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HomeMy WebLinkAboutAgenda GEPB 111306City of Palm Beach Gardens 10500 N. Military Trail Palm Beach Gardens, FL 33410 Please take notice that the Board of Trustees of the City of Palm Beach Gardens will conduct a meeting of the board at the above location on November 13, 2006 at 2:OOPM in Council Chambers. Old Business: Approval of 8/7/06 minutes New Business: Adjournment Report from Rockwood Capital Advisors Report from Bogdahn Consulting Report from Foster & Foster Report from Scott Christiansen Approval of Money Market Sweep Account Approval of 2007 meeting dates Approval of Bills III LTA laV1 ffil iOTelI.Xi /_rIT[�7 1 In accordance with the Disabilities Act and F.S.S.286.26, persons with disabilities needing special accommodation to participate in this proceeding should contact the Human Resource Department no later then seven days subsequent to the proceeding at (561) 799 — 4223 for assistance, if hearing impaired, telephone the Florida Relay Service Number at 800 — 955 — 8770 (VOICE) for assistance. If a person decides to appeal any decision made by the Board, with respect to any matter considered at such meeting or hearing, he will need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. LAW OFFICES CHRISTIANSEN & DEHNER, P.A. 63 SARASOTA CENTER BLVD. SUITE 107 SCOTT R. CHRISTIANSEN SARASOTA, FLORIDA 34240 H. LEE DEHNER TO: City of Palm Beach Gardens General Employees' Pension Plan FROM: Nora O'Connor RE: Revised Tentative 2007 Meeting Dates DATE: September 28, 2006 PHONE: (941) 377 -2200 FAX: (941) 377 -4848 Listed Below are the tentative 2007 meeting dates based on the previous years' schedule. Should they meet with the Board's approval, please let us know and we will put them on our calendar. ALL MEETINGS WILL BE HELD AT 2:00 PM February 12, 2007 May 14, 2007 August 13, 2007 November 12, 2007 Thank you. f S V. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH A FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN A FUND. FST Administration Shares April 28, 2006 • Prime Obligations Fund • Money Market Fund • Treasury Obligations Fund • Treasury Instruments Fund ■ Government Fund ■ Federal Fund ■ Tax -Free Money Market Fund I 1 Asset Management NOT FDIC - Insured May Lose Value No Bank Guarantee General Investment Management Approach Goldman Sachs Asset Management, L.P. ( "GSAM° ") serves as Investment Adviser to the Financial Square Funds (the "Funds "). GSAM is referred to in this Prospectus as the "Investment Adviser." Goldman Sachs' Money Market Investment Philosophy: The Money Market Funds are managed to seek preservation of capital, daily liquidity and maximum current income. With each Fund, the Investment Adviser follows a conservative, risk - managed investment process that seeks to: ■ Manage credit risk ■ Manage interest rate risk ■ Manage liquidity Since 1981, the Investment Adviser has actively managed the Goldman Sachs Money Market Funds to provide investors with the greatest possible preservation of principal and income potential. INVESTMENT PROCESS 1. Managing Credit Risk The Investment Adviser's process for managing risk emphasizes: ■ Intensive research —The Credit Department, a separate operating entity of Goldman, Sachs & Co. ( "Goldman Sachs "), approves all money market fund eligible securities for the Funds. Sources for the Credit Department's analysis include third -party inputs, such as financial statements and media sources, ratings releases and company meetings, as well as the Investment Research, Legal and Compliance departments of Goldman Sachs. ■ Timely updates —A Credit Department- approved list of securities is continuously communicated on a "real- time" basis to the portfolio management team via computer link. The Result. An "approved" list of high - quality credits —The Investment Adviser's portfolio management team uses this approved list to construct portfolios which offer the best available risk -return tradeoff within the "approved" credit universe. Z Managing Interest Rate Risk Three main steps are followed in seeking to manage interest rate risk: IN Establish weighted average maturity ( "WAM ") target —WAM (the weighted average time until the yield of a portfolio reflects any changes in the current interest rate environment) is constantly revisited and adjusted as market conditions change. An overall strategy is developed by the portfolio management team based on insights gained from weekly meetings with both Goldman Sachs economists and economists from outside the firm. ■ Implement optimum portfolio structure — Proprietary models that seek the optimum balance of risk and return, in conjunction with the Investment Adviser's analysis of factors such as market events, short-term interest rates and each Fund's asset volatility, are used to identify the most effective portfolio structure. ■ Conduct rigorous analysis of new securities —The Investment Adviser's five - step process includes legal, credit, historical index and liquidity analysis, as well as price stress testing to determine suitability for money market mutual funds. 3. Managing Liquidity Factors that the Investment Adviser's portfolio managers continuously monitor and that affect liquidity of a money market portfolio include: ■ Each Fund's investors and factors that influence their asset volatility; ■ Technical events that influence the trading range of federal funds and other short-term fixed - income markets; and IN Bid -ask spreads associated with securities in the portfolios. Benchmarks for the Money Market Funds are the iMoneyNet, Inc. Indices. Each Fund uses the iMoneyNet Index which best corresponds to the Fund's eligible investments. References in this Prospectus to a Fund's benchmark are for informational purposes only, and unless otherwise noted are not an indication of how a particular Fund is managed. GENERAL INVESTMENT MANAGEMENT APPROACH ■ The Funds: Each Fund's securities are valued by the amortized cost method as permitted by Rule 2a -7 under the Investment Company Act of 1940, as amended (the "Act "). Under Rule 2a -7, each Fund may invest only in U.S. dollar - denominated securities that are determined to present minimal credit risk and meet certain other criteria, including conditions relating to maturity, diversifica- tion and credit quality. These operating policies may be more restrictive than the fundamental policies set forth in the Statement of Additional Information (the "Additional Statement "). • Taxable Funds: Prime Obligations, Money Market, Treasury Obligations and Government Funds. • Tax - Advantaged Funds: Treasury Instruments and Federal Funds. • Tax- Exempt Fund: Tax -Free Money Market Fund. IN The Investors: The Funds are designed for institutional investors seeking a high rate of return, a stable net asset value ( "NAV ") and convenient liquidation privileges. The Funds are particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. Shares of the Government Fund are intended to qualify as eligible investments for federally chartered credit unions pursuant to Sections 107(7), 107(8) and 107(15) of the Federal Credit Union Act, Part 703 of the National Credit Union Administration ( "NCUA ") Rules and Regulations and NCUA Letter Number 155. The Fund intends to review changes in the applicable laws, rules and regulations governing eligible investments for federally chartered credit unions, and to take such action as may be necessary so that the investments of the Fund qualify as eligible investments under the Federal Credit Union Act and the regulations thereunder. Shares of the Government Fund, however, may or may not qualify as eligible investments for particular state - chartered credit unions. A state - chartered credit union should consult qualified legal counsel to determine whether the Government Fund is a permissible investment under the law applicable to it. • NAV. Each Fund seeks to maintain a stable NAV of $1.00 per share. There can be no assurance that a Fund will be able at all times to maintain a NAV of $1.00 per share. • Maximum Remaining Maturity of Portfolio Investments: 13 months (as determined pursuant to Rule 2a -7) at the time of purchase. • Dollar - Weighted Average Portfolio Maturity: Not more than 90 days (as required by Rule 2a -7). ■ Investment Restrictions: Each Fund is subject to certain investment restrictions that are described in detail under "Investment Restrictions" in the Additional Statement. Fundamental investment restrictions of a Fund cannot be changed without approval of a majority of the outstanding shares of that Fund. The Treasury Obligations Fund's policy of limiting its investments to U.S. Treasury Obligations (as defined in Appendix A) and related repurchase agreements is also fundamental. All investment objectives and policies not specifically designated as fundamental are non - fundamental and may be changed without shareholder approval. ■ Diversification: Diversification can help a Fund reduce the risks of investing. In accordance with current regulations of the Securities and Exchange Commission (the "SEC "), each Fund may not invest more than 5% of the value of its total assets at the time of purchase in the securities of any single issuer. However, a Fund may invest up to 25% of the value of its total assets in the securities of a single issuer for up to three business days. These limitations do not apply to cash, certain repurchase agreements, U.S. Government Securities (as defined in Appendix A) or securities of other investment companies. In addition, securities subject to certain unconditional guarantees are subject to different diversification requirements as described in the Additional Statement. Fund Investment Objectives and Strategies The Prime Obligations, Money Market, Treasury Obligations, Treasury Instruments, Government, Federal and Tax -Free Money Market Funds seek to maximize current income to the extent consistent with the preservation of capital and the maintenance of liquidity by investing exclusively in high quality money market instruments. Taxable and Tax- Advantaged Funds: The Prime Obligations and Money Market Funds pursue their investment objectives by investing in U.S. Government Securities, obligations of U.S. banks, commercial paper and other short-term obligations of U.S. companies, states, municipalities and other entities and repurchase agreements. The Money Market Fund may also invest in U.S. dollar - denominated obligations of foreign banks, foreign companies and foreign govern- ments. The Treasury Obligations Fund pursues its investment objective by investing only in securities issued by the U.S. Treasury and repurchase agreements relating to such securities. The Government Fund pursues its investment objective by investing, directly or indirectly, only in U.S. Government Securities and repurchase agreements relating to such securities. The Treasury Instruments and Federal Funds pursue their investment objectives by limiting their investments only to certain U.S. Treasury Obligations and U.S. Government Securities, respectively, the interest from which is generally exempt from state income taxation. You should consult your tax adviser to determine whether distributions from the Treasury Instruments and Federal Funds (and any other Fund that may hold such obligations) derived from interest on such obligations are exempt from state income taxation in your own state. In order to obtain a rating from a rating organization, the Prime Obligations, Money Market, Treasury Obligations, Treasury Instruments, Government and Federal Funds will observe special investment restrictions. Tax- Exempt Fund: The Tax -Free Money Market Fund pursues its investment objective by investing in securities issued by or on behalf of states, territories, and possessions of the United States and their political subdivisions, agencies, authorities and instrumentalities, and the District of Columbia, the interest from which, if any, is in the opinion of bond counsel excluded from gross income for federal income tax purposes, and generally not an item of tax preference under the federal alternative minimum tax ( "AMT "). The table below identifies some of the investment techniques that may (but are not required to) be used by the Funds in seeking to achieve their investment objectives. The table also highlights the differences among the Funds in their use of these techniques and other investment practices and investment securities. Numbers in this table show allowable usage only; for actual usage, consult the Funds' annual and semi - annual reports. For more information see Appendix A. The Funds publish their complete portfolio holdings on their website (http: / /www.gs.com/funds). The Prime Obligations and Money Market Funds publish their holdings as of the end of each month subject to a thirty calendar -day lag between the date of the information and the date on which the information is disclosed. The other Funds publish their holdings as of the end of each calendar quarter subject to a thirty calendar -day lag between the date of the information and the date on which the information is disclosed. This information will be available on the website until the date on which a Fund files its next quarterly portfolio holdings report on Form N -CSR or Form N -Q with the SEC. In addition, a description of the Funds' policies and procedures with respect to the disclosure of a Fund's portfolio securities is available in the Funds' Additional Statement. Investment Policies Matrix Fund U.S. Treasury Obligations U.S. Government Securities Bank Obligations Commercial Paper Prime Obligations ■I ■ ■ U.S. banks only2 ■ Money Market ■t ■ ■ Over 25% of total assets must be invested in U.S. and foreign (US$) banks3 ■ U.S. and foreign (US$) commercial paper Treasury Obligations 111114 Treasury Instruments ■`t Government ■t ■ Federal ■t ■ Tax -Free Money Market ■ Tax- exempt only Note: See AppendU A,lbr a description of and certain criteria applicable to, each of these categories of investments. ' Issued or guaranteed by the U.S. Trvasur•. ' Including,fareign branches of U.S. banks. ' If adverse economic conditions prevail in the banking industry (such as substantial losses an loans, increases in non - perfarming acmes and charge -offs and declines in total deposits), the Fund may. for temporary defensive purposes, inest less than 15% of its total assets in bank obligations. c Issued by the U.S. Treasury. To the extent required by Rule 1a -7, asset- backed and receivables- backed securities will be rated by the requisite number of nationally recognized statistical rating organizations ( "NRSROs' ). " The Money Market Fund may invest in U.S. dollar - denominated obligations (limited to commercial paper and other notes) issued or guaranteed by a.forrign government. The Fund may also invest in US dollar - denominated obligations issued or guaranteed by am• entity located or organized in a foreign country that maintains a short -term ,foreign currency rating in the highest short-term ratings category by the requisite number of NRSROs. The Fund may not invest more than 15% of its total assets in the securities of any one foreign government. FUND INVESTMENT OBJECTIVES AND STRATEGIES Short -Term Foreign Obligations of Asset - Backed and Government Corporations and Repurchase Receivables- Backed Obligations Other Entities Agreements SecuritiesS (USS) ■ ■ ■ U.S. entities only ■ ■ ■ ■6 U.S. and foreign (US$) entities ■ ■ (Does not intend to invest) Investment Policies Matrix continued Custodial Unrated Investment Fund Municipals Receipts Securities9 Companies Prime Obligations 07 ■ IN ■ Up to 10% of total assets in other investment companies Money Market ■t ■ ■ ■ Up to 10% of total assets in other investment companies Treasury Obligations Treasury Instruments Government ■ Up to 10% of total assets in other investment companies Federal Tax -Free Money Market ■ ■ ■ ■ At least 80% of net assets in Up to 10% of total tax - exempt municipal assets in other obligations (except in investment companies extraordinary circumstances)8 Note: See Appendix A for a description of, and certain criteria applicable to, each of these categories of Investments. ' Will only make such investments when yields on such securities are attractive compared to other taxable investments. " Ordinarily expect that 100% of the Fund's assets will be invested in municipal obligations, but the Fund may, for temporary defensive purposes, hold cash or invest in short -term taxable securities. v To the extent permitted by Rule 2a -7, securities without short -term ratings may be purchased if they are deemed to be of comparable quality to First Tier Securities. In addition, a Fund holding a security supported by a guarantee or demand feature may rely on the credit quality of the guarantee or demand feature in determining the credit quality of the investment. FUND INVESTMENT OBJECTIVES AND STRATEGIES Private Summary of Activity Credit Taxation for Bonds Quality9 Distributions13 Miscellaneous ■ First Tierl2 Taxable federal and state14 Reverse repurchase agreements not permitted. ■ First Tierl2 Taxable federal and state14 May invest in obligations of the International Bank for Reconstruction and Development. Reverse repurchase agreements not permitted. First Tier12 Taxable federal and state14 Reverse repurchase agreements not permitted. First Tier12 Taxable federal and Reverse repurchase agreements not permitted. generally exempt from state taxation First Tier12 Taxable federal and state14 Reverse repurchase agreements not permitted. First Tier12 Taxable federal and Under extraordinary circumstances, may hold generally exempt from state cash, U.S. Government Securities subject to state taxation taxation or cash equivalents. Reverse repurchase agreements not permitted. ■ Does not First Tier12 Tax - exempt We%and May (but does not currently intend to) invest up intend to taxable state to 20% of net assets in securities subject to invest if AMT and may temporarily invest in the taxable subject t? money market instruments described herein. AMT Reverse repurchase agreements not permitted. If such policy should change, private activity bonds subject to AMT would not exceed 10% of the Fund's net assets under normal market conditions. No more than 15% of the value ol'the Fund's total assets may be invested in industrial development bonds or similar obligations where the non - governmental entities supplying the revenues firom which such bonds or obligations are to be paid are in the same industry. First Tier Securities are (a) rated in the highest short -term rating category by at least two NRSROs, or if only one NRSRO has assigned a rating, by that NRSRO; or (b) issued or guaranteed by, or otherwise allow a Fund under certain conditions to demand paymem from. an entity with such ratings. U.S. Government Securities are considered First Tier Securities- ,3 See "Taxation " jor an explanation of the tax consequences summarized in the table above. Taxable in many states except for distributions from U.S. Treasury Obligation interest income and certain U.S. Government Securities interest income. " Taxable except, for distributions from interest on obligations of an investor's state of residence in certain states. Principal Risks of the Funds Loss of money is a risk of investing in each Fund. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The following summarizes important risks that apply to the Funds and may result in a loss of your investment. None of the Funds should be relied upon as a complete investment program. There can be no assurance that a Fund will achieve its investment objective. • Appfutle — Not zppkkl, Tax -Free Prime Money Treasury Treasury Money Obligations Market Obligations Instruments Government Federal Market Fund Fund Fund Fund Fund Fund Fund NAV Interest Rate CrediUDefault Liquidity U.S. Government Securities — — — Concentration Foreign — — — — Banking Industry — — — — — Tax — — — Risks that apply to all Funds: • NA Risk —The risk that a Fund will not be able to maintain a NAV per share of $1.00 at all times. • Interest Rate Risk —The risk that during periods of rising interest rates, a Fund's yield (and the market value of its securities) will tend to be lower than prevailing market rates; in periods of falling interest rates, a Fund's yield will tend to be higher. • Credit/Default Risk —The risk that an issuer or guarantor of a security, or a bank or other financial institution that has entered into a repurchase agreement, may default on its payment obligations. In addition, with respect to the Tax -Free Money Market Fund, this risk includes the risk of default on foreign letters of credit, guarantees or insurance policies that back municipal securities. • Liquidity Risk —The risk that a Fund will be unable to pay redemption proceeds within the time period stated in this Prospectus, because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. to PRINCIPAL RISKS OF THE FUNDS Risk that applies to the Prime Obligations, Money Market, Government and Federal Funds: ■ U.S. Government Securities Risk —The risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Although many U.S. Government Securities purchased by the Funds, such as those issued by the Federal National Mortgage Association ( "Fannie Mae "), Federal Home Loan Mortgage Corporation ( "Freddie Mac ") and Federal Home Loan Banks may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the United States Treasury and, therefore, are not backed by the full faith and credit of the United States. The maximum potential liability of the issuers of some U.S. Government Securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future. Risks that apply to the Money Market Fund: • Foreign Risk —The risk that a foreign security could lose value as a result of political, financial and economic events in foreign countries, less publicly available financial and other information, less stringent foreign securities regulations and accounting and disclosure standards, or other factors. The Money Market Fund may not invest more than 25% of its total assets in the securities of any one foreign government. • Banking Industry Risk —The risk that if the Fund invests more than 25% of its total assets in bank obligations, an adverse development in the banking industry may affect the value of the Fund's investments more than if the Fund's investments were not invested to such a degree in the banking industry. Normally, the Money Market Fund intends to invest more than 25% of its total assets in bank obligations. Banks may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. EE Risks that apply to the Tax -Free Money Market Fund: ■ Concentration Risk —The risk that if the Fund invests more than 25% of its total assets in issuers within the same state, industry or economic sector, an adverse economic, business or political development may affect the value of the Fund's investments more than if its investments were not so concentrated. ■ Tax Risk —The risk that future legislative or administrative changes or court decisions may materially affect the value of the Fund's portfolio and/or the ability of the Fund to pay federal tax - exempt dividends. This Fund would not be a suitable investment for IRAs, other tax - exempt or tax - deferred accounts or for other investors who are not sensitive to the federal, state or local tax consequences of their investments. More information about the Funds' portfolio securities and investment techniques, and their associated risks, is provided in Appendix A. You should consider the investment risks discussed in this section and in Appendix A. Both are important to your investment choice. 12 Fund Performance The bar chart and table below provide an indication of the risks of investing in a Fund by showing: (a) changes in the performance of a Fund's Administration Shares from year to year for up to the last ten years (with respect to the bar charts); and (b) the average annual total returns of a Fund's Administration Shares. Investors should be aware that the fluctuation of interest rates is one primary factor in performance volatility. The bar chart (including "Best Quarter" and "Worst Quarter" information) and table assume reinvestment of dividends and distribu- tions. A Fund's past performance is not necessarily an indication of how the Fund will perform in the future. Performance reflects expense limitations in effect. If expense limitations were not in place, a Fund's performance would have been reduced. You may obtain a Fund's current yield by calling 1 -500- 621 -2550. 13 Prime Obligations Fund TOTAL RETURN Best Quarter` Q3 '00 1.59% Worst Quarter" Q1 '04 0.11% 5.14% 5.34% 5.29% CALENDAR YEAR 6.18% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 AVERAGE ANNUAL TOTAL RETURN For the period ended December 31, 2005 1 Year 5 Years 10 Years Since Inception Administration Shares (Inception 11/9/92) 2.88% 2.01% 3.68% 3.80% • Please note that " Besv Quarter'' and "Won't Quarter- figures are applicable only to the lime period covered by the bar chart. Money Market Fund TOTAL RETURN Best Quarter* Q3 '00 1.59% Worst Quarter* Q3 '03 0.17% 5.19% 5.37% 5.29% n o�*c FUND PERFORMANCE CALENDAR YEAR 6.18% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 For the period ended December 31, 2005 1 Year 5 Years 10 Years Since Inception Administration Shares (Inception 5/20/94) 2.88% 2.01% 3.69% 3.92% * Please note that "Best Quarter" and "Worst Quarter" figures are applicable only to the time period covered by the bar chart. 15 Treasury Obligations Fund TOTAL RETURN Best Quarter' Q4 '00 1.54% Worst Quarter' Q3 '03 0.14% 5.92% 5.09% 5.24% 5,14% CALENDAR YEAR 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 For the period ended December 31, 2005 1 Year 5 Years 10 Years Since Inception Administration Shares (Inception 1/21/93) 2.75% 1.86% 3.52% 3.66% "Please note that "Best Quarter" and "Worst Quarter" figures are applicable only to the time period covered br the bar chart. 16 FUND PERFORMANCE Treasury Instruments Fund TOTAL RETURN Best Quarter" Q4 '00 1.48% Worst Quarter' Q1 '04 0.13% CALENDAR YEAR 5.64% For the period ended December 31, 2005 1998 1999 2000 2001 2002 2003 2004 2005 1 Year 5 Years Since Inception Administration Shares (Inception 4/1/97) 2.58% 1.77% 3.12% * Please note that "Best Quarter" and "Worst Quarter'' figures are applicable only to the time period covered by the bar chart. 17 Government Fund TOTAL RETURN Best Quarter' Q4 '00 1.56% Worst Quarter' Q1 '04 0.16% 5.12% 5.28% 5.20% CALENDAR YEAR 6.05% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 For the period ended December 31, 2005 1 Year 5 Years 10 Years Since Inception Administration Shares (Inception 9/1/93) 2.85% 1.97% 3.61% 3.80% ' Please note that ''Beet Quarter" and "N4nst Quarter' figures are applicable only to the time period covered by the bar chart. 18 Federal Fund TOTAL RETURN Best Quarter` Q4 '00 1.55% Worst Quarter' Q1 '04 0.15% FUND PERFORMANCE CALENDAR YEAR 6.00% For the period ended December 31, 2005 1998 1999 2000 2001 2002 2003 2004 2005 1 Year 5 Years Since Inception Administration Shares (Inception 411/97) 2.78% 1.92% 3.36% • Please note that ''Best Quarter" and "Worst Quarter'' figures are applicable only to the lime period covered by the bar chart. 19 Tax -Free Money Market Fund TOTAL RETURN CALENDAR YEAR Best Quarter' Q4 '00 0.97% Worst Quarter' Q3 '03 0.11% 3.69% 3.13 % 3.28%3.08% 2.88% 2.34 2.01% 0.64% 0.79 %. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 AVERAGE ANNUAL TOTAL RETURN For the period ended December 31, 2005 1 Year 5 Years 10 Years Since Inception Administration Shares (Inception 8/1/94) 2.01% 1.36% 2.28% 2.43% • Please tune that "Bent Quarter" rind "Nbrst Quarter" ftatres are applicable only to the lime period covered by the bar chart. 20 [This page intentionally left blank] Fund Fees and Expenses (Administration Shares) This table describes the fees and expenses that you would pay if you buy and hold Administration Shares of a Fund. See page 241iu' till other jimmote., As a result of waivers and expense limitations, "Other Expenses" and "Total Fund Operating Expenses" of the Funds which are actually incurred are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, "Other Expenses" and "Total Fund Operating Expenses" may increase without shareholder approval. Prime Obligations Fund Money Market Fund Shareholder Fees (fees paid directly from your investment): Maximum Sales Charge (Load) Imposed on Purchases None None Maximum Deferred Sales Charge (Load) None None Maximum Sales Charge (Load) Imposed on 0.25% 0.25% Reinvested Dividends None None Redemption Fees None None Exchange Fees None None Annual Fund Operating Expenses (expenses that are deducted from Fund assets):t Management Fees 0.21% 0.21% Other Expenses' 0.27% 0.27% Administration Fees 0.25% 0.25% All Other Expenses 0.02% 0.02% Total Fund Operating Expenses' 0.48% 0.48% See page 241iu' till other jimmote., As a result of waivers and expense limitations, "Other Expenses" and "Total Fund Operating Expenses" of the Funds which are actually incurred are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, "Other Expenses" and "Total Fund Operating Expenses" may increase without shareholder approval. 22 Prime Obligations Fund Money Market Fund Annual Fund Operating Expenses (expenses that are deducted from Fund assets):I Management Fees2 0.16% 0.16% Other Expenses 0.27% 0.27% Administration Fees 0.25% 0.25% All Other Expenses4 0.02% 0.02% Total Fund Operating Expenses (after waivers and expense limitations) 0.43% 0.43% 22 FUND FEES AND EXPENSES Treasury Treasury Tax -Free Obligations Instruments Government Federal Money Market Fund Fund Fund Fund Fund None None None None None None None None None None None None None None None None None None None None None None None None None 0.21% 0.21% 0.21% 0.21% 0.21% 0.28% 0.29% 0.28% 0.27% 0.27% 0.25% 0.25% 0.25% 0.25% 0.25% 0.03% 0.04% 0.03% 0.02% 0.02% 0.49% 0.50% 0.49% 0.48% 0.48% Treasury Treasury Tax -Free Obligations Instruments Government Federal Money Market Fund Fund Fund Fund Fund 0.18% 0.18% 0.16% 0.18% 0.16% 0.27% 0.17% 0.27% 0.27% 0.27% 0.15% 0.25% 0.15% 0.25% 0.25% 0.02% 0.02% 0.02% 0.02% 0.02% 0.45% 0.45% 0.43% 0.45% 0.43% 23 Fund Fees and Expenses continued The Funds' annual operating expenses have been restated to reflect the imposition of a trans %r agency lee equal to 0.015% oj'the average dailv net assets of each Fund effective July 1, 2005. Prior to July 1, 1005, Goldman Sachs received no separate fee as transfer agent. In addition, "Total Fund Operating Expenses q %per waivers and expense (imitations" have been restated to reflect that effective .fitly 1, 2005, GSAM increased its management fee waiver to 0.05% of the average daily net assets of Prime Obligations, Money Market, Government and Tax -Free Money Market Funds and 0.03% of the average daily net assets of the Treasury Obligations, Treasury Instruments and Federal Funds. Prior to July 1, 2005, GSAM had agreed to waive a portion of its management fees equal annually to 0.035% of the average daily net assets of'Prime Obligations, Money Market, Government and Tax -Free Money Market Funds and 0.015% gl'the average daily net assets of the Treasury Obligations, Treasury Instruments and Federal Funds. The contractual management fee of each Fund is 0.1050% of each Fund's average daily net assets. The Investment Adviser has voluntarily agreed not to impose a portion of the management fee equal to 0.030° /a of the Treasury Obligations, Treasury Instruments and Federal Funds' average daily net assets and equal to 0.050% of all other Funds' average daily net assets. As a result of fee waivers, the current management fees of the Treasury Obligations Fund, Treasury Instruments Fund, Federal Fund and all other Funds are 0.175 %, 0.175 %, 0.175% and 0.155 %, respectively, of such Funds' average daily net assets. The waivers may be terminated at any time at the option of the Investment Adviser. ,Service Organi_ation.s may charge other fees direct/v to their customers who are hencfic•ial owners of Administration Shares in connection with their customers' accounts. Such fees may affect the return customers realize with respect to their investments. 4 All Other Expenses include transfer agency fees and expenses equal on an annualized basis to 0.015% of the average daily net assets of each Fund's Administration Shares, plus all other ordinary expenses not detailed above. The Investment Adviser has voluntarily agreed to reduce or limit "All Other Expenses " of each Fund (excluding management fees, transfer agency fees and expense, administration fees. taxes, interest, brokerage fi•es and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to 0.014% of each Fund's average daily net assets. FUND FEES AND EXPENSES Example The following Example is intended to help you compare the cost of investing in a Fund (without the waivers and expense limitations) with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Administration Shares of a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that a Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: Fund 1 Year 3 Years 5 Years 10 Years Prime Obligations $49 $152 $266 $598 Money Market $49 $152 $266 $598 Treasury Obligations $50 $156 $271 $610 Treasury Instruments $51 $159 $277 $622 Government $50 $156 $271 $610 Federal $49 $152 $266 $598 Tax -Free Money Market $49 $152 $266 $598 Service Organizations that invest in Administration Shares on behalf of their customers may charge other fees directly to their customer accounts in connection with their investments. You should contact your Service Organization for information regarding such charges. Such fees, if any, may affect the return such customers realize with respect to their investments. Certain Service Organizations that invest in Administration Shares may receive other compensation in connection with the sale and distribution of Administration Shares or for services to their customers' accounts and/or the Funds. For additional information regarding such compensation, see "Shareholder Guide" in the Prospectus and "Payments to Intermediaries" in the Additional Statement. 25 Service Providers Goldman Sachs Asset Management, L.P. ( "GSAM "), 32 Old Slip, New York, New York 10005, has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman Sachs. As of December 31, 2005, GSAM had assets under management of $496.1 billion. The Investment Adviser provides day -to -day advice regarding the Funds' portfolio transactions. The Investment Adviser also performs the following services for the Funds: ■ Continually manages each Fund, including the purchase, retention and disposi- tion of securities and other assets ■ Administers each Fund's business affairs ■ Performs various recordholder servicing functions (to the extent not provided by other organizations) Pursuant to SEC orders, certain Funds may enter into principal transactions in certain money market instruments, including repurchase agreements, with Goldman Sachs. SERVICE PROVIDERS MANAGEMENT FEES As compensation for its services and its assumption of certain expenses, the Investment Adviser is entitled to the following fees, computed daily and payable monthly, at the annual rates listed below (as a percentage of each respective Fund's average daily net assets): Actual Rate For the Fiscal Year Ended Fund Contractual Rate December 31, 2005 Prime Obligations 0.205% 0.162% Money Market 0.205% 0.162% Treasury Obligations 0.205% 0.182% Treasury Instruments 0.205% 0.182% Government 0.205% 0.162% Federal 0.205% 0.182% Tax -Free Money Market 0.205% 0.162% The difference, if any, between the stated fees and the actual fees paid by the Funds reflects that the Investment Adviser did not charge the full amount of the fees to which it would have been entitled. The Investment Adviser may discontinue or modify any such voluntary limitations in the future at its discretion. A discussion regarding the basis for the Board of Trustees' approval of the Management Agreement in 2005 for the Funds is available in the Funds' semi- annual report dated June 30, 2005. DISTRIBUTOR AND TRANSFER AGENT Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor (the "Distributor ") of each Fund's shares. Goldman Sachs, 71 S. Wacker Dr., Suite 500, Chicago, Illinois 60606, also serves as each Fund's transfer agent (the "Transfer Agent ") and, as such, performs various shareholder servicing functions. From time to time, Goldman Sachs or any of its affiliates may purchase and hold shares of the Funds. Goldman Sachs reserves the right to redeem at any time some or all of the shares acquired for its own account. 27 The involvement of the Investment Adviser, Goldman Sachs and their affiliates in the management of, or their interest in, other accounts and other activities of Goldman Sachs may present conflicts of interest with respect to a Fund or limit a Fund's investment activities. Goldman Sachs is a full service investment banking, broker dealer, asset management and financial services organization and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, financer, advisor, market maker, trader, prime broker, lender, agent and principal, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Funds directly and indirectly invest. Thus, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking or other services. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Funds and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Funds. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Funds. The results of a Fund's investment activities, therefore, may differ from those of Goldman Sachs, its affiliates, and other accounts managed by Goldman Sachs and it is possible that a Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Funds may, from time to time, enter into transactions in which Goldman Sachs or its other clients have an adverse interest. Furthermore, transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may adversely impact the Funds. Transactions by one or more Goldman Sachs advised clients or the Investment Adviser may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. A Fund's activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Funds, and may also perform or seek to perform investment banking and 28 SERVICE PROVIDERS financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Funds or who engage in transactions with or for the Funds. For more information about conflicts of interest, see the Additional Statement. On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against The Goldman Sachs Group, Inc. ( "GSG "), Goldman Sachs Asset Management, L.P. ( "GSAM "), the Trustees and Officers of the Goldman Sachs Trust (the "Trust "), and John Doe Defendants. In addition, certain investment portfolios of the Trust were named as nominal defendants. On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed a consolidated amended complaint against GSG, GSAM, Goldman Sachs Asset Management International ( "GSAMI "), Goldman, Sachs & Co., Goldman Sachs Variable Insurance Trust ( "GSVIT "), the Trustees and Officers of the Trust and GSVIT and John Doe Defendants (collectively, the "Defendants ") in the United States District Court for the Southern District of New York. Certain investment portfolios of the Trust and GSVIT (collectively, the "Goldman Sachs Funds ") were also named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consoli- dated complaint on April 15, 2005. The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Sachs Funds between April 2, 1999 and January 9, 2004, inclusive (the "Class Period "), asserts claims involving (i) violations of the Act and the Investment Advisers Act of 1940; (ii) common law breaches of fiduciary duty; and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Sachs Funds paid excessive and improper investment advisory fees to GSAM and GSAMI. The complaint also 29 alleges that GSAM and GSAMI used Rule 12b -I fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust's Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM's and GSAMI's investment advisory agreements and return of fees paid; an accounting of all Goldman Sachs Funds - related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Sachs Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds. Dividends Dividends will be distributed monthly. You may choose to have dividends paid in: ■ Cash ■ Additional shares of the same class of the same Fund You may indicate your election on your Account Application. Any changes may be submitted in writing to Goldman Sachs at any time. If you do not indicate any choice, dividends and distributions will be reinvested automatically in the applicable Fund. All or substantially all of each Fund's net investment income will be declared as a dividend daily. Dividends will normally, but not always, be declared as of the following times: Dividend Declaration Time Fund (New York Time) Prime Obligations 5:00 p.m. Money Market 5:00 p.m. Treasury Obligations 5:00 p.m. Treasury Instruments 4:00 p.m. Government 5:00 p.m. Federal 4:00 p.m. Tax -Free Money Market 4:00 p.m. Dividends will be reinvested as of the last calendar day of each month. Cash distributions normally will be paid on or about the first business day of each month. Net short-term capital gains, if any, will be distributed in accordance with federal income tax requirements and may be reflected in a Fund's daily distributions. Each Fund may distribute at least annually other realized capital gains, if any, after reduction by available capital losses. In order to avoid excessive fluctuations in the amount of monthly capital gains distributions, a portion of any net capital gains realized on the disposition of securities during the months of November and December may be distributed during the subsequent calendar year. The realized gains and losses are not expected to be of an amount which would affect a Fund's NAV of $1.00 per share. 31 The income declared as a dividend for the Prime Obligations, Money Market, Treasury Obligations and Government Funds is based on estimates of net investment income for each Fund. Actual income may differ from estimates, and differences, if any, will be included in the calculation of subsequent dividends. Shareholder Guide The following section will provide you with answers to some of the most often asked questions regarding buying and selling the Funds' Administration Shares How Can I Purchase Administration Shares Of The Funds? Generally, Administration Shares may be purchased only through institutions that have agreed to provide shareholder administration services to their customers who are the beneficial owners of Administration Shares. These institutions are called "Service Organizations." Customers of a Service Organization will normally give their purchase instructions to the Service Organization, and the Service Organiza- tion will, in turn, place purchase orders with Goldman Sachs. Service Organiza- tions will set times by which purchase orders and payments must be received by them from their customers. Generally, Administration Shares may be purchased from the Funds on any business day at their NAV next determined after receipt of an order by Goldman Sachs from a Service Organization. No sales load is charged. Service Organizations are responsible for transmitting purchase orders and payments to Goldman Sachs in a timely fashion. Service Organizations should place a purchase order in writing or by telephone. By Writing: Goldman Sachs Funds P.O. Box 06050 Chicago, IL 60606 -6306 By Telephone: 1- 800 - 621 -2550 Before or immediately after placing an initial purchase order, a Service Organization should complete and send to Goldman Sachs the Account Application. Service Organizations may send their payments as follows: ■ Wire federal funds to The Northern Trust Company ( "Northern "), as sub - custodian for State Street Bank and Trust Company ( "State Street ") (each Fund's custodian); or ■ Send a check or Federal Reserve draft payable to Goldman Sachs Funds - (Name of Fund and Class of Shares), P.O. Box 06050, Chicago, IL 60606 -6306. The Funds will not accept checks drawn on foreign banks, third party checks, cashier's checks or official checks, temporary checks, electronic checks, drawer 33 checks, cash, money orders, travelers' cheques or credit card checks. In limited situations involving the transfer of retirement assets, the Funds may accept cashier's checks or official bank checks. It is strongly recommended that payment be effected by wiring federal funds to Northern. It is expected that Federal Reserve drafts will ordinarily be converted to federal funds on the day of receipt and that checks will be converted to federal funds within two business days after receipt. When Do Shares Begin Earning Dividends? If a wire purchase order is received on a business day by the deadline specified below and payment in federal funds is received by the Fund by the close of the Federal Reserve wire transfer system (normally, 6:00 p.m. New York time), then dividends will begin to accrue on the same business day that the wire purchase order is received: Treasury Instruments and Federal Funds: ■ By 3:00 p.m. New York time Prime Obligations, Money Market, Treasury Obligations and Government Funds: ■ By 5:00 p.m. New York time Tax -Free Money Market Fund: ■ By 2:00 p.m. New York time If a wire purchase order is received on a business day after the deadline specified above, you will not earn dividends on the day the purchase order is received. Also, in the event an order is placed by the deadline specified above but an anticipated wire payment is not received by the Fund by the close of the Federal wire transfer system that same day, your purchase will be cancelled and you will be liable for any resulting losses or fees incurred by the Fund, Goldman Sachs, or the Fund's custodian. For purchase orders accompanied by check, dividends will normally begin to accrue within two business days of receipt. What Do I Need To Know About Service Organizations? Service Organizations may provide the following services in connection with their customers' investments in Administration Shares: • Acting, directly or through an agent, as the sole shareholder of record • Maintaining account records for customers • Processing orders to purchase, redeem or exchange shares for customers • Processing confirmation statements and payments for customers 34 SHAREHOLDER GUIDE • Facilitating the inclusion of the Funds in customer accounts, products or services • Processing dividend payments on behalf of customers Some (but not all) Service Organizations are authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers, and may designate other intermediaries to accept such orders, if approved by the Trust. In these cases: • A Fund will be deemed to have received an order in proper form when the order is accepted by the authorized Service Organization or intermediary on a business day, and the order will be priced at the Fund's NAV per share next determined after such acceptance. • Service Organizations or intermediaries will be responsible for transmitting accepted orders and payments to the Trust within the time period agreed upon by them. You should contact your Service Organization directly to learn whether it is authorized to accept orders for the Trust. Pursuant to an administration plan adopted by the Trust's Board of Trustees, Service Organizations are entitled to receive payment for their services from the Trust of up to 0.25% (on an annualized basis) of the average daily net assets of the Administration Shares of the Funds, which are attributable to or held in the name of the Service Organization for its customers. The Investment Adviser, Distributor and/or their affiliates may also make additional payments to Service Organization and other financial intermediaries ( "Intermediaries ") from time to time to promote the sale, distribution and /or servicing of shares of the Funds and other Goldman Sachs Funds. These payments are made out of the Investment Adviser's, Distributor's and /or their affiliates' own assets, and are not an additional charge to the Funds. The payments are in addition to the administration fees described in this Prospectus. Such payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds and other Goldman Sachs Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries' registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, contribute to various non -cash and cash incentive arrangements to promote the sale of shares, as well as sponsor various educational programs, sales contests and/or promotions. The additional payments by the Investment Adviser, Distributor and/or their affiliates may also 35 compensate Intermediaries for subaccounting, administrative and/or shareholder processing services that are in addition to the fees paid for these services by the Funds. The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. Please refer to the "Payments to Intermediaries" section of the Additional Statement for more information about these payments. The payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your Service Organization or other Intermediary for more information about the payments it receives and any potential conflicts of interest. In addition to Administration Shares, each Fund also offers other classes of shares to investors. These other share classes are subject to different fees and expenses (which affect performance), and are entitled to different services than Administra- tion Shares. Information regarding these other share classes may be obtained from your sales representative or from Goldman Sachs by calling the number on the back cover of this Prospectus. What Is My Minimum Investment In The Funds? Minimum initial investment $10 million (may be allocated among the Funds) Minimum account balance $10 million Minimum subsequent investments None A Service Organization may, however, impose a minimum amount for initial and subsequent investments in Administration Shares and may establish other require- ments such as a minimum account balance. A Service Organization may redeem Administration Shares held by non - complying accounts, and may impose a charge for any special services. What Else Should I Know About Share Purchases? The Trust reserves the right to: ■ Modify or waive the minimum investment and minimum account balance requirement. ■ Reject any purchase order for any reason. 36 SHAREHOLDER GUIDE The Board of Trustees of the Trust has not adopted policies and procedures with respect to frequent purchases and redemptions of Fund shares in light of the nature and high quality of the Funds' investments. As stated, however, each Fund reserves the right to refuse a purchase or exchange order, and may do so, for example, if management of the Trust believes that the transaction may not be in the best interests of the Fund. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. In addition, restrictions on frequent transactions may apply with respect to other investment portfolios of the Trust. Generally, the Funds will not allow non -U.S. citizens and certain U.S. citizens residing outside the United States to open an account directly with the Funds. The Funds may allow Service Organizations to purchase shares with securities instead of cash if consistent with a Fund's investment policies and operations and if approved by the Fund's Investment Adviser. The minimum investment requirement may be waived for current and former officers, partners, directors or employees of Goldman Sachs or any of its affiliates. Customer Identification Program. Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other identifying information, for each investor who opens an account with the Funds. Applications without the required information may not be accepted by the Funds. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to: (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor's shares and close an account in the event that the Funds are unable to verify an investor's identity. The Funds and their agents will not be responsible for any loss in an investor's account resulting from the investor's delay in providing all required identifying information or from closing an account and redeeming an investor's shares pursuant to the customer identification program. 37 How Are Shares Priced? The price you pay or receive when you buy, sell or exchange Administration Shares is the Fund's next determined NAV for a share class. The Funds calculate NAV as follows: (Value of Assets of the Class) NAV = — (Liabilities of the Class) Number of Outstanding Shares of the Class Fund NAV Calculated Treasury Instruments, Federal and As of the close of regular trading of Tax -Free Money Market the New York Stock Exchange (normally 4:00 p.m. New York time or such later time as the New York Stock Exchange or the NASDAQ market may officially close) on each business day Prime Obligations, Money Market, As of 5:00 p.m. New York time Treasury Obligations and on each business day Government • NAV per share of each class is generally calculated by the accounting agent on each business day. Fund shares will be priced on any day the New York Stock Exchange is open, except for days on which Chicago, Boston or New York banks are closed for local holidays. • On any business day when the Bond Market Association ( "BMA ") recommends that the securities markets close early, each Fund reserves the right to close at or prior to the BMA recommended closing time. If a Fund does so, it will cease granting same business day credit for purchase and redemption orders received after the Fund's closing time and credit will be given to the next business day. • The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC. Note: The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York time. In the event the New York Stock Exchange does not open for business because of an emergency, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during an emergency situation, please call 1- 800 - 621 -2550. 38 SHAREHOLDER GUIDE To help each Fund maintain its $1.00 constant share price, portfolio securities are valued at amortized cost in accordance with SEC regulations. Amortized cost will normally approximate market value. There can be no assurance that a Fund will be able at all times to maintain a NAV of $1.00 per share. In addition, if an event that affects the value of a security occurs after the publication of market quotations used by a Fund to price its securities but before the close of trading on the New York Stock Exchange, the Trust in its discretion and consistent with applicable regulatory guidance may determine whether to make an adjustment in light of the nature and significance of the event. How Can I Sell Administration Shares Of The Funds? Generally, Administration Shares may be sold (redeemed) only through Service Organizations. Customers of a Service Organization will normally give their redemption instructions to the Service Organization, and the Service Organization will, in turn, place redemption orders with the Funds. Generally, each Fund will redeem its Administration Shares upon request on any business day at their NAV next determined after receipt of such request in proper form. Redemption proceeds may be sent to recordholders by check or by wire (if the wire instructions are on record). A Service Organization may request redemptions in writing or by telephone if the optional telephone redemption privilege is elected on the Account Application. By Writing: Goldman Sachs Funds P.O. Box 06050 Chicago, IL 60606 -6306 By Telephone: If you have elected the telephone redemption privilege on your Account Application: ■ 1 -800- 621 -2550 Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application. Other information may also be required. Please contact the Funds. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions. Certain Service Organizations are authorized to accept redemption requests on behalf of the Funds as described under "What Do I Need To Know About Service 39 Organizations ?" A redemption may also be made with respect to certain Funds by means of the check redemption privilege described in the Additional Statement. When Do I Need A Medallion Signature Guarantee To Redeem Shares? A Medallion signature guarantee may be required if: ■ You would like the redemption proceeds sent to an address that is not your address of record; or ■ You would like to change your current bank designation. A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required for executors, trustees or corporations or when deemed appropriate by the Transfer Agent. What Do I Need To Know About Telephone Redemption Requests? The Trust, the Distributor and the Transfer Agent will not be liable for any loss you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs employs reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect: • All telephone requests are recorded. • Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application. Other information may also be required. Please contact the Funds. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions. • For the 30 -day period following a change of address, telephone redemptions will only be filled by a wire transfer to the bank account designated in the Account Application (see immediately preceding bullet point). In order to receive the redemption by check during this time period, the redemption request must be a letter with a signature Medallion guaranteed. • The telephone redemption option may be modified or terminated at any time. Note: It may be difficult to make telephone redemptions in times of drastic economic or market conditions. 40 SHAREHOLDER GUIDE When Will Redemption Proceeds Be Wired? Redemption proceeds will normally be wired to the domestic bank account designated on a Service Organization's Account Application as follows: Redemption Request Received Redemption Proceeds Dividends Treasury Instruments and Federal Funds: • By 3:00 p.m. New York time Wired same business day Not earned on day request is received • After 3:00 p.m. New York time Wired next business day Earned on day request is received Prime Obligations, Money Market, Treasury Obligations and Government Funds: ■ By 5:00 p.m. New York time Wired same business day Not earned on day request is received ■ After 5:00 p.m. New York time Wired next business day Earned on day request is received Tax -Free Money Market Fund: ■ By 1:00 p.m. New York time Wired same business day Not earned on day request is received ■ After 1:00 p.m. New York time Wired next business day Earned on day request is received • Although redemption proceeds will normally be wired as described above, under certain circumstances, (i) redemption proceeds may be paid the next business day following receipt of a properly executed wire transfer redemption request (or up to three business days later with respect to the Tax -Free Money Market Fund) and (ii) redemption requests or payments may be postponed or suspended as permitted pursuant to Section 22(e) of the Act. Generally, under that section, redemption requests or payments may be postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by a Fund or the fair determination of the value of a Fund's net assets not reasonably practicable; or (iii) the SEC by order permits the suspension of the right of redemption. • If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days. If the Federal Reserve Bank is closed on the day the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed one additional business day. 41 ■ Neither the Trust nor Goldman Sachs assumes any responsibility for the performance of intermediaries or your Service Organization in the transfer process. If a problem with such performance arises, you should deal directly with such intermediaries or Service Organizations. What Else Do I Need To Know About Redemptions? The following generally applies to redemption requests: • Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received. • Service Organizations are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, Service Organizations may set times by which they must receive redemption requests. Service Organizations may also require additional documentation from you. The Trust reserves the right to: • Redeem your shares in the event a Service Organization's relationship with Goldman Sachs is terminated and you do not transfer your account to another Service Organization with a relationship with Goldman Sachs. The Trust will not be responsible for any loss in an investor's account resulting from the redemption. • Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interest of the Trust. • Pay redemptions by a distribution in -kind of securities (instead of cash). If you receive redemption proceeds in -kind, you should expect to incur transaction costs upon the disposition of those securities. • Reinvest any dividends or other distributions which you have elected to receive in cash should your check for such dividends or other distributions be returned to a Fund as undeliverable or remain uncashed for six months. In addition, that distribution and all future distributions payable to you will be reinvested at the NAV on the day of reinvestment in additional Administration Shares of the Fund that pays the distributions. No interest will accrue on amounts represented by uncashed distribution or redemption checks. SHAREHOLDER GUIDE Can 1 Exchange My Investment From One Fund To Another? A Service Organization may exchange Administration Shares of a Fund at NAV for shares of the corresponding class of another Goldman Sachs Fund. The exchange privilege may be materially modified or withdrawn at any time upon 60 days' written notice. Instructions For Exchanging Shares: By Writing: ■ Write a letter of instruction that includes: ■ The recordholder name(s) and signature(s) ■ The account number ■ The Fund names and Class of Shares ■ The dollar amount to be exchanged ■ Mail the request to: Goldman Sachs Funds P.O. Box 06050 Chicago, IL 60606 -6306 By Telephone: If you have elected the telephone exchange privilege on your Account Application: ■ 1- 800 - 621 -2550 You should keep in mind the following factors when making or considering an exchange: ■ You should obtain and carefully read the prospectus of the Goldman Sachs Fund you are acquiring before making an exchange. ■ All exchanges which represent initial investments into the Fund need not meet the traditional minimum initial investment requirements for that Fund if the entire balance of the original Goldman Sachs Fund account is exchanged. ■ Telephone exchanges normally will be made only to an identically registered account. ■ Exchanges are available only in states where exchanges may be legally made. ■ It may be difficult to make telephone exchanges in times of drastic economic or market conditions. ■ Goldman Sachs may use reasonable procedures described under "What Do 1 Need To Know About Telephone Redemption Requests ?" in an effort to prevent unauthorized or fraudulent telephone exchange requests. ■ Exchanges into Goldman Sachs Funds that are closed to new investors may be restricted. ■ Exchanges into a Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund. For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the 43 exchange. You should consult your tax adviser concerning the tax consequences of an exchange. What Types Of Reports Will I Be Sent Regarding Investments In Administration Shares? Service Organizations will receive from the Funds annual shareholder reports containing audited financial statements and semi - annual shareholder reports. Service Organizations will also be provided with a monthly account statement. Service Organizations are responsible for providing these or other reports to their customers who are the beneficial owners of Administration Shares in accordance with the rules that apply to their accounts with the Service Organizations. In addition, Service Organizations and other financial intermediaries will be respon- sible for providing any communications from a Fund to the shareholders, including but not limited to prospectuses, prospectus supplements, proxy materials, and notices regarding the sources of dividend payments pursuant to Section 19 of the Investment Company Act. The Funds do not generally provide sub - accounting services. Taxation As with any investment, you should consider how your investment in the Funds will be taxed. The tax information below is provided as general information. More tax information is available in the Additional Statement. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Funds. Unless your investment is through an IRA or other tax - advantaged account, you should consider the possible tax consequences of Fund distributions. Taxes on Distributions: Each Fund contemplates declaring as dividends each year all or substantially all of its net investment income. Fund distributions of investment income are generally taxable as ordinary income for federal tax purposes, and may also be subject to state or local taxes. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash. Distributions of short-term capital gains are taxable to you as ordinary income. Any long -term capital gain distributions are taxable as long -term capital gains, no matter how long you have owned your Fund shares. It is anticipated that substantially all of the distributions by the Funds, other than the Tax -Free Money Market Fund, will be taxable as ordinary income. You should note that these distributions will not qualify for the reduced tax rate currently applicable to certain qualified dividends because the Funds' investment income will consist generally of interest income rather than corporate dividends. Although distributions are generally treated as taxable to you in the year they are paid, distributions declared in December but paid in January will be taxable as if they were paid in December. The Funds will inform shareholders of the character and tax status of all distributions promptly after the close of each calendar year. To the extent that Fund distributions are attributable to interest on certain federal obligations or interest on obligations of your state of residence or its municipalities or authorities, they will in most cases be exempt from state and local income taxes. Distributions from the Tax -Free Money Market Fund that are designated as "exempt interest dividends" are generally not subject to federal income tax. However, you should note that, while the Fund intends to avoid such investments, a portion of the exempt- interest dividends paid by the Tax -Free Money Market Fund may be attributable to investments in securities, the interest on which will be a preference item when determining your federal alternative minimum tax liability. Exempt- interest dividends are also taken into account in determining the taxable portion of social security or railroad retirement benefits. Any interest on indebtedness incurred by you to purchase or carry shares in the Tax - Exempt Funds generally will not be deductible for federal income tax purposes. 45 Other Information: When you open your account, you should provide your social security or tax identification number on your Account Application. By law, each Fund must withhold 28% of your taxable distributions and any redemption proceeds if you do not provide your correct taxpayer identification number, or certify that it is correct, or if the IRS instructs the Fund to do so. Non -U.S. investors may be subject to U.S. withholding and estate tax. However, withholding is generally not required on properly designated distributions of short- term capital gains and qualified interest income paid to non -U.S. investors after November 1, 2005 and before October 31, 2008. Currently, only the Government Fund, Federal Fund, Treasury Obligations Fund and Treasury Instruments Fund anticipate designating distributions from short-term capital gains and qualified interest income. Appendix A Additional Information on Portfolio Risks, Securities and Techniques This section provides further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks. Additional information is provided in the Additional Statement, which is available upon request. Among other things, the Additional Statement describes certain fundamental policies and investment restrictions that cannot be changed without shareholder approval. You should note, however, that all investment policies not specifically designated as fundamental are non - fundamental and may be changed without shareholder approval. If there is a change in a Fund's investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs. A Fund may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Fund's investment objective and policies. U.S. Treasury Obligations and U.S. Government Securities. U.S. Treasury Obligations include securities issued or guaranteed by the U.S. Treasury ( "U.S. Treasury Obligations "). Payment of principal and interest on these obligations is backed by the full faith and credit of the U.S. government. U.S. Treasury Obligations include, among other things, the separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury if such components are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ( "STRIPS "). U.S. Treasury Obliga- tions may also include Treasury inflation - protected securities which are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. U.S. Government Securities are obligations issued or guaranteed by U.S. government agencies, authorities, instrumentalities or sponsored enterprises ( "U.S. Government Securities "). Unlike U.S. Treasury Obligations, U.S. Government Securities can be supported by either (a) the full faith and credit of the U.S. Treasury (such as the Government National Mortgage Association ( "Ginnie Mae ")); (b) the right of the issuer to borrow from the U.S. Treasury; (c) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (d) only the credit of the issuer. U.S. Government Securities are deemed to include (a) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government, its agencies, authorities or instrumentalities; and (b) participations in loans made to foreign governments or their agencies that are 47 so guaranteed. Certain of these participations may be regarded as illiquid. U.S. Government Securities also include zero coupon bonds. Some Funds invest in U.S. Treasury Obligations and certain U.S. Government Securities the interest from which is generally exempt from state income taxation. Securities generally eligible for this exemption include those issued by the U.S. Treasury and certain agencies, authorities or instrumentalities of the U.S. government, including the Federal Home Loan Banks, Federal Farm Credit Banks and Tennessee Valley Authority. U.S. Government Securities have historically involved little risk of loss of principal if held to maturity. However, no assurance can be given that the U.S. government will provide financial support to U.S. government agencies, authorities, instrumen- talities or sponsored enterprises if it is not obligated to do so by law. Bank Obligations. Bank obligations include certificates of deposit, commercial paper, unsecured bank promissory notes, bankers' acceptances, time deposits and other debt obligations. Certain Funds may invest in obligations issued or backed by U.S. banks when a bank has more than $1 billion in total assets at the time of purchase or is a branch or subsidiary of such a bank. In addition, certain Funds may invest in U.S. dollar- denominated obligations issued or guaranteed by foreign banks that have more than $1 billion in total assets at the time of purchase, U.S. branches of such foreign banks (Yankee obligations), foreign branches of such foreign banks and foreign branches of U.S. banks having more than $1 billion in total assets at the time of purchase. Bank obligations may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligation or by government regulation. If a Fund invests more than 25% of its total assets in bank obligations (whether foreign or domestic), it may be especially affected by favorable and adverse developments in or related to the banking industry. The activities of U.S. and most foreign banks are subject to comprehensive regulations which, in the case of U.S. regulations, have undergone substantial changes in the past decade. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operations and profitability of domestic and foreign banks. Significant developments in the U.S. banking industry have included increased competition from other types of financial institutions, increased acquisition activity and geographic expansion. Banks may be particularly susceptible to certain economic factors, such as interest rate changes and adverse developments in the real estate markets. Fiscal and monetary policy and general economic cycles can affect the availability and cost of funds, loan demand and asset quality and thereby impact the earnings and financial conditions of banks. Commercial Paper. A Fund may invest in commercial paper, including variable amount master demand notes and asset - backed commercial paper. Commercial paper normally represents short-term unsecured promissory notes issued in bearer form by 48 APPENDIX A banks or bank holding companies, corporations, finance companies and other issuers. The commercial paper purchased by a Fund consists of direct U.S. dollar- denominated obligations of domestic or, in the case of certain Funds, foreign issuers. Asset - backed commercial paper is issued by a special purpose entity that is organized to issue the commercial paper and to purchase trade receivables or other financial assets. The credit quality of asset - backed commercial paper depends primarily on the quality of these assets and the level of any additional credit support. Short -Term Obligations. A Fund may invest in other short-term obligations, including master demand notes and short-term funding agreements payable in U.S. dollars and issued or guaranteed by U.S. corporations, foreign corporations or other entities. A master demand note typically permits the investment of varying amounts by a Fund under an agreement between the Fund and an issuer. The principal amount of a master demand note may be increased from time to time by the parties (subject to specified maximums) or decreased by the Fund or the issuer. A funding agreement is a contract between an issuer and a purchaser that obligates the issuer to pay a guaranteed rate of interest on a principal sum deposited by the purchaser. Funding agreements will also guarantee a stream of payments over time. A funding agreement has a fixed maturity date and may have either a fixed rate or variable interest rate that is based on an index and guaranteed for a set time period. Because there is normally no secondary market for these investments, funding agreements purchased by a Fund may be regarded as illiquid. Repurchase Agreements. Certain Funds may enter into repurchase agreements with securities dealers and banks. Repurchase agreements are similar to collateralized loans, but are structured as a purchase of securities by a Fund, subject to the seller's agreement to repurchase the securities at a mutually agreed upon date and price. The difference between the original purchase price and the repurchase price is normally based on prevailing short -term interest rates. Under a repurchase agreement, the seller is required to furnish collateral at least equal in value or market price to the amount of the seller's repurchase obligation. If the seller under a repurchase agreement defaults, a Fund could suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund's cost associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy or insolvency proceedings concerning the seller, a Fund could suffer additional losses if the collateral held by the Fund is subject to a court "stay" that prevents the Fund from promptly selling the collateral. If this occurs, the Fund will bear the risk that the value of the collateral will decline below the repurchase price. Furthermore, a Fund could experience a loss if a court determines that the Fund's interest in the collateral is not enforceable. In evaluating whether to enter into a repurchase agreement, the Investment Adviser will carefully consider the creditworthiness of the seller. Distributions of the 49 income from repurchase agreements will be taxable to a Fund's shareholders. In addition, certain Funds, together with other registered investment companies having advisory agreements with the Investment Adviser or any of its affiliates, may transfer uninvested cash balances into a single joint account, the daily aggregate balance of which will be invested in one or more repurchase agreements. Asset - Backed and Receivables- Backed Securities. Certain Funds may invest in asset - backed and receivables - backed securities whose principal and interest payments are collateralized by pools of assets such as auto loans, credit card receivables, leases, mortgages, installment contracts and personal property. Asset - backed and receivables - backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass- through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset - backed and receivables- backed securities can be expected to accelerate. Accordingly, a Fund's ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. In addition, securities that are backed by credit card, automobile and similar types of receivables generally do not have the benefit of a security interest in collateral that is comparable in quality to mortgage assets. If the issuer of an asset - backed security defaults on its payment obligation, there is the possibility that, in some cases, a Fund will be unable to possess and sell the underlying collateral and that a Fund's recoveries on repossessed collateral may not be available to support payments on the securities. In the event of a default, a Fund may suffer a loss if it cannot sell collateral quickly and receive the amount it is owed. Foreign Government Obligations and Related Foreign Risks. Certain Funds may invest in foreign government obligations. Foreign government obligations that the Funds invest in are U.S. dollar- denominated obligations (limited to commercial paper and other notes) issued or guaranteed by a foreign government or other entity located or organized in a foreign country that maintains a short-term foreign currency rating in the highest short-term ratings category by the requisite number of NRSROs. Investments by a Fund in foreign securities, whether issued by a foreign government, bank, corporation or other issuer, may present a greater degree of risk than investments in securities of domestic issuers because of less publicly - available financial and other information, less securities regulation, potential imposition of foreign withholding and other taxes, war, expropriation or other adverse govern- mental actions. Foreign banks and their foreign branches are not regulated by U.S. banking authorities, and generally are not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks. The legal remedies for 50 APPENDIX A investors may be more limited than the remedies available in the United States. In addition, changes in the exchange rate of a foreign currency relative to the U.S. dollar (e.g., weakening of the currency against the U.S. dollar) may adversely affect the ability of a foreign issuer to pay interest and repay principal on an obligation. Municipal Obligations. Certain Funds may invest in municipal obligations. Municipal obligations are issued by or on behalf of states, territories and possessions of the United States and their political subdivisions, agencies, authorities and instrumentalities, and the District of Columbia. Municipal obliga- tions in which a Fund may invest include fixed rate notes and similar debt instruments; variable and floating rate demand instruments; tax - exempt commercial paper; municipal bonds; and unrated notes, paper, bonds or other instruments. Municipal Notes and Bonds. Municipal notes include tax anticipation notes ( "TANs "), revenue anticipation notes ( "RANs "), bond anticipation notes ( "BANs "), tax and revenue anticipation notes ( "TRANs ") and construction loan notes. Municipal bonds include general obligation bonds and revenue bonds. General obligation bonds are backed by the taxing power of the issuing municipality and are considered the safest type of municipal obligation. Revenue bonds are backed by the revenues of a project or facility such as the tolls from a toll bridge. Revenue bonds also include lease rental revenue bonds which are issued by a state or local authority for capital projects and are secured by annual lease payments from the state or locality sufficient to cover debt service on the authority's obligations. Industrial development bonds ( "private activity bonds ") are a specific type of revenue bond backed by the credit and security of a private user and, therefore, have more potential risk. Municipal bonds may be issued in a variety of forms, including commercial paper, tender option bonds and variable and floating rate securities. Tender Option Bonds. A tender option bond is a municipal obligation (generally held pursuant to a custodial arrangement) having a relatively long maturity and bearing interest at a fixed rate substantially higher than prevailing short-term, tax - exempt rates. The bond is typically issued in conjunction with the agreement of a third party, such as a bank, broker- dealer or other financial institution, pursuant to which the institution grants the security holder the option, at periodic intervals, to tender its securities to the institution. As consideration for providing the option, the financial institution receives periodic fees equal to the difference between the bond's fixed coupon rate and the rate, as determined by a remarketing or similar agent, that would cause the securities, coupled with the tender option, to trade at par on the date of such determination. Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax - exempt rate. An institution will normally not be obligated to accept tendered bonds in the cvcnt of certain defaults or a significant downgrading in the credit rating assigned to the issuer of the bond. The tender option will be taken 51 into account in determining the maturity of the tender option bonds and a Fund's average portfolio maturity. There is a risk that a Fund will not be considered the owner of a tender option bond for federal income tax purposes, and thus will not be entitled to treat such interest as exempt from federal income tax. Certain tender option bonds may be illiquid or may become illiquid as a result of a credit rating downgrade, a payment default or a disqualification from tax- exempt status. Revenue Anticipation Warrants. Revenue Anticipation Warrants ( "RAWs ") are issued in anticipation of the issuer's receipt of revenues and present the risk that such revenues will be insufficient to satisfy the issuer's payment obligations. The entire amount of principal and interest on RAWs is due at maturity. RAWs, including those with a maturity of more than 397 days, may also be repackaged as instruments which include a demand feature that permits the holder to sell the RAWs to a bank or other financial institution at a purchase price equal to par plus accrued interest on each interest rate reset date. Industrial Development Bonds. Certain Funds may invest in industrial develop- ment bonds (private activity bonds). Industrial development bonds are a specific type of revenue bond backed by the credit and security of a private user, the interest from which would be an item of tax preference when distributed by a Fund as "exempt- interest dividends" to shareholders under the AMT. Other Municipal Obligation Policies. Certain Funds may invest 25% or more of the value of their respective total assets in municipal obligations which are related in such a way that an economic, business or political development or change affecting one municipal obligation would also affect the other municipal obligation. For example, a Fund may invest all of its assets in (a) municipal obligations the interest of which is paid solely from revenues from similar projects such as hospitals, electric utility systems, multi - family housing, nursing homes, commercial facilities (including hotels), steel companies or life care facilities; (b) municipal obligations whose issuers are in the same state; or (c) industrial development obligations. Concentration of a Fund's investments in these municipal obligations will subject the Fund, to a greater extent than if such investment was not so concentrated, to the risks of adverse economic, business or political developments affecting the particular state, industry or other area of concentration. Municipal obligations may also include municipal leases, certificates of participa- tion and "moral obligation" bonds. A municipal lease is an obligation issued by a state or local government to acquire equipment or facilities. Certificates of participation represent interests in municipal leases or other instruments, such as installment contracts. Moral obligation bonds are supported by the moral commitment but not the legal obligation of a state or municipality. Municipal leases, certificates of participation and moral obligation bonds present the risk that the state or municipality involved will not appropriate the monies to meet scheduled payments under these instruments. 52 APPENDIX A Municipal obligations may be backed by letters of credit or other forms of credit enhancement issued by domestic banks or foreign banks which have a branch, agency or subsidiary in the United States or by other financial institutions such as insurance companies which may issue insurance policies with respect to municipal obligations. The credit quality of these banks, insurance companies and other financial institutions could, therefore, cause a loss to a Fund that invests in municipal obligations. Letters of credit and other obligations of foreign banks and financial institutions may involve risks in addition to those of domestic obligations because of less publicly available financial and other information, less securities regulation, potential imposition of foreign withholding and other taxes, war, expropriation or other adverse governmental actions. Foreign banks and their foreign branches are not regulated by U.S. banking authorities and generally are not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks. In order to enhance the liquidity, stability or quality of a municipal obligation, a Fund may acquire the right to sell the obligation to another party at a guaranteed price and date. In purchasing municipal obligations, the Funds intend to rely on opinions of bond counsel or counsel to the issuers for each issue as to the excludability of interest on such obligations from gross income for federal income tax purposes. A Fund will not undertake independent investigations concerning the tax - exempt status of such obligations, nor does it guarantee or represent that bond counsels' opinions are correct. Bond counsels' opinions will generally be based in part upon covenants by the issuers and related parties regarding continuing compliance with federal tax requirements. Tax laws contain numerous and complex requirements that must be satisfied on a continuing basis in order for bonds to be and remain tax - exempt. If the issuer of a bond or a user of a bond - financed facility fails to comply with such requirements at any time, interest on the bond could become taxable, retroactive to the date the obligation was issued. In that event, a portion of a Fund's distributions attributable to interest the Fund received on such bond for the current year and for prior years could be characterized or recharacterized as taxable income. Custodial Receipts. Certain Funds may invest in custodial receipts (including tender option bonds) representing interests in U.S. Government Securities, municipal obligations or other debt instruments held by a custodian or trustee. Custodial receipts evidence ownership of future interest payments, principal payments or both on notes or bonds issued or guaranteed as to principal or interest by the U.S. government, its agencies, instrumentalities, political subdivisions or authorities, or by a state or local governmental body or authority, or by other types of issuers. For certain securities law purposes, custodial receipts are not considered obligations of the underlying issuers. In addition, if for tax purposes a Fund is not considered to be the owner of the underlying securities held in the custodial 53 account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account. Other Investment Companies. A Fund may invest in securities of other investment companies subject to statutory limitations prescribed by the Act. These limitations include a prohibition on any Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a Fund's total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Such other investment companies will have investment objectives, policies and restrictions substantially similar to those of the acquiring Fund and will be subject to substantially the same risks. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open -end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund. Pursuant to an exemptive order obtained from the SEC, other investment companies in which a Fund may invest include money market funds for which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor. Floating and Variable Rate Obligations. The Funds may purchase floating and variable rate obligations, including tender option bonds. The value of these obligations is generally more stable than that of a fixed rate obligation in response to changes in interest rate levels. Subject to the conditions for using amortized cost valuation under the Act, a Fund may consider the maturity of a variable or floating rate obligation to be shorter than its ultimate stated maturity if the obligation is a U.S. Treasury Obligation or U.S. Government Security, if the obligation has a remaining maturity of 397 calendar days or less, or if the obligation has a demand feature that permits the Fund to receive payment at any time or at specified intervals not exceeding 397 calendar days. The issuers or financial intermediaries providing demand features may support their ability to purchase the obligations by obtaining credit with liquidity supports. These may include lines of credit, which are conditional commitments to lend, and letters of credit, which will ordinarily be irrevocable, both of which may be issued by domestic banks or foreign banks. A Fund may purchase variable or floating rate obligations from the issuers or may purchase certificates of participation, a type of floating or variable rate obligation, which are interests in a pool of debt obligations held by a bank or other financial institution. When - Issued Securities and Forward Commitments. The Funds may purchase when- issued securities and make contracts to purchase or sell securities for a fixed price at a future date beyond customary settlement time. When- issued securities are 54 APPENDIX A securities that have been authorized, but not yet issued. When- issued securities are purchased in order to secure what is considered to be an advantageous price and yield to a Fund at the time of entering into the transaction. A forward commitment involves entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period. The purchase of securities on a when- issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when - issued or forward commitment basis with the intention of acquiring the securities for its portfolio, a Fund may dispose of when- issued securities or forward commitments prior to settlement if the Investment Adviser deems it appropriate. Illiquid Securities. Each Fund may invest up to 10% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include: ■ Both domestic and foreign securities that are not readily marketable ■ Certain municipal leases and participation interests ■ Certain stripped mortgage- backed securities ■ Repurchase agreements and time deposits with a notice or demand period of more than seven days ■ Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so- called ­4(2) commercial paper" or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933. Investing in restricted securities may decrease the liquidity of a Fund's portfolio. Borrowings. Each Fund may borrow up to 331/3% of its total assets from banks for temporary or emergency purposes. A Fund may not make additional investments if borrowings exceed 5% of its net assets. For more information, see the Additional Statement. Downgraded Securities. After its purchase, a portfolio security may be assigned a lower rating or cease to be rated. If this occurs, a Fund may continue to hold the security if the Investment Adviser believes it is in the best interest of the Fund and its shareholders. ss Appendix B Financial Highlights The financial highlights tables are intended to help you understand a Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with a Fund's financial statements, is included in the Fund's annual report (available upon request). PRIME OBLIGATIONS FUND FST Administration Shares For the Years Ended December 31, 2005 2004 2003 2002 2001 Net asset value, beginning of year ........... S 1.00 S 1.00 S 1.00 $ 1.00 $ 1.00 Net investment income(a) .................. 0.028 0.010 0.008 0.01 0.04 Distributions to shareholders ................ (0.028) (0.010) (0.008) (0.01) (0.04) Net asset value, end of year ............ ... S 1.00 S 1.00 $ 1.00 S 1.00 S 1.00 Total return(b) ........................... 2.88% 1.00% 0.81% 1.50% 3.89% Net assets, end of year (in 000's) ............ $3,421,363 52,765,553 53,080,780 52,927,767 $2,803,798 Ratio of net expenses to average net assets .... 0.43% 0.43% 0.43% 0.43% 0.43% Ratio of net investment income to average net assets ............................ 2.88% 0.99% 0.80% 1.48% 3.64% Ratios assuming no expense reductions Ratio of total expenses to average net assets ... 0.47% 0.47% 0.47% 0.47% 0.48% Ratio of net investment income to average net assets ............................ 2.84% 0.95% 0.76% 1.44% 3.59% See page 63 fin- all f nanoles. MONEY MARKET FUND APPENDIX 8 FST Administration Shares For the Years Ended December 31, 2005 2004 2003 2002 2001 Net asset value, beginning of year........ ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income (a) ..................... 0.029 0.010 0.008 0.01 0.04 Distributions to shareholders .................. (0.029) (0.010) (0.008) (0.01) (0.04) Net asset value, end of year .................. $ 1.00 $ 1.00 S 1.00 $ 1.00 S 1.00 Total retum( b ) .............................. 2.88% 1.01% 0.81% 1.50% 3.91% Net assets, end of year (in 000's) .............. $609,847 $626,210 $447,290 $480,359 $645,588 Ratio of net expenses to average net assets ...... 0.43% 0.43% 0.43% 0.43% 0.43% Ratio of net investment income to average net assets ............................... 2.85% 1.05% 0.81% 1.50% 3.72% Ratios assuming no expense reductions Ratio of total expenses to average net assets ....... 0.47% 0.47% 0.47% 0.47% 0.48% Ratio of net investment income to average net assets ............................... 2.81% 1.01% 0.77% 1.46% 3.67% See page 63 fqr all foutnotes. 57 TREASURY OBLIGATIONS FUND FST Administration Shares For the Years Ended December 31, 2005 2004 2003 2002 2001 Net asset value, beginning of year ...... S 1.00 S 1.00 S 1.00 S 1.00 S 1.00 Net investment income(a) ....... I ..... 0.027 0.009 0.007 0.01 0.04 Distributions to shareholders ............. (0.027) (0.009) (0.007) (0.01) (0.04) Net asset value, end of year ............ S 1.00 S 1.00 S 1.00 $ 1.00 $ 1.00 Total return(b) ... 0.89% 0.71% 1.40% 3.61% Net assets, end of year (in 000's) ....... $1,856,730 $1,581,650 $1,199,363 $1,396,765 $1,515,737 Ratio of net e)penses to average net assets .. 0.45% 0.45% 0.45% 0.45% 0.45% Ratio of net investment income to average net assets ....................... 2.78% 0.90% 0.67% 1.31% 3.54% Ratios assuming no expense reductions Ratio of total eq)enses to average net assets 0.48% 0.47% 0.47% 0.47% 0.48% Ratio of net investment income to average net assets ....................... 2.75% 0.88% 0.65% 1.29% 3.51% See pave 63 lbw all liuunates. `H TREASURY INSTRUMENTS FUND APPENDIX B FST Administration Shares For the Years Ended December 31, 2005 2004 2003 2002 2001 Net asset value, beginning of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income(a) ..................... 0.026 0.008 0.006 0.01 0.03 Distributions to shareholders .................. (0.026) (0.008) (0.006) (0.01) (0.03) Net asset value, end of year .................. S 1.00 S 1.00 $ 1.00 S 1.00 S 1.00 Total retum( b ) .............................. 2.58% 0.83% 0.64% 1.31% 3.53% Net assets, end of year (in 000's) .............. $537,912 $236,848 $187,685 5208,186 $117,089 Ratio of net expenses to average net assets ...... 0.45% 0.45% 0.45% 0.45% 0.45% Ratio of net investment income to average net assets ............................... 2.67% 0.84% 0.59% 1.14% 3.22% Ratios assuming no expense reductions Ratio of total expenses to average net assets ....... 0.49% 0.49% 0.50% 0.50% 0.51% Ratio of net investment income to average net assets ............................... 2.63% 0.80% 0.54% 1.09% 3.16% Sec page 63 Jor all footnotes. 59 GOVERNMENT FUND FST Administration Shares For the Years Ended December 31, 2005 2004 2003 2002 2001 Net asset value, beginning of year ._. S 1.00 S 1.00 $ 1.00 $ 1.00 S 1.00 Net investment income(a) ..... ....... 0.028 0.010 0.008 0.01 0.04 Distributions to shareholders ........... (0.028) (0.010) (0.008) (0.01) (0.04) Net asset value, end of year ........... $ 1.00 1 1.00 S 1.00 S 1.00 $ 1.00 Total return(b) ...................... 2.85% 0.98% 0.79% 1.44% 3.83% Net assets, end of year (in 000's) ......... 51,163,046 $1,072,788 S 934,764 S 944,400 51,169,694 Ratio of net expenses to average net assets ........................... 0.43% 0.43% 0.43% 0.43% 0.43% Ratio of net investment income to average net assets ........ .............. 2.86% 0.99% 0.78% 1.40% 3.52% Ratios assuming no expense reductions Ratio of total expenses to average net assets .. .... .............. 0.48% 0.47% 0.47% 0.47% 0.49% Ratio of net investment income to average net assets ....................... 2,81% 0.95% 0.74% 1.36% 3.46% .See page 63 Jiw a!! /iminnres FEDERAL FUND APPENDIX B FST Administration Shares For the Years Ended December 31, 2005 2004 2003 2002 2001 Net asset value, beginning of year ........... f 1.00 f 1.00 $ 1.00 $ 1.00 f 1.00 Net investment income(a) ................ 0.028 0.009 0.007 0,01 0.04 Distributions to shareholders .............. (0.028) (0.009) (0.007) (0.01) (0.04) Net asset value, end of year .............. $ 1.00 $ 1.00 f 1.00 $ 1.00 S 1.00 Total retum(b) ......................... 2.78% 0.93% 0.74% 1.40% 3.79% Net assets, end of year (in 000's) .......... $696,899 $679,050 $ 419,747 S 685,582 $1,134,424 Ratio of net expenses to average net assets .. 0.45% 0.45% 0.45% 0.45% 0.45% Ratio of net investment income to average net assets .......................... 2.78% 1.00% 0.75% 1.39% 3.75% Ratios assuming no expense reductions Ratio of total expenses to average net assets .. 0.47% 0.47% 0.47% 0.47% 0.47% Ratio of net investment income to average net assets .......................... 2.76% 0.98% 0.73% 1.37% 3.73% See page 63 fir all Jiminutes. 61 TAX -FREE MONEY MARKET FUND FST Administration Shares For the Years Ended December 31, 2005 2004 2003 2002 2001 Net asset value, beginning of year .............. S 1.00 $ 1.00 S 1.00 $ 1.00 $ 1.00 Net investment income(a) ..................... 0.020 0.008 0.006 0.01 0.02 Distributions to shareholders ... . .............. (0.020) (0.008) (0.006) (0.01) (0.02) Net asset value, end of year .................. S 1.00 $ 1.00 $ 1.00 S 1.00 S 1.00 Total return (b) ......................... ..... 2.01% 0.79% 0.64% 1.05% 2.34% Net assets, end of year (in 000's) .............. S349,087 S345,968 S273,661 $206,792 $146,621 Ratio of net expenses to average net assets ...... 0.43% 0.43% 0.43% 0.43% 0.43% Ratio of net investment income to average net assets .... . ... ............... ..... 1.98% 0.81% 0.61% 1.04% 2.27% Ratios assuming no expense reductions Ratio of total expenses to average net assets ..... 0.47% 0.47% 0.47% 0.47% 0.48% Ratio of net investment income to average net assets ............................... 1.94% 0.77% 0.57% 1.00% 2.22% .See /rage 63 lin' all laatnote.c. APPENDIX B Footnotes: a Calculated based on the average shares outstanding methodology. b Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption oJ'the investment at the net asset value at the end of the period Returns do not rgflect the deduction of tares that a shareholder would pay on fiord distributions. [This page intentionally left blank] Index 1 General Investment Management Approach 5 Fund Investment Objectives and Strategies 10 Principal Risks of the Funds 13 Fund Performance 22 Fund Fees and Expenses 33 Shareholder Guide 33 How to Buy Shares 39 How to Sell Shares 45 Taxation 47 Appendix A Additional Information on Portfolio Risks, Securities and Techniques 26 Service Providers 56 Appendix B 31 Dividends Financial Highlights Financial Square Funds Prospectus (FST Administration Shares) Annual /Semi - annual Report Additional information about the Funds' investments is available in the Funds' annual and semi - annual reports to shareholders. Statement of Additional Information Additional information about the Funds and their policies is also available in the Funds' Additional Statement. The Additional Statement is incorporated by reference into this Prospectus (is legally considered part of this Prospectus). The Funds' annual and semi - annual reports, and the Additional Statement, are available free upon request by calling Goldman Sachs at 1- 800 -621 -2550. You can also access and download the annual and semi - annual reports and the Additional Statement at the Funds' website: http: / /www.gs.com/funds. To obtain other information and for shareholder inquiries: ■ By telephone: 1- 800 -621 -2550 ■ By mail: Goldman Sachs Funds, P.O. Box 06050 Chicago, IL 60606 -6306 ■ On the Internet: SEC EDGAR database — http: / /www.sec.gov Goldman Sachs — http: / /gs.com/funds You may review and obtain copies of Fund documents (including the Additional Statement) by visiting the SEC's public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SEC's Public Reference Section, Washington, D.C. 20549 -0102 or by electronic request to: publicinfo @sec.gov. Information on the operation of the public reference room may be obtained by calling the SEC at (202) 942 -8090. The Funds' investment compan� registration number is 811 -5349. Goldman Sachs Financial Square Fundss is a service mark of Goldman, Sachs & Co. GSAM" is a registered service mark of Goldman, Sachs & Co. FSPROADMM 0 Asset Management Palm Beach Gardens General Employees' Pension Plan Third Quarter 2006 ' 7 ROCKW OOD CAPITAL ADVISORS 1401 S. Brentwood Blvd. Suite 400 • St. Louis, Missouri 63144 • (888) 962 -8336 (toll -free) (314) 962 -1254 (fax) Doves vs. Hawks: Who will win? 1 1 1 ROCKWOOD CAPITAL ADVISORS 1 Palm Beach Gardens General Em Third Quarter 2006 Total Fund Portfolio Summary Pension Plan I Equities 93% Change in Market Value Net Dividends /Interest Contributions Disbursements Net Realized & Unrealized (G /L) Portfolio Summary Short -Term Funds 7% R 0 C K W 0 0 D CAPITAL ADVISORS $4,677 $117,789 ($39,390) $72,991 Total Fund Performance Palm Beach Gardens General Employees' Pension Plan Equity - Third Quarter 2006 Market Environment The third quarter of 2006 was a robust one for most equity investors, as stocks appreciated across all market -caps. The most popular measuring stick, the S &P 500 Index, increased 5.7% while the average diversified equity fund gained a less stellar 2.0 %. Bond investors too had something to smile about as the Lehman Brothers Aggregate Bond Index jumped 3.8 %. The Balanced Composite Index increased 4.9 %. i Despite the positive performance of major market indices, market breadth continued to deteriorate and leadership continued to shift noticeably as summer progressed into fall, like the changing colors of trees. For the past several years, asset class leadership was predominantly confined to small to mid - capitalization stocks. In fact, small -cap funds have been Wall Street's leaders since the bear market of 2000 to 2002. While we still feel money can be made in this segment of the market, opportunities may be more limited relative to their large -cap brethren. We are responding to this leadership change by increasing core holdings within the large -cap segment of the market. : Portfolios have benefited from a decreased allocation in the "tired" energy sector, and from a buildup in holdings within the consumer staples and financials sectors over the past several months. We continue to monitor portfolios, looking to take advantage of opportunities that become evident during the upcoming months. Contravisory Research & Management Corp. is a registered investment adviser and equity sub - adviser to Rockwood Capital Advisors, LLC. 18% 15% 12% 9% 6% 3% 0% 3rd Qr. 2006 Performance 8.5% 7.0% YTD N Palm Beach Gardens GE R 0 C K W 0 0 D CAPITAL ADVISORS 14.1% 14.1% Since Inception (10/25/05) ❑ S &P 500 3 Equity Portfolio Third Quarter 2006 Characteristics Top Ten Holdings 1. Apartment Invt. & Mgmt. 3.4% 2. T. Rowe Price Group 3.3% 3. Volvo 3.2% 4. Seagate Technology 3.1% 5. Safeway Inc. 3.1% 6. VCA Antech Inc. 3.1% 7. Canadian Pacific RR 3.1% 8. Ryanair Holdings 3.1% 9. Precision Castparts 3.0% 10. Simon Property Group 3.0% Five Best Impact 1. T. Rowe Price +26.7% 2. Apartment Invt. & Mgmt. +26.0% 3. Volvo +21.3% 4. Ryanair Holdings Plc. +19.7% 5. Lockheed Martin Corp. +19.6% R 0 C K W 0 0 D CAPITAL ADVISORS Style Box t Val Cr Grw Large Cap - 35.1 % Mid Cap - 60.6% Small Cap - 4.3% Average Market Cap $22.7 billion Median Market Cap $12.5 billion Healtl 1' Finance 30% Sector Allocation Materials Energy Producer 3% 5% Durables ire 7% Technology -13.9% 11% -12.4% Utilities 3% A DR's 6% Transportation 7% Cons. Staples Cons. Discr. 14% 3% Five Worst Impact 1. Pacer Intl. Inc. -15.1% 2. J2 Global Communication -14.7% 3. CIT Group Inc. -14.3% 4. IndyMac Bancorp -13.9% 5. Halliburton Co. -12.4% 4 Equity Transactions Third Quarter 2006 Sold July Fair Isaac Corp. July Medimmune Inc. July TD Ameritrade Holding Aug THQ Inc. Aug Sunrise Senior Living Sep Halliburton Co. Sep Indymac Bancorp Inc. Sep CIT Group Inc. Bought July BRIE Properties July NYSE Group Inc. July Pacer International Inc. Aug McCormick & Co. Aug Kraft Foods Inc. Sep HJ Heinz Co. Sep Sears Holdings Corp. 1 1 1 1 R 0 C K W 0 0 D CAPITAL A D V I S 0 R S Proxy Voting Record I Loews Corp. LTR I McKesson Corporation MCK I Precision Castnarts Corp. PCP I THQ Inc. THQI R 0 C K W 0 0 D CAPITAL A D V I S 0 R S 6 Equity Holdings - Third Quarter 2006 urrent Annual Avg Total ISS 'Id ( "I Income Cost Cost CGC -- Cash 136,389 1.00 136,389 7.5 4.2 5,769 1.00 136,389 NA AFL Aflac Inc 925 45.76 42,328 2.3 1.1 407 47.23 43,691 0.30 AN Apartment Invt & Mgm 1,040 54.41 56.586 3.1 4.4 3,120 36.91 38,391 0.49 BA Boeing Co 520 78.85 41,002 2.2 1.5 624 64.47 33,525 0.91 BF.B Brown Forman Dst'b' 590 76.65 45,223 2.5 1.5 - 74.52 43,967 0.03 BRE Bre Properties Inc 600 59.73 35,838 2.0 3.4 1,200 57.15 34,289 0.96 CAT Caterpillar Inc 620 65.80 40,796 2.2 1.8 620 49.83 30,895 0.89 CHK Chesapeake Energy Co 1,195 28.98 34,631 1.9 0.8 239 31.29 37,392 0.97 CID Canadian Pac Ry Ltd 1,040 49.74 51,730 2.8 1.3 542 44.05 45,814 NA EP El Paso Corp 3,240 13.64 44,194 2.4 1.2 518 11.72 37,973 0.77 FISV Fisery Inc 920 47.09 43,323 2.4 0.0 - 43.76 40,259 0.39 HCC Hoc Ins Hldgs Inc 1,355 32.88 44,552 2.4 1.2 407 28.00 37,945 0.83 HNZ Heinz H J Cc 1,015 41.93 42,559 2.3 3.3 1,218 42.21 42,842 0.95 HPQ Hewlett Packard Cc 1,345 36.69 49,348 2.7 0.9 430 32.33 43,477 0.83 HSIC Schein Henry Inc 970 50.14 48,636 2.7 0.0 - 45.52 44,158 0.91 JCOM J2 Global Communicat 1,580 27.17 42,929 2.3 0.0 23.18 36,618 0.22 KFT Kraft Foods Inc 1,265 35.66 45,110 2.5 2.8 1,164 32.61 41,249 0.53 LMT Lockheed Martin Corp 510 86.06 43,891 2.4 1.4 612 60.12 30,663 0.51 LSTR Landstar Sys Inc 1,105 42.70 47,184 2.6 0.3 111 37.15 41,046 0.38 LTR Loews Corp 1,275 37.90 48,323 2.6 0.7 255 29.94 38,172 0.24 MCK Mckesson Hboc Inc 860 52.72 45,339 2.5 0.5 206 45.92 39,489 0.64 MKC Mccormick & Co Inc 1,170 37.98 44,437 2.4 1.9 749 3529 41,292 0.34 NYX Nyse Group Inc 515 74.75 38,496 2.1 0.0 66.09 34,037 NA PACK Pacer Intl Inc Tenn 1,045 27.76 29,009 1.6 2.2 627 32.35 33,803 0.65 PCG Pg &E Corp 1,075 41.65 44,774 2.4 3.2 1,419 35.89 38,584 0.87 PCP Precision Castparts 815 63.16 51,475 2.8 0.2 98 46.03 37,510 0.65 PL Protective Life Corp 935 45.75 42,776 2.3 1.9 729 41.74 39,022 0.96 PRU Prudential Finl Inc 565 76.25 43,081 2.4 1.0 441 78.05 44,095 0.71 RYAA.Y Ryanair Hldgs Plc 815 63.29 51,581 2.8 0.0 55.22 45,007 NA SHLD Sears Hldgs Corp 284 158.09 44,898 2.5 0.0 151.84 43,123 0.20 SPG Simon Ppty Group Inc 560 90.62 50,747 2.8 3.4 1,568 68.08 38,125 0.13 SRCL Stericycle Inc 655 69.79 45,712 2.5 0.0 63.44 41,555 0.31 STX Seagate Technology 2,265 23.09 52,299 2.9 1.4 13.97 31,642 NA SWY Safeway Inc 1,720 30.35 52,202 2.9 0.8 344 22.29 38,342 0.81 TROW T.Rowe Price Group 1 1,150 47.85 55,027 3.0 1.2 644 33.76 38,819 0.05 TXN Texas Instrs Inc 1,340 33.25 44,555 2.4 0.5 161 33.48 44,861 0.52 VOLV Volvo Aktiebolaget 915 59.70 54,625 3.0 3.1 2,046 40.65 37,194 NA WOOF I Vca Antech Inc 1,445 1 36.06 1 52,107 1 2.9 1 0.0 1 - 28.86 41,707 1 0.06 Portfolio Total 175,628 S1,827,712 100 r .0 1 R 0 C K W 0 0 D CAPITAL ADVISORS Economic Environment & Outlook Third Quarter 2006 A For the first time in over two years, the Fed refrained from hiking the funds rate this quarter. The federal funds rate target remains at 5.25 %. A couple of weak employment reports gave the Fed the opening they needed to pause after seventeen consecutive rate hikes. A Employment growth has slowed from an average of 176,000 jobs per month in the first quarter of 2006 to 120,000 in Q3. However, other labor market indicators are painting a different picture. The unemployment rate, for example, dropped to 4.6% in September, a level not seen since mid -2001. A To complicate matters, the Bureau of Labor Statistics just released benchmark payroll revisions for the 12 months ended March 2006. An astounding 810,000 jobs were added, an average of 67,000 per month. This is the largest revision ever, pushing job growth 45% higher than previously reported. A The Fed must remain on guard against the prospect of rising inflation expectations. The core CPI has risen 2.8% over the past 12 months, its highest level since 2001. A tightening labor market has put upward pressure on wages. In September 2005, average hourly earnings were rising at a modest 2.7% year - over -year rate; but by September 2006 the rate had climbed to 4.0 %. A With the recent slowing in housing and monthly job growth, some analysts have discussed the possibility of the Fed reducing the funds rate in the near future. However, can the Fed really begin to ease with the unemployment rate at multi- year lows, while inflation and wage growth are at multi -year highs? A Most of those predicting a near term Fed ease are basing their argument on a substantial housing slowdown. However, we are skeptical that this down shift in housing alone will be sufficient to derail the economy. Former Fed Chairman Greenspan shares our pessimism. Greenspan very recently stated that the "worst may well be over" for the U.S. housing industry. A We have become less defensive from a duration standpoint, and our portfolios maintain durations near their respective benchmarks. Market sentiment has changed dramatically, with many analysts anticipating a Fed ease in 2007. We feel that the economy maintains a good deal of vigor, while inflation remains above the upper bound of the Fed's comfort zone. R0CKWOOD CAPITAL ADVISORS 8 5 2 G i d UQQQ a �z O O �y �0 O U �^ W 4 n td L O C O U .0 C H J v r' vJyi .0 La h L C u L u b � L p R R b Y O O O O Q. u �'L R d e Y C R m 0 Z ■ d _ m d 0 J R ■ d _ N V 0 Z v 8 LL y .b W cc Q C = lL WE W Z uN ++ W a .O r - fn :��. o ^� o V) ` :', Q a tiO G —= z O 4.t G CAL b y O vc72 a d C/) as aE[= ? �y �0 O U �^ W 4 n td L O C O U .0 C H J v r' vJyi .0 La h L C u L u b � L p R R b Y O O O O Q. u �'L R d e Y C R m 0 Z ■ d _ m d 0 J R ■ d _ N V 0 Z z N : . . . � E v � c N LLJ CD w gu ayi o rn o C > N N n. N N U C Vf l9 C • � C y O� U N .�+' O W C C .� m C O. ..0 o H '2 t C O Li CO L U c d y ' E o i-c 0. H c m =$ m y o LL LL L aEi N€ 2 N m m U U d O` m� c rn m E w w y m ` c z Z .p. 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L'o N �.vy N rrJ' ni'.' o c G nn 4 CiC C H P O L° O ,� '[ •• IIIIIIII U T l J U a v v ^C n r ° J W �' L r 7R = O �. -0 C 7 O 3 .D L C W t4 w b Y J]vy L 'd n W L J W L Z C 1.13 E O 5 o O = ¢ S• p 7 ~ L to cac ^u EU--0 �'. C9 TJ W �� 7 W _- v n �•'L cc S L j N Q a Q W C.) to W o - "' d s C7 v �L W 13 u �:. "o H c✓.v ❑> a Fes' W. 0 u N U d a N 0 n. d H O _ a O c N d N H O v v O O n M O Cp \ O V vvvvvvvv- MM�'�l�'1 M M MME! N mmmo�mrnrnmm o 000000000 mmm e�omm�o�o 0 .C.G.Q.� .G.y .C.y .y N UC�U�C�UC�H C1 CITY OF PALM BEACH GARDENS RETIREMENT PLAN FOR EMPLOYEES ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2004 (Revised November 10, 2006) CONTRIBUTIONS APPLICABLE TO THE PLAN /FISCAL YEAR ENDED SEPTEMBER 30, 2006 Section Title TABLE OF CONTENTS I Introduction a. Summary of Report b. Requirements of Chapter 112, Part VII, Florida Statutes II Valuation Information a. Derivation of Unfunded Actuarial Accrued Liability b. Actuarial Assumptions and Funding Methods c. Valuation Notes III IV V VI Trust Fund Member Statistics a. Eligibility for Retirement b. Statistical Data c. Age and Service Distribution d. Member Reconciliation Summary of Plan Provisions Governmental Accounting Standards Board Statements No. 25 and No. 27 Disclosure Information Page 1 4 D 10 11 12 16 17 18 19 20 22 SECTION I INTRODUCTION 1 SUMMARY OF REPORT The regular annual actuarial valuation of the City of Palm Beach Gardens Retirement Plan For Employees, performed as of October 1, 2004, has been completed, and the results are presented in this Report. The results of this valuation are applicable to the plan /fiscal year ended September 30, 2006. The funding requirements, compared with the amounts developed in the August 25, 2004 Actuarial Impact Statement (determined as of October 1, 2003), are as follows: Valuation Date 10/1/2003 10/1/2004 Applicable Plan /Fiscal Year End 9/30/2005 9/30/2006 Total Required Contribution $126,148 $95,220 % of Total Annual Payroll 32.5% 37.0% Member Contributions (Est.) 23,285 15,425 Balance from City 102,863 79,795 % of Total Annual Payroll 26.5% 31.0% During the past year the actuarial experience has been less favorable than expected. The primary components of unfavorable experience included average salary increases that exceeded the assumed rate and a 1.8% investment return (Actuarial Asset Basis) that was less than the 8.0% assumption. These losses were partially offset by the effects of a decrease in the level of non - investment expenses. Additionally, certain Plan Members experienced a substantial amount of hurricane - related overtime. Because this was an unusual event and because it is unlikely that 0a future reported salaries will reflect this compensation component, for the purposes of this valuation, projected plan liabilities and the current valuation payroll were reduced in proportion to each Member's hurricane - related overtime, in order to more closely reflect anticipated experience. The "Old Method" in the Comparative Summary illustrates the liabilities and costs associated with not removing hurricane - related overtime for each Member's pay. The "New Method" column shows the costs and liabilities associated with removing hurricane - related overtime from the pay for those Members not in the three year averaging period. Please note that this revised treatment of the hurricane - related overtime resulted in an increased City contribution requirement of $403.00. Because the books for fiscal 2006 have closed as of this revision, a $435.24 ($403.00 adjusted for one year of interest) additional one time contribution will be required by the City during the fiscal year ending September 30, 2007. This additional contribution will serve to reduce future City funding requirements. In connection with this valuation of the Fund, the actuarial cost method was changed from the Aggregate Actuarial Cost Method to the Entry Age Normal Actuarial Cost Method, with a level dollar amortization assumption for the Unfunded Actuarial Accrued Liability. These changes are designed to produce contribution amounts that are more stable and predictable. Details of the impact of the changes on plan costs are presented in the "Comparative Summary" beginning on page 3 of the report. The balance of this Report presents additional details of the actuarial valuation and the general operation of the Fund. The undersigned would be pleased to meet with the Board of Trustees in order to discuss the Report and any pending questions concerning its contents. 3 Respectfully submitted, FOSTER & FOSTER, INC. , MA "1 By: Patrick T. Donlan, MAAA n IComparative Summary of Principal Valuation Results ' New Method Old Method Old Method 10/1 /2004' 10/1/2004 10/1/2003 ' A. Participant Data Number Included Actives 5 5 7 ' Service Retirees 9 9 7 Beneficiaries 2 2 3 Terminated Vested 3 3 3 ' Disability Retirees 1 1 1 Total 20 20 21 ' Total Annual Payroll $243,023 $245,168 $364,394 Payroll Under Assumed Ret. Age 243,023 245,168 364,394 Annual Rate of Payments to: Service Retirees 198,286 198,286 95,764 ' Beneficiaries 20,033 20,033 29,463 Terminated Vested 29,817 29,817 29,817 Disability Retirees 6,873 6,873 6,873 B. Assets Actuarial Value 2,585,580 2,585,580 2,607,935 Market Value 2,691,410 2,691,410 2,534,283 ' C. Liabilities Present Value of Benefits Active Members Retirement Benefits 896,685 909,475 1,691,943 Disability Benefits 13,517 13,753 18,245 Death Benefits 10,732 10,933 13,841 ' Vested Benefits 130,673 141,503 108,606 Refund of Contributions 9,404 4,889 18,172 Service Retirees 1,843,103 1,843,103 811,622 ' Beneficiaries 209,642 209,642 212,577 Terminated Vested 58,528 58,528 54,081 Disability Retirees 73,163 73,163 74,122 ' Total 3,245,448 3,264,989 3,003,209 C. Liabilities - (Continued) Liabilities Due and Unpaid Present Value of Future Salaries (Attained Age) Present Value of Future Salaries (Entry Age) Present Value of Future Member Contributions Present Value of Future Normal Costs (Entry Age) Actuarial Accrued Liability Unfunded Actuarial Accrued Liability (UAAL) D. Actuarial Present Value of Accrued Benefits Vested Accrued Benefits New Method 10/1/2004 $0 1,401,945 2,373,232 84,117 125,942 3,119, 506 533,926 Old Method 110/11/2004 $0 1,425,729 2,392,455 85,544 128,483 2,585,580 0 5 Old Method 10/1/2003 $0 1,459,432 3,683,841 87,566 135,139 2,607,935 0 Inactives 2,184,436 2,184,436 1,152,402 Actives 439,708 447,508 983,321 Member Contributions 178,138 178,138 332,853 Total 2,802,282 2,810,082 2,468,576 Non - vested Accrued Benefits 0 0 8,893 Total Present Value Accrued 2,802,282 2,810,082 2,477,469 Benefits Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments 0 0 Assumption Changes (7,800) 0 New Accrued Benefits 0 288,889 Benefits Paid 0 (148,532) Interest 0 192,256 Other 0 0 Total: (7,800) 332,613 51 F. Past Contributions Plan Years Ending: 9/30/2004 Total Required Contribution 92,016 City Requirement 67,027 Actual Contributions Made: Members 24,655 City 67,027 Total 91,682 G. Net Actuarial Gain (Loss) N/A * Contributions developed as of 10/1/04 are expressed as a percentage of projected annual payroll at 10/1/05 of $257,091. New Method Old Method Old Method 10/1/2004 110/11/2004 10/1/2003 E. Pension Cost Normal Cost (with interest) $46,581 $142,361 $126,148 % of Total Annual Payroll* 18.1 54.5 32.5 Payment Required to Amortize Unfunded Actuarial Accrued Liability over 30 years (as of 10/1/04) 48,639 0 0 % of Total Annual Payroll* 18.9 0.0 0.0 Total Required Contribution 95,220 142,361 126,148 % of Total Annual Payroll* 37.0 54.5 32.5 Expected Member Contributions 15,425 15,666 23,285 % of Total Annual Payroll* . 6.0 6.0 6.0 Expected City Contrib. 79,795 126,695 102,863 % of Total Annual Payroll* 31.0 48.5 26.5 F. Past Contributions Plan Years Ending: 9/30/2004 Total Required Contribution 92,016 City Requirement 67,027 Actual Contributions Made: Members 24,655 City 67,027 Total 91,682 G. Net Actuarial Gain (Loss) N/A * Contributions developed as of 10/1/04 are expressed as a percentage of projected annual payroll at 10/1/05 of $257,091. H. Schedule Illustrating the Amortization of the Total Unfunded Actuarial Accrued Liability as of: (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Projected Unfunded Year Ended 9/30/2004 1.8% Year Accrued Liability 8.0% 2004 533,926 (d) Average Annual Rate 2005 529,213 2006 524,123 2016 444,488 2026 272,561 2031 122,245 178138 0 I. (i) 3 Year Comparison of Actual and Assumed Salary Increases Actual Assumed Year Ended 9/30/2004. 11.2% 6.5% Year Ended 9/30/2003 3.2% 6.5% Year Ended 9/30/2002 11.5% 6.5% (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Assumed Year Ended 9/30/2004 1.8% 8.0% Year Ended 9/30/2003 2.4% 8.0% Year Ended 9/30/2002 -7.0% 8.0% (iii) Average Annual Payroll Growth (a) Payroll as of: 10/1/2004 $243,023 10/1/1995 685,535 (b) Total Increase -64.5% (c) Number of Years 9.00 (d) Average Annual Rate -10.9% n Statement by Enrolled Actuary This actuarial valuation was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 112, Florida Statutes. There is no benefit or expense to be provided by the plan and /or paid from the plan's assets for which liabilities or current costs have not been established or otherwise taken into account in the valuation. All known events or trends which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. Q 0A,- U19106 Patrick T. Gonlan, EA, MAAA Enrolled Actuary #05 -6595 A copy of this Report is to be furnished to the Division of Retirement within 60 days of receipt from the actuary at the following address: Mr. Charles Slavin, Actuary Bureau of Local Retirement Systems Cedars Executive Center, Bldg. C 2639 North Monroe Street Tallahassee, FL 32303 SECTION II VALUATION INFORMATION Derivation of Unfunded Actuarial Accrued Liability (1) Total Present Value of Benefits (2) Present Value of Future Normal Costs (3) Accrued Liability: (1) - (2) (4) Actuarial Value of Assets (5) Unfunded Accrued Liability as of October 1, 2004 (3) -(4) Date Established "A" 10/1/2004 Years Remaining 30 10/1/2004 Amount 533,926 3,245,448 125,942 3,119, 506 2,585,580 533,926 Amortization Amount 43,914 9 10 ACTUARIAL ASSUMPTIONS AND COST METHODS Assumptions Mortality Rates 1983 Group Annuity Mortality Table. Termination Rates See Tables below. Disability Rates See Tables below. Retirement Age Age 62. Also, any member who has 40 reached Normal Retirement is assumed to ' 50 continue employment for one additional 60 year. Early Retirement Commencing upon eligibility for Early Retirement (age 55 with 10 years of service), members are assumed to retire with an immediate benefit at the rate of 2% per year. Interest Rate 8% per year, compounded annually, net of investment related expenses. Salary Increases Payroll Increase Administrative Expenses ' % Terminating Age During the Year 20 17.2% 30 15.0 40 8.2 ' 50 1.7 60 0.5 6.5% per year until the assumed retirement age; see Table below. in addition, projected salary in the year of retirement is increased 20% to account for non - regular compensation. None. $11,700 added to Normal Cost. % Becoming Disabled During the Year 0.03% 0.04 0.07 0.18 0.90 ' Funding Method ' Entry Age Normal Actuarial Cost Method. Current Salary as % of Salary at ape 65 5.9% 11.0 20.7 38.9 73.0 11 VALUATION NOTES Total Annual Payroll is the projected annual rate of pay for the year following the valuation date of all covered members. Present Value of Benefits is the single sum value on the valuation date of all future benefits to be paid to current Members, Retirees, Beneficiaries, Disability Retirees and Vested Terminations. Normal (Current Year's) Cost is the current year's cost for benefits yet to be funded. Unfunded Actuarial Accrued Liability (UAAL) is a liability which arises when a pension plan is initially established or improved and such establishment or improvement is applicable to all years of past service. Under the Entry Age Normal Actuarial Cost Method, there is also a new UAAL created each year equal to the actuarial gain or loss for that year. Total Required Contribution is equal to the Normal Cost plus an amount sufficient to amortize the Unfunded Accrued Liability over no more than 30 years. The required amount is adjusted for interest according to the timing of contributions during the year. Entry Age Normal Actuarial Cost Method is the method used to determine required contributions under the Plan. The use of this method involves the systematic funding of the Normal Cost (described above) and the Unfunded Accrued (Past Service) Liability. SECTION III TRUSTFUND City of Palm Beach Gardens 12 ' General Employees' Pension Plan (DB) BALANCE SHEET ' September 30, 2004 ASSETS COST VALUE MARKET VALUE ' Cash and Cash Equivalents: Money Market 26,604.41 26,604.41 ' Total Cash and Equivalents 26,604.41 26,604.41 Receivable: Member Contributions 786.58 786.58 ' City Contributions 16,756.75 16,756.75 ' Total Receivable 17,543.33 17,543.33 Investments: Mutual Funds: ' International Equity 106,612.34 107,606.89 Pooled /Common /Commingled Funds: Fixed Income 964,731.38 1,031,474.85 ' Equity 1,338,018.61 1,508,180.39 Total Investments 2,409,362.33 2,647,262.13 ' TOTAL ASSETS 2,453,510.07 2,691,409.87 LIABILITIES AND NET ASSETS Total Liabilities 0.00 0.00 Net Assets: Active and Retired Members' Equity 2,453,510.07 2,691,409.87 ' Total Net Assets 2,453,510.07 2,691,409.87 TOTAL LIABILITIES AND NET ASSETS 2,453,510.07 2,691,409.87 City of Palm Beach Gardens General Employees' Pension Plan (DB) CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS September 30, 2004 Market Value Basis INCOME Contributions: Member City Total Contributions Earnings from Investments Interest & Dividends Net Realized Gain (Loss) Unrealized Gain (Loss) Total Earnings and Investment Gains EXPENSES Administrative Expenses: Investment Related* Other Total Expenses Distributions to Members: Benefit Payments Return of Contributions Total Distributions Change in Net Assets for the Year Net Assets Beginning of the Year Net Assets End of the Year "Investment Related expenses include investment advisory, custodial and performance monitoring fees. 24,655.39 67,027.00 270.23 169,357.20 82,038.05 26, 008.02 11,680.13 148,532.40 0.00 13 91,682.39 251,665.48 37,688.15 148, 532.40 157,127.32 2,534,282.55 2,691,409.87 City of Palm Beach Gardens General Employees' Pension Plan (DB) ACTUARIAL ASSET VALUATION September 30, 2004 Actuarial Assets for funding purposes are developed by increasing the Actuarial Assets used in the most recent actuarial valuation of the Fund by the average annual market value rate of return (net of investment related expenses) for the past four years, but are limited to 120% of Market Value, if less. Details of the derivation are set forth as follows: Plan Year End 9/30/01 9/30/02 9/30/03 9/30/04 Annualized Rate of Return Rate of Return* -4.09% -7.03% 10.46% 9.03% 14 for prior four (4) years: 1.79% (A) 10/01/03 Actuarial Assets: $2,607,935.35 (1) Net Investment Income: 1. Interest and Dividends 270.23 2. Realized Gains (Losses) 169,357.20 3. Change in Actuarial Value (97,444.53) 4. Investment Related Expenses 26,008.02 Total 46,174.88 (B) 10/01/04 Actuarial Assets: $2,585,580.09 Actuarial Asset Rate of Return = 21 /(A +B -1): 1.79% 10/01/04 Limited Actuarial Assets: $2,585,580.09 (Lesser of Actuarial Assets or 120% of Market Value) *Market Value Basis, net of investment related expenses City of Palm Beach Gardens 15 ' General Employees' Pension Plan (DB) CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS September 30, 2004 ' Actuarial Asset Basis INCOME ' Contributions: Member 24,655.39 City 67,027.00 ' Total Contributions 91,682.39 Earnings from Investments Interest & Dividends 270.23 Net Realized Gain (Loss) 169,357.20 Change in Actuarial Value (97,444.53) ' Total Earnings and Investment Gains 72,182.90 EXPENSES Administrative Expenses: Investment Related* 26,008.02 Other 11,680.13 Total Administrative Expenses 37,688.15 Distributions to Members: Benefit Payments 148,532.40 Return of Contributions 0.00 Total Distributions 148,532.40 Change in Net Assets for the Year (22,355.26) Net Assets Beginning of the Year 2,607,935.35 Net Assets End of the Year ** 2,585,580.09 *Investment Related expenses include investment advisory, custodial and performance monitoring fees. * *Net Assets may be limited for actuarial consideration SECTION IV MEMBER STATISTICS ELIGIBILTY FOR RETIREMENT Members are eligible for Normal Retirement based upon the following criteria: 1) Attained Age 62 Members are eligible for Early Retirement based upon the following criteria: 1) Attained Age 55 with 10 Years of Credited Service As of the date of this valuation, the following list of Members are eligible for: Normal Retirement ' Martin, S. Sigler, W. Early Retirement West, D. 16 17 STATISTICAL DATA (Averages are salary weighted) 10/11/2001 10/1/2002 10/1/2003 10/11/2004 Number 8 8 7 5 Average Current Age 52.1 53.6 55.8 52.4 Average Age at Employment 34.5 34.5 35.8 35.6 Average Past Service 17.5 19.1 20.0 16.7 Average Annual Salary $43,838 $48,882 $52,056 $48,605 W.* AGE AND SERVICE DISTRIBUTION PAST SERVICE AGE 0 1 2 3 4 5 -9 10 -14 15 -19 20 -24 25 -29 30+ Total 15 -19 0 0 0 0 0 0 0 0 0 0 0 0 20 -24 0 0 0 0 0 0 0 0 0 0 0 0 25 -29 0 0 0 0 0 0 0 0 0 0 0 0 30 -34 0 0 0 0 0 0 0 0 0 0 0 0 35 -39 0 0 0 0 0 0 1 0 0 0 0 1 40 -44 0 0 0 0 0 0 0 0 0 0 0 0 45-49 0 0 0 0 0 0 1 0 0 0 0 1 50 -54 0 0 0 0 0 0 0 0 0 0 0 0 55-59 0 0 0 0 0 0 1 0 0 0 0 1 60-64 0 0 0 0 0 0 0 1 0 0 1 2 65+ 0 0 0 0 0 0 0 0 0 0 0 0 Total 0 0 0 0 0 0 3 1 0 0 1 5 VALUATION PARTICIPANT RECONCILIATION 1. Active lives a. Number in prior valuation 10/1/03 b. Terminations i. Vested (partial or full) with deferred benefits ii. Non - vested or full lump sum distribution received c. Deaths i. Beneficiary receiving benefits ii. No future benefits payable d. Disabled e. Retired f. DROP Retired g. Voluntary withdrawal h. Continuing participants i. New entrants j. Total active life participants in valuation 2. Non - Active lives (including beneficiaries receiving benefits) Service 0 0 Retirees, 0 1 0 Vested Receiving Receiving Receiving Death Disability Benefits Benefits Benefits a. Number prior 7 3 1 valuation b. In c. Out d. Number current valuation 19 7 0 0 2 0 0 5 0 5 Vested Deferred DROP Total 3 0 14 2 0 0 0 0 2 0 1 0 0 0 1 9 2 1 3 0 15 SECTION V SUMMARY OF PLAN PROVISIONS 20 Effective Date Original Plan Latest Amendment SUMMARY OF PLAN PROVISIONS (Through Ordinance 11, 2004) December 20, 1982 April 15, 2004 Eligibility Full -time Employees who were members of the Plan on 2/6/97 who are not classified as full -time Police Officers or Firefighters. Salary W -2 compensation, plus all tax deferred, tax sheltered, and tax exempt items of income. Average Final Compensation 1/12th of average Salary for the 3 best consecutive years of the 5 years immediately preceding retirement or termination. Credited Service Total years and completed months of service with the City as a General Employee. Members receive credit only for years during which Member Contributions were made. Normal Retirement Date Age 62. Benefit 2.5% of Average Final Compensation times Credited Service. Form of Benefit 10 Year Certain and Life Annuity (options available). Early Retirement Date Age 55 and completion of 10 years of Credited Service. Benefit Accrued benefit, reduced 1/15th for each of the first 5 and 1 /30th for each of the next 5 years that early retirement precedes normal retirement. 21 Death Benefit Pre - Retirement Vested Accrued benefit payable to designated beneficiary for 10 years at the Member's Normal Retirement Date (unreduced) or on a reduced basis at the otherwise Early Retirement Date. Not Vested Refund of accumulated Member Contributions. Post - Retirement According to optional form of benefit Selected at retirement. Vesting Schedule Years of Service Vested % Less than 5 0% 5 25 6 40 7 55 8 70 9 85 10 or more 100 Benefit Member will receive the vested portion of his (her) accrued benefit at the otherwise Early or Normal Retirement Date. Member Contributions Amount 6.0% of Salary. Interest 6.0% per year. Disability Eligibility Total and permanent (as determined by the Board). Benefit Benefit accrued to date of disability, payable for life (with a 10 year guarantee) or until recovery (as determined by the Board). SECTION VI GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 25 AND No. 27 INFORMATION N a- J 0 o-- o > >+ 06 �Ua� C O L- .r- N CU 4- Q =3 (a t� 000.-!Zoo 000000 fl- 00000 0000000 r N coVO CV) C'MN N 0 LO O 00 v OrM0rl-00� v 0O OA LO rl- LO N M CO M v LO 0 0 �0 0 0 0000000 00000000 N00000o c00000r- N0000r- CA � co O (OLO COrl- Nr- O0'M (00 1n00OM�In 01 0lnLO r-OL00000LO �0O(DCOM M MNNCV NM OLO 0'Or-NO COMV-- T--(Or- V)M(DMr-O Sri r- r-- 0) [�- 000LO 00Mv LO (O 00 (O m 00 N N N N N N vMN�O(n 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O CO N O c fa �c: �U) C > c C U aQ L m � aci cE - c a L CD co 0 Q.(7 N Q N L C � 00 Q N �z 6a) E aa) N (}a O 0 Q CO O co 7 L t f` U Z) fa N L N 0a = Cl. H w O LU F-- H z W z m z O W 2 O Z LU O it W LLl 2 F- O LL co Z _O H D m (Y H z O LL O LU J LLl 2 U CO \° \° O N 4 O 0 0 0 0 0 0 c 000000 600000 L C O O O O O 0 a0 C O_ 1,,- 14, O0flr- (0 � 3 NU-)v00(O� O O�tn00 U" r-00 fl- 00r'- N C O U C aO d1"� (Ot`(O `- NLov000Or- C O � O- - V Q 0w Cr �- O C tiWP - Mr- N O (O���v� U O M L C -0 00 CUa E 00000m >- C: N Em (D a — o U) �- > 06 2 Ud' aria LL 0 Q L O N O ±+ c 3 m c 00 O UO a ZQ vQ c cad ca 0ia C7 Lim ZZ m0 W HH a. Q cn (Z c Z_ a > LU M 0 (� Z -p z a Z) 0 O-L LL _ "D 00 U 046 0 LL -iQ ,`: aOi 0 .. U) = � J 0~ J O LL 3z w Zw _ �a LLJ Z a (J) O � �LJJ 'Op+� a _ rn OyJQ OO U(D OL o 0.r, U U•� C QQJ LU (D N M a Q. L � 0T U (a N L- 0 m o <n O ` .b.. (a 2 cn cu Q Q C O L- .r- N CU 4- Q =3 (a t� 000.-!Zoo 000000 fl- 00000 0000000 r N coVO CV) C'MN N 0 LO O 00 v OrM0rl-00� v 0O OA LO rl- LO N M CO M v LO 0 0 �0 0 0 0000000 00000000 N00000o c00000r- N0000r- CA � co O (OLO COrl- Nr- O0'M (00 1n00OM�In 01 0lnLO r-OL00000LO �0O(DCOM M MNNCV NM OLO 0'Or-NO COMV-- T--(Or- V)M(DMr-O Sri r- r-- 0) [�- 000LO 00Mv LO (O 00 (O m 00 N N N N N N vMN�O(n 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O CO N O c fa �c: �U) C > c C U aQ L m � aci cE - c a L CD co 0 Q.(7 N Q N L C � 00 Q N �z 6a) E aa) N (}a O 0 Q CO O co 7 L t f` U Z) fa N L N 0a = Cl. H w O LU F-- H z W z m z O W 2 O Z LU O it W LLl 2 F- O LL co Z _O H D m (Y H z O LL O LU J LLl 2 U CO \° \° O N 4 O 0 0 0 0 0 0 c 000000 600000 L C O O O O O 0 a0 C O_ 1,,- 14, O0flr- (0 � 3 NU-)v00(O� O O�tn00 U" r-00 fl- 00r'- N C O U C aO d1"� (Ot`(O `- NLov000Or- C O � O- - V Q 0w Cr �- O C tiWP - Mr- N O (O���v� U O M L C -0 V, MNv -00) CUa E 00000m >- C: NNNNNI (D U) 22 23 DISCLOSURE INFORMATION PER STATEMENT NO. 27 OF THE GOVERNMENTAL ACCOUNTING STANDARDS BOARD ANNUAL PENSION COSTS AND RELATED INFORMATION Contribution rates as of 9/30/04 City 16.3% Plan Members 6.0% Annual pension cost 67,027 Contributions made 67,027 Actuarial valuation date 101112002 Actuarial cost method Aggregate Amortization method N/A Remaining amortization period N/A Asset valuation method Market Actuarial assumptions: Investment rate of return 8.0% Projected salary increase* 6.5% * Includes inflation at 3.0% Post Retirement COLA 0.0% THREE YEAR TREND INFORMATION Actuarially Percentage of Net Year Determined Actuarially Determined Pension Endinq Contribution Contribution Obligation 9/30/04 67,027 100% 0 9/30/03 18,154 100% 0 9/30/02 17,046 100% 0 Performance Evaluation for Palm Beach Garden General Employees Pension Plan Rockwood & Sawgrass For the Period Ending September 30, 2006 Presented by: Bogdahn Consulting, LLC Palm Beach Gardens General Employees' General Employees Pension Plan Executive Summary Report Explanation The Executive Summary provides an overview of the fund's performance. It shows the performance in dollars, percent, and relative to the investment policy. These are provided over different time periods including up and down markets. All rates of return are annualized if the period for which they are calculated exceeds one year. Account Reconciliation: This section shows the performance of the account in dollars, during the most recent quarter, the calendar year, and since the inception date. The Beginning Value is the value at the start of each period. The Ending Value shows the value as of the date of the report. Net contributions are the total contributions less the total withdrawals during the period. The Investment G/L is the gain or loss resulting from the investments. It is the difference between the beginning and ending values that cannot be explained by the net contributions. Positive investment G/L figures represent a profit, and negative values represent a loss. Investment Policy: This section defines the benchmark against which the fund is being compared. Generally, this is the most important objective for a fund to achieve. The performance of the fund relative to this measure over longer periods of time, such as market cycles, is the strongest indicator of the success or failure of the investment strategy. This objective should be reasonable, and the performance of the fund should be measured against the investment policy after adjusting for risk. Trailing Returns: This section shows the cumulative time weighted returns over the last 1 year, 2 years, and so on up through 10 years if available, as well as since the inception date. A positive difference indicates the fund has exceeded the policy's returns. The investor would prefer that this difference be positive for all time periods; however, it is more important for it to be positive for the longer periods rather than the shorter periods. Calendar Year Returns: This section gauges the consistency of performance over one year time periods. Each calendar year of performance represents the return from January 1st through December 31st. Watch out for a trend of declining relative performance in recent periods. Returns In Up /Down Markets: This section shows how the fund performed in both up and down markets. The methodology is to segregate the performance for each time period into the quarters in which the market, as defined by the policy, was positive and negative. Quarters with negative policy returns are treated as down markets, and quarters with positive policy returns are treated as up markets. Thus, in a 3 year or 12 quarter period, there might be 4 down quarters and 8 up quarters. Up market returns are calculated for the fund and the policy based on the up quarters. Down market returns are calculated for the fund and the policy based on the down quarters. The ratio of the fund's return in up markets to the policy's is the up market capture ratio. The ratio of the fund's return in down markets to the policy's is the down market capture ratio. Ideally, the fund would have a greater up market capture ratio than down market capture ratio. Palm Beach Gardens General Employees' General Employees Pension Plan Executive Summary Account Reconciliation 09/30/2006 2006 09/30/1994 Qtr YTD Incept ..................................... ...................................... 13e it?ri?ri :Value ::: ............................... ............................... GS :::: 7..::::.1;D 9: N6t�Flows :::::::::::::::: :::: - 34:::::::;::::: =9T::: -3.72 ar ostrrlent G/L `:1 }Z ::: 1; 2:::::: 1 Yr Erwiri :: : 2;8 4: 2; 33 Trailing Returns through September 30, 2006 Investment Policy Index Weight Calendar Year Returns 09/30/2006 2006 ............................... < ............. ,x..._...........16,7. ::: , .. : . cy .... 1 . . . , _ ... .. . ... . . . ..2.......,..... . ..... .. . ,.. .19 . .o . 09/30/1994 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept ............................................................................................................ :......:.:::::5::::::7 :97::::::8:40:...... . ......... ........ ....... 4::::::: 5:53::::::3:83::::::4 ,90: >:::::0.8r ...9....... :96:::::: 5....::......::::...... ............................... } ::::::::.... : _.__ ............................................................................................................ .... ...... ............................... r � 7 ....................:78..: _.. 3.87... _. ..8.25. ._......................................... .:6:4 _ .. 314. 9> : ':: .. ........_...._................. ............................... :.:... ....... T .... .:: :9.. . ... a ` ;:< :.; :1�4:..... ..... 0.20;:% ........ .: A` :. X1.84 _0.94 ,.. #3:T3:. . . 1�. 7 0.27. 0.90.. 0,84 Calendar Year Returns 09/30/2006 2006 ............................... < ............. ,x..._...........16,7. ::: , .. : . cy .... 1 . . . , _ ... .. . ... . . . ..2.......,..... . ..... .. . ,.. .19 . .o . t. .............8.... Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 1997 1= .............................................................................................................. 3,9$........ .............................................................................................................. 6 .. . ......... ........ ....... ......3: , ...........8. ....... ,90: >:::::0.8r ...9....... :: ............ ;: 5; , .: .........8...................2. ............I.................. ............................... : >. . . 1. } Doti... . . . . ....::::::::::: . Y ...... ........ .4:92...... >:::::: G.34...... _.. 3.87... _. ..8.25. 1$::76:.: - 9:53... ............... , , 3 67 - 0 �92 ... ..... :.1:1::4(f: ................... 2'f 3 ...23:68; ......... . . : . . .. ::.- :${#74 .. ..... .... . .bt. . E} 0 . . ..... . 389 . . ...... .. ... 0 .. . . . . 6 .6 9 3=..0$ . : 1::9.: Returns in Up Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept ..................................... l"i�itid::: S. .....12S.. .._........33..7 ............................... < ............. ,x..._...........16,7. ::: , .. : . cy .... 1 . . . , _ ... .. . ... . . . ..2.......,..... . ..... .. . ,.. .19 . .o . t. .............8.... >:93: `:::::91::2:::: $ .................. ........ ;: >:88:4:::::::::: ........................ .. Inception date is September 30, 1994 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 2 Returns in Down Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept ... _ . _. fiu�tl... . ............................... ... >2.5. - ........ ...................... � ... .. .:.....x. . Po[i : :::: ......................._............ r2:7: :: 4a2:3 ........_...................... > F3:9 ;:.:31:3:9: Ratio::::::.:: >:93: `:::::91::2:::: $ .................. ;: >:88:4:::::::::: ........................ tit3:U? Palm Beach Gardens General Employees Pension Plan Asset Allocation Through September 30, 2006 Equit} 61% At Market Cash & Equiv 6% Equity 58% At Cost Cash & Equiv 6% 3 Fixed Income 33% So Fixed Income 36% Equity Limitations 65 @ Cost 70 @ Market Palm Beach Gardens General Employees' General Employees Pension Plan Universe Comparison Report Explanation The universe compares the fund's returns to a group of other investment portfolios, called a universe. Ideally the universe is comprised of many other investment funds with similar investment profiles. Comparisons are provided over many different time periods. Trailing Returns: This section focuses on longer term returns. It shows the cumulative time weighted returns and percentile rankings for the last 1 year, 2 years, 3 years, and so on up through 10 years if available. The returns for the fund, the policy and the universe percentiles are displayed. A percentile ranking of 1 is the best, and 100 is the worst. For example, a ranking of 50 means that the fund outperformed half of the universe. A ranking of 25 means the fund was in the top 25% of the universe, outperforming 75 %. Above 50 is acceptable. Above 25 is excellent. High rankings over all time periods are ideal; however, it is more important to rank highly over the longer periods rather than the shorter periods. Calendar Year Returns: This section focuses on shorter periods and gauges the consistency of performance over time. It shows the calendar year returns for the fund, the investment policy and the universe percentiles. Each full year of performance represents the return from January 1st through December 31st. Ideally the fund has performed well in the earlier years and in the most recent years. Watch out for a trend toward underperformance in recent periods. Note the performance in different market environments. A high policy return indicates a bull market, and a low policy return indicates a bear market. All rates of return are annualized if the period for which theyare calculated exceeds one year. 4 Palm Beach Gardens General Employees' General Employees Pension Plan Universe Comparisons 60% Pure Lg Cap Core & 40% High Quality Bond i railing Ketums through September 3u, zuu6 Calendar Year Returns 1 Yr I 2 Yr I 3 Yr I 4 Yr I 5 Yr I 6 Yr I 7 Yr I 8 Yr I 9 Yr 1 10 Yr .............................................................................................................. ............................... ............................................................................................................. ............................... Fund.. : > :::::' ::::::::::::... ... ............................. ............................... . ............................................................................................................ ............................... .......................................................................................................... ...I,.......................... Return 7.79 7.97 8.40 8.94 5.53 3.83 4.96 5.80 5.24 7.26 % -tile 41 55 55 82 61 20 17 21 54 49 .......................... ........... I............................. . . ....._....I ............. ....... ... ............................... P 4�IIC}► ........... ............................... . ........ ........_.......... .......... Return 7.93 8.17 8.67 10.78 6.47 3.10 4.19 5.53 6.14 8.10 % -tile 33 45 44 34 26 28 30 27 15 12 n... 5th % -tile 9.89 10.22 10.69 12.16 8.00 6.74 6.67 7.21 6.78 8.68 25th % -tile 8.09 8.73 9.23 11.07 6.52 3.33 4.39 5.58 5.80 7.72 50th % -tile 7.57 8.05 8.49 10.30 5.78 2.41 3.62 4.95 5.32 7.22 75th % -tile 5.97 7.20 7.61 9.36 5.07 0.98 2.89 4.40 4.79 6.56 95th % -tile 2.00 4.86 4.89 6.95 3.09 -2.33 0.96 2.75 3.67 4.99 Calendar Year Returns Returns are in percent. "% -tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to September 30, 2006 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate +1 I Qtr YTD 1 2005 2004 2003 2002 2001 2000 1999 1998 ................... . . t =iItid Return 3.95 5.60 3.98 8.33 14.87 -9.90 0.84 5.74 7.81 11.27 % -tile 66 56 49 28 90 45 9 16 84 92 :.. ... . . . Pony. . Return 4.92 6.34 3.97 8.25 18.76 -9.53 -3.67 -0.92 11.40 21.35 % -tile 17 30 49 30 38 36 38 53 57 14 :. ..... ... Unlvers .. .. .... .... .. .. 5th % -tile 5.32 8.51 7.78 10.61 22.15 -6.02 2.49 12.89 21.77 23.85 25th % -tile 4.79 6.44 5.07 8.43 19.57 -8.97 -2.72 3.21 13.94 20.05 50th % -tile 4.30 5.91 3.95 7.53 18.17 -10.15 -4.10 -0.70 11.87 18.01 75th % -tile 3.64 4.12 3.31 6.43 16.73 -11.58 -5.12 -2.41 9.72 14.49 95th % -tile 1.36 -1.15 1.46 4.31 13.99 -13.58 -8.55 -5.23 3.84 10.59 Returns are in percent. "% -tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to September 30, 2006 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate +1 Palm Beach Gardens General Employees' Total Fixed Income Executive Summary Account Reconciliation 09/30/2006 2006 09/30/1994 Qtr YTD Incept ............................ ii?iirtg' Value .:.:..::::::: ....................I.......... #i3:::::: 3:47$: :::::::::::: ..::/.4 .::.. .. ........ ..................................... ............................... ............................... .........11+f................�0 9.....:. ..........I.................. ..................................... ..................................... ..................................... it vestrY.....:f3fC : :::::::.:::::::......:: ..................................... ..................................... ............................... ............................... ............................... ............................... ............................... :::......::::::::.... . ..................................... ..................................... ..................................... ..... ~lg .......::.::. :: ............................... ............................... . :966::......9fi .... ::;::.:.. . Trailing Returns through September 30, 2006 Investment Ho Index Weight Calendar Year Returns 09130/2006 2006 :: 9: :::::::::::: ..::/.4 .::.. .. 8. o11e....... .... ................................. .........11+f................�0 9.....:. ..........I.................. ............,............1..... ... . . 09/30/1994 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept ............................................................................................................ ............................................................ Find:..... .: 4 ? . ............................................................................................................. 3:20 2::8 :.::.:......5 . ..:...... ...:5.;56 ............................... .: 5:.5 .. .:4.25. .: ............................... .. ............................... :.5:.1:7 :.: ............................... .....I......................... �:15a .::::::::6:0 :: ........ ............................... ............................................................................................................. ............................................................................................................ s7 .....:::::: :1. - ....................................................... ::..... ::::5:fl .....:6::3i4::::: 'I't:fl2 fi 40::::::.. ....... .............I................. ............................... s:�r: ............................... �: ::::::::..: . .. ...... ........ .: # �N` P:::::::::::0:85::::::0;19::::: .............. :.... ::::: �t1.:37 :::: ..I.....:: <?0:76:::::c1:05::::: ........ .. }. ..... .. .: X1::25...... -' -, ......1.00 :: ;:::�?i�3q........... ... ...... :9$ . 93. Calendar Year Returns 09130/2006 2006 :: 9: :::::::::::: ..::/.4 .::.. .. 8. o11e....... .... ................................. .........11+f................�0 9.....:. ..........I.................. ............,............1..... ... . . ..................................... Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 1997 ............................................................................................................. ............................................................................................................. nd... ...... 3,$ .:.. ............................................................................................................. ............................................................................................................ 0.:::::::. ... ..... F5............. g::g ::::::: 3::::::: ...2,$.......9 .. :;:::;:::9:: rt ::::::6: 2 ...... ............................... ............................... ..50.....1,3........99......... ............................... ............................... �.: 7:::::8; 8:7 . ............................................................................................................. ............................................................................................................ ............................................................................................................. Poli .::.::: ::...: ::::3:8'1:::::::3:06: Gy .... ............................................................ 2:34 :4:21: ::::4:8$:: ............................... 'I't:fl2 8:51:: ............................... ............................... ............................... : 't1::$l.:_::::: -2A6: ...................... :9:47.::::9:75 ": .. ��it: .: :::: G 0. �..:::: ......... ............ -i#:b5 b::t .......... .. ...... .... 1: > .......... ....................... :7 a:7 ....... ........................ : :a:07:] Returns in Up Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept .................................................................... Lsici: . .. ... .. ...... .. ...92 :: 9: :::::::::::: ..::/.4 .::.. .. 8. o11e....... .... ................................. .........11+f................�0 9.....:. ..........I.................. ............,............1..... ... . . ..................................... 7:D:::::::: :8::::.: ............................... b .:.: :.. 1 . Inception date is September 30, 1994 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Returns in Down Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept ..................................... .. 3:: .:. ............................... ... : .... . Piifi :::: py.. X3:7' : ... ............................... X3:3::: X3:3:::::::: ...... =::: <3:8: ...... Ratio : ......... :::88:'#::::::::.::98:$: ....... .. :: ::::9'1::9:::::::::::91:: ........$. Sawgrass assumed fixed- 10 -26-05 $1,043,932.60 - Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate n Palm Beach Gardens General Employees' Total Fixed Income Universe Comparisons High Quality Bond I railing Ketums through September 3U, ZUU6 Calendar Year Returns 1 Yr I 2 Yr I 3 Yr I 4 Yr 5 Yr I 6 Yr I 7 Yr I 8 Yr I 9 Yr 1 10 Yr ... .... .... ;:.::::.. ...., . .... find . _ . . . Return 4.52 3.20 2.82 3.25 3.98 5.56 5.15 4.25 5.17 5.50 % -tile 18 57 72 73 79 68 80 93 81 79 ............ ..... ....... ..... PS)11Cy .:....:....::.. . .... Return 3.67 3.11 3.19 4.01 5.03 6.34 6.40 5.36 6.17 6.50 % -tile 73 63 57 43 37 35 36 49 35 36 >.... ... .. .. 5th % -tile 5.28 5.32 5.73 7.30 7.45 8.13 8.10 6.77 7.28 7.85 25th % -tile 4.28 3.76 3.98 4.65 5.26 6.55 6.59 5.68 6.33 6.69 50th % -tile 3.93 3.30 3.33 3.83 4.70 6.03 6.13 5.34 5.94 6.26 75th % -tile 3.63 2.88 2.77 3.19 4.12 5.30 5.43 4.86 5.38 5.60 95th % -tile 2.66 2.38 2.26 2.50 3.18 4.18 4.47 4.09 4.57 4.73 Calendar Year Returns Returns are in percent. "% -tile" is the percentile ranking within the universe. ' Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to September 30, 2006 Sawgrass assumed fixed- 10 -26-05 $1,043,932.60 - Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate FA Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 i=il d .: : % ::.: :: :.:.:.::: : : s1 Return 3.34 3.01 2.65 3.16 2.83 9.23 9.24 6.50 -1.37 8.99 % -tile 50 77 17 61 77 28 10 92 73 13 . Ptificy Return 3.81 3.06 2.34 4.21 4.68 11.02 8.51 11.84 -2.15 9.47 % -tile 28 74 29 34 35 4 21 10 84 5 Untvers� ....:.... .. . 5th % -tile 4.67 4.60 3.37 6.19 11.51 10.87 9.85 12.37 4.61 9.45 25th % -tile 3.84 3.55 2.41 4.54 5.34 9.37 8.40 10.90 1.75 8.34 50th % -tile 3.34 3.28 2.00 3.69 4.04 7.98 7.81 9.56 -0.45 7.26 75th % -tile 2.70 3.04 1.57 2.13 2.90 5.51 7.00 7.70 -1.46 6.33 95th % -tile 1.60 2.28 1.09 0.98 1.63 1.50 4.93 5.78 -3.67 4.50 Returns are in percent. "% -tile" is the percentile ranking within the universe. ' Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to September 30, 2006 Sawgrass assumed fixed- 10 -26-05 $1,043,932.60 - Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate FA Palm Beach Gardens General Employees' Fixed Income & Cash - Sawgrass Executive Summary Account Reconciliation Trailing Returns through September 30, 2006 Investment Policy Calendar Year Returns 09/30/2006 2006 Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 1997 .... ............................................................................................................. end.. ............................................................................................................. 09/30/2006 2006 10/26/2005 3:_81: Qtr YTD Incept ..................................... fie.{�....... yam... \�.�s� ................ in ValtaQ :. ...................... ............................... ''.''}}..(f�...'}.. ......''}}..(r.��...............}�. . .: : :': : !714r !. .... ............................... !JY.� . ............... ......... ............................... let F lows :::::::::::: ..................................... ..................................... ..................................... ........ :; 120::::::::= ............................... ............................... ..........I.................... ....... 14t}::::::::: .......... ... 124 ..................................... ..................................... ...... tr......:GlL :: ::::::::4:::::: ............................... ............................... -:3: t :::::::::::::46 E6din' Value : ::::: 6fi ::::::::::9 ::::::::: 6 Trailing Returns through September 30, 2006 Investment Policy Calendar Year Returns 09/30/2006 2006 Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 1997 .... ............................................................................................................. end.. ............................................................................................................. _ .. ........................................................................................ 3, 34.. ...............................I ............................... 0. 1 ............................... .......................... ............................... ......... _. -- . . . . .. . ........... ............................... Policy. 3:_81: :.3.06 :..•: . . ::.:. 0.�.......b5 . .: .... .. . ..: ..... _ ..... _ ............. ................... ............................... .................. . Returns in Up Markets 10/26/2005 Incept . ... ... . .............. . .... Piilicy :::::::::: :::::::::::::::: : : `: ` :::::::::: Inception date is October 26, 2005 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Index change effective 1/1/2006 from LB Gov /Credit to LB Aggregate Returns in Down Markets 10/26/2005 Incept ...... _ ....................... fiud -0:3 .py ... ............. ..... .......... .............. ...... ....7: ... . ...... ....•. :Rabb .. .....:....:.::..........:.. :...:::...:.......::. :: :: : : ::::4A-;4:. Palm Beach Gardens General Employees' Fixed Income & Cash - Sawgrass Universe Comparisons High Quality Bond i idnrtly Mew1115 ttitvuyn OUPLUInuei Ou, e-uuu Calendar Year Returns 12 Qtrs 13 Qtrs I 1 Yr I 2 Yr 3 Yr I 4 Yr I 5 Yr I 6 Yr l 7 Yr l 8 Yr ............................................................................................................. ............................... ............................................................................................................. ............................... Fud ............... .......I....................... ........... ......... . ............................................................................................................. ............................... ............................................................................................................. ............................... Return 3.44 3.01 % -tile 59 77 ............................................................................................................. ............................... ............................................................................................................. ............................... PQ ICy. Return 3.72 3.06 % -tile 35 74 ............................................................................................................. ............................... ........................ .......................................... ............................... n' . s . tJ t ...... .:.:. ..:. :::..:::........:.:...:..:...:.:.:..:.:.:.:.:...:.:.:.....:....:..:.:.:.:.::.:..:....:.:.:.:.:.:.:.:.:.:.:.:.:.:.:... :..:.:..:.:.....:.:..:.::.::::: : : ...... .... ...... ........... ......... ............... ..... ....................... .... ....................... ............................................................................................................. ............................... 5th % -tile 4.51 4.60 5.28 5.32 5.73 7.30 7.45 8.13 8.10 6.77 25th % -tile 3.84 3.55 4.28 3.76 3.98 4.65 5.26 6.55 6.59 5.68 50th % -tile 3.56 3.28 3.93 3.30 3.33 3.83 4.70 6.03 6.13 5.34 75th % -tile 3.11 3.04 3.63 2.88 2.77 3.19 4.12 5.30 5.43 4.86 95th % -tile 2.53 2.28 2.66 2.38 2.26 2.50 3.18 4.18 4.47 4.09 Calendar Year Returns Returns are in percent. "% -tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is October 26, 2005 to September 30, 2006 Index change effective 1/1/2006 from LB Gov /Credit to LB Aggregate J Qtr YTD 1 2005 2004 2003 2002 2001 2000 1999 1998 Return 3.34 3.01 % -tile 50 77 .. .......... . ._ PoliGji ...... ....... . . Return 3.81 3.06 % -tile 28 74 .:.:.::::::::: ` :.::...........:::::::::::::: : :::::: :::::::::::::: :::::::::::::::::::::;:;:; :; tln verse ... ...... ............ . 5th % -tile 4.67 4.60 3.37 6.19 11.51 10.87 9.85 12.37 4.61 9.45 25th % -tile 3.84 3.55 2.41 4.54 5.34 9.37 8.40 10.90 1.75 8.34 50th % -tile 3.34 3.28 2.00 3.69 4.04 7.98 7.81 9.56 -0.45 7.26 75th % -tile 2.70 3.04 1.57 2.13 2.90 5.51 7.00 7.70 -1.46 6.33 95th % -tile 1.60 2.28 1.09 0.98 1.63 1.50 4.93 5.78 -3.67 4.50 Returns are in percent. "% -tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is October 26, 2005 to September 30, 2006 Index change effective 1/1/2006 from LB Gov /Credit to LB Aggregate J 1 Palm Beach Gardens General Employees' Total Equity q Y r Executive Summary Account Reconciliation 09/30/2006 2006 09/30/1994 Qtr YTD Incept ..................................... Be 8e$ci�r)?rf�. Value ... .....- .............I................. 1 J 1 .'....... 3Aw 622 Ot Flaws: . ..................................... ..................................... :::$1 ::::::::::: ............................... ............................... ............................... =269 ..................................... ..................................... invoi ti'n fG /L:::: ...........................I... ............................... :3:: :::: ::1:21:: :::::::'1:;5x5: ............. Eitdirig v�IU6 ::::::::::::::::::4 ;888:: :::1;8fr.8::::: 1:;868 I railing Keturns through September 3u, Zuub Investment Policy Index Weight 09/30/1994 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept ............................................................................................................ ....................... .. ....::::::':..72:::::1......:: ............................................................................................................ ............................................................................................................. ............................................................................................................ ................................................. :1:T::::::: >: g .. ..... ::......::...... ::::2......:::: ............................... 4:5:':...... .......................... ':':':':': ....I.......................... 5:04::::::7:97.::::::::9:96 ............................... ...............................11— ...2.89 ............. ................................................................... y 567: ....... .. .. 1...5 .'.....2 30. '.: '. 6 . ..... .................................... ,. f�.46 2.20 5.1ft ............................... ............................... 5:53 :8:59.` : :. 11.3,fi . ...... I..: ..... I ....... -'1f 7'''''' ..} 6 ....... . 4'''''. .;.:. -tl fi8.... ;.::Y .. 2.6.......Oa......... .. .. 1 : ............................... ;:36 ....: 36.::. .'. �Q:.. .....0, ".'.'t 2 . 2. ... :1 :.0 . Calendar Year Returns 09/30/2006 2006 Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 1997 ft td: ::: ` ............................................................................................................. ::::::: L: $:::::: :1:T::::::: 4 :5 :::.... ..... 22c83:: '.::0 ........ 2'f ...... .. .. .... b 29 ............ ............................... ......... ............................... 1.11;26 ...2.89 ......... Poti : cy 567: ....... .. .. 8:53 :::::::::4a�'t .. ............................. .. . 18.88:: .. ... .... :28:68: .......................................... ............................... -22:14 = 1:1:88::: := 9:1:1:::::21::04 ............................... _ ..... . ............................... .............. :'28:5 :36 ' iff #� ::: _ .. . 1....'.':' .'.'.'.'.'.'.'.'.' ..... ':':'- :..6::::.:::::; '.'..'.'.'.'.'.'.'...'.. ..:.... ...... ........... :.........:::::: '..'.'.' .... '.... 5 ......::.. .'... ;.'.'.'.'.'.'.'.'.'.'.'.'.' ...:::::::7:46....... .:.:.:.:.:.:.:.. :.:..'.:.:.:.:.:.'.'.'.'.'.'.'. I ....::::::......::= ............................. ..8...::.:::.:33 '.'........'..'.'.'.'.'.'.'.' :x..::19::::::: =4:. ;8:: Returns in Up Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept ... .iP . . .:.: . ...... . . . . ... ....:. :1:7 ..:.:.:.:.: :: . :3..:...:. :............ .... ; :: .. X:3.. : obey... ; : ....19 6 ..... X .................:.. . .. ... . ....: . .. . 30:6 : R " tin:::::. . ..... .'.'.'... .'..96.6.: '... ...... .. ... ............. Sb 2.:' 85 :2 Inception date is September 30, 1994 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Rockwood assumed account 10 -26-05 $ 1,565,898.88 10 Returns in Down Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept ................ Fu ►d .... '. .'.'.' ....5.7.... .'.'.'........ .. ................ ............. . ...... .'.'.'.'� .' . ...... ... 2 ....... I............. .. -22 #: >: >' .......................... '.'.'.'.4' . .'. '. ....X1.4. Poficy. : .:... . .`... ''' :.............. X26:3:..:::. `.:> ? .7: :R '. a5.. 106.5 931E _ > . . :. >:':':: Palm Beach Gardens General Employees' Total Equity Universe Comparisons Pure Large Cap Core Trailing Keturns tnrougn 5eptemder su, zuun Calendar Year Returns 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr F n: ... Return 9.72 10.88 11.67 12.52 6.20 2.39 4.56 6.46 5.04 7.97 % -tile 60 63 61 78 62 20 16 17 52 54 Pp.ICY. ... ..... Return 10.79 11.52 12.30 15.21 6.97 0.46 2.20 5.10 5.53 8.59 % -tile 24 39 37 30 35 39 42 37 28 26 :' :::::::::::: : :::::::::::::::: :::::::::::::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::: I .......................... ............................... 5th % -tile 13.68 14.67 15.38 17.36 9.96 6.99 6.87 8.39 7.22 10.28 25th % -tile 10.74 12.22 13.00 15.42 7.46 1.23 3.25 5.86 5.63 8.60 50th % -tile 10.26 11.27 12.01 14.82 6.67 0.22 1.95 4.78 5.08 8.08 75th % -tile 7.24 9.63 10.25 13.07 5.30 -2.79 0.78 3.77 4.08 6.82 95th % -tile 0.56 5.70 5.83 8.69 1.93 -7.95 -2.28 1.02 2.30 4.37 Calendar Year Returns Retums are In percent. "% -tile" is the percentile ranking within the universe ' Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to September 30, 2006 Rockwood assumed account 10 -26-05 $ 1,565,898.88 11 Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 ...... . ... . ... . .... .. ,>,a::.:: .. Return 4.24 7.17 4.52 11.44 22.83 -21.03 -4.42 5.29 14.26 12.39 % -tile 71 59 67 26 87 34 9 12 81 97 ........ :: .. Pofliy. . . .... ...... ..... .. .. .. .. .. .. . .. ..... ....: . .. Return 5.67 8.53 4.91 10.88 28.68 -22.10 -11.88 -9.11 21.04 28.58 % -tile 20 21 55 34 29 46 48 60 38 24 Universe . ......... . ... 5th % -tile 6.53 11.78 11.33 15.14 33.34 -15.55 -1.49 13.61 35.03 34.74 25th % -tile 5.61 8.43 7.20 11.51 28.99 -20.13 -9.35 -0.20 22.80 28.47 50th % -tile 5.29 7.95 5.09 10.39 27.83 -22.23 -12.08 -7.39 20.27 25.44 75th % -tile 3.77 4.49 4.22 8.38 24.97 -23.39 -13.51 -9.63 16.39 18.85 95th % -tile 0.04 -4.23 1.07 5.14 20.58 -26.60 -19.10 -14.67 6.13 13.04 Retums are In percent. "% -tile" is the percentile ranking within the universe ' Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to September 30, 2006 Rockwood assumed account 10 -26-05 $ 1,565,898.88 11 Palm Beach Gardens General Employees' Equity & Cash - Rockwood Executive Summary Account Reconciliation 09/30/2006 2006 10/26/2005 Qtr YTD Incept ...........I ............... ............................... 8e........ Value `:: .................. ;::: # 1 >: > _ ..................... :::: # fi39 ....1;5s6: ..... lgws:. :: .:.... .:. .:.5A :.:.:::::.:.:.:::75.: ..... ...................... fi#�iestiYieii : G .. .::.:.:.::::.::: :::::.:.....::::::.::'i 1::::::: 2 ;: Endit�4#:llalue ... X868 .:.:: f:;a�58:: Trailing Returns through September;3U, luub Investment Policy Index Weight 10/26/2005 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept ..... uiid .... ... . . . ... Calendar Year Returns ..... .......... .................. . ..... ....................... .. .. . . 1:2.37 .. 1:99. 09/30/2006 2006 Qtr YTD 2005 2004 2003 2002 2001 2000 1999 1998 1997 .. ...... Find ; : .. a. 24 : ............ ........ .. .. . . .. ... 7.17 ' :.:: .Policy 567.....: . .. ... . .... ; ': . ... .: > tiiif< ..... ...................... ,.. ..... 136 Returns in Up Markets 10/26/2005 Incept ..................................... Irs;a ::::. .. ..:. >.: ............................... Policy. 1.4.0 Ratui... 11 7:5 Inception date is October 26, 2005 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. 12 Returns in Down Markets 10/26/2005 Incept ...................................... >: ..................I............ .... . ,P4ifi�y ... .... . ratio. Palm Beach Gardens General Employees' Equity & Cash - Rockwood Universe Comparisons Pure Large Cap Core Trailing Returns through September 30, 2006 Calendar Year Returns 2 Qtrs 3 Qtrs 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr ....... ............................... ................................................................ I ....... I............. ...... . ............................................................................................................. ............................... Un:,. . Return 2.36 7.17 % -tile 62 59 QICy.. ....................... .. Return 4.14 8.53 % -tile 20 21 ... ............................... . . ............................... ............ ............ ....... ............................... n.... s ............... i� _.. . ............................................................................................................. ............................... ............................................................................................................. ............................... 5th % -tile 6.08 11.78 13.68 14.67 15.38 17.36 9.96 6.99 6.87 8.39 25th % -tile 4.06 8.43 10.74 12.22 13.00 15.42 7.46 1.23 3.25 5.86 50th % -tile 3.67 7.95 10.26 11.27 12.01 14.82 6.67 0.22 1.95 4.78 75th % -tile 0.65 4.49 7.24 9.63 10.25 13.07 5.30 -2.79 0.78 3.77 95th % -tile -6.24 -4.23 0.56 5.70 5.83 8.69 1.93 -7.95 -2.28 1.02 Calendar Year Returns Returns are in percent. "% -tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is October 26, 2005 to September 30, 2006 13 Qtr YTD I 2005 2004 2003 [ 2002 2001 I 2000 l 1999 1998 :: ...................... ` :::: >:: ` :: >:: :::: Return 4.24 7.17 % -tile 71 59 :Policy .. Return 5.67 8.53 % -tile 20 21 Uhlver : >..: 5th % -tile 6.53 11.78 11.33 15.14 33.34 -15.55 -1.49 13.61 35.03 34.74 25th % -tile 5.61 8.43 7.20 11.51 28.99 -20.13 -9.35 -0.20 22.80 28.47 50th % -tile 5.29 7.95 5.09 10.39 27.83 -22.23 -12.08 -7.39 20.27 25.44 75th % -tile 3.77 4.49 4.22 8.38 24.97 -23.39 -13.51 -9.63 16.39 18.85 95th % -tile 0.04 -4.23 1.07 5.14 20.58 -26.60 -19.10 -14.67 6.13 13.04 Returns are in percent. "% -tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is October 26, 2005 to September 30, 2006 13 Palm Beach Gardens General Employees' General Employees Pension Plan 25.00% Up Market Returns 20.00% ----------------------------------- 15.00% ------ - - - - -- -- - -- 10.00% - -- -- - -- - 5.00% - -- -- - -- - 0 00°/ ° 3 Yr 5 Yr 10 Yr Incept Fund ( %) 12.61 13.67 16.91 16.67 Policy ( %) 13.06 15.73 19.20 19.05 Difference ( %) -0.45 -2.06 -2.29 -2.38 Ratio 96.55 86.90 88.07 87.51 # Up Qtrs 9.00 14.00 28.00 36.00 Down Market Returns 0.00% - 5.00% - - - -- -- -- - -- - - 10.00% - - - - -- -- - 15.00% 3 Yr 5 Yr 10 Yr Incept Fund ( %) -2.49 -11.26 -12.27 -12.27 Policy ( %) -2.66 -12.35 -13.94 -13.94 Difference ( %) 0.17 1.09 1.67 1.67 Ratio 93.61 91.17 88.02 88.02 # Down Qtrs 3.00 6.00 12.00 12.00 ❑ Fund ( %) 0 Policy ( %) Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 14 Palm Beach Gardens General Employees' General Employees Pension Plan ' Objective Comparison v a ' u e JV 1 UV I IVIVG JVG JVL VVL [VIVO JVJ JVJ VVJ IVIVY JVY JVY VVY InVV JVV VVV vvv YVV vvv vvv Quarter Ending ❑ Fund X Policy Q Nominal 8% ❑ CPI + 4% ' Inception date is September 30, 1994 All dollar values are shown in thousands. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 15 Palm Beach Gardens General Employees' General Employees Pension Plan Attributions of Returns Report Explanation Performance attribution concentrates on evaluating the effect of the manager's decisions on asset allocation and security selection. This allows the investor to see whether the manager is adding value by adjusting the actual asset allocation or by picking individual securities. This information is valuable in helping determine the amount of freedom that might be given to the manager in regard to asset allocation ranges. The result of these skills are shown for multiple time periods. The top section shows the returns for both the account and the investment policy and the results of the manager's contribution. The fund's return is thus attributed to the policy and the manager. The bottom section divides the manager's contribution into two components: asset allocation and security selection. The asset allocation effect measures the value that was added by varying the actual asset allocation from the target allocation. This is done by assuming investments, in amounts equal to the actual asset allocation weights, were made in the policy's indices so that security selection has no effect. The difference between this return and the policy's return is the asset allocation effect. The security selection is the remainder of the manager's contribution that is not explained by asset allocation. 16 Palm Beach Gardens General Employees' General Employees Pension Plan Attribution of Returns Attribution of Performance to show Manager Contribution Policy + Manager Contribution = Fund Attribution of Manager Contribution between Asset Allocation and Security Selection Policy ................... ... .... ... .... ... _. ............................... ............................... ............................... ............................... ............................... Mah6d6i r:0 aritribi',ti6i h:: Fund Current Quarter 4.92 = 11;97:: 3.95 Year to Date 6.34 : ... ........... :::::::::- 4;�4:: :` :::::..:.: 5.60 3 Years 8.67 X0:27 : ::::::::::::: 8.40 5 Years 6.47 ... .... ... .... ... : =0:9 ............................... ............................... ............................... ............................... ............................... 5.53 10 Years 8.10 :: -0:8 > ::: .. .... ... 7.26 Incept 9.78 :: = 1::1:4:: 8.64 Policy + Manager Contribution = Fund Attribution of Manager Contribution between Asset Allocation and Security Selection Asset Allocation + Security Selection = Manager Contribution Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 17 Asset Allocation Security Selection 1vltageE Caritrifri: Current Quarter -2.29 1.32 :9 Year to Date -2.80 2.06 :` :::::..:.: ...... :: ;T4 3 Years -3.66 3.39 ::::::::::::: >::: <: r0;27 5 Years -2.95 2.01 10 Years -3.58 2.74 > ::: .. .... ... <0:$4 .... _....... _ ............. .................... _ ......... ............................... ............................... Incept -4.35 3.21 : =1:`i 4 Asset Allocation + Security Selection = Manager Contribution Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 17 1 Palm Beach Gardens General Employees' General Employees Pension Plan ' Asset Allocation Effect ' 5.00% ' 4.00% ' p 3.00% e r 2.00% c e 1.00% n t 0.00% E -1.00% f f - 2.00% ' e c - 3.00% t ' -4.00% -500% D01 M02 J02 S02 D02 M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 SI Quarter Ending Security Selection Effect t5.00 ° ' D01 M02 J02 S02 D02 M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 SI Quarter Ending ' Quarterly Effect Cumulative Effect Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1 18 /o ' 4.00% p 3.00% e ' r 2.00% c e 1.00% n ' t 0.00% E - 1.00% f f - 2.00% e c - 3.00% t - 4.00% -500% ' D01 M02 J02 S02 D02 M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 SI Quarter Ending ' Quarterly Effect Cumulative Effect Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1 18 Palm Beach Gardens General Employees' General Employees Pension Plan Asset Allocation vs Targets 80.00% 70.00% --------------------------------------------- 60.00°/ ------------------------------------------- 50.00°/ --------------------------------------------- 40.00°/ ------------------------------------------- 30.00°/ ------------------------------------------- 20.00°/ ------------------------------------------ 10.00°/ --------------------------------------------- 0.00% --, - .. --+- ..,. . 80 70 60 50 40 30. 20, 10, 0. Quarter Ending Cash & Equiv Target UUl MUZ JUZ SUZ UUZ MU3 JU3 5U3 LM MU4 JU4 5U4 UU4 MU5 JU9 SU5 UU5 M06 J06 506 Quarter Ending Equity Target 80. 70. 60. 50. 40. 30. 20. 10. 0 D01 M02 J02 S02 D02 M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 Quarter Ending ❑ Fixed Income -X- Target Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 19 1 4.00% 3.00% ' 2.00°/ 0 ' R 1.00% e t ' u 0.00% r n - 1.00% - 2.00% -3.00% i $ $ V a $ 1 ' u e $ 1 Palm Beach Gardens General Employees' General Employees Pension Plan Manager Contribution ------------------- -- ---- - - - - -- -- ------- - - - - -- _ ----------------------------- - --------------- - - - - -- ------------------- --- ------------------------------------ ----------------- - - - - - -- --------------------- - - - - -- ------------------------------------------------------------------------------------------ --------------------------- - - - - -- ----------------- 11 )1 M02 J02 S02 D02 M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S Quarter Ending Quarterly - - Cumulative Growth of $100 Fund VS Policy OUl UUl MUZ JUZ SUZ UVZ MU3 JV3 0U6 UU3 MU4 JV4 JU4 UV4 MUD JUD JVD UUO MUO JUO AVO Quarter Ending ❑ Fund -�. Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 20 Palm Beach Gardens General Employees' General Employees Pension Plan Quarterly Comparison Analysis ($) Period Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Ending Sep 1994 1,079 1,079 0 1,079 0 1,079 0 Dec 1994 1,059 1,078 -20 1,098 -39 1,090 -31 Mar 1995 1,211 1,240 -29 1,194 17 1,188 23 Jun 1995 1,369 1,421 -51 1,294 75 _ 1,286 84 Sep 1995 1,432 1,495 -63 1,316 116 1,301 131 Dec 1995 1,533 1,600 -67 1,365 168 1,338 195 Mar 1996 1,634 1,697 -62 1,452 182 1,431 203 Jun 1996 1,688 1,752 -64 1,486 202 1,461 227 Sep 1996 1,728 1,800 -72 1,518 210 1,488 240 Dec 1996 1,820 1,916 -96 1,551 270 1,514 306 Mar 1997 1,927 2,045 -118 1,685 242 1,647 280 Jun 1997 2,141 2,284 -144 1,717 424 1,664 477 Sep 1997 2,328 2,423 -94 1,752 576 1,691 637 Dec 1997 2,375 2,530 -155 1,820 556 1,741 635 Mar 1998 2,568 2,756 -188 1,856 712 1,769 799 Jun 1998 2,550 2,842 -291 1,893 657 1,797 753 Sep 1998 2,385 2,730 -345 1,928 456 1,818 566 Dec 1998 2,679 3,106 427 2,001 678 1,874 805 Mar 1999 2,642 3,168 -526 2,025 617 1,888 753 Jun 1999 2,790 3,256 466 2,033 757 1,890 900 Sep 1999 2,647 3,131 -484 2,063 584 1,917 730 Dec 1999 2,821 3,391 -570 2,095 726 1,934 887 Mar 2000 2,907 3,490 -583 2,149 758 1,999 907 Jun 2000 2,843 3,432 -589 2,167 675 2,010 833 Sep 2000 2,926 _ 3,436 -510 _ 2,192 734 2,027 899 Dec 2000 2,945 3,324 -380 2,225 719 2,042 903 Mar 2001 2,846 3,104 -258 2,243 603 2,061 785 Jun 2001_ 2,927 3,183 -256 2,251 676 2,068 859 Sep 2001 2,675 2,893 -218 2,229 446 2,028 648 Dec 2001 2,827 3,062 -234 2,256 571 2,013 814 Mar 2002 2,824 3,046 -222 2,283 541 2,040 783 Jun 2002 2,621 2,805 -184 2,290 331 2,038 583 Sep 2002 2,397 2,540 _ -144 2,305 92 _ 2,041 356 Dec 2002 2,434 2,655 -221 2,313 121 2,024 410 Mar 2003 2,385 2,609 -224 2,345 41 2,068 318 Jun 2003 2,534 2,852 -317 2,358 176 2,050 484 Sep 2003 2,5331 2,861 -329 2,373 160 2,056 477 All dollar values are shown in thousands. Index change effective 1/1106 from LB Gov /Credit to LB Aggregate 21 ' Palm Beach Gardens General Employees' General Employees Pension Plan Quarterly Comparison Analysis ($) Period Ending Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Dec 2003 2,680 3,036 -356 2,388 292 2,035 645 Mar 2004 2,741 3,094 -352 2,424 317 2,077 664 Jun 2004 2,717 3,068 -351 2,453 263 2,105 611 Sep 2004 2,674 3,045 -371 2,469 205 2,096 578 Dec 2004 2,805 3,188 -383 2,483 321 2,088 717 Mar 2005 2,745 3,112 -367 2,504 240 2,115 630 Jun 2005 2,717 3,117 400 2,490 228 2,087 630 Sep 2005 2,740 3,148 408 2,513 227 2,129 611 Dec 2005 2,779 3,177 -398 2,541 238 2,109 671 Mar 2006 2,812 3,206 -394 2,549 264 2,121 691 Jun 2006 2,7651 3,162 -3961 2,581 1 184 2,1591 606 Sep 2006 2,8341 3,276 442 2,591 1 242 2,141 692 1 All dollar values are shown in thousands. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 22 ' Palm Beach Gardens General Employees' General Employees Pension Plan Quarterly Comparison Analysis ( %) Period Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Ending Dec 1994 -1.67 0.16 -1.83 1.94 -3.61 1.22 -2.89 Mar 1995 7.15 7.82 -0.67 1.94 5.21 2.12 5.03 Jun 1995 6.68 8.32 -1.64 1.941 4.74 1.71 4.97 Sep 1995 4.85 5.52 -0.67 1.94 2.91 1.45 3.40 Dec 1995 5.46 5.49 -0.03 1.94 3.52 1.08 4.38 Mar 1996 2.64 2.24 0.40 1.94 0.70 2.39 0.25 Jun 1996 2.91 2.88 0.03 1.94 0.97 1.69 1.22 Sep 1996 2.22 2.61 -0.39 1.94 0.28 1.69 0.53 Dec 1996 5.12 6.23 -1.11 1.94 3.18 1.49 3.63 Mar 1997 0.17 1.30 -1.13 1.94 -1.77 1.89 -1.72 Jun 1997 11.16 11.79 -0.63 1.94 9.22 1.09 10.07 Sep 1997 8.66 5.95 2.71 1.94 6.72 1.49 7.17 Dec 1997 0.59 3.06 -2.47 1.94 -1.35 0.99 -0.40 Mar 1998 8.07 8.90 -0.83 1.94 6.13 1.59 6.48 Jun 1998 -0.75 3.05 -3.80 1.94 -2.69 1.49 -2.24 Sep 1998 -6.44 -3.89 -2.55 1.94 -8.38 1.29 -7.73 Dec 1998 10.89 12.51 -1.62 1.94 8.95 1.09 9.80 Mar 1999 -0.83 2.50 -3.33 1.94 -2.77 1.59 -2.42 Jun 1999 6.80 3.77 3.03 1.94 4.86 1.69 5.11 Sep 1999 -4.78 -3.56 -1.22 1.94 -6.72 1.99 -6.77 Dec 1999 6.89 8.60 -1.71 1.94 4.95 1.29 5.60 Mar 2000 2.62 2.57 0.05 1.94 0.68 2.69 -0.07 Jun 2000 -1.42 -1.02 -0.40 1.94 -3.36 1.69 -3.11 Sep 2000 3.54 0.63 2.91 1.94 1.60 1.69 1.85 Dec 2000 0.95 -3.01 3.96 1.94 -0.99 1.19 -0.24 Mar 2001 -2.54 -5.93 3.39 1.94 -4.48 2.19 -4.73 Jun 2001 4.11 3.69 0.42 1.94 2.17 2.09 2.02 Sep 2001 1 -6.53 -7.20 0.67 1.94 -8.47 1.18 -7.71 Dec 2001 6.32 6.41 -0.09 1.94 4.38 0.09 6.23 Mar 2002 0.47 0.03 0.44 1.94 -1.47 2.19 -1.72 Jun 2002 -5.93 -6.75 0.82 1.94 -7.87 1.69 -7.62 Sep 2002 -7.51 -8.45 0.94 1.94 -9.45 1.59 -9.10 Dec 2002 3.08 5.95 -2.87 1.94 1.14 0.98 2.10 Mar 2003 -1.47 -1.24 -0.23 1.94 -3.41 2.80 -4.27 Jun 2003 7.62 10.56 -2.94 1.94 5.68 0.69 6.93 Sep 2003 1.161 1.44 -0.28 1.94 -0.781 1.79 -0.63 Dec 2003 7.081 7.21 -0.13 1.941 5.141 0.491 6.59 IReturns for periods exceeding one year are annualized. Index change effective 1/1106 from LB Gov /Credit to LB Aggregate 23 Palm Beach Gardens General Employees' General Employees Pension Plan Quarterly Comparison Analysis ( %) Period Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Ending Mar 2004 2.67 2.25 0.42 1.94 0.73 2.59 0.08 Jun 2004 -0.24 -0.25 0.01 1.94 -2.18 2.19 -2.43 Sep 2004 -0.38 0.30 -0.68 1.94 -2.32 1.08 -1.46 Dec 2004 6.17 5.82 0.35 1.94 4.23 1.18 4.99 Mar 2005 -1.19 -1.54 0.35 1.94 -3.13 2.59 -3.78 Jun 2005 1.32 2.21 -0.89 1.94 -0.62 1.69 -0.37 Sep 2005 1.75 1.79 -0.04 1.94 -0.19 3.20 -1.45 Dec 2005 2.07 1.50 0.57 1.94 0.13 -0.01 2.08 Mar 2006 2.71 2.25 0.46 1.94 0.77 2.59 0.12 Jun 2006 -1.09 -0.89 -0.20 1.94 -3.03 2.59 -3.68 Sep 2006 3.95 4.92 -0.97 1.94 2.01 0.98 2.97 Incept. 8.64 9.78 -1.14 8.00 0.64 _ 6.57 2.07 IReturns for periods exceeding one year are annualized. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 24 Palm Beach Gardens General Employees' General Employees Pension Plan Risk Measures Report Explanation The evaluation of a fund's performance should extend beyond return to encompass measures of risk. The next two pages are used to determine the level of risk to which the fund has been exposed, and whether the return has been commensurate with the risk taken. All measures are calculated for both the fund and the policy as well as the difference between the two. Up to four time periods are evaluated depending on the age of the fund. # Of Negative Qtrs /# Of Positive Qtrs: Number of negative quarters shows the number of quarters in which the return was less than zero, and the number of positive quarters is the number of quarterly returns which were greater or equal to zero. Batting Average: The batting average is a measure of consistency. It shows the percent of the quarters the fund has beaten the policy and the percent of the quarters the policy has beat the fund. A high average for the fund (e.g. over 50) is desirable, indicating the fund has beaten the policy frequently. Worst Quarter /Best Quarter /Range: The worst quarter is the lowest quarterly return experienced during the period, a measure of downside risk. The best quarter is the highest quarterly return, and the range is the difference of the high and low, and indicates dispersion. Standard Deviation: Standard deviation measures the total volatility of the fund, by measuring dispersion. Higher standard deviation indicates higher risk. If the quarterly or monthly returns are all the same the standard deviation will be zero. The more they vary from one another, the higher the standard deviation. Thus, it measures uncertainty, which is a measure of risk. Alpha/Beta/R- Squared: If the policy is appropriate, then the alpha should be positive, the beta close to one, and the r- squared should be high. Beta measures risk relative to the policy. A beta of 1 suggests risk equivalent to the policy. Higher betas indicate higher relative risk. A beta of 1.2 indicates 20% more risk than the policy. The alpha measures the return adjusting for beta. The higher the alpha, the better. R- squared measures the relationship between the policy and the fund. A high r- squared means the returns of the fund can largely be explained by movements of the policy. The higher the r- squared, the more reliable the alpha and the beta. R- squared may range from 0 to 100. Beta, alpha and r- squared are derived from regression analysis using the fund and policy returns as the dependent and independent variables respectively. Roughly, one would expect the fund's performance to equal the return of the policy multiplied by 1 the beta plus the alpha. Sharpe Ratio/Treynor Ratio: The Sharpe and Treynor ratios are similar. The Sharpe ratio is the excess return per unit of total risk as measured by standard deviation. The Treynor ratio is the excess return per unit of market risk as 1 measured by beta. Both of these should be compared against the corresponding value for the policy. Higher numbers are better, indicating more return for the level of risk that was experienced. 25 Palm Beach Gardens General Employees' General Employees Pension Plan Risk Measures Yr............ ............................... .................. ur.........P ... �' ...... ........... . # of Negative Qtrs 4.00 3.00 1.00 # of Positive Qtrs 8.00 9.00 -1.00 Batting Average 50.00 50.00 0.00 Worst Qtr -1.19 -1.54 0.35 Best Qtr 7.08 7.21 -0.13 Range 8.27 8.75 -0.48 Worst 4 Qtrs 3.98 3.97 0.01 Standard Deviation 5.42 4.80 0.62 Beta 1.07 1.00 0.07 Annualized Alpha -0.62 0.00 -0.62 R- Squared 0.90 1.00 -0.10 Sharpe Ratio 1.06 1.25 -0.19 Treynor Ratio 5.37 6.02 -0.65 Tracking Error 1.77 0.00 1.77 Information Ratio -0.15 ............................ 10'lr ..uric ........................ Po)ic :: ............ 13if # of Negative Qtrs 14.00 12.00 2.00 # of Positive Qtrs 26.00 28.00 -2.00 Batting Average 42.50 57.50 -15.00 Worst Qtr -7.51 -8.45 0.94 Best Qtr 11.16 12.51 -1.35 Range 18.67 20.96 -2.29 Worst 4 Qtrs -11.63 -12.21 0.58 Standard Deviation 8.23 9.32 -1.09 Beta 0.81 1.00 -0.19 Annualized Alpha -0.01 0.00 -0.01 R- Squared 0.85 1.00 -0.15 Sharpe Ratio 0.43 0.47 -0.04 Treynor Ratio 4.42 4.42 0.00 Tracking Error 3.65 0.00 3.65 information Ratio -0.23 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 26 ............................. :.:::..:.:.:.:...:.........:::: ............. ......................... : Pol t ......... # of Negative Qtrs 7.00 6.00 1.00 # of Positive Qtrs 13.00 14.00 -1.00 Batting Average 45.00 55.00 -10.00 Worst Qtr -7.51 -8.45 0.94 Best Qtr 7.62 10.56 -2.94 Range 15.13 19.01 -3.88 Worst 4 Qtrs -11.63 -10.68 -0.95 Standard Deviation 6.36 7.29 -0.93 Beta 0.82 1.00 -0.18 Annualized Alpha -0.15 0.00 -0.15 R- Squared 0.88 1.00 -0.12 Sharpe Ratio 0.52 0.58 -0.06 Treynor Ratio 4.04 4.25 -0.21 Tracking Error 2.60 0.00 2.60 Information Ratio -0.36 ......... ............................... frti e t : :. : : :: :: Fsnd ......................... : Pol t Off: # of Negative Qtrs 15.00 12.00 3.00 # of Positive Qtrs 33.00 36.00 -3.00 Batting Average 39.58 60.42 -20.84 Worst Qtr -7.51 -8.45 0.94 Best Qtr 11.16 12.51 -1.35 Range 18.67 20.96 -2.29 Worst 4 Qtrs -11.63 -12.21 0.58 Standard Deviation 7.87 8.86 -0.99 Beta 0.80 1.00 -0.20 Annualized Alpha 0.01 0.00 0.01 R- Squared 0.83 1.00 -0.17 Sharpe Ratio 0.59 0.65 -0.06 Treynor Ratio 5.83 5.80 0.03 Tracking Error 3.69 0.00 3.69 Information Ratio -0.31 1 ' 13.00% 12.00% 11.00% 10.00% A n ' u 9.00% a i ' z 8.00% e ' d R e 7.00% ' t u r n 6.00% i 5.00% 4.00% 3.00% Palm Beach Gardens General Employees' General Employees Pension Plan Return vs Risk through September 30, 2006 ' �.00% i t S &P 500 Fun i LB Gov /Corp 3 Mo TBill 5.00% 10.00% Risk (Annualized Std Dev) Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 27 15.00% 20.00% 20.00% 15.00% R t 10.00% u r n s 5.00% 0.00% 1.00% 3.00% 5.00% 7.00% 9.00% 0.00% 2.00% 4.00% 6.00% 8.00% Risk (Annualized Std Dev) Palm Beach Gardens General Employees' General Employees Pension Plan Return vs Risk through September 30, 2006 3 Years 10 Years 10.00% I 9.00% S &P 500 8.00% R 7.00% fund e t' t 6.00% LB Go4Corp r n s 5.00% I 4.00% 3 Mo TBill 3.00% r I I I I I -i 5.00% 15.00% 25.00% 0.00% 10.00% 20.00% Risk (Annualized Std Dev) Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 28 8.00% 7.00% 6.00% R e t 5.00% u r n s 4.00% 3.00% 2 5 Years S &P 500 Fund LB �ov/Corp i .00% 10.00% 15.00% 20.00% Risk (Annualized Std Dev) Inception 13.00% 12.00% 11.00% S &P 500 10.00% R 9.00% e t 8.00% liund u 0 i n 7 0 LB Gov /(borp s 6.00% 5.00% 4.00% 3 Mo Mill 3.009/6 5.00% 10.00% 15.00% 20.00% Risk (Annualized Std Dev) Palm Beach Gardens General Employees' General Employees Pension Plan Policy First Objective: Second Objective: Universe Data: 09/30/1994-12/31/2005 01/0 1 /2006- 09/30/2006 09/30/1994-09/30/2006 09/30/1994-09/30/2006 60.00 S &P 500 40.00 Lehman Gov /Credit Bond 60.00 S &P 500 40.00 Lehman Aggregate Bond Annual Return of 8.00% 100.00 US Consumer Price Index + 4.00 annual adder 60% Pure Lg Cap Core & 40% High Quality Bond 09/30/1994- 09/30/2006 40.00 High Quality Bond 60.00 Pure Large Cap Core 29 Bogdahn Consulting, LLC. CONTRIBUTIONS /WITHDRAWALS Palm Beach Garden General Employees' Combined Account From 07 -01 -06 To 09 -30 -06 Tran Trade Settle Code Date Date Security Amount CONTRIBUTIONS ti 07 -03 -06 07 -03 -06 Cash 11,259.11 Transfer in ti 07 -03 -06 07 -03 -06 Cash 7,506.07 Transfer in ti 07 -05 -06 07 -05 -06 Cash 264.35 Transfer for invoice payments ti 07 -05 -06 07 -05 -06 Cash 176.24 Transfer for invoice payment ti 07 -06 -06 07 -06 -06 Cash 1,200.00 Transfer to cover invoice payment ti 07 -06 -06 07 -06 -06 Cash 800.00 Transfer to cover invoice payment G 07 -14 -06 07 -14 -06 Cash 642.67 EE ti 07 -14 -06 07 -14 -06 Cash 321.33 Transfer for investment ti 07 -14 -06 07 -14 -06 Cash 321.34 Transfer for investment li 07 -28 -06 07 -28 -06 Cash 607.93 EE li 08 -01 -06 08 -01 -06 Cash 10,894.35 li 08 -01 -06 08 -01 -06 Cash 7,262.90 Transfer from investment accounts to cover benefit payments li 08 -04 -06 08 -04 -06 Cash 1,373.86 li 08 -04 -06 08 -04 -06 Cash 915.90 Transfer from investment accounts to cover invoice payments li 08 -11 -06 08 -11 -06 Cash 563.54 EE li 08 -11 -06 08 -11 -06 Cash 338.12 Transfer for investment li 08 -11 -06 08 -11 -06 Cash 225.42 Transfer for investment of contribution li 08 -25 -06 08 -25 -06 Cash 578.06 EE G 09 -01 -06 09 -01 -06 Cash 10,905.07 Transfer in to cover benefit payments li 09 -01 -06 09 -01 -06 Cash 7,270.05 Transfer in to cover benefit payments li 09 -08 -06 09 -08 -06 Cash 582.48 EE li 09 -11 -06 09 -11 -06 Cash 104,330.00 Transfer from Sawgrass accuont to rebalance li 09 -11 -06 09 -11 -06 Cash 349.82 Transfer from R &D account li 09 -11 -06 09 -11 -06 Cash 233.22 Transfer from R &D account G 09 -22 -06 09 -22 -06 Cash 599.23 EE li 09 -25 -06 09 -25 -06 Cash 19,848.00 ER li 09 -25 -06 09 -25 -06 Cash 359.54 Transfer from R &D account Broker Quantity Code Commission Bogdahn Consulting, LLC. CONTRIBUTIONS /WITHDRAWALS Palm Beach Garden General Employees' Combined Account From 07 -01 -06 To 09 -30 -06 Tran Trade Settle Code Date Date Security Amount Quantity li 09 -25 -06 09 -25 -06 Cash 239.69 Transfer from R &D account li 09 -26 -06 09 -26 -06 Cash 11,908.80 Transfer from R &D account li 09 -26 -06 09 -26 -06 Cash 7,939.20 Transfer from R &D account 209,816.29 WITHDRAWALS 10 07 -03 -06 07 -03 -06 Cash 16,971.88 Benefit Payments to 07 -03 -06 07 -03 -06 Cash 1,793.30 Federal w/h tax on benefit payments to 07 -03 -06 07 -03 -06 Cash 11,259.11 Transfer to R/D account to 07 -03 -06 07 -03 -06 Cash 7,506.07 Transfer to R/D account to 07 -054)6 07 -05 -06 Cash 1,088.38 Christiansen & Delmer to 07 -05 -06 07 -05 -06 Cash 26435 Transfer to R/D account to 07 -05 -06 07 -05 -06 Cash 176.24 Transfer to R/D account to 07 -06 -06 07 -06 -06 Cash 2,000.00 Bogdahn Consulting to 07 -06 -06 07 -06 -06 Cash 1,200.00 Transfer to R/D account to 07 -06 -06 07 -06 -06 Cash 800.00 Transfer to R/D account to 07 -12 -06 07 -12 -06 Cash 467.10 Salem Trust Fee to 07 -12 -06 07 -12 -06 Cash 282.90 Salem Trust Fee to 07 -14 -06 07 -14 -06 Cash 321.33 Transfer to Rockwood to 07 -14 -06 07 -14 -06 Cash 321.34 Transfer to Sawgrass to 08 -01 -06 08 -01 -06 Cash 16,971.88 Benefit payments 10 08 -01 -06 08 -01 -06 Cash 1,793.30 W/H tax on benefit payments 10 08 -01 -06 08 -01 -06 Cash 25.91 Foreign tax on Canadial Pacific Railway dividend 10 08 -01 -06 08 -01 -06 Cash 10,894.35 Transfer to R &D account to 08 -01 -06 08 -01 -06 Cash 7,262.90 Transfer to R &D account to 08 -04 -06 08 -04 -06 Cash 2,290.00 Gibson & Wirt for Fiduciary Liability insurance renewal of policy to 08 -04 -06 08 -04 -06 Cash 1,373.86 Transfer to R &D account to 08 -04 -06 08 -04 -06 Cash 915.90 Transfer to R &D account 2 Broker Code Commission J Bogdahn Consulting, LLC. CONTRIBUTIONS /WITHDRAWALS Palm Beach Garden General Employees' Combined Account From 07 -01 -06 To 09 -30 -06 Tran Trade Settle Code Date Date Security Amount Quantity to 08 -11 -06 08 -11 -06 Cash 338.12 to 08 -11 -06 08 -11 -06 Cash 225.42 Transfer to investment accounts for investment of contributions to 09 -01 -06 09 -01 -06 Cash 16,971.88 Benefit payments to 09 -01 -06 09 -01 -06 Cash 1,793.30 W/H tax on benefit payments to 09 -01 -06 09 -01 -06 Cash 10,905.07 Transfer to R &D account to 09 -01 -06 09 -01 -06 Cash 7,270.05 Transfer to R &D account to 09 -11 -06 09 -11 -06 Cash 349.82 Transfer to equity account to 09 -11 -06 09 -11 -06 Cash 233.22 Transfer to fixed income account to 09 -11 -06 09 -11 -06 Cash 104,330.00 Transfer to Rockwood account to rebalance to 09 -25 -06 09 -25 -06 Cash 359.54 Transfer to Rockwood accouont to 09 -25 -06 09 -25 -06 Cash 239.69 Transfer to Saygrass account to 09 -26 -06 09 -26 -06 Cash 11,908.80 Transfer to Rockwood account to 09 -26 -06 09 -26 -06 Cash 7,939.20 Transfer to Sawgrass account 248,844.21 EXPENSE ACCOUNTS 0.00 AFTER FEE PERFORMANCE EXPENSE ACCOUNTS dp 07 -11 -06 07 -11 -06 Administration Fee 912.00 Sawgrass Asset Mgmt. dp 08 -02 -06 08 -02 -06 Administration Fee 3,000.25 Quarterly management fee to Rockwood Capital Advisors 3,912.25 PORTFOLIO NET TOTAL 42,940.17 EXPENSE ACCOUNTS PAID BY CLIENT AFTER FEE PERFORMANCE EXPENSE ACCOUNTS PAID BY CLIENT 0.00 0.00 GRAND TOTAL 42,940.17 3 Broker Code Commission Quantity DOMESTIC EQUITIE Common Stock Large Cap 925.000 520.000 825.000 620.000 1,015.000 1,345.000 1,265.000 510.000 1,275.000 1,075.000 565.000 1,720.000 1,340.000 Mid Cap Bogdahn Consulting, LLC. PORTFOLIO APPRAISAL Palm Beach Garden General Employees' Combined Account September 30, 2006 (Excluding Reinvested Divs.) Unit Total Security Cost Cost Price S Aflac Inc. BOEING CO COM CIT Group Caterpillar Inc Heinz H J Company Hewlett Packard Co Kraft Foods Lockheed Martin Corp. Loews Corp. PG & E Corp. Prudential Financial Inc Safeway Inc. COM Texas Instruments 1,040.000 Apartment Inventory & 64.53 Management Co - Reit 600.000 BRE Properties 590.000 Brown Forman Corp. 42.21 Class B 1,195.000 Chesapeake Energy 32.61 Corp. 3,240.000 El Paso Corp 920.000 FISERV INC COM 1,355.000 HCC Insurance 78.05 Holdings Inc Com 970.000 Henry Schein Inc. 860.000 MCKESSON HBOC 151.84 INC COM 1,170.000 McCormick &Co Inc 515.000 NYSE Group Inc. 1,150.000 Price T Rowe Assoc Inc 52,202.00 Com 935.000 Protective Life Corp. 2,265.000 Seagate Technology 52,298.85 Holdings 284.000 Sears Holdings Corp 560.000 Simon PPTY Group Inc. 655.000 Stericycle Inc Small Cap 47.23 43,690.71 64.53 33,556.42 54.92 45,308.26 49.83 30,894.91 42.21 42,842.34 32.33 43,477.39 32.61 41,248.74 60.12 30,662.63 29.94 38,172.27 35.89 38,583.79 78.05 44,095.59 22.29 38,341.72 33.48 44,859.98 515,734.75 36.91 38,390.98 57.15 34,289.46 74.52 43,967.27 31.29 37,391.67 11.72 37,972.80 43.76 40,259.57 28.00 37,945.69 45.52 44,158.09 45.92 39,488.79 35.29 41,292.11 66.09 34,036.66 33.76 38,819.00 41.74 39,022.51 13.65 30,917.25 151.84 43,122.84 68.08 38,124.80 63.44 41,554.44 - 1,014.34 660,753.93 Market Pct. Value Gain/Loss Assets 45.76 42,328.00 - 1,362.71 78.85 41,002.00 7,445.58 48.63 40,119.75 - 5,188.51 65.80 40,796.00 9,901.09 41.93 42,558.95 - 283.39 36.69 49,348.05 5,870.66 35.66 45,109.90 3,861.16 86.06 43,890.60 13,227.97 37.90 48,322.50 10,150.23 41.65 44,773.75 6,189.96 76.25 43,081.25 - 1,014.34 30.35 52,202.00 13,860.28 33.25 44,555.00 - 304.98 578,087.75 62,353.00 54.41 56,586.40 18,195.42 59.73 35,838.00 1,548.54 76.65 45,223.50 1,256.23 28.98 34,631.10 - 2,760.57 13.64 44,193.60 6,220.80 47.09 43,322.80 3,063.23 32.88 44,552.40 6,606.71 50.14 48,635.80 4,477.71 52.72 45,339.20 5,850.41 37.98 44,436.60 3,144.49 74.75 38,496.25 4,459.59 47.85 55,027.50 16,208.50 45.75 42,776.25 3,753.74 23.09 52,298.85 21,381.60 158.09 44,897.56 1,774.72 90.62 50,747.20 12,622.40 69.79 45,712.45 4,158.01 772, 715.46 111,961.53 1.5 1.4 1.4 1.4 1.5 1.7 1.6 1.5 1.7 1.6 1.5 1.8 1.6 20.4 2.0 1.3 1.6 1.2 1.6 1.5 1.6 1.7 1.6 1.6 1.4 1.9 1.5 1.8 1.6 1.8 1.6 27.3 1,580.000 J2 Global 23.18 36,617.53 27.17 42,928.60 6,311.07 1.5 Communications hie. 1,105.000 Landstar Systems Inc. 37.15 41,046.43 42.70 47,183.50 6,137.07 1.7 1,045.000 Pacer International hie. 32.35 33,802.72 27.76 29,009.20 - 4,793.52 1.0 815.000 Precision Castparts 46.02 37,510.29 63.16 51,475.40 13,965.11 1.8 Corp. Bogdahn Consulting, LLC. 45,814.52 Corporate Bonds 55.22 PORTFOLIO APPRAISAL Chase Manhattan Corp 40.65 7.125% Due 02 -01 -07 Palm Beach Garden General Employees' Caterpillar Financial 29,921.00 Services Combined Account 4.875% Due 06 -15 -07 45,000 Merrill Lynch & Co. September 30, 2006 6.560% Due 12 -16 -07 25,000 Wells Fargo & Co (Excluding Reinvested Divs.) 4.000% Due 08 -15 -08 25,000 IBM Unit Total Market 35,000 Pct. Quantity Security Cost Cost Price Value Gain/Loss Assets 1,445.000 VCA Antech Inc 28.86 41,707.04 36.06 52,106.70 10,399.66 1.8 190,684.01 222,703.40 32,019.39 7.9 1,367,172.68 1,573,506.61 206,333.93 55.5 1,367,172.68 1,573,506.61 206,333.93 55.5 INTERNATIONAL EQUITIES Foreign Stock Foreign 1,040.000 Canadian Pacific Railway Ltd. NEW 815.000 Ryanair Holdings PLC -SP ADR 915.000 Volvo Aktiebolaget ADR CL B FIXED INCOME 45,814.52 Corporate Bonds 55.22 25,000 Chase Manhattan Corp 40.65 7.125% Due 02 -01 -07 50,000 Caterpillar Financial 29,921.00 Services 157,936.45 4.875% Due 06 -15 -07 45,000 Merrill Lynch & Co. 29,921.00 6.560% Due 12 -16 -07 25,000 Wells Fargo & Co 97.92 4.000% Due 08 -15 -08 25,000 IBM 96.51 4.250% Due 09 -15 -09 35,000 John Deere Cap Corp 340.35 Ser MTN 100.10 5.650% Due 07 -25 -11 25,000 Lehman Brothers 520.70 Holdings 105.39 6.625% Due 01 -18 -12 40,000 Morgan Stanley 164.25 4.750% Due 04 -01 -14 25,000 Goldman Sachs Group 95.10 Inc 269.60 5.125% Due 01 -15 -15 20,000 Anheuser Busch Cos Inc. 96.95 4.625% Due 02 -01 -15 50,000 BellSouth Capital 95.58 Funding 95.30 6.040% Due 1 I -15 -26 44.05 45,814.52 49.74 55.22 45,006.91 63.29 40.65 37.194.02 59.70 128,015.45 128,015.45 51,729.60 5,915.08 1.8 51,581.35 6,574.44 1.8 54,625.50 17,431.48 1.9 157,936.45 29,921.00 5.6 157,936.45 29,921.00 5.6 157,936.45 29,921.00 5.6 102.76 25,688.75 100.53 25,131.55 - 557.20 0.9 99.99 49,992.50 99.67 49,834.05 - 158.45 1.8 103.41 46,536.30 101.63 45,731.52 - 804.78 1.6 97.50 24,375.25 97.92 24,480.13 104.88 0.9 96.51 24,126.50 97.87 24,466.85 340.35 0.9 100.10 35,036.05 101.59 35,556.75 520.70 1.3 105.39 26,348.25 106.05 26,512.50 164.25 0.9 94.42 37,769.60 95.10 38,039.20 269.60 1.3 94.23 23,558.50 96.95 24,237.43 678.93 0.9 95.58 19,115.80 95.30 19,060.52 -55.28 0.7 102.25 51,125.00 100.03 50,015.40 - 1,109.60 1.8 2 FHLMC FNMA 53,919 FHLMC Pool 002621 5.000% Due 10 -01 -20 Accrued Interest 45,886 FNMA Pool #256060 6.000% Due 01 -01 -36 74,922 FNMA Pool #896494 6.000% Due 08 -01 -36 Accrued Interest 98.86 53,303.70 98.27 53,303.70 101.39 46,523.99 100.14 75,027.66 121,551.65 121,551.65 924,449.72 3 52,985.37 - 318.33 1.9 Bogdahn Consulting, LLC. 0.0 53,210.03 - 318.33 1.9 121,377.01 - 174.64 4.3 PORTFOLIO APPRAISAL 0.0 121,981.05 - 174.64 4.3 Palm Beach Garden General Employees' 575.77 33.1 Combined Account September 30, 2006 (Excluding Reinvested Divs.) Unit Total Market Pct. Quantity Security Cost Cost Price Value Gain/Loss Assets 40,000 First Union Corp 107.09 42,834.40 106.48 42,590.12 - 244.28 1.5 6.180% Due 02 -15 -36 406,506.90 405,656.01 - 850.90 14.3 Accrued Interest 5,580.38 0.2 406,506.90 411,236.39 - 850.90 14.5 Government Bonds 0 FNMA 0.00 0.00 98.34 0.00 0.00 0.0 3.800% Due 01 -18 -08 40,000 FNMA 96.95 38,780.80 98.03 39,212.50 431.70 1.4 3.875% Due 08 -15 -08 150,000 FNMA 97.88 146,826.50 98.25 147,375.00 548.50 5.2 6.500% Due 06 -01 -10 50,000 FHLLMC Series MTN 98.86 49,431.00 100.23 50,114.40 683.40 1.8 5.250% Due 02 -24 -11 25,000 US Treasury Note 95.25 23,813.48 97.28 24,319.33 505.85 0.9 4.250% Due 08 -15 -15 25,000 UNITED STATES 114.72 28,679.69 114.41 28,603.53 -76.17 1.0 TREAS BDS 6.000% Due 02 -15 -26 50,000 Tennessee Valley 111.11 55,556.00 110.76 55,382.35 - 173.65 2.0 Authority 5.880% Due 04 -01 -36 343,087.47 345,007.10 1,919.63 12.2 Accrued Interest 5,900.46 0.2 343,087.47 350,907.56 1,919.63 12.4 FHLMC FNMA 53,919 FHLMC Pool 002621 5.000% Due 10 -01 -20 Accrued Interest 45,886 FNMA Pool #256060 6.000% Due 01 -01 -36 74,922 FNMA Pool #896494 6.000% Due 08 -01 -36 Accrued Interest 98.86 53,303.70 98.27 53,303.70 101.39 46,523.99 100.14 75,027.66 121,551.65 121,551.65 924,449.72 3 52,985.37 - 318.33 1.9 224.66 0.0 53,210.03 - 318.33 1.9 100.49 46,109.17 414.82 1.6 100.46 75,267.85 240.19 2.7 121,377.01 - 174.64 4.3 604.04 0.0 121,981.05 - 174.64 4.3 937,335.04 575.77 33.1 Bogdahn Consulting, LLC. PORTFOLIO APPRAISAL Palm Beach Garden General Employees' Combined Account September 30, 2006 (Excluding Reinvested Divs.) Unit Total Quantity Security Cost Cost Price CASH & EQUIV. Money Markets 164,862 Goldman Sachs Fin.Sq.Treasury Oblib. Admin TOTAL PORTFOLIO 1.00 164,861.52 1.00 164,861.52 2,584,499.37 4 Market Pct. Value Gain /Loss Assets 164,861.52 0.00 5.8 164,861.52 0.00 5.8 164,861.52 0.00 5.8 2,833,639.62 236,830.70 100.0 October 1, 2006 PALM BEACH GARDENS GENERAL EMPLOYEES' PENSION PLAN (DB) SUMMARY PLAN DESCRIPTION INTRODUCTION The Board of Trustees of the Palm Beach Gardens General Employees' Pension Plan (DB) is pleased to present this booklet which briefly explains the provisions of your General Employees' Pension Plan. As a participant in the Fund, you are included in a program of benefits to help you meet your financial needs at retirement, or in the event of disability or death. This booklet can assist you in preparing for your retirement and financial future. If you need further information on any of the topics presented in this booklet, please contact any member of the Board of Trustees. They will either answer questions you might have to help you understand your benefits or otherwise get you an answer to your questions. We urge you to read and understand this booklet in order to become familiar with the benefits of the plan and how they contribute to your financial security and how they will enrich your retirement years. The information presented is only a summary of the pension plan ( "Plan ") as provided in the ordinances of the City of Palm Beach Gardens. If there are any conflicts between the information in this booklet and the ordinances of the City of Palm Beach Gardens, the ordinances shall govern. The provisions of this Summary Plan Description shall not constitute a contract between the Member and the Board of Trustees. The plan shall be administered in accordance with state and federal law, notwithstanding any provisions in this booklet or ordinances to the contrary. A copy of the ordinance establishing the Plan can be obtained from the City Clerk's office, which is located at 10500 North Military Trail, Palm Beach Gardens, Florida 33410. Board of Trustees, Palm Beach Gardens General Employees' Pension Plan (DB) Date 1. BOARD OF TRUSTEES AND PLAN ADMINISTRATION A. Administration. The Palm Beach Gardens General Employees' Pension Plan (DB) is a defined benefit pension plan administered by a Board of Trustees which acts as the administrator of the Plan. The Board consists of 5 Trustees, 2 of whom are legal residents of the City who are appointed by the City Council, 2 of whom are members of the System who are elected by a majority of the General Employees who are members of the System and a fifth Trustee who is chosen by a majority of the first 4 Trustees. Each Trustee serves a three year term. B. The names and addresses ofthe current Trustees are attached to this Summary Plan Description as Exhibit "A ". The Chairman of the Board of Trustees is designated as agent for the service of legal process. 2. ELIGIBILITY FOR PLAN MEMBERSHIP All General Employees who are Members of the System as of February 6, 1997 shall remain Members of the System and are therefore eligible for plan benefits as provided for in the plan document and by applicable law. All General Employees who are not Members of the System as of February 6, 1997, and all future new General Employees shall be ineligible to become Members of this System. 3. PLAN BENEFITS All claims for benefits under the Plan shall be made in writing to the Board of Trustees. A. Normal Retirement Eli ig bilitX. You are eligible for retirement upon the attainment of age 62, regardless of years of credited service. B. Amount ofNormal Retirement Benefits. The amount of the normal retirement benefit is based on your credited service and average final compensation: "Credited Service" is generally your period of employment as a General Employee with the City measured in years and parts of years. Credited service will include a break in employment for military service, pursuant to conditions that are required or permitted under state or federal law, as amended from time to time, provided that you are reemployed within 1 year of discharge under honorable conditions. Additional credited service time may also be available (See subsection J. below). "Average Final Compensation" is 1/12 of your average salary of the 3 best consecutive years of the last 5 years of credited service prior to your termination, retirement or death, or your career average as a full -time General Employee, whichever is greater. A year is defined as 12 consecutive months. "Salary" is the total compensation for services rendered to the City reportable on your W -2 form, plus all tax deferred, tax sheltered or tax exempt items of income derived from elective employee payroll deductions or salary reductions. Normal and early retirement payments will commence on the first day of the month following your last day of employment. The normal retirement benefit is calculated by multiplying 2.5% times years of credited service times your average final compensation: (2.5% x CS x AFC = normal retirement benefit). -1- The benefit is paid to you for your life, but you or your beneficiary shall receive at least 120 monthly benefit payments in any event. C. Early Retirement. You are eligible for early retirement upon the of age 5 5 and the completion of 10 years of credited service. D. Amount of Early Retirement Benefits. The amount of the early retirement benefit is calculated in the same manner as for normal retirement and is available as follows: (1) Beginning on the date on which you would have qualified for normal retirement; or (2) Beginning immediately upon retirement, but if beginning immediately, the amount of the monthly benefit is reduced by 1/1 5th for each of the first 5 years, and 1 /30th for each of the next 5 years by which the commencement of benefits precedes the date which would have been your normal retirement date had you continued employment as a General Employee. E. Optional Forms of Retirement. In lieu of the amount and form of retirement income payable under normal and early retirement, you may elect to receive a retirement benefit in a different form so long as the form you elect is of equal actuarial value as the normal benefit. The optional forms of benefits which are available are: (1) A retirement income of a monthly amount payable to you for your lifetime only. (2) A retirement income of a modified monthly amount, payable to you during your lifetime and following your death, 100 %, 75 %, 66 2/3% or 50% of such monthly amount payable to a joint pensioner for his lifetime. (3) If you retire prior to the time at which social security benefits are payable, you may elect to receive an increased retirement benefit until such time as social security benefits shall be assumed to commence and a reduced benefit thereafter in order to provide, to as great an extent as possible, a more level retirement allowance during your entire period of retirement. F. Disability Retirement. You are considered disabled when you become totally and permanently unable to perform useful and efficient service as a General Employee in your current position or in another position that the City makes available to you. A written application is made to the Board of Trustees for a disability pension and the Board of Trustees receives evidence of the disability and decides whether or not the pension is to be granted. If the pension is granted, the benefit amount shall be 2 %2% of your average final compensation multiplied by your total years of credited service. Terminated persons, either vested or non - vested, are not eligible for disability benefits, except that those terminated by the City for medical reasons may apply for a disability benefit within 30 days after termination. Your disability benefit terminates upon the earlier of death, with 120 payments guaranteed, or recovery. You may, however, select a "life only" or "joint and survivor" optional form of benefit as described above under "Optional Forms of Retirement ". -2- Your benefit will be reduced if you receive worker's compensation benefits, social security benefits or any other salary continuation program provided by the City, and your combined benefit exceeds 100% of your final salary. The pension benefit will be reduced so that the total does not exceed 100 %. To receive disability benefits, you must establish to the satisfaction of the Board, that such disability was not occasioned primarily by: (1) Excessive or habitual use of any drugs, intoxicants or alcohol. (2) Injury or disease sustained while willfully and illegally participating in fights, riots or civil insurrections. (3) Injury or disease sustained while committing a crime. (4) Injury or disease sustained while serving in any branch of the Armed Forces. (5) Injury or disease sustained after your employment as a General Employee with the City of Palm Beach Gardens shall have terminated. (6) Willful, wanton or intentional misconduct or gross negligence. (7) Injury or disease sustained while working for anyone other than the City and arising out of such employment. (8) A condition pre- existing your membership in the system. As a disabled pensioner, you are subject to periodic medical examinations as directed by the Board to determine whether a disability continues. You may also be required to submit statements from your doctor, at your expense, confirming that your disability continues. G. Death Before Retirement. If you die prior to retirement from the City, your beneficiary shall receive the following benefit: (1) Prior to Vesting or r Eli ig bility for Retirement. If you die and were not receiving benefits or were not yet vested or eligible for early or normal retirement, your beneficiary shall receive a refund of 100% of your accumulated contributions, with interest. (2) Deceased Members Vested or Eligible for Retirement. If you die, and at the date of your death were vested or eligible for early or normal retirement, your beneficiary shall be entitled to a benefit as follows: (a) If you were vested, but not eligible for normal or early retirement, your beneficiary shall receive a benefit payable for 10 years, beginning on the date that you would have been eligible for early or normal retirement, at the option of your beneficiary. The benefit shall be calculated as for normal retirement based on your vested percentage, credited service and average final compensation as of the date of your death and reduced as for early retirement, if applicable. Your beneficiary may also elect to receive an immediate benefit, -3- payable for 10 years, which is actuarially reduced to reflect the commencement of benefits prior to your early retirement date. (b) If you were eligible for normal or early retirement, your beneficiary shall receive a benefit payable for 10 years, beginning on the first day of the month following your death or at your otherwise normal or early retirement date, at the option of your beneficiary. The benefit shall be calculated as for normal retirement based on your credited service and average final compensation as of the date of your death and reduced as for early retirement, if applicable. (c) Your beneficiary may elect an optional form of benefit and the board may elect to make a lump sum payment pursuant to Section 10 of the plan document. (d) Your beneficiary may, in lieu of any benefit provided for in (a) or (b) above, elect to receive a refund of your accumulated contributions, with interest. H. Termination of Employment and Vesting. If your employment is terminated, either voluntarily or involuntarily, the following benefits are payable: (1) If you have less than 5 years of credited service upon termination, you shall be entitled to a refund of the money you have contributed, with interest, or you may leave it deposited with the Fund. (2) If you have attained your normal retirement date, you shall be fully vested in your accrued retirement benefit regardless of your years of credited service. If you are not otherwise fully vested, you shall have a minimum vested interest in the amount of your accrued benefit equal to the percentage thereof, as hereinafter indicated, applicable to the number of your years of Credited Service: Years of Credited Service Vested Interest in Accrued Benefit 0 -4 0% 5 25% 6 40% 7 55% 8 70% 9 85% 10 100% (3) You shall at all times and in all events have a fully vested interest in your accumulated contributions. Your vested interest may not be reduced as a result of any amendment to this section; however, any increase in your vested interest will be determined by the vesting schedule in effect at the time of your separation from service. (4) If you have 5 or more years of credited service upon termination, you shall be entitled to a monthly retirement benefit, payable to you commencing at your otherwise normal or early retirement date, 0 provided you do not elect to withdraw your accumulated contributions and provided you survive to your otherwise normal or early retirement date. If you do not withdraw his accumulated contributions and do not survive to your otherwise normal or early retirement date, your designated beneficiary or your spouse at the time of your death shall be entitled to a benefit as provided herein for a deceased Member under Death Before Retirement. The Internal Revenue Code provides that certain eligible lump sum distributions from the pension system maybe directly rolled over into qualified individual retirement accounts, annuities or certain other pension plans. A 20% withholding shall be required on taxable portions of such lump sum distributions not directly transferred to a new custodian. I. Reemployment After Retirement. If you retire under normal or early retirement and wish to be reemployed by the city, you should be aware that your ability to continue to receive your pension benefit upon reemployment may be restricted. J. Additional Credited Service. In addition to credited service actually earned in the employment of the City, you may also receive credited service as follows: (1) Family and Medical Leave Act. If you are absent on unpaid leave under the Family & Medical Leave Act, you may purchase lost credited service by making an actuarially determined contribution to the Plan, such that there is no cost to the Plan in allowing such credited service, within strict time periods provided for in the plan document. (2) Military Service Prior To Employment. The years or fractional parts of years that you serve or have served on active duty in the active military service of the Armed Forces of the United States, the United States Merchant Marine or the United States Coast Guard, voluntarily or involuntarily, honorably or under honorable conditions, prior to first and initial employment with the City shall be added to your years of credited service provided that: (a) You contribute to the Fund a sum equal to: (i) the amount that you would have contributed to the plan, based on your salary and the member contribution rate in effect at the time that the credited service is requested, had you been a member of the system for the years or fractional parts of years for which you are requesting credit, 1p_us (ii) an additional amount to be determined by the Board's actuary so that there is no cost to the plan in giving you the additional years of credited service, plus (iii) the amount charged by the actuary for determining the amount you must contribute. (b) Multiple requests to purchase credited service may be made at any time prior to retirement. -5- (c) Payment of the required amount shall be made within 6 months of your request for credit, but not later than your retirement date, and shall be made in one lump sum payment upon receipt of which credited service shall be given. (d) The maximum credit under this subsection shall be 5 years. (e) Credited service purchased pursuant to this subsection shall not count toward vesting. (3) 'Buy- Back" for Prior Government Service. The years or fractional parts of years that you were previously a member but terminated employment and are not otherwise entitled to credited service for such previous period of employment as a general employee, or the years or fractional parts of years that you serve or have served as an employee for any government agency in the United States, including but not limited to federal, state or local government service, and for which you do not otherwise qualify for and receive credit under this system, shall be added to your years of credited service provided that: (a) You contribute to the Fund a sum equal to: (i) the amount that you would have contributed to the plan, based on your salary and the member contribution rate in effect at the time that the credited service is requested, had you been a member of the system for the years or fractional parts of years for which you are requesting credit, plus (ii) amounts actuarially determined such that the crediting of service does not result in any cost to the Fund, plus (iii) payment of costs for all professional services rendered to the Board in connection with the purchase of years of credited service. (b) Multiple requests to purchase credited service pursuant to this subsection may be made at any time prior to retirement. (c) Payment of the required amount shall be made within 6 months of your request for credit, but not later than your retirement date, and shall be made in one lump sum payment upon receipt of which credited service shall be given. (d) There shall be no maximum purchase of credited service pursuant to this subsection and credited service purchased shall count for all purposes, including vesting, except that credited service purchased for prior government service other than with the City of Palm Beach Gardens shall not count toward vesting. (e) In no event may credited service be purchased pursuant to this subsection for prior service with any other governmental agency, if such prior service forms or will form the basis of a W retirement benefit or pension from a different employer's retirement system or plan. (4) Rollovers or Transfers of Funds to Purchase Service. In the event you are eligible to purchase additional credited service as provided above, you may be eligible to rollover or transfer funds from another retirement program in which you participate (traditional IRA, deferred compensation plan maintained by a government employer (457 plan), 401k plan, profit sharing plan, defined benefit plan, money purchase plan, annuity plan or tax sheltered annuity) in order to pay all or part of the cost of purchasing such additional credited service. K. Contributions and Funding. The City is paying the portion of the cost of the pension plan over and above your contributions. You contribute 6% of your salary to the Plan. Your contribution will be excluded from your gross income for withholding purposes so you will realize income tax benefits. Your contributions, with interest, are guaranteed refundable in any event. L. Minimum Benefits. In no event will the benefits paid from this Plan be any less than your contributions, with interest. M. Maximum Benefits. In no event will the annual benefits paid from this Plan exceed $160,000 annually, subject to certain cost of living adjustments and actuarial reductions for retirement prior to age 62 as set forth in Section 415 of the Internal Revenue Code. If you began participation for the first time on and after January 1, 1980, you cannot receive a benefit in excess of 100% of your average final compensation. N. Forfeiture of Pension. If you are convicted of the certain crimes listed in the Plan, or if your employment is terminated by reason of your admitted commission, aid or abetment of these crimes, you shall forfeit all rights and benefits under the Plan, except for the return of your contributions as of the date of your termination. O. Claims Procedure Before the Board. You may request, in writing, that the Board review any claim for benefits under the Plan. The Board will review the case and enter a decision as it deems proper within not more than 180 days from the date of the receipt of such written request, or in the case of a disability claim, from receipt of a medical release and completed interrogatories. The time period may be extended if you agree to the extension. The Board's decision on your claim will be contained in an order which will be in writing and will include: (1) The specific reasons for the Board's action; (2) A description of any additional information that the Board feels is necessary for you to perfect your claim; (3) An explanation of the review procedure next open to you which includes a formal evidentiary hearing. 4. NON - FORFEITURE OF PENSION BENEFITS A. Liquidation of Pension Fund Assets. In the event of repeal, or if contributions to the Fund are discontinued by the City, there will be a full vesting of benefits accrued to date of repeal. -7- B. Interest of Members in Pension Fund. At no time prior to the satisfaction of all liabilities under the Plan shall any assets of the Plan be used for any purpose other than for the General Employees' exclusive benefit. In any event, your contributions to the Plan are non - forfeitable. 5. VESTING OF BENEFITS Your retirement benefits are fully vested after 10 years of credited service. 6. APPLICABLE LAW The Plan is governed by certain federal, state and local laws, including, but not limited to the following: Systems ". A. Internal Revenue Code and amendments thereto. B. Part VIII, Chapter 112, Florida Statutes, "Actuarial Soundness of Retirement C. Ordinances of the City of Palm Beach Gardens. D. Administrative rules and regulations adopted by the Board of Trustees. 7. PLAN YEAR AND PLAN RECORDS The Plan year begins on October 1 of each year and ends on September 30 of the following year. All records of the Plan are maintained on the basis of the Plan year. City. APPLICABLE PROVISIONS OF COLLECTIVE BARGAINING AGREEMENTS There is no collective bargaining agreement between the General Employees and the 9. FINANCIAL AND ACTUARIAL INFORMATION A report ofpertinent financial and actuarial information on the solvency and actuarial soundness of the Plan has been prepared by the Pension Plan's actuary, Foster & Foster, Inc., and is attached as Exhibit "B ". 10. DIVORCE OR DISSOLUTION OF MARRIAGE Federal and state law provides certain restrictions regarding the payment of your pension benefits in the event of your divorce or dissolution of marriage. Immediately upon your involvement in such a legal proceeding, you should provide a member of the Board with the name and address of your attorney or your name and address if you have no attorney. The Board's attorney will then provide you or your attorney with information concerning the legal restrictions regarding your pension benefits. IS YOUR BENEFICIARY FORM CURRENT? IN THE EVENT YOU DIE, YOUR BENEFIT OR CONTRIBUTIONS WILL BE DISTRIBUTED TO THE PERSON OR PERSONS DESIGNATED BY NAME ON THE BENEFICIARY FORM ON FILE WITH THE PENSION PLAN. NO PROVISION IN YOUR LAST WILL AND TESTAMENT WILL CHANGE THIS SELECTION. PLEASE BE SURE THAT YOUR BENEFICIARY FORM DESIGNATES THE PERSON OR PERSONS YOU INTEND TO RECEIVE YOUR BENEFITS AND THAT YOU REVIEW THIS CHOICE IN THE EVENT OF A MAJOR LIFE CHANGE SUCH AS A DIVORCE OR THE DEATH OF YOUR BENEFICIARY. In EXHIBIT "A" BOARD OF TRUSTEES The names and addresses of the members of the Board of Trustees are: Chairman: Stephen F. Parella 10500 North Military Trail Palm Beach Gardens, Florida 33410 Secretary: Allan Owens 10500 North Military Trail Palm Beach Gardens, Florida 33410 Member: Dindial Laljie 10500 North Military Trail Palm Beach Gardens, Florida 33410 Member: Kenneth Steele 10500 North Military Trail Palm Beach Gardens, Florida 33410 Member: Jami Smith 10500 North Military Trail Palm Beach Gardens, Florida 33410 W