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Home My WebLink AboutBUDGET AND FINANCE ACTION SUMMARY 09-04-12Jl Central Contra Costa Sanitary District Protecting public health and the environment 5019 Imhoff Place, Martinez, CA 94553 -4392 SPECIAL MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT BUDGET AND FINANCE COMMITTEE ACTION SUMMARY Chair McGill Member Nejedly Tuesday, September 4, 2012 9:30 a.m. Executive Conference Room 5019 Imhoff Place Martinez, California BOARD OF DIRECTORS: JAMESA NEJEDLY President DAVID R. WILLIAMS President Pro Tent BARBARA D. HOCKE7T AHCHAEL R MCGILL MARIO AL MENESINI PHONE: (925) 228 -9500 FAX: (925) 676 -7211 www.centralsan.org PRESENT: Mike McGill, Jim Nejedly, Curt Swanson, Shari Deutsch (left after Item 5.a.), Andrew Brown of Highmark Capital Management and Mitch Barker of PARS, Earlene Millier (left after Item 6.), Jarred Miyamoto -Mills (left after Item 6.), Thea Vassallo Call Meeting to Order Chair McGill called the meeting to order at 9:30 a.m. 2. Public Comments None. '3. Six -Month Summary of the Governmental Accounting Standards Board (GASB) 45 Public Agency Retirement Services (PARS) Trust presentation from Andrew Brown of Highmark Capital Management and Mitch Barker of PARS COMMITTEE ACTION: Received the presentation and written report (attached). 4. Review Position Paper approving the Statement of Investment Policy for District assets and the Investment Guidelines Document for the GASB 45 Trust (Item 4.d. in Board Binder) Budget and Finance Committee September 4, 2012 Page 2 COMMITTEE ACTION: Reviewed and recommended Board approval. 5. Risk Management a. Review Loss Control Report and discuss outstanding claims COMMITTEE ACTION: Reviewed the report and discussed outstanding claims. 6. Review Position Paper adopting Resolution 2012 -076 authorizing the General Manager to execute certificates of unpaid charges on properties when delinquent charges are owed; and authorizing staff to record with the Contra Costa County Recorder (1) all such certificates of unpaid charges, and (2) releases of such certificates upon receipt of payment (Item 4.k. in Board Binder) Engineering Assistant 111 Earlene Millier and Provisional Environmental Services Division Manager Jarred Miyamoto -Mills summarized that this method of collecting delinquencies avoids amount owed as being reclassified as unsecured tax roll in December. COMMITTEE ACTION: Reviewed and recommended Board approval. 7. Receive Adjusted Period 13 Operations and Maintenance (O &M) June 2012 Year -End Financial Statements and Investment Reports (Period 13) (Item 8.a. in Board Binder) COMMITTEE ACTION: Reviewed and recommended Board receipt. 8. Expenditures a. Review Expenditures (Item 4.b. - Part Two in Board Binder) COMMITTEE ACTION: Reviewed and recommended Board approval. Member Nejedly requested follow up on check #191473 to Morgan - Bonanno Development in the amount of $17,211.82. 9. Reports and Announcements None. 10. Suggestions for future agenda items Budget and Finance Committee September 4, 2012 Page 3 Finance Manager Thea Vassallo will provide memo and copy of Benchmark Study prepared by Schultz Collins, Lawson, Chambers, Inc. at the next meeting for committee review prior to presentation by Jon Chambers at October 1, 2012 scheduled meeting. 11. Adjournment - at 10:20 a.m. * Attachment ntral Contra Costa Sanitary District PARS Retirement Healthcare Plan Funding Client Review bank. �HIGHMP` ARK �� PA RS CAPITAL MANAGEMENT wAing ret mnunt work Or you y9m7s = NO Fj Mitch Barker, Executive Vice President mitch. barker @pars.org 800.540.6369 ext. 116 Lauren Muschetto, Senior Client Services Coordinator lauren.muschetto @pars.org 800.540.6369 ext. 141 HighMark Capital Management .[f.NWM PARS Akeu p rc Kt*A?* v IKA Iry pm Andrew Brown, CFA, Vice President, Senior Portfolio Manager andrew.brown@highmarkcapital.com 415 - 705 -7605 z Areas to Cover Program Overview and Responsible Parties Plan Review Investment Review Administrative Review Enclosures June 2012 Statement Investment Guidelines Document Performance Sheets Section I Section II Section III Section IV Section V 'UNWIS PA R5 WVW f"wr"V IWA kr yuu 3 nMK PARS AW44 "ll twrn cts sthv . Mcwxy� ranrtvrx+ry ntxt kryaA Program Overview & Responsible Parties OPEB Trust Team Corporate Experience OPEB Experience Number of plans under administration Dollars under administration •Y PARS N[I�YY[M ftNv7CIS M bwp wovtKwv fKA *V)qu AGE bank. HIGH PARS MARK Making retirement work for you. CAPITAL MANAGEMENT Trust Administrator and Consultant • Record keeping /Sub -trust accounting • Actuarial Coordination • Legal /Compliance • Ongoing Client Liaison 29 years (1983 - 2012) 16 years Trustee • Safeguard plan assets • Oversight protection • Effective 2/1/2012 acquired Union Bank's Retirement Plan Services business, which includes trustee services for all PARS programs 149 years (1863 - 2012) 7 years Investment Manager • An investment sub - advisor to U.S. Bank • Open architecture • Investment policy assistance 93 years (1919 - 2012) 16 years 1,137 plans for 611 public agencies More than More than More than 1.06 billion $17.5 billion $ $4 trillion under management ' S U.S. Bank • 51" largest commercial bank in the nation • 100 years in institutional trust and custody business ti PARS 4an rtp rmnW?*" tk"* kv )VI • One of the highest rated, financially secure banks in country • PARS has been a business partner with U.S. Bank on another trust program since 2006 and has a strong, established relationship with the bank. • U.S. Bank will enable PARS to accommodate continued growth and greater economies of scale for our agencies. "NMI ;PARS ,�ntw �� hrygA More than 100 PARS OPEB Client Agencies Cities Allen Apple Valley Atherton Bakersfield Camarillo Conroe Crescent City Cupertino Duarte Euless Fountain Valley Ft Worth Garland Half Moon Bay Haltom City Hercules Hermosa Beach Hurst La Verne Lake Forest Lakewood Livermore Mammoth Lakes Mansfield North Richland Hills Redding Rialto Richmond Rosemead San Leandro Santa Clara Santa Clarita Southlake Tyler Union City Yountville Counties Amador Contra Costa Inyo Merced Mono Shasta Solano Sonoma Trinity Yolo Educational and Special Districts Bass Lake Jt Union Elementary School District Bellflower Unified School District Calaveras County Water District California Joint Powers Insurance Authority Calistoga Joint Unified School District Central Contra Costa Sanitary District Central Contra Costa Transit Authority Coastside Fire Protection District Contra Costa Mosquito & Vector Control District Corning Union Elementary School District Crestline Village Water District Delta Diablo Sanitation District Desert Recreation District East Bay Regional Park District Eastern Sierra Community Services District Fowler Unified School District Fresno Irrigation District Fresno Metropolitan Flood Control District Glenn - Colusa Irrigation District Great Basin Unified Air Pollution Control District Hayward Area Recreation & Park District Housing Authority of the County of San Bernardino INTELECOM John Swett Unified School District Lemon Grove School District Menlo Park Fire Protection District Metropolitan Transportation Commission Mid - Peninsula Water District Mojave Desert Air Quality Management District Montecito Fire Protection District Moreno Valley Unified School District Municipal Water District of Orange County Ontario - Montclair School District Orange County Vector Control District Orange County Water District Rancho Murieta Community Services District Red Bluff Jt Union High School District River Delta Unified School District Riverdale Joint Union School District Rowland Water District San Bruno Park School District San Marino Unified School District Santa Barbara County Law Library South Orange County Wastewater Authority South Placer Fire Protection District Southern Marin Fire Protection District State Center Community College District Superior Court of CA, County of Butte Superior Court of CA, County of Sonoma Trona Joint Unified School District Twin Rivers Unified School District Vallejo Sanitation & Flood Control District Ventura Regional Sanitation District Visalia Unified School District West County Wastewater District Western Riverside Council of Governments Yosemite Community College District Updated July 16, 2012 7 Plan Review r-OK PARS OKISSMOO ; -% WxVx&l • MmJV1Q /QNHI wv V"A kY )04 Plan Overview ;,PARS AkriXIQ reMivrMry �KXR hr �olA Type of Plan: IRC Section 115 Irrevocable Exclusive Benefit Trust Trustee Approach: Discretionary Plan Effective Date: June 10, 2009 Plan Administrator: Thea Vassallo - Finance Manager Current Investment Strategy: Moderate HighMark PLUS (Active) - Selected 11/18/2008 As of 06/30/2012: Initial Contribution: March 2009 - $560,000 Additional Contributions: $19,096,600 Total Contributions: $19,656,600 Reimbursements: $0.00 Total Investment Earnings: $3,235,451 Account Balance: $22,718,524 * Does not include July /August 2012 contributions in the amount of $1,003,434 10 Summary of the Plan Activity Central Contra Costa Sanitary District Total Assets, Contributions & Distributions $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 IP Plan Year Ending *Plan Year Ending June 2009 is based on 4 month of activity. max" i PA ■ S Mu4v1� rrmarxw ��cX[ hr yaA Plan Year End Contributions aimbursements Total Assets Jun -09* $2,240,000 $2,341,251 Jun -10 $6,720,000 $9,305,799 Jun -11 $6,565,000 $18,077,303 Jun -12 $4,131,600 $22,718,524 11 Actuarial Results A" PARS +�u+w rttw�,x�ry „�xa kr,a� We have received the actuarial reports prepared by Bartel & Associates on August 9, 2011 with a valuation date of July 1, 2010. In the tables below, we have summarized the results. Demographic Study 12 June 30, 2009 July 1, 2010 Active Participants 272 252 Retirees 188 216 Total Plan Members 460 468 Active Average Age 47.2 47.0 Retiree Average Age 68.3 67.5 12 Actuarial Results (continued) ;;PARS rwarwv WA fcv MA Mavv Actuarial Accrued Liability o �.. 009 4.00% Discount Rate Pay -As- You -Go - - July 1, 2010 6.5% Discount Rate $120,813,410 $90,337,000 Actuarial Value of Assets $2,341,251 $9,404,000 Unfunded Actuarial Liability $118,472,159 $80,933,000 Normal Cost $3,227,854 $2,213,000 Annual Required Contribution (ARC) $10,011,913 $8,300,000 Pay -As- You -Go $2,200,000 $3,632,000 13 Central Contra Costa Sanitary District Second Quarter 2012 Presented by Andrew Brown, CFA -AHIGHMARK(g: CAPITAL MANAGEMENT DISCUSSION HIGHLIGHTS - Central Contra Costa Sanitary District Asset Allocation Current allocation (8/29/12) 53.25% stocks, 44% bonds, 2.75% cash Large cap domestic 32.25 %, international 8.75 %, small cap 6 %, mid -cap 4.75 %, real estate 1.5% Performance (Gross of investment fees) Thru July 2012 Year to date 7.39% One -year period 4.13% Inception to date 13.68%(4-1-2009) Stocks — Technology giveth /taketh away — growth funds, real estate strong, international laggard Bonds — Treasury/corporate exposure. Outlook HCM earnings estimate $104/FY12, $110/FY13 Jobs /unemployment 8.3 %, = China slowdown Europe C Washington DC - Fiscal cliff 2013 , elections Other U.S. Bank day one Moderate investment objective HIGHMARKG CAPITAL MANAGEMENT 15 CCCSD Asset Allocation Total Assets: $23,638, 597 Period Ending 7 -31 -12 July Return: -0.96% 1 Year Return: 4.13% FY 2011 -2012: 2.31 % Inception Date: 4 -1 -2009 Fixed Income $10,184,458 43.1% JHIGHMAW CAPITAL MANAGEMENT Cash $929,871 .1 9% Equity $12,524,268 53.0% 16 Selected Period Performance PARS /CENTRAL CONTRA COSTA SANT PRHCP Account 6746030600 Period Ending: 07/31/2012 Account Inception: 4/1/2009 Returns are gross -of -fees unless otherwise noted. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value. JHIGHMARK� CAPITAL MANAGEMENT WA Year Inception to Date to Date Sector 3 Months (7 Months) 1 Year 3 Years (40 Months) Cash Equivalents .01 .01 .02 .11 .17 iMoneyNet, Inc. Taxable .00 .00 .00 .00 .02 Total Fixed Income 2.22 5.48 6.13 7.28 8.56 BC US Aggregate Bd Index 2.33 3.78 7.26 6.86 7.24 Total Equities -3.59 9.30 1.62 11.44 18.67 Large Cap Funds -2.76 10.31 4.45 11.13 17.46 S &P 500 Composite Index -.78 11.00 9.12 14.12 20.33 Mid Cap Funds -5.35 7.20 3.06 Russell Midcap Index -3.87 8.21 2.27 16.20 24.27 Small Cap Funds -4.21 7.81 3.30 16.95 24.88 Russell 2000 Index -3.31 7.04 .20 13.72 22.10 REIT Funds 2.72 17.29 12.86 Wilshire REIT Index 2.67 17.09 13.38 30.11 41.78 International Equities -6.67 5.55 -12.32 4.83 15.69 MSCI EAFE Index 4.20 4.12 -11.45 3.31 13.14 Total Managed Portfolio -.96 7.39 4.13 9.69 13.68 Account Inception: 4/1/2009 Returns are gross -of -fees unless otherwise noted. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value. JHIGHMARK� CAPITAL MANAGEMENT WA ASSET ALLOCATION As of July 31, 2012 Ctrt'ent Jl wt.Alloftten 111,11vresunent Vehicle Equity 52.98% Range: 40% -60% Large Cap Core 5.02% SMGIX Columbia Contrarian Core CI Z 1,185,815 5.03% SICWX Sentinel Common Stock 1 1,188,173 Large Cap Value 6.49% PRFDX T. Rowe Price Equity Income Fund 1,534,635 6.52% LSGIX Loomis Sayles Value Fund 1,542,401 Large Cap Growth 4.71% HACAX Harbor Capital Appreciation Instl 1,112,766 4.97% PRGFX T. Rowe Price Growth Stock Fund 1,175,976 Mid Cap Value 2.72% TlMVX TIAA -CREF Mid -Cap Value Instl 643,088 Mid Cap Growth 1.95% PNMFX HighMark Geneva Mid Cap Growth Fund 461,486 Small Cap Value 3.67% NSVAX Columbia Small Cap Value Fund II 867,714 Small Cap Growth 2.19% PRNHX T. Rowe Price New Horizons Fund 517,780 International Core 1.73% HIOFX HighMark International Opportunity Fund 408,472 International Value 1.25% DODFX Dodge & Cox International Stock Fund 295,037 International Growth 1.26% MQGIX MFS International Growth Fund 297,189 Emerging Markets 3.97% RSENX RS Emerging Markets Y 937,798 Real Estate 1.51% FARCX Nuveen Real Estate Secs 1 355,938 Fixed Income 43.08% Range: 40 % -60% Short -Term 10.01% VFSUX Vanguard Short-Term Corp Adm Fund 2,366,825 Intermediate -Term 15.68% HMBDX HighMark Bond Fund 3,705,669 15.93% PTTRX PIMCO Total Return Instl Fund 3,764,659 High Yield 1.47% PHIYX PIMCO High Yield Instl Fund 347,305 Cash 3.93% Range: 0% -20% 3.93% HMDDX HighMark Diversified MM Fund 929,871 TOTAL 100.00% $23,638,597 JHIGHMARKe 18 CAPITAL MANAGEMENT PARS /CENTRAL CONTRA COSTA SANITARY PRHCP For Periods Ending July 31, 2012 JHIGHMARK" 19 CAPITAL MANAGEMENT LARGE CAP EQUITY FUNDS 1 -Month 3 -Month Year -to- 1 -Year 3 -Year 5 -Year 10 -Year Fund Name Return Return Date Return Return Return Return Columbia Contrarian Core Cl Z (2) 1.72 -1.35 11.39 6.56 13.48 4.14 7.14 T. Rowe Price Equity Income (5) 1.34 -0.57 9.64 7.60 12.66 0.16 6.40 Harbor Capital Appreciation Instl(3) -0.73 -7.11 10.08 1.95 12.43 3.60 6.76 Sentinel Common Stock 1 (8) 1.57 -2.17 8.79 5.86 12.83 1.99 7.30 Loomis Sayles Value Fund 1.55 -0.91 10.44 6.02 10.56 -0.32 7.43 T. Rowe Price Growth Stock 0.31 -4.61 13.63 6.94 15.22 2.51 7.66 S&P 500 Index 1.39 -0.78 11.01 9.13 14.13 1.13 6.34 HighMark Geneva Mid Cap Growth (1) -2.01 -8.25 5.15 4.69 16.78 5.48 9.26 Russell Mid Cap Growth Index -0.13 -5.72 7.96 0.67 15.99 2.34 9.57 TIAA -Cref Mid -Cap Value Insd (1) 0.56 -3.25 8.51 1.97 13.74 1.05 Russell Mid Cap Value Index 0.55 -2.08 8.38 3.81 16.45 1.13 9.35 Columbia Small Cap Value II Z -0.56 -4.02 6.03 0.08 14.11 1.71 9.41 T. Rowe Price New Horizons -1.15 -4.54 10.51 8.83 22.05 7.04 12.29 Russell 2000 Index -1.38 -3.31 7.03 0.19 13.71 1.69 8.62 INTERNATIONAL • FUNDS Dodge & Cox Intl Stock 0.70 •5.47 4.04 -12.70 4.15 -4.50 9.29 HighMark Intl Opportunities Fid 0.81 -4.28 6.64 -13.35 4.02 -5.53 8.02 RS Emerging Markets Y (4) 1.27 -8.61 5.76 -12.81 5.72 -0.37 15.44 MFS International Growth 1 0.85 -5.22 7.33 -6.51 7.99 -0.66 9.47 MSCI EAFE Index 1.13 -4.20 4.13 -11.45 3.31 -5.61 6.36 REIT EQUITY Nuveen Real Estate Secs 1 (6) 1.95 2.74 17.33 12.91 29.20 6.65 13.19 DJ US Select REIT Index 1.90 2.63 17.09 13.38 29.99 4.04 11.09 BOND FUNDS HighMark Bond Fid 1.55 2.13 5.01 7.11 7.60 7.23 5.80 Pimco Total Return Instl 1.73 3.07 7.58 7.46 8.50 9.34 7.10 Vanguard Short-Term Investment -Grade Adm 0.75 1.06 3.08 2.81 4.73 4.44 4.24 BarCap US Aggregate Bond Index 1.38 2.34 3.78 7.25 6.85 6.91 5.65 PIMCO High Yield Instl (7) 1.67 2.20 8.42 6.91 13.73 8.26 9.67 Credit Suisse HY Index 1.76 2.28 8.54 7.71 14.40 8.80 10.27 Source: SEI Investments, Morningstar Investments (1) Fund was added to the Plan in February 2010 (5) Fund was added to the Plan in March 2011 (2) Fund was added to the Plan in June 2011 (6) Fund was added to the Plan in December 2009 (3) Fund was added to the Plan in July 2010 (7) Fund was added to the Plan in February 2012 (4) Fund was added to the Plan in August 2010 (8) Fund was added to the Plan in June 2012 Returns less than one year are not annualized. Past performance is no indication of future results. The information presented has been obtained from sources believed to be accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value. JHIGHMARK" 19 CAPITAL MANAGEMENT Administrative Review PARS �[fwLWM SlMVI(tS retrnrkrr ��crk hr yae Administrative Issues ✓ Update on Program ✓ Administrator's Handbook PARS ✓ Discussion of any administrative questions or concerns ✓ Future Anticipated Contributions ✓ Future Anticipated Reimbursement Requests ✓ Agency's future actuarial valuation for GASB 45 compliance ✓ Up -to -Date Investment Guidelines Document ✓ Client Feedback 21 INVESTMENT GUIDELINES DOCUMENT Central Contra Costa Sanitary District L SD Central Contra Costa Sanitary District Investment Guidelines August 2011 Central Contra Costa Sanitary District Investment Guidelines Document In response to the Government Accounting Standards Board (GASB) Statement Number 45 disclosure requirements for Other Post - Employment Benefit (OPEB) Plans, the Central Contra Costa Sanitary District has adopted a Section 115 Trust and Plan that seeks to satisfy these liabilities for certain eligible employees Executive Summary Client Name: Central Contra Costa Sanitary District Investment Authority: Full Investment Authority Account Number: Risk Tolerance: Time Horizon: 6746030600 Moderate Objective Long -Term Investment Objective: The primary objective is to maximize total Plan return, subject to the risk and quality constraints set forth below. The Plan's targeted rate of return is 6.0 %. The Investment objective the District has selected is the Moderate Objective. The asset allocation ranges for this objective are listed below: Strategic Ranges: 0 - 20% Cash 40 - 60% Fixed Income 40 - 60% Equity Communication Schedule: Semi - annual committee meetings. Monthly statements provided. HCM Portfolio Manager: HCM Back up - Portfolio Manager: UB Administrative Officer: Andrew Brown, CFA 415- 705 -7605 Andrew.Brown(EDUnionbank.com Anne Wimmer, CFA 310 - 550 -6457 Anne.Wimmer(WUnionbank.com Fran Schoenfeld, 949 - 553 -7961 Fran. Schoenfeld(cD Union ban k.com The managing director for HighMark Capita/ Management is Kevin Rogers, he can be reached at 949- 353 -2580 Central Contra Costa Sanitary District Investment Guidelines August 2011 2 Client Signature: 2 Y y Date: I / // HCM Portfolio Manager: UB Administrative Officer• N Date: 5--111111 Date: F. / S ^ /f Central Contra Costa Sanitary District Investment Guidelines August 2011 3 In at*5 as Document The purpose'all irvestment Guidelines document (IGD) is to assist you and your Portfolio Manager in affective monitoring and evaluating the investment of your portfolio. Yourkwestment program Is defined in the various sections of the IGD by: 4. :Shiting in a written document your attitudes, expectations, objectives and guidelines for the investment of all assets. 2. Setting forth an investment structure for managing your portfolio. This structure Includes various asset classes, Investment management stytes, asset allocation and acceptable ranges that, in4,*W,-.,are expected to produce an appropriate level of overall diversification and total,inveloWnert-toturn over the investment time horizon. 3. Encouraging effective communications between you and your Portfolio Manager. 4. Complying with all applicable fiduciary, prudence and due diligence requirements pe enoed Investment professionals would utilize, and with all applicable laws, rules and reWlat" f fq various local, state, and federal entities that may impact your assets I • Your Portfolio 'ManaW is responsible for maintaining the balance between fixed Income and equity securities based on ft,-asset allocation. The following parameters shall be adhered to in managing the portfolio: Fixed Imil • The long-term ibied*r4me Investments (greater than seven-years in maturity) shall ,constitute 'norhora than 2611 and as little as 0% of the total Plan assets. • The intermediate4erm fixed incom Investments (between three-seven years in maturity) shall constitute no more than 60%, nor less than 25% of the total Plan assets. • The high-yield port nof- the Plan shall constitute no more than 10%, and as little as 01YC of the total Plan assets, • The convertible bond exposure she-11 - constitute no more than 10%, and as little as 0% of the total Plan • The short-term fixed- Income Investments (between one-three years in maturity) shall constitute more than 25%, and as little as 00/6 of the total Plan assets. Equity • The domestic large-cap el o o(the Plan s al constitute no m r a than 45% nor less than IS% of the total Plan assets. • The domestic mid-capitalization equity investments of the Plan shall constitute no more than 10%, and as little as 0% of the total Plan assets. • The domestic small capitalization equity investments of the Plan shelf constitute no more than 15% and as little as 0% of the total Man assets. 1p!lll�lllIl;llll1I 1!1711!1!11�1111 �illillillillillillilliiiij Illp W77-711*7777W,-M-17�- � , - , 11111111111111=77771t-? I I'll r The ktema ml equity investments of the PIj *W Witte no more than 15% aWas iittl as'0% of the total Plan assets. o TtWrsW estete investments of the Plan shall, coroftft n, o more than 10% and as M.aa d % of the total Plan assets. s r e• . Fixed Irrc me ' ,' o' M MIC Bonds 9 Non -U.S. Bonds A #AU • Emerging Markets • Real Estate Investment Trust (REITs) • Cash and Cash Enulvalents 00*40oft Cosm Sammy Mona 6sv Mt t3U" Awl2011 Crohibited assets • ' Precious metals r Venture Capital +� Short sales • ` `Purchases of Letter Stock, Private Placemernts, d kJOrect 0604ft Leveraged Transactions • Commodities Transactions Puts, calls, straddles, or other option strategies, 0: Purchases of real estate, with the exception of REITs • Derivatives, with exception of ETFs ebalsncin From time to time, market conditions may cause your asset allocation to very from the established target. To remain consist ed with the set allocation guidelines estabilshed'by this o Investment Guidelines document, y ut , Portfolio Manager will rebalance the portfolio oti "ji quarterly b. Your portfolio manager, is expected to manage your portfolio in a manner consistent with this Investment Guidelines document and in accordance with State and Federal taw and the Uniform Prudent Investor Act. HighMark Capital Management is a registered investment advisor and shall act as such until you decide otherwise. Your portfollo manager shall be responsible for 1. Designing, recommending and implementing an appropriate asset allocation consistent with the investment objectives, time horizon, risk profile, guidelines and constraints outlined in this statement. 2. Advising the committee about the selection of and the allocation of asset categories. 3. identifying speck assets and investment managers within each asset category. 4. Monitoring the performance of all selected assets. 5. Recommending changes to any of the above. 6. Periodically reviewing the suitability of the investments, being available to meet with the committee at least once each year, and being available at such other times within reason at your request. 7. Preparing and presenting appropriate reports. 8. Informing the committee if changes occur in personnel that are responsible for portfolio management or research. You shall be responsible for: 1. The oversight of the investment portfolio. 2. Providing your portfolio manager with all relevant information on the Plan, and shall notify him or her promptly of any changes to this information. 3. Advising your portfolio manager of any change In the Plan's circumstances, such as a change in the actuarial assumptions, which could possibly necessitate a change to your overall risk tolerance, time horizon or liquidity requirements, and thus would dictate a change to your overall investment objective and goals for the portfolio. 4. Monitoring performance by means of regular reviews to assure that objectives are being met and that the policy and guidelines are being followed. Gust Contra Goo Samary D*rwt hwesun at Guidetim Am** 2M 1 6 Communication As a matter of course, your portfolio manager shall keep you apprised of any material changes in HighMark Capital's outlook, recommended investment policy and tactics. In addition, your portfolio manager shall meet with you no less than annually to review and explain the portfolio's Investment results and any related issues. Your portfolio manager shall also be available on a reasonable basis for telephone communication when needed. Any material event that affects the ownership of HighMark Capital Management or the management of the portfolio must be reported immediately to you. Disclosures Union Bank N.A. and HighMark Capital Management, Inc. are wholly owned subsidiaries of UnionBanCal Corporation. Investments are not deposits or bank obligations, are not guaranteed by any government agency, and involve risk, including loss of principal Central Contra Costa Sanitary District Investment Guidefirm Augag 2011 PUBLIC AGENCY RETIREMENT SERVICES PARS CENTRAL CONTRA COSTA SANITARY DISTRICT PARS GASB 45 Program Monthly Account Report for the Period 6/1/2012 to 6/30/2012 Colette Curtis -Brown Finance Administrator Central Contra Costa Sanitary District 5019 Imhoff Place Martinez, CA 94553 Account Summary Beginning Ending Balance as of Balance as of Source 6/1/2012 Contributions Earnings Expenses Distributions Transfers 6/30/2012 Employer Contribution $22,304,581.81 $0.00 $421,344.82 $7,402.36 $0.00 $0.00 $22,718,524.27 Totals $22,304,581.81 $0.00 $421,344.82 $7,402.36 $0.00 $0.00 $22,718,524.27 Investment Selection Central Contra Costa Sanitary District 115 Trust Investment Objective Individual account based on Moderate HighMark PLUS. The dual goals of the Moderate Strategy are growth of principal and income. It is expected that dividend and interest income will comprise a significant portion of total return, although growth through capital appreciation is equally important. The portfolio will be allocated between equity and fixed income investments. Investment Return Annualized Return 1 -Month 3- Months 1 -Year 3-Years 5 -Years I 10 -Years Inception Date 1.89% -1.77% 2.39% 10.78% N/A N/A 3/19/2009 Information as provided by Union Bank, Trustee for PARS GASB 45 Program; Not FDIC Insured; No Bank Guarantee; May Lose Value Past Performance does not guarantee future results. Performance returns may not reflect the deduction of applicable fees, which could reduce returns. Information is deemed reliable but may be subject to change. Investment Return: Annualized rate of return is the return on an investment over a period other than one year multiplied or divided to give a comparable one -year return. Inception Date: Plans inception date 4350 Von Kansan Ave., Suite 100, Newport Beach, CA 92660 800.540.6369 Fax 949.250.1250 www.pars.org PUBUC AGENCY RE11REMENT SERVICES PARS CENTRAL CONTRA COSTA SANITARY DISTRICT PARS GASB 45 Program Colette Curtis -Brown Finance Administrator Central Contra Costa Sanitary District 5019 Imhoff Place Martinez, CA 94553 Account Summary Annual Account Report for the Period 7/1/2011 to 6/30/2012 Beginning Ending Balance as of Balance as of Source 7/1/2011 Contributions Earnings Expenses Distributions Transfers 6/30/2012 Employer Contribution $18,077,302.63 $4,131,600.00 $591,248.60 $81,626.96 $0.00 $0.00 $22,718,524.27 Totals $18,077,302.63 $4,131,600.00 $591,248.60 $81,626.96 $0.00 $0.00 $22,718,524.27 Investment Selection Central Contra Costa Sanitary District 115 Trust Investment Objective Individual account based on Moderate HighMark PLUS. The dual goals of the Moderate Strategy are growth of principal and income. It is expected that dividend and interest income will comprise a significant portion of total return, although growth through capital appreciation is equally important. The portfolio will be allocated between equity and fixed income investments. Investment Return Annualized Return 1 -Month 3- Months 1 -Year 3 -Years 5 -Years I 10 -Years Inception Date 1.89% -1.77% 2.39% 10.78% N/A N/A 3/19/2009 Information as provided by Union Bank, Trustee for PARS GASB 45 Program; Not FDIC Insured; No Bank Guarantee; May Lose Value Past Performance does not guarantee future results. Performance returns may not reflect the deduction of applicable fees, which could reduce returns. Information is deemed reliable but may be subject to change. Investment Return: Annualized rate of return is the return on an investment over a period other than one year multiplied or divided to give a comparable one -year return. Inception Date: Plans inception date 4350 Von Karrnan Ave., Suite 100, Newport Beach, CA 92660 800.540.6369 Fax 949.250.1250 www.pars.org HIGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results:" WHY THE PARS DIVERSIFIED CONSERVATIVE PORTFOLIO? Comprehensive Investment Solution HighMark® Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above - average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We've set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible Investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange - traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification -- asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive return potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide a consistent level of inflation - protected income over the long -term. The major portion of the assets will be fixed income related. Equity securities are utilized to provide inflation protection. Efficient Frontier 2 .� Balanced /Moderately Aggressive a Moderate 0 v Moderately Conservative 3 Conservative Risk (Standard Deviation) ASSET ALLOCATION — CONSERVATIVE PORTFOLIO Strategic Range Policy Tactical Equity 5 -20'% 15% 17% Fixed Income 60 -95% 80 %, 78% Cash 0 -20% ; "s, 5 % ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) • HighMark Plus (Active) Index Plus (Passive) Current Quarter* ............................ 0.48% Current Quarter* ............................ 0.55% Blended Benchmark *1 ............ .......................... 0.45% Blended Benchmark *............. .......................... 0.45% Year To Date* .... ............................... 4.34 %. Year To Date* .... ............................... 3.21% BlendedBenchinark * ............... .........................2.56% Blended Benchmark* ....................................... 2.56% 1 Year ................. ............................... 3.75% 1 Year................. ............................... 4.36 % Blended Benchmark ............... .......................... 3.99% Blended Benchmark.......... ............................... 3.99% 3 Year ................. ............................... 7.95% 3 Year................. ............................... 7.30% Blended Benchmark ............... ..........................6.08% Blended Benchmark ......................................... 6.08% 5 Year ................. ............................... 4.70% 5 Year................. ............................... 4.21 %i Blended Benchmark ............... ....,..................... 4.37% Blended Benclnnark............... .......................... 4.37% Inception To Date (96- Mos.) .......... 5.22% Inception To Date (96- Mos.) .......... 4.76% Blended Benchmark ............... .......................... 4.53% Blended Benchmark............... .......................... 4.53% *Returns less than 1 -year are notannual ized. 'Breakdown for Blended Benchmark:l2 S &P 500; 1 % Russell 2000,2 %MSCI EAFF.,40%ML 1 -3 Year CorpJGcvt,406BCAgg,5 %Citi 1 Mth T-Bill. Priorto April 2(X)7, the blended benchmarkswere 15% S&P 500,40% M1.1 -3Yr Corp/Gov, 40% BC Agg, and 5 %Citi 1 Mth T -Bill. ANNUAL RETURNS • HighMark Plus (Active) Index Plus (Passive) 2007 ....................... ..........................6.44% 2007....................... ..........................6.49% 2008 ................ ............................... - 9.04 %, 2008................ ............................... -6.70% 2009 ............... ............................... 15.59% 2009............... ............................... 10.48 %, 2010 ........................ .........................8.68 % 2010....................... ..........................7.67% 2011 ......................... ........................2.19 % 2011....................... ..........................3.70% PORTFOLIO FACTS • HighMark Plus (Active) Index Plus (Passive) Inception Date ............................ 07/2004 Inception Date ............................ 07/2004 No. of Funds in Portfolio ...................... 20 No. of Funds in Portfolio...................... 14 A newly funded account enters a composite after three full months of management and is removed from a composite at the end of the last full month that the account is consistent with the criteria of the composite. Terminated accounts are included in the historical results 0f3 composite through the last full month prior to closing. Composites may include accounts invested in domestic (U.S.) or international (non -U.S.) individual securities, funds, or a combination thereof. Account exclusions based on equity security concentrations are applied quarterly. Employing a construction methodology different from the above could lead to different results. HIGHMARK® CAPITAL MANAGEMENT Vision. Discipline. Results:" ABOUT THE ADVISER HighMark Capital Management, Inc., the adviser to HighMark Funds, has over 90 years (including predecessor organizations) of institutional money management experience with more than $17.0 billion in assets under management. HighMark has a longterm disciplined approach to money management and currently manages assets for a wide array of clients. ABOUT THE PORTFOLIO MANAGEMENT TEAM Ar..: 3.rown, "A-i' Senior Portfolio Manager Investment Experience: since 1994 HighMark Tenure: since 1997 Education: MBA, University of Southern California; BA, University of Southern California Tom Cheo Senior Portfolio Manager Investment Experience: since 1980 HighMark Tenure: since 2000 Education: BA, Boston University Ahmed Khatib, CFP° Portfolio Manager Investment Experience: since 2000 HighMark Tenure: since 2006 Education: MBA, University of California, Irvine; BA, University of California, San Diego Mike Ladd, CFA®, CAIA, CMT, CFP° Senior Portfolio Manager Investment Experience: since 1993 HighMark Tenure: since 2008 Education: MBA, University of Oklahoma; BA, Oklahoma City University Anne Wimmer, CFA° Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education: BA, University of California, Santa Barbara Asset Allocation Committee Number of Members: 9 Average Years of Experience: 28 Average Tenure (Years): 18 Manager Review Committee Number of Members: 11 Average Years of Experience: 18 Average Tenure (Years): 7 SAMPLE HOLDINGS HighMark Plus (Active) Columbia Contrarian Core Z T. Rowe Price Growth Stock Columbia Small Cap Value II Z T. Rowe Price New Horizons HighMark International Opportunities HighMark Bond Vanguard Short Term Invest -Grade Adm Loomis Sayles Value Y PIMCO Total Return Dodge & Cox International Stock MFS International Growth I Sentinel Common Stock I Nuveen Real Estate Securities I TIAA -CREF Mid Cap Value HighMark Geneva Mid Cap Growth Harbor Capital Appreciation RS Emerging Markets Y T. Rowe Price Equity Income PIMCO High Yield STYLE Index Plus (Passive) iShares S &P 500 iShares S&P 500/Value iShares S&P 500 /Growth iShares S &P Small Cap 600 Value iShares S &P Small Cap 600 Growth iShares MSCI EAFE Vanguard Short -Term Invest -Grade Adm iShares Barclays Aggregate Bond iShares Cohen & Steers Realty Majors iShares Russell Midcap Value iShares Russell Midcap Growth SPDR Barclays Capital High Yield Bond Vanguard MSCI Emerging Markets ETF Holdings are subject to change at the discretion of the investment manager. High Yield 1.5% Small Cap 2.5% Large Cap Value 3.75% Real Estate 0.75% Cash 5.25% Intl Stocks 3% Mid Cap 2.5% Large Cap Growth 2 %• Large Cap Core 2.25% A Short -Term Bond 32% Interm -Term Bond 44.5% The performance records shown represent six weighted composites of tax exemk t accounts that meet the following criteria: Composites are managed by I lighMark's I lighMark Capital Advisors (FICA) with full investment authority according to the PARS Conservative active and passive objectives and do not have equity concentration of 25% or more in one common stock security. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are Calculated based on tradrdate accounting. es Fe charged are at the discretion off lighMark and Union Bank,@ N.A. (Union Bank); investment advisory fees are described in fart 2 of I lighMark's Form AIN An account's return will be reduced by investment advisory fees and any other expenses that may he incurred in the management of an account. HCA's standard management fee sClledelle is 1.00% annually. Assuming an investment for five years, a 5%) annual total return, and an annual fee rate of 1.0096 deducted from the assets at market value at the end of each year, a $10 mill ion initial value would grow to $12.14 million after fees (Net -of -Pecs) and $12.76 million before fees (Gross -of- Fees). Additional Information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request. Blended benchmarks represent I lighMark's strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory ties or other expenses of inve.tinb but assumes the reinvestment of dividends and other earnings. An investor Cannot invest directly in an index. The unmanaged S &P 500 Index is representative of the performance of large -inpanies in the U.S. stock market. The MSCI GAFF. Index is a free float- acijJUAed market capitalization index designed to measure developed ma rket eyu itv Ecrtbrmance•, excluding the U.S, and Canada. The Russell 2000index measures the performance of the small -rap segment of the U.S. equity universe. The unmanaged Barclays Capital MC) U.S. Aggregate Band Index is generally representative of the U.S. taxable bond market as a whole. The Merrill Lynch (ML) 1 -3 Year U.S. Corporate Government I ndc:x t racks the bond performance of The ML U.S. Corporate i% Government Index, with a remaining term to final maturity less than 3 ycars.'Fhe unmanaged Citigroup 1 -Month Treasury Bill Index tracks theyield ofthe 1 -month U.S. Treasury Bill. Individual account management and amstnution will vary depending on each client's investment needs and obieuives including liquidity needs. tax situation, risk tolerance, and security restrictions. There can be no guarantee that this or anv investment strategy will achieve its ohjcaive. fast performance does not guarantee future results. Securities investments involve risk, including the possible loss of the principul amount invested. Investments are not deposits of the adviser's parent or any of the adviser's affiliates, and are not FDIC insured. HighMark is a whi,lly owned subsidiary of Union Bank, and manages institutional separate account porttiilios for a wide variety of entities. It also .serves as i i rvest n n•nt adviser for mutual funds and other types of funds, and sub - advises certain Union Bank collective funds. Union Bank -i +,, i, li.n v „f l lnionBanC:al Corporation, provides certain services to I lighMark and is compensated for these services. HIGHMARK0 CAPITAL MANAGEMENT Vision. Discipline. Results:" WHYTHE PARS DIVERSIFIED MODERATELY CONSERVATIVE PORTFOLIO? Comprehensive Investment Solution HighMark° Capital Management, Inc: s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above - average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We've set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible Investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange - traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification -- asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive return potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide current income and moderate capital appreciation. The major portion of the assets is committed to income - producing securities. Market fluctuations should be expected. c a 0 a io 3 c Conservative Efficient Frontier Balanced/Moderately Aggressive Moderate Moderately Conservative Risk (Standard Deviation) ASSET ALLOCATION — MODERATELY CONSERVATIVE PORTFOLIO Strategic Range Policy Equity 2040% 300) Fixed Income. 50 -80% 65% Cash 0-20% 5% Tactical 3 TY6 64% 3' %i ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) HighMark Plus (Active) Current Quarter* .......................... -0.43% Blender( Benchmark *t ...... ............................... .0.05% Year To Date* .... ............................... 5.52% Blended Benchmark* ........ ............................... 3.81% 1 Year ................. ............................... 3.48% Blended Benchmark .......... ............................... 4.45% 3 Year ................. ............................... 9.80% Blended Benchm ark .......... ............................... 8.15% 5 Year ................. ............................... 4.09% Blended Benchmark .......... ............................... 3.92% Inception To Date (95- Mos.) .......... 5.66% Blended Benchmark .......... ............................... 4.83% Index Plus (Passive) Current Quarter * .......................... - 0.13% Blended Benchmark * ............. ..........................0.05% - 12.40% Year To Date* .... ............................... 4.18% Blended Benchmark* ........ ............................... 3.81% 1 Year ................. ............................... 4.24% Blended Benchmark .......... ............................... 4.45% 3 Year ................. ............................... 8.98% Blended Benchni ark .......... ............................... 8.15% 5 Year ................. ............................... 3.49% Blended Benchmark .......... ............................... 3.92% Inception To Date (86- Mos.) .......... 4.94% Blended Benchmark .......... ............................... 4.79% * Returns less- than 1 -year are not annualized. 'Breakdown for Blended Benchmark: 25%S3P 500; 1.5% Russell 2000, 3.5% MSCI EAFE, 25% ML. 1 -3 Year Corp. /Govt, 40% BC Agg, 5% Citi 1 Mth T -Bill. Prior to April 2007, the blended benchmarks were 30% S&P 500, 25% ML 1 -3Yr Corp /Gov, 40 %13C Agg, and 5 %Citi 1 Mth T -Bill. ANNUAL RETURNS 6.32% • HighMark Plus (Active) - 12.40% 2007 .................. ............................... 6.59% 2008 .............. ............................... - 15.37% 2009 ............... ............................... 17.64% 2010 ............... ............................... 10.46% 2011 .................. ............................... 1.75% PORTFOLIO FACTS • HighMark Plus (Active) Inception Date .............................. 8/2004 No. of Funds in Portfolio ...................... 20 Index Plus (Passive) 2007 .................. ............................... 6.32% 2008 .............. ............................... - 12.40% 2009 .................. . ...........................11.9 2' '/ 0 2010 .................. ............................... 9.72[% 2011 .................. ............................... 3.24% Index Plus (Passive) Inception Date ............................ 05/2005 No. of Funds in Portfolio ...................... 14 A newly funded account enters a composite after three Full months of management and is removed from a composite at the end of the last full month that the account is consistent with the : riteria of th, —inpositc. Terminated accounts are included in the historical results of a composite through the last full month prior to, 1—in,; Composites max, include accounts invested in domestic (U.S.) or international (aon -U.S.) individual securities, fund.. ,i . —inknotion thereof. Account exclusions based on equity security concentrations are applied quarterly. Fmplaying a . �vio i o. t i iii mm th-lology different from the above could lead to different results. HIGHMARK® CAPITAL MANAGEMENT Vision. Discipline. Results ?" ABOUT THE ADVISER HighMark Capital Management, Inc., the adviser to HighMark Funds, has over 90 years (including predecessor organizations) of institutional money management experience with more than $17.0 billion in assets under management. HighMark has a longterm disciplined approach to money management and currently manages assets for a wide array of clients. ABOUT THE PORTFOLIO MANAGEMENT TEAM r-. I _ _ .vn, CFAO Senior Portfolio Manager Investment Experience: since 1994 HighMark Tenure: since 1997 Education: MBA, University of Southern California; BA, University of Southern California Tom Cheo Senior Portfolio Manager Investment Experience: since 1980 HighMark Tenure: since 2000 Education: BA, Boston University Ahmed Khatib, CFP� Portfolio Manager Investment Experience: since 2000 HighMark Tenure: since 2006 Education: MBA, University of California, Irvine; BA, University of California, San Diego Mike Ladd, CFA's, CAIA, CMT, CFP° Senior Portfolio Manager Investment Experience: since 1993 HighMark Tenure: since 2008 Education: MBA, University of Oklahoma; BA, Oklahoma City University Anne Wimmer, CFA° Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education: BA, University of California, Santa Barbara Asset Allocation Committee Number of Members: 9 Average Years of Experience: 28 Average Tenure (Years): 18 Manager Review Committee Number of Members: 11 Average Years of Experience: 18 Average Tenure (Years): 7 SAMPLE HOLDINGS HighMark Plus (Active) Columbia Contrarian Core Z T Rowe Price Growth Stock Columbia Small Cap Value II Z T Rowe Price New Horizons HighMark International Opportunities HighMark Bond Vanguard Short Term Invest -Grade Adm Loomis Sayles Value Y PIMCO Total Return Dodge & Cox International Stock MFS International Growth I Sentinel Common Stock I Nuve.en Real Estate Securities I TIAA -CREF Mid Cap Value HighMark Geneva Mid Cap Growth Harbor Capital Appreciation RS Emerging Markets Y T. Rowe Price Equity Income PIMCO High Yield STYLE High Yiel Mid ( 4 °r Large Cap Grow 4.75% Large Cap Value 7% Large Ca Core 5.25% Index Plus (Passive) iShares S &P 500 iShares S &P 500/Value iShares S &P 500 /Growth iShares S&P Small Cap 600 Value iShares S &P Small Cap 600 Growth iShares MSCI EAFE Vanguard Short -Term Invest -Grade Adm iShares Barclays Aggregate Bond iShares Cohen & Steers Realty Majors iShares Russell Midcap Value iShares Russell Midcap Growth SPDR Barclays Capital High Yield Bond Vanguard MSCI Emerging Markets ETF Holdings are subject to change at the discretion of the investment manager. Intl Stocks Cash 6.5% 2.75% Rohl [�r�ro Interco Term Bond 48.5% Short-Term Bond 13.75% The performance records shown represent size - weighted composites of tax exempt accounts that meet the following criteria: The performance records shown re p�resent size-weighted composites of tax exempt accounts that meat the following criteria: Composite are managed by HighMark's I IighMark Capital Advisors (HCA) with full investment authority according to the PARS Moderately Conservative active and passive objectives and do not have equity concentration of 25 %or more in one common stock security. Perfi,rmance results arc calculated and prey nted in U.S, dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the dcchi Lion of trading expenses. Return are calculated based on trade -date accounting. Fees charged are at the discretion of I IighMark and Union Bank,® N.A. (Union Bank): investment advisory fees are described in Part 2 of 1 lighMat -Vs Form ADV. An account's return will he reduced by investment advisory fees and any otherexpenes that may be incurred in the management of an account. I ICA's standard management fee schedule is 1 (('ft annually. Assuming an investment for five years, a 5% annual total rctum,andananm131fcCratCof 1.1 X % deducted from the assets at market value at the end ofeach year, a$ 10 mill ion initial value would brow to $12.14 million after teas (Net -,f -Fees) and $12.76 million before fees (Gross -of= Fees). Additional information regarding the Firm's policies and procedures for uilculating and reporting performance results is available upon request. Blended benchmarks represent I IighMark's strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividend and other earnings. An investor cannot inve t dire t,y man index. The unmanaged S&P 500 Index is representative of the perfi nnancc of large wm,anies in the U.S. stock market. The MSCI SAFE Index is a free float - adjusted market capitalization index designed to measure deve�opal market c uity performance, excluding the U.S. and Canada. The Russell 2(X X) Index measures the performance of the• smalltiap segment oft e U.S. equity universe The ummanayud Barclays Cakital (BC) U.S. Aggregate Bond Index is gg,nerally reppresentative of the I I S, taxable bond market as a whole. The Merrill Lynch (ML) 1 -3 Year U.S. Corporate $ Government Index tracks the bon l ,erfl,r m s ane of'1•he ML U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years. The ummnnagv � e: itign pup I -Month Treasury Bill Index track the yield of the 1 -month U.S. Treasury Bill. Individual account management and construction will vary depending on each client's investment needs and objectives including I need', tax situation, risk tolerance, and security restrictions. There can he no guarantee that this or any investment st ateggyy will achieve its obicctivc. Punt performance des not guarantee future results. Securities investments involve risk, including the e"e loss of the principal amount invested. Investments are not deposits ofthe advisees parent or any of the adviser's affiliates, andpare not FDIC insured. I IighMark is n wholly owned whsldlnrryy of Union Bank, and managges nstitutional separate account portfolios for a wide variety of entities. It also serve as in —uncut adviser for mutual fund and urther types of timd , and sub-advises certain Union Bank colle Live funds. Union Bank, a subIIIINI v of 1 inionflanlal Corporation, provides certain services to HighMark and is compensated for these services. HIGHMARKD CAPITAL MANAGEMENT Vision. Discipline. Results" WHY THE PARS DIVERSIFIED MODERATE PORTFOLIO? Comprehensive Investment Solution HighMark° Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above - average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We've set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible Investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange - traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification - asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive return potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide growth of principal and income. It is expected that dividend and interest income will comprise a significant portion of total return, although growth through capital appreciation is equally important. a 0 d �o 72 3 v o: Efficient Frontier Risk (Standard Deviation) ASSET ALLOCATION - MODERATE PORTFOLIO - 1.55% Blended Bendunark*i ...... ............................... Strategic Range Policy Tactical Equity 40 -6094 50 %. 53 %i Fixed Income 40 -60% 45% 44% Cash 0 -20% 5% 3% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) HighMark Plus (Active) Current Quarter * .......................... - 1.55% Blended Bendunark*i ...... ............................... -0.88% Year To Date* .... ............................... 6.50 %i Blended Benchmark ' .......... .._ ......................... 5.31% 1 Year ................. ............................... 3.00% Blended Benchmark .......... ............................... 4.40% 3 Year .............. ............................... 11.34% Blended Benchmark ........ ............................... 10.40% 5 Year ................. ............................... 2.63% Blended Benchmurk ......................................... 2.90% Inception To Date (93- Mos.) .......... 5.12% Blended Bench mark .......... ............................... 4.80% Index Plus (Passive) Current Quarter* .......................... -1.01% Blended Bend: nark* ....... ............................... -0.88% Year To Date* .... ............................... 5.61% Blended Benchmark* ........ ............................... 5.31% 1 Year ................. ............................... 3.71% Blended Benchmark ......... ............._.......... _ 4.40% 3 Year .............. ............................... 10.98 %, Blended Benchmark ........ ............................... 10.40% 5 Year ................. ............................... 2.92% Blended Bendunark .......... ............................... 2.90% Inception To Date (74- Mos.) .......... 4.12% Blended Benchnuirk .......... ............................... 4.18% *Returns less than 1 -year are not annualized. 'Breakdown for Bkended Benchmark: 43% S&P 500; 2% Russell 20f )0, 5%MSCI EAlT, 15% ML 1 -3 Year CorpJGovt, 3095 BC Agg, 5% Citi 1 Mth T -Bill. Prior to Apri12007, the blended benchmarks were 50%S&P 500, 15% ML 1 -3Yr CoridGov, 3096 BC Agg, and 5%Citi I Mth T -Bill. ANNUAL RETURNS • HighMark Plus (Active) 2007 .................. ............................... 5.88% 2008 .............. ............................... - 22.88 %> 2009 ............... ............................... 21.47% 2010 ............... ............................... 12.42% 2011 ....................... ..........................0.55% PORTFOLIO FACTS HighMark Plus (Active) Inception Date ............................ 10/2004 No. of Funds in Portfolio ...................... 20 • Index Plus (Passive) 2007 .................. ............................... 5.78% 2008 .............. ............................... - 18.14 %, 2009 ............... ............................... 16.05% 2010 ............... ............................... 11.77% 2011 .................. ............................... 2.29% • Index Plus (Passive) Inception Date ............................ 05/2006 No. of Funds in Portfolio ...................... 14 A newly funded account enters- a composite after three full months of management and is removed from a composite at the end of the last full month that the account is consistent with the criteria of the composite Terminated accounts are included in the historical results of a composite through the last full month prior to closing. Composites may include accounts invested in domestic (U.S.) or international (non-U.S.) individual securities, funds, or a combination thereof. Account exclusions based on equity security concentrations are applied quarterly. Employing a construction methodology different from the above could lead to different results. HIGHMARK® CAPITAL MANAGEMENT Vision. Discipline. Results:' ABOUT THE ADVISER HighMark Capital Management, Inc., the adviser to HighMark Funds, has over 90 years (including predecessor organizations) of institutional money management experience with more than $17.0 billion in assets under management. HighMark has a longterm disciplined approach to money management and currently manages assets for a wide array of clients. ABOUT THE PORTFOLIO MANAGEMENT TEAM A— - - _ ,:on, C:.. Senior Portfolio Manager Investment Experience: since 1994 HighMark Tenure: since 1997 Education: MBA, University of Southern California; BA, University of Southern California Tom Cheo Senior Portfolio Manager Investment Experience: since 1980 HighMark Tenure: since 2000 Education: BA, Boston University Ahmed Khatib, CFP`1 Portfolio Manager Investment Experience: since 2000 HighMark Tenure: since 2006 Education: MBA, University of California, Irvine; BA, University of California, San Diego Mike Ladd, CFA's, CAIA, CMT, CFP° Senior Portfolio Manager Investment Experience: since 1993 HighMa rk Tenure: since 2008 Education: MBA, University of Oklahoma; BA, Oklahoma City University Anne Wimmer, CFAI Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education: BA, University of California, Santa Barbara Asset Allocation Committee Number of Members: 9 Average Years of Experience: 28 Average Tenure (Years): 18 Manager Review Committee Number of Members: 11 Average Years of Experience: 18 Average Tenure (Years): 7 SAMPLE HOLDINGS HighMark Plus (Active) Columbia Contrarian Core Z T. Rowe Price Growth Stock Columbia Small Cap Value II Z T. Rowe Price New Horizons HighMark International Opportunities HighMark Bond Vanguard Short Term Invest -Grade Adm Loomis Sayles Value Y PIMCO Total Return Dodge & Cox International Stock MFS International Growth I Sentinel Common Stock I Nuveen Real Estate Securities I TIAA -CREF Mid Cap Value HighMark Geneva Mid Cap Growth Harbor Capital Appreciation RS Emerging Markets Y T Rowe Price Equity Income PIMCO High Yield High Yieh Mid Cap 4.7 Large Cap Growth 9.75% Large C Value 13% Index Plus (Passive) iShares S &P 500 iShares S &P 500/Value iShares S &P 500 /Growth iShares S &P Small Cap 600 Value iShares S&P Small Cap 600 Growth iShares MSCI EAFE Vanguard Short Term Invest -Grade Adm. iShares Barclays Aggregate Bond iShares Cohen & Steers Realty Majors iShares Russell Midcap Value iShares Russell Midcap Growth SPDR Barclays Capital High Yield Bond Vanguard MSCI Emerging Markets ETF Holdings are subject to change at the discretion of the investment manager. Intl Stocks Cash Small Can 8.25% 2.75% Interm Term Bond 32.25% Large Cap Short-Term Core Bond 10% 10.25% The performance records shown represent size wer�hted comlwsites oftaxexempt accounts that meet the following criteria: Composites are managed by HighMark's HighMark Capital Advisors (HCA) with full investment authority according to the PARS Moderate active and passive objectives and do not have equity concentration 425% or more in one common stock security. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory ties, custody fees, or taxes but do reflect the dcductiunoftradingexpenses. Returns are calculated based ontrade datearcuunting .Foeschar, edareat the discretion of[ lighMark and Union Bank,® N.A. (Union Bank.); investment advisory fees aredescribed in Part 2 off limark's Form ADV. An account's return will be reduced by investment advisory fees and any other expenses that may be incurrred in the management of an account. f ICA's standard management fee schedule is 1.00% annually. Assuming an investment for five years, a 595 annual total return, and an annual tee rate of IA A R, deducted from the assets at market value at the end of each year, a $10 million initial value would brow to $12.14 million after tees (Net-of-Fees) and $12.7(1 million before fees (Gross -of -Fens). Additional information regarding the firm's policies a nd prca c• lures h r calculating and reporting performance results is available upon mque t. Blended benchmarks represent I lighMark's strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other c,x}�doses of inv -sti�ngb but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500Index is representative of the pe ibrmance of large cornkklanies in the U.S. stock market. The MSCI EAI'E Index is a free float- adjiuteei market capitalization index d signed to measure dcvrlapc market c ttufty pe formancc excluding the U.S. and Canada. The Rusdl 200( Index measures the pertorniancc of the smaller ❑p se �mrnt of the U.S. equity universe. The unmana! L� ch I ) I Ya rU ed Banlays Capital (BC) U.S. Aggregate Bond Index is generall rcF nsenta[ive of ehr�.S. taxable hood market as a whole. The Me riln Iex trathe bond herformancc• ufThc ML USCorrpprate government Inxwith a remaining term to fiyears .Thrunmanagn itigrotrp IManthTma'ury .1 1ndextrathe,6 ofhe 1 -month U.S. Treasury Bill. Individual account management and construction will vary depending on each client's investment needs and objectives including liquidity needs, tax situation, risk tolerance, and security restrictions. There can be no guarantee that this or any investment strategy will achieve its objective. Past perfumranre does not guarantee future results. Securities investments involve risk, including the possible loss of the principal amount invested. Investments are not deposits of the adviser's parent or any ofthe adviser's affiliates, and are not FDIC insured. flighMark is a wholly owned subsidiary of Union Bank, and rnanags institutional separate account portfolios for a wide variety of entities. It also serves as investment adviser for mutual funds and other types of funds, and sub-advises certain Union Bank collective funds. Union Bank, a subsidiary of UnionBanCal Corporation, provides certain services to HighMark and is compensated for these services. HIGHMARK® CAPITAL MANAGEMENT Vision. Discipline. Results:" WHYTHE PARS DIVERSIFIED BALANCED /MODERATELY AGGRESSIVE PORTFOLIO? Comprehensive Investment Solution HighMark° Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above - average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We've set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible Investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange - traded funds. Both investment options leverage High Mark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification -- asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive return potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide growth of principal and income. While dividend and interest income are an important component of the objective's total return, it is expected that capital appreciation will comprise a larger portion of the total return. Efficient Frontier 2 Balanced /Moderately Aggressive o Moderate v Moderately Conservative 3 XConservative Risk (Standard Deviation) ASSET ALLOCATION — BALANCED/ MODERATELY AGGRESSIVE PORTFOLIO Tactical 62% 36% 2% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) HighMark Plus (Active) Current Quarter * .......................... Strategic Range Policy Equity 50 -701N, 60% Fixed Income 30 -50% 35 % , Cash 0 -20 % 5% Tactical 62% 36% 2% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) HighMark Plus (Active) Current Quarter * .......................... - 2.15 %i Blended Benchmark * r ...... ............................... .1.24% Year To Date* .... ............................... 6.75% Blended Benc/ nnark * ........ ............................... 6.12% 1 Year ................. ............................... 1.81% Blended Benchmark .......... ............................... 4.55% 3 Year .............. ............................... 11,51% Blended Benchmark ........ ............................... 11.74% 5 Year ................. ............................... 1.78% Blended Benchmark .......... ............................... 2.48% Inception To Date (69- Mos.) .......... 3.01% Blended Benchmark .......... ............................... 3.76% Index Plus (Passive) Current Quarter * .......................... - 1.55% Blended Benclunark*' ...... ............................... -1.24% Year To Date* .... ............................... 6.05% Blended Benchmark* ........ ............................... 6.12% 1 Year ................. ............................... 3.06% Blended Benchmark .......... ............................... 4.55% 3 Year .............. ............................... 11.65 % Blended Benchmark ........ ............................... 11.74% 5 Year... ................................................ N/A Blended Benchmark .......... ............................... 2.48% Inception To Date (57- Mos.) .......... 1.63% Blended Benchmark ............... .......................... 2.16% * Returns Ices than 1 -year are net annualized. 'Breakdown fhr Blended Benchmark: 5I %S &P 50U; 3% Russell 2(X10, fill MSCI EAPE, 596 ML l -3 Year CcrpJGevt, 301Ni BC Agg, 5%Citi 1 Mth T -Bill. Priar to April 1-007, the hlended henclnnnrks were tit Ai S &P 500, 576 ML 1 -3Yr C,wrV G %, 30% BC Agg, and 5%c:w l Mth T -Bill. ANNUAL RETURNS HighMark Plus (Active) 2007 .................. ............................... 5.41% 2008 .............. ............................... - 25.80% 2009 ............... ............................... 21.43% 2010 ............... ............................... 14.11% 2011 ................ ............................... -0.46% PORTFOLIO FACTS • HighMark Plus (Active) Inception Date ............................ 10/2006 No. of Funds in Portfolio ...................... 20 Index Plus (Passive) 2007 ..................... ............................... N/A 2008 .............. ............................... - 23.22% 2009 ............... ............................... 17.62% 2010 ............... ............................... 12.76 %r 2011 .................. ............................... 1.60% Index Plus (Passive) Inception Date ............................ 10/2007 No. of Funds in Portfolio ...................... 14 A newly funded account enters a composite after three full months of management and is removed from a composite at the end of the last full month that the account is consistent with the criteria of the composite. Terminated accounts are included in the historical results of a composite through the last full month prior to dosing. Composites may include accounts invested in domestic (U.S.) or international (non -U.S.) individual securities, funds, or a combination thereof. Account exclusions based on equity security concentrations are applied quarterly. Employing a construction methodology different from the above could lead to different results. H IGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results" ABOUT THE ADVISER HighMark Capital Management, Inc., the adviser to HighMark Funds, has over 90 years (including predecessor organizations) of institutional money management experience with more than $17.0 billion in assets under management. HighMark has a longterm disciplined approach to money management and currently manages assets for a wide array of clients. ABOUTTHE PORTFOLIO MANAGEMENTTEAM Andrew Brown, CFA® Senior Portfolio Manager Investment Experience: since 1994 HighMark Tenure: since 1997 Education: MBA, University of Southern California; BA, University of Southern California Tom Cheo Senior Portfolio Manager Investment Experience: since 1980 HighMark Tenure: since 2(X)0 Education: BA, Boston University Ahmed Khatib, CFP� Portfolio Manager Investment Experience: since 2000 HighMark Tenure: since 2006 Education: MBA, University of California, Irvine; BA, University of California, San Diego Mike Ladd, CFAI, CAIA, CMT, CFP''' Senior Portfolio Manager Investment Experience: since 1993 HighMark Tenure: since 2(x)8 Education: MBA, University of Oklahoma; BA, Oklahoma City University Anne Wimmer, CFA® Senior Portfolio Manager Investment Experience: since 1987 HighiiMark Tenure: since 2(X)7 Education: BA, University of California, Santa Barbara Asset Allocation Committee Number of Members: 9 Average Years of Experience: 28 Average Tenure (Years): 18 Manager Review Committee Number of Members: 11 Average Years of Experience: 18 Average Tenure (Years): 7 SAMPLE HOLDINGS HighMark Plus (Active) Columbia Contrarian Core Z T Rowe Price Growth Stock Columbia Small Cap Value II Z T Rowe Price New Horizons HighMark International Opportunities HighMark Bond Vanguard Short Term Invest -Grade Adm Loomis Sayles Value Y PIMCO Total Return Dodge & Cox International Stock MFS International Growth I Sentinel Common Stock I Nuveen Real Estate Securities I TIAA -CREF Mid Cap Value HighMark Geneva Mid Cap Growth Harbor Capital Appreciation RS Emerging Markets Y T. Rowe Price Equity Income PIMCO High Yield STYLE Index Plus (Passive) iShares S &P 500 iShares S &P 500/Value iShares S&P 500 /Growth iShares S &P Small Cap 600 Value iShares S &P Small Cap 600 Growth iShares MSCI EAFE Vanguard Short -Term Invest -Grade Adm iShares Barclays Aggregate Bond iShares Cohen & Steers Realty Majors iShares Russell Midcap Value iShares Russell Midcap Growth SPDR Barclays Capital HighYield Bond Vanguard MSCI Emerging Markets ETF Holdings are subject to change at the discretion of the investment manager. Cash 2% Real Estate 2% Short -Term Bond 8.5% Interm -Term Bond 26% The performance records shown rc44iv ntsvAweightedcumpositesoftaxexemptaccountsthatmeetthefollowingcriteria :Compositesare managed by 1- 11"ark's I IighMark Capital Advisors (I ICA) with fill investment authority according to the PARS Balan eL Moderately Aggressive active and passive objectives and do not have equity concentration of 25% or more in one common stuck sccvrity. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading ex nses. Returns are calculated based on trademdate accounting Pecs charged are at the liscretion of I- IighMark and Union Bank,® NA I,Union Bank); investment advisory fives are described in Part 2 of F IighMark's Form MW An account's return will he rduccd by investment advisory fees and any other expenses that may be incurred in the management of an account. FICA's standard management fct• schedule is 1.0096 annually. Assuming an investment for five years, a 5%ammual total return, and an annual fee me of L1x P6 deducted from the assetsat market valueat the end of each year, a $10 million initial value would grow to $12.14 million after fits (Netof -Pecs) and $12.76 million before fees (Grossof- Fees). Additional infomnation regarding the firm's policies and procedures for calculating and reporting performance results is available upon request. Blended benchmarks represent I IighMark's strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment oftlividends and other earnings. An investor cannot invest directly in an index. The unmanaged SO 500 Index is representative ofthe performance of large companies in the U.S. stock market. The MSCI FAFF. Index is a free float - adjusted market capitalization index designed to measure developed market equity lx rf6miant% excluding the U.S. and Canada. The Russell 2000 Index measures the performance of the small <ap segment ofthe U.S. equity univem', The unmanaged Barclays Capital (BC) U.S. Aggregate Bond Index is generally representative ofthe U.S. taxable bond market as a Whole. The Merrill Lynch (ML)1 -3 Year US. Corporate R Goverment Index tracksthe bond performance otfihe ML U.S. Corporate R Government Index, with a remaining term to final maturity less than 3 years. The unmanaged Citig;roup 1 -Month Treasury Bill Index tracks the yield of the I -month U.S. Treasury Bill. Individual account management and .instruction will vary do ending on each client's investment needs and objectives including liquidity needs, tax situation, risk toles c•, and security nstrktions. T�ere can lie no yvarantee that this or any investment stratcey will achieve its objective. Past perfiormancc do,,, nut gum aster future results. Securities investments involve risk, including the possible loss ofthe principal amount invested. Investments are not deposits ofthe adviser's parent or any ofthe adviser's affiliates, and are not FDIC insured. HishMark is a wholly ownctl subsidiary of Union Bank, and manages institutional separate account purtfulios fora wide variety of entities. It also erves as investnxsa adviser for nuaeal times and other types of funds, and sulradviscs certain Union Bank collective funds. Union Bank, a subsidiary of Unionllane:al Corporation, provides certain services to HighMark and is compensated forthese servics. Intl Stocks Small Cap 9.5% 8% High Yield 1.5 Mid Cap 5.75% Large Cap Growth 11% Large Cap Value 14.25% Large Cap Core 11.5% Cash 2% Real Estate 2% Short -Term Bond 8.5% Interm -Term Bond 26% The performance records shown rc44iv ntsvAweightedcumpositesoftaxexemptaccountsthatmeetthefollowingcriteria :Compositesare managed by 1- 11"ark's I IighMark Capital Advisors (I ICA) with fill investment authority according to the PARS Balan eL Moderately Aggressive active and passive objectives and do not have equity concentration of 25% or more in one common stuck sccvrity. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading ex nses. Returns are calculated based on trademdate accounting Pecs charged are at the liscretion of I- IighMark and Union Bank,® NA I,Union Bank); investment advisory fives are described in Part 2 of F IighMark's Form MW An account's return will he rduccd by investment advisory fees and any other expenses that may be incurred in the management of an account. FICA's standard management fct• schedule is 1.0096 annually. Assuming an investment for five years, a 5%ammual total return, and an annual fee me of L1x P6 deducted from the assetsat market valueat the end of each year, a $10 million initial value would grow to $12.14 million after fits (Netof -Pecs) and $12.76 million before fees (Grossof- Fees). Additional infomnation regarding the firm's policies and procedures for calculating and reporting performance results is available upon request. Blended benchmarks represent I IighMark's strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment oftlividends and other earnings. An investor cannot invest directly in an index. The unmanaged SO 500 Index is representative ofthe performance of large companies in the U.S. stock market. The MSCI FAFF. Index is a free float - adjusted market capitalization index designed to measure developed market equity lx rf6miant% excluding the U.S. and Canada. The Russell 2000 Index measures the performance of the small <ap segment ofthe U.S. equity univem', The unmanaged Barclays Capital (BC) U.S. Aggregate Bond Index is generally representative ofthe U.S. taxable bond market as a Whole. The Merrill Lynch (ML)1 -3 Year US. Corporate R Goverment Index tracksthe bond performance otfihe ML U.S. Corporate R Government Index, with a remaining term to final maturity less than 3 years. The unmanaged Citig;roup 1 -Month Treasury Bill Index tracks the yield of the I -month U.S. Treasury Bill. Individual account management and .instruction will vary do ending on each client's investment needs and objectives including liquidity needs, tax situation, risk toles c•, and security nstrktions. T�ere can lie no yvarantee that this or any investment stratcey will achieve its objective. Past perfiormancc do,,, nut gum aster future results. Securities investments involve risk, including the possible loss ofthe principal amount invested. Investments are not deposits ofthe adviser's parent or any ofthe adviser's affiliates, and are not FDIC insured. HishMark is a wholly ownctl subsidiary of Union Bank, and manages institutional separate account purtfulios fora wide variety of entities. It also erves as investnxsa adviser for nuaeal times and other types of funds, and sulradviscs certain Union Bank collective funds. Union Bank, a subsidiary of Unionllane:al Corporation, provides certain services to HighMark and is compensated forthese servics.