Treasury yields hit record lows this week closing at 0.597% on June 29, 2010. Yields ended the quarter over 0.40% lower than they started as debt problems in Europe, cooling growth in China, and low U.S. inflation led investors to doubt the strength of the global recovery. The record low Treasury yields are largely the result of increased demand for high quality assets and expectations that the Fed is unlikely to begin raising interest rates any time soon. 2 -Year U.S. Treasury Yields July 1, 2009 — July 2, 2010 1.5% 1.3% 1.1% 0.9% 0.7% 0.5% Jul '09 Oct'09 Jan '10 Apr'10 Jul '10 Source: Bloomberg • As global equity indexes and U.S. Treasury yields slide lower, talk of a double dip recession begins to surface. While it is unlikely that the U.S. will return to the depressed levels of early 2009, Paul Krugman warns in a recent New York Times editorial that governments, fearing large debt and inflation, may begin to remove stimulus measures at a time when they are still essential to keep the economy from slipping back into recession. 12,000 11,000 10,000 • 111 111' 7,000 . 111 MMMMIII 1: Oct'08 Jan '09 Apr'09 Jul '09 Oct'09 Jan 10 Apr'10 Jul '10 ©.2010 PFM Asset Management LLC Dow Jones Industrial Average July 1, 2008 —July 2, 2010 Source: Bloomberg, www.nytimes.com Personal income moved higher by a robust 0.4% while personal spending moved up a modest 0.2 %. Auto purchases added to the increase in personal outlays, but outlays were subdued largely as a result of a drop in gasoline sales. The increases in both personal income and spending this month indicate growing strength among consumers, despite dwindling confidence in the economy. 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% Personal Income and Outlays May 2008 — May 2010 May 08 Sep 08 Jan 09 Personal Income MoM May 09 Sep 09 Jan 10 May 10 - ` :.. Personal Spending MoM Personal income includes wages and salaries, fringe benefits such as employer contributions of private pension plans, proprietors' income, income from rent, dividends and interest and transfer payments less contributions for social insurance. Personal outlays include consumption expenditures, interest payments, and transfer payments. Consumption expenditures make of a major portion of outlays and give an advanced indication of the quarterly consumption component of GDP. © 2010 PFM Asset Management LLC Bloomberg • ISM Manufacturing was only 56.2, despite expectations of a release of 59. While the release was disappointing, it is likely due to a natural slowing in growth that occurs as a sector reaches the end of its recovery phase, and not weakness in the manufacturing sector. A reading of 56.2, being greater than 50, still shows growth in the manufacturing sector. 65 60 55 50 45 40 35 30 ISM Manufacturing Composite Index June 2006 — June 2010 Jun '06 Dec '06 Jun '07 Dec '07 Jun '08 Dec '08 Jun '09 Dec '09 Jun '10 ISM manufacturing is created from a qualitative survey of manufacturing firms covering new orders, production, employment, supplier deliveries, and inventories. Historically, readings of 50 or above are associated with an expanding manufacturing sector and healthy GDP growth. Readings below 50 indicate a contracting manufacturing sector, but GDP growth is still positive until the ISM index falls below 42.7. Source: Bloomberg • Month over month change in pending home sales was a shocking negative 30 %. Economists expected a large 20% drop due to the expiration of the home buyer tax credits, but a 33.3% decline in pending home sales in the South helped drag the number lower than expected. Equity markets faltered on the news. 30% 20% 10% 0% -10% -20% -30% May '05 Pending Home Sales Index May 2005 — May 2010 May '06 May '07 May '08 May '09 May '10 Pending Homes Sales MoM Pending Homes Sales YoY Pending home sales is a leading indicator of existing home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale. © 2010 PFM Asset Management LLC • Source: Bloomberg = There are no market - moving economic releases this week. 7/6/2010 7/7/2010 7/7/2010 7/8/2010 7/8/2010 7/8/2010 7/8/2010 7/9/2010 Source: Bloomberg ISM Non -Manf. Composite 55.4 55.4 ABC Consumer Confidence - - -41 MBA Mortgage Applications - - 8.80% Initial Jobless Claims - - - - Continuing Claims - - - - ICSC Chain Store Sales YoY - - 2.60% Consumer Credit -$2.OB $1.013 Wholesale Inventories 0.40% 0.40% 5% 4% 3% 2 2% 1% o% 361 2 3 5 rrmy Y Y y U.S. Treasury Yield Curve 10 y Maturity 30 Y Change Change 6/30/09 6/23/10 6/30/10 Over Over Week Year 3 month 0.18% 0.12% 0.18% +0.06% -0.00% 6 month 0.34% 0.18% 1 year 0.48% 0.26% 2 year 1.11% 0.69% 0.22% + 0.04% - 0.12% 0.31% + 0.05% - 0.17% 0.62% - 0.07% - 0.49% 3 year 1.62% 1.12% 0.98% - 0.14% - 0.64% 5 year 2.56% 1.94% 1.79% - 0.15% - 0.77% 10 year 3.53% 3.14% 2.97% - 0.18% - 0.57% 30 year 4.33% 4.08% 3.93% - 0.15% - 0.40% © 2010 PFM Asset Management LLC 8 Bloomberg 7 -day Current Yield Change over Week Change over Month Change over Year U.S. Treasury 1 month 0.16 % 0.09% 0.02% 0.06 % 3 months 0.18% 0.06% 0.02% -0.01% 6 months 0.23% 0.04% 0.00% - 0.12% 12 months 0.32% 0.05% 0.00% - 0.17% 7 -day 0.06% -0.01% -0.08% 0.00% 1 month 0.10% 0.01% - 0.06% -0.01% 3 months 0.17% 0.03% -0.03% -0.02% 6 months 0.24% 0.00% -0.01% - 0.06% 9 months 0.32% - 0.02% -0.01% -0.12% 12 months 0.47% 0.00% -0.10% -0.13% - � - ��_ �...,. � • • • � S � a. fir-% 1 month 0.41% 0.02% 0.08% 0.14% 3 months 0.49% -0.02% 0.03% 0.15% 6 months 0.64% - 0.06% 0.00% 0.15% 9 months 0.84% 0.00% 0.07% 0.03% 12 months 1.06% 0.01% 0.06% 0.14% 7 -day 0.34% 0.02% 0.04% 0.08% 1 month 0.41% -0.01% 0.04% 0.08% 3 months 0.62% 0.01% 0.09% -0.07% 6 months 0.84% 0.01% 0.11% -0.15% 9 months 0.98% -0.03% 0.15% - 0.20% Rates as of June 30, 2010 2010 PFM Asset Management LLC 9 Bloomberg 3 year 5 year Agency B�i ullets 2 year 3 year 5 year Rates as of June 30, 2010 Source: Bloomberg 1.00% -0.10% -0.23% - 0.62% 1.81% -0.11% - 0.28% -0.75% 0.81% - 0.07% - 0.22% -0.49% 1.23% -0.12% -0.28% -0.75% 2.01% -0.19% -0.31% -0.99% 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 a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities. © 2010 PFM Asset Management LLC �'� Village of North Palm Beach Investment Report - Quarter Ended June 30, 2010 Quarterly Summary Report Total Portfolio Value'- June 30, 2010 March 31, 2010 Market Value $8,126,012.05 $8,038,443.82 Amortized Cost $8,050,764.79 $8,008,314.42 Investment Portfolio $14,885.05 ($615.33) Investment Portfolio $21,177.43 $7,165.26 Notes: 1. In order to comply with GASB accrual accounting reporting requirements; forward selling trades are included in the monthly balances. 2. End of quarter trade -date market values of portfolio holdings, including accrued interest. 3. The Investment Portfolio's core balance increased due to a $1 million CO maturing on 12118109 and imesled as pad of core balance. 4. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Inslihde•s Global Inveslment Performance Standards (GIPS). 5. Merrill Lynch Indices provided by Bloomberg Financial Markets. 6. Quaderly returns are presented on both an - annualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return wit be the mull of chaining the most recent four quarterly returns. 7. Includes money market fund /cash in performance and duration computations. B. Returns presented far 12 months or longer are presented on an annual basis. 9. Past performance is not indicative of future results. PFM Asset Management LLC Section A - 1 Quarterly Return Annualized Last Last Since Incephon Total Return 1 za +s saes June 30. 2010 Quarter 12 Months 24 Months June 30, 2009 Investment Portfolio 1.09% 4.44% 2.67% N/A 2.67 Merrill Lynch 1 -3 Year U.S. Treasury Index 1.16% 4.73% 2.69 % „ N/A 2.69 Total Current Quarter Previous Quarter _ Current Quarter Previous Quarter Effective Duration(Years) ' June 30, 2010 March 31, 2010 Yields June 30, 2010 March 31, 2010 Investment Portfolio 1.61 1.69 Yield at Market 0.65% 1.04% Merrill Lynch 1 -3 Year U.S. Treasury Index 1.82 1.84 Yield at Cost 1.17% � 1.29 % Portfolio Duration % of Benchmark Duration 89% 92% Investment Portfolio $14,885.05 ($615.33) Investment Portfolio $21,177.43 $7,165.26 Notes: 1. In order to comply with GASB accrual accounting reporting requirements; forward selling trades are included in the monthly balances. 2. End of quarter trade -date market values of portfolio holdings, including accrued interest. 3. The Investment Portfolio's core balance increased due to a $1 million CO maturing on 12118109 and imesled as pad of core balance. 4. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Inslihde•s Global Inveslment Performance Standards (GIPS). 5. Merrill Lynch Indices provided by Bloomberg Financial Markets. 6. Quaderly returns are presented on both an - annualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return wit be the mull of chaining the most recent four quarterly returns. 7. Includes money market fund /cash in performance and duration computations. B. Returns presented far 12 months or longer are presented on an annual basis. 9. Past performance is not indicative of future results. PFM Asset Management LLC Section A - 1 Quarter Total Return Comparison Previous Quarter Quarter Ended 06/30/10 1.50% - -- 1.25% _ -.___- __ -__ ML_1 -3_ Year_U.S._Treasury Index March 31, 2010 Investment Portfolio V 1.16% 1.00% - - - -- 109 %�_ c 0.75% $36,433.03 ID of Investment Portfolio 0.50% $8,855.91 0.25% 0.50 1.00 1.50 2.00 2.50 3.00 0.00% TD Bank Money Market Fund 0.50 1.00 1.50 2.00 2.50 3.00 Total Effective Duration (Years) Investment Portfolio $14,885.05 ($615.33) Investment Portfolio $21,177.43 $7,165.26 Notes: 1. In order to comply with GASB accrual accounting reporting requirements; forward selling trades are included in the monthly balances. 2. End of quarter trade -date market values of portfolio holdings, including accrued interest. 3. The Investment Portfolio's core balance increased due to a $1 million CO maturing on 12118109 and imesled as pad of core balance. 4. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Inslihde•s Global Inveslment Performance Standards (GIPS). 5. Merrill Lynch Indices provided by Bloomberg Financial Markets. 6. Quaderly returns are presented on both an - annualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return wit be the mull of chaining the most recent four quarterly returns. 7. Includes money market fund /cash in performance and duration computations. B. Returns presented far 12 months or longer are presented on an annual basis. 9. Past performance is not indicative of future results. PFM Asset Management LLC Section A - 1 Total Return Comparison Since Inception as of Previous Quarter Quarter Ended 06/30/10 3.50% - - - - - - -- -- 3.00% _ .. Investment Portfolio ML 1 -3 Year U.S. Treasury Index March 31, 2010 2.67% 2.69% 2.50% E Year to Date d IY 2.00 $36,433.03 1.50% Investment Portfolio $91,671.37 $8,855.91 1.00 0.50 1.00 1.50 2.00 2.50 3.00 Effective Duration (Years) Investment Portfolio $14,885.05 ($615.33) Investment Portfolio $21,177.43 $7,165.26 Notes: 1. In order to comply with GASB accrual accounting reporting requirements; forward selling trades are included in the monthly balances. 2. End of quarter trade -date market values of portfolio holdings, including accrued interest. 3. The Investment Portfolio's core balance increased due to a $1 million CO maturing on 12118109 and imesled as pad of core balance. 4. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Inslihde•s Global Inveslment Performance Standards (GIPS). 5. Merrill Lynch Indices provided by Bloomberg Financial Markets. 6. Quaderly returns are presented on both an - annualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return wit be the mull of chaining the most recent four quarterly returns. 7. Includes money market fund /cash in performance and duration computations. B. Returns presented far 12 months or longer are presented on an annual basis. 9. Past performance is not indicative of future results. PFM Asset Management LLC Section A - 1 Current Quarter Previous Quarter Fiscal Year 2010 Fiscal Year 2009 Quarterly Interest Income June 30, 2010 March 31, 2010 Fiscal Year Interest Income Year to Date Year to Date Investment Portfolio $36,433.03 $28,258.08 Investment Portfolio $91,671.37 $8,855.91 TD Bank Money Market Fund. 4.67 7.51 TD Bank Money Market Fund 28.61 94.97 Total $36,437.70 $28,265.59 Total $91,699.98 $8,950.88 Current Quarter Previous Quarter Fiscal Year 2010 Fiscal Year 2009 Quarterly Realized Gain /Loss on Cost June 30, 2010 March 31, 2010 Fiscal Year Realized Gain /Loss on Cost Year to Date Year to Date Investment Portfolio $14,885.05 ($615.33) Investment Portfolio $21,177.43 $7,165.26 Notes: 1. In order to comply with GASB accrual accounting reporting requirements; forward selling trades are included in the monthly balances. 2. End of quarter trade -date market values of portfolio holdings, including accrued interest. 3. The Investment Portfolio's core balance increased due to a $1 million CO maturing on 12118109 and imesled as pad of core balance. 4. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Inslihde•s Global Inveslment Performance Standards (GIPS). 5. Merrill Lynch Indices provided by Bloomberg Financial Markets. 6. Quaderly returns are presented on both an - annualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return wit be the mull of chaining the most recent four quarterly returns. 7. Includes money market fund /cash in performance and duration computations. B. Returns presented far 12 months or longer are presented on an annual basis. 9. Past performance is not indicative of future results. PFM Asset Management LLC Section A - 1 Village of North Palm Beach Investment Report - Quarter Ended June 30, 2010 Executive Summary PORTFOLIO STRATEGY ,F j ➢ The Village's portfolio is of high credit quality and maintains adequate liquidity. The portfolio is invested entirely in Federal Agency, U.S. Treasury, and FDIC guaranteed corporate securities. The securities are allocated among high quality issuers rated AAA. ➢ 2 -year U.S. Treasury rates ended the quarter at record lows, falling over 0.40% from 1.06% on April 1, 2010 to 0.61% on June 30, 2010. Continued fallout from the European debt crisis was a large driver of the flight to quality that characterized the second quarter. Concerns of slower than expected global growth compounded with low inflation forecasts in the United States led market participants to increase demand for U.S. Treasuries, driving intermediate -term rates to their lowest levels ever. ➢ Spreads between U.S. Treasuries and Federal Agencies widened from 0.16% in the beginning of April to 0.29% in mid -May, closer to their 10 -year historical average of 0.35 %. By the end of the quarter, 2 -year spreads had narrowed to 0.20 %. ➢ At the June FOMC meeting, the Fed continued to call for "an extended period" of low rates. At the beginning of the quarter, investors in the federal funds futures market were betting that the Fed would first raise its target rate to 0.50% by the end of 2010. By the end of the quarter, investors did not expect that increase to occur until the middle of 2011. ➢ There are signs of growing strength in the U.S. economy, including robust manufacturing, positive GDP growth, and rising non -farm payrolls. Still, the current high level of unemployment, weakness in the housing sector, and slowed global growth are keeping a full recovery in check. Additionally, as long as inflation does not present a problem, the Fed is likely to continue expansionary monetary policy, keeping its target rate low. ➢ During the quarter, we found value in floating rate federal agency notes. Floating rate notes offer a yield advantage over bulleted securities of comparable durations as well as some protection in a rising interest rate environment. Additionally, they do not add significantly to the portfolio's overall duration and, thus, can be purchased in a barbell structure with longer -dated securities. ➢ We continued to emphasize safety and liquidity in our management of the portfolio. During this period of historically low interest rates, we relied heavily on active management to safely enhance the portfolio's long -term performance. ➢ At the beginning of the quarter, we targeted a duration of 90 -95% of the benchmark duration in order to benefit from the yield and roll down offered by the steep yield curve. We were slightly short of the benchmark to provide some market value protection if rates rose quickly. Over the quarter, as rates decreased, we allowed the duration of the portfolio to drift shorter to 85 -90% of the benchmark duration in anticipation of rising rates. As a result of being shorter than the benchmark, the portfolio's return of 1.09 %, slightly underperformed the benchmark's return of 1.16% by 7 basis points (0.07 %). We will continue to position the portfolio short of the benchmark in this period of historic low interest rates to limit interest rate risk and the market value erosion that will occur if rates rise. ➢ PFM will continue to follow the prudent investment strategies that have safely provided the Village with favorable long -term performance during this period of historic low interest rates. ➢ With intermediate -term rates at their lowest levels ever, PFM seeks to preserve market value in the event interest rates rise by positioning portfolio duration near 80% of the benchmark duration. While this positioning gives up yield and roll down in the short -run, we aim to protect against potential market value losses and possible negative returns for the benchmark if rates rise. As interest rates rise, we will begin bringing the portfolio's duration more in line with that of the benchmark. ➢ We will continue to follow the markets carefully for opportunities to actively manage the portfolio through duration adjustments and purchases in the federal agency sector. As sector spreads begin to widen closer to historical averages, we plan to decrease our allocation to Treasuries and increase our allocation to other sectors. ➢ In the coming quarter, we will continue to use floating rate notes in a barbell structure with longer -dated securities. This offers both the yield advantage of securities further out on the yield curve and shorter -term securities that will reset their rates periodically, which acts as a safeguard in a rising interest rate environment. ➢ Additionally, we are planning to purchase "cushion callables," which are callable federal agency securities with higher than market coupons. They offer an attractive yield compared with bulleted agencies of similar duration. The higher than market coupons mean they will more than likely be called allowing the portfolio to pickup additional income without having a significant impact on duration. PFM Asset Management LLC Section B - 1 Village of North Palm Beach Investment Portfolio Composition and Credit Quality Characteristics Investment Report - Quarter Ended June 30, 2010 Security Type ' °' June 80, 2010 % of Portfolio March 31, 2010 % of Portfolio U.S. Treasuries $3,681,048.46 45.3% $3,348,857.07 41.7% Federal Agencies 2,852,699.78 35.1% 2,775,110.31 34.5% 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 1,525,155.95 18.8% 1,883,634.32 23.4% Mortgage Backed 0.00 0.0% 0.00 0.0% Money Market Fund /Cash 67,107.86 0.8% 30,842.12 0.4% Totals $8,126,012.05 100.0% $8,038,443.82 100.0% Portfolio Composition as of 06/30/10 Money Market Corporate Fund /Cash Notes /Bonds - 0.83% FDIC Insured U.S. Treasuries i 45% 4 Federal Agency Obligations 35% 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. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. Credit Quality Distribution 3 as of 06/30/10 i 1 �+ AAA ?-�54% TSY`. 46% PFM Asset Management LLC Section B - 2 Village of North Palm Beach Investment Report - Quarter Ended June 30, 2010 70% Investment Portfolio Maturity Distribution Maturity Distribution' June 30, ni March 31, 2010 Overnight (Monedy Market Fund) $67,107.86 $30,842.12 Under Months 0.00 501,692.36 6 - 12 Months 877,261.26 0.00 1 - 2 Years 4,890,664.66' 3,954,345.22 2 - 3 Years 2,290,978.27 3,252,979.74 3 - 4 Years 0.00` 298,584.38 4 - 5 Years 0.00 0.00 5 Years and Over 0.00; 0.00 Totals $8,126,012.05 $8,038,443.82 w. 0 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' 70% 60% 60% ❑June 30, 2010 o March 31, 2010 7o 50% 49% 40% 0° 40% m �-o 30% 28% w. 0 20% m c 11% v 10% 6% 4% 0- 10/ 0% 0% 0% F 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 June 30, 2010 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% a� 15.0% 10.0% 5.0% 0.0% tih h° �`' o° ti`' �° '�`' oo tih `�° '�`' o° `bh `�° ��' o° "> rL`� `�° '��' o0 00 o. o. o. �• �• ti - ti ti ti ti ti � � D� D� D h• oo, ho ^h, oo, �h, �o, ^�- ooI,-), I'll) ^h, oo, ^� Years to Maturity ❑ Investment Portfolio 0Menill 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 June 30, 2010* Security Type June 30, 2010 June 30, 2010 Notes Permitted by Policy Florida SBA 353,112.47 2.06% 11 2 25% United States Treasury Securities 3,651,121.41 21.28% `' =`" 100% United States Government Agency Securities - 0.00% Interest Bearing Checking or Savings Account - Wachowa 100% Federal Instrumentalities 2,824,788.77 16.46% 50% 50% Certificates of Deposit - 0.00% 2 100% Repurchase Agreements - 0.00% 0% Commercial Paper - 0.00% 2.86% 0% Corporate Notes 1,507,746.75 8.79% 405,483.81 25% Mortgage- Backed Securities - 0.00% Corporate Notes D 0% Bankers'Acceptances - 0.00% 33% 0% Money Market Mutual Funds 2,785,719.71 16.24% 50% Intergovernmental Investment Pool - 0.00% 25% Interest Bearing Checking or Savings Account 6,034,541.63 35.17% 2 100% Village Managed 9,106,265.95 53.08% PFM Managed 8,050,764.79 46.92% Total $17,157,030.74 100.00% Individual Issuer Breakdown June 30, 2010 June 30, 2010 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/ a 100% Federal Housing Administration (FHA) - 0.00 /` ` 100% General Services Administration - 0.00% 100% New Communities Act 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) 330,006.77 1.92% 10% Federal Home Loan Bank (FHLB) 669,994.61 3.91% 10% Federal National Mortgage Association (FNMA) 703,744.31 4.10% 10% Federal Home Loan Mortgage Corporation (FHLMC) 1,121,043.08 6.53% 10% Student Loan Marketing Association (SLMA) - 0.00% 0% Notes: 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 June 30, 2010 Money Market Mutual CorporateNotes Funds 8.79% 16.24% Federal Instrumentalities 16.46% " -, _ _... -., Interest Bearing Checking or Savings Account 35.17% United States TreasuryJ rs� Securities 2128% Florida SBA 2.06% Individual Issuer Breakdown June 30, 2010 June 30, 2010 Notes Permitted by Policy CD -BankA - 0.00% 2 33% CD - BankB - 0.00% 33% Interest Bearing Checking or Savings Account - Wachowa 6,034,541.63 35 17 % 2 50% Interest Bearing Checking or Savings Account - B - 0.00% 50 Citigroup Corporal Notes - FDIC insured 610,830.49 3.56% 33 General Electric Corporate Notes - FDIC insured 491,432.45 2.86% 33 Bank of America Corporate Notes - FDIC insured 405,483.81 2.36% 33% Corporate Notes D - 0.00% 33% Corporate Notes E - 0.00% ,. 33% Money Market Fund - TD Bank Sweep Account 67,107.86 0.39% 33% Money Market Fund - Evergreen 2,718,611.85 15.85% 2 33% PFM Asset Management LLC Section C -1 p t " l Customer Service VF 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 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 �PFM' 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 June 30, 2010 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 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 P:.I' WFManaged Account Summary Statement For the Month Ending June 30, 2010 NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Summary - Managed Account Cash Transactions summary - Managed Account Opening Market Value $8,015,821.85 Maturities /Calls 0.00 Maturities /Calls 0.00 Sale Proceeds 845,463.79 Principal Dispositions (844,429.69) Coupon /Interest Income 13,900.76 Principal Acquisitions 840,452.53 Principal Payments 0.00 Unsettled Trades 0.00 Security Purchases (840,749.72) Change in Current Value 26,994.20 Net Cash Contribution (0.01) Reconciling Transactions 0.00 Closing Market Value $8,038,838.89 Earnings Reconciliation (Cash Basis) - Managed Account Cash Balance Interest /Coupons Received 14,934.86 Closing Cash Balance $67,107.86 Less Purchased Interest Related to Interest /Coupons (297.19) Plus Net Realized Gains /Losses 1,092.19 Total Cash Basis Earnings $15,729.86 Earnings Reconciliation (Accrual Basis) Total Ending Amortized Value of Securities 7,963,591.63 Ending Accrued Interest 20,065.30 Plus Proceeds from Sales 845,463.79 Plus Proceeds of Maturities /Calls /Principal Payments 0.00 Plus Coupons Received 13,900.76 Less Cost of New Purchases (840,749.72) Less Beginning Amortized Value of Securities (7,967,273.96) Less Beginning Accrued Interest (25,935.86) Total Accrual Basis Earnings $9,061.94 �t Account 61350001 Page 1 PFM Asset Management LLC Portfolio Summary and Statistics NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Account Summary Description Par Value Market Value Percent U.S. Treasury Bond / Note 3 295 000.00 3 321 786 74 4133 U.S. Treasury Bill 350,000.00 . US TSY Bond / 349,275.50 4.34 41. U.S. Government Supported Corporate 1,480,000.00 1,520,895.02 18.92 Debt 642 Federal Agency Bond / Note 2,820,000.00 2,846,881.63 35.41 Managed Account Sub -Total 7,945,000.00 8,038,838.89 100.00% Accrued Interest 20,065.30 Total Portfolio 7,945,000.00 8,058,904.19 Unsettled Trades 10.91% 60.68% Maturity Distribution 28.411% 0.00% 1 1 1 1 1 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 TS) 4.34% For the Month Ending June 30, 2010 Fed Agy Bond / Note 35.41% JS Govt Supported Corp Debt 18.92% Yield to Maturity at Cost 1.17% Yield to Maturity at Market 0.65% Duration to Worst 1.73 Weighted Average Days to Maturity 642 PFNI' Account 61350001 Page 2 WF PFM Asset Management LLC a PFM" Managed Account Issuer Summary NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Issuer Summary Market Value Issuer of Holdings Percent BANK OF AMERICA CORP TLGP 409,624.00 5.10 CITIGROUP INC 615,429.58 7.66 FANNIE MAE 714,343.75 8.89 FEDERAL FARM CREDIT BANKS 330,068.97 4.11 FEDERAL HOME LOAN BANKS 672,415.63 8.36 FREDDIE MAC 1,130,053.28 14.05 GENERAL ELECTRIC CO 495,841.44 6.17 UNITED STATES TREASURY Total 3,671,062.24 45.66 $8,038,838.89 100.000/0 TSY 45.67% For the Month Ending June 30, 2010 AAA 54.33% Account 61350001 Page 3 PFM Asset Management LLC P I 'N Managed Account Detail of Securities Held For the Month Ending June 30, 2010 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 300,000.00 TSY TSY 06/02/10 06/07/10 301,019.53 1.26 526.83 300,996.73 303,657.00 DTD 05/15/2010 1.375% 05/15/2013 Security Type Sub -Total 3,295,000.00 3,290,255.68 1.14 9,986.22 3,292,093.41 3,321,786.74 U.S. Treasury Bill US TREASURY BILL 350,000.00 TSY TSY 05/18/10 05/20/10 348,911.11 0.32 0.00 349,041.78 349,275.50 -- 0.000% 05/05/2011 1 CPFNI Account 61350001 Page 4 qu PFM Asset Management LLC W. Managed Account Detail of Securities Held NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 For the Month Ending June 30, 2010 Security Type/ Description S &P Moody's Trade Settle Original YTM Accrued Amortized Dated Date /Coupon /Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Market Value Security Type Sub -Total 350,000.00 348,911.11 0.32 0.00 349,041.78 349,275.50 Supported U.S. Government .. . CITIGROUP INC (FDIC) GLOBAL NOTE 17313UAA7 110,000.00 AAA Aaa 12/16/09 12/17/09 113,974.30 1.02 193.26 112,895.40 113,419.68 01/30/2009 2.100% 04/30/2012 CITIGROUP INC (FDIC) GLOBAL NOTE 17313UAE9 490,000.00 AAA Aaa 01/06/10 01/07/10 497,541.10 1.45 1,764.34 495,977.49 502,009.90 DTD 01/30/2009 2.125% 04/30/2012 Security Type Sub -Total Federal Agency :. Note 1,480,000.00 1,513,337.80 1.44 4,260.93 1,503,485.82 1,520,895.02 01/15/2010 1.750% 02/22/2013 T,r11 Account 61350001 Page 5 PFM Asset Management LLC P FN 'I. Managed Account Detail of Securities Held For the Month Ending 3une 30, 2010 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 Federal Agency Bond / Note FHLB GLOBAL BONDS 300,000.00 AAA Aaa 03/03/10 03/04/10 299,580.00 1.67 1,584.38 299,623.92 304,500.00 DTD 03/04/2010 1.625% 04/15/2013 Security Type Sub -Total 2,820,000.00 2,819,251.63 1.18 5,818.15 2,818,970.62 2,846,881.63 Managed Account Sub -Total 7,945,000.00 7,971,756.22 1.17 20,065.30 7,963,591.63 8,038,838.89 Securities Sub -Total $7,945,000.00 $7,971,756.22 1.17% $20,065.30 $7,963,591.63 $8,038,838.89 Accrued Interest $20,065.30 Total Investments $8,058,904.19 Account 61350001 Page 6 PFM Asset Management LLC Af�a P `.''�. Managed Account Fair Market Value & Analytics For the Month Ending June 30, 2010 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 TREASURY NOTES 912828NCO 300,000.00 BK AMER 101.22 303,657.00 2,637.47 2,660.27 2.81 0.94 DTD 05/15/2010 1.375% 05/15/2013 Security Type Sub -Total 3,295,000.00 3,321,786.74 31,531.06 29,693.33 1.68 0.59 U.S. Treasury Bill US TREASURY BILL 350,000.00 BK AMER 99.79 349,275.50 364.39 233.72 0.85 0.24 -- 0.000% 05/05/2011 PPR4' Account 61350001 Page 7 WF PFM Asset Management LLC Managed Account Fair Market Value & Analytics For the Month Ending June 30, 2010 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 Security Type Sub -Total 350,000.00 349,275.50 364.39 233.72 0.85 0.24 Supported U.S. Government .. Debt CITIGROUP INC (FDIC) GLOBAL NOTE 200,000.00 BK AMER 101.94 203,875.00 4,163.00 4,120.59 2.57 1.01 DTD 01/15/2010 1.750% 02/22/2013 Ad - CPP\i' Account 61350001 Page 8 VF PFM Asset Management L LC P.1 " N, 1. Managed Account Fair Market Value & Analytics For the Month Ending June 30, 2010 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 Federal Agency Bond / Note FHLB GLOBAL BONDS 300,000.00 JPMCHASE 101.50 304,500.00 4,920.00 4,876.08 2.71 1.08 DTD 03/04/2010 1.625% 04/15/2013 Security Type Sub -Total 2,820,000.00 2,846,881.63 27,630.00 27,911.01 1.94 0.71 Managed Account Sub -Total 7,945,000.00 8,038,838.89 67,082.67 75,247.26 1.73 0.65 Securities Sub -Total $7,945,000.00 $8,038,838.89 $67,082.67 $75,247.26 1.73 0.65% Accrued Interest $20,065.30 Total Investments $8,058,904.19 1 �PFNI Account 61350001 Page 9 WF PFM Asset Management L C PEN WFManaged Account Security Transactions & Interest For the Month Ending June 30, 2010 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 06/02/10 06/07/10 US TREASURY NOTES 330,000.00 0.00 89.58 89.58 DTD 03/26/2010 0.317% 09/26/2011 Transaction Type Sub -Total 1,940,000.00 0.00 13,900.76 13,900.76 06/02/10 06/07/10 US TREASURY NOTES 300,000.00 301,265.63 271.06 301,536.69 58.60 232.39 FIFO DTD 04/30/2009 0.875% 04/30/2011 ]PUM Account 61350001 Page 10 PFM Asset Management LLC PFM` iwManaged Account Security Transactions & Interest NORTH PALM BEACH INVESTMENT PORTFOLIO - 61350001 Transaction Type Principal Accrued Trade Settle Security Description CUSIP Par Proceeds Interest 06/18/10 06/21/10 US TREASURY NOTES 912828NB2 540,000.00 543,164.06 763.04 DTD 04/30/2010 1.000% 04/30/2012 For the Month Ending June 30, 2010 Realized G/L Realized G/L Sale Total Cost Amort Cost Method 543,927.10 1,033.59 1,106.33 FIFO Transaction Type Sub -Total 840,000.00 844,429.69 1,034.10 845,463.79 1,092.19 1,338.72 Managed Account Sub -Total 3,620,000.00 3,977.16 14,637.67 18,614.83 1,092.19 1,338.72 Total Security Transactions $3,620,000.00 $3,977.16 $14,637.67 $18,614.83 $1,092.19 $1,338.72 l Account 61350001 Page 11 PI'4t PFM Asset Management LLC