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HomeMy WebLinkAbout03. GASB 45 Trust First Quarter Report3. OPEB Prefunding Trust Program Client Review gt"et Central Contra Costa Sanitar District -M v April 27, 2015 PUBLIC AGENCY REnREMENT SERVICES PARS TRUSTED SOLUTIONS. LASTING RESULTS. Contacts PARS Mitch Barker, Executive Vice President mbarker @pars.org; 800.540.6369 ext. 116 Rachael Sanders, Supervisor, Client Services rsanders @pars.org; 800.540.6369 ext. 121 HighMark Capital Management Andrew Brown, CFA, Vice President, Senior Portfolio Manager Andrew. Brown@ highmarkcapital.com; 415 -705 -7605 Role Corporate Experience OPEB Experience Number of plans under administration OPEB Trust Team PURUC AUNCy Rcnnu„eNT PARS sraVICES Trust Administrator and Consultant • Record keeping /Sub -trust accounting • Actuarial Coordination *Monitor Contributions/ Process Disbursements • Monitor Plan Compliance • Ongoing Client Liaison *Pre-fund Pension Option — NEW! 31 years (1984 — 2015) 18 years bank.. HIGHMARK0 CAPITAL MANAGEMENT Trustee • Safeguard plan assets • Oversight protection • Plan Fiduciary • Custodian of assets 152 years (1863 — 2015) 9 years Investment Manager • An investment sub - advisor to U.S. Bank • Open architecture • Investment policy assistance 1,400 plans for 700 public agencies 96 years (1919 — 2015) 18 vears Dollars under More than More than More than administration $1.7 billion $4 trillion $14.9 billion under management I MORE THAN 140 OPEB CLIENT AGENCIES .f .., . Alarneda Novato Calaveras County Water District South Montebello Irrigation District Allen Redding California JPIA South Orange County Wastewater Authority Atherton Rialto Central Contra Costa Sanitary District South Placer Fire Protection District Bakersfield Richmond Central Contra Costa Transit Authority Southern Marin Fire Protection District Brisbane Rosemead Coachella Valley Water District Superior Court of CA, County of Contra Costa Camarillo San Leandro Coastside Fire Protection District Superior Court of CA, County of Imperial Carver Santa Clara Contra Costa Mosquito & Vector Control District Superior Court of CA, County of Inyo Commerce Santa Clarita Crestline Village Water District Superior Court of CA, County of Kern Conroe Sausalito- Pension Too Delta Diablo Superior Court of CA, County of Marin Coppell Southlake Desert Recreation District Superior Court of CA, County of Merced Coronado Temple City Eastern Sierra Community Services District Superior Court of CA, County of Orange Covina Tyler Fresno Irrigation District Superior Court of CA, County of San Mateo Crescent City Union City Fresno Metropolitan Flood Control District Superior Court of CA, County of Shasta Cupertino Wareham Glenn- COlusa Irrigation District Superior Court of CA, County of Siskiyou Duarte Woodland Great Basin Unified Air Pollution Control District Superior Court of CA, County of Sonoma Elk Grove YOUntville Hayward Area Recreation & Park District Tarrant Regional Water District Euless Yucca Valley Housing Authority of Florence, SC Vallejo Sanitation & Flood Control District Fort Worth COUNTIES ErHousing Authority of the County of San Bernardino Ventura Regional Sanitation District Fountain Valley Amador INTELECOM Walnut Valley Water District Galt Contra Costa Menlo Park Fire Protection District West County Wastewater District Garland Imperial Mesa Water District Western Riverside Council of Governments Half Moon Bay Inyo Metropolitan Transportation Commission SCHOOL Haltom City Kern Mid - Peninsula Water District Bass Lake Joint UESD Ontario - Montclair SD Hercules Merced Mojave Desert Air Quality Management District Bellflower USD Red Bluff Joint ESD Hermosa Beach Mono Montecito Fire Protection District Calistoga Joint USD Red Bluff Joint UHSD Hurst Plumas Monterey Bay Unified Air Pollution Control District Centinela Valley UHSD River Delta USD La Verne Plymouth Moraga- Orinda Fire Protection District Corning Union ESD Riverdale Joint USD Lake Forest San Benito Municipal Water District of Orange County El Dorado UHSD San Bruno Park SD Lakewood Shasta Northern Lancaster County Reg Police Department Fowler USD Sari Marino USD Livermore Solano- Pension Too Orange County Vector Control District John Swett USD Trona JUSD Mammoth Lakes Sonoma Orange County Water District Lemon Grove SD Twin Rivers USD Mansfield Trinity Placer County Resource Conservation District Manteca USD Visalia USD North Richland Hills Yolo Rancho Murrieta Community Services District Moreno Valley USD COMMUNITY • Rowland Water District State Center CCD Yosemite CCD Santa Barbara County Law Library Updated April 8, 2015 .f Plan Overview Type of Plan: IRC Section 115 Irrevocable Exclusive Benefit Trust Trustee Approach: Discretionary Plan Effective Date: November 6, 2008 Plan Administrator: Thea Vassallo- Finance Manager Current Investment Strategy: Moderate: HighMark PLUS (Active) (Individual Account) As of 02/28/2015: Initial Contribution: March 2009— $560,000 Additional Contributions: $27,940,800 Total Contributions: $28,500,800 Disbursements: $0 Total Investment Earnings: $11,137,814 Account Balance: $39,183,715 -Selected on 11/18/2008 Summary of the Plan Activity Central Contra Costa Sanitary District Total Assets, Contributions & Disbursements $45,000,000 $40,000,000 $35,000,000 $30,000,000 $ 25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 oc ti° titi ,yti Plan Year Ending ti3 tia by *Plan Year Ending June 2015 is based on 8 months of activity through 02/28/2015. Plan Year End Contributions Disbursements Total Assets Jun -09 $2,240,000 $0 $2,341,251 Jun -10 $6,720,000 $0 $9,305,799 Jun -11 $6,565,000 $0 $18,077,303 Jun -12 $4,131,600 $0 $22,718,524 Jun -13 $4,142,600 $0 $29,352,833 Jun -14 $2,828,400 $0 $36,131,536 Jun -15* $1,873,200 $0 $39,183,715 It Actuarial Results We have received the actuarial reports prepared by Bartel & Associates on April 6, 2015 with a valuation date of July 1, 2014. In the tables below, we have summarized the results. Demographic Study Active Participants July 1, 2012 242 July 1, ,, 259 Retirees 241 249 Total Plan Members 483 508 Active Average Age 46.2 46.0 Retiree Average Age 67.3 68.1 i Actuarial Results (continued) July 1, ,. 6.25% .. 6.25% .. Rate Present Value of Projected Benefits (PVPB) $113,900,000 $118,848,000 Actuarial Accrued Liability $100,498,000 $103,904,000 Actuarial Value of Assets $22,481,000 $33,695,000 Unfunded Actuarial Liability $78,017,000 $70,209,000 Normal Cost $2,134,000 $2,325,000 Annual Required Contribution $8,103,000 $7,866,000 (ARC) Pay -As- You -Go $4,813,000 $5,376,00 Central Contra Costa Sanitary District First Quarter 2015 Presented by Andrew Brown, CFA JHIGHMARK® CAPITAL MANAGEMENT DISCUSSION HIGHLIGHTS - CCCSD Asset Allocation: Moderate HM Plus BAs of 4-16-2015) Allocation Target — 48.5% stocks (40 -60% range), 48% bonds (40 -60% range), 3.5% cash (0 -20% range) Large cap 24.5 %, mid -cap 4.25 %, small cap 7.25 %, international 12.5% Performance: Central Contra Costa Sanitary District (as of 3 -31 -2015) gross of investment management fees, net of fund fees 3- months: 2.42% 1 -Year: 5.88% Inception to date (4/1/2009) 11.87% Bonds — Short duration a negative, High Yield slight positive Stocks — Large cap and small cap outperformance. International and mid cap laggards. Overweight to international Active management challenges in 2014 12 -Month Changes Asset Allocation: Euro - Stoxx, Ivy Mid -Cap Growth Fund Outlook 2015 Oil and the Fed International — Central banks supporting Japan and Europe GDP est. 2.5% in 2015 Unemployment 5.5% S &P 500 Target 2140 10 -yr yield 2.25 %, Fed Funds 0.5% Plan Goals and Objectives Discount rate and trends JHIGHMARK° CAPITAL MANAGEMENT CCCSD Asset Allocation Total Assets: $39,311,571 Period Ending 3 -31 -15 1Q15 Return: 2.42% 1 Year Return: 5.88% Inception -to -Date Return: 11.87% Inception Date. 4 -1 -2009 Fixed Income $19,048,080 48.4% Investment Summary Since Inception Beginning Value $ 3,771,422.27 Contributions 33,636, 811.95 Withdrawals -8,701,167.64 Gain (Loss) 5,615,852.40 Interest and Dividends 4,988,716.87 Net Accrued Income 28,804.38 *Ending Market Value $ 39,340,440.,23 Cash 111496112 Equity 8,779,380 47.8% * Ending Market Value differs from total market value on page 5 due to differences in reporting methodology. The above ending market value is reported as of trade date and includes accruals. The Asset Allocation total market value is reported as of settlement date. A HIGHMARK`p' CAPITAL MANAGEMENT PARS: Central Contra Costa Sanitary District Selected Period Performance PARS /CENTRAL CONTRA COSTA SANT PRHCP Account 6746030600 Period Ending: 03/31/2015 Account Inception: 4/2009 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. HIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT Year Inception to Date to Date Sector (3 Months) 1 Year 2 Years 3 Years 5 Years (6 Years) Cash Equivalents .00 .02 .02 .02 .03 .10 iMoneyNet, Inc. Taxable .00 .01 .01 .02 .02 .03 Total Fixed Income 1.69 4.25 2.21 3.48 4.47 5.90 BC US Aggregate Bd Index 1.61 5.72 2.77 3.10 4.41 4.95 Total Equities 3.18 7.77 14.47 13.69 12.11 18.09 Large Cap Funds 2.00 11.04 17.38 15.97 13.11 18.45 S &P 500 Composite Index .95 12.73 17.21 16.11 14.47 19.71 Mid Cap Funds 3.42 10.10 14.56 13.95 14.21 Russell Midcap Index 3.95 13.68 18.50 18.10 16.16 23.49 Small Cap Funds 5.16 8.67 18.69 17.64 17.10 23.72 Russell 2000 Index 4.32 8.21 16.26 16.27 14.57 21.47 International Equities 4.21 .82 4.70 4.43 4.08 12.36 MSC/ SAFE Index 4.88 -.92 7.92 9.02 6.16 13.00 MSCI EM Free Index 2.24 .44 -.50 .31 1.75 12.01 Total Managed Portfolio 2.42 5.88 7.88 8.24 8.24 11.87 Account Inception: 4/2009 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. HIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT ASSET ALLOCATION As of March 31, 2015 Current Asset Allocation Investment Vehicle Equity 47.77% Range: 40%-60% 18, 779, 380 Large Cap Core 5.70% SMGIX Columbia Contrarian Core Cl Z 2,241,820 4.76% SICWX Sentinel Common Stock 1 1,871,300 Large Cap Value 2.70% DODGX Dodge & Cox Stock Fund 1,062,628 4.14% LSGIX Loomis Sayles Value Fund 1,627,286 Large Cap Growth 3.43% HACAX Harbor Capital Appreciation Instl 1,347,763 3.43% PRGFX T. Rowe Price Growth Stock Fund 1,348,400 Mid Cap Value 2.07% TIMVX TIAA -CREF Mid -Cap Value Instl 815,687 Mid Cap Growth 2.08% IYMIX Ivy Mid Cap Growth Fund 1 817,559 Small Cap Value 3.59% NSVAX Columbia Small Cap Value Fund II 1,411,196 Small Cap Growth 3.59% PRNHX T. Rowe Price New Horizons Fund 1,411,323 International Core 3.72% NWHNX Nationwide Bailard Intl Equities Fund 1,460,826 International Value 1.87% DODFX Dodge & Cox International Stock Fund 734,323 International Growth 1.87% MQGIX MFS International Growth Fund 734,722 Tactical - Europe 2.44% FEZ SPDR EURO STOXX 50 ETF 958,854 Emerging Markets 2.38% SEMNX Schroder Emerging Market Equity 935,693 Fixed Income 48.45% Range: 40% -60% 19,046,080 Short-Term 6.17% VFSUX Vanguard Short -Term Corp Adm Fund 2,425,309 Intermediate -Term 19.93% NWJJX Nationwide HighMark Bond Fund 7,836,558 19.92% PTTRX PIMCO Total Return Instl Fund 7,832,042 High Yield 2.42% PHIYX PIMCO High Yield Instl 952,172 Cash 3.78% Range: 0%-20% 1,486,112 3.78% FPZXX Money Market 1,486,112 TOTAL 100.00% $39,311,571 -A HIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT CENTRAL CONTRA COSTA SANITARY DISTRICT For Period Ending March 31, 2015 Data Source: Morningstar, SB Investments Returns less than one year are not annualized. Past performance is not indicative of future returns. The information presented has been obtained from sources Jbelieved accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value. HIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT 3 -Month YTD 1 -Year 3 -Year 5 -Year Fund Name Inception Return Rank Return Rank Return Rank Return Rank Return Rank Sentinel Common Stock 1 (7/13) 1.37 41 1.37 41 10.68 54 14.69 58 13.43 44 Columbia Contrarian Core Z (7/13) 1.20 46 1.20 46 13.12 16 17.12 14 14.94 10 Dodge & Cox Stock (8/14) -1.19 90 -1.19 90 6.50 75 18.20 3 13.81 14 Harbor Capital Appreciation Instl 5.55 12 5.55 12 16.18 23 15.78 36 15.08 25 Loomis Sayles Value Fund (7/11) -0.38 67 -0.38 67 7.68 57 16.88 9 12.98 33 T. Rowe Price Growth Stock 6.04 7 6.04 7 16.85 19 17.05 16 16.23 9 Idx: Russell 1000 1.59 1.59 - 12.73 -- 16.45 -- 14.73 -- EQUITY TIAA -CREF Mid -Cap Value Instl 2.85 47 2.85 47 11.47 23 16.95 47 14.69 32 Idx: Russell Mid Cap Value 2.42 -- 2.42 -- 11.70 -- 18.60 15.84 - Ivy Mid Cap Growth 1 (5/14) 3.99 77 3.99 77 11.09 56 13.62 68 15.21 37 Idx: Russell Mid Cap Growth 5.38 5.38 -- 15.56 17.41 - 16.43 - EQUITY Columbia Small Cap Value II Z 3.93 18 3.93 18 6.36 33 16.06 23 14.68 14 Idx: Russell 2000 Value 1.98 -- 1.98 4.43 14.79 - 12.54 T. Rowe Price New Horizons 6.40 38 6.40 38 10.99 27 19.03 7 20.72 1 Idx: Russell 2000 Growth 6.63 - 6.63 -- 12.06 17.74 -- 16.58 INTERNATIONAL • Dodge & Cox International Stock 4.20 68 4.20 68 1.48 21 12.25 5 7.99 9 Nationwide Bailard Intl Eqs InSw 4.49 62 4.49 62 1.01 25 10.15 16 7.08 17 MFS International Growth 1 5.11 51 5.11 51 0.68 55 5.87 83 6.63 54 Idx: MSCI EAFE 4.88 -- 4.88 -- -0.92 -- 9.02 -- 6.16 -- Schroder Emerging Market Equity (11/12) 2.94 23 2.94 23 0.84 33 0.88 41 1.81 42 Idx: MSCI Emerging Markets 2.24 2.24 0.44 0.31 -- 1.75 -- SPDR EURO STOXX 50 ETF (6/14) 4.53 50 4.53 50 -6.12 64 10.12 45 3.69 100 Pimco Total Return Inst'I 2.22 5 2.22 5 5.64 22 4.03 27 4.98 35 Vanguard Short -Term Investment -Grade Adm 1.03 26 1.03 26 2.08 14 2.32 16 2.77 25 Nationwide HighMark Bond InSvc 1.64 41 1.64 41 4.60 63 3.45 49 4.84 42 BarCap US Aggregate Bond 1.61 1.61 5.72 -- 3.10 - 4.41 PIMCO High Yield Instl (11/14) 2.46 34 2.46 34 3.06 11 6.86 34 7.72 40 Credit Suisse HY 2.59 - 2.59 1.39 7.07 -- 8.29 Data Source: Morningstar, SB Investments Returns less than one year are not annualized. Past performance is not indicative of future returns. The information presented has been obtained from sources Jbelieved accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value. HIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT Administrative Review ✓ Future Contributions ✓ Future Disbursement Requests- Options ✓ Agency's future actuarial valuation for GASB 45 compliance — Next Valuation Due 07/01/16 ✓ Investment Guidelines Document — Completed: May, ?014 ✓ Prefund Pension Obligations (Pension Rate Stabilization Program) ✓ Client Funding Policy ✓ Client Feedback 15 HIGHMARK® CAPITAL MANAGEMENT Vision. Discipline. Results" WHY THE PARS DIVERSIFIED CONSERVATIVE PORTFOLIO? Comprehensive Investment Solution HighMark' Capital Management, Ines (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 have 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 Capital Appreciation Balanced Moderate Moderately Conservative 3 / Conservative ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) • HighMark Plus (Active) Index Plus (Passive) Risk (Standard Deviation) Current Quarter *............................ 1.219E ASSET ALLOCATION — CONSERVATIVE PORTFOLIO Year To Date* .... ............................... 3.88% Year To Date* .... ............................... 4.3296 Strategic Range Policy Tactical Equity 5 -20% 15% 15% Fixed Income 60-95% 80% 80% Cash 0-20% 5% 5% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) • HighMark Plus (Active) Index Plus (Passive) Current Quarter * ... ......................... 1.13% Current Quarter *............................ 1.219E Blended Benchmark *' ............ .......................... 1.60% Blended Benchmark *'............ .......................... 1.60% Year To Date* .... ............................... 3.88% Year To Date* .... ............................... 4.3296 Blended Benchmark * .............. ..........................4.75% Blended Benchmark *............. .......................... 4.75% 1 Year ................. ............................... 3.88% 1 Year................. ............................... 4.32% Blended Benchmark ............... .......................... 4.75% Blended Benchmark............... .......................... 4.75% 3 Year ................. ............................... 5.32% 3 Year................. ............................... 4.64% Blended Benchmark ............... .......................... 4.28% Blended Benchmark............... .......................... 4.28% 5 Year ................. ............................... 5.35% 5 Year................. ............................... 5.05% Blended Benchmark ............... .......................... 4.57% Blended Benchmark............... .......................... 4.57% 10 Year ............... ............................... 4.88% 10 Year............... ............................... 4.47% Blended Benchmark ............... .......................... 4.31% Blended Benchmark............... .......................... 4.31% 'Returns less than I -year are not annualized. 'Breakdown for Blended Benchmark- 7.5 %S&P500,1.5% Russell Mid Cap, 2.5% Russell 2000, 1% MSCI EM FREE, 2% MSCI EAFE, 52.25% BC US Agg, 25.75% ML 1 -3 Yr US Corp✓Gov't, 2% US High Yield Master 11, 0.5% Wilshire REM and 5 %Citi 1 Mth T -Bill. Prior to October 2012, the blended benchmarks were 12% S&P 500, 1% Russell 2000,2% MSCI EAFE, 40% ML 1 -3 YearCorpJGovt, 40% BC Agg, 5 %Citi 1 Mth T -Bill. Prior to April 2007, the blended benchmarks were 15% S&P 500,40% ML 1 -3Yr Corp/Gov, 4096 BC Agg, and 5 %Citi 1 Mth T -Bill. ANNUAL RETURNS • HighMark Plus (Active) Index Plus (Passive) 2008 ..................... ............................... - 9.04% 2008..................... ............................... - 6.70% 2009 ................... ............................... 15.59% 2009................... ............................... 10.49% 2010 ............................ .........................8.68% 2010 ............................ .........................7.67% 2011 ............................ .........................2.19% 2011 ............................ .........................3.70% 2012 ............................ .........................8.45% 2012 ............................ .........................6.22% 2013 ........................... ..........................3.69% 2013 ............................ .........................3.40% 2014 ........................... ..........................3.88% 2014........................... ..........................4.32% PORTFOLIO FACTS • HighMark Plus (Active) Index Plus (Passive) Inception Date ............................ 07/2004 Inception Date ............................ 07/2004 No. of Funds Held in Portfolio ............. 20 No. of Funds Held in Portfolio............. 14 A newly funded account enters a composite after three full months of management and is removed from a composite at the last full end of the 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.g 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. -A HIGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results" ABOUTTHE ADVISER HighMark Capital Management, Inc. has over 90 years (including predecessor organizations) of institutional money management experience with more than $15.3 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 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 Christiane Boyd Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education: BA, International Christian University, Tokyo Kevin Churchill, CFA®, CFP® Senior Portfolio Manager Investment Experience: since 1996 HighMark Tenure: since 2012 Education: MS, Seattle University-, BS, University of Puget Sound Ryan Fox Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2009 Education: BA, Boston College Salvatore "Tory" Milazzo III, CFA`' Senior Portfolio Manager Investment Experience: since 1991 HighMark Tenure: since 2014 Education: BA, Colgate University Matthew Webber, CFA® Senior Portfolio Manager Investment Experience: since 1995 HighMark Tenure: since 2011 Education: BA, University of California, Santa Barbara Anne Wimmer, CFAs Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education: BA, University of California, Santa Barbara Asset Allocation Committee Number of Members: 13 Average Years of Experience: 25 Average Tenure (Years): 13 Manager Review Committee Number of Members: 7 Average Years of Experience: 22 Average Tenure (Years): 10 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 Nationwide Bailard International Equities Nationwide 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 First American Prime Obligation Z TIAA -CREF Mid Cap Value Ivy Mid Cap Growth Harbor Capital Appreciation Schroder Emerging Market Equity Dodge & Cox Stock SPDR Euro Stoxx 50 ETF PIMCO High Yield STYLE Large Cap Value 2.2% Cash s.a%_ --I Mid Cap 1.29 Large Cap Growth 2.2% Large Cap Core 3.20/6_ Short-Term Bond • 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 iShares Russell Midcap Value iShares Russell Midcap Growth iShares Barclays Aggregate Bond Vanguard Short-Term Invest -Grade Adm First American Prime Obligation Z SPDR Euro Stoxx 50 ETF SPDR Barclays High Yield Bond ETF Vanguard FTSE Emerging Markets ETF Holdings are subject to change at the discretion of the investment manager. Cap 2.2% = HighYieId4.0% Intern -Term Bond 44.8% The performance records shown represent size - welted composites of tax exempt accounts that meet the following criteria: Composites are mans�d by HtMaik's Hi Mark capital Advisors (HCA) with full investment authority according to the PARS Conservative active and passive objectives an do not have equity concentration of 25%or more in one common stock security. The adviser to the PARS portfolios is US Bank, and HighMark serves as sub-adviser to US Bank to manage these portfolios. US Bank ma charge clients as much as 0.6096 annual management fee based on a sliding scale. As of December 31. 2014. the blended rem is 0.5R% US ce results is available upon request in Q l ZU 1 U, the YAKS composite detinition was changed tram $750,000 minimuin to no Performance results are calculated and presented in US. dollars and do not reflect the I uction of investment advisory fees, s,ortaxes but do reflect thedeductionoftradingexpenses. Returnsare calculatedbasedontradedateaccounting. enchmarks represent HighMark's strategic allocations between equity, fixed income, and cash and are rebalanced monthly. k retums do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of and other earnings. An investor cannot invest directl in an index.�rhe unmans] 5&P 500 Index is representative of mane of large companies in the U.S. stock market The MSCI EAFE Index is a free float -adjusted market capitalization gned to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets is a free float- adjusted market capitalization index that is designed to measure equity market performance in the elobal U.S. as a terra to final maturity less than 3 years. The unmanaged Citigmup 1 -Month Treasury' Bill Index tracks the yield of the 1 -month U.S. HIGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results:' WHYTHE PARS DIVERSIFIED MODERATELY CONSERVATIVE PORTFOLIO? Comprehensive Investment Solution HighMark Capital Management, Ines (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 have 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. Efficient Frontier • Capital Appreciation Balanced a° Moderate Moderately Conservative (Conservative Risk (Standard Deviation) ASSET ALLOCATION — MODERATELY CONSERVATIVE PORTFOLIO ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) HighMark Plus (Active) Current Quarter * ............................ 1.34% Strategic Range Policy Tactical Equity 20-40% 30% 30% Fixed Income 50-80% 65% 68% Cash 0-20% 5% 2% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) HighMark Plus (Active) Current Quarter * ............................ 1.34% Blended Benchmark*' ....... ............................... 2.17% Year To Date* .... ............................... 4.41% Blended Benchmark* ........ ............................... 5.91% 1 Year ................. ............................... 4.41% Blended Benchmark .......... ............................... 5.91% 3 Year ................. ............................... 7.50% Blended Benchmark .......... ............................... 6.79% 5 Year ................. ............................... 6.90% Blended Benchmark .......... ............................... 6.45% 10 Year ............... ............................... 5.45% Blended Benchmark .......... ..:............................ 4.99% Index Plus (Passive) Current Quarter* ............................ 1.76% Blended Benchmark*' ....... ............................... 2.17% Year To Date* .... ............................... 5.40% Blended Benchmark* ........ ............................... 5.91% 1 Year ................. ............................... 5.40% Blended Benchmark .......... ............................... 5.91% 3 Year ................. ............................... 6.80% Blended Benchmark .......... ............................... 679% 5 Year ................. ............................... 6.65% Blended Benchmark .......... ............................... 6.45% Inception To Date (116- Mos.)........ 5.33% Blended Benchmark .......... ............................... 5.25% 'Returns less than 1 -year are not annualized. 'Breakdown for Blended Benchmark: 15.5 %S &P500, 3 %Russell Mid Cap, 4.5% Russell 2000, 2 %MSCI EM FREE, 4% MSCI EAFE, 49.25% BC US Agg, 14% ML 1 -3 Yr US Corp(Gov't, 1.75 %US Iligh Yield Master 11, 1 % Wilshire REIT, and 5 %Citi 1 Mth T -Bill. Prior to October 2012, the blended benchmarks were 25% S&P 500; 1.5% Russell 2000,3.5% MSCI EAFE, 25% ML 1 -3 Year CorpJGovt, 40% BC Agg, 5% Citi I Mth T -Bill. Prior to April 2007, the blended benchmarks were 30% S&P 500,25% ML 1 -Wr Corp/Gov, 40% BC Agg, and 5 %Citi 1 Mth T -Bill. ANNUAL RETURNS • HighMark Plus (Active) Index Plus (Passive) 2008 ................. ............................... - 15.37% 2008.................... I............................ - 12.40% 2009 ................... ............................... 18.71% 2009................... ............................... 11.92% 2010 ................... ............................... 10.46% 2010........................... ..........................9.72% 2011 ........................... ..........................1.75% 2011........................... ..........................3.24% 2012 ................... ............................... 10.88% 2012........................... ..........................8.24% 2013 ........................... ..........................7.30% 2013........................... ..........................6.78% 2014 ........................... ..........................4.41% 2014........................... ..........................5.40% PORTFOLIO FACTS • HighMark Plus (Active) Index Plus (Passive) Inception Date .............................. 8/2004 Inception Date ............................ 05/2005 No. of Funds Held in Portfolio ............. 20 No. of Funds Held 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 througgh 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. HIGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results?" ABOUT THE ADVISER HighMark Capital Management, Inc. has over 90 years (including predecessor organizations) of institutional money management experience with more than $15.3 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 MANAGEMENT TEAM 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 Christiane Boyd Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education: BA, International Christian University, Tokyo Kevin Churchill, CFA', CFP0 Senior Portfolio Manager Investment Experience: since 1996 HighMark Tenure: since 2012 Education: MS, Seattle University; BS, University of Puget Sound Ryan Fox Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2009 Education: BA, Boston College Salvatore "Tory" Mitazzo 111, CFA® Senior Portfolio Manager Investment Experience: since 1991 HighMark Tenure: since 2014 Education: BA, Colgate University Matthew Webber, CFA® Senior Portfolio Manager Investment Experience: since 1995 HighMark Tenure: since 2011 Education: BA, University of California, Santa Barbara 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: 13 Average Years of Experience: 25 Average Tenure (Years): 13 Manager Review Committee Number of Members: 7 Average Years of Experience: 22 Average Tenure (Years): 10 SAMPLE HOLDINGS • HighMark Plus (Active) Index Plus (Passive) Columbia Contrarian Core Z iShares S&P 500 T. Rowe Price Growth Stock iShares S &P 500/Value Columbia Small Cap Value II Z iShares S&P 500 /Growth T. Rowe Price New Horizons iShares S &P Small Cap 600 Value Nationwide Bailard International Equities iShares S &P Small Cap 600 Growth Nationwide HighMark Bond iShares MSCI EAFE Vanguard Short Term Invest -Grade Adm iShares Russell Midcap Value Loomis Sayles Value Y iShares Russell Midcap Growth PIMCO Total Return iShares Barclays Aggregate Bond Dodge & Cox International Stock Vanguard Short -Term Invest -Grade Adm MFS International Growth I First American Prime Obligation Z Sentinel Common Stock I SPDR Euro Stoxx 50 ETF First American Prime Obligation Z SPDR Barclays High Yield Bond ETF TIAA -CREF Mid Cap Value Vanguard FTSE Emerging Markets ETF Ivy Mid Cap Growth Harbor Capital Appreciation Schroder Emerging Market Equity Dodge &Cox Stock Holdings are subject to change at the discretion SPDR Euro Stoxx 50 ETF of the investment manager. PIMCO High Yield STYLE Large Cap Value 4.3% cash 2.5% Intl Stocks 7.8% Mid Cap 2.6 9/6, - Large Cap Large Cap Core Short-Tern 169% The performance records shown re performance records shown repprese are managed by HighMark' s F g19 Conservative active and passive objet The adviser to the PARS portfolios is 17te 36bas1 points paid the points id to e_portfolio returns Assumir trom the assets at m;rmaarket a $12.76 million before fees ting performance results is; n to no minimum. Performa Yield 3.4% IntemrTeml Bond 47.2°% ent size weighted co mposites of tax exempt accounts that meet the following criteria: The ze weighted composites of tax exempt accounu that meet the following mteria: Composites Capital Advisors (HC A) with full investment authority according to the PARS Moderately s and do not have equity concentration of 2576 or more in one common stock security. Bank and HighMark serves as sub�dviser to US Bank to manage these portfolios. US Bank may management tee based on a slidin scale. As of December 31, 2014, the blended rate is 0.5896. ual management fee for assets subgedvised by HighMark under its subadvisory agreement with dmMarl . as well as other exoen�c that may Fr inn m cl in the mamas rant of rl, n tf,l:n upon advisory tees, custody tees, ortows butdo retlectthe deduction ottiading expenses. Returns are calculated based on tradedate accountine. HIGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results:' WHY THE PARS DIVERSIFIED MODERATE PORTFOLIO? Comprehensive Investment Solution HighMark° Capital Management, Ines (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 have 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. Efficient Frontier r Capital Appreciation Balanced a Moderate -o /' Moderately Conservative v � Conservative ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) • HighMark Plus (Active) Risk (Standard Deviation) Current Quarter* ............................ 2.10% ASSET ALLOCATION - MODERATE PORTFOLIO Year To Date' .... ............................... 4.84% Year To Date' .... ............................... 5.72% Blended Benchmark' ............. .......................... 6.95% Strategic Range Policy Tactical Equity 40-60% 50% 50% Fixed Income 40-60% 45% 48% Cash 0-20% 5% 2% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) • HighMark Plus (Active) Index Plus (Passive) Current Quarter* ............................ 1.67% Current Quarter* ............................ 2.10% Blended Benchmark'' ............ .......................... 2.81% Blended Benchmark''............ .................:........ 2.81% Year To Date' .... ............................... 4.84% Year To Date' .... ............................... 5.72% Blended Benchmark' ............. .......................... 6.95% Blended Benchmark'............. .......................... 6.95% 1 Year ................. ............................... 4.84% 1 Year................. ............................... 5.72% Blended Benchmark ............... .......................... 6.95% Blended Benchmark............... .......................... 6.95% 3 Year ................. ............................... 9.99% 3 Year................. ............................... 9.77% Blended Benchmark .............. ......................... 10.07% Blended Benchmark ........................................ 10.07% 5 Year ................. ............................... 8.50% '5 Year................. ............................... 8.62% Blended Benchmark ............... .......................... 8.66% Blended Benchmark............... .......................... 8.66% 10 Year ............... ............................... 5.59% Inception To Date (104- Mos.)........ 5.62% Blended Benchmark ............... .......................... 5.67% Blended Benchmark............... .......................... 5.80% 'Returns less than 1-year are not annualized. 'Breakdown for Blended Benchmark 26.5% S&P500,5% Russell Mid Cap, 7.5% Russell 2000,3.25% MSCI EM FREE, 6% MSCI EAFE, 33.50% BC US Agg, 10% ML 1 -3 Yr US Corp/Gov't, 1.50% US High Yield Master II, 1.75% Wilshire REn; and 5 %Citi 1 Mth T -Bill. Prior to October 2012, the blended benchmarks were 43% S&P 500; 2% Russell 2000, 5% MSCI EAFE, 15% ML 1 -3 Year Corp /Govt, 30% BC Agg, 5 %Citi 1 Mth T -Bill. Prior to April 2007, the Mended benchmarks were 50% S&P 500, 15% ML 1 -3Yr Corp/Gov, 30% BC Agg, and 5% Citi I Mth T -Bill. ANNUAL RETURNS • HighMark Plus (Active) Index Plus (Passive) 2008 .................. ............................... - 22.88% 2008.................. ............................... - 18.14% 2009 .......................... ........................21.47% 2009................... ............................... 16.05% 2010 .......................... ........................ 12.42% 2010................... ............................... 11.77% 2011 ........................... ..........................0.55% 2011 ............................ .........................2.29% 2012 ................... ............................... 12.25% 2012................... ............................... 10.91% 2013 ................... ............................... 13.06% 2013................... ............................... 12.79% ?f) 14 ...................... ............................... 4.84% 2014...................... ............................... 5.72% PORTFOLIO FACTS • HighMark Plus (Active) Index Plus (Passive) Inception Date ............................ 10/2004 Inception Date ............................ 05/2006 No. of Funds Held in Portfolio ............. 20 No. of Funds Held 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. has over 90 years (including predecessor organizations) of institutional money management experience with more than $15.3 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 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 Christiane Boyd Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education: BA, International Christian University, Tokyo Kevin Churchill, CFAI, CW Senior Portfolio Manager Investment Experience: since 1996 HighMark Tenure: since 2012 Education: MS, Seattle University; BS, University of Puget Sound Ryan Fox Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2009 Education: BA, Boston College Salvatore "Tory" Milazzo III, CFAI' Senior Portfolio Manager Investment Experience: since 1991 HighMark Tenure: since 2014 Education: BA, Colgate University Matthew Webber, CFA° Senior Portfolio Manager Investment Experience: since 1995 HighMark Tenure: since 2011 Education: BA, University of California, Santa Barbara 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: 13 Average Years of Experience: 25 Average Tenure (Years): 13 Manager Review Committee Number of Members: 7 Average Years of Experience: 22 Average Tenure (Years): 10 SAMPLE HOLDINGS • HighMark Plus (Active) Index Plus (Passive) Columbia Contrarian Core Z iShares S &P 500 T. Rowe Price Growth Stock iShares S&P 500/Value Columbia Small Cap Value II Z iShares S &P 500 /Growth T. Rowe Price New Horizons iShares S&P Small Cap 600 Value Nationwide Bailard International Equities iShares S&P Small Cap 600 Growth Nationwide HighMark Bond iShares MSCI EAFE Vanguard Short Term Invest -Grade Adm iShares Russell Midcap Value Loomis Sayles Value Y iShares Russell Midcap Growth PIMCO Total Return iShares Barclays Aggregate Bond Dodge & Cox International Stock Vanguard Short -Term Invest -Grade Adm MFS International Growth I First American Prime Obligation Z Sentinel Common Stock I SPDR Euro Stoxx 50 ETF First American Prime Obligation Z SPDR Barclays High Yield Bond ETF TIAA -CREF Mid Cap Value Vanguard FTSE Emerging Markets ETF Ivy Mid Cap Growth Harbor Capital Appreciation Schroder Emerging Market Equity Dodge &Cox Stock Holdings are subject to change at the discretion SPDR Euro Stoxx 50 ETF of the investment manager. PIMCO High Yield STYLE Large Cap Value 7.31% Small Cap 7.6% Cash 2.5% High Yield 2.4% Intl Stocks 13.01% - Mid Cap 4.2% Interm -Term Bond 33.2% Large Cap Growth Large Cap Core 10.6%-/ Short-Term Bond 11.9% The performance records shown represent size - weighted composite; of tax exe pt 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 of 25% or more in one common stock security. The adviser to the PARS portfolios is US Bank, and Hi rk serves as sub-adviser to US Bank to manage these portfolios. US Bank ma charge clients as much as 0.60% annual management based on a sliding scale. As of December 31 -014, the blended rate is 0.58'76. US 13ank S�yyss Hi Mack 60% of the annual management fee for assets subadvised by HighMark under its sub-advisor agreernent with US Bark Tfre 36 points paid to HighMark, as well as other expenses that may be incurred in the managgeemment of the portfolio will seduce the rtfolio returns Assuming an tnvestrr�ent%rfive years, a S %annual total return and an annual subadvisory rate o f 0.3696 deducted from the assets at market at the end of each year, a 10 million initial value would gmw to $12.54 million aer Cres (Net of- and) rid $12.76 million before fees (Gross of- Fees). Additional information re�atdi'n� the firm's policies and procedures for calculating and reporting perfnmtance results is available upon request In Q1 2010, the PARS Composite definition was changed from $750,000 mimmum to no mmit�um. Performance resultsare calculated and presented in U.S. dollarsand do not n�fled the deduction of investment advisory fees, ciistodv lees, ortaxes but do tefled the deduction of tradine excenses. Returns are calculated bated nn tradeclam arrrn ntinv HIGHMARK® CAPITAL MANAGEMENT Vision. Discipline. Results ' WHYTHE PARS DIVERSIFIED BALANCED PORTFOLIO? Comprehensive Investment Solution HighMark' Capital Management, Ines (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 have 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 f Capital Appreciation Balanced v ; = Moderate Moderately Conservative Conservative ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) • HighMark Plus (Active) Risk (Standard Deviation) Current Quarter * .. ..........................1.69% ASSET ALLOCATION - BALANCED PORTFOLIO Blended Benchmark *' ............ .......................... 3.13% Blended Benchmark *'............ .......................... 3.13% Year To Date* .... ............................... 4.70% Strategic Range Policy Tactical Equity 50-70% 60% 60% Fixed Income 30-50% 35% 38% Cash 0-20% 5% 2% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) • HighMark Plus (Active) Index Plus (Passive) Current Quarter * .. ..........................1.69% Current Quarter* ............................ 2.28% Blended Benchmark *' ............ .......................... 3.13% Blended Benchmark *'............ .......................... 3.13% Year To Date* .... ............................... 4.70% Year To Date* .... ............................... 6.08% Blended Benchmark * ............. .......................... 7.49% Blended Benchmark *............. .......................... 749% 1 Year ................. ............................... 4.70% 1 Year................. ............................... 6.08% Blended Benchmark ............... .......................... 7.49% Blended Benchmark............... .......................... 7.49% 3 Year .............. ............................... 11.41% 3 Year.............. ............................... 11.14% Blended Benchmark .............. ......................... 11.75% Blended Benchmark.............. ......................... 11.75% 5 Year ................. ............................... 9.45% 5 Year................. ............................... 9.48% Blended Benchmark ............... .......................... 9.88% Blended Benchmark............... .......................... 9.88% Inception To Date (99- Mos.) .......... 5.34% Inception To Date (87- Mos.) .......... 4.73% Blended Benchmark ............... .......................... 6.07% Blended Benchmark............... .......................... 5.31% ' Returns less than I-year are not annualized. Breakdown for Blended Bendunark: 32% S0500,6& Russell Mid Cap, 996 Russell 20D0, 4% MSCI EM FREE, 7% MSCI EAFE, 27% BC US Agg, 6.75% ML 1 -3 Yr US Corp/Gov't,1.25% US High Yield Master 11, 2% Wilshire REIT, and 5 %Citi 1 Mth T -Bill. Prior to October 2012, the blended benchmarks were 51 %S&P 500,3% Russell 2000,6% MSCI EAFE, 5% ML 1 -3 Year Corp /Govt, 3096 BC Agg, 5 %Citi 1 Mth T -Bill. Priorto April 2007, the blended benchmarks were 60 %SILP 5005% 1- 3YrCorp/Gw, 30% BC Agg. and 5 %Citi I Mth T -Bill. ANNUALRETURNS • HighMark Plus (Active) Index Plus (Passive) 2008 .................. ............................... - 25.72% 2008.................. ............................... - 23.22% 2009 ......................... .........................21.36% 2009................... ............................... 17.62% 2010 ................... ............................... 14.11% 2010................... ............................... 12.76% 2011 ..................... ............................... -0.46% 2011...................... ............................... 1.60% 2012 ................... ............................... 13.25% 2012................... ............................... 11.93% 2013 ................... ............................... 16.61% 2013................... ............................... 15.63% 2014 ........................... ..........................4.70% 2014........................... ..........................6.08% PORTFOLIO FACTS • HighMark Plus (Active) Index Plus (Passive) Inception Date ............................ 10/2006 Inception Date ............................ 10/2007 No. of Funds Held in Portfolio ............. 20 No. of Funds Held 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.1 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. HIGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results!" ABOUT THE ADVISER HighMark Capital Management, Inc. has over 90 years (including predecessor organizations) of institutional money management experience with more than $15.3 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 MANAGEMENTTEAM Andrew Brown, CFAI Senior Portfolio Manager Investment Experience: since 1994 HighMark Tenure: since 1997 Education: MBA, University of Southern California; BA, University of Southern California Christiane Boyd Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education: BA, International Christian University, Tokyo Kevin Churchill, CFA°, CFP® Senior Portfolio Manager Investment Experience: since 1996 HighMark Tenure: since 2012 Education: MS, Seattle University, BS, University of Puget Sound Ryan Fox Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2009 Education: BA, Boston College Salvatore "Tory" Milazzo III, CFA' Senior Portfolio Manager Investment Experience: since 1991 HighMark Tenure: since 2014 Education: BA, Colgate University Matthew Webber, CFA0 Senior Portfolio Manager Investment Experience: since 1995 HighMark Tenure: since 2011 Education: BA, University of California, Santa Barbara 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: 13 Average Years of Experience: 25 Average Tenure (Years): 13 Manager Review Committee Number of Members: 7 Average Years of Experience: 22 Average Tenure (Years): 10 SAMPLE HOLDINGS • HighMark Plus (Active) Index Plus (Passive) Columbia Contrarian Core Z iShares S &P 500 T. Rowe Price Growth Stock iShares S&P 500/Value Columbia Small Cap Value II Z iShares S &P 500 /Growth T Rowe Price New Horizons iShares S &P Small Cap 600 Value Nationwide Bailard International Equities iShares S&P Small Cap 600 Growth Nationwide HighMark Bond iShares MSCI EAFE Vanguard Short Term Invest -Grade Adm iShares Russell Midcap Value Loomis Sayles Value Y iShares Russell Midcap Growth PIMCO Total Return iShares Barclays Aggregate Bond Dodge & Cox International Stock Vanguard Short Term Invest -Grade Adm MFS International Growth I First American Prime Obligation Z Sentinel Common Stock I SPDR Euro Stoxx 50 ETF First American Prime Obligation Z SPDR Barclays High Yield Bond ETF TIAA -CREF Mid Cap Value Vanguard FTSE Emerging Markets ETF Ivy Mid Cap Growth Harbor Capital Appreciation Schroder Emerging Market Equity Dodge & Cox Stock Holdings are subject to change at the discretion SPDR Euro Stoxx 50 ETF of the investment manager. PIMCO High Yield STYLE Intl Stocks Mid Cap Large Cap Gi Term Bond 6.2% Large cap Core 12.8% The performance records shown represent size - weighted mm ites of tax exempt accounts that meet the followin criteria: Composites are managed by High.Mark's HighMark Capital Advisors (HC with full investment authority according to the PA12 A% criteria: activeand passive objectives and do not have equity concentration of 25% or more in one common stock security. The corn to name has been changed from PARS Balanced/Moderate Aggressive m PARS Balanced on 5/1/2013. The adviser to the PARS_porliosisUSBank and HighT�iark serves assubedviser oUSBan�mr�nanagetheseport folios. US Bankm�aychargeclientsasmuch as 0. annual management fee based on a sliding sale. As of December 31, 2014, the blended rate is 0.5896. US Bank pays HidiMark mancunoerrtssu" civisoryagreet�entwithUSBank .The3 basis points ed in the management of the portfolio, will reduce the po lio returns. and an annual sub -adv' ry fee rate of 0.36% deducted from the assets at r$12.54 million aft6r fees (Net-of-Fees) and $12.76 million before to ies and procedures for calculatingand reporting performance results is on was changed from $750,000 minimum to no minimum. Performance ect the deduction of investment advisory fees, custody fees, or taxes but do based on trade -date accounting. s between equity, fixed income, and cash and are rebalanced monthly to to measure m1. U -N. LO rate ik Govemment Index with a remaining terra to tinal- maturity less than 3 years. The unmanaged Citigroup I -Month Treasury Bill Index tracks the yield of the i -month US. Treasury Bill. HighMark Ca ital Management Inc. (HighMark), an SEC-registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank N.A. (MUB). Highly lark manages institutional seppaarate account portfolios for a wide vanety of for -profit and nonprofit organizations, public agencies,pubhc and pnvate retirement plans, and ppeersonal trusts of all sizes. It may also serve as subedviser for mutual funds, common tnut �tuunds, and collective investment funds. MU$, a subsidiaryof MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction wdl Viary depending on each client's investment needs and ob'ectives. Investments empl ngHighMarikstrateg�esareNOTinsuredbytheFlllC orbyenyotherFederalGovernmentp�ency areOTBankdeposits, are N�T guaranteed by the Bank or arty Bank affiliate, and MAY lose value, including pkusible loss of PtinnpaL HIGHMARK® CAPITAL MANAGEMENT Vision. Discipline. Results ' WHY THE PARS DIVERSIFIED CAPITAL APPRECIATION PORTFOLIO? Comprehensive investment Solution HighMark" Capital Management, Ines (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 have 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 Pius 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 The primary goal of the Capital Appreciation objective is growth of principal. The major portion of the assets are invested in equity securities and market fluctuations are expected. Efficient Frontier IT ° Moderate Moderately Conservative 3 / i l / Conservative f Capital Appreciation Balanced Risk (Standard Deviation) ASSET ALLOCATION — CAPITAL APPRECIATION PORTFOLIO Strategic Range Policy Tactical Equity 65 -85% 75% 75% Fixed Income 10-30% 20% 23% Cash 0-20% 5% 2% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees) Current Quarter * ............................ 2.27% Blended Benchmark" ....... ............................... 3.36% Year To Date" .... ............................... 6.050 Blended Benchmark" ........ ............................... 788% 1 Year ................. ............................... 6.05% Blended Benchmark .......... ............................... 788% 3 Year .............. ............................... 13.26% Blended Benchmark ........ ............................... 13.84% 5 Year ...................... ........................10.12% Blended Benchmark ........ ............................... 11.03% Inception To Date (7 2-Mos.) ........ 12.28% Blended Benchmark ........ ............................... 13.36% 'Returns less than I- yearare not annualized. 'Breakdown for Blended Benchmark 39.5 %S&P500, 7.5 %Russell Mid Cap, 10.5 %Russe112000, 5.25 %MSCI EM FREE, 10.25% MSCI EAFE,16%BC US Agg, 3% ML 1 -3 Yr US Corp/Gov't,1 %US High Yield Master 11, 2% Wilshire REn; and 5 %Citi 1 Mth T -Bill. ANNUAL RETURNS 2008 .................. ............................... N /A% 2009 ............... ............................... 23.77% 2010 ............... ............................... 12.95% 2011 ................ ............................... - 1.35% 2012 ............... ............................... 13.87% 2013 ............... ............................... 20.33% 2014 .................. ............................... 6.05% PORTFOLIO FACTS • HighMark Ptus (Active) Index Plus (Passive) Inception Date ............................ 01/2009 Inception Date..... ............................... N/A No. of Funds Held in Portfolio ............. 20 No. of Funds Held 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.g 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. HIGHMARKO CAPITAL MANAGEMENT Vision. Discipline. Results!" ABOUT THE ADVISER HighMark Capital Management, Inc. has over 90 years (including predecessor organizations) of institutional money management experience with more than $15.3 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 Andrew Brown, CFAI' Senior Portfolio Manager Investment Experience: since 1994 HighMark Tenure: since 1997 Education: MBA, University of Southern California; BA, University of Southern California Christiane Boyd Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education: BA, International Christian University, Tokyo Kevin Churchill, CFA", CFP® Senior Portfolio Manager Investment Experience: since 1996 HighMark Tenure: since 2012 Education: MS, Seattle University; BS, University of Puget Sound Ryan Fox Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2009 Education: BA, Boston College Salvatore "Tory" Milazzo 111, CFA® Senior Portfolio Manager Investment Experience: since 1991 HighMark Tenure: since 2014 Education: BA, Colgate University Matthew Webber, CFA0 Senior Portfolio Manager Investment Experience: since 1995 HighMark Tenure: since 2011 Education: BA, University of California Santa Barbara Anne Wimmer, CFAm Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education: BA, University of California, Santa Barbara Asset Allocation Committee Number of Members: 13 Average Years of Experience: 25 Average Tenure (Years): 13 Manager Review Committee Number of Members: 7 Average Years of Experience: 22 Average Tenure (Years): 10 SAMPLE HOLDINGS • HighMark Plus (Active) • Index Plus (Passive) Columbia Contrarian Core Z iShares S &P 500 T. Rowe Price Growth Stock iShares S &P 500Nalue Columbia Small Cap Value II Z iShares S&P 500 /Growth T. Rowe Price New Horizons iShares S&P Small Cap 600 Value Nationwide Bailard International Equities iShares S &P Small Cap 600 Growth Nationwide HighMark Bond iShares MSCI EAFE Vanguard Short Term Invest -Grade Adm iShares Russell Midcap Value Loomis Sayles Value Y iShares Russell Midcap Growth PIMCO Total Return iShares Barclays Aggregate Bond Dodge & Cox International Stock Vanguard Short Term Invest -Grade Adm MFS International Growth I First American Prime Obligation Z Sentinel Common Stock I SPDR Euro Stoxx 50 ETF First American Prime Obligation Z SPDR Barclays High Yield Bond ETF TIAA -CREF Mid Cap Value Vanguard FTSE Emerging Markets ETF Ivy Mid Cap Growth Harbor Capital Appreciation Schroder Emerging Market Equity Dodge & Cox Stock Holdings are subject to change at the discretion SPDR Euro Stoxx 50 ETF of the investment manager. PIMCO High Yield STYLE Large Cap Value 10.9% —Small Cap 11.2% Cash 2.0% ice-- High Yield 1.2% Inter 16e2r% Bond Intl Stocks 19.6% Bond 5.6% Mid Large Cap Growth10.9%J large Cap Core 16.0% The performance records shown re nt size - weighted com iris of tax exempt accounts that meet the followingg �criteria: Composites aremanagedbyHighMark 'sHi�CapitalAdvrwrs(HC with full investmentauthorityaccordingtothePARSCapiha lApprenation active and passive ci 'ectives an do not have equity concentration of 25 %or more in one common stock security. The adviser to the PARS portfolios is US Bank, and HighMark serves as sub-adviser to US Bank to manage these portfolios. US Bank may charge clients as much as 0.6096 annual management tee based on a sliding scale. As of December 31, -014, the blended rate is 0.5896. US Bank yyss Hi����j�yy��rk 6096 of the annual management fee for assets subedvised by HighMark under its sub-advisory agreement with US Bank he 3G basis points paid m HighMark, as well as other expenses that may be incurred in the managgeemment of the portfo,o, will reduce thel ortfolio returns. Assuming an investment forfiveyears, a 5% annual total return, and an annual subadvisory fee rate of 0.36% auu rcyurwrg pcnVnnancc asuns is avauaoue upon minimum to no mtnit�tum. Performance resultsarei advisory tees, custody lees, or taxes but do reflect the Blended benchmarks represent HighMark's strateg Benchmark returns do not reflect the deduction of a and other earnings. An investor cannot invest direct, large companies in the US. stock market. The MSCI developed market equity performance, excluding th market capitalization index that is designed to meas Index measures the performance of the midtap segi of thesmall- ap segment of the U.S. equity universe. U.S. dollardenommated corporate bonds publicly r& Real Estate Investment Trusts. The unmans Bar taxable bond market as a whole. The Merri ll Lynch of The ML US. Corporate & Government Index, w 1 -Month Treasury Bill Index tracks the yield ofthe 1- HighMark Ca ital Management, Inc. (HighMark Union Bank, N.A. (MUB). HighMark manages insi organizations, public agencies,pu blic and private n mutual funds, common trust funds, and collective provides certain services to HighMark and is com Individual account management and construction em to * gHighMarkstrategtesareNOTinsuredk are NOT guaranteed by the Bank or any Bank affil Coated based on trai and cash and are re assumes the reinves is tctive of 1 tpita rfration index d ikets Free Index is a to in ore ua. uomesuc marxer. vvusnne Kti i index measures rys Capital (BC) U.S. Aggregate Bond Index is generally repro ML) 1 -3 Year U.S. Corporate & Government Index tracks the h a retraining term to final maturity less than 3 years. The un aonth US. Treasury Bill. an SEC - registered investment_ adviser, is a wholly owned su to