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Attachment 1
TITLE PAGE RFP TIRE: COMPANY NAME: Public Agency Retirement Services (PARS) IRS Code Section 115 Trust Provider Services CONTACT PERSON: Mitch Barker, PARS Executive Vice President (800) 540-6369 Ext. 116 mbarker@pars.org ADDRESS: 4350 Von Karman Ave, Suite 100 Newport Beach, CA 92660 PROPOSAL DUE DATE: May 30, 2017 by 5.00pm 4! PARS TRUSTED SOLUTIONS. LASTING RESULTS. TABLE OF CONTENTS SECTION PAGE 1 Transmittal Letter 1 2 Executive Summary 3 3 Experience 5 4 Program Team & Relationship Services 7 5 Private Letter Ruling 13 6 Trustee & Trust Administration Services 16 7 Investment Requirements & Performance 18 8 Fees 23 9 References 26 10 Proposer Warranties 27 11 Appendix 29 - Investment Portfolios - IRS PLR - Client List - Form ADV - Trust Documents PUBUC AGENCy RETREMENT PARS TRUSTED SOLUTIONS. LASTING RESULTS. PLIBuc AGENCY RETIREMENT SERVICES PARS TRUSTED SOLUTIONS. LASTING RESULTS_ May 24, 2017 Town of Los Gatos Stephen Conway Director of Finance 110 East Main Street Los Gatos, CA, 95030 Re: Request for Proposals for IRS Code Section 115 Trust Provider Services Dear Mr. Com ay, Public Agency Retirement Services (PARS) is proud to submit the enclosed proposal in response to the RFP to provide IRS Code Section 115 Trust Provider Services for the Town of Los Gatos. Our IRS - approved, PARS Pension Rate Stabilization Program (PRSP) will provide the Town with comprehensive trust administration, trustee, investment management, fiduciary, compliance monitoring, and reporting services to help address your long-term pension liabilities. PARS will serve as the programs consultant and trust administrator, U.S. Bank will serve as trustee, and HighMark Capital Management (HighMark) will serve as the investment advisor/manager. Together, this collaborative trust structure will best serve the Town by bringing the following key features: • Experienced, Industry Leading Trust Administrator — With 20+ years of experience, and over 250 Section 115 Trust accounts under administration, including 80+ for pension prefunding in California, PARS is dedicated to serving California public agencies and is one of the largest and longest serving retirement trust administrators in the nation. • Strong, Secure Trustee — The Town's assets will be safeguarded by U.S. Bank, the 5 largest bank in the nation, and one of the largest trustees for these types of public agency assets in the country. • Successful, Highly -Respected Investment Management — As a sub -advisor to U.S. Bank, HighMark will provide hands-on investment management/advisory services for the Town. The firm, which has 98 years of experience and manages over 51 billion in Section 115 trust assets, provides the highest levels of fiduciary protection and offers multiple investment options to fit your current and changing needs. • Innovative Trust Design — The PARS PRSP is a unique, industry -leading trust approach which allows both pension and OPEB to be pre -funded within one single trust. This structure helps to bring economies of scale and cost efficiencies to the Town, while still allowing for local control and customization. 11Page 4350 Von Karmen Ave., Ste. 100 Newport Beach, CA 92660-2043 800.540.6369 fax 800.660.8057 www.pars.org PARS is committed to meeting the needs of the Town outlined in the scope of work, and will handle all services within the requested timeline. Management of your trust account will be provided by a full team of highly experienced personnel from both PARS and HighMark. This team will be led by: Mitch Barker, PARS Executive Vice President Phone: (800) 540-6369 Ext. 116 Email: mbarker@pars.org. As President of PARS, I have the authority to legally represent the firm and sign a contract with the Town. I attest that the offer in this proposal is truthful and irrevocable for a period of 120 days. Thank you for your thoughtful consideration. Sincere regards, Dan Johns President, 2 J P a g e Town of Los Gatos IRS Code Section 115 Trust Provider Services EXECUTIVE SUMMARY Public Agency Retirement Services (PARS), in collaboration with U.S. Bank and HighMark Capital Management (HighMark) propose a comprehensive solution for the Town of Los Gatos' IRS Code Section 115 Trust Provider Services needs. Utilizing PARS' industry -leading Pension Rate Stablization Program (PRSP), the Town can pre - fund it's pension liabilities in an IRS -approved Section 115 trust which provides economies of scale for investment, administrative, and trustee services while at the same time minimizing staff burdens and costs. With many years of experience and over 250 Section 115 Trust agencies, including 80+ in CA for pension prefunding, we have developed a unique, comprehensive program that combines the following services: • Trust administration and recordkeeping • Signature -ready trust documents • Trustee and custodial services • Fiduciary investment management/advisory services • Consulting and advisory • Comprehensive reporting and performance monitoring WHO ARE THE PROGRAM PROVIDERS? The turn -key, PARS PRSP operates as a collaboration of the following 3 industry leaders: 1. PARS - TRUST ADMINISTRATOR - Dedicated to the retirement plan and trust needs of California public agencies since 1984, PARS administers over 250 Section 115 trust plans with $1.3 billion in assets. As administrator of the largest and fastest growing pension prefunding trust in the nation, PARS will handle all recordkeeping, reporting, servicing, compliance monitoring and program coordination for your account. 2. U.S. BANK - TRUSTEE/CUSTODIAN — The largest trustee for pension pre -funding in the nation, U.S. Bank will serve as trustee and custodian for the Town's account. The Bank, which serves all of PARS' 850+ public agency clients, has over $3 billion in Section 115 trust assets under administration, and will act in a fiduciary role to safeguard the Town's assets. 3. HICHMARK - INVESTMENT MANAGER — Operating as a discretionary investment manager and sub -advisor to U.S. Bank, HighMark will provide active portfolio management for your account. Serving over 500 PARS clients. including all 80+ of our city, county, and special district Section 115 PRSP clients, HighMark undestands the unique investment needs associated with pension pre -funding. WHY IS THE PARS PRSP THE BEST SOLUTION FOR THE TOWN OF LOS GATOS? PARS has continually fine-tuned its Section 115 Trust Programs to meet the needs of California public agencies. Today, our program includes the following key features: • First -of -its -kind, multiple -employer trust approach that allows pension and/or OPEB liabilities to be funded within the same trust 3IPage Town of Los Gatos IRS Code Section 115 Trust Provider Services • Ready -to -use, simply -organized irrevocable Section 115 multiple employer trust and investment program that is compliant with California and federal law, as well as GASB rules • Market leading provider with 84 pension prefunding clients in California • Robust, well -established fiduciary investment structure that aims to minimize/downside market risk while providing strong investment performance long-term • IRS -approved trust that provides immediate tax-exempt status to client agencies. • Discretionary investment options designed by HighMark specifically for pension pre -funding - The Town can select from 5 model portfolios or a customized option, as well as active or passive strategy • Investment policy development, asset allocation assistance and ongoing portfolio analysis to meet the Towns objectives • Hands-on, individualized attention from highly experienced PARS/HighMark services team • Regular reporting that includes monthly statements, quarterly reports, and periodic onsite reviews • Streamlined implementation process with signature -ready documents • Strong, historical investment returns- We show true, historical return information • No start up costs minimum contribution requirements, transaction fees, trading fees or ongoing legal and cornpliance costs • Fees that decrease as assets accumulate • Simple and financially sound process for disbursement of funds • Ongoing consulting and technical guidance led by the Town's assigned Lead Consultant • No red tape to enter or leave the trust in addition to a no -cost 30-day termination option • Local control that enables the Town to determine its own discount rate assumptions, distribution frequencies, and risk tolerance levels • Fiduciary protection from the 5`h largest bank and one of the largest Section 115 trustees in the nation, U.S. Bank • Experience from PARS, a pioneer of pension prefunding and 30 year veteran in the administration of retirement plans and trusts for public agencies as well as a specialist in Section 115 retirement trust programs - PRSP is our core business 4 1 Town of Los Gatos IRS Code Section 115 Trust Provider Services EXPERIENCE Describe your firm's experience serving California local government clients in establishing IRS Section 115 Trusts and related investment services. Comment on the key program advantages which make your firm different from your competitors. Please disclose the total volume of all Section 115 trusts under management with your firm. Public Agency Retirement Services (PARS) has been designing and administering niche retirement plan and trust solutions exclusively for public agencies for the fast 33 years. Founded and headquartered in California, our firm offers local governments control and flexibility to meet their individual needs, and has built up a record of service which includes the following: • Administration of over 1.400 plans for more than 850 public entities, including 675 in California • 250+ Section 115 trust clients with over $1.3 billion in assets under management • Development of the first multiple -employer Section 115 Trust Program for pension pre-fundinq in the nation — In the first 78 months, over 80 California public agencies joined the trust, making PARS the fastest growing provider and the pioneer of this important concept • First provider to obtain IRS Private Letter Ruling on a "combination" multiple -employer, Section 115 trust approach (for pension and/or OPEB pre -funding) • Developed and administered multiple employer Section 115 Trust Programs for California associations and group entities including the California School Boards Association and California Special Districts Association • Provides ongoing servicing for over 375,000 public employees • Serves as primary pension provider for numerous public agency clients in California In addition to PARS' vast experience providing services to local government agencies, both the program trustee, U.S. Bank, and investment manager, HighMark, also have a long history of servicing the public sector. U.S Bank serves as trustee to over 2 000 government clients nationwide, including all of PARS` 850+ clients. HighMark has over 1.000 local government clients, with the vast majority in California. The firms also provide respective trustee and investment management services to all 80+ members of the PARS PRSP. PARS PROGRAM ADVANTAGES - As the first firm in the nation to develop a Section 115 trust for pension pre -funding on a multiple employer basis, the PARS PRSP has quickly become the market leader with over 80 local government agencies joining in the last 18 months alone. Designed as a comprehensive, full -service solution that includes trust administration, trustee, and investment management services in one turn -key approach, PARS' unique PRSP will bring the Town of Los Gatos the following advantages: • SIMPLE TURN -KEY TRUST ADMINISTRATION — The program's trust administration was designed to be "turn -key" every step of the way. PARS will provide all consulting, plan design, plan compliance, legal document re aration actuarial coordination lan installment trust administration lan-level recordkeeping, employer statements and reporting. plan communications and materials. and ongoing client services. As program administrator, PARS will also serve as liaison between the Town and U.S. Bank/HighMark. Town of Los Gatos IRS Code Section 115 Trust Provider Services • USER FRIENDLY TRUST APPROACH - Our program was designed to maximize ease of administration. We have no minimum fees, no required contribution amounts (either initially or annually), no account start up fees, no trade/transaction fees and termination fees. We also provide fully vetted, signature ready trust documents that enable each member's trust account to be set up quickly and easily. Once the program is adopted, the Town's only role would be to make contributions, request disbursements, and monitor reports on account and investment activity. • UNIQUE, COMBINATION TRUST - The PARS Program is structured as a multiple employer, combination trust option which allows both pension and OPEB assets to be pre -funded within the same trust, This unique approach brings economies of scale. as well as administrative and fee efficiencies to members of the program. • EXPERIENCED, KNOWLEDGEABLE PROVIDER - By joining the PARS PRSP, the Town will be utilizing a program provider who was the pioneer of pension ',refunding and whose core business is niche retirement plan and trust administration for public agencies. We are experts in the retirement trust industry and have spent the last 20 years fine-tuning our trust program to ensure we offer the best possible program available. Our dedication and knowledge of clients' needs is the reason why we were the first in the nation to develop a multiple -employer trust for pension prefunding, and is why today we are the market leader with over 80 clients. • PERSONALIZED SERVICE - PARS understands that a hands-on, personalized approach is the most effective method for administration and takes great pride working closely with our clients as well as providing clear and transparent investment reporting. The Town's assigned services team will always be directly available to staff and we guarantee regular in -person client reviews. • SIMPLE BUT FLEXIBLE INVESTING - The trust is designed to give participating agencies investment flexibility using an industry leading investment manager, HighMark which has worked alongside PARS for the last 21 years. Offering five pre -established investment portfolios, a customized allocation, and both active and passive strategies the Town can utilize an investment structure that most effectively meets its needs. Dedicated Senior Portfolio Manager, Andrew Brown has been assigned to the Town to provide hands-on Investment Policy development, asset allocation recommendations, and ongoing investment support. He will be supported by a full team of investment professionals and analysts at HighMark's San Francisco headquarters who analyze and review all client portfolios on an ongoing basis., • LOCAL CONTROL - PARS seeks to maximize local control for our clients, by giving the Town sole and exclusive control of its plan without the interference of an outside retirement board, legislature or state body. Through the PARS PRSP, the administrative burden will be low but your staff will still have full flexibility to determine funding policies. contribution and distribution levels, and funding frequency. VOLUME OF SECTION 116 TRUST CLIENTS- PARS serves over 250 Section 115 Trust clients with $1.3 billion in assets under management. Out of these 250 clients, over 80 are members of the PARS PRSP. blPage Town of Los Gatos IRS Code Section 115 Trust Provider Services PROGRAM TEAM AND RELATIONSHIP SERVICES • Provide the resume of the person (executive assigned to the Town's Trust account) who will be the key contact point to coordinate services to the Town. Please identify members of your firm's service team including their tenure with the firm, their background, and the role they will play in managing the Town's proposed Trust account. PARS places a heavy emphasis on strong customer services and will dedicate a team of individuals to the ongoing administration and management of the Town's trust account. The following individuals will serve as the primary service team members to the Town (led by Mitch Barker), but will also be supported by a larger team working behind the scenes at PARS' and HighMark's corporate headquarters. MITCH BARKER, PROJECT MANAGER & EXECUTIVE VICE PRESIDENT, PARS ROLE - Mitch will serve as the designated representative and primary point of contact to facilitate services to the Town - from program initiation to ongoing administration. Mitch will provide a full scope of consulting services to assist the Town with the pre -funding of its pension liabilities, and he will also take responsibility for coordinating services between PARS, U.S. Bank, and HighMark. Mitch has provided services to municipalities for retirement trust finding since 2004, and he is PARS' lead trust consultant for municipalities in California. The Town will have direct access to Mitch on all matters and he will be available to meet with staff both in -person and over the phone as often as requested. EXPERIENCE - Mitch has been with PARS over 13 years. His primary focus is on Section 115 pension and OPEB trust programs for towns, cities, counties, and special districts, so he is particularly well -suited to design and deliver effective servicing to your Town. Mitch has helped more than 140 agencies set up their pension and/or OPEB trust accounts, and is the Project Manager for the vast majority of our municipal clients. Mitch has over 35 years experience in the health care and retirement industries. Before joining PARS, Mitch formed his own consulting company and provided national profitability improvement services to hospitals and physician groups for 14 years. Prior to this, he also held many other positions in the healthcare field. EDUCATION- Mitch holds a bachelor's degree in Biomedical Sciences from Texas A&M University. ANDREW BROWN, CFA, VICE PRESIDENT B SENIOR PORTFOLIO MANAGER, HIGHMARK ROLE - As a Senior Portfolio Manager, Andrew is responsible for managing investment portfolios on behalf of pension prefunding trust clients, retirement plans, foundations, not- 1 for -profit organizations, and high net worth investors. On plan inception, he will meet with staff to discuss the Town's investment needs, and will craft an Investment Policy Statement which will serve as the underlying investment guide to the Town's account. The Town will have direct access to Andrew at all times, and he will be available to provide ongoing investment advice at the Town's request. EXPERIENCE - Andrew joined HighMark in November 1997 and he has been working with PARS clients for over a decade. Prior to joining HighMark, Andrew's work experience includes three years as a Japanese Equity 71Page Town of Los Gatos IRS Code Section 115 Trust Provider Services Specialist at Wako Securities (America). His duties there included designing and implementing a marketing program to sell Japanese stocks to institutional investors. He also performed securities analysis for Japanese equities and made buy/sell recommendations on Nikkei 225 and OTC equities. Andrew has more than 20 years experience in the investment industry. EDUCATION - Andrew received a BA in International Relations, concentrating in Asia-Politics/Economy, and an MBA with an emphasis in Finance/Marketing, both from the University of Southern California. In addition, Andrew is also a Chartered Financial Analyst (CFA) charter -holder. JENNIFER MEZA, SUPERVISOR, CLIENT SERVICES, PARS ROLE - Jennifer will be responsible for ongoing client services related to the Town's Pension Trust account as well as being the internal point of contact for Town staff. Specifically, Jennifer will develop the administrators handbook, work with the plan administrator to ensure a smooth contribution/distribution process, coordinate meetings with the trustee/investment manager, and lead periodic client service review meetings. Additionally, Jennifer will manage any administrative issues that arise and provide ongoing technical support regarding reporting, contributions, distributions, and other trust account activities. EXPERIENCE - Jennifer has 10 years of customer service experience in various private sector industries including 31/2 years in the retirement plan industry. She joined PARS in February of 2013 as an Administration Specialist, and then transitioned to her current position as a Client Services Coordinator in November 2013. EDUCATION - Jennifer has a bachelor's degree in Business Administration from the California State University, Fullerton, She has also received her Certified Employee Benefit Specialist (CEBS) designation from the International Foundation of Employee Benefits and the Wharton School of Business. SHAUNA VULCAN, VICE PRESIDENT, IMPLEMENTATION. PARS ROLE - Shauna will manage implementation of the Town's Section 115 Pension Trust account, as well as oversee document compliance on an ongoing basis. If legal, legislative, and regulatory changes are identified that impact the PARS trust or an agency's account, Shauna will coordinate with our legal counsel in providing updated drafts/required amendments of the trust and plan documents for review by the Town's legal counsel. Shauna has served PARS clients in this role since a trust was established for OPEB prefunding in 2004, and has managed implementation of all 250+ client accounts since this time. EXPERIENCE - Shauna has been at PARS for 14 years. During this time she has been closely involved in developing documents and forms for our Pension and OPEB Trust programs and has overseen the implementation and compliance of more than 500 retirement plans. Shauna worked 15 years in the legal field before coming to PARS in 2001. EDUCATION - Shauna has a bachelor's degree in Spanish from California State University, Long Beach. PHILLIP MUSCHETTO. VICE PRESIDENT, PLAN ACCOUNTING. PARS Town of Los Gatos IRS Code Section 115 Trust Provider Services ROLE - As Vice President of Plan Accounting, Phillip provides accounting services to all of PARS' 80+ Section 115 Pension Trust clients. Specifically, he is responsible for monitoring each agency's contributions and distributions, reconciling the accounts on a monthly/annual basis, allocating expenses to providers, and providing regular statements/reporting. EXPERIENCE - Phillip joined PARS 12 years ago. Working his way up through the Accounting Department from Accounting Administrator to Vice President, Phillip is now responsible for updating and allocating monthly transactions within the PARS database to more than 1,400 plans. He also oversees the reconciliation of all contributions, distributions, earnings and expenses. EDUCATION - Phillip has a bachelor's degree in Finance from California State University, Long Beach, and a master's degree in Business Administration with an emphasis in Accounting from National University. • Describe the entity or entities proposed to serve as the trustee/custodian of the Section 115 Trust and as trust administrator, including a description of their background and experience with these types of trusts. U.S. BANK (TRUSTEE/CUSTODIAN) - Established in 1863, U.S. Bank is the fifth largest bank and highest rated in the country. U.S. Bank has offices throughout the U.S., including many in California, and manages over $500 billion in assets. The Bank's Institutional Trust & Custody division, which is responsible for Section 115 Pension Prefunding Trust services, manages more than 2,600 clients in 27 locations and S764 billion in client assets, including over 1,300 government and related clients with over $20 billion dollars in assets. U.S. Bank is consistently recognized for its fiscal conservativeness and sound business model which has enabled investments in core business lines such as Institutional Trust and Custody. This division that provides advisory, trustee, and investment management services to PARS PRSP clients prides itself on the following qualifications: 1 Sixth largest custodian in the United States with more than 2,600 clients in 27 locations 1 Over $1 trillion in client assets ✓ Provides trust and investment services to over 1,300 government clients ✓ One hundred years in institutional trust and custody business ✓ Provided investment management and advisory services since 1914 ✓ One of the largest trustees of Section 115 Retirement Trust assets in the country with $3 billion and growing SECTION 115 PENSION TRUST EXPERIENCE - First established in 1863, U.S. Bank has been acting as trustee and investment manager for health funding programs similar to pension and OPEB prefunding trusts, including VEBAs and HRAs, for the last 70+ years. With GASB 45 pending in the mid-2000's, U.S. Bank saw the need for OPEB trust services in the public sector and consequently decided to focus on significantly growing the business. The Bank first began providing trustee/investment services for Section 115 trusts in 2004 when it took on a large school board association trust with PARS as the administrator. In the years since, U.S. Bank has become trustee to all of PARS' 850+ client's, including the 80+ in our Section 115 Pension Rate Stabilization Program. In total, the Bank now acts as trustee/custodian to more than 300 Section 115 trust clients, making it one of the largest trustees for Section 115 Trust funding in the nation. Town of Los Gatos IRS Code Section 115 Trust Provider Services PARS (TRUST ADMINISTRATOR] - PARS is a pioneer in the design and administration of governmental retirement plans for public agencies with three decades of experience in the business. Throughout this time, our company has experienced continual corporate growth and has built a long track record of service which includes the following key accomplishments: • Administration of over 1,400 plans for more than 850 public entities, including 675 in California • Specialists in supplemental pension trusts, post -employment health care trusts, retirement/separation incentive plans, alternate to Social Security plans, and other defined benefit and defined contribution plans. • Developed first multiple -employer Section 115 Trust Program's for both pension and OPEB prefunding. Obtained first IRS Private Letter Ruling for both of these trusts, as well as for our "combination" multiple -employer trust approach which enable both pension and/or OPEB pre -funding to be combined within a single trust • Development and administration of multiple employer Section 115 Trust Programs for associations and group entities in 4 states, including California (California School Boards Association and California Special Districts Association) • Provides ongoing retirement plan administration to over 375,000 public employees • Vast experience providing integrated retirement solutions and multiple trust programs to agencies — over 300 of our client agencies have multiple plans with us • Primary pension provider for numerous public agency clients in California SECTION 115 PENSION/OPEB TRUST EXPERIENCE — Section 115 trust administration and pension/OPEB prefunding is currently the fastest growing business line for PARS, even though we are not new to this field. PARS first began administering post -retirement health care trusts in 1996 using a VEBA approach, but then in 2004, we developed a Section 115 Trust Program. Since this time, we have developed a number of Section 115 trusts (including the one proposed for the Town which allows for the combined prefunding of OPEB and pension liabilities) which include over 250 member accounts and over $1.3 billion in assets under management. • Describe the entity or entities proposed to serve as the investment manager of the Section 115 Trust and as trust administrator, including a description of their background and experience with these types of trusts. Specify the number of years your organization or subcontractor has been providing investment advisory services. HighMark Capital Management (HighMark) serves as investment manager for the PARS Section 115 Trust, and has served PARS clients in an investment management role since 1994. Below is information on the firm's background and Section 115 trust experience: BACKGROUND - Originally established as Union Bank in 1919, HighMark manages approximately S15 billion in U.S equity and fixed income investment strategies for a variety of individual and institutional clients including public agencies, corporate retirement plans, corporate cash portfolios, Taft -Hartley plans, hospital funds, insurance companies, and foundations and endowments. Since the firm's founding nearly 100 years ago, HighMark has continued to provide innovative investment solutions to its clients and remains committed to outstanding research, disciplined investment processes, and comprehensive risk management. This three pronged approach enables HighMark to deliver insightful 10IPage Town of Los Gatos IRS Code Section 115 Trust Provider Services investment guidance and superior service while at the same time striving to exceed client expectations and deliver value at every level of the investment relationship. SECTION 115 PRSP/OPEB TRUST EXPERIENCE — HighMark has provided fiduciary investment advisory and management services to PARS' clients, including those in our retirement trust programs for over 20 years. Today, HighMark serves over 175 of PARS' Section 115 trust clients, including all 80, in the PRSP. In total, the firm manages in excess of $1 billion in Section 115 Trust assets. • Disclose if your firm's proposal includes use of any subcontractors for the servicing of the Trust plan and if so, please describe the nature of these services. PARS will handle all day-to-day administration of the program in-house as it has done since we first began administering Section 115 trusts. PARS does not contract out administrative tasks to other companies, with the following exceptions of legal and audit work: • PARS legal counsel for its PRSP is Pillsbury Winthrop Shaw Pittman LLP, one of the largest law firms in the nation. The firm provides ongoing legal and compliance support related to federal law and was involved both with the development of our trust agreements/documents, as well as with coordination of obtaining the IRS PLR. • The PARS Trust auditor is White Nelson Diehl Evans LLP. White Nelson Diehl Evans LLP is built upon over 75 years of knowledge and expertise in business practices, economic trends, and the ever - changing tax scene. They also have a strong base of clients among governmental agencies, in both the auditing and consulting arenas. • Provide the Town sample copies of contract documents you would expect to require the Town to sign and approve to enter into an agreement. PARS has developed a streamlined implementation process with signature -ready documents which will minimize the workload of Town staff from the beginning. In order to implement the PARS PRSP, a board resolution would need to be adopted and the following documents signed: • Master Plan Document • Trust Agreement • Adoption Agreement • Administration Agreement • Resolution • Trustee Forms Sample implementation documents can be viewed in the Appendix under "Trust Documents. • Explain if your firm or subcontractor is a registered investment advisor under the Investment Advisor's Act of 1940. Please attach Part 2A of your most current Form ADV as an appendix. HighMark, the investment advisor for the PARS PRSP, is a registered investment advisor under the Investment Advisor's Act of 1940. 11IPage Town of Los Gatos iRS Code Section 115 Trust Provider Services A copy of the firm's Form ADV Part 2A can be viewed in the Appendix under "Form ADV," • Describe any SEC, FINRA, or regulatory censure or litigation involving your firm, subcontractor, or its employees within the past three years, There has been no SEC, FINRA, or regulatory censure involving PARS, its subcontractors or employees in the last three years. LITIGATION PARS - On January 7, 2011, San Francisco Unified School District filed a lawsuit against Phase II Systems (d.b.a. PARS) alleging that 18 years earlier the company provided a retirement benefit plan that did not comply with certain IRS regulations, resulting in a potential tax liability for the District. The District sought damages and indemnity from the company for any tax liability it incurs. In a related case, three plan participants in the same retirement plan filed a putative class action against the company on June 22, 2011. These two actions were coordinated in Los Angeles Superior Court. On May 28, 2014, all parties to the San Francisco Unified School District lawsuit entered into an agreement to settle that lawsuit. That lawsuit was dismissed with prejudice on July 10, 2014. In January 2015, all parties to the putative class action filed by the three plan participants entered into a class settlement agreement. A final order and judgment was entered on November 25, 2015, approving the settlement and dismissing the class action with prejudice. U.S. BANK - As a large financial institution, U.S. Bank from time to time is a party to various pending or threatened legal actions that arise in the normal course of its business. The Bank maintains reserves for losses from legal actions that are considered probable and estimable. Details can be found in the U.S. Bancorp quarterly and annual flings with the SEC and the latest 10-Q report filing as of June 30, 2016 can be provided upon request. While at any given time, U.S. Bank is involved in disputes and litigation which normally occur in banking operations and which often involve claims for money damages, these pending cases are generally not considered unusual in number or amount and based on past experiences in similar litigation, should not have a material adverse effect on the financial position of U.S. Bank, nor impact the delivery of services to our clients. HIGHMARK - There is no litigation to which HighMark is currently a party that would a) materially impair its ability to perform investment advisory services, or b) materially affect the financial condition of the firm if decided in an adverse manner. 12JPage Town of Los Gatos IRS Code Section 115 Trust Provider Services PRIVATE LETTER RULING • Explain the legal basis for your Section 115 Trust and how your program meets the requirements for compliance with federal and state law and any applicable requirements related to pronouncements issued by the Governmental Accounting Standards Board (GASB). PARS' proposed trust solution is a Section 115, IRS -approved multiple -employer trust which brings investment, administrative and legal economies of scale to PRSP member agencies. The program is formulated as an aggregation of individual employer plans which means there is no sharing of assets or risks. This model follows the same concept that PARS has utilized successfully for its pension and OPEB prefunding clients since 1990 and is currently being used by some the largest cities, counties, special districts and school districts in the country. Our program is structured with the following characteristics: Separate Accounts: Separate accounts (or sub -trusts) are maintained for each employer and assets are segregated by individual agency. In addition, agencies can create separate sub -accounts by PERS plan (e.g., Misc, Safety, etc) if required. • Separate Liabilities: Employer contributions provide benefits only for employees of that employer. This means there is no cross -liability or joint liability among participating public agencies, and no sharing of investment earnings or losses. • Economies of Scale: By using a multiple employer trust approach, The Town will benefit from the cost, legal, and administrative efficiencies associated with joining other public entities. • Local Control: There is no central authority placing mandates on the trust that may not be in the best interests of the Town. • Tailored Investments: Assets can be pooled for investment purposes based on asset allocation risk models to fit with The Town's actuarial and discount rate needs. • Combination Trust: PARS' trust approach allows both pension and OPEB obligations to be funded in one single trust. Assets are held in separate sub -accounts but aggregated for fee purposes. ONGOING COMPLIANCE - The PARS OPEB Trust was designed in conjunction with PARS' attorney Pillsbury Winthrop Shaw Pittman LLC to comply with state and federal law as well as IRS and GASB rules/regulations. PARS spends considerable time and resources on compliance support related to our Section 115 pension and OPEB trust programs. Our Public Affairs and Implementation Departments, in addition to our lobbyists and legal counsel, monitor legislative and regulatory developments affecting public employee retirement issues on an ongoing basis. When legislative/regulatory changes (including federal law, state law, IRS and GASB) are identified that impact the PARS trust or account, our Implementation Department will notify each client and provide updated drafts of the trust and plan documents and/or amendments for review by each client's legal counsel. In addition, certain legislative/regulatory changes are posted on the PARS website, and are also included in other communication materials that are sent out to our clients periodically. 13IPagie Town of Los Gatos IRS Code Section 115 Trust Provider Services To assist the Town with the Governmental Accounting Standard Board's ongoing compliance requirements, PARS provides client agencies with the following: • An individual trust statement of each member agency's plan assets that shows a reconciliation of assets held at the beginning of the fiscal year through the end of the fiscal year, breaking out the appropriate plan contributions, plan withdrawals, expenses, and investment earnings + A year-end audited financial statement of the Trust as a whole (not on an individual plan basis) completed by PARS's auditor, White Nelson Diehl Evans • Supporting SOC 1-Type 2 report on the controls over the calculation and allocation of additions and deductions to employer accounts within the Trust Investment allocation data and information on investment policies including target asset allocations and allowable asset class allocation ranges • Disclose if your pension Section 115 Trust program has received approval from the IRS in the form of a Private Letter Ruling. PARS received a "first of its kind" Private Letter Ruling from the IRS in June, 2015 for its innovative "combination" trust vehicle which allows local government agencies to set aside funds to pre -fund pension and/or OPEB obligations. This PLR legitimizes the tax treatment of PARS PRSP and subsequently provides legal protection for each participating agency, its employees, retirees, and their beneficiaries. The IRS PLR is a major benefit of the PARS PRSP as if the Town was to create its own Section 115 pension trust it would have to complete the very costly and complex IRS approval process on its own. A copy of PARS' most recent PLR can be viewed in the Appendix under "IRS PLR. ' • Describe safeguards built into your Section 115 Trust program to limit the liability exposure to the Town. The following safeguards are built into the program to limit the liability of the Town: • LEGAL SCRUTINY - The program was developed in conjunction with PARS' lawyer, Pillsbury Winthrop Shaw Pittman LLC to be compliant with state and federal law as well as IRS and GASB rules. The legal documentation and structure of the trust have also been reviewed by numerous attorney firms throughout the country. • IRS APPROVAL AND PROTECTIONS - Obtained in 2015, the Private Letter Ruling on PARS' combination trust ensures that it meets federal IRS laws and guidelines which is important from a fiduciary standpoint as it legitimizes the tax treatment of the trust. The IRS is the federal regulatory entity governing public sector plans so its approval of the OPEB trust is crucial. • SECURE. REGULATED TRUSTEE - U.S. Bank, the program's discretionary trustee is a federally chartered bank that acts as an independent trustee for qualified ERISA and governmental retirement plans. As such, the bank is required to meet some of the highest regulatory standards, including ongoing stringent audits and examinations by the Office of the Comptroller of Currency external auditors, and the bank's own internal audit department. This type of continual audit coverage and oversight reassures the Town 141=age Town of Los Gatos IRS Code Section 115 Trust Provider Services that its plan is operating according to the terms of trust, with prudent procedures as determined by independent opinions as well as meeting federal and state regulations. It also provides the Town protections beyond what a smaller, state -chartered trust company can provide. • FIDUCIARY PROTECTION - U.S. Bank will enter the relationship with the Town in a fiduciary capacity. This means that as the 5th largest financial institution in the country. U.S. Bank will take full responsibility for overseeing all corporate trustee and investment management decisions related to the OPEB trust account. In a fiduciary role, both the bank and the investment manager will act in accordance with the terms of the OPEB trust, keep the portfolio in compliance with the stated investment policy statement, and make decisions that are in the best interest of the participants as an "exclusive benefit" trust. • DEDICATED PORTFOLIO MANAGER - Senior Portfolio Manager, Andrew Brown, will be assigned to work directly with the Town to develop a customized investment policy statement that takes your risk tolerances/restrictions into account. Andrew will also work closely behind the scenes with HighMark's analysts and the trading desk to actively manage all investment activity and to ensure your cash balance and liquidity needs are continually met. • INVESTMENT MANAGEMENT SERVICES — Investment Management services are provided by HighMark to assist the Town in one of the fiduciary's central responsibilities - to act prudently. When acting as investment manager, HighMark ensures the Town's fiduciary obligations are met by investing assets according to the parameters established under California and federal law. Additionally, all investment managers at HighMark are salaried and have no connections to proprietary funds, which results in them being completely unbiased and free of any conflict of interest in their investment decisions. 151Page Town of Los Gatos IRS Code Section 115 Trust Provider Services TRUSTEE AND TRUST ADMINISTRATION SERVICES • Please provide a comprehensive list of trustee services and Section 115 trust administration services you will provide. PARS' Section 115 trust approach was designed as a comprehensive, full -service program to meet the needs of member agencies throughout California. The following is a list of services that we will provide to the Town as a member of the PRSP. SECTION 115 TRUST ADMINISTRATION SERVICES PARS) • Maintenance of detailed accounting records, which includes individual recordkeeping of the Town's contributions, earnings, and assets • Reconciliation of contributions to the trust account • Coordination of distributions from the Town's trust account, which includes receiving distribution documentation and directing the trustee to make distributions • Monthly reporting as well as customized reports as requested • All necessary forms, handbooks, training, and technical support • Administrative training meeting at implementation as we as ongoing training as necessary • Onsite client service reviews to ensure the Town's ongoing satisfaction with the trust program • Participation at Board meetings and assistance in preparing to present information to the Board, staff, or employee groups , if the Town requests • Coordination of periodic audits of the trust • Preparation and submission of documents as required by the Towns auditors for GASB 68/75 reporting • Periodic publications and website resources on legislative and regulatory developments related to retirement trust funding • Facilitation of actuarial valuation updates and funding scenarios with enrolled actuary as requested • Ongoing consulting/analytical services as needed TRUSTEE SERVICES 1U.S. BANK) • Safeguarding of assets for the exclusive benefit of the Town's employees, retirees, and beneficiaries • Receipt and investment of the Town's contributions according to selected investment strategy • Electronic interface and reporting to the trust administrator • Reimbursements for pension related costs made to the Town, or directly to the provider based on direction from the Trust Administrator • Please note if there are any additional costs for any of the above mentioned services. There are no additional costs for any of the services listed above • Describe how Town contributions to and distributions from the Section 115 Trust are how handled. Following adoption of the trust, PARS will provide the Town with an Administrator's Handbook to instruct and �... assist staff with the ongoing administration of the Program. This document will include information on 16IPage Town of Los Gatos IRS Code Section 115 Trust Provider Services contribution and distribution procedures, as well as form completion information, reporting requirements, and timelines. CONTRIBUTIONS — The Town's sole responsibility in the contribution process will be to send contributions to the trustee, U.S. Bank, either via check, wire or ACH. From here, the funds will be processed by the Bank and invested according to the Town's chosen investment selection. This will occur within 24 hours of the funds being sent, and the contribution amounts will then be reflected on the Town's subsequent statement. The Town has full discretion with regards to contribution amounts and timing. DISTRIBUTIONS - Like contributions, the Town will have full control over the disbursement of funds held in the trust, providing the legal requirements of the plan/trust are adhered to, For instance, disbursements can only be used to pay for pension plan or administrative expenses (e.g. CaIPERS plan costs or actuarial valuation services). Our program also allows for expenses to be reimbursed for the last two years of CaIPERS Employer contributions. The Town will make reimbursement requests using a PARS reimbursement form that indicates the premiums paid for retiree healthcare during a particular statement period. Once a distribution request has been received, PARS will contact U.S. Bank using a designated signer to request the funds to be disbursed. U.S. Bank will then handle the transfer of funds from the Town's OPEB account to the designated reimbursement location. • Define any termination restrictions for the Section 115 Trust. There are no termination costs or restrictions associated with PARS' Section 115 Trust Prograrn. We simply require a 30 day notice period in order to transfer assets to a like Section 115 trust. 171Page Town of Los Gatos IRS Code Section 115 Trust Provider Services INVESTMENT REQUIREMENTS AND INVESTMENT PERFORMANCE • Is there an initial minimum balance requirement for the 115 Trust? There is no initial minimum balance requirement with the PARS PRSP. Our program also has no minimum fees, contribution requirements or termination fees/restrictions. • Please describe the investment services your firm offers with respect to the 115 Trust including: The PARS Section 115 PRSP offers discretionary management of assets utilizing the program's trustee, U.S. Bank, with HighMark as sub -advisor. This approach allows the Town to mitigate investment fiduciary risk by designating a professional investment advisor/manager to have discretion of strategic and tactical investment decisions. Utilizing this approach, HighMark will provide the following investment services: • Flexible investment options that include both pre -established and customized portfolio options • Ongoing fiduciary protections • Investment Policy Statement development • Assistance with asset allocation and investment portfolio development/selection based on Town's risk tolerance and discount rate • Ongoing account monitoring and investment policy assistance • Ongoing asset rebalancing • Quarterly reports and periodic onsite client reviews • Open architecture investment program • Dedicated Senior Portfolio Manager Andrew Brown who will be directly available to the Town at all times • Does your firm offer assistance with investment strategy selection and investment policy development? Does this service typically include specific asset allocations recommendations? If so, please explain. HighMark will assist the Town with the investment of its assets by providing both investment policy assistance and asset allocation recommendations. Prior to making any recommendations, Senior Portfolio Manager Andrew Brown and HighMark s team of investment analysts will gain an in-depth understanding of the Town's circumstances. They will focus on determining a diversified, multi -asset portfolio structure that represents an optimal asset mix based on the Town's time horizon, risk tolerance level and liquidity needs. Primary consideration for asset allocations is given to the following: • Investable Cash Flow— How does the Town plan to fund its PRSP account? • Return Expectations — What are the actuarial assumptions for the plan? • Risk Tolerance — What is the comfort level with investments and varying risk? • Income and Liquidity Needs — What are needs for income to pay current liabilities? 18IPacie Town of Los Gatos IRS Code Section 115 Trust Provider Services After receiving input from staff, Andrew will craft an Investment Policy Statement and subsequently make an asset allocation recommendation that must be reviewed and approved by the Plan Administrator before going into effect. • Please provide the firm's recommended comparative yield benchmarks for trust assets held in this type of trust. The comparative yield benchmarks for PARS PRSP members vary based on the investment portfolio selected. For the 5 pre -established portfolio options that were developed by HighMark for PARS Section 115 trust clients, benchmarks are as follows: PARS -CAPITAL APPRECIATION S&P 500 Composite Index 1 39.50% BC US Aggregate Bd Index (USD) 16.00% Russell 2000 Index (USD) 10.50% MSCI EAFE Index (Net) 10.25% Russell Midcap Index 7.50% MSCI EM Free Index (Net USD) 5.25% Citigroup 1 Month T-Bill Index 5.00% ML 1-3 Yr US Corp/Govt 3.00% Wilshire REIT Index 2.00% ML US High Yield Mstr II Index 1.00% PARS BALANCED S&P 500 Composite Index 32.00% Russell Midcap Index 6.00% Russell 2000 Index (USD) 9.00% Wilshire REIT Index 2.00% MSCI EM Free Index (Net USD) 4.00% MSCI EAFE Index (Net) 7.00% BC US Aggregate Bd Index (USD) 27.00% ML 1-3 Yr US Corp/Govt 6.75% ML US High Yield Mstr II Index 1.25% Citigroup 1 Month T-Bill Index 5.00% PARS MODERATELY CONSERVATIVE S&P 500 Composite Index 15.50% Russell Midcap Index 3.00% Russell 2000 Index (USD) 4.50% Wilshire REIT Index 1.00% MSCI EM Free Index (Net USD) 2.00% MSCI EAFE Index (Net) 4.00% BC US Aggregate Bd Index (USD) 49.25% ML 1-3 Yr US Corp/Govt 14.00% ML US High Yield Mstr If Index 1 1.75% Citigroup 1 Month T-Bill Index 5.00% PARS MODERATE S&P 500 Composite Index 26.50% Russell Midcap Index 5.00% Russell 2000 Index (USD) 7.50% Wilshire REIT Index 1.75% MSCI EM Free Index (Net USD) 3.25% MSCI EAFE Index (Net) 6.00% BC US Aggregate Bd Index (USD) 33.50% ML 1-3 Yr US Corp/Govt 10.00% ML US High Yield Mstr II Index 1.50% Citigroup 1 Month T-Bill Index 5.00% PARS CONSERVATIVE S&P 500 Composite Index 7.50% Russell Midcap Index 1.50% Russell 2000 Index (USD) 2.50% Wilshire REIT Index 0.50% MSCI EM Free Index (Net USD) 1.00% MSCI EAFE Index (Net) 2.00% BC US Aggregate Bd Index (USD) 52.25% ML 1-3 Yr US Corp/Govt 25.75% ML US High Yield Mstr II Index 2.00% Citigroup 1 Month T-Bill Index 5.00% • Please provide annual, five-year, ten-year, fifteen- year, and twenty-year return history and expense ratios for each fund/portfolio option available. Would the firm be able to benchmark against yields obtained from similar 115 Trusts such as the California Employee Retirement Benefit Trust? If so, please provide this data. The following table shows return history (as of March 31, 2017) for the pre -established portfolio options. We are unable to provide 15 and 20 year return history due to the fact that the portfolios have only been in place for 10 years. Please note that fund level expenses have already been netted out of the performance returns. 19IPage Town of Los Gatos IRS Code Section 115 Trust Provider Services ACTIVELY MANAGED PORTFOLIOS PORTFOLIO BALANCED 1 YEAR 11.25% 5 YEARS 7.16% 10 YEARS 5.06% MODERATE 9.67% 6,34% 4.97% MODERATELY CONSERVATIVE 6.44% 4.85% 4.73% CONSERVATIVE 4.07% 3.67% 4.25% BLENDED ACTIVE/INDEX PORTFOLIOS PORTFOLIO CAPITAL APPRECIATION 1 YEAR 13.08% 5 YEAR 8.39% 10 YEARS 10.46%* *inception to date - 01/2009 INDEX PORTFOLIOS PORTFOLIO BALANCED 1 YEAR 10.51% 5 YEAR 7.22% 10 YEARS 4.75% MODERATE 8.75% 6.39% 5.08% MODERATELY CONSERVATIVE 5.40% 4.65% 4.27% CONSERVATIVE 2.91% 3.28% 3.81% EXPENSE RATIO 0.56% 0.53% 0.49% 0.44% EXPENSE RATIO 0.59% EXPENSE RATIO 0.14% 0.13% 0.11% 0.10% Comparative Benchmarks - HighMark is able to benchmark against yields for similar 115 trusts (including the California Employee Benefit Trust) during our regular performance reviews to the extent that the information is available coincident with our meeting schedules. As the data can only be obtained from CalPERS directly, our ability to provide a comparison depends on their regular communication of returns. • Describe the investment and risk options available for the 115 Trust. The PARS PRSP was designed to give client agencies maximum investment flexibility. Utilizing HighMark as discretionary investment manager, the Town will have the following investment/risk choices available for the investment of its funds: 1. FIVE RISK TOLERANCE LEVELS The Town can participate in one of five risk tolerance levels that have been developed specifically for clients in PARS' Section 115 Trust. The five portfolios include: (a) actively -managed underlying mutual funds intended to outperform benchmarks or (b) low-cost Index/Exchange-Traded Funds (ETFs) which are baskets of stocks tracking the composition and performance of most leading market indices. The following table provides an overview of the investment objectives for each of the five portfolios: 20 Page Town of Los Gatos IRS Code Section 115 Trust Provider Services STRATEGY INVESTMENT OBJECTIVE EQUITY ALLOCATION CAPITAL APPRECIATION BALANCED Provide growth of principal and income 65-85% Provide growth of principal and income 50-70% MODERATE Provide growth of principal and income 40-60% MODERATELY CONSERVATIVE Provide current income and moderate capital appreciation 20-40% CONSERVATIVE Provide a consistent level of inflation -protected income over the long-term 5-20% A full breakdown of the funds within the pre -established portfolios can be viewed in the Appendix under "Investment Portfolios." 2. CUSTOMIZED APPROACH Still using a discretionary trustee approach, the Town can customize its own portfolio under the investment and fiduciary advice of HighMark to include: (a) any funds available under an open architecture trading platform, (b) any combination of active and index funds in the pre -established portfolios, or (c) individual securities/bonds to reduce costs. This option gives the Town full flexibility of its investments. • Explain your firm's views on passive versus active management. What is your typical recommendation regarding allocation of the Section 115 Trust assets between active and passive management? HighMark believes in active management and frequently uses actively managed strategies. The firm has internal research teams dedicated to discovering the best active investments including equities, bonds, and actively managed funds. In many cases, this process has demonstrated HighMark's ability to add risk -adjusted return versus passive benchmarks. In addition, whether based on client preference or when active strategies are not available or are not favorable, the firm will also utilize index -based securities such as exchange traded funds in order to gain diversification and exposure to various markets at a traditionally lower embedded fund fee than actively managed funds. To maximize flexibility, the portfolios developed by HighMark for PARS PRSP clients can be selected as either active or passively managed. • What are the typical approaches made to rebalancing or reallocating asset classes, styles, and sectors for or on behalf of the fund/trust? Rebalancing is an important part of the success story of any portfolio's long-term returns, so HighMark places a high degree of importance on these decisions. Portfolio rebalancing is largely focused on market developments (e.g. changes in investment climate, changes in valuation levels, expected market response to Fed policy) but must also be consistent with the Town's needs and preferences, as well as changes in circumstances, including changes in cash flow needs. For that reason, it is important that Andrew Brown, your assigned portfolio manager, work in close conjunction with staff to stay current on the needs and requirements of the Town of Los Gatos, including any impending cash distributions or other needs. 211 agr Town of Los Gatos IRS Code Section 115 Trust Provider Services When a portfolio's allocation has veered significantly from long-term and/or established targets because of performance (for example, the equity allocation may have risen due to a general rise in the equity market or other performance), HighMark will generally rebalance to the long-term equity targets as a function of the ongoing quality risk management process. The context for making such longer -term decisions comes from the firm's internal allocation policies. HighMark Capital Management's Asset Allocation Committee (AAC) meets monthly to determine the overall strategic and tactical asset class returns expectations, which are then rapidly communicated throughout the firm via both conference calf and email. Any such change in the firm's market outlook or allocation policies are rapidly transmitted into the Town's portfolio via rebalance. • Are there minimums requirements for periodic contributions to the Section 115 Trust? There are no minimum periodic contribution requirements for the PARS Section 115 Trust. Member agencies have full discretion to make contributions at any time. 221Paae Town of Los Gatos IRS Code Section 115 Trust Provider Services FEES In a separate schedule, please provide all fees for the proposed services, including administration, trustee and investment management services. A full fee schedule breakdown has been included in the response to the third question below. • Detail any initial balance or start-up fees. There are no initial balance or start-up fees associated with the PARS Program. In fact, no fees will be charged until after the Town has made its first contribution, • Are fees scalable dependent upon the amount of assets placed into the Section 115 Trust? If so, provide a schedule of the fees. Yes. Fees for the program decrease as assets in the trust increase. A full breakdown of fees has been included in the response to the question below. • Identify fees for consulting, trustee and investment services separately. Fees for PARS Section 115 Pension Prefunding Trust services are broken down into trust administration, and discretionary trustee/investment management costs. A full breakdown of these program fees are listed below. Please note there are no start-up or termination costs associated with the program. TRUST ADMINISTRATION/CONSULTING FEES The following fees are comprehensive and paid to PARS through the trust. These fees provide for administration, including compliance, legal, recordkeeping, funding analysis, and reporting. COMPANY ONGOING FEE PARS 025% for assets under $10 million 020% for assets $10-15 million 0.1S% for assets $15-50 million 0.10% for assets over $50 million DISCRETIONARY TRUSTEE/INVESTMENT MANAGEMENT FEES Trustee and investment management fees are paid to U.S. Bank. These fees include investment policy development, asset allocation recommendations, asset management, and al'l custodial services. 231Page Town of Los Gatos IRS Code Section 115 Trust Provider Services COMPANY ONGOING FEE lf.S. BANK/HIGHMARK Trustee fees — 0.00% (fee waived) Investment Management Fees 0.35% for assets under $5 million- 0.25% for assets $5—$10 million 0.20% for assets $10—$15 million 0.15% for assets 515—$50 million 0,10% for assets over $50 million *These fees represent the highest weighted investment management fee that can be charged. Fees for HighMark's five risk tolerance portfolios as of March 37, 2077 range from 0.25% to 0.34 a for assets under S5 million, depending on risk tolerance level. Subject to change due to rebalancing. This is because all investment management fees are waived on the First American Prime Obligation Z fund as well as any funds within the portfolio that HighMark serves as sub-adviser/adviser. • Provide historical fees for each of the prior five years (2012 through 2016). The asset based fees for PARS' Section 115 Trust Program have seen no change since 2012. Prior to 2012 however, the asset based program fees were reduced on 2 separate occasions. • Identify the expense structure of the Section 115 Trust investment platforms. Detail the expenses, (i.e. no-load, low -load, proprietary funds, institutional shares, etc.). The investments within the HighMark portfolios are institutional share class funds, These types of funds will benefit the Town because they are the lowest fee share class available and there are no additional fees either; (a) netted from investment performance, or (b) received by providers outside of investment performance. • Describe in detail revenue sharing agreements that the firm has with investment managers and/or subcontractors, insurance providers, and any remuneration that the firm derives from investment managers and/or sub -advisors. Include any 12b-1, service, distributor, or platform fees that the firm derives from investment managers and/or sub -advisors. PARS is a fee for service provider. We have no revenue sharing agreements with any investment managers, and/or subconsultants and derive no remuneration for services provided as part of the PARS PRSP. U.S. Bank, as discretionary investment advisor utilizes HighMark Capital Management (HighMark) as a sub - advisor to provide investment management services for members of the PARS PRSP. Under this sub -advisory arrangement, U.S. Bank pays HighMark 60% of the annual management/discretionary trustee fee for assets sub- advised by HighMark. HighMark does not have any revenue sharing agreements. One hundred percent of HighMark`s revenue is derived from fees from investment management and advisory services provided to its clients. 24'Pao e Town of Los Gatos IRS Code Section 115 Trust Provider Services • Describe in any additional fees or potential hidden costs to be netted from investment performance. The only additional fees not listed above are the embedded fund fees which are charged on the funds within each portfolio. Listed below are the embedded fund fees for the pre -established portfolio options as of March 31, 2017. Please note that these fund level fees are already netted out of reported performance returns. INVESTMENT PORTFOLIO OPERATING EXPENSE RATIO ACTIVE PASSIVE CAPITAL APPRECIATION 0.59% BALANCED MODERATE MODERATELY CONSERVATIVE CONSERVATIVE 0.56% 0.53% 0.49% 0.44% 0.15% 0.14% 0.13% 0.11% 0.10% • Describe in detail any and all surrender, withdrawal, transfer, or deferred sales charges within your investment products. There are no surrender, withdrawal, transfer, or deferred sales charges within any of the investment products used for the PARS PRSP. • Describe any fee related to transfer of assets and restrictions or costs related to the termination of the agreement with your firm. There are no fees or restrictions related to the transfer of assets or termination of the agreement. PARS simply requests a 30 day notice period in order for us to transfer assets to a like Section 115 trust. 25'Page Town of Los Gatos IRS Code Section 115 Trust Provider Services REFERENCES Please list the name, address, contact name, telephone number and e-mail address of at least five public agency client references, with emphasis on clients served by the Section 115 Trust pension program proposed in response to this RFP. AGENCY CONTACT INFORMATION CITY OF PALO ALTO CITY OF DALY CITY CITY OF ALAMEDA CITY OF DUBLIN CITY OF UNION CITY Lalo Perez. Chief Financial Officer 250 Hamilton Avenue Palo Alto, CA 94301 Phone: 650.329.2675 Email: Lalo_Perez@cityofpaloalto.org Lawrence Chiu, Director of Finance & Admin. Services 333 90th Street Daly City, CA 94105 Phone:650-991-8048 Emailichiu@dalycity.org Elena Adair, Director, Finance 2263 Santa Clara Ave., Suite 220 Alameda, CA 94501 Phone: 510-747-4888 Email: eadair@alamedaca.gov Colleen Tribby, Director of Administrative Services 100 Civic Plaza, Dublin, CA 94568 Phone: (925) 833-6654 Email:colleen.tribby@dublin.ca.gov Mark Carlson, Director, Finance 34009 Alvarado -Niles Road Union City, CA 94587 Phone: 510-675-5431 Email: mcarlson@unioncity.org A full PARS Section 115 Trust client list can be viewed in the appendix under "Client List.' 261Page APPENDIX A: PROPOSER WARRANTIES The proposer warrants that it can and will provide and make available, at a minimum, all of the services and deliverables set forth in this RFP. The proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing a prudent amount of coverage for the willful or negligent acts or omissions of any officers, employees, or agents in conjunction with the services to be provided. Coverage limits shall be $2,000,000 or more per occurrence, without reduction for claims paid during the policy period. The carrier should be duly insured and authorized to issue similar insurance policies for this nature in the State of California. The proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the prior written permission of the Town. The proposer shall state the length of time for which the submitted Proposal shall remain valid. The Town requires a period of at least 120 calendar days. The proposer warrants that all information provided by it in connection with this proposal is true and accurate. Signature: Printed Name: Dan Johnson Title: President Firm: Public Agency Retirement Services (PARS) Date: 5/24/2017 **Signed contingent on the proposed exceptions set forth on the following page**. 27 1Page Town of Los Gatos IRS Code Section 115 Trust Provider Services EXCEPTIONS TO THE PROPOSAL REQUIREMENTS The proposal is submitted contingent on the Town of Los Gatos consideration of the following exceptions and/or modifications: 1. APPENDIX A: PROPOSER WARRANTIES PARS' errors and omissions coverage is written on a claims made basis. Our provider has requested that the paragraph from Appendix A on errors and omissions insurance be modified to read as follows: "The proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing a prudent amount of coverage for negligent acts or omissions of any officers, employees, or agents in conjunction with the services to be provided. Coverage limits shall be $2,000,000 per claim. The carrier should be authorized to issue similar insurance policies for this nature in the State of California." 2. SAMPLE TOWN CONTRACT PARS was unable to attain a copy of the sample Town contract and reserves the right to propose modifications, if any, to the contract if selected as the successful proposer. 281 age Town of Los Gatos IRS Code Section 115 Trust Provider Services ACTIVELY MANAGED PORTFOLIOS RAS OF MARCH 31, 2017) Equity Large Cap Core Large Cap Core Large Cap Value Large Cap Growth Large Cap Growth Mid Cap Blend Real Estate Small Cap Value Small Cap Growth International International International Emerging Markets Fixed Income PARS PARS Moderately PARS PARS J.0 <20% equity <40%equity <60% equity 50.70% equity 65-85% equity 1.45% 3.29% 6.86% 11.46% 1.23% 2.47% 4.26% 0.62% 1.24% 2.13% 0,62% 1.24% 2.13% 1.10% 2.20% 3.60% 0.75% 1,38% 1.50% 1.25% 2,25% 3.75% 1.25% 2.25% 3.75% 1.29% 2.50% 4.03% 0.69% 1.40% 2.60% 0.69% 1.40% 2.60% 0.78% 1.93% 3.25% 15.00% 30.00% 50.00% 2.89% 4.95% 6.00% 13.40% 5.00% 2.50% 2.50% 4.50% 1.63% 4.50% 4.50% 4.92% 3.28% 3.28% 4.00% 60.00% 7.45% 17.32% 6.16% 3.08% 3.08% 5.50% 1.75% 5.25% 5.25% 6.34% 4.28% 4.28% 5.25% 75.00% Actively Managed Mutual Funds SMGIX VGIAX DO0GX HACAX PRU FX IWR FARCX UBVLX PRJIX NWHMX DODFX MQGIX SE MN X COLUMBIA CONTRARIAN CORE-2 VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-INST T ROWE PR GROWTH STOCK -I !SHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UN DISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ•INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT EQ-I Short Term Bond Interm Term Bond Intern, Term Bond Interm Term Bond Floating Rate Note Cash 12.40% 10.19% 6,31% 4.50% 19.21% 14.44% 10.00% 9.00% 20.61% 16.75% 12.53% 10.00% 23.8496. 22.37% 15.59% 11.8196 3.00% 2.75% 2.49% 2,00% 79,06% 66.50% 46.92% 37.31% 5.94% 3.50% 3.08% 2.69% 4.00% 5.62% 6.00% 5.69% 1,50% 22.81% 2.19% VFSUX PTTRX PTRQX NWJIX EIFHX FG2XX VANGUARD S/T INVEST GR-ADM PIMCOTOTAL RETURN FUND•INST PRUDENTIAL TOTAL RETRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBLIG-Z TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 0.44% 0.25% 0, 49% 0.26% 0.53% 0.28% 0.56% 0.59% Weighted embedded expense ratio* 0.30% 0.32% Weighted investment management fee*' *Represents the weighted embedded expense ratio for that fund (Source: Morningstar Direct) **Represents the weighted investment management fee net of any waivers in place for assets invested in funds for which HighMark serves as sub-adviser/adviser; assuming a $5 million account Town of Los Gatos IRS Code Section 115 Trust Provider Services PASSIVELY MANAGED PORTFOLIOS [AS OF MARCH 31, 2017) PARS PARS Moderately PARS PARS PARS Capital Passively Managed Mutual Funds Conservative Conservative Moderate Balanced Appreciation Ticker ,end Name Equity _ <20%equity <40% equity <60% equity 50-70% equity 65-85%equity Large Cap Blend 4.73% 9.76% 16.41% 19.40% 24.77% IVV !SHARES CORE S&P 500 ETF Large Cap Value 1.23% 2.47% 4,26% 5.00% 6,16% IVE ISHARES S&P 500 VALUE ETF Large Cap Growth 1,23% 2.47% 4.26% 5.00% 6.16% IVW ISHARES S&P 500 GROWTH ETF Mid Cap Blend 1.10% 2.20% 3.60% 4.50% 5.50% IWR ISHARES RUSSELL MID -CAP ETF Real Estate 0.75% 1.38% 1.50% 1.63% 1.75% VNQ VANGUARD REIT ETF Small Cap Value 1.25% 2.25% 3.75% 4.50% 5.25% IWN ISHARES RUSSELL 2000 VALUE E Small Cap Growth 1.25% 2.25% 3.75% 4.50% 5.25% IWO ISHARES RUSSELL 2000 GROWTH International 2.68% 5.30% 9.23% 11.48% 14.90% EFA ISHARES MSCI EAFE ETF Emerging Markets 0.78% 1.93% 3.25% 4.00% 5,25% VWO VANGUARD FTSE EMERGING MARKE 15.00% 30.00% 50.00% 60.00% 75.00% Fhced Income Short Term Bond 12.40% 10.19% 6.31% 4.50% 4.00% VFSUX VANGUARD S/T INVEST GR-ADM Intermediate Term Bond 63.66% 53.56% 38.12% 30.81% 17.31% AGG ISHARES CORE U.S. AGGREGATE Floating Rate Note 3.00% 2,75% 2.49% 2.00% 1.50% BKLN POWERSHARES SENIOR LOAN 79.06% 66.50% 46.92% 37.31% 22.81% Cash 5.94% 3.50% 3.08% 2.69% 2.19% FGZXX FIRST AM GOV OBLIG-Z TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 0.10% 0.11% 0.13% 0.33% 0.34% 0.34% 0.14% 0.15% Weighted embedded expense ratio* 0.34% 0,34% Weighted Investment management feel* *Represents the weighted embedded expense ratio for that fund (Source: Morningstar Direct) **Represents the weighted investment management fee net of any waivers in place for assets invested in funds for which HighMark serves as sub-adviser/adviser; assuming a $5 million account JHIGHMARK' CAPITAL MANAGEMENT PARS DIVERSIFIED PORTFOLIOS CONSERVATIVE Q1 2017 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 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. Reward (Pala of Ralson) Capital Appreciation Balanced Moderate Moderately Conservative Conservative sk 'i Standard Deviation) ASSET ALLOCATION - CONSERVATIVE PORTFOLIO Equity Fixed Income Cash Strategic Range 5 - 20% 60 - 95% 0 - 20% Policy 15% 80% 5% Tactical 15% 79% 6% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees. but Net of Embedded Fund Fees) HighMark Plus Active 'ndex Plus _ Current Quarter* Blended Benchmark" Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 1.88% 1.43% 1.88% 1_43% 4.07% 3.26% 2.97% 2 99% 3.67% 3.27% 4.25% 3.88% Current Quarter` Blended Benchmark" Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 1.44% 1.43% 1.44% 1 43% 2.91% 3.26% 2.72% 2.99% 3.28% 3.27% 3.81 % 3.88% ' Returns less than 1-year are not annualized "Breakdown for Blended Benchmark. 75% S&P500. 1 5% Russell Mb Cap. 2 5- Russell 2000 1 % MSC; EM FREE. 2% MSCI LAFE. 52.25% BC US Agg. 25 75% ML 13 Yr US CorpiCou t. 2% US High Yield Master II. 0 5% Wilshire REIT. and 5% Cih 1 Mat T-Bill. Prior to October 2012. the (blended benchmarks were 12% S&P 500, 1% Russell 2000 2% MSC( EAFE, 40 % ML 1.3 Year Corp_?Gout, 40% BC Agg. 5% Cm 1 Mih 7-13111. Pr or tri April 2007. the blended benchmarks were 15% S&P 500.40% PAL 1-3Yr CorpCov 40'4 BC Agg and 5% C4i 1 Mfh T-Bd ANNUAL RETURNS r�1u51Acuvei 2008 2009 2010 2011 2012 2013 2014 2015 2016 PORTFOLIO FACTS Inception Data No of Funds in Portfolio -9.04%0 15 59% 8.68% 2 19% 8.45% 3.69% 3.88% 0 29% 4.18% Index Plus (Passive) 2008 2009 2010 2011 2012 2013 2014 2015 2016 index Plus Passive) 0,7/2004 Inception Data 19 No of Funds in Portfolio -6.70% 10.49% 7.67% 3.70% 6.22% 3.40% 4.32% 0.06% 3.75% 07/2004 13 HOLDINGS HighMark Plus (Active) COLUMBIA CONTRARIAN CORE-2 VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-iNST T ROWE PR GROWTH STOCK -I (SHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT EQ I VANGUARD S!T INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST PRUDENTIAL TOTAL RETRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBUG-Z STYLE intt Storks 3.5%-1 Mid Cap 1 1.1 % Large Cap Growth 1.2% Large Cap Core �g 4.7% Short -Tenn Bond J 124% Floating Rate Note_/ 3.0% Intern -Term Bond 83 7% Index Phis )Passive) (SHARES CORE S&P 500 ETF (SHARES S&P 500 VALUE ETF (SHARES S&P 500 GROWTH ETF ISHARES RUSSELL MID -CAP ETF VANGUARD REIT ETF SHARES RUSSELL 2000 VALUE E SHARES RUSSELL 2000 GROWTH $SHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD SIT INVEST GR-ADM SHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBUG-Z Holdings are subject to change at the discretion of the investment manager CashLarge 1 Cap Value Rea Estate 59`E 0.8% Small Cap 25% The performance records shown representsae-weighted composites of tax exempt accounts that meet the following cnlek Composites are managed by HighMarks HighMark Capital Advisors (HCA) with full investment aulh0nty according to the PARS Conservative active and passive objectives and do not have equity concentration of 25% or more in one common stock secunty 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 0,80% annual management fee based on a stiding scale. As of March 31. 2017 the blended rate is 0.58% US Bank pays HighMark 80% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreement with US Bank. The 36 basis points pad to Hrg1Ma-k as well as other expenses that may be incurred in the management of the portfolio. wit reduce the partial° returns. Assuming an Investment for five years. a 5'-- annual total return.. and an annual sub -advisory fee rate of 0.38% deducted from the assets a1 market at the end of each year, a 10 million initial value would grow to 512 54 million after fees I Net -of -Fees! and 512 76 million before fees (Gross -off -Fees) Additional information regarding the firm's polices and procedures for calculating and reporting performance results is available upon request. In 01 2010, the PARS Composite definition was changed from 5750,000 minimum to no minimum Performance results are calculated and presented in U S dol Pars and do not reflect the deduction of investment advisory feescustody fees, or taxes but do reflect the deduction of trading expenses Returns are calculated based on trade -date accounting. Blended benchmarks represent HighMarks strategic allocations between equity. fixed Incomeand cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or outer expenses of investing but assumes the reinvestment of dividends and other earnings An investor cannot Invest directly in an index The unmanaged S&P 500 Inds, is representative of the performance of large companies in the tJ S stook market The MSCI EAFE Index is a free float - adjusted market capifalrzation index designed to measure developed market equity performance. excluding the U S and Canada. The MSCI Emerging Markets Free index is a free float -adjusted market capitalization index that is designed to measure equity nnatket performance in the global emerging markets The Russell Midcap Index measures the performance of the mid -cap segment of the U S equity universe The Russell 2000 Index measures the performance of the srnall-cap segment of the U.S equity universe The US High Yield Master I1 Index tracks the performance of below investment grade U S. dollar -denominated corporate bonds publicly issued in the U 5 dornestic market Wilshire REIT index measures U S publicly traded Real Estate investment Trusts The unmanaged Bloomberg Barclays Capital (BC) U S. Aggregate Bond ,rda is generally representative of the U.S taxable bond market as a whole. The Merrill Lynch IMLj 1-3 Year U.S. Corporate & Government Index tracks the bond performance of The ML U.S. Corporate & Government Index, with a remaining term to final matunty less than 3 years. The unmanaged Citigroup 1-Month Treasury Bill Index trades the yield of the 1-month U S Treasury Bill. HighMark Capital Management, Inc, (HighMark), an SEC -registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, NA (MUB). HighMark manages institutional separate account portfolios for a wide variety of for -profit and nonprofit organizationspublic agencies. public and private retirerrtentplans, and personal trusts of all sizes it may also serve as sub -adviser for mutual funds. Common trust funds, and collective investment finds MUB, a subsidiary of 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 construct en will vary depending on each client's investment needs and objectives Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits. are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible lass of principal HIGHMARKCAPITAL MANAGEMENT 350 California Street Suite 1600 San Francisco. CA 94104 800-582-4734 www highmarkcapital com ABOUT THE ADVISER HighMark' Capital Management. Inc (HighMark) has over 90 years (including predecessor organizations) of institutional money management experience with more than S15 9 billion in assets under management. HighMark has a long term 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 Andrew Bates, CFA' Portfolio Manager Investment Experience: since 2008 HighMark Tenure: since 2015 Education BS. University of Colorado Salvatore "Tory' Milazzo III. CFA Senior Portfolio Manager Investment Experience since 2004 HighMark Tenure since 2014 Education: BA, Colgate University J. Keith Stribling, CFA Senior Portfolio Manager Investment Experience since 1985 HighMark Tenure: since 1995 Education. BA Stetson University Christiane Tsuda Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education. BA, International Christian University, Tokyo Anne Wimmer. CFA' Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education BA. University of Califomia. Santa Barbara Asset Allocation Committee Number of Members 16 Average Years of Experience: 26 Average Tenure (Years): 13 Manager Review Group Number of Members: 8 Average Years of Experience 19 Average Tenure (Years): 7 J H IGHMARK° CAPITAL MANAGEMENT PARS DIVERSIFIED PORTFOLIOS MODERATELY CONSERVATIVE Q1 2017 WHY THE 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 ter 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 Fiexibie 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. valuegrowth). 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. erd (Pule of Pesum) Efficient Frontier Capital Appreciation Balanced Moderate Moueratety Conservative Pick (Standard DeMation+ ASSET ALLOCATION - MODERATELY CONSERVATIVE PORTFOLIO Equity Fixed Income Cash Strategic Range 20-40% 50 - 80% 0 - 20% Policy 30% 65% 5% Tactical 30% 67% 3% (Gross of Investment Management Fees, but ANNUALIZED TOTAL RETURNS Net of Embedded Fund Fees) Current Quarter Blended Benchmark" Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 2.68% 2 21% 2.68% 2.21 % 644°% 5.61% 3.64% 4.01% 4.85% 4.82% 4.73% 4.57% Current Quarter* Blended Benchmark" Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 2.16% 2.21 % 2.16% 2 21% 5.40% 5 61% 3 72% 4.01% 4.65% 4.82% 4.27% 4.57% • Returns Bess then 1-year are notannual¢ed -Breakdown for Blended Benchmark 15 -, S&P500. 3% Russell Mid Caps 5'% Russell 2000 2% MSCI EM FREE, 4% MSCI SAFE. 49 25% BC US Agg 14% ML 1-3 Yr US Corp/GoVt.. t 75% US High yield Master 11, 1% Wilshire REIT, and 5% Ca 1 Mth T-Bi t, Prior to October2012. the blended benchmarks were 25% S&P 500. 1.5'i Russell 2000 3 5% MSCI EAFE 25% ML 1.3 Year Corp !Govt. 40% BC Agg. 5% Ceti 1 Mth T-Bill Prior to Apn9 2007 the Mended benchmarks were 30% S&P 500.. 25% ML I-3Yr CorprGoe.40% EC Agg. and 5% Co, 1 Ma T-1341 ANNUAL RETURNS HIw tJlc = 2008 2009 2010 2011 2012 2013 2014 2015 2016 Active' PORTFOLIO FACTS HighMark Inception Data No of Funds in Portfolio -15.37% 18.71 % 10.46% 1 75% 10.88% 7.30% 4.41% 0.32% 4.93% Index Plus (Passive, 2008 2009 2010 2011 2012 2013 2014 2015 2016 Index Pius lPassive) 08/2004 Inception Data 19 No of Funds in Portfolio -12.40% 11.92% 9.72% 3,24% 8,24% 6.78% 5.40% -0.18% 5.42% 05/2005 13 HOLDINGS HighMark Plus (Activel COLUMBIA CONTRARIAN CORE-2 VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA•INST T ROWE PR GROWTH STOCK -I (SHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT E -I VANGUARD SIT INVEST GR-ADM PIMCO TOTAL RETURN FUND-1NST PRUDENTIAL TOTAL RETRN BND-O NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBUG-Z STYLE Index Plus (Passive) 'SHARES CORE S&P 500 ETF ISHARES S&P 500 VALUE ETF 'SHARES S&P 5500 GROWTH ET ISHARES RUSSELL MID -CAP ETF VANGUARD REIT ETF ISHARES RUSSELL 2000 VALUE E (SHARES RUSSELL 2000 GROWTH ISHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD SIT INVEST GR-ADM ISHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LAN FIRST AM GOV OBUG-2 Holdings are subject to change at the discretion of the investment manager. Lune Cap Value, , Real Estate 1.4% 25% Cash 3.5 Ina Stocks 7 2% Mid Cap 2.2% Large Cap Growth 25% Large cap. Core 9.8% Short.Term Bond 10.1 % Eloa5ng Rate Nate 2.8% Sisal Cap 4.5% Intsm-Term Bona 535% The performance records shown represent size -weighted composites of lax exempt accounts that meet the following Greene Composites are managed by HghMarks HighMark Capital Advisors MCA) with full Investment authonty 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 The adviser to the PARS portfolios is US Bank. and F4 nMark serves as sub 30vi58r to US Bank to manage these portfolios US Bankmay charge clients as much as 0.60 y annual management fee based on a slidmg scale. As of March 31. 2017. the blended rate is 0.56% US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under lls sub -advisory agreement with US Bank The 36 basis points pad to HighMark as well as ether expenses that may be incurred in the management of the portfolio, well reduce the portfolio returns. Assuring an investment for five years a �= annual total return, and an annual sub -advisory fee rate of 036% deducted from the assets at market at the end of each a 10 million initial value would grow to 5.12.54 million after fees (Net -of -Fees) and 512.76 million before fees (Gross -of -Fees Additional information regarding the firm's policies and procedures for calculating and reporttng performance results is avertable upon request fit 01 2010, the PARS Corix.x site definition was changed from 5750 000 m ienlm to na minimum Performance results are calculated and presented in U.S dollars and do not reflect the deduction a1 investment advisory fees. custody feesor taxes Out do reflect the deduction of trading expenses. Retums are calculated based on trade -date accounting. Blended benchmarks represent HighMark'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 dividends and other eammgs An investor cannot invest directly in an index The unmanaged S&P 500 Index is representative of the performance of large companies In the U S stock market The MSC( EAFE index is a free float - adjusted market capitalization Index designed to measure developed market equity performance. excluding the U S. and Canada The MSC/ Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance an the Octal errergirg markets The Russell Midcap Index measures me performance of the rr oil -cap segment of the U S equity universe The Russell 2000 Index measures the performance of the small -sap segment of the U.S. equity universe. The US High Yield Master II Index tracks the performance of below investment grade U.S. dolfar-denonanated corporate bonds publicly issued In the U S domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg 8arciays Capital (BC) U.S. Aggregate Bond Index is generally representative of the U.S taxable bond rrradtet as a whale The Memlf Lynch (Men) 1-3 Year U 5 Corporate & Government Index tracks the bond performance of The Mt. U.S Corporate & Government Index with a remaining term to final maturity less than 3 years The unmanaged Ctigrlup 1-Month Treasury Bill Index tracks the yield of the 1-month U.S Treasury Bic. HighMark Capital Management. Inc. (HighMark). an SEC -registered Investment adviser is a wholly owned subsidiary of MUFG Union. Bank, N A )MUB) HighMark manages institutional separate account portfokos for a wide sanely of for -profit and nonprofit organizationspublic agencies, public and pnvate retirement plansand personal trusts of all sizes. It may also serve as sub -adviser for mutual funds, common trust funds and collective investment ftxlds.. MUB a subsidiary of MUFG Americas Holdings Corporation provides certain services. to HighMark and is compensated for these services Past perruirrence does not guarantee future results. Individual mount management and construction will vary depending on each clients investment needs and objectives investments employing HighMark strategies are NOT Insured by the FDIC or by any either Federal Government Agency, are NOT Bank deposits. are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value. including possible loss of principal. HIGHMARK CAPITAL MANAGEMENT 350 California Street Suite 1600 San Francisco. CA 94104 800-582-4734 vwvw.hroghmarkcapital com ABOUT THE ADVISER HlghMark° Capita) Management. Inc. (HighMark) has over 90 years (including predecessor organizations) of institutional money management experience with more than S15.9 billion in assets under management. HighMark has a long term 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 Andrew Bates, CFA' Portfolio Manager Investment Experience: since 2008 HighMark Tenure: since 2015 Education BS. University of Colorado Salvatore "Tory" Milazzo III, CFA` Senior Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2014 Education BA, Colgate University J. Keith Stribling, CFA' Senior Portfolio Manager Investment Experience since 1985 HighMark Tenure: since 1995 Education: BA. Stetson University Christiane Tsuda Senior Portfolio Manager Investment Experience. since 1987 HighMark Tenure: since 2010 Education: BA. International Christian University. Tokyo 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: 16 Average Years of Experience: 26 Average Tenure (Years): 13 Manager Review Group Number of Members 8 Average Years of Experience: 19 Average Tenure (Years): 7 HIGHMARKm CAPITAL MANAGEMENT PARS DIVERSIFIED PORTFOLIOS MODERATE Q1 2017 WHY THE PARS DDIVERSIFIED 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 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 Reward (Rale of Return) Efficent Fronter Capital Appreaatlon Balanced Moderate Moderately Conservative Conservative se (Standard I]enet/two ASSET ALLOCATION - MODERATE PORTFOLIO Strategic Range Policy Tactical Equity 40 - 60% 50% 50% Fixed Income 40 - 60% 45% 47%) Cash 0 - 20% 5% 3% ANNUALIZED TOTAL RETURNS (Gross of investment Management Fees. but Net of Embedded Fund Faesl Hight,.fark Plus IActivel Current Quarter' Blended Benchmark* Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 3.72% 3.20% 3.72% 3.20% 9.67% 8-96% 4.58% 5.21% 6.34% 6.79% 4,97% 5.25% Current Quarter' Blended Benchmark" Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year 3.08% 3.20% 3.08% 3.20% 8.75% 8 96% 4.67% 5 21% 6.39% 6- 79% 5.08% Blended Benchmark 5.25% 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. 104E ML 1-3 Yr US CorprGov ,, 1 50% US Hugh Yield Masser VI. 1.75% Wilshire REIT. and 5% Cal 1 Mth T-Bill. Pnor to Ocfaber2012. the blended benchmarks were 43% S&P 500: 2°: Russell 2000 5% MSCI EAFE 15% ML 1-3 Year Carp..Gavt 30% BC Agg 5% Ca 1 Mth T-BaI Pear to Apra 2007 the blended benchmarks were 50% S&P 500. 15% ML 1-3Yr Corp'Gov 30% BC Agg. and 5% Cm 1 Mar T-Sal ANNUAL RRETURNS �tivel Ir,dsx Pius iPassivef 2008 -22.88% 2009 2010 2011 2012 2013 2014 2015 2016 PORTFOLIO FACTS Inception Data No of Funds in Portfolio 21.47% 12.42% 0.55% 1225% 13.06% 4-84% 0.14% 6.44% 2008-18.14% 2009 2010 2011 2012 2013 2014 2015 2016 Index Plus Passive) 10/2004 Inception Data 19 No of Funds in Portfolio 16.05% 11-77% 2,29% 10.91% 12 79% 5.72% -0 52% 7.23% 05/2006 13 HOLDINGS HighMark Plus (Active) COLUMBIA CONTRARIAN CORE-2 VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-INST T ROWE PR GROWTH STOCK -I (SHARES RUSSELL MO -CAP ETF NUVEEN REAL ESTATE SECUR-1 UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAJLRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT EO-I VANGUARD Sif INVEST GR-ADM P(MCO TOTAL RETURN FUNDLINST PRUDENTIAL TOTAL RETRN BND-0 NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBUG-Z STYLE Cash 3.1 % Intl Stocks 12.5% Mid Cap 3-6% Large Cap Growth 4.3% Large Cap Core 16.4% Index Plus (Passive) (SHARES CORE S&P 500 ETF 'SHARES S&P 500 VALUE ETF (SHARES S&P 500 GROWTH ETF SSHARES RUSSELL MID -CAP ETF VANGUARD REIT ETF 'SHARES RUSSELL 2000 VALUE E 'SHARES RUSSELL 2000 GROWTH 'SHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD SJT INVEST GR-ADM 'SHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBUG-Z Holdings are subject to change at the discretion of the investment manager. Large Cap Value, 4.3% / Short -Term Bondi 6.3% Real Estate 1 5% Shall Cap 7.5% Nee Floating Rate Note 2.5% Intern -Term Bond 38.1% The performance records shown represent size -weighted composites of tax exempt accounts that meet the following entente Composites are managed by HighMark's HighMark Capital Advisors IHCAI 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 stoc secunty. The adviser to 1he PARS portfolios. is US Bank and HighMark serves as sub -adviser 10 US Bank to manage these portfolios US Bank may charge cheats as much as 0.60` 5 annual management fee based on a sliding scale As of March 31 2017 :-- blended rate is 0.58% US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreert®m with US Bank. The 36 basis points paid to HighMark, as well as other expenses that may be incurred in the management of the portfoliowill reduce the portfolio returns Assuming an investment for five years. a 1e. annual total relumand an annual sub -advisory fee rate of 0 36% deducted from the assets at marker at the end of each ye_' a 10 million rnitiai value would grow to $12 54 mtlion after fees i Net -of -Feed and 512. 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- In O1 2010. the PARS Composite definition was changed from $750_e00 minimum to no minimum. Performance results are calculated and presented in U S dollars and do not reflect the deduction of investment advisory feescustody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade -date accounting. Blended benchmarks represent leigJ1Ma11 s strategic allocations between equity. fixed income, and cash and are rebalanced monthly. Benchm7arkreturns do not reflect the deduction of advisory fees or other expenses of investing but assumes tie remvestment 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 companies in the U S stock market The MSC( EAFE Index is a free float - adjusted market capitalization index designed to measure developed market equity performance. excluding the U.S. and Canada. The MSCI Emerging Markets Free index is a free float -adjusted market capitatization index Mat is designed to measure equity market performance in the global emerging markets The Russell Midcap Index measures the performance of the mid -cap segment of the U S equity universe. The Russell 2000 Index measures the performance of the small -cap segment of the U.S. equity universe. The US High Yield Master II index tracks the performance of below investment grade U S dollar -denominated corporate bonds publicly issued in the U.S domestic market Wilshire REIT index measures U S pubiidy traded Real Estate Irrvest rent Trusts- The unmanaged Bloomberg Barclays Capital (8CI U S.. A Bond index is generally representative of the U.S taxable bond market as a whine The Memll Lynch ONO1-3Year UPS Corporate & Government Index tracks the bond performance of The ML U S Corporate & Geyer' entlnt Index, with a remaining lertn to final matunly less than 3 years The unmanaged Citigrorip 1-Month Treasury Bill Index twice the yield of the 1-month U S Treasury Bill HighMark Captal Management. Inc. (HighMark), an SEC -registered investment adviser is a wholly owned subsidary of MUFG Union Bank, N A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for -profit and nonprofit organizations, public agencies.. public and pnvate retirement plans and personal trusts of all sizes It may also serve as sub -adviser for mutual funds. common trust funds. and collective investment hands MUB. a subsidiary of MUFG Amencas 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 will vary depending on each client's+nvestment needs aril objectives Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY Jose value, including possible loss of principal. HIGHMARK CAPITAL MANAGEMENT 350 California Street Suite 1600 San Francisco. CA 94104 300-582-4734 •.wrvw.highmarkcapital.com ABOUT THE ADVISER HighMark Capital Management, Inc. (HighMark) has over 90 years (including predecessor organizations) of institutional money management experience with more than $15.9 billion in assets under management. HighMark has a long term 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 Andrew Bates, CFA3 Portfolio Manager investment Experience: since 2008 HighMark Tenure: since 2015 Education: BS, University of Colorado Salvatore "Tory" Milazzo III, CFA`® Senior Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2014 Education: BA. Colgate University J. Keith Stribling, CFA3' Senior Portfolio Manager Investment Experience: since 1985 HighMark Tenure: since 1995 Education: BA, Stetson University Christiane Tsuda Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education: BA, International Christian University. Tokyo Anne Wimmer, CFAE Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education: BA. University of California, Santa Barbara Asset Allocation Committee Number of Members: 16 Average Years of Experience: 26 Average Tenure (Years): 13 Manager Review Group Number of Members: 8 Average Years of Experience: 19 Average Tenure (Years): 7 JHIGHMARK® CAPITAL MANAGEMENT PARS DIVERSIFIED PORTFOLIOS BALANCED Q1 2017 WHY THE PARS DIVERSIFIED BALANCED PORTFOLIO? Comprehensive Investment Solution HighMarkt& 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 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. While dividend and interest income are an important component of the objective's total return. it is expected that Moderately Conservative capital appreciation will comprise a larger portion of the total return Rsk (Standard Deviation} ASSET ALLOCATION - BALANCED PORTFOLIO Equity Fixed Income Cash R€ Strategic Range 50-70% 30 - 50% 0 - 20% Conservative Policy 60% 35% 5% Efficient Frontier Capital Appreciation Balanced Moderate Tactical 60% 37% 3°% (Gross of Investment Management Fees. but ANNUALIZED TOTAL RETURNS Net of Embedded Fund Fees) HighMark Plus (Active) Current Quarter Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 4.34% 3.71 % 4.34% 3-71 % 11.25% 10.64% 4.86% 5.81% 7.16% 7.80% 5.06% 5.61% :,_4 Current Quarter` Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark Inception to Date (114-Mos.) Blended Benchmark 3.57% 3.71% 3.57% 3.71% 10.51% 10.64% 5.14% 5.81% 7.22% 7.80% 4.75% 5.28% ' Returns less than 1-year are not annualized. "Breakdown for Blended Benchmark: 32% S&P500, fi%Russell Mid Cap. 3%Russell 2000, 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 II. 2% Wilshire REIT. and 5% CAI 1 Mth T-Hill.. Prior to October 2012, the blended benchmarks were 51% S&P 500.--, 3°4 Russell 2000 E'0 MSCI EAFE, 5% ML 1-3 Year Corp..!Govt. 30% BC Agg, 5 Cdr 1 Mth T-Bid Pnor to April 2007the blended benchmarks were 60`5 S&P 500, 5% ML 1-3Yr Corp: Gov, 30 % BC Agg, and 50 Cti 1 Mth T-Bill. ANNUAL RETURNS Hrghr.la,k�itei 2008 2009 2010 2011 2012 2013 2014 2015 2016 PORTFOLIO FACTS Inception Data No of Funds in Portfolio -25.72% 21.36% 14.11% -0.46% 13.25% 16.61% 4.70% 0.04% 6.82% :n.ex nlus .Passive, 2008 2009 2010 2011 2012 2013 2014 2015 2016 Index. F'us Passivei 10/2006 Inception Data 19 No of Funds in Portfolio -23.22% 17.62% 12.76% 1.60% 11.93% 15.63% 6.08% -0.81 % 8.26% 10/2007 13 HOLDINGS HighMark Plus (Active) COLUMBIA CONTRARIAN CORE-Z VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-INST T ROWE PR GROWTH STOCK -I SHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH-f HRTFRD SCHR EM MRKT EQ-I VANGUARD SIT INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST PRUDENTIAL TOTAL REFRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBIJG-Z STYLE Intl Stocks 15 5% Mid Cap 4.5% Large Cap Growth 5.0% Index Plus (Passive) (SHARES CORE S&P 500 ETF ISHARES S&P 500 VALUE ETF ISHARES S&P 500 GROWTH ETF ISHARES RUSSELL MID -CAP ETF VANGUARD REIT ETV ISHARES RUSSELL 2000 VALUE E (SHARES RUSSELL 2000 GROWTH (SHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD SIT INVEST GR-ADM (SHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBUG-Z Holdings are subject to change at the discretion of the investment manager. Large Cap Value Real Estate 5,0% Cash1.6% 1 2.7%. Large Cap Core 194% Small Cap 9.0% Intern -Term Bond 30.8% "L Floating Rate Note 2.0% Short -Term Bond 4.5% The performance records shown represent size -weighted composites of tax exempt accounts that meet the following enter'_ Composites are managed by HighMark's HighMark Capital Advisors (HCA) with full investment authority according to the PARS Balanced active and passive objectives and do not have equity concentration of 25% or more in one common stock security The composite name has been changed from PARS Balan0ediModerately Aggressive to PARS Balanced on 5/1 /2013_ The adviser to the PARS portfolios is US Bank, and HighMark serves as sub -adviser to US Bank to manage these portfolios_ US Bank rrray charge clients as much as 0 60% annual management fee based on a sliding scale As of March 31, 2017, the blended rate is 0 58%. US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreement with US Bank. The 36 basis points paid to HighMark, as well as other expenses that may be incurred in the management or the portfolio, will reduce the portfolio returns. Assuming an investment for five years, a 5'- _ annual total return, and an annual sub -advisory fee rate of 0.36% deducted from the assets at market at the end of each yea - a 10 trillion initial value would grow to $12 54 million after fees (Net -of -Fees) and 512.76 million before fees (Gross -of -Fees Additional information regarding the firms policies and procedures for calculating and reporting performance results is available upon request In Q1 2010, the PARS Composite definition was changed Lean 5750,000 minimum to no minimum. 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 trade -date accounting. Blended benchmarks represent HighMark'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 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 companies in the U.S. stock ma ket. The MSCI EAFE Index is a free float - adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada The MSCI Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance In the global emerging markets. The Russell Midcap Index measures the performance of the mid -cap segment of the U-S. equity universe. The Rueseli 2000 Index measures the performance of the small -cap segment of the U-S. equity universe_ The US High Yield Master II index tracks the performance of below investment grade U.S. dollar -denominated corporate bonds publicly issued in the U.S, domestic nmarket. 'Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts_ The unmanaged Bloomberg Barclays Capital IBC) U.S Aggregate Bond Index is generally representative of the it S- taxable bond market as a whole. The Merrill Lynch (ML) 1-3 Year U S Corporate & Government Index tracks the bond porfommance of The ML U-S- Corporate & Government Indexwith a remaining term to, final reatunty less than 3 years. The unmanaged Citigroup 1-Month Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill. HighMark Capital Management, Inc (HighMark), an SEC -registered investment adviser is a wholly owned subsidiary of MUFG Union Bank. H A. (MUB]. HighMark manages institutional separate account portfolios for a wide variety of for -profit and nonprofit organizations, public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub -adviser for mutual funds, common trust fundsand collective investment ftmds. MUG, a subsidiary of MUFG Americas Holdings Corporation, provides certain services re HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each clients investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Govemment Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. HIGHMARK CAPITAL MANAGEMENT 350 California Street Suite 1600 San Francisco, CA 94104 800-582-4734 www.highmarkcapital.com ABOUT THE ADVISER HighMarkeCapital Management. Inc. (HighMark) has over 90 years (including predecessor organizations) of institutional money management experience with more than $15.9 billion in assets under management. HighMark has a long term 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 Andrew Bates, CFA9 Portfolio Manager Investment Experience: since 2008 HighMark Tenure: since 2015 Education: BS. University of Colorado Salvatore "Tory" Milazzo 111, CFAT Senior Portfolio Manager Investment Experience: since 2004 HighMark Tenure: since 2014 Education: BA, Colgate University J. Keith Stribling, CFA4 Senior Portfolio Manager Investment Experience: since 1985 HighMark Tenure. since 1995 Education: BA- Stetson University Christiane Tsuda Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education: BA. International Christian University, Tokyo Anne Wimmer, CFA9' Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2007 Education: BA, University of California, Santa Barbara Asset Allocation Committee Number of Members: 16 Average Years of Experience: 26 Average Tenure (Years): 13 Manager Review Group Number of Members: 8 Average Years of Experience: 19 Average Tenure (Years): 7 J H IGHMARK° CAPITAL MANAGEMENT PARS DIVERSIFIED PORTFOLIOS CAPITAL APPRECIATION Q1 2017 WHY THE PARS DIVERSIFIED CAPITAL APPRECIATION 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 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 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. Howard (Rale of Return) Efficient Frontier Capital Appreciation Balanced Moderate Moderately Conservative Conserve!, ve Gi5P Stardard 1ev`anor, ASSET ALLOCATION - CAPITAL APPRECIATION PORTFOLIO Equity Fixed Income Cash Strategic Range 65 - 85% 10 - 30% 0 - 20% Policy 75% 20% 5% Tactical 75% 23% 2% :Gross of Investment Management Fees but ANNUALIZED TOTAL RETURNS Net of Embedded Fund Fees) Current Quarter' Blended Benchmark" Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark Inception to Date (99-Mos ) Blended Benchmark 4.48% 4.54 % 4.48% 4 54% 13.08% 13.11 5.87% 6.48% 8-39% 8 96% 10.46% 11.29% Returns less, Than 1-year are not annualized. ^Breakdown for Mended Benchmark: 39 5% SdP500. 7 5% Russell Mid Cap, 10. 5% Russel 20005.2S% MSCI FM FREE, i025% MSCI SAFE 16% BC US Agg.3%ML1-3 Yr US Corp, Gov't 1% US Hal Yield Master ti Wilshire REIT and 5% Cie 1 Mth T-B ANNUAL RETURNS 2008 2009 2010 2011 2012 2013 2014 2015 2016 PORTFOLIO FACTS Inception Data 01/2009 No of Funds in Portfolio NIA% 23 77% 12-95% -1-35% 13.87% 20.33% 6.05% -0.27% 8.81% Index Plus IPasslvel Inception Data 19 No of Funds in Portfolio NIA 13 HOLDINGS HighMark Plus (Active) COLUMBIA CONTRARIAN CORE-2 VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECLA•INST T ROWE PR GROWTH STOCK -I 'SHARES RUSSELL M1D-CAP ETF NINEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NAT1ONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT EO-I VANGUARD Sri INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST PRUDENTIAL TOTAL RETRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV 0$UG-2 STYLE Large Cap Value Ca2% ss 2.2% Intl Stocks 201% Mid Cap 5 5% Large Cap Growth 62% Index Plus (Passive) (SHARES CORE S&P 500 ETF ISHARES S&P 500 VALUE ETF !SHARES S&P 500 GROWTH ETF (SHARES RUSSELL MO -CAP ETF VANGUARD REIT ETF (SHARES RUSSELL 2000 VALUE E !SHARES RUSSELL 2000 GROWTH !SHARES MSC( EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD S)T INVEST GR-ADM !SHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBUG-2 Holdings are subject to change at the discretion of the investment manager. Real Estate 1.8% Small Cap 10 5% Interco -Tenn Bond 17.3% Large Cap Core 24 7% Floating Rate Note 1 5% Short -Tenn Bond 4.0% The performance records shown represent size -weighted composites of tax exempt accounts that meet me following cnlena. Composites are managed by HighMark's HignMark Capital Advisors (HCA} with full investment authority according to the PARS Capital Appreciation 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 HighMark serves as sub -adviser to US Bank to manage these portfolios US Bank may charge dienls as much as 0 60% annual management fee based on a sliding scale As of March 31. 2017the blended rate is 0.56%. US Bank pays HighMark 60% of the annual management fee for assets sue -advised try HighMark under its sub -advisory agreement with US Bank. The 36 basis points pad to HighMarkas well as other expenses that may be incurred in the management of the portfolio will reduce the portfolio returns. Assuming an investment for five years. a 5' annual total return_ and an annual sub -advisory fee rate of 0 36% deducted from the assets at market at the end of each yea' a 10 mtlion initial value would grow to 512 54 million after fees (Net -of -Fees) and S12.76 million before fees (Gross -of -Fees Additional information regarding the firms pcih: = s a-. procedures for calculating and reporting nce results is avadabte upon request In 01 2010. the PAF e definition was changed from S750.00 li�rdunmuum to no mnirum Performance results are calculated and prese = dollars and do not reflect the deduction of investment advisory fees. custody fees, or taxes but do reflect the _s trading expenses Returns are calcuiated based on trade -date accounting. Blended benchmarks represent HighMark 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 dividends and other earnings An investor cannot invest directly en an index The unmanaged S&P 500 index is representative of the performance of large companies in the U S stock market The MSCI EAFE index is a free float - adjusted market capitalization index designed to measure developed market equity performance, excluding the U S. and Canada The MSCI Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets The Russell Midcap Index measures the performance _- the mid -cap segment of the U.S. equity universe. The Russell 2000 index measures the performance of the small -cap segment of the U.S. equity universe. The US High Yield Master II Index tracks the performance of below investrment grade U.S dollar-denomnated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U S publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg Barclays Capital (BCI U S Aggregate Bond Index is generally representative of the U.S taxable bond market as a whole. The Merrill Lynch (NIL) 1-3 Year U S Corporals & Government Index tracks the bond performance of Tne ML U S Corporate & Government Index with a remaining tern to final mafunty less than 3 years. The unmanaged Citigroup 1-Month TreasuryBill Index tracks the yield of the 1-rnonth U S Treasury Bill HighMark. Capital Management, Inc. (HighMark) an SEC -registered investment adviser is a wholly Owned subsidiary of MUFG Union Bank. N.A 'MLitt). HighMark manages institutional separate account portfolios for a wide variety of for -profit and nonprofit organizations. public agencies public and private retirement plans and personal trusts of all sizes It may also serve as sub -adviser for mutual funds common trust funds and collective investment funds. MUB a subsicbary of MUFG Amencas Holdings Corporationprovides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results individual account manaderrent and construction will vary depending on each clients investment needs and objectives Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency_ are NOT Bank deposits. are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. HIGHMARK CAPITAL MANAGEMENT 350 California Street Suite 1600 San Francisco. CA 94104 800-582-4734 www highmarkcapital con ABOUT THE ADVISER HighMark`- Capital Management, Inc. (HighMark) has over 90 years (including predecessor organizations) of institutional money management experience with more than S15 9 billion in assets under management. HighMark has a long term 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 Andrew Bates, CFA' Portfolio Manager Investment Experience: since 2008 HighMark Tenure. since 2015 Education: BS. University of Colorado Salvatore "Tory" Milazzo III, CFA` Senior Portfolio Manager Investment Experience: since 2004 HighMark Tenure'. since 2014 Education: BA. Colgate University J. Keith Stribling, CFA- Senior Portfolio Manager Investment Experience: since 1985 HighMark Tenure: since 1995 Education BA. Stetson University Christiane Tsuda Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenure: since 2010 Education BA. International Christian University, Tokyo Anne Wimmer, CFA Senior Portfolio Manager Investment Experience: since 1987 HighMark Tenuresince 2007 Education BA, University of California. Santa Barbara Asset Allocation Committee Number of Members: 16 Average Years of Experience: 26 Average Tenure (Years): 13 Manager Review Group Number of Members: 8 Average Years of Experience: 19 Average Tenure (Years) 7 i PARS Investment Program Andrew Brown, CFA Director & Senior Portfolio Manager HIGHMARK® CAPITAL MANAGEMENT Firm Overview LONGEVITY Managing assets for clients since 1919* Asset Class TALENT 52 investment professionals 30 professionals hold the Chartered Financial Analyst® (CFA) designation 22 years average industry experience ASSETS UNDER MANAGEMENT $15.9 billion as of 3/31/2017 ■ Equity $6.8 billion • Fixed Income $5.4 billion • Liquidity $2.9 billion Cash $0.9 billion STABILITY Investment boutique structure headquartered in California backed by global strength within MUFG Union Bank, N.A. and Mitsubishi UFJ Financial Group Client Base *Includes predecessor organizations. HighMark Capital Management, Inc. registered with the SEC as an investment adviser on August 7. 1998. Institutional $6.8 billion • Wealth Mgmt $5.8 billion • Sub -Advised $3.3 billion AiH IGHM,Ar K� 2 CAPITAL M /EMENT f Disciplined Investment Process Your Plan's Portfolio Manager is supported by deep investment resources and unique processes. Regular investment & performance reports, as well as contact with your account portfolio manager, helps to keep you informed. We typically invest in share classes that offer the lowest expense ratio available for that fund, which is typically reserved for larger institutional investors. Performance Results Investment Review „stabljSi1 Strategic Asset Allocation Andrew Brown, CFA Sr. Portfolio Manager Trading & Rebalancing Equity & Fixed Income Research Your portfolio's strategic asset allocation policy is established in your Investment Guidelines Document (IGD) after a thorough analysis of your needs and objectives. Tactical Asset Allocation Manager Research oliStrtrct & M2 4 Asset Allocation Committee (AAC) employs a multi -factor approach to establish long-term strategic asset allocation ranges as well as provide tactical diversification guidelines in an effort to capitalize on short-term market opportunities. Manager Research Group utilizes rigorous due diligence methodologies to provide access to competitive externally managed strategies and index -based funds. H tGHMARK° CAPITAL MANAGEMENT Establish: Analyze Your Plan's Needs and Objectives Your Plan's needs and objectives drive the selection of an investment strategy, which is governed by your Investment Guidelines Document. 4 Objectives Risk Tolerance Liquidity and Cash Flows Time Horizon Constraints Other Considerations What is the primary purpose of the Plan's investment portfolio? How much growth is needed to meet the Plan's objectives? How much risk can the Plan accept in order to meet Plan objectives? How much of the portfolio should be made available to meet the Plan's cash flow requirements? How much time does the Plan have to meet objectives or what events may trigger a change to the Plan's investment portfolio? Are there any regulatory or other limitations as to how the Plan's assets can be invested? What is the current funding status of the Plan? HIGH1‘'RK® CAPITAL M LMENT Establish: Determine your Strategic Asset Allocation Strategy Expected Return Efficient frontier of portfolios with varying ranges of equities and fixed income Moderate Moderately Conservative , Conservative Capital Appreciation Balanced Conservative Moderately Conservative Moderate Balanced Capital Appreciation Expected Standard Deviation (Volatility) Equity 5-20% 20-40% 40-60% 50-70% 65-85% Fixed Income Cash 60-95% 50-80% 40-60% 30-50% 10-30% 0-20% 0-20% 0-20% 0-20% 0-20% Each Investment Objective reflects the associated PARS Diversified Portfolio as of 3/31/2017. A client's portfolio construction may vary depending on the client's investment needs, objectives, and restrictions as well as the prevailing market conditions at the time of investment. H IGHMARK® 5 CAPITAL MANAGEMENT Diversify: Tactical Asset Allocation Strategic Asset Allocation Fixed Income Equity Strategic Asset Allocation is the foundation of portfolio management. Optimizes the Tong -term allocation of your portfolio across key asset classes; Aligned with your individual goals and objectives; • Rooted in empirical observations supported by financial, economic, and investment theory. Tactical Asset Allocation d 417 u41 m c G®`,6 klcs6 Gep mole Small Cap Value Smell Cap Blend Ord,/ , odCSt Nk Orb P. OU GI �6 Tactical Asset Allocation exploits opportunities frequently overlooked as sources for excess return. Logical extension of Strategic Asset Allocation; Skews the direction, size, expected value, and duration of the portfolio; Sector selection, style rotation, and currency inputs identify opportunities to achieve additional return above strategic asset allocation. HIGHTt ARK® CAPITAL M EMENT Diversify: Tactical Asset Allocation What are we favoring today in PARS Diversified Portfolios? Equity Capitalization Equity Style Equity Global Equity Updated March 2017 Asset Allocation Guidelines provided by HighMark Capital Management 7 International Equity Developed Emerging Fixed Cash Bond Duration Intermediate Short Bond Sector Government Credit Credit Quality Investment Grade Non -Investment Grade IHIGHMARK® CAPITAL MANAGEMENT Construct Your Plan's Portfolio: PARS Diversified Portfolios - Tactical Allocation Equity Current Tactical Large Cap Blend Large Cap Value Large Cap Growth Mid Cap Blend Mid Cap Value Real Estate Small Cap Value Small Cap Growth International Tactical - Europe Emerging Markets Conservative 5-20% 15.00% 4.73% 1.23% 1.23% 1.10% 0.00% 0.75% 1.25% 1.25% 2.68% 0.00% 0.78% Moderately Conservative Moderate 20-40% 40-60% 30.00% 50.00% 9.76% 16.41% 2.47% 4.26% 2.47% 4.26% 2.20% 3.60% 0.00% 0.00% 1.38% 1.50% 2.25% 3.75% 2.25% 3.75% 5.30% 9.23% 0.00% 0.00% 1.93% 3.25% Balanced 50-70% 60.00% 19.40% 5.00% 5.00% 4.50% 0.00% 1.63% 4.50% 4.50% 11.48% 0.00% 4.00% Capital Appreciation 65-85% 75.00% 24.77% 6.16% 6.16% 5.50% 0.00% 1.75% 5.25% 5.25% 14.90% 0.00% 5.25% Fixed Income 60-95% Current Tactical 79.06% 50-80% 40-60% 66.50% 46.92% 30-50% 10-30% 37.31% 22.81% Short Term Bond Intermediate Term Bond Floating Rate Note 12.40% 63.66% 3.00% 10.19% 53.56% 2.75% 6.31% 38.12% 2.49% 4.50% 30.81% 2.00% 4.00% 17.31% 1.50% Cash Current Tactical 0-20% 0-20% 0-20% 0-20% 5.94% 3.50% 3.08% 2.69% 0-20©% 2.19% TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% Each Investment Objective reflects the associated PARS Diversified Portfolio as of 3/31/2017. A client 's portfolio construction may vary depending on the client's investment needs, objectives, and restrictions as well as the prevailing market conditions at the time of investment. �HIGHM K® 8 CAPITAL N ,DEMENT Construct Your Plan's Portfolio: PARS Diversified Portfolios — Active v. Passive Equity Large Cap Blend Large Cap Blend Large Cap Value Large Cap Growth Large Cap Growth Mid Cap Blend Real Estate Small Cap Value Small Cap Growth International International International Emerging Markets Fixed Income Short Term Bond Intermediate Term Bond Intermediate Term Bond Intermediate Term Bond Floating Rate Note Cash Characteristics Fund Manager Dependency Opportunity to Outperform Index Costs HighMark Plus (Active) Ticker Fund Name SMGIX Columbia Contrarian. Core Z VGIAX Vanguard Growth & Income Adm DODGX Dodge & Cox Stock HACAX Harbor Capital Appreciation Insti PRUFX T. Rowe Price Growth Stock I IWR iShares Russell Mid -Cap FARCX Nuveen Real Estate Securities I UBVLX Undiscovered Managers Behavioral Val L PRJIX T. Rowe Price New Horizons I NWHMX Nationwide Bailard Intl Eqs Instl DODFX Dodge & Cox International Stock MQGIX MFS International Growth I SEMNX Hartford Schroders Emerging Mkts Eq Tkker Fund Name VFSUX PTTRX PTRQX NWJJX EIFHX Vanguard Short -Term Investment -Grade Adm PIMCO Total Return Instl Prudential Total Return Bond Q Nationwide HighMark Bond InSvc Eaton Vance Floating -Rate & Hi Inc Inst Higher dependency on portfolio manager skill Opportunity to outperform index Higher expense ratios due to portfolio manager skill Index Plus (Passive) Ticker Fund Name IVV iShares Core S&P 500 IVE iShares S&P 500 Value IVW iShares S&P 500 Growth IWR VNQ IWN IWO iShares Russell Mid -Cap Vanguard REIT ETF iShares Russell 2000 Value iShares Russell 2000 Growth EFA iShares MSC! EAFE VWO Vanguard FTSE Emerging Markets ETF Tkker Fund Name VFSUX Vanguard Short -Term Investment -Grade Adm AGG iShares Core US Aggregate Bond BKLN PowerShares Senior Loan ETF Tracks index, thus little -to -no dependency on portfolio manager skill Typically performs below index after fees Lower expense ratio due to little dependency on portfolio manager skill or opportunity for outperformance Each Investment Objective reflects the associated PARS Diversified Portfolio as of 3/31/2017. A client 's portfolio construction may vary depending on the client's investment needs, objectives, and restrictions as well as the prevailing market conditions at the time of investment. Specific securities identified above do not represent all of the securities purchased, sold or recommended for advisory clients, and you should not assume that investments in the securities identified in this presentation were or will be profi]a lI 9 IG1-iRK® CAPITAL MANAGEMENT Report: Responsive and Proactive Client Communication HighMark's dedicated investment team continuously seeks to add value to our relationship with your organization. Integrated client service program established with PARS over the last 18 years We have a tradition of interactive client. service to maintain a strong relationship delivered by local portfolio managers You benefit from face-to-face meetings and scheduled conference calls with your client service team and portfolio management team You receive regular communications in a variety of formats Account holdings and transactions Quarterly performance evaluation reports Investment outlook and economic updates 10 Andrew Bates, CFA Vice President Portfolio Manager Northern California Andrew Brown, CFA Director Sr. Portfolio Manager Northern California w. . Tory Milazzo, CFA Vice President Sr. Portfolio Manager Central. Coast Keith Stribling, CFA Vice President Sr. Portfolio Manager Orange County Hoddy Fritz Christiane Tsuda Director Vice President Business Sr. Portfolio Manager Development San Diego Southern California Fred Hurst Director Business Development Northern California Anne Wimmer, CFA Director Sr. Portfolio Manager Los Angeles H GHT'4 RK" CAPITAL hV.,AL MLNT Summary Strength and Longevity After 98 years* of experience, we remain dedicated to helping our clients meet their investment goals and objectives; With more than 18 years of partnership with PARS, we remain firmly committed to investing in the business. Our unique market position and ownership structure provides the resources, talent, and product breadth of a large parent organization combined with the agility, flexibility, and responsiveness of a boutique investment advisor. Disciplined Investment Process Proprietary strategic asset allocation process forms the foundation of portfolio; Tactical asset allocation exploits potential market opportunities; Rigorous manager due diligence provides access to competitive externally managed strategies; Rebalancing strategies helps to ensure the portfolio is aligned with goals and objectives. Flexible Investment O • tions 5 Investment Objectives 0 Conservative Moderately Conservative Moderate Balanced Capital Appreciation 2 Implementation Strategies HighMark Plus (Active) Index Plus (Passive) Inciudes predecessor organizations HighMark Capital Management, Inc. registered with the SEC as an investment adviser on August 7, 1998. 11 H IGHMARK® CAPITAL MANAGEMENT Disclosures HighMark Capital Management, Inc. (HighMark), an SEC -registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for -profit and nonprofit organizations, public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub -adviser for mutual funds, common trust funds and collective investment funds. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. MUB is an indirect subsidiary of Mitsubishi UFJ Financial Group. Past performance does not guarantee future results. Individual account management and construction will vary depending on each client's investment needs and objectives. Specific securities identified in this presentation do not represent all of the securities purchased, sold or recommended for advisory clients, and you should not assume that investments in the securities identified in this presentation were or will be profitable. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. H �cHr'[nxx® 12 CAPITAL N, 1,EMENT c ADDITIONAL INFORMATION 13 AiHIGHMARK® CAPITAL MANAGEMENT Asset Allocation Committee Seek to identify investment opportunities using fundamental indicators to enhance returns over time through active asset allocation and investment selection without significantly increasing risk Asset Valuation Investment Policy Committee Economic Environment Interest Rates Market Inter -Relationships Asset Allocation Committee As of 3/31/2017 14 Investment Professionals 16 Investment Experience 25 years average Tenure with Firm 12 years average Multi -disciplinary Group Equity, Bond, Quantitative Manager Research Our manager due diligence process optimizes our diversification strategy while harnessing both internal and external investment expertise. Research -Based • Manager Research Group (MRG) represents a team of experienced and highly qualified manager research professionals • 8 members • 18 years average experience • 6 years average tenure • MRG conducts proprietary due diligence and monitoring of managers, platforms, and independent research experts Manager / Vehicle Selection • We go beyond performance and category ranking to assess sustainability of competitive advantages • In-depth quantitative and fundamental research focuses on people, philosophy, and process • Access to a broad universe of mutual funds and ETFs helps to select the most appropriate vehicle while assessing associated expenses and costs • Ongoing monitoring of over 150 funds • Focus on spotting red flags that can threaten a successful manager's track record • Emphasize understanding the key drivers of returns and markets where they are most effective • Regular site visits and manager calls to monitor firm and process changes Portfolio -Centric • Select strategies best suited to portfolio's risk and return objectives • Careful review and regular affirmation of portfolio goals, objectives, risk tolerance, time horizon, and liquidity needs • Understand how the strategies within a portfolio can complement each other • Construct portfolios using strategies designed to help boost risk -adjusted returns HIGHMARK® CAPITAL MANAGEMENT INVESTMENT BIOGRAPHY Andrew Brown, CFA, Director and Senior Portfolio Manager Andrew Brown joined HighMark Capital Management, the investment management subsidiary of MUFG Union Bank, N.A., in November of 1997. As Senior Portfolio Manager, Andrew is responsible for managing investment portfolios on behalf of high net worth investors, trusts, retirement plans, foundations, and not - for -profit organizations. In addition, he is a member of HighMark's Manager Review Group (MRG). Andrew began his career in the investment management industry in 1994. Prior to joining HighMark, Andrew's work experience includes three years as a Japanese Equity Specialist at Wako Securities (America). Andrew received a Bachelor of Arts degree in International Relations, concentrating in Asia- Politics/Economy, from the University of Southern California, and a Master's degree in Business Administration with an emphasis in Finance/Marketing from the University of Southern California. In addition, Andrew is a CFA charterholder. H IGHMARK® CAPITAL N EMENT Internal Revenue Service Index Number: 115.00-00 U.S. Bank National Association c/o Susan Hughes, Vice President 3121 Michelson Drive (Suite 300) Irvine, CA 92612 Legend Trust Department of the Treasury Washngton, DC 20224 Third Party Communication: None Date of Communication: Not Applicable Person To Contact: Robin J. Ehrenberg, ID No. 1000219292 Telephone Number: (202) 317-5800 Refer Reply To: CC:TEGE:EOEG:EO3 PLR-146796-14 Date: June 5, 2015 Public Agencies Post -Employment Benefits Trust Trust Agreement = Public Agencies Post -Employment Benefits Trust Agreement Trustee Dear Ms. Hughes: U.S. Bank National Association This letter responds to a letter from your authorized representative dated December 22, 2014, requesting rulings that (1) the Trust's income is excludable from gross income under section 115 of the Internal Revenue Code (IRC) and (2) the Trust is not required to file annual federal income tax returns under IRC section 6012(a)(4). The Trust represents the facts as follows: FACTS The Trust is a multiple employer trust established to enable public -agency employers to fund post -retirement employee benefits. Each participating employer must be a public agency that is a state, political subdivision of a state, or an entity the income of which is excludable from gross income under IRC section 115. The employer's governing body must authorize in writing the adoption of the Trust and the employer must execute the adoption agreement, which approves the Trust's administrator and provides that the agency adopts and agrees to be bound by the Trust Agreement. In the adoption agreement, the employer elects to fund obligations to provide benefits under a post - employment health care plan and contribute to a defined -benefit pension plan maintained by the employer that is qualified under IRC section 401(a). The employer may elect to fund either or both obligations. PLR-146796-14 2 The Trust Agreement provides that assets are held by the Trust for the exclusive purpose of funding participating employers' benefit obligations and defraying the reasonable expenses of the Trust. The Trusts assets may not be used for any other purpose. Each employer's contributions to the Trust, together with any allocable investment earnings and losses, are held in a separate account for that employer. Assets allocated to satisfy an employer's health and welfare benefit obligation or the employer's pension obligation may only be used for purposes of satisfying that particular obligation. The assets held in an employer's account are not available to pay any obligations incurred by any other employer. The employers appoint the Trustee and the Trust's administrator and may remove the Trustee or the administrator by a two-thirds vote of all employers. The employers may amend the Trust Agreement with the approval of two-thirds of all employers then participating in the Trust. The employers may terminate the Trust by unanimous agreement of all employers. Upon termination of the Trust, any assets remaining in an employer's account, after satisfaction of benefit and the Trust's obligations are returned to the employer to the extent permitted by law and consistent with the requirements of 1RC section 115. LAW AND ANALYSIS Issue 1 - IRC section 115(1) IRC section 115(1) provides that gross income does not include income derived from any public utility or the exercise of any essential governmental function and accruing to a state or any political subdivision thereof. Rev. Rul. 77-261, 1977-2 C.B. 45, holds that income generated by an investment fund that is established by a state to hold revenues in excess of the amounts needed to meet current expenses is excludable from gross income under IRC section 115(1), because such investment constitutes an essential governmental function. The ruling explains that the statutory exclusion is intended to extend not to the income of a state or municipality resulting from its own participation in activities, but rather to the income of an entity engaged in the operation of a public utility or the performance of some governmental function that accrues to either a state or political subdivision of a state. The ruling points out that it may be assumed that Congress did not desire in any way to restrict a state's participation in enterprises that might be useful in carrying out projects that are desirable from the standpoint of a state government and that are within the ambit of a sovereign to conduct. PLR-146796-14 3 Rev. Rul. 90-74, 1990-2 C.B. 34, holds that the income of an organization formed, funded, and operated by political subdivisions to pool various risks (e.g.. casualty, public liability, workers' compensation, and employees' health) is excludable from gross income under IRC section 115(1), because the organization is performing an essential governmental function. The revenue ruling states that the income of such an organization is excludable from gross income so long as private interests do not participate in the organization or benefit more than incidentally from the organization The benefit to the employees of the insurance coverage obtained by the member political subdivisions was deemed incidental to the public benefit. Through the Trust, participating public agency employers fund health and welfare and pension obligations for retired employees. Each of the Trust's participating employers is required to be a state, political subdivision of a state or an entity the income of which is excludable from gross income under IRC section 115. Providing health, welfare and pension benefits to current and former employees constitutes the performance of an essential government function within the meaning of IRC section 115(1). See Rev. Rul. 90-74 and Rev. Rul. 77-261. The Trust's income accrues to its participating employers, all of which are political subdivisions of a state or entities the income of which is excludable from gross income under IRC section 115. No private interests will participate in, or benefit from, the �-. operation of Trust, other than as providers of goods or services, The benefit to employees is incidental to the public benefit. See Rev. Rul. 90-74. In no event, including dissolution, will the Trust's assets be distributed or revert to any entity that is not a state, a political subdivision of a state, or entity the income of which is excludable from its gross income by application of IRC section 115(1). Issue 2- IRC section 6012(a)(4) Section 301.7701-1(b) of the Procedure and Administration Regulations (Regulations) provides that the classification of organizations that are recognized as separate entities is determined under sections 301.7701-2, 301.7701-3, and 301.7701-4, unless a provision of the IRC provides for special treatment of that organization. Section 301.7701-4(a) of the Regulations provides that, in general, an arrangement will be treated as if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit. The Trust enables public -agency employers to set aside funds to be used to satisfy each employer's separate pension and health and welfare benefit obligations. The PLR-146796-14 4 Trustee is charged with the responsibility of the protection and conservation of the Trust property for the benefit of the beneficiaries of the Trust. The beneficiaries of the Trust cannot share in the discharge of the Trustee's responsibility for the protection and conservation of property and, therefore, are not associates in a joint enterprise for the conduct of business for profit. ;RC section 6012(a)(4) provides that every trust having for the taxable year any taxable income or having gross income of $600 or more, regardless of the amount of taxable income, shall make returns with respect to income taxes under Subtitle A. Based solely on the facts and representations submitted by the Trust, we conclude that: 1. Because the income of the Trust derives from the exercise of an essential governmental function and will accrue to a state or a political subdivision thereof, the Trust's income is excludable from gross income under IRC section 115(1). 2. The Trust is classified as a trust within the meaning of IRC section 7701(a) and section 301.7701-4(a) of the Regulations. Because Trust's income is excludable from gross income under IRC section 115, the Trust is not required by 1RC section 6012(a)(4) to file an annual income tax return. Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. This ruling concerns only the federal tax treatment of the Trust's income and may not be cited or relied upon by any taxpayer, including the Trust, employers participating in the Trust, and any recipients of benefits paid under the terms of the Trust, as to any matter relating to the taxation of accident or health contributions or benefits. This ruling is directed only to the taxpayer who requested it. 1RC section 6110(k)(3) provides that it may not be used or cited as precedent. In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative. A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter ruling. PLR-146796-14 5 The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. Sincerely, Kenneth M�Gril=fin Branch Chief, Exempt Organizations Branch 3 (Tax Exempt and Government Entities) cc: Marcus Wu Pillsbury Winthrop Shaw Pittman LLP 12255 El Camino Real, Suite 300 San Diego, CA 92130-4088 Paul Marmolejo Director, Office of Federal, State and Local Governments SE:T:GE:FSL PENSION PREFUNDING CLIENT LIST CITIES & TOWNS City of Alameda City of Bell Gardens City of Brea City of Brisbane City of Capitola City of Chino Hills City of Coronado City of Daly City City of Dublin City of Fountain. Valley City of Fullerton City of Half Moon Bay EDUCATIONAL DISTRICTS Grossmont-Cuyamaca CCD Hartnell CCD Marin CCD San Bernardino CCD Victor Valley CCD Yosemite CCD Corning Union ESD SPECIAL DISTRICTS Delta Diablo (Sanitation District) El Dorado Hills County Water District Fallbrook Public Utility District Great Basin Unified APCD Mojave Desert AQMD PUMA PUN( V PA Rs m11RLM NI tit RVICTS City of Healdsburg City of Huntington Beach City of La Mesa City of Lake Forest City of Lodi City of Manhattan Beach City of Morgan Hill City of Napa City of Palo Alto City of Rancho Cucamonga City of Rohnert Park City of Santa Ana Bass Lake Joint Union ESD Calistoga Joint USD Campbell Union HSD Compton USD Cotati-Rohnert Park USD River Delta USD Riverdale Joint USD City of Santa Clara City of Sausalito City of Solana Beach City of Stanton City of Tustin City of Union City City of Upland City of Westminster City of Yuba City Town of Colma Town of Tiburon San Marino USD Santa Rita USD Visalia USD Hesperia Unified SD Lakeside Union SD Lemon Grove SD Natomas USD Montecito Fire Protection District Moraga-Orinda Fire Protection District Napa County Mosquito Abatement District Novato Sanitary District Rancho Cucamonga Fire PD UPDATED: MAY 2017 COUNTIES County of Humboldt County of Kings County of Nevada County of Placer County of Riverside County of San Benito County of Solano County of Sutter Ocean View SD Ontario -Montclair SD Placer Union SD Whittier City SD South Coast Water District Superior Court of CA - County of Kern Three Valleys Municipal Water District Twentynine Palms Water District West Bay Sanitary District CLIENT LIST NARK AI NCy RETIREMENT SE RVKES r r � SECTION 115 TRUST CLIENT LISTS UPDATED: MAY o„ CITIES & TOWNS Alameda Daly City Lodi Santa Clara Alhambra Duarte Mammoth Lakes Santa Clarita Atherton Elk Grove Manhattan Beach Sausalito Bakersfield Fountain Valley Morgan Hill Solana Beach Bell Gardens Fullerton Napa Stanton Brea Galt Norwalk Temple City Brisbane Half Moon Bay Novato Tiburon Camarillo Healdsburg Palo Alto Tustin Capitola Hercules Rancho Cucamonga Union City Chino Hills Hermosa Beach Redding Upland Colma Huntington Beach Rialto Westminster Commerce La Mesa Richmond Woodland Coronado La Verne Rohnert Park Yountville Covina Lake Forest Rosemead Yuba City Crescent City Lakewood San Leandro Yucca Valley Cupertino Livermore Santa Ana COUNTIES Amador Merced Shasta Contra Costa Mono Solano Humboldt Nevada Sonoma Imperial Placer Sutter lnyo Plumas Trinity Kern Riverside Yolo Kings San Benito PARS CLIENT LIST r 1 PUBLIC AGENCY FE1Vi MEN1 SERVOLE5 SECTION 115 TRUST CLIENT LISTS SPECIAL DISTRICTS Bodega Bay Public Utility District Calaveras County Water District California JPIA California joint Powers RMA Central Contra Costa Sanitary District Central Contra Costa Transit Authority Coastside Fire Protection District Contra Costa MVCD Crestline Village Water District Delta Diablo (Sanitation District) Desert Recreation District Eastern Sierra Community Services District El Dorado Hills County Water District Fallbrook Public Utility District Fresno Irrigation District Fresno Metropolitan Flood Control District Glenn-Colusa Irrigation District Great Basin Unified APCD Hayward Area Recreation & Park District Housing Authority of the County of Contra Costa Housing Authority of the County of San Bernardino Humboldt No. 1 Fire Protection District Menlo Park Fire Protection District Mesa Water District Metropolitan Transportation Commission Mid -Peninsula Water District PARS Mojave Desert AQMD Montecito Fire Protection District Monterey Bay UAPCD Moraga-Orinda Fire Protection District Municipal Water District of Orange County Napa County Mosquito Abatement District Novato Sanitary District Orange County Vector Control District Orange County Water District Placer County Resource Conservation District Rancho Cucamonga Fire Protection District Rancho Murrieta Community Services District Rowland Water District San Mateo County MVCD Santa Barbara County Law Library Santa Cruz Regional 9-1-1 South Montebello Irrigation District South Coast Water District South Orange County Wastewater Authority South Placer Fire Protection District Southern Marin Fire Protection District Superior Court of CA, County of Contra Costa Superior Court of CA, County of Imperial Superior Court of CA, County of lnyo Superior Court of CA, County of Kern Superior Court of CA, County of Marin Superior Court of CA, County of Merced Superior Court of CA, County of Orange UPDATED: MAY 2017 Superior Court of CA, County of San Mateo Superior Court of CA, County of Shasta Superior Court of CA, County of Siskiyou Superior Court of CA, County of Sonoma Three Valleys Municipal Water District Twentynine Palms Water District Vallejo Sanitation & Flood Control. District Ventura Regional Sanitation District Walnut Valley Water District West Bay Sanitary District West County Wastewater District Western Riverside Council of Governments CLIENT LIST 2 SECTION 115 TRUST CLIENT LISTS SCHOOL DISTRICTS Auburn Union School District Bass Lake Joint Union Elementary School District Bellflower Unified School District Beverly Hills Unified School District Calistoga Joint Unified School District Compton Unified School District Corning Union Elementary School District Cotati-Rohnert Park Unified School District El Dorado Union High School District Fowler Unified School District Hesperia Unified School District John Swett Unified School District Lakeside Union School District Lemon Grove School District Manteca Unified School District Moreno Valley Unified School District Natomas Unified School District COMMUNITY COLLEGE DISTRICTS Grossmont-Cuyamaca CCD Hartnell CCD Marin CCD San Bernardino CCD State Center CCD Victor Valley CCD Yosemite CCD PARS UPDATED: MAY 2017 Ocean View School District Ontario -Montclair School District Placer Union High School District Red Bluff Joint. Union High School District Red Bluff Union Elementary School District River Delta Unified School District Riverdale Joint Union School District San Bruno Park School District San Marino Unified School District Santa Barbara Unified School District Santa Rita Union School District Trona Joint Unified School District Twin Rivers Unified School District Visalia Unified School District Westside Union School District Whittier City School District Wilsona School District SPECIAL EDUCATION DISTRICTS Intelecom CLIENT LIST 13 HIGHMARKs CAPITAL MANAGEMENT Vision. Disdptine. Results?' Form ADV Part 2A March 29, 2016 HighMark Capital Management, Inc. 350 California Street, Suite 1600 San Francisco, CA 94104 www.highmarkcapital.com Contact Info: 1-800-582-4734 This Form AD V Part 2A ("the Brochure') provides information about the qualifications and business practices of HighMark Capital Management, Inc. Ifvou have arty questions about the contents of this brochure. please contact us at 1-800-582-4734. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. HighMark Capital Management. Inc. is a registered investment adviser. Registration of an investment adviser does not imply any level of skill or training. Additional information about HighMark Capital Management, Inc. is available on the SEC's website at www.adviserinfo_sec.gov. HighMark Capital Management, Inc. ("HCM") has not made any material changes to its Form ADV Part 2A (the `Brochure) since its last update on October 26, 2015. Additional non -material changes that update, enhance or further clarify existing language have also been incorporated throughout this Brochure since its prior version. In this regard. note that HCM sold its mutual fund sponsorship business to Nationwide in the fall of 2013, and that HCM may receive additional compensation from Nationwide in the fall of 2016 based on the total amount of assets in the Nationwide Funds, including assets held in accounts advised or sub -advised by HCM, connected to that transaction. You may also request a free copy of the Brochure by calling 1-800-582-4734 or by visiting www.highmarkcapital.com. HighMark Capital Management, Inc. I 2 Table of Contents ----'1111111111 1: Cover Page Page 1 Item 2: Material Changes .Page 2 Item 3: Table of Contents Page 3 Item 4: Advisory Business Page 4 Item 5: Fees and Compensation Page 6 Item 6: Performance -Based Fees and Side -By -Side Management .Page 9 Item 7: Types of Clients Page 10 Item 8: Methods of Analysis, Investment Strategies and Risk of Loss Page 10 Item 9: Disciplinary Information .Page 11 Item 10: Other Financial Industry Activities and Affiliations Page 12 Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading Page 12 Item 12: Brokerage Practices ..Page 14 Item 13: Review of Accounts Page 17 Item 14: Client Referrals and Other Compensation _Page 17 Item 15: Custody Page 18 Item 16: Investment Discretion .Page 18 Item 17: Voting Client Securities Page 18 Item 18: Financial Information Page 19 HighMark Capital Management. Inc. 3 Item 4: Advisory Business HCM is a Securities and Exchange Commission (-SEC') registered investment adviser and a wholly owned subsidiary of MUFG Union Bank, N.A. ("MUFG Union Bank"), a national bank regulated by the Comptroller of the Currency. HCM and MUFG Union Banks's ultimate parent company is Mitsubishi UFJ Financial Group, Inc. ("MUFG"), a Japanese -based financial institution. Please refer to Item 10: Other Financial Industry Activities and Affiliations, for additional information regarding HCM's affiliates. Including its predecessor organizations, HCM has been managing client assets since 1919, and has been registered as an investment adviser with the SEC since 1998. As of December 31, 2015, HCM had $16.3 billion assets under management, $15.1 billion of these assets are managed on a discretionary basis, while $1.2 billion are managed on a non -discretionary basis. As described below, HCM provides certain investment models for use in third party models programs. HCM provides a variety of investment advisory services as described below. Managed Accounts HCM manages accounts for clients with which it has a direct investment management agreement ("direct accounts") and also manages accounts for MUFG Union Bank, certain MUFG Union Bank affiliates and US Bank, National Association ("U.S. Bank") under applicable investment advisory services agreements ("indirect accounts"). HighMark also manages institutional separate account portfolios for a wide variety of for -profit and nonprofit organizations, public agencies, public and private retirement plans, and personal trusts of all sizes. It also serves as sub -adviser for mutual funds, common trust funds, and collective investment funds. Services for direct and indirect accounts include some or all of the following: • Assisting the client in developing and modifying investment objectives, guidelines and restrictions. • Determining an appropriate investment strategy, including asset allocation, consistent with the investment objectives, guidelines and restrictions established by the client, and reviewing and periodically modifying the strategy through meetings and consultations with the client or its agent. • Implementing the client's investment strategy through the purchase and sale of securities and other financial instruments, the exercise of options, warrants, and subscription rights, and the investment and re -investment of cash balances for the account. • Providing information and instructions to the client or its custodian (or trustee) so that transactions for the account are settled in an accurate and timely manner. • Reconciling its records with those of the client or its custodian (or trustee) on a periodic basis. • Reviewing the client's' overall accounts and monitoring individual instruments so that the overall portfolio remains consistent with the account's investment strategy, as well as the client's investment objectives, guidelines and restrictions. • Furnishing reports to the client on a periodic basis concerning account activity and performance. For certain clients. HCM engages unaffiliated sub -advisers to assist it in providing its services, or to provide clients access to third party investment platforms, some of which include private equity or hedge fund investment options. As a wholly owned subsidiary and the sub -adviser to MUFG Union Bank's managed account business, HCM is required to comply with MUFG Union Bank's applicable compliance policies and procedures, which include reporting obligations that are not generally required by third party clients. HighMark Capital Management, Inc. 4 —41 Sub -Advisory Services Provided to Non -Affiliated Parties HCM serves as a sub -adviser to Nationwide Fund Advisers with respect to certain funds in the Nationwide Mutual Fund trust and the Nationwide Variable Insurance Trust (collectively 'Nationwide") under sub -advisory agreements with Nationwide. Please see Item 5: Fees and Compensation for a listing of the funds and the fees paid to HCM by Nationwide. HCM also has a sub -advisory agreement with U.S. Bank to sub -advise certain client accounts. In addition, HCM sub -advises a collective investment fund for an unaffiliated trust company. The range of services HCM provides for these indirect accounts is similar to the services it provides to managed accounts, as described above. U.S. Bank and the trust company pay HCM a fee to provide these investment advisory services, as described in the agreement between these entities and HCM. Sub -Advisory Services Provided to MUFG Union Bank HCM serves as a sub -adviser to MUFG Union Bank with respect to certain client accounts, including retirement plans, for which MUFG Union Bank acts as trustee or agent, pursuant to an agreement with MUFG Union Bank. MUFG Union Bank discloses to these indirect account clients that it has retained HCM to provide investment advisory services with respect to these indirect accounts. Depending on the size of the account, client investment objectives, guidelines, restrictions, and other circumstances, HCM may invest some or all of the trust or agency assets in MUFG Union Bank's collective investment funds, as described below; in mutual funds. including funds in which HCM serves as sub -adviser; or in separately -managed accounts, which are available through an arrangement with SEI Investment Management Corporation. HCM also serves as sub -adviser to the HighMark Management Account Strategies, which are MUFG Union Bank -sponsored wrap accounts. A wrap account is an account for which the sponsor charges a fee that is not based directly upon transactions in a client's account but instead is charged for investment advisory services and the execution of client transactions, HCM also serves as a sub -adviser to MUFG Union Bank with respect to certain collective investment funds maintained by MUFG Union Bank for investment by its personal trust accounts for which MUFG Union Bank acts as trustee. Collective investment funds are commingled trust funds created to facilitate the investment management of individual fiduciary accounts for which MUFG Union Bank has investment responsibility. The assets of such accounts are combined into one or more investment funds, each with its own specific investment strategy. Although similar in some respects to mutual funds. collective investment funds are administered by banks under applicable banking law and are not registered under the Investment Company Act of 1940. HCM may use its investment discretion to place the assets of a MUFG Union Bank trust account in a MUFG Union Bank managed collective investment fund. MUFG Union Bank pays HCM a portion of the fees it receives as compensation for these sub -advisory services, as described in the agreement between MUFG Union Bank and HCM. The range of services HCM provides for these accounts is similar to the services it provides to managed accounts, as described above. HCM Models HCM has an arrangement with MUFG Union Bank Personal Trust and Estate Services to provide investment advisory services to clients of MUFG Union Bank Personal Trust. Depending on the portfolio market value, as well as investment needs and objectives. HCM may use its investment models in HighMark Capital Management. Inc. 5 managing the client's assets. Generally, the models cover a range of investment strategies from income to capital appreciation. HCM offers these investment models to clients through MUFG Union Bank's Personal Trust's platform. MUFG Union Bank pays a fee to HCM based on assets under management. HCM also has a non-exclusive licensing arrangement with Envestnet Asset Management, Inc., and its legal affiliates (collectively, "Envesmet") to provide various investment models for use in Envestnet's Third Party Models Program. Under the arrangement with Envestnet, HCM is responsible for constructing and maintaining each model, while Envestnet is responsible for implementing and executing all trade orders for each Envesmet client based on the respective investment models. The HCM Models are accessed through the Envestnet platform. HCM pays Envesmet a one-time set up fee for the construction and installation of each model on its platform. HCM, as the model provider, earns a fee paid by Envesmet pursuant to the model licensing agreement between HCM and Envestnet. UnionBanc Investment Services, LLC ("UBIS"), a subsidiary of MUFG Union Bank and a registered broker dealer and investment adviser, may utilize the aforementioned HCM Models in providing advisory services to its clients. Please consult Envestnet Asset Management's Form ADV, Part 2A for a detailed description of the Third Party Models Program. A copy of the ADV may be obtained by visiting www.adviserinfo.sec.gov. Consulting Services HCM provides investment consulting services, including supplying investment research and information, on a non -discretionary basis. These services consist of providing sample model portfolios, investment strategies, general overviews of certain securities markets, or similar services. HCM also assists MUFG Union Bank in the evaluation of sub -advisers retained or proposed to be retained by MUFG Union Bank in connection with MUFG Union Bank's trust or agency account business and their securities selection process. Fees for consulting services are negotiated in each case based on the nature and complexity of the services to be provided. Such fees may be fixed or based on a percentage of the assets subject to the consulting arrangement and such fees are generally payable upon provision of the services. Item 5: Fees and Corn motion Fees are generally charged as a percentage of assets under management as described in the investment advisory agreement between HCM and the client. Fees may be negotiated on a relationship basis. In addition to the investment advisory fee, it is possible that clients would pay other fees related to the management of their account depending on the type of account and investment such as, brokerage, trading cost, custody, transfer agent, fund accounting and administration, 12b-1, shareholder servicing and investment management fees associated with any third -party fund. Please see Item 12: Brokerage Practices. The fee tables below reflect annual fee schedules for advisory services only. When clients contract for additional services such as; custody, trust, or agency services with MUFG Union Bank or other entities the fees paid for such arrangements may be higher than those shown below. The current HCM account annual fee schedules for direct accounts are set out below. HighMark Capital Management, Inc. Customized Investment Management Fee schedule: Multi -Assets and Specialized Accounts 0.85% on the first $10 million 0.75% on the next $15 million 0.65% on the next $25 million 0.50% on amounts over $50 million Fixed Income Fee Schedule: Liquidity/Cash Management Accounts 0.15% on the first $10 million 0.12% on the next $10 million 0.10% on amounts over $20 million Fixed Income Fee Schedule: Short Term Fixed Income Accounts 0.30% on the first $10 million 0.25% on the next $15 million 020% on the next $25 million 0.15% on the next $50 million 0.10% on amounts over $100 million Fixed Income Fee Schedule: Core Fixed Income Accounts 0.50% on the first $10 million 0.35% on the next $15 million 0.30% on the next $25 million 0.25% on the next $50 million 0.20% on amounts over $100 million Fixed Income Fee Schedule: Municipal Accounts 0.50% on the first $10 million 0.35% on the next $15 million 0.30% on the next $25 million 0.25% on the next $50 million 0.20% on amounts over $100 million Equity Fee Schedule: U.S. Large Cap Fundamental Accounts 0.75% on the first $10 million 0.60% on the next $15 million 0.50% on the next $25 million 0.45% on amounts over $50 million Equity Fee Schedule: U.S. Large Cap Disciplined Equity Accounts 0.65% on the first $10 miIlion 0.50% on the next $15 million 0.40% on the next $25 million 0.35% on amounts over $50 million Equity Fee Schedule: U.S. Small Cap Accounts 0.90% on the first $10 million 0.70% on the next $15 million 0.65% on the next $25 million 0.60% on amounts over $50 million HighMark Capital Management. Inc. I 7 Equity Fee Schedule: U.S. Micro Cap Accounts 1.05% on the first $10 million 1.00% on the next $15 million 0.95% on the next $25 million 0.90% on amounts over $50 million HCM requires a minimum annual fee of $10,000 for managed account investment management services. In certain circumstances, the minimum fee may be negotiable. For clients' assets custodied at MUFG Union Bank, clients generally choose to deduct fees from assets or receive a bill for fees incurred. For those clients' assets custodied outside of MUFG Union Bank, clients will be invoiced. Fees are paid in arrears and clients have the option to pay fees monthly or quarterly'. Fees are prorated for the billing period at the beginning or end of a client relationship. The method of fee calculations is disclosed to clients in their investment advisory agreements. For other accounts described under Item 4: Advisory Business, HCM receives a fee for providing investment advisory services, as described in the agreement between HCM and the respective party. Based on investment advice provided by HCM, MUFG Union Bank as discretionary trustee or agent may place a MUFG Union Bank client's assets in a fund sub -advised by HCM. Because HCM is paid an advisory fee by the sub -advised fund with respect to those assets, MUFG Union Bank credits each MUFG Union Bank managed account for those assets an amount equal to the sub -advisory fee which HCM receives. If a client account for which MUFG Union Bank acts as discretionary trustee or agent, is invested in a fund sub -advised by HCM, that account generally will purchase the institutional shares of the sub -advised fund that do not carry a sales load or Rule 12b-1 fee. HCM may recommend that a non -discretionary client invest in a fund that is sub -advised by HCM. If the non -discretionary client chooses to invest in the sub -advised fund, the client will generally not receive any fee waivers or reductions. It is possible that such a client could select a class of shares of a sub -advised fund that charges both a sales toad and a Rule 12b-1 fee. In that event, the client will, in essence, pay advisory fees at two levels, that is, a separate advisory fee paid to HCM by the client, and the advisory fee that is paid to HCM by the sub -advised fund. HCM will also charge a fee for rebalancing non - discretionary assets invested in certain third -party investment platforms. Sub -Advised Funds The table below shows the fees received by HCM as sub -adviser to Nationwide. Sub -Advised Funds Fee Received (Annual Rate) t Nationwide HighMark Bond Fund 0.15°% on Subadviser Assets up to 5250 million: 0.125% on Subadviser Assets of 5250 million and more but less than 51 billion; 0.10% on Subadviser Assets of Si billion and more Nationwide HighMark California Intermediate Tax -Free Bond Fund Nationwide HighMark National Intermediate Tax -Free Bond Fund 0.25% on all Subadviser Assets Nationwide HighMark Short Term Bond Fund 0 10°% on Subadviser Assets up to 5500 million; HighMark Capital Management, Inc. Sub -Advised Funds Fee Received (Annual Rate) t 0.0975% on Subadviser Assets of $500 million and more but less than $1 billion; 0.0925% on Subadviser Assets of $1 billion and more Nationwide HighMark Large Cap Core Equity Fund 0.27% on all Subadviser Assets Nationwide HighMark Small Cap Core Fund 0.475% on all Subadviser Assets NVIT Nationwide Fund 0.25% on Aggregate Subadviser Assetsttup to $250 million; 0.20% on Aggregate Subadviser Assetstt of $250 and more but less than $1 billion; 0.18% on Aggregate Subadviser Assetstt of $1 billion and more Nationwide Fund 0.25% on Aggregate Subadviser Assetstfup to $250 million: 0.20% on Aggregate Subadviser Assetstt of $250 and more but less than $1 billion; 0.18% on Aggregate Subadviser Assets ftof $1 billion and more ee is oaseo on iubaoviser Assets. which are that portion of the assets of a Fund that the investment adviser to such Fund allocates and puts under the control of HCM as the sub -adviser. ft The term "Aggregate Subadviser Assets" means the aggregate amount resulting from the combination of Subadviser Assets of the Nationwide Fund together with Subadviser Assets of the NVIT Nationwide Fund, a series of Nationwide Variable Insurance Trust. HCM sold its mutual fund sponsorship business to Nationwide in the fall of 2013. HCM may receive additional compensation from Nationwide in the fall of 2016 based on the total amount of assets in the Nationwide Funds, including assets held in accounts advised or sub -advised by HCM, connected to that transaction. Portfolio managers for each Fund sub advised by HCM receive a salary from HCM and participate in the MUFG Union Bank's incentive compensation plan, which is an annual plan that pays a bonus. A portfolio manager's bonus is generally a percentage of his or her salary and is based on ( I) an evaluation of the manager's investment performance. (2) achievement of budgeted financial goals and (3) meeting of business objectives determined by a portfolio manager's direct supervisor. In evaluating investment performance, the plan generally considers the one -and three-year (or shorter period if applicable) performance of mutual funds and other accounts under a portfolio manager's oversight relative, solely or in part. to the peer groups and/or market indices. To encourage exchange of information and support, a part of a portfolio manager's investment performance evaluation is also based on the performance of other Funds or other accounts that the portfolio manager does not manage. A portfolio manager may also be compensated for providing securities/quantitative analysis for certain Funds. where applicable. Item 6: Performance -Based Fees and Side -By -Side iNlau meat Generally, performance -based fee structures create a potential conflict of interest by creating incentives regarding portfolio investments that could compromise the independent judgment of the investment adviser. Although there are currently none, it is possible that HCM might enter into performance -based fee arrangements to the extent permitted by applicable law. If HCM had performance -based fee arrangements. they could vary depending on the client's needs and individual circumstances. HighMark Capital Management, Inc. 1 9 HCM provides investment advice to individuals, high net worth individuals, investment companies, pension and profit sharing plans, pooled investment vehicles, charitable organizations, corporations, state and municipal government entities, corporate employee benefit plans, public agencies, foundations and endowments. Taft -Hartley plans, hospital and religious organizations, treasury departments and trusts and family enterprises. HCM generally requires a minimum account size of $250,000 for individual clients, $3 million for non - individual or trust accounts and $10 million for liquidity accounts. HCM may lower the minimum account size in its sole discretion. Item 8: Methods of Analysis, Investment Strategies and Risk of Los Methods of Analysis HCM equity professionals combine fundamental, quantitative, and econometric analyses to build diversified equity portfolios that aim to outperform the market. Different style strategies focus on different criteria. The Fundamental team seeks companies with double digit growth rates that have sustainable competitive advantages. The Core team uses information -based analysis to find companies where informed investors have positive outlooks. All managers consider the risks involved in their holdings and how such risk might affect their portfolio. HCM's fixed income investment professionals perform intensive market and credit research to identify high -quality issues. To minimize volatility in client portfolios, HCM carefully manages interest rate and credit risk and repositions portfolios it deems appropriate to take advantage of opportunities arising from changes in interest rates, the yield curve and sector spreads. HCM strives to avoid securities that are leveraged with respect to interest rate or prepayment risk. HCM's cash management specialists utilize extensive analysis of market sectors and individual issues to enhance diversification and reduce portfolio volatility. HCM invests in a wide range of investment grade domestic and foreign dollar -denominated securities according to each client's specific liquidity needs. Investment Strategies HCM provides a range of style -specific strategies using both internal and external managers. HCM's approach is a disciplined, consistent process to actively manage portfolios including equity, fixed income, liquidity management and multi -asset strategies. Equity strategies include fundamental research -based strategies including Value, Relative Dividend Yield, Fundamental Advantage and Large Cap Growth, as well as disciplined -based strategies including Large Cap Core, Small Cap Core and Microcap. HCM also employs fixed income strategies in the areas of Core, Intermediate Term. Investment Grade Corporates, Short Term, National Tax -Free and California Tax -Free, For management of institutions' cash and excess working capital, HCM offers both domestic and non-U.S. liquidity strategies invested principally in money market instruments. Multi -asset strategies include a variety of risk/return balanced portfolios and Custom Investment Management. HCM offers other strategies through third -party sub -adviser relationships. Risk of Loss Investments in HCM strategies are not bank deposits, are not guaranteed by any agency of the U.S. government, and involve risk, including the possible loss of principal, a risk that clients should be prepared to bear. HighMark Capital Management, Inc. 10 Investment performance can also be affected by other risks such as: • Market Risk: The risk of a security's market value declining, especially rapidly and unpredictably for short or extended periods. These fluctuations may cause a security to be worth less than the price the investor originally paid for it. Market risk can affect a single issuer, sector or the market as a whole. • Liquidity Risk: The risk that a security is difficult or impossible to sell at the time and price the seller wishes. The seller may have to accept a lower price for the security, sell other securities instead, or forego a more attractive investment opportunity. • Credit Risk: The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation. Generally speaking, the lower a security's credit rating, the higher its credit risks. If a security's credit rating is downgraded, its price tends to decline sharply, especially as it becomes more probable that the issuer will default. • Interest Rate Risk: The risk that debt prices overall will decline over short or long periods due to rising interest rates. Interest rate risk usually is modest for shorter -term securities, moderate for intermediate -term securities, and high for longer -term securities. A change in a central bank's monetary policy or improving economic conditions may result in an increase in interest rates. Rising interest rates could decrease liquidity in the fixed income securities markets, making it more difficult to sell fixed income securities. In addition. decreased market liquidity also could make it more difficult to value a fixed income security. • Counterparty Risk. The risk that the counterparty to a repurchase agreement or reverse repurchase agreement will not fulfill its obligation which would cause the income and the value of the investment to decline. • Foreign Risk: Compared with investing in the United States, investing in foreign markets involves a greater degree and variety of risks including the possibility of delayed settlements, currency controls, adverse economic developments, and higher overall transaction costs. In addition, fluctuations in the U.S. dollar's value could erode or reverse gains from investments denominated in foreign currencies or widen losses. Exchange rate fluctuations also could impair an issuer's ability to repay U.S. dollar denominated debt, increasing credit risk of such debt. Finally. the value of foreign securities could be affected by incomplete or inaccurate financial information, smaller and less liquid securities markets, social upheavals or political actions ranging from tax code changes to significant governmental restructuring or collapse. Reinvestment Risk: The risk that the proceeds, dividends. or interest generated from an investment are reinvested in a security that offers a lower rate of return compared to the returns generated by the original investment. • Non -diversification Risk: The risk involved with excessive exposure to securities in any one issuer, industry or sector. • Alternative Investment Risk: Alternative mutual funds and other managers that employ alternative investment strategies primarily invest in non-traditional asset classes and implement speculative investment techniques. Alternative investments often offer investment return characteristics that are not correlated to traditional investments, but also present greater and/or unique risks to investors. Such risks include: loss of all or a substantial portion of the investment due to HighMark Capital Management, Inc. 4 leveraging, short selling or other speculative practices; management risk; lack of liquidity; restrictions on transferring interests; higher or excessive volatility; absence of information for valuations and pricing; less transparency on underlying investments, complex tax structures and delays in tax reporting; less regulation; and potentially higher fees than traditional investments. • Management Risk: The risk that a strategy or investment technique used by HighMark may fail to produce the intended result or achieve its investment objective. • Tar Risk: The risk of unfavorable tax consequences to a client that could result from the administration of a client account pursuant to the advisory services described in this Brochure. Item 9: Disciplinary Information HCM has not been involved in legal or disciplinary events that are material to its advisory business or the integrity of its management. Item 10: Other Financial Industry Activities and Affiliations Material Related Part\ Arrangements As noted in Item 4; Advisory Business, HCM is a wholly owned subsidiary of MUFG Union Bank. MUFG Union Bank is a principal subsidiary of MUFG Americas Holding Corporation ("MUAH"), a bank holding company regulated by the Federal Reserve Board. MUAH is wholly owned by The Bank of Tokyo -Mitsubishi UFJ, Ltd. (`BTMU"), headquartered in Tokyo, Japan. BTMU, in turn, is a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc. ("MUFG"). HCM's ultimate parent company, MUFG, beneficially owns 22.5% of the common stock of Morgan Stanley as of December 31, 2015, and is also represented by two seats on Morgan Stanley's Board of Directors. Morgan Stanley is the parent company of several registered broker -dealers, among other businesses. If HCM manages your account, the fact of MUFG's beneficial ownership interest in Morgan Stanley may limit HCM's ability to purchase an interest in a Morgan Stanley -sponsored or advised asset or use Morgan Stanley brokerage services for your account, without your written consent, and, in some cases, will wholly prevent such purchases and/or the use of Morgan Stanley brokerage services. All employees of HCM including its board of directors are also employees of MUFG Union Bank. The employees of HCM generally perform work for HCM only. Pursuant to an intercompany reliance agreement. MUFG Union Bank provides a variety of administrative services to HCM, including, but not limited to, human resources, legal and accounting services. MUFG Union Bank serves as the custodian for many of the accounts for which HCM provides advisory services. In addition, MUFG Union Bank may refer clients to HCM for advisory services; and HCM may refer clients to MUFG Union Bank for banking services. MUFG Union Bank has a SEC -registered broker -dealer subsidiary, UBIS, which is also an SEC registered investment adviser. Both HCM and UBIS are under the common control of MUFG Union Bank. HCM currently has no arrangements with UBIS to use UBIS or any of its registered representatives or principals to provide broker -dealer services to HCM or its advisory clients. UB1S may refer a client to HCM for advisory services. HighMark Capital Management, Inc. 12 '"1 Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading Personal Transactions in Recommended Securities HCM generally does not buy or sell securities that it recommends to clients. HCM's related persons may however, transact or hold securities that are or have been recommended by HCM to its clients. HCM has adopted a Code of Ethics for all employees in accordance with Rule 204A-1 of the Investment Advisers Act of 1940 and Rule I7j-1 of the Investment Company Act of 1940 which describes standards for business conduct, fiduciary duty to clients and rules surrounding personal securities transactions. HCM's officers and directors, and certain employees are required to report certain personal securities transactions and holdings. These personal securities transactions may raise potential conflicts with the interests of HCM clients. The Code of Ethics mitigates potential conflicts of interest by requiring, among other things, prior approval of certain securities transactions and a holding period for sub -advised funds. The Code of Ethics also requires regular employee certification and reporting and outlines disciplinary actions for exceptions. All Code of Ethics exceptions are reported to HCM's Board of Directors and to the Board of any sub -advised funds. A copy of HCM's Code of Ethics is available upon request by calling 1- 800-582-4734. Principal Transactions HCM does not, as principal, buy securities from or sell securities to its clients. HCM also does not use its investment discretion to direct or authorize securities transactions between its related persons and its clients except in accordance with HCM policy, and to the extent permitted by law. Certain related persons of HCM, such as BTMU, MUFG Union Bank, and UBIS, from time to time, may buy securities from or sell securities to HCM's clients in connection with their own separate relationship with HCM's clients. These activities of HCM's related parties are not connected to HCM's advisory business. The related persons engage in these activities in a manner that is consistent with customary commercial practice and applicable federal and state regulations. Agency Transactions HCM does not process securities transactions for compensation as broker or agent for its clients. HCM also does not use its investment discretion to direct or authorize client securities transactions in which a related person is a broker or agent except in accordance with HCM policy, and to the extent permitted by law. Certain related persons of HCM, such as BTMU, MUFG Union Bank and UBIS, from time to time, may effect securities transactions for compensation as broker or agent for clients of HCM or their counterparties in connection with their own separate relationships with such clients or other persons. These activities are not connected to HCM's advisory business except to the extent that such clients or other persons invest in a fund sub -advised by HCM. The related persons engage in these activities in a manner that is consistent with customary commercial practice and applicable federal and state regulations. MUFG's Investment in Morgan Stanley Please see Item 10: Other Financial Industry Activities and Affiliations which discusses MUFG's investment in Morgan Stanley. Although HCM does not consider this investment an arrangement that is material to its advisory business, this indirect affiliation prevents HCM from effecting certain broker transactions with Morgan Stanley on behalf of certain client accounts. Where permitted by law, HCM may use Morgan Stanley in connection with certain brokerage transactions on an agency or principal basis. HighMark Capital Management_ Inc. 13 Interest in Client Recommendations Generally, HCM does not recommend to clients that they buy or sell securities or investment products in which HCM has a financial interest. HCM, however, purchases for clients shares of mutual funds or collective investment funds sub -advised by HCM, and from which HCM receives a sub -advisory fee. Please see Item 5: Fees and Compensation for a description of the effect such purchases will have on advisory fees paid by clients. One or more MUFG Union Bank affiliates may invest its employees' retirement plans in certain funds sub -advised by HCM or use some of the sub -advised funds as an investment option in its participant directed retirement plans. To the extent that HCM receives an advisory fee from the sub -advised fund(s), HCM could be considered to indirectly benefit from the recommendations and investments made by MUFG Union Bank. UBIS receives Rule 12b-1 or other fees in connection with its sales of shares of Nationwide Mutual Funds to UBIS clients. It is possible that MUFG Union Bank could also receive such fees in accounts for which it has no investment discretion. HCM may also recommend to clients securities in which HCM's related persons have a financial interest. HCM considers that the range of the potential holdings of RCM's related persons, and the range of the potential issuers to whom HCM's related persons provide banking, custodial, brokerage and other services. is such that it would be inadvisable to exclude these securities from consideration for a client's portfolio solely because of these potential conflicts of interest. HCM makes portfolio transaction decisions or recommendations independently and not based on the interests of any related person. HCM may also engage in cross transactions, most likely in a format where client accounts are matched to provide liquidity and avoid brokerage fees. These are broker -less and non -principal transactions and there is no compensation earned by HCM. There may be nominal transaction processing fees involved in cross transactions. Cross transactions are done in compliance with applicable rules and procedures. HCM provides investment advice to clients on both a discretionary and non -discretionary basis, depending upon clients' wishes. For more information about the advisory services offered by HCM, please refer to Item 4: Advisory Business. Most clients authorize HCM to use broker -dealers selected by HCM, and to pay commission rates negotiated by HCM with the broker -dealer. HCM however, may. agree to take written direction from a client to use a broker -dealer selected by the client. Please see discussion below about "Client Directed Brokerage." Client Directed Brokerage HCM may accept a client's written request for client directed brokerage by executing a transaction with the broker -dealer selected by the client, which may or may not be a broker -dealer used by HCM for other trades in the same security during that period. In accordance with client directed brokerage instructions, the brokerage transactions may result in higher commissions, greater spreads, or less favorable net prices than would be the case if HCM were authorized to select the broker -dealer. Client directed brokerage may not, in all cases, result in the best execution of securities transactions for the client. Clients acknowledge the possibility of paying higher commission rates and not obtaining best execution when they enter into their agreement with HCM. HCM may limit the extent to which it will agree to client directed brokerage. ''1 HighMark Capital Management, Inc. Although HCM has no brokerage commission recapture program, from time to time, certain clients may direct HCM to a certain broker as part of their participation in such a program. Where a client directs the use of a particular broker -dealer. HCM may be unable to achieve most favorable execution of client transactions and the client may pay more in execution fees than if HCM was permitted to choose the executing broker -dealer. In such cases, HCM may not be able to determine the terms of how an order will be handled with such broker -dealer and may not be able to freely negotiate commission rates. In addition, HCM may not be able to aggregate the client's orders with other client orders, even to reduce transaction costs. As a result. a client's direction that HCM use a particular broker -dealer may cause a client to pay higher commissions or receive less favorable net prices than would be the case if HCM were given discretion to choose the broker -dealer through which to execute the transaction for the client's account. Broker Selection In selecting a broker -dealer for a transaction. HCM endeavors to choose the broker -dealer most capable of providing the services necessary to obtain best execution of the transaction. HCM maintains a list of approved broker -dealers from which its traders select a broker -dealer for a particular transaction. HCM's Investment Policy committee ('`IPC"), a committee composed of HCM's Chief Equity Officer and Chief Fixed Income Officer and other senior investment personnel reviews and determines the approved broker - dealers list at least once a year. Broker -dealers are evaluated on various criteria, including the commissions charged, as well as the reliability. integrity, and financial condition of the firm, the timeliness and accuracy of trade execution skills. operational and settlement capabilities, and any research services or products offered. HCM does not commit a specific amount of business to any broker -dealer, but does set an overall target based on what is required to gain the best arrangement of services, products, and best execution of client transactions. Actual brokerage business directed to any broker -dealer may not reach or may exceed the target. HCM does not place brokerage orders for a client with UBIS, or with any other affiliate of HCM, except in accordance with HCM's policy, and to the extent permitted by law. On a continuing basis. HCM seeks to determine what levels of commission rates are reasonable for specific transactions. Consideration is given to factors including historical commission rates, market commission rates (based on publicly available information), the size and complexity of the transaction, the type and level of business done with a firm over a period of time. and the extent to which the broker - dealer has capital at risk in the transaction. For each transaction, HCM's trading desk determines which broker -dealer on the approved list can provide the best execution of a specific transaction. Consideration is given to various factors including consistency of quality execution. general order flow. market -making skills. ability or willingness to commit capital and provide liquidity, and sales trading and coverage skills. RCM's policy does allow the use of a broker -dealer not on the approved list when HCM deems it will be able to achieve best execution. Trades with brokers not on the approved list are reported to HCM's Client Commissions Committee at its next meeting with an explanation as to why a broker not on the approved list was selected to provide best execution. HCM may effect transactions through an electronic crossing network ("ECN") in an attempt to find liquidity per price improvement not available through traditional trading methods. In selecting among market makers. and non -market makers or ECNs, HCM generally seeks to select those it believes to be actively and effectively trading the security being purchased or sold. HCM may select an ECN offered by a provider of services to HCM and any sub -advised funds in addition to ECNs offered by other vendors. In some cases, HCM aggregates as a block transaction multiple transaction orders that are received at about the same time. HCM's policy is to engage in block transactions in a fair and equitable manner to all participating clients, so that the price of the securities purchased or sold of all participating clients will be HighMark Capital Management, Inc. 15 the average share price for the block transaction with commissions and costs shared among the participating clients on a pro-rata basis. There can be no assurance. however, that any particular investment will be proportionally allocated among clients, or that the allocation process will achieve the same results for each client. HCM does not receive additional compensation for aggregating orders in block transactions. HCM believes that the use of block transactions may prevent the transaction of one client from affecting the purchase or sale price of a transaction for another client, and that the use of block transactions may enable HCM, on average and over time, to obtain enhanced execution and lower brokerage commissions. Client Commissions HCM may process securities transactions that result in a client paying an amount of commission in excess of the amount of commission another broker would have charged. In selecting such broker -dealer. HCM will make a good faith determination that the amount of commission is reasonable in relation to the value of the brokerage services, research and investment information, viewed in terms of either the specific transaction or HCM's overall responsibility to the accounts for which it exercises investment discretion. In processing client brokerage transactions through broker -dealers, HCM may receive from such broker - dealers, at no direct cost. certain investment information and research services, including conferences, research reports. oral advice, or data regarding particular companies, industries. or general market or economic conditions. To the extent legally allowed, certain of such services include the use of or delivery of quotation or computer systems whose software components are provided to HCM as part of the services. In any case in which information and other services can be used for both research and non -research purposes, HCM will make an appropriate good faith allocation of those uses and will pay directly for that portion of the services to be used for non -research purposes. HCM uses investment information and research services that it receives from broker -dealers to evaluate securities and formulate investment recommendations for both discretionary and non -discretionary clients. These recommendations, as well as HCM's analyses and the information and research services used to formulate recommendations, may be made available to HCM's affiliates and all of HCM's clients and are used by HCM in providing services to all of its clients. A client account may pay commissions to a broker -dealer which supplies research services not utilized by the account. Non -discretionary clients for whom HCM does not ordinarily place brokerage orders may benefit from such investment information, even though such information was generated through commission paid by other clients. The procedure to determine the allocation amounts includes an evaluation by HCM's traders of the broker -dealers' execution capability, and an evaluation by a committee of HCM's equity advisory personnel of the quality and usefulness of the broker -dealers' research. The minutes of this committee are then reviewed and approved by HCM's IPC. No absolute dollar amounts are required to be met, and in no case will an order be placed if the broker -dealer is not believed to be able to provide best execution of a particular transaction in light of all the factors HCM considers. HCM does endeavor to direct sufficient orders to such broker -dealers to ensure continued receipt of research services that HCM believes are useful to all HCM accounts. Substantial portions of brokerage commissions are paid to broker -dealers who supply investment information and research services to HCM. At HCM's discretion, HCM can choose to trade on an execution -only basis for a particular transaction or client account. HighMark Capital Management, Inc. 1 16 Initial Public Offerings From time to time, HCM may be offered securities in an initial public offering CVO-) and HCM will determine in its sole discretion whether to accept any such offer. Generally, HCM does not accept offers to participate in IPOs. In the event that HCM accepts an offer of IPO securities, HCM's policy is to allocate the securities proportionally, based on asset value, among client portfolios for which the securities are deemed suitable. Suitability will be determined by HCM's portfolio managers based on a number of factors, including but not limited to, investment goals, existing securities in the portfolio available cash and purchasing power, portfolio investment restrictions, and the subjective judgments of the portfolio managers. A small IPO offering may be allocated only to one client portfolio, if HCM determines in its sole discretion that allocation among more than one portfolio would be inefficient for client accounts. While generally based on objective criteria, HCM does not make IPO allocations based on strict, mathematical formulas. HCM's allocation of any specific IPO offering may not result in proportional allocation across all its client portfolios. HCM however, will treat all client portfolios fairly and will not give preferences to any particular client or type of clients when allocating IPOs. Item 13: Review of Accounts Account Review Process Investment strategies, risk characteristics and performance are set and reviewed regularly by HCM's IPC. HCM's portfolio managers then review direct accounts on an ongoing basis to assess the appropriateness of client investments relative to the investment strategy and in accordance with the client's specific investment objective, guidelines and restrictions for the account. HCM Operations routinely reviews direct account custodian reconciliations. For indirect accounts, annual review and oversight is performed by the appropriate personnel and/or committees at MUFG Union Bank and U.S. Bank. Trade Errors It is HCM's policy to ensure trading errors are handled and corrected in a timely manner in the best interests of the client affected by the error. All trade errors should be corrected within a reasonable period of time following discovery of the error. HCM will not use commissions from client accounts to correct trade errors. It is the strict policy of HCM that HCM employees are not permitted to make payments to clients or to client accounts. Reports to Clients HCM issues periodic reports to direct clients, which include transaction summaries, portfolio valuation, and performance data. These reports often include information compiled by others including MUFG Union Bank and U.S. Bank. MUFG Union Bank provides periodic reports to its trust and agency account clients. The information provided by MUFG Union Bank in these reports is similar to the information included in HCM's periodic reports described above. Item 14: Client Referrals and Other Compensation HCM or its related persons may from time to time receive some economic benefit from non -clients, such as a broker -dealer, in connection with giving advice to clients. See Item 12, Brokerage Practices. Compensation for Client Referrals to MUFG Union Bank and Relationship Management of Clients Participating in MUFG Union Bank Services MUFG Union Bank generally compensates certain employees and employees of its affiliates, such as UBIS and HCM, when clients they refer to MUFG Union Bank establish an account, relationship or HighMark Capital Management, Inc. I 17 service. In addition, MUFG Union Bank generally pays certain MUFG Union Bank employees and employees of MUFG Union Bank's affiliates compensation for providing relationship management services that facilitate the coordination of the review, recommendation and integration of suitable products and services of MUFG Union Bank and its affiliates, including UBIS and HCM, that are relevant to the client's overall financial situation. Such compensation can vary depending on the account, relationship or service. Other Referral Arrangements In addition, from time to time, HCM and its related persons may also enter into cash referral arrangements with related and unrelated persons in accordance with Rule 206(4)-3 of the Investment Advisers Act of 1940, and compensate referrals with respect to such activities in accordance with Rule 206(4)-3 or other applicable regulations. The amounts of such fees are individually negotiated. Item 156 Custody _ The custodian of each client account (either MUFG Union Bank or a client -directed custodian) sends a periodic statement of the account to the client on at least a quarterly basis. HCM recommends that each client should compare the security positions shown on the investment statement they receive from HCM to those shown on the statement they receive from the applicable custodian. Differences in reported security positions may exist because investment statements are presented on a trade date basis and custodial statement are often shown on a settlement date basis. Differences in the reported security values may exist due to the timing of posting of accrued but uncollected income and/or the use of differing valuation sources and methods by HCM and the custodian. Item 16: Investment Discretion Clients who have their agreements directly with HCM grant discretionary authority to HCM at the outset of an advisory relationship when they execute the HCM Advisory Services Agreement. At such time, the client communicates the investment parameters, including limitations, restrictions, asset allocation requirements, and/or market capitalization thresholds that apply; any desire to invest only in socially responsible companies; and any other client -defined investment specifications. With respect to the indirect accounts for which MUFG Union Bank acts as trustee or agent, the terms of the governing trust instrument or MUFG Union Bank's agreement with each client provides MUFG Union Bank the authority to exercise investment discretion. HCM and MUFG Union Bank have a separate agreement that describes the obligations for investment advisory services that HCM performs with respect to such MUFG Union Bank clients. Item 17: Voting Client Securities HCM's clients have the option to vote their proxies themselves or to authorize HCM to vote such proxies on their behalf. Most clients authorize HCM to vote proxies for securities held in the client's account. HCM has established policies for voting these proxies in the interests of the clients. For assets managed by a sub -adviser. HCM delegates to the sub -adviser the authority to vote the proxies according to the sub -adviser's policies, subject to monitoring, review and oversight by HCM. HighMark Capital Management, Inc. 18 For other portfolios. HCM retains ISS Governance Services ("ISS"), an independent proxy voting service, as its agent. HCM delegates to ISS the authority to vote the proxies according to [SS' policies, subject to monitoring and review by HCM. HCM reserves the right to withdraw any proxy from ISS and vote the proxy with review and approval by the IPC. HCM will withdraw a proposed proxy vote from ISS in the event that HCM determines that the proposed vote by ISS would not be consistent with HCM's fiduciary duty to one or more of its clients. HCM has written policies and procedures in place to address any situation where there is a conflict of interest between HCM and a client. Before HCM votes a proxy. the IPC will take steps to determine if HCM has a conflict of interest in voting the proxy. If the IPC finds that a material conflict exists, either HCM or MUFG Union Bank will retain an independent fiduciary to vote the proxy, depending on whether the client or MUFG Union Bank has engaged MUFG Union Bank for its investment advisory services. The majority of the proxy voting records for HCM are maintained by ISS. HCM will make proxy voting records available to client as required by law. Clients may obtain a copy of HCM's proxy voting policies and procedures and/or proxy voting records for their account by calling 1-800-582-4734. Item 18: Financial Information HCM is not aware of any financial condition that is reasonably likely to impair its ability to meet contractual commitments. HCM has not been the subject of a bankruptcy petition. HiahMark Capital Management, Inc. 19 '1 '1 PUBLIC AGENCIES POST -EMPLOYMENT HEALTH CARE PLAN MASTER PLAN DOCUMENT (Effective as of November 5, 2014) INTRODUCTION The Employer specified in the Adoption Agreement has adopted this qualified governmental post -employment health care plan ("OPEB Plan") for the benefit of its Eligible Employees. The plan document for the OPEB Plan consists of this Master Plan Document plus the Adoption Agreement. Assets of the OPEB Plan are held under a trust (the "Trust") evidenced by a trust agreement (the "Trust Agreement"). Each Employer's separate portion of the Trust dedicated to funding the Employer's OPEB Obligation and defraying the reasonable expenses associated with the same is referred to as the Employer's "OPEB Account." Capitalized terms that are not defined herein shall have the meaning attributed to such terms in the Trust Agreement. The Trust is established with the intention that it qualify as a tax-exempt trust performing an essential governmental function within the meaning of Section 115 of the Code and any regulations issued thereunder and as a tax-exempt trust under the provisions of the relevant state's statutory provisions of each Employer. It is intended that contributions to the Employer's OPEB Account shall qualify as "plan assets" within the meaning of GASB Statement No. 45 (Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions). At any time prior to the satisfaction of all liabilities with respect to Eligible Employees under an Employer's OPEB Account, the OPEB Account assets shall not be used for, or diverted to, any purpose other than funding the Employer's OPEB Obligation and defraying the reasonable expenses associated with the same. Page 1 of 6 ARTICLE I PLAN AND TRUST INFORMATION 1.1 Plan Name. The name of the OPEB Plan adopted by the Employer is the Public Agencies Post -Employment Health Care Plan. 1.2 Effective Date. The OPEB Plan is effective as of the date set forth in Section A.3.1.2 of the Adoption Agreement. If this OPEB Plan is a restatement of an existing plan, that date is also the effective date of the restatement. 1.3 Plan Year. The plan year for the OPEB Plan shall be the consecutive twelve-month period beginning on January 1 and ending on December 31. ARTICLE II EMPLOYER INFORMATION 2.1 Employer. The name and address of the Employer sponsoring this OPEB Plan (the "Employer") are as set forth in Section A.2.1 of the Adoption Agreement. The Adoption Agreement can only be used by a governmental agency that is a state, a political subdivision of a state, or an entity the income of which is excludible from gross income under Section 115 of the Code to establish a plan. ARTICLE III ELIGIBLE EMPLOYEES 3.1 Eligible Persons Each employee of the Employer who is or becomes eligible for post -employment health care and welfare benefits as specified in such Employer's applicable policies and/or applicable collective bargaining agreements is an Eligible Employee under this OPEB Plan. In addition, any person who, due to his or her relationship with the Eligible Employee, is entitled to post -employment health care and welfare benefits as specified in the Employer's applicable policies and/or collective bargaining agreement, is an Eligible Beneficiary under this OPEB Plan. Page 2 of 6 3.2 Termination of Eligible Status An Eligible Employee or Eligible Beneficiary shall cease to be an Eligible Employee or Eligible Beneficiary as specified in the Employer's applicable policies and/or applicable collective bargaining agreements. ARTICLE IV CONTRIBUTIONS 4.1 Amount of Member Agency Contributions Eligible Employees and Eligible Beneficiaries are not permitted to make contributions to the Trust, provided however, that nothing herein shall be deemed to (i) prevent the Employer from imposing a charge (including, without limitation, a payroll deduction) for coverage under the OPEB Plan, or (ii) prevent the Employer from depositing the proceeds of any such charge to the Trust (provided that such deposit shall be considered an Employer contribution and shall not be segregated within Employer's OPEB Account from any other Employer contributions). Each Employer shall from time -to -time contribute to its OPEB Account an amount determined by such Employer in its sole discretion. Such amount may, but need not, equal such Employer's "annual required contribution" ("ARC") as determined in accordance with GASB 45. 4.2 Administrative Expenses The Employer may make contributions to its OPEB Account sufficient to defray all or part of the expenses of administering the OPEB Plan or may pay such expenses directly. 43 Allocation of Administrative Expenses If the Employer chooses not to directly pay the expenses of administering this OPEB Plan, such expenses shall be charged against the OPEB Account for such Employer. 4.4 Reversions The Employer shall have the right to a return of contributions from this OPEB Plan only if the conditions for such return set forth in the Trust Agreement are satisfied. Page 3 of 6 ARTICLE V DISTRIBUTION OF BENEFITS 5.1 Payment of Distribution Distribution shall only be made to the insurers, third party administrators, service providers, or other entities providing benefits or services under the OPEB Plan, or to Eligible Employees and Eligible Beneficiaries for reimbursement of OPEB Plan premiums (or other payments for OPEB Plan benefits) paid by the Eligible Employee or Eligible Beneficiary, or to the Employer for the reimbursement of OPEB Plan benefits and expenses paid by the Employer. The Plan Administrator or its Delegatee shall provide instructions to the Trustee regarding how distributions and reimbursements are to be made. ARTICLE VI FUNDING AND INVESTMENT 6.1 Funding and Investment The assets of the OPEB Plan shall be held in the OPEB Account of each Employer. In Section A.4.2.1 of the Adoption Agreement, each Employer shall elect between a discretionary or directed investment approach. If the Employer elects a discretionary investment approach, the Employer shall further elect between the various investment strategies offered in the investment strategy selection and disclosure form. If the Employer elects a directed investment approach, the Employer, in accordance with the Trust Agreement, shall have absolute discretion over the investment of the assets of its OPEB Account. 6.2 Type and Nature of Plan and Trust Neither the faith and credit nor the taxing power of each Employer is pledged to the distribution of benefits hereunder. Except for contributions, earnings and other amounts held in the Trust, no amounts are pledged to the distribution of benefits hereunder. Distributions of benefits are neither general nor special obligations of the Employer, but are payable solely from contributions, as more fully described herein. No employee of any Employer or any other person may compel the exercise of the taxing power by the Employer. Distributions of benefits are not a debt of the Employer within the meaning of any constitutional or statutory limitation or restriction. Distributions are not a legal or equitable pledge, charge, lien or encumbrance, upon any of the Employer's property, or upon any of its income, receipts or revenues. Page4of6 ARTICLE VII ADMINISTRATION, AMENDMENT AND TERMINATION OF PLAN 7.1 Designation of Plan Administrator In Section A.2.2 of the Adoption Agreement, the Employer shall provide the name of the Plan Administrator that has been duly authorized and designated by the governing body of the Employer to act on its behalf in all matters pertaining to the OPEB Plan and the Trust pursuant to Section 3.4 of the Trust Agreement. If no name is provided, the Employer is the Plan Administrator. In addition to a Plan Administrator the Employer may designate a Delegatee to perform those activities relating to the OPEB Plan as specified in the written appointment of such Delegatee certified to the Trust Administrator. Except where the context requires otherwise, the term "Employer" as used in this Article shall mean the Plan Administrator or Delegatee where responsibility for administration of the OPEB Plan has been given to such parties. 7.2 Rules and Regulations The Employer has full discretionary authority to supervise and control the operation of this OPEB Plan in accordance with its terms and may make rules and regulations for the administration of this OPEB Plan that are not inconsistent with the terms and provisions hereof. The Employer shall determine any questions arising in connection with the interpretation, application or administration of the OPEB Plan (including any question of fact relating to age, employment, compensation or eligibility of Eligible Employees or Eligible Beneficiaries) and its decisions or actions in respect thereof shall be conclusive and binding upon all persons and parties. The Employer shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following: (a) To determine all questions relating to an Eligible Employee's or Eligible Beneficiary's eligibility; (b) To construe and interpret the terms and provisions of the OPEB Plan; (c) To compute, certify to, and direct the Trustee with regard to the amount and kind of benefits payable to health care providers; (d) To authorize all disbursements from its OPEB Account; (e) To maintain all records that may be necessary for the administration of the OPEB Plan other than those maintained by the Trustee; and (f) To appoint a Plan Administrator or, any other agent, and to delegate to them or to the Trustee such powers and duties in connection with the administration of the OPEB Plan as it may from time to time prescribe_ Page 5 of 6 Expenses and fees incurred in connection with the administration of the OPEB Plan and the Trust shall be paid from the Trust assets to the fullest extent permitted by law, unless the Employer determines otherwise, The Employer may elect to make contributions to its OPEB Account sufficient to defray the expenses of administering the OPEB Plan or may pay such expenses directly. 7.3 Amendment and Termination The Employer shall have the right to amend, modify or terminate the OPEB Plan at any time. If an Employer terminates the OPEB Plan, the Assets held in its OPEB Account shall be distributed by the Trustee as provided in Section 7.3 of the Trust Agreement. ARTICLE VIII MISCELLANEOUS 8.1 Nonalienation An Eligible Employee or Eligible Beneficiary does not have any interest in the OPEB Plan or the Assets held in the Trust. Accordingly, the Trust shall not in any way be liable to attachment, garnishment, assignment or other process, or be seized, taken, appropriated or applied by any legal or equitable process, to pay any debt or liability of an Eligible Employee, Eligible Beneficiary or any other party. 8.2 Investment All contributions, interest earned, and any assets of the OPEB Plan shall at all times be invested and managed in accordance with the Trust Agreement and the requirements of applicable law. 8.3 Parties to the Plan Eligible Employees, Eligible Beneficiaries and unions of each Employer are not parties to this OPEB Plan. The OPEB Plan is only a funding source for such Employer's post -employment health care and welfare benefits and does not increase the rights of any Eligible Employee, Eligible Beneficiary or union. 8.4 Confidential Medical Information Each Employer and its health care providers or other service providers shall not share confidential medical information regarding employees of the Employer with the OPEB Plan, the Trustee, or the Trust Administrator. Page 6 of 6 "Th "") '") PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST AGREEMENT (Effective November 5, 2014) ARTICLE I DEFINITIONS 1.1 "Adoption Agreement" shall have the meaning given to such term in Section 2.3. 1.2 "Agency Account" shall have the meaning given to such term in Section 2.4. 1.3 "Agreement for Administrative Services" shall mean the agreement executed between the Employer and the Trust Administrator which authorizes the Trust Administrator to perform specific duties of administering the Agency Account of the Employer, 1.4 "Assets" shall have the meaning given to such term in Section 2.5. 1.5 "Code" shall mean the Internal Revenue Code of 1986 as amended from time to time. 1.6 "Delegatee" shall mean an individual or entity, appointed by the Plan Administrator or Employer to act in such matters as are specified in the appointment. 1.7 "Effective Date" shall mean the date first written above, the date the Trust was established, and with respect to each Employer, the Effective Date shall be the date on which the Employer executes the Adoption Agreement. 1.8 "Eligible Beneficiary" shall mean any person who, due to his or her relationship to an Eligible Employee, is entitled to post -employment benefits pursuant to the Employer's Pension Plan or OPEB Plan, including but not limited to the Eligible Employee's current or former spouse or domestic partner, child, dependent, or survivor. 1.9 "Eligible Employee" shall mean any employee of an Employer who is entitled to post -employment benefits pursuant to the Employer's Pension Plan or OPEB Plan. Unless the context otherwise requires, the term "Eligible Employee" as used herein shall include any Eligible Beneficiaries. 1.10 "Employer" shall mean a public agency that executes the Adoption Agreement, thereby adopting the provisions of this Trust Agreement, provided that such agency is a state, a political subdivision of a state, or an entity the income of which is excludible from gross income under Section 115 of the Code. 1.11 "GASB" shall mean the Governmental Accounting Standards Board. 1.12 "Omnibus Account" shall mean an account, established for record keeping purposes only, to aggregate the balances of the Assets credited to the Agency Accounts. The Trust Administrator shall maintain and reconcile, at the Agency Account level (and subaccount level), the investments of the Agency Accounts Page 1 of 25 and will provide reports to the Plan Administrator with respect to such investments. The Trustee will maintain a record of the aggregate balance (principal and earnings) for all Agency Accounts. The Trust Administrator will in the ordinary course of business maintain a record of the name, address, taxpayer identification number, account number and amount of funds, including earnings, of each Employer. On periodic valuation dates (no less frequently than monthly) to be established by the Trust Administrator, the Trustee and Trust Administrator will reconcile the aggregate balance information maintained by the Trustee with the Agency Account level records maintained by the Trust Administrator pursuant to this Trust Agreement. 1.13 "OPEB" shall mean "other post -employment benefits," such as medical, dental, vision, life insurance, long-term care and other similar benefits provided to retirees, other than pension benefits. 1.14 "OPEB Obligation" shall mean an Employer's obligation to provide OPEB to its Eligible Employees in accordance with the Employer's OPEB Plan. 1.15 "OPEB Plan" shall mean the Public Agencies Post -Employment Health Care Plan, as adopted by the Employer under the Adoption Agreement. 1.16 "Pension Obligation" shall mean an Employer's obligation to contribute to the Pension Plan's Qualified Trust and shall not, for example, mean an Employer's Obligation to provide retirement benefits under the Pension Plan to the Employer's Eligible Employees. 1.17 "Pension Plan" shall mean an Employer's defined -benefit pension plan or plans, each of which is (i) qualified under Section 401(a) of the Code, (ii) sponsored by the Employer in order to provide retirement benefits to its Eligible Employees, and (iii) partly or wholly funded by the Employer's contributions to a Qualified Trust. 1.18 "Plan Administrator" shall mean the individual designated by position of employment at the Employer to act on its behalf in all matters relating to the Employer's participation in the Trust. 1.19 "Qualified Trust" shall mean a trust which (i) is separate and apart from the Trust, (ii) constitutes a qualified trust under Code Section 401(a), and (iii) funds retirement benefits provided under an Employer's Pension Plan to the Employer's Eligible Employees. 1.20 "Trust" shall mean the Public Agencies Post -Employment Benefits trust arrangement. 1.21 "Trust Administrator" shall mean Public Agency Retirement Services or any successor trust administrator appointed by the Employers as provided herein. The Trust Administrator shall serve as trust administrator to the Trust established Page 2 of 25 pursuant to this Trust Agreement until such Trust Administrator resigns or is removed as provided in Article Ill. 1.22 "Trust Agreement" shall mean this Public Agencies Post -Employment Benefits trust document adopted by each Employer upon execution of an Adoption Agreement, as amended from time to time. 1.23 "Trustee" shall mean U.S. Bank National Association, or any successor trustee appointed by the Employers as provided herein. The Trustee shall serve as trustee of the Trust established pursuant to the provisions of this Trust Agreement until such Trustee resigns or is removed as provided in Article III. ARTICLE II THE TRUST 2.1 Multiple Employer Trust The Trust is a multiple employer trust arrangement established to provide economies of scale and efficiency of administration to public agencies that adopt it to hold the assets used to fund the agency's OPEB Obligation or Pension Obligation or both. The Trust is divided into Agency Accounts to hold the Assets of each Employer as described in Section 2.4. 2.2 Purpose The Trust is established with the intention that it qualify as a tax-exempt trust performing an essential governmental function within the meaning of Section 115 of the Code and any regulations issued thereunder and as a tax-exempt trust under the provisions of the relevant state's statutory provisions of each Employer. This Trust Agreement shall be construed and the Trust shall be administered in a manner consistent with such intention. The fundamental purpose of the Trust is to fund the Employer's OPEB Obligation or Pension Obligation or both. It is intended that adopting Employers retain an interest in the underlying securities held in the Trust on their behalf, rather than in the Trust itself. The Employer hereby represents and warrants that the assets held hereunder (including the Assets) are not assets of any qualified plan under Code Section 401(a), regardless of the character of such assets once distributed. The Employer hereby acknowledges that the Trust does not constitute a qualified trust under Code Section 401(a). 2.3 Employers Any public agency may, by action of its governing body in writing accepted by the Trustee, adopt the provisions of the Trust Agreement. Executing an adoption instrument for the Trust ("Adoption Agreement"), in the form attached hereto as Exhibit "A" (or such other form as may be approved by the Trustee), shall Page 3 of 25 constitute such adoption, unless the Trustee requires additional evidence of adoption. In order for such adoption to be effective, the public agency must also execute an Agreement for Administrative Services with Public Agency Retirement Services, the Trust Administrator, pursuant to Section 3.6 of this Trust Agreement. Such adopting Employer shall then become an Employer of the Trust. Each such Employer shall, at a minimum, famish the Trust Administrator with the following documents to support its adoption of the Trust: (a) a certified copy of the resolution(s) of the governing body of the Employer authorizing the adoption of the Trust Agreement and the appointment of the Plan Administrator for such Employer; (b) an original of the Adoption Agreement executed by the Plan Administrator or other duly authorized Employer employee; (c) an original of the Agreement for Administrative Services with Public Agency Retirement Services executed by the Plan Administrator or other duly authorized Employer employee and Public Agency Retirement Services; (d) an address notice; and (e) such other documents as the Trustee may reasonably request. (f) Any action taken by the Plan Administrator for an Employer shall be deemed to have been taken by such Employer. Any notice given to or delivered by the Plan Administrator for an Employer shall be deemed to have been given to or delivered by such Employer. 2.4 Agency Accounts (a) Upon an Employer's adopting the Trust Agreement, as provided in Section 2.3, a separate "Agency Account" shall be established under the Trust for that Employer, and all Assets of the Trust attributable to that Employer shall be held in that Employer's Agency Account (b) An Employer's Agency Account comprises three subaccounts: a "Pension Account", an "OPEB Account", and a "Suspense Account". The Assets of the Trust that are held in the Employer's Pension Account will be available only to fund the Employer's Pension Obligation and defray the reasonable expenses associated with the same. The Assets of the Trust that are held in the Employer's OPEB Account will be available only to fund the Employer's OPEB Obligation and defray the reasonable expenses associated with the same. (c) The Assets of the Trust that are held in an Employer's Agency Account shall not be available to pay any obligations incurred by any other Employer as provided in Section 2.8. Page 4 of 25 (d) All contributions and transfers received by the Trust on behalf of the Employer will be held in the Employer's Agency Account and will be allocated to the subaccounts under the Agency Account as follows: (1) If the Employer maintains a Pension Account or OPEB Account (and not both a Pension Account and an OPEB Account), all contributions and transfers received by the Trust on the Employer's behalf will be allocated to that subaccount. (2) If the Employer maintains both a Pension Account and an OPEB Account, contributions and transfers received by the Trust on the Employer's behalf will be allocated to either the Pension Account or OPEB Account, as directed by the Plan Administrator. To the extent the Plan Administrator does not provide such direction, the Employer hereby directs the Trustee to allocate such contributions and transfers to the Suspense Account and to use the assets of the Suspense Account to purchase a position in the sweep vehicle identified on an exhibit hereto or, if none is identified, to hold such assets un-invested. The Plan Administrator may at any time direct the reallocation of cash from the Suspense Account to either the Pension Account or the OPEB Account. (3) Once allocated to the Pension Account or the OPEB Account, amounts under the Trust may not subsequently be transferred to the other subaccount. 2.5 Assets of Agency Account The assets held in an Agency Account shall consist of all contributions and transfers received by the Trust on behalf of the Employer, together with the income and earnings from such contributions and transfers, and any increments accruing to the Agency Account, net of any investment losses, benefits, expenses or other costs ("Assets"). All contributions or transfers shall be received by the Trustee in cash or in other property acceptable to the Trustee. The Trustee shall manage and administer the Assets held in Agency Accounts without distinction between principal and income. The Trustee and the Trust Administrator shall have no duty to compute any amount to be transferred or paid to the Agency Account by the Employer, and the Trustee and the Trust Administrator shall not be responsible for the collection of any contributions or transfers to the Agency Account. 2.6 Aggregate Balance for Investment and Administration The balances of the Assets of more than one Agency Account may be aggregated by the Trustee in one or more Omnibus Accounts for investment and administrative purposes, to provide economies of scale and efficiency of administration to the Agency Accounts. The responsibility for Agency Account level accounting (including subaccount-level accounting within each Agency Account) within this Omnibus Account(s) shall be that of the Trust Administrator. Page 5 of 25 2.7 Trustee Accounting The Trustee shall be responsible only for maintaining records and maintaining accounts for the aggregate assets of the Trust. The responsibility for accounting and subaccounting for each Agency Account, based upon the Omnibus Account(s), shall be that of the Trust Administrator. 2.8 No Diversion of Assets The Assets in each Employer's Agency Account shall be held in trust for the exclusive purpose of funding the Employer's OPEB Obligation or Pension Obligation or both and defraying the reasonable expenses associated with the same. The Assets in each Agency Account shall not be used for or diverted to, any other purpose, including, but not limited to, the satisfaction of any other Employer's Pension Obligation or OPEB Obligation. 2.9 Type and Nature of Trust Neither the full faith and credit nor the taxing power of each Employer is pledged to the distribution of amounts hereunder. Except for contributions and other amounts hereunder, no other amounts are pledged to the distribution of benefits hereunder. Distributions of benefits are neither general nor special obligations of any Employer, but are payable solely from the Assets held in such EmpIoyer's Agency Account, as more fully described herein. No employee of any Employer or beneficiary may compel the exercise of the taxing power by any Employer. Distributions of Assets from any Agency Account are not debts of any Employer within the meaning of any constitutional or statutory limitation or restriction. Such distributions are not legal or equitable pledges, charges, liens or encumbrances, upon any of an Employer's property, or upon any of its income, receipts, or revenues, except amounts in the accounts which are, under the terms of each Plan and the Trust set aside for distributions. Neither the members of the governing body of any Employer nor its officers, employees, agents or volunteers are liable hereunder. 2.10 Loss of Tax -Exempt Status as to Any Employer If any Employer participating in the Trust receives notice from the Internal Revenue Service that the Trust as to such Employer fails to satisfy the requirements of Section 115 of the Code, or if any Employer consents to the Internal Revenue Service's determination that the Trust fails to meet such requirements, Assets having a value equal to the funds then held in such Employer's Agency Account shall be segregated and placed in a separate trust by the Trustee for the exclusive benefit of such Employer's Eligible Employees within a reasonable time after the Trust Administrator notifies the Trustee of the Internal Revenue Service's determination. Each Employer participating in the Trust agrees to immediately notify the Trust Administrator upon receiving such Page 6 of 25 notice or giving such consent. The separate trust provided for in this Section 2.10 shall thereafter be considered as a separate trust containing all of the provisions of this Trust Agreement until terminated as provided in this Trust Agreement. ARTICLE III ADMINISTRATIVE MATTERS 3.1 Appointment of Trustee The Employers may, with the approval of two-thirds (2/3) or more of the Employers then participating in the Trust, act to appoint a bank, trust company, retirement board, insurer, committee or such other entity as permitted by law, to serve as the trustee of this Trust. Such action must be in writing. Upon the written acceptance of such entity it shall become the Trustee of the Trust. If the Trustee is removed or resigns pursuant to Section 3.2, the Employers shall appoint a successor Trustee in accordance with the voting requirements set forth in this Section 3.1. 3.2 Resignation or Removal of Trustee The Employers may act to remove the Trustee, provided that such action must satisfy the voting requirements set forth in Section 3.1 and notice of such action must be promptly delivered to the Trust Administrator, the Trustee and each Plan Administrator. The Trustee may also resign at any time by giving at least ninety (90) days prior written notice to the Trust Administrator and to the Plan Administrator of each Employer that has adopted the Trust Agreement and not terminated its participation in the Trust; provided, however, that the Trustee may resign immediately upon the earlier of the approval date or the effective date of any amendment of the Trust Agreement by the Employers that would change or modify the duties, powers or liabilities of the Trustee hereunder without the Trustee's consent. The Trustee shall, upon the appointment and acceptance of a successor trustee, transfer and deliver the Assets and all records relating to the Trust to the successor, after reserving such reasonable amount as it shall deem necessary to provide for its fees and expenses and any sums chargeable against the Trust for which it may be liable. The Trustee shall do all acts necessary to vest title of record in the successor trustee. 3.3 Withdrawal of Employer An Employer may elect to withdraw from the Trust by giving at least thirty (30) days prior written notice to the Trustee and the Trust Administrator. If an Employer so elects to withdraw, Assets having a value equal to the funds held in such Employer's Agency Account shall be segregated by the Trustee and, as soon as practicable, shall be transferred to one or more trusts maintained by the Employer, provided that (i) for Assets transferred from the OPEB Account, any such trust shall satisfy the requirements of Section 115 of the Code, (ii) for Assets Page 7 of 25 transferred from the Pension Account, any such trust shall satisfy the requirements of either Section 115 or 401(a) of the Code, and (iii) all assets held by any such trust and previously held in the Employer's Pension Account or OPEB Account shall qualify as "plan assets" within the meaning of GASB Statement No. 68 (Accounting and Financial Reporting for Pensions —An Amendment of GASB Statement No. 27) or GASB Statement No. 45 (Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions), respectively, in each case as reasonably determined by the Employer and certified in writing by the Employer to the Trust Administrator. The Employer shall appoint a trustee for such Employer's separate trust and, upon the trustee's acceptance of that appointment, the trustee will be vested with title to the transferred Assets. 3.4 The Plan Administrator The governing body of each Employer shall have plenary authority for the administration and investment of such Employer's Agency Account pursuant to any applicable state laws and applicable federal laws and regulations. Each Employer shall by resolution designate a Plan Administrator. Unless otherwise specified in the instrument the Plan Administrator shall be deemed to have authority to act on behalf of the Employer in all matters pertaining to the Employer's participation in the Trust and in regard to the Agency Account of the Employer. Such appointment of a Plan Administrator shall be effective upon receipt and acknowledgment by the Trustee and the Trust Administrator and shall be effective until the Trustee and the Trust Administrator are furnished with a resolution of the Employer that the appointment has been modified or terminated. 3.5 Failure to Appoint Plan Administrator If a Plan Administrator is not appointed, or such appointment lapses, the Employer shall be deemed to be the Plan Administrator. As used in this document the term "Plan Administrator" shall be deemed to mean "Employer" when a Plan Administrator has not been appointed for such Employer. 3.6 Delegatee The Plan Administrator, acting on behalf of the Employer, may delegate certain authority, powers and duties to a Delegatee to act in those matters specified in the delegation. Any such delegation must be in a writing that names and identifies the Delegatee, states the effective date of the delegation, specifies the authority and duties delegated, is executed by the Plan Administrator, is acknowledged in writing by the Delegatee, and is certified as required in Section 3.7 to the Trust Administrator. Such delegation shall be effective until the Trustee and the Trust Administrator are directed in writing by the Plan Administrator that the delegation has been rescinded or modified. Page 8 of 25 3.7 Certification to Trustee The governing body of each Employer, or other duly authorized official, shall certify in writing to the Trustee and the Trust Administrator the names and specimen signatures of the Plan Administrator and Delegatee, if any, and all others authorized to act on behalf of the Employer whose names and specimen signatures shall be kept accurate by the Employer acting through a duly authorized officer or governing body of the Employer. The Trustee and the Trust Administrator shall have no liability if they act upon the direction of a Plan Administrator or Delegatee that has been duly authorized, as provided in Section 3.6, if that Plan Administrator or Delegatee is no longer authorized to act, unless the Employer has informed the Trustee and the Trust Administrator of such change. 3.8 Directions to Trustee All directions to the Trustee from the Plan Administrator or Delegatee must be in writing and must be signed by the Plan Administrator or Delegatee, as the case may be. For all purposes of this Trust Agreement, direction shall include any certification, notice, authorization, application or instruction of the Plan Administrator, Delegatee or Trustee appropriately communicated. The above notwithstanding, direction may be implied if the Plan Administrator or Delegatee has knowledge of the Trustee's intentions and fails to file written objection. The Trustee shall have the power and duty to comply promptly with all proper directions of the Plan Administrator or Delegatee, appointed in accordance with the provisions of this Trust Agreement. In the case of any direction deemed by the Trustee to be unclear or ambiguous the Trustee may seek written instructions from the Plan Administrator, the Employer or the Delegatee on such matter and await their written instructions without incurring any liability. If at any time the Plan Administrator or the Delegatee should fail to give directions to the Trustee, the Trustee may act in the manner that in its discretion seems advisable under the circumstances for carrying out the purposes of the Trust and/or the applicable Agency Account which may include not taking any action. The Trustee may request directions or clarification of directions received and may delay acting until clarification is received. In the absence of timely direction or clarification, or if the Trustee considers any direction to be a violation of the Trust Agreement or any applicable law, the Trustee shall in its sole discretion take appropriate action, or refuse to act upon a direction. 3.9 Appointment of Trust Administrator The Employers may, with the approval of two-thirds (2/3) or more of the Employers then participating in the Trust, act to appoint a bank, trust company, retirement board, insurer, committee or such other entity as permitted by law, to serve as Trust Administrator of the Trust. Such action must be in writing. Upon the written acceptance of such entity it shall become the Trust Administrator of Page 9 of 25 the Trust. If the Trust Administrator is removed or resigns pursuant to Section 3.13, the Employers shall appoint a successor Trust Administrator in accordance with the voting requirements set forth in this Section 3.9. 3.10 Trust Administrator The Trust Administrator's duties involve the performance of the following services pursuant to the provisions of this Trust Agreement and the Agreement for Administrative Services: (a) Performing periodic accounting of each Agency Account (including subaccount-level accounting within each Agency Account) and reconciling such Agency Account balances with the Trust/Omnibus Account; (b) Directing the Trustee to make distributions from the appropriate subaccount under an Agency Account in accordance with Section 5.9. (c) Allocating contributions, earnings and expenses to each Agency Account and the underlying subaccounts; (d) Directing the Trustee to pay the fees of the Trust Administrator and to do such other acts as shall be appropriate to carry out the intent of the Trust; (e) Such other services as the Employer and the Trust Administrator may agree in the Agreement for Administrative Services pursuant to Section 2.3. The Trust Administrator shall be entitled to rely on, and shall be under no duty to question, any direction and/or data received from the Plan Administrator, or other duly authorized entity, in order to perform its authorized duties under this Trust Agreement. The Trust Administrator shall not have any duty to compute contributions made to the Trust, determine or inquire whether contributions made to the Trust by the Plan Administrator or other duly authorized entity are adequate to meet an Employer's Pension Obligation or OPEB Obligation as may be determined under any applicable GASH pronouncement; or determine or inquire whether contributions made to the Trust are in compliance with the Employer's OPEB Plan or Pension Plan. The Trust Administrator shall not be liable for nonperformance of duties if such nonperformance is directly caused by erroneous, and/or late delivery of, directions or data from the Plan Administrator, or other duly authorized entity. 3.11 Additional Trust Administrator Services The Plan Administrator may at any time retain the Trust Administrator as its agent to perform any act, keep any records or accounts and make any computations which are required of the Employer or the Plan Administrator by this Trust Agreement or by the Employer's policies and/or applicable collective bargaining agreements. The Trust Administrator shall be separately compensated Page I 0 of 25 for such service and such services shall not be deemed to be contrary to the Trust Agreement. 3.12 Trust Administrator's Compensation As may be agreed upon from time to time by the Employer and Trust Administrator, the Trust Administrator will be paid reasonable compensation for services rendered or reimbursed for expenses properly and actually incurred in the performance of duties with respect to such Employer's Agency Account and to the Trust 3.13 Resignation or Removal of Trust Administrator The Employers may act to remove the Trust Administrator, provided that such action must satisfy the voting requirements set forth in Section 3.9 and notice of such action must be promptly delivered to the Trust Administrator, the Trustee and each Plan Administrator. The Trust Administrator may also resign at any time by giving at least one hundred and twenty (120) days prior written notice to the Trustee and to the Plan Administrator of each Employer that has adopted the Trust Agreement and not terminated its participation in the Trust; provided, however, that the Trust Administrator may resign immediately upon the earlier of the approval date or the effective date of any amendment of the Trust Agreement by the Employers that would change or modify the duties, powers or liabilities of the Trust Administrator hereunder without the Trust Administiator's consent. The Trust Administrator shall, upon the appointment and acceptance of a successor trust administrator, transfer all records relating to the Trust to the successor. ARTICLE 1V THE TRUSTEE 4.1 Powers and Duties of the Trustee Except as otherwise provided in Article V and subject to Article VI, the Trustee shall have full power and authority with respect to property held in the Trust to do all such acts, take all proceedings, and exercise all such rights and privileges, whether specifically referred to or not in this document, as could be done, taken or exercised by the absolute owner, including, without limitation, the following (a) To invest and reinvest the Assets or any part hereof in any one or more kind, type, class, item or parcel of property, real, personal or mixed, tangible or intangible; or in any one or more kind, type, class, item or issue of investment or security; or in any one or more kind, type, class or item of obligation, secured or unsecured; or in any combination of them (including those issued by the Trustee of any of its affiliates, to the extent permitted by applicable law), and to retain the property for the period of time that the Trustee deems appropriate; Page 11 of 25 (b) To acquire and sell options to buy securities ("call" options) and to acquire and sell options to sell securities ("put" options); (c) To buy, sell, assign, transfer, acquire, loan, lease (for any purpose, including mineral leases), exchange and in any other manner to acquire, manage, deal with and dispose of all or any part of the Trust property, for cash or credit and upon any reasonable terms and conditions; (d) To make deposits, with any bank or savings and loan institution, including any such facility of the Trustee or an affiliate thereof provided that the deposit bears a reasonable rate of interest; (e) To invest and reinvest the Assets, or any part thereof in any one or more collective investment trust funds, including common and group trust funds that consist exclusively of assets of exempt pension and profit sharing trusts and individual retirement accounts qualified and tax exempt under the Code, that are maintained by the Trustee or an affiliate thereof. The declaration of trust or plan of operations for any such common or collective fund is hereby incorporated herein and adopted into this Trust Agreement by this reference. The combining of money and other assets of the Trust with money and other assets of other non - qualified trusts in such fund or funds is specifically authorized. Notwithstanding anything to the contrary in this Trust Agreement, the Trustee shall have full investment responsibility over Assets of the Trust invested in such commingled funds. If the plan and trust for any reason lose their tax exempt status, and the Assets have been commingled with assets of other tax exempt trusts in Trustee's collective investment funds, the Trustee shall within 30 days of notice of such loss of tax exempt status, liquidate the Trust's units of the collective investment fund(s) and invest the proceeds in a money market fund pending investment or other instructions from the Plan Administrator. The Trustee shall not be liable for any loss or gain or taxes, if any, resulting from said liquidation; (f) To place uninvested cash and cash awaiting distribution in one or more mutual funds and/or commingled investment funds maintained by or made available by the Trustee or any of its affiliates, and to receive compensation from the sponsor of such fund(s) for services rendered, separate and apart from any Trustee's fees hereunder. The Trustee or its affiliate may also be compensated for providing investment advisory services to any mutual fund or commingled investment funds; (g) To borrow money for the purposes of the Trust from any source with or without giving security; to pay interest; to issue promissory notes and to secure the repayment thereof by pledging all or any part of the Assets; (h) To take all of the following actions: to vote proxies of any stocks, bonds or other securities; to give general or special proxies or powers of attorney with or Page 12 of 25 without power of substitution; to exercise any conversion privileges, subscription rights or other options, and to make any payments incidental thereto; to consent to or otherwise participate in corporate reorganizations or other changes affecting corporate securities and to delegate discretionary powers and to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities or other property held in the Trust; (i) To make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (j) To raze or move existing buildings; to make ordinary or extraordinary repairs, alterations or additions in and to buildings; to construct buildings and other structures and to install fixtures and equipment therein; (k) To pay or cause to be paid from the Trust any and all real or personal property taxes, income taxes or other taxes or assessments of any or all kinds levied or assessed upon or with respect to the Trust; (1) To exercise all the further rights, powers, options and privileges granted, provided for, or vested in trustees generally under applicable federal or state laws, as amended from time to time, it being intended that, except as herein otherwise provided, the powers conferred upon the Trustee herein shall not be construed as being in limitation of any authority conferred by law, but shall be construed as consistent or in addition thereto. 4.2 Additional Trustee Powers In addition to the other powers enumerated above, the Trustee in any and all events is authorized and empowered: (a) To invest funds pending required directions in any type of interest -bearing account, including, without limitation, time certificates of deposit or interest - bearing accounts issued by the Trustee, or any mutual fund or short term investment fund ("Fund"), whether sponsored or advised by the Trustee or any affiliate thereof); the Trustee or its affiliates may be compensated for providing such investment advice and providing other service to such Fund, in addition to any Trustee's fees received pursuant to this Trust Agreement; (b) To cause all or any part of the Trust to be held in the name of the Trustee (which in such instance need not disclose its fiduciary capacity) or, as permitted by law, in the name of any nominee, and to acquire for the Trust any investment in bearer form, but the books and records of the Trust shall at all times show that all such investments are a part of the Trust and the Trustee shall hold evidences of title to all such investments; Page 13 of 25 (c) To serve as custodian with respect to the Trust Assets; (d) To employ such custodians, agents and connsel as may be reasonably necessary in managing and protecting the Assets and to pay them reasonable compensation from the Trust; to employ any broker -dealer or other agent, including any broker -dealer or other agent affiliated with the Trustee, and pay to such broker -dealer or other agent, at the expense of the Trust, its standard commissions or compensation; to settle, compromise or abandon all claims and demands in favor of or against the Trust; and to charge any premium on bonds purchased at par value to the principal of the Trust without amortization from the Trust, regardless of any law relating thereto; (e) In addition to the powers Iisted herein, to do all other acts necessary or desirable for the proper administration of the Trust, as though the absolute owner thereof; (f) To prosecute, compromise and defend lawsuits, but without obligation to do so, all at the risk and expense of the Trust; and to tender its defense to the Employer in any legal proceeding where the interests of the Trustee and the Employer are not adverse; (g) To exercise and perform any and all of the other powers and duties specified in this Trust Agreement or the Plan; (h) To permit such inspections of documents at the principal office of the Trustee as are required by law, subpoena or demand by a United States agency; (i) To comply with all requirements imposed by applicable provisions of law; (j) To seek written instructions from the Plan Administrator or other fiduciary on any matter and await their written instructions without incurring any liability. If at any time the Plan Administrator or the fiduciary should fail to give directions to the Trustee, the Trustee may act in the manner that in its discretion seems advisable under the circumstances for carrying out the purposes of the Trust; (k) To compensate such executive, consultant, actuarial, accounting, investment, appraisal, administrative, clerical, secretarial, medical, custodial, depository and legal firms, personnel and other employees or assistants as are engaged by the PIan Administrator in connection with funding the Employer's OPEB Obligation or Pension Obligation or both and to pay from the Trust the necessary expenses of such firms, personnel and assistants, to the extent not paid by the Plan Administrator; Page 14 of 25 (1) To act upon proper written directions of the Plan Administrator or Delegatee, including directions given by photostatic transmissions using facsimile signature, and such other forms of directions as the parties shall agree; (m) To pay from the Trust the expenses reasonably incurred in the administration of the Trust; (n) To maintain insurance for such purposes, in such amounts and with such companies as the Plan Administrator shall elect, including insurance to cover liability or losses occurring by reason of the acts or omissions of fiduciaries but only if such insurance permits recourse by the insurer against the fiduciary in the case of a breach of a fiduciary obligation by such fiduciary. ARTICLE V INVESTMENTS 5.1 Discretionary Versus Directed Investment For the Pension Account and the OPEB Account under the Agency Account, the Employer shall elect either a discretionary or directed investment approach. The Employer may elect the same or different investment approaches for those two subaccounts. The Employer hereby elects a directed approach for the Suspense Account. If the Employer elects a discretionary investment approach for a subaccount, the Employer shall further elect between the various investment strategies offered and the Trustee, in accordance with Article TV, shall have absolute discretion over the investment of the Assets held in such subaccount under the Employer's Agency Account. If the Employer elects a directed investment approach for a subaccount, the Trustee shall direct the investment of the Assets of such subaccount under the Employer's Agency Account in accordance with the direction provided by such Employer. 5.2 Trustee Fees As may be agreed upon, in writing, between the Plan Administrator and Trustee, the Trustee will be paid reasonable compensation for services rendered or reimbursed for expenses properly and actually incurred in the performance of duties with respect to the applicable Agency Account or the Trust. 5.3 Contributions Eligible Employees are not permitted to make contributions to the Trust. The Plan Administrator shall, on behalf of the Employer, make all contributions to the Trustee. Such contributions shall be in cash unless the Trustee agrees to accept a contribution that is not in cash. All contributions shall be paid to the Trustee for investment and reinvestment pursuant to the terms of this Trust Agreement. The Trustee shall not have any duty to determine or inquire whether any contributions Page 15of25 to the Trust made to the Trustee by any Plan Administrator are in compliance with the Employer's Pension Plan or OPEB Plan; nor shall the Trustee have any duty or authority to compute any amount to be paid to the Trustee by any Plan Administrator; nor shall the Trustee be responsible for the collection or adequacy of the contributions to meet an Employer's Pension Obligation or OPEB Obligation. The contributions received by the Trustee from each Employer shall be held and administered pursuant to the terms hereof without distinction between income and principal. 5.4 Records (a) The Trustee shall maintain accurate records and detailed accounts of all investments, receipts, disbursements and other transactions hereunder at the Trust level. Such records shall be available at all reasonable times for inspection by the Trust Administrator. The Trustee shall, at the direction of the Trust Administrator, submit such valuations, reports or other information as the Trust Administrator may reasonably require. (b) The Assets of the Trust shall be valued at their fair market value on the date of valuation, as determined by the Trustee based upon such sources of information as it may deem reliable; provided, however, that the Plan Administrator shall instruct the Trustee as to valuation of assets which are not readily determinable on an established market. The Trustee may rely conclusively on such valuations provided by the Plan Administrator and shall be indemnified and held harmless by the Employer with respect to such reliance. If the Plan Administrator fails to provide such values, the Trustee may take whatever action it deems reasonable, including employment of attorneys, appraisers or other professionals, the expense of which will be an expense of administration of the Trust. Transactions in the account involving such hard to value assets may be postponed until appropriate valuations have been received and Trustee shall have no liability therefore. 5.5 Statements (a) Periodically as specified, and within sixty days after December 31, or the end of the Trust's fiscal year if different, Trustee shall render to the Trust Administrator as directed, a written account showing in reasonable summary the investments, receipts, disbursements and other transactions engaged in by the Trustee during the preceding fiscal year or period with respect to the Trust. Such account shall set forth the assets and liabilities of the Trust valued as of the end of the accounting period. (b) The Trust Administrator may approve such statements either by written notice or by failure to express objections to such statements by written notice delivered to the Trustee within 90 days from the date the statement is delivered to the Trust Administrator. Upon approval, the Trustee shall be released and discharged as to all matters and items set forth in such statement as if such Page 16 of 25 1 account had been settled and allowed by a decree from a court of competent jurisdiction. 5.6 Wire Transfers The Trustee shall follow the Plan Administrator's, Delegatee's, or Trust Administrator's wire transfer instructions in compliance with the written security procedures provided by the party providing the wire transfers. The Trustee shall perform a telephonic verification to the Plan Administrator, Trust Administrator, or Delegatee, or such other security procedure as selected by the party providing wire transfer directions, prior to wiring funds or following facsimile directions as Trustee may require. The Plan Administrator assumes the risk of delay of transfer if Trustee is unable to reach the Plan Administrator, or in the event of delay as a result of attempts to comply with any other security procedure selected by the directing party. 5.7 Exclusive Benefit The Assets of an Employer's Agency Account shall be held in trust for the exclusive purpose of funding the Employer's OPEB Obligation or Pension Obligation or both and defraying the reasonable expenses associated with the same and shall not be used for or diverted to any other purpose. No party shall have authority to use or divert the Assets of an Agency Account of an Employer for the satisfaction of any other Employer's Pension Obligation or OPEB Obligation or any other Employer's expenses. 5.8 Delegation of Duties The Plan Administrator, Delegatee, or Trust Administrator, may at any time retain the Trustee as its agent to perform any act, keep any records or accounts and make any computations that are required of the Plan Administrator, Delegatee or Trust Administrator by this Trust Agreement or by the Plan. The Trustee may be compensated for such retention and such retention shall not be deemed to be contrary to this Trust Agreement. 5.9 Distributions (a) The Trustee shall, from time to time, upon the written direction of the Plan Administrator or Delegatee, make distributions from the Assets of the Trust under the OPEB Account to the insurers, third party administrators, service providers or other entities providing benefits or services under the OPEB Plan, or to Eligible Employees and Eligible Beneficiaries for reimbursement of OPEB Plan premiums (or other payments for OPEB Plan benefits) paid by the Eligible Employee or Eligible Beneficiary, or to the Employer for reimbursement of OPEB Plan benefits and expenses paid by the Employer, in such manner in such form(s), in such amounts and for such purposes as may be specified in such directions. Page 17 of 25 (b) In addition, the Trustee shall, from time to time, upon the written direction of the Plan Administrator or Delegatee, make distributions from the Assets of the Trust under the Pension Account directly to (i) the Qualified Trust as employer contributions, (ii) any insurers, third party administrators, service providers or other entities providing services in connection with determining the Employer's Pension Obligation, or (iii) the Employer as reimbursement for the Employer's payment of amounts described in this Section 5.9(b)(i) and (ii). (c) In no event shall the Trustee have any responsibility respecting the application of distributions from the Assets of the Trust, or for determining or inquiring into whether such distributions are in accordance with the Employer's OPEB Plan, Pension Plan, policies, or applicable collective bargaining agreements. ARTICLE VI FIDUCIARY RESPONSIBILITIES 6.1 More Than One Fiduciary Capacity Any one or more of the fiduciaries with respect to the Trust Agreement or the Trust may, to the extent required thereby or as directed by the Plan Administrator pursuant to this Trust Agreement, serve in more than one fiduciary capacity with respect to the Trust Agreement and the Trust. 6.2 Fiduciary Discharge of Duties Except as otherwise provided by applicable law, each fiduciary shall discharge such fiduciary's duties with respect to the Trust Agreement and the Trust: (a) solely in the interest of the Eligible Employees and for the exclusive purpose of funding the Employer's OPEB Obligation or Pension Obligation or both and defraying the reasonable expenses associated with the same; and (b) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. 6.3 Limitations on Fiduciary Responsibility To the extent allowed by the laws of the state of each Employer: No fiduciary shall be liable with respect to a breach of fiduciary duty by any other fiduciary if such breach was committed before such party became a fiduciary or after such party ceased to be a fiduciary. Page 18 of 25 No fiduciary shall be liable for a breach by another fiduciary except as provided by law. No fiduciary shall be liable for carrying out a proper direction from another fiduciary, including refraining from taking an action in the absence of a proper direction from the other fiduciary possessing the authority and responsibility to make such a direction, which direction the fiduciary in good faith believes to be authorized and appropriate. 6,A Indemnification of Trustee by Employer The Trustee shall not be liable for, and Employer shall (to the extent allowed by the laws of the state of each Employer) indemnify, defend (as set out in Section 6.8 of this Trust Agreement), and hold the Trustee (including its officers, agents, employees and attorneys) and other Employers harmless from and against any claims, demands, loss, costs, expense or liability imposed on the indemnified party, including reasonable attorneys' fees and costs incurred by the indemnified party, arising as a result of Employer's active or passive negligent act or omission or willful misconduct in the execution or performance of its duties under this Trust Agreement. 6.5 Indemnification of Employer by Trustee The Employer shall not be liable for, and Trustee shall (to the extent allowed by the laws of the state of each Employer) indemnify, defend (as set out in Section 6.8 of this Trust Agreement), and hold the Employer (including its officers, agents, employees and attorneys) and other Employers harmless from and against any claims, demands, loss, costs, expense or liability imposed on the indemnified party, including reasonable attorneys' fees and costs incurred by the indemnified party, arising as a result of Trustee's active or passive negligent act or omission or willful misconduct in the execution or performance of its duties under this Trust Agreement. 6.6 Indemnification of Trustee by Trust Administrator The Trustee shall not be liable for, and Trust Administrator shall (to the extent allowed by the laws of the state of each Employer) indemnify and hold the Trustee (including its officers, agents, employees and attorneys) harmless from and against any claims, demands, loss, costs, expense or liability imposed on the indemnified party, including reasonable attorneys' fees and costs incurred by the indemnified party, arising as a result of Trust Administrator's active or passive negligent act or omission or willful misconduct in the execution or performance of its duties under this Trust Agreement. 6.7 Indemnification of Trust Administrator by Trustee The Trust Administrator shall not be liable for, and Trustee shall (to the extent allowed by the laws of the state of each Employer) indemnify and hold the Trust Page 19 of 25 Administrator (including its officers, agents, employees and attorneys) harmless from and against any claims, demands, loss, costs, expense or liability imposed on the indemnified party, including reasonable attorneys' fees and costs incurred by the indemnified party, arising as a result of Trustee's active or passive negligent act or omission or willful misconduct in the execution or performance of its duties under this Trust Agreement. 6.8 Indemnification Procedures Promptly after receipt by an indemnified party of notice or receipt of a claim or the commencement of any action for which indemnification may be sought, the indemnified party will notify the indemnifying party in writing of the receipt or commencement thereof. When the indemnifying party has agreed to provide a defense as set out above that party shall assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to such indemnitee) and the payment of expenses, insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the indemnifying party. Any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party unless (i) the employment of such counsel has been specifically authorized by the indemnifying party or (ii) the named parties to any such action (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. The indemnifying party shall not be liable to indemnify any person for any settlement of any such action effected without the indemnifying party's consent. The indemnification procedures of this Trust Agreement shall survive the termination of the Trust, any Employer's participation in the Trust and/or this Tnist Agreement. 6.9 No Joint and Several Liability This document is not intended to and does not create any joint powers agreement or any joint and several liability. No Employer shall be responsible for any contributions, costs or distributions of any other Employer. ARTICLE VII AMENDMENT, TERMINATION AND MERGER 7.1 No Contractual Obligation An Employer's participation in the Trust does not create, and is not intended to create, any contractual obligation to Eligible Employees. Therefore, no Employer is contractually obligated to Eligible Employees solely due to its participation in Page20 of 25 the Trust to continue providing benefits under its Pension Plan or OPEB Plan or to make contributions to the Trust. 7.2 Amendment of Trust (a) The Trust Agreement may be amended only by the approval of two-thirds (2/3) or more of the Employers then participating in the Trust. Any such amendment by the Employers shall be set forth in an instrument in writing and shall be delivered to the Trustee, the Trust Administrator and all Plan Administrators not less than one hundred and eighty (180) days before the effective date of such amendment; provided, however, that any party may waive in writing such 180-day requirement with respect to any amendment (and such waiver shall not constitute a waiver with respect to any other amendment); and provided, further, that a waiver in writing of such 180-day requirement by two- thirds (2/3) or more of the Plan Administrators of the Employers participating in the Trust as of the date the amendment is adopted shall constitute a waiver of such 180-day requirement by all of the Employers then participating in the Trust. In addition, the Trust Administrator or the Trustee shall have the right to amend this Trust Agreement from time to time (without the requirement of a vote of Employers) solely for the purpose of keeping the Trust Agreement in compliance with the Code and applicable state Iaw. Any such amendment by the Trust Administrator or the Trustee shall be set forth in an instrument in writing and shall be delivered to the Trustee, the Trust Administrator and all Plan Administrators promptly as each is made. (b) Any amendment of the Trust Agreement may be current, retroactive or prospective, provided, however, that no amendment shall: (1) Cause the Assets of any Agency Account to be used for or diverted to purposes other than for the exclusive purpose of funding the Employer's OPEB Obligation or Pension Obligation or both and defraying the reasonable expenses associated with the same. (2) Permit the Assets of any Agency Account to be used for the benefit of any other Employer. 7.3 Termination of Employer's Obligation to Provide Pension Benefits or OPEB A termination of the Employer's obligation to provide benefits under the Employer's Pension Plan or 013E13 Plan for which the Employer's Agency Account was established shall not, in itself, effect a termination of the Agency Account. Upon a termination of the Employer's obligation to provide benefits under its Pension Plan or OPEB Plan, the Assets of the Employer's Pension Account or OPEB Account, as applicable, will be distributed by the Trustee when directed by the Plan Administrator in accordance with this Section 7.3. From and after the date of such termination and until final distribution of all Assets under the Employer's Agency Account, the Trustee shall continue to have all the powers Page 21 of 25 provided herein as are necessary or expedient for the orderly liquidation and distribution of such Assets, and the Agency Account shall continue until the Assets have been completely distributed. Any Assets remaining in the Pension Account or OPEB Account will be used first to satisfy any remaining Pension Obligation or OPEB Obligation, respectively, pursuant to the Employer's Pension Plan or OPEB Plan (to the extent that such distribution constitutes the exercise of an "essential governmental function" within the meaning of Section 115 of the Code) and to satisfy any of such Employer's obligations under this Trust Agreement. Any Assets remaining in the Employer's Pension Account or OPEB Account (as applicable) after giving effect to the preceding sentence will be paid to the Employer to the extent permitted by law and consistent with the requirements of Section 115 of the Code. 7.4 Fund Recovery Based on Mistake of Fact Except as hereinafter provided or in accordance with Section 7.3, the Assets of the Trust shall never inure to the benefit of the Employer. The Assets shall be held for the exclusive purpose of funding the Employer's OPEB Obligation or Pension Obligation or both and defraying the reasonable expenses associated with the same. However, in the case of a contribution which is made by an Employer because of a mistake of fact, that portion of the contribution relating to the mistake of fact (exclusive of any earnings or losses attributable thereto) may be returned to the Employer, provided such return occurs within two (2) years after discovery by the Employer of the mistake. If any repayment is payable to the Employer, then, as a condition to such repayment, and only if requested by Trustee, the Employer shall execute, acknowledge and deliver to the Trustee its written undertaking, in a form satisfactory to the Trustee, to indemnify, defend and hold the Trustee harmless from all claims, actions, demands or liabilities arising in connection with such repayment. 7.5 Termination of Trust (a) The Trust and this Trust Agreement may be terminated by the unanimous agreement of all Employers, which action roust be in writing and delivered to the Trustee and Trust Administrator. Upon termination of the Trust under this Section 7.5(a), the Assets of each Employer's Pension Account or OPEB Account, as applicable, will be distributed by the Trustee when directed by the Plan Administrator in accordance with this Section 7.5(a). From and after the date of such termination and until final distribution of all Assets under each Employer's Agency Account, the Trustee shall continue to have all the powers provided herein as are necessary or expedient for the orderly liquidation and distribution of such Assets, and the Agency Account shall continue until the Assets have been completely distributed. Any Assets remaining in the Pension Account or OPEB Account will be used first to satisfy any remaining Pension Obligation or OPEB Obligation, respectively, pursuant to the Employer's Pension Plan and OPEB Plan (to the extent that such distribution constitutes the exercise of an "essential governmental function" within the meaning of Section 115 of the Code) and to Page 22 of 25 satisfy any of such Employer's obligations under this Trust Agreement. Any Assets remaining in the Employer's Pension Account or OPEB Account (as applicable) after giving effect to the preceding sentence will be paid to the Employer to the extent permitted by law and consistent with the requirements of Section 115 of the Code. (b) Contributions to the Trust are conditioned on initial qualification of the Trust under Section 115 of the Code. If the Trust receives an adverse determination with respect to its initial qualification, then the Trust and this Trust Agreement will automatically terminate without any action by any Employer or other parties. After such termination, the Assets of each Employer's Pension Account or OPEB Account, as applicable, will be returned by the Trustee to the Employer as directed by the Plan Administrator in accordance with this Section 7.5(b) to the extent permitted by law and consistent with the requirements of Section 115 of the Code. This Section 7.5(b) will cease to apply upon the Trust's receipt of a favorable determination with respect to its initial qualification. (c) The Trust and this Trust Agreement may be terminated only as described in this Section 7.5. In no case will the assets of the Trust be distributed on termination to an entity that is not a state, a political subdivision of a state or an entity the income of which is excluded from gross income under Section 115 of the Code. ARTICLE VIII MISCELLANEOUS PROVISIONS 8.1. Nonalienation Eligible Employees do not have an interest in the Trust. Accordingly, the Trust shall not in any way be liable to attachment, garnishment, assignment or other process, or be seized, taken, appropriated or applied by any legal or equitable process, to pay any debt or liability of an Eligible Employee or any other party. Trust Assets shall not be subject to the claims of any Employer or the claims of its creditors. 8.2 Saving Clause In the event any provision of this Trust Agreement is held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of the Trust Agreement, but this instrument shall be construed and enforced as if said provision had never been included. 8-3 Applicable Law This Trust Agreement and the Trust shall be construed, administered and governed under the Code and the law of the State of California. To the extent any Page 23 of 25 of the provisions of this Trust Agreement are inconsistent with the Code or applicable state law, the provisions of the Code or state law shall control. In the event, however, that any provision is susceptible to more than one interpretation, such interpretation shall be given thereto as is consistent with the Trust Agreement being a tax-exempt trust within the meaning of the Code. 8.4 Joinder of Parties In any action or other judicial proceedings affecting this Trust Agreement, it shall be necessary to join as parties only the Trustee, the Plan Administrator or Delegatee. No participant or other persons having an interest in the Trust or any Agency Account shall be entitled to any notice or service of process unless otherwise required by law. Any judgment entered in such a proceeding or action shall be binding on all persons claiming under this Trust Agreement; provided, however, that nothing in this Trust Agreement shall be construed as to deprive a participant of such participant's right to seek adjudication of such participant's rights under applicable law. 8.5 Employment of Counsel The Trustee may consult with legal counsel (who may be counsel for the Trustee, the Trust Administrator or any Employer) with respect to the interpretation of this Agreement or the Trustee's duties hereunder or with respect to any legal proceedings or any questions of law and shall be entitled to take action or not to take action in good faith reliance on the advice of such counsel and charge the Trust and, as applicable, one or more Agency Accounts. 8.6 Gender and Number Words used in the masculine, feminine or neuter gender shall each be deemed to refer to the other whenever the context so requires; and words used in the singular or plural number shall each be deemed to refer to the other whenever the context so requires. 8.7 Headings Headings used in this Trust Agreement are inserted for convenience of reference only and any conflict between such headings and the text shall be resolved in favor of the text. 8.8 Counterparts This Trust Agreement may be executed in an original and any number of counterparts by the Plan Administrator (executing an Adoption Agreement), the Trust Administrator and the Trustee, each of which shall be deemed to be an original of the one and the same instrument. Page 24 of 25 IN WITNESS WHEREOF, the Plan Administrator (by executing the Adoption Agreement), the Trustee and the Trust Administrator have executed this Trust Agreement by their duly authorized agents on the Effective Date. U.S. BANK NATIONAL ASSOCIATION "Trustee" Y}� By: �I Si re Susan M. Hughes Typed or printed name Its: Vice President & Relationship Manager PUBLIC AGENCY RETIREMENT SERVICES "Trust Administrator" By: Signatur Daniel Johnson Typed or printed name Its: President Page 25 of 25 ADOPTION AGREEMENT for the POST -EMPLOYMENT SECTION 115 TRUST A.1.1. Trust agreement with U.S. Bank National Association (the -Bank") (the `Trust Agreement"): Post-Emplovment Section 115 Trust. Public Agencies Post -Employment Benefits —Trust Agreement, effective November 5, 2014 A.1.2. OPEB Plan: Public Agencies Post -Employment Health Care Plan A.1.3. Pension Plan: A.1.4. Pension Plan's effective date: A.2.1. Employer: Name: U.S. mail address: Phone number: EIN: Fiscal year end: A.2.2. Plan Administrator: Position at Employer: Incumbent: U.S. mail address: Phone number: Email address: The plan document for the OPEB Plan is the Public Agencies Post - Employment Health Care Plan —Master Plan Document, effective as of November 5, 2014 (the ''Plan Document"). D (Check if applicable) Additional Pension Plans (and their respective effective dates) are listed on an exhibit attached hereto. Page 1 of 4 EXIHBTT "A" TO PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST AGREEMENT A.3.1 Adoption. The Employer hereby: A.3.1.1.Adopts the Trust Agreement as part of the (Check one or both of the following boxes.): ❑ OPEB Plan ❑ Pension Plan (each such plan separately. the "Plan") and agrees to be bound by the Trust Agreement's terms, effective as of the Employer's signature date below and subject to the investment approach selected below. A.3.1.2.T he following provisions apply if and only if the OPEB Plan box above is checked: (i) Adopts the Plan Document and agrees to be bound by the Plan Document's terms, effective as of the Employer's signature date below and (ii) acknowledges that the determination of Eligible Employees and Eligible Beneficiaries is finally and conclusively made by the Employer according to the Employer's applicable policies and collective bargaining agreements and without reference to the Trust Agreement. A.3.1.3.Ratifies, affirms, and approves Employer's appointment of Phase II Systems as Trust Administrator and represents and warrants that attached hereto is a fully -executed original of Employer's Agreement for Administrative Services with Phase II Systems, d/b/a Public Agency Retirement Services (PARS). A.3.1.4.Agrees that capitalized terms used herein but not defined herein shall have the same meaning attributed to them as in the Trust Agreement or Plan Document, as the case may he. A.4.1. The Employer hereby represents and warrants that: A.4.1.1. Authorizing Law. Employer has reviewed with its legal counsel and has determined that Employer is authorized to establish and maintain the Plan and to establish a financial - institution trust (separate and apart from the state) for the Plan, including the authority to adopt the Trust Agreement. A.4.1.2. Authorizing Resolution. Attached hereto is a certified copy of a resolution of the Employer's governing body authorizing the adoption of the Trust Agreement as part of the Plan and authorizing the appointment of the Plan Administrator designated by position of employment at the Employer to act on the Employer's behalf in all matters relating to the trust; A.4.1.3. Tax Status. The Plan is a "governmental plan" as defined in Section 414(d) of the Internal Revenue Code of 1986, as amended; is a "Section 401(a)(24) governmental plan" as defined in Revenue Ruling 2011-1; and is not subject to Federal income taxation. The Plan's governing document expressly provides that it is irrevocably impossible for any part of the corpus or income of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of the Plan participants and their beneficiaries. The Pension Plan is a qualified plan under Code Section 401(a). (In addition, the Employer hereby acknowledges that the Plan is prohibited from assigning any part of its equity or interest in the trust.) Page 2 of 4 EXHIBIT "A" TO PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST AGREEMENT A.4.2. Investment Approach. 4.2.1. The following provisions apply if and only if the OPEB Plan box above is checked: OPEB Account. OPEB Account assets are invested in the discretion of (check one and only one of the following boxes): Discretionary investment approach: ❑ The Bank, subject to Exhibit A (Investment Strategy Selection and Disclosure Form) hereto. Directed investment approach: ❑ The Plan Administrator. o The following registered investment adviser, bank (other than the Bank), or insurance company (a '`Third -Party Manager"): . The Employer hereby represents and warrants that attached hereto is an executed copy of the agreement with the above appointed Third Party Manager. 4.2.2. The following provisions apply if and only if the Pension Plan box above is checked: Pension Account. Pension Account assets are invested in the discretion of (check one and only one of the following boxes): Discretionary investment approach: ❑ The Bank, subject to Exhibit A (Investment Strategy Selection and Disclosure Form) hereto. Directed investment approach: o The Plan Administrator, ❑ The following registered investment adviser, bank (other than the Bank), or insurance company (a "Third -Party Manager"): . The Employer hereby represents and warrants that attached hereto is an executed copy of the agreement with the above appointed Third Party Manager. [signature page follows] Page 3 of 4 EXHIBIT "A" TO PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST AGREEMENT EMPLOYER By: Its: Date: Accepted by: PHASE II SYSTEMS, DBA PUBLIC AGENCY RETIREMENT SERVICES (PARS) By: Its: President Date: U.S. BANK NATIONAL ASSOCIATION By: Its: Vice President and Relationship Manager Date: Page 4 of 4 EXHIBIT 'A" TO PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST AGREEMENT AGREEMENT FOR ADMINISTRATIVE SERVICES This agreement ("Agreement") is made this _ day of , 2017, between Phase I1 Systems. a corporation organized and existing under the laws of the State of California. doing business as Public Agency Retirement Services and PARS (hereinafter .:PARS'") and the [Agency Name] ("'Agency") WHEREAS, the Agency has adopted the PARS Public Agencies Post -Employment Benefits Trust for the purpose of pre -funding pension obligations and/or OPEB obligations ("Plan"), and is desirous of retaining PARS as Trust Administrator to the Trust, to provide administrative services. NOW THEREFORE. the parties agree: 1. Services. PARS will provide the services pertaining to the Plan as described in the exhibit attached hereto as "Exhibit IA- (-Services-) in a timely manner, subject to the further provisions of this Agreement. 2. Fees for Services. PARS will be compensated for performance of the Services as described in the exhibit attached hereto as "Exhibit 1B". 3. Payment Terms. Payment for the Services will be remitted directly from Plan assets unless the Agency chooses to make payment directly to PARS. In the event that the Agency chooses to make payment directly to PARS, it shall be the responsibility of the Agency to remit payment directly to PARS based upon an invoice prepared by PARS and delivered to the Agency. If payment is not received by PARS within thirty (30) days of the invoice delivery date, the balance due shall bear interest at the rate of 1.5% per month. If payment is not received from the Agency within sixty (60) days of the invoice delivery date, payment plus accrued interest will be remitted directly from Plan assets, unless PARS has previously received written communication disputing the subject invoice that is signed by a duly authorized representative of the Agency. 4. Fees for Services Beyond Scope. Fees for services beyond those specified in this Agreement will be billed to the Agency at the rates indicated in the PARS' standard fee schedule in effect at the time the services are provided and shall be payable as described in Section 3 of this Agreement. Before any such services are performed, PARS will provide the Agency with a detailed description of the services, terms, and applicable rates for such services. Such services, terms, and applicable rates shall be agreed upon in writing and executed by both parties. 5. Information Furnished to PARS. PARS will provide the Services contingent upon the Agency's providing PARS the information specified in the exhibit attached hereto as "Exhibit 1C" ("Data'"). It shall be the responsibility of the Agency to certify the accuracy, content and completeness of the Data so that PARS may rely on such information without further audit. It shall further be the responsibility of the Agency to deliver the Data to PARS in such a manner that allows for a reasonable amount of time for the Services to be performed. Unless specified in Exhibit IA. PARS shall be under no duty to question Data received from the Agency, to compute contributions made to the Page 1 Plan, to determine or inquire whether contributions are adequate to meet and discharge liabilities under the Plan, or to determine or inquire whether contributions made to the Plan are in compliance with the Plan or applicable law. In addition, PARS shall not be liable for non performance of Services to the extent such non performance is caused by or results from erroneous and/or late delivery of Data from the Agency, In the event that the Agency fails to provide Data in a complete, accurate and timely manner and pursuant to the specifications in Exhibit 1 C, PARS reserves the right, notwithstanding the further provisions of this Agreement. to terminate this Agreement upon no less than ninety (90) days written notice to the Agency. 6. Records. Throughout the duration of this Agreement, and for a period of five (5) years after termination of this Agreement, PARS shall provide duly authorized representatives of Agency access to all records and material relating to calculation of PARS' fees under this Agreement. Such access shall include the right to inspect, audit and reproduce such records and material and to verify reports furnished in compliance with the provisions of this Agreement. All information so obtained shall be accorded confidential treatment as provided under applicable law. 7. Confidentiality. Without the Agency's consent, PARS shall not disclose any information relating to the Plan except to duly authorized officials of the Agency, subject to applicable law, and to parties retained by PARS to perform specific services within this Agreement. The Agency shall not disclose any information relating to the Plan to individuals not employed by the Agency without the prior written consent of PARS, except as such disclosures may be required by applicable law. 8. Independent Contractor. PARS is and at all times hereunder shall be an independent contractor. As such, neither the Agency nor any of its officers. employees or agents shall have the power to control the conduct of PARS, its officers, employees or agents, except as specifically set forth and provided for herein. PARS shall pay all wages, salaries and other amounts due its employees in connection with this Agreement and shall be responsible for all reports and obligations respecting them. such as social security, income tax withholding, unemployment compensation, workers' compensation and similar matters. 9. Indemnification. PARS and Agency hereby indemnify each other and hold the other harmless, including their respective officers, directors, employees, agents and attorneys, from any claim. loss, demand, liability, or expense, including reasonable attorneys' fees and costs, incurred by the other as a consequence of, to the extent, PARS' or Agency's, as the case may be, negligent acts, errors or omissions with respect to the performance of their respective duties hereunder. 10. Compliance with Applicable Law. The Agency shall observe and comply with federal, state and local laws in effect when this Agreement is executed, or which may come into effect during the term of this Agreement, regarding the administration of the Plan. PARS shall observe and comply with federal, state and local laws in effect when this Agreement is executed, or which may come into effect during the term of this Agreement, regarding Plan administrative services provided under this Agreement. Page 2 11. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. In the event any party institutes legal proceedings to enforce or interpret this Agreement, venue and jurisdiction shall be in any state court of competent jurisdiction. 12. Force Majeure. When a party's nonperformance hereunder was beyond the control and not due to the fault of the party not performing, a party shall be excused from performing its obligations under this Agreement during the time and to the extent that it is prevented from performing by such cause, including but not limited to: any incidence of fire, flood, acts of God, acts of terrorism or war, commandeering of material. products, plants or facilities by the federal, state or local government, or a material act or omission by the other party. 13. Ownership of Reports and Documents. The originals of all letters, documents, reports, and data produced for the purposes of this Agreement shall be delivered to, and become the property of the Agency. Copies may be made for PARS but shall not be furnished to others without written authorization from Agency. 14. Designees. The Plan Administrator of the Agency. or their designee, shall have the authority to act for and exercise any of the rights of the Agency as set forth in this Agreement, subsequent to and in accordance with the written authority granted by the Governing Body of the Agency, a copy of which writing shall be delivered to PARS. Any officer of PARS, or his or her designees, shall have the authority to act for and exercise any of the rights of PARS as set forth in this Agreement. 15. Notices. All notices hereunder and communications regarding the interpretation of the terms of this Agreement, or changes thereto, shall be effected by delivery of the notices in person or by depositing the notices in the U.S. mail, registered or certified mail, return receipt requested, postage prepaid and addressed as follows: (A) To PARS: PARS; 4350 Von Karman Avenue. Suite 100, Newport Beach, CA 92660; Attention: President (B) To Agency: [Agency]; [Address]; [City, State, Zip]; Attention: [Plan Administrator] Notices shall be deemed given on the date received by the addressee. 16. Term of Agreement. This Agreement shall remain in effect for the period beginning , 2017 and ending , 2020 ("Term"). This Agreement may be terminated at any time by giving thirty (30) days written notice to the other party of the intent to terminate. Absent a thirty (30) day written notice to the other party of the intent to terminate. this Agreement will continue unchanged for successive twelve month periods following the Term. 17. Amendment. This Agreement may not be amended orally, but only by a written instrument executed by the parties hereto. 18. Entire Agreement. This Agreement. including exhibits, contains the entire understanding of the parties with respect to the subject matter set forth in this Agreement_ In the event a conflict arises between the parties with respect to any term, condition or Page 3 provision of this Agreement, the remaining terms. conditions and provisions shall remain in full force and legal effect. No waiver of any term or condition of this Agreement by any party shall be construed by the other as a continuing waiver of such term or condition. 19. Attorneys Fees. In the event any action is taken by a party hereto to enforce the terrns of this Agreement the prevailing party herein shall be entitled to receive its reasonable attorney's fees. 20. Counterparts. This Agreement may be executed in any number of counterparts, and in that event. each counterpart shall be deemed a complete original and be enforceable without reference to any other counterpart. 21. Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. 22. Effective Date. This Agreement shall be effective on the date first above written, and also shall be the date the Agreement is executed. AGENCY: BY: TITLE: DATE: PARS: BY: TITLE: DATE: Page 4 EXHIBIT 1 A SERVICES PARS will provide the following services for the [Agency Name] Public Agencies Post - Employment Benefits Trust: 1. Plan Installation Services: (A) Meeting with appropriate Agency personnel to discuss plan provisions, implementation timelines, actuarial valuation process, funding strategies, benefit communication strategies, data reporting, and submission requirements for contributions/reimbursements/distributions; (B) Providing the necessary analysis and advisory services to finalize these elements of the Plan: (C) Providing the documentation needed to establish the Plan to be reviewed and approved by Agency legal counsel. Resulting final Plan documentation must be approved by the Agency prior to the commencement of PARS Plan Administration Services outlined in Exhibit 1A, paragraph 2 below. 2. Plan Administration Services: (A) Monitoring the receipt of Plan contributions made by the Agency to the trustee of the PARS Public Agencies Post -Employment Benefits Trust (''Trustee'). based upon information received from the Agency and the Trustee: (B) Performing periodic accounting of Plan assets, reimbursements/distributions, and investment activity, based upon information received from the Agency and/or Trustee; (C) Coordinating the processing of distribution payments pursuant to authorized direction by the Agency, and the provisions of the Plan, and, to the extent possible, based upon Agency -provided Data; (D) Coordinating actions with the Trustee as directed by the Plan Administrator within the scope this Agreement; (E) Preparing and submitting a monthly report of Plan activity to the Agency, unless directed by the Agency otherwise; (F) Preparing and submitting an annual report of Plan activity to the Agency; (G) FaciIitating actuarial valuation updates and funding modifications for compliance with GASB 45/75, if prefunding OPEB obligations; (H) Coordinating periodic audits of the Trust; (I) Monitoring Plan and Trust compliance with federal and state Iaws. 3. PARS is not licensed to provide and does not offer tax, accounting, legal, investment or actuarial advice. Page 5 EXHIBIT 1 B FEES FOR SERVICES PARS will be compensated for performance of Services, as described in Exhibit IA based upon the following schedule: An annual asset fee shall be paid from Plan Assets based on the following schedule: For Plan Assets from: Annual Rate: $0 to $10,000,000 0.25% $10,000,001 to $15,000,000 0.20% $15,000,001 to $50,000,000 0.15% $50,000,001 and above 0.10% Annual rates are prorated and paid monthly. The annual asset fee shall be calculated by the following formula [Annual Rate divided by 12 (months of the year) multiplied by the Plan asset balance at the end of the month]. Trustee and Investment Management Fees are not included. Page 6 (E) EXHIBIT IC DATA REQUIREMENTS PARS will provide the Services under this Agreement contingent upon receiving the following information: Executed Legal Documents: (A) Certified Resolution (B) Adoption Agreement to the Public Agencies Post -Employment Benefits Trust (C) Trustee Investment Forms 2. Contribution — completed Contribution Transmittal Form signed by the Plan Administrator (or authorized Designee) which contains the following information: (A) Agency name (B) Contribution amount (C) Contribution date (D) Contribution method (Check, ACH, Wire) 3. Distribution — completed Payment Reimbursement/Distribution Form signed by the Plan Administrator (or authorized Designee) which contains the following information: (A) Agency name (B) Payment reimbursement/distribution amount (C) Applicable statement date (D) Copy of applicable premium, claim, statement, warrant, and/or administrative expense evidencing payment Signed certification of reimbursement/distribution from the Plan Administrator (or authorized Designee) 4. Other information pertinent to the Services as reasonably requested by PARS and Actuarial Provider. Page 7 '' '1 '") RESOLUTION NO. RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS APPROVING THE ADOPTION OF THE PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS) WHEREAS PARS has made available the PARS Public Agencies Post -Employment Benefits Trust (the "Program") for the purpose of pre -funding pension obligations and/or OPEB obligations; and WHEREAS the Town of Los Gatos ("Town") is eligible to participate in the Program, a tax-exempt trust performing an essential governmental function within the meaning of Section 115 of the Internal Revenue Code, as amended, and the Regulations issued there under, and is a tax-exempt trust under the relevant statutory provisions of the State of California; and WHEREAS the Town's adoption and operation of the Program has no effect on any current or former employee's entitlement to post -employment benefits; and WHEREAS the terms and conditions of post -employment benefit entitlement, if any, are governed by contracts separate from and independent of the Program; and WHEREAS the Town's funding of the Program does not, and is not intended to, create any new vested right to any benefit nor strengthen any existing vested right; and WHEREAS the Town reserves the right to make contributions, if any, to the Program. NOW THEREFORE, BE IT RESOLVED THAT: 1. The Town Council hereby adopts the PARS Public Agencies Post -Employment Benefits Trust, effective , 2017; and 2. The Town Council hereby appoints the (POSITION OR TITLE) , or his/her successor or his/her designee as the Town's Plan Administrator for the Program; and The Town's Plan Administrator is hereby authorized to execute the PARS legal and administrative documents on behalf of the Town and to take whatever additional actions are necessary to maintain the Town's participation in the Program and to maintain compliance of any relevant regulation issued or as may be issued; therefore, authorizing him/her to take whatever additional actions are required to administer the Town's Program.. AYES: NOES: ABSENT: ABSTAIN: STATE OF CALIFORNIA COUNTY OF SANTA CLARA , the Clerk of the Town of Los Gatos, State of California, hereby certifies that the above foregoing resolution was duly and regularly adopted by said Town at a regular meeting thereof held on the , and passed by a vote of said Council. IN WITNESS WHEREOF I have hereunto set my hand and seal this Town Clerk , 2017. '") °Th 3. Investment Strategy Selection and Disclosure Form PARS Pension / OPEB Trust Program • This document is entered into by client and U S Bank National Association ("U.S. Bank"). as trustee. • Employer: ■ 0 0 LL 0 O. fl UJ LL N cc W 0 Plan/Trust Name: Public Agencies Post -Employment Benefits Trust To: HighMark Capital Management. Inc. and U.S. Bank: U.S. Bank has been or is hereby appointed Investment Manager of the above -referenced Plan/Trust Please invest the assets of the above -referenced Plan/Trust for which you have been appointed Investment Manager in the (select one of the strategies listed below for each Plan funded by the Trust) OPEB Account ❑ Pension Account Primary Goal Strategic Range in Liquidity Management 'US Treasu I q g ry Liquidity Management (US Treasury)and q g Provide current income with liquidity stability of principal through investments in short-term U.S Treasury obligations. MoneyMarket Fund ❑ Liquidity Management ,Prime Obligation) ❑ Liquidity Management (Prime Obligation) Generate current income with liquidity. Money Market Fund ❑ ❑ Conservative HighMark PLUS Conservative Index PLUS ❑ ■ Conservative HighMark PLUS Conservative Index PLUS Provide a consistent level of inflation- protected income over the long-term. Equity 5.20% Fixed Income: 00 95% Cash: 0-20% ❑ ❑ Moderately Conservative HighMark PLUS Moderately Conservative Index PLUS ❑ ❑ Moderately Conservative HighMark PLUS Moderately Conservative Index PLUS Provide current income with capital appreciation as a secondary objective. Equity 20-40% Fixed Income.50 20% Cash: 0-0% ❑ ❑ Moderate HighMark PLUS ❑ Moderate tndex PLUS ❑ Moderate HigtiMark PLUS Moderate Index PLUS Provide alnent income and moderate capital appreciation Equity 40-60% Fixed Income: 40 60% Gash: 0-20% (� !J Balanced HighMark PLUS Balanced Index PLUS ❑ Balanced HighMark PLUS Balanced Index PLUS Provide growth of principal and income. Equity: 50-70% Fixed Income: 30-50% Cash: 0-20% ❑ ❑ Appreciation HighMark PLUS Capital Appreciation Index PLUS ❑❑ Capital Appreciation HighMark PLUS Capital Appreciation Index PLUS Primary goal is growth of principal. Equity 65-85%Capital Fixed Income. 10-30% Cash: 0-20% Custom ❑ Custom Specify: Note. HighMark PLUS portfolios are diversified portfolios of actively managed mutual funds. Index PLUS portfolios are diversfied portfolios of Index -based mutual funds or exchange -traded funds Acknowledged and Approved Signature of Authorized Signer Print Name of Authorized Signer Title Date PENSION OPES HM MANAGED ISSOF 203 09222016 Exhibit A to the Adoption Agreement embank /Discretionary Trustee Fee Schedule PARS Pension / OPEB Trust Program This document is entered into by client and U.S. Bank National Association ("U.S. Bank"). as trustee. Discretionary Trustee Fees Discretionary Trustee Fees are based on the Investment Strategy you select. Following is a list of the Discretionary Trustee Fees applicable to each Investment Strategy: • Liquidity — First American U.S. Treasury Money Market — Fund level fees only (see prospectus) • Liquidity — First American Prime Obligation Fund Class Z — Fund level fees only (see prospectus) • Diversified Portfolios (Conservative, Moderately Conservative, Moderate, Balanced, Capital Appreciation) Per Annum Charges* _35% on the first .25% on the next .20% on the next .15% on the next .10% on all over $5,000,000 $5,000,000 $5,000 000 $35, 000, 000 $50,000,000 "'Waived for plan assets invested in First American and NationwidelHighMark funds where HighMark Capital Management is the sub -adviser of the fund. Other Fees First American Mutual Funds (see prospectus) Payment of Fees • Market values used for fee calculations on fee invoices may differ slightly from market values on client statements due to posting of accruals, late pricing of securities and/or other timing issues. • Fees are calculated and charged to the account monthly. If account cannot be charged after 30 days, fees not paid will be subject to a late charge of 1% per month on the unpaid balance. • Changes to this Fee Schedule may be made at any time by U S. Bank upon a sixty (60) days notice, Acknowledged and Approved Public Agencies Post -Employment Benefits Trust Name of PlanlTrust Name of Authorized Signer for Employer Name of Employer Title Signature of Authorized Signer for Employer Date U.S Bank and its representatives do not provide tax or legal advice. Each client's tax and financial situation is unique Clients should consult their tax and/or legal advisor for advice and information concerning their particular situation. PENSfON OPEB HM MANAGED FEESCH 103 07.25.2016 mbank Notices . Disclosures . Acknowledgment U.S. Bank Important Information • To help the government fignt the funding of terrorism and money laundering activities. federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account, What this means for you: When you open an account, we will ask for your name. address, tax identification number. and other information that will allow us to identify you. We may also ask for identifying documents. • Trustee may from time to time hold uninvested cash awaiting disbursement without paying interest thereon, and as a result may receive indirect compensation on such funds, First American Funds Related Disclosures • For a prospectus containing more complete information on First American Funds, including investment policies, risks. fees, and expenses. please contact your investment professional, call First American Funds Investor Services at (800) 677-FUND (3863), or visit firstamericanfunds.com. Please read the prospectus carefully before you invest or send money. • U.S. Bank and other U.S. Bancorp affiliates receive compensation for services rendered to the First American Funds as disclosed in the funds' prospectuses U.S. Bancorp Asset Management, Inc., a registered investment advisor and subsidiary of U.S. Bank, services as the investment advisor to the First American Funds. The First American Funds are distributed by Quasar Distributors. LLC a U S Bancorp affiliate. First American Funds Acknowledgment Employer: Plan!Trust Name: • The undersigned (the "Customer") hereby acknowledges that: 1. The Customer is independent of U.S. Bank National Association ("USBNA"). U.S Bancorp Asset Management. Inc. ("USBAM`), U.S Bancorp Fund Services, LLC (-USBFS`), Quasar Distributors. LLC (`Quasar"), and ail other affiliates of U.S. Bancorp (collectively, 'U.S. Bank") and has authority to approve the fee schedule provided for the account named above (the "Account). 2. The Customer has read and understands the adoption agreement and trust agreement with USBNA with respect to the Account including the Discretionary Trustee Fee Schedule (the 'Account -level Fees"). Within the adoption agreement, the Customer elected a discretionary investment approach for Account assets The customer approves the Account —level Fees. 3. USBAM is the investment advisor to the open-end investment companies registered under the Investment Company Act of 1940 (the "'40 Act") in the First American Funds. Inc family (each, a "Fund"). U.S. Bank may enter into agreements with Funds or with Funds' service providers (including investment advisers, administrators, transfer agents, or distributors) whereby U.S Bank provides services to the Funds, including, as applicable, services provided by USBAM (investment advisory. shareholder services), by USBNA (custody, securities -lending), by USBFS (accounting. administrator. transfer agency), and by Quasar (distribution, principal underwriting) and receives fees for these services. The fees are received from the Fund, are based on investment in a Fund, may vary by Fund and by class of shares issued by the Fund. are charged against the Fund's assets, and reduce the Fund's average daily balance and investment yields (collectively, the -Fund-level Fees"). 4 The Customer has received, read, and understands the prospectus for each Fund, including the sections thereof regarding fees, expenses, and compensation. The customer approves the Fund -level Fees. 5. From time to time, a Fund's service provider may voluntarily waive a portion of the fee it is entitled to receive for serving the Fund. If a waiver is in effect, then the Customer's approval of Fund -level Fees includes approval up to the Fund's total annual operating expenses before waivers; if the service provider terminates the waiver as provided in the Fund's prospectus, then the approval persists. 6. USBNA will not vote proxies with respect to Fund shares held in the Account but will instead forward such proxies to the Plan Administrator (as defined in the aforementioned trust agreement). 7 Shares of registered investment companies are not deposits or obligations of, or guaranteed by, any bank. including any bank affiliated with U.S. Bancorp. Nor does the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other governmental agency insure such products. An investment in such products involves investment risks, including the possible loss of principal, due to fluctuations in each product's net asset value. Customer Acknowledgment Print Name of Authorized Signer for Employer Signature of Authorized Signer for Employer Date NOTICES - ❑ ISCLOSURES FRM 501 03.222016 jibank. HIGHMARK CAN - AL MANAGEMENT Mutual Fund Disclosure Statement for U S. Bank Account Sub -Advised by HighMark Capital Management. Inc. Effective September 16, 2013 HighMark Capital Management, Inc. CHCM") has a sub -advisory relationship with U S Bank National Association ("US BANK') with respect to various trust accounts (Client Accounts). Under the sub -advisory relationship, HighMark has the authority to invest Client Accounts in a variety of mutual funds, Among the funds currently available are the mutual funds that are sub -advised by HCM. an SEC registered investment adviser and wholly owned investment management subsidiary of Union Bank, N A,. ("UNION BANK"). Fees for the services described below are paid by mutual funds to HCM for sub -advising certain of their funds. Additionally, US BANK charges your Account fees. either separately or bundled, for the services provided to you which may include investment management. custody, and other services `Account" means the client trust managed by US BANK and sub -advised by HCM ("Sub -Advised Accounts"). To avoid management fee duplication for Sub -Advised Accounts. HCM and US BANK will reduce or waive the account level investment management fee with respect to any shares in any mutual funds sub -advised by HCM held in the Sub -Advised Accounts. You can contact your Account officer for an additional copy of your Account Fee Schedule HCM may receive certain indirect benefits from having your Sub -Advised Account(s) invested in mutual funds sub -advised by HCM because sub -advisory fees paid to HCM are based on the size of the sub -advised funds. You have or will separately receive by mail or through electronic delivery prospectuses that contain information on the investment objectives. operation and fees for all mutual funds sub -advised by HCM that are available to Accounts of the type you have Read the prospectuses carefully. Please review the prospectuses for mutual funds carefully to identify risks, investment objectives, any investment limitations and restrictions. and costs and expenses of investing in any mutual fund you purchase. including fees paid to service providers. Investments in mutual funds are not insured by the FDIC or any other government agency, involve risk, including the possible loss of principal. HCM is a sub -adviser to certain Nationwide HighMark Funds (see below the `Sub -Advised Funds for fees received from Nationwide Funds) under sub -advisory agreements with Nationwide Mutual Funds. Nationwide Variable Insurance Trust and Nationwide Fund Advisers HCM also has a sub -advisory agreement with American Independence Financial Services, LLC to sub -advise the American Independence Strategic Income Fund (see below the -Sub-Advised Funds' for fees received from American Independence). HCM may. from time to time, enter into sub -advisory agreements with other mutual fund companies to sub -advise their funds. HCM's fees for such services will vary. FEES FOR SERVICES The services performed for mutual funds sub -advised by HCM and the maximum fees which may be paid for such services are set forth below. Investment Adviser Services (Sub -Advised Funds): The table below shows the fees received by HCM as sub -adviser to Nationwide Mutual Funds, Nationwide Venable Insurance Trust, Nationwide Fund Advisers. and American Independence Financial Services, LLC Sub -Advised Funds Fee Received lAnnual Rate) Fiduciary Class Nationwide HighMark Bond Fund 0.15% on Subadviser Assetst up to 5250 million: 0.125% on Subadviser Assetst of S250 million and more but less than S1 billion; 0.10% on Subadviser Assetst of $t billion and more Nationwide HighMark California dntermediate Tax -Free Bond Fund Nationwide HighMark National Intermediate Tax -Free Bond Fund 0.25% on all Subadviser Assetst Nationwide HighMark Short Term Bond Fund 0.10% on Aggregate Subadviser Assetstt up to $500 million; 0.0975% on Aggregate Subadviser Assetstt of 5500 million and more but less than $1 billion; 0.D925% on Aggregate Subadviser Assetstt of S1 billion and more Nationwide HighMark Large Cap Growth Fund 0.30% on all Subadviser Assetst Mutual Fund Disclosure Statement Sub -Advised Funds Fee Received (Annual Rate) Fiduciary Class t Nationwide HighMark Value Fund Nationwide HighMark Balanced Fund 0 30% on all Subadviser Assetst Nationwide HighMark Large Cap Core Equity Fund 0 27% on all Subadviser Assetst Nationwide HighMark Small Cap Core Fund 0.475% on all Subadviser Assetst NVIT Enhanced income Fund 0.10%0 on Aggregate Subadviser Assetstt up to S500 million; 0.0975% on Aggregate Subadviser Assetstt of 5500 and more but less than S1 billion; 0.0925% on Aggregate Subadviser Assetstt of S1 billion and more NVIT Nationwide Fund 0.25% on Aggregate Subadviser Assets -Mt up to 5250 million; 0.20% on Aggregate Subadviser Assetsttt of 5250 and more but less than $1 billion, 0.18% on Aggregate Subadviser Assetsttt of 51 billion and more Nationwide Fund 4.25% on Aggregate Subadviser Assetsttt up to 5250 million: 0.20% on Aggregate Subadviser Assetsttt of S250 and more but less than S1 billion; 0.18% on Aggregate Subadviser Assetsttt of S1 billion and more Nationwide Short Duration Bond Fund 0 10% on Aggregate Subadviser Assetstt up to 5500 million: 0.0975% an Aggregate Subadviser Assetstt of 5500 and more but less than 51 billion; 0.0925% on Aggregate Subadviser Asselstt of S1 billion and more Nationwide Enhanced Income Fund 0.10% on Aggregate Subadviser Assetstt up to 5500 million: 0 0975% on Aggregate Subadviser Assetstt of 5500 and more but less than $1 billion: 0-0925% on Aggregate Subadviser Assetstt of S1 billion and more American Independence Strategic Income Fund S 0.20% on Subadviser Assetst less 50% of any fee waivers - ubadwser Assets are khat portion of the assets of a Fund tha the investment adviser to such Fund allocates and puts under the control of HCM as the sub -adviser. ttThe term "Aggregate Subadviser Assets" means the aggregate amount resulting from the combination of Subadviser Assets of the Nationwide Enhanced Income Fund. Nationwide HighMark Short Term Bond Fund and Nationwide Short Duration Bond Fund, together with the Subadviser Assets of the NVIT Enhanced Income Fund, a series of Nationwide Variable Insurance Trust These fees will be paid to HCM for its sub -advisory services. tit The term "Aggregate Subadviser Assets" means the aggregate amount resulting from the combination of Subadviser Assets of the Nationwide Fund together with Subadviser Assets of the NVIT Nationwide Fund. a series of Nationwide Variable Insurance Trust. These Fees will be paid to HCM for its sub -advisory services. Mutual Fund Disclosure Statement Additional Services Provided To Mutual Funds Sub -Advised by HCM: Other Services: HCM reserve the right to direct that certain brokerage transactions be performed through their affiliated' broker. Such transactions would be subject to "best execution" requirements. entered into solely pursuant to the provisions of applicable law and regulation. and only after approval by the Board of Trustees of mutual funds sub -advised by HCM In the event of such transactions. the affiliates would be paid brokerage fees by mutual funds sub -advised by HCM HCM may receive soft dollar compensation from brokers consistent with section 28(e) of the Securities Exchange Act of 1934. Transactions involving Morgan Stanley: HCM's ultimate parent company. Mitsubishi UFJ Financial Group Inc. ('"MUFG") beneficially owns a minority interest of the common stock of Morgan Stanley and is also represented by membership on the Morgan Stanley Board of Directors. Morgan Stanley is the parent company of several registered broker -dealers. among other businesses. If HCM sub -advises your Account. the fact of MUFG's beneficial ownership interest in Morgan Stanley may limit HCM's ability to purchase an interest in a Morgan Stanley sponsored or advised asset or use Morgan Stanley brokerage services for your Sub -Advised Account without your written consent, and in some cases, may wholly prevent such purchases and the use of Morgan Stanley brokerage services However. HCM may invest some of your assets in Separately Managed Accounts. which may be available through an arrangement with unaffiliated third parties and their respective investment advisers who may invest in and/or may recommend mutual funds. ETFs. or other investment products of Morgan Stanley companies or its affiliates, if such securities or products meet applicable investment criteria, and may use Morgan Stanley brokerage services or one of its related persons as the broker -dealer for securities trades in seeking best execution or when they otherwise deem it appropriate. USE OF MUTUAL FUNDS SUB -ADVISED BY HCM Investment in the mutual funds sub -advised by HCM may be beneficial because it gives portability to Account holders whose Accounts provide for in -kind distributions or rollovers. results in diversification of Account assets, thereby potentially lowering overall investment risk: allows Account holders to benefit from professional management of the mutual funds' investments, and allows selection among a family of related funds for quick and inexpensive movement between funds in response to market shifts or changes in investment objectives. If we manage your Account. you can withdraw your consent to use of mutual funds sub -advised by HCM at any time by notifying, in writing. your Account's trust officer. If you direct investments in your Account. you may direct redemptions of investments in any HCM sub -advised mutual fund at any time as is the case with any mutual fund investments you hold in your Account. Applicable fiduciary law and regulation require disclosure of relevant fee information for Sub -Advised Accounts so that the client or an independent fiduciary acting on the client's behalf may monitor the reasonableness of the total fees being received by HCM for its services to the Sub -Advised Account. Please sign below indicating you have read this Disclosure and consent to the use of the above - referenced funds and to HCM's receipt of the above fees. I hereby acknowledge receipt of the prospectuses of the mutual funds. I also approve the receipt of fees by HCM in accordance with the information set forth in the Disclosure, in the funds' prospectuses. and in my Account Fee Schedule, CLIENT / COMPANY / ENTITY NAME: Authorized Signer: Title: Signature of Authorized Signer: Date: Authorized Signer: Title: Signature of Authorized Signer: Date: