Attachment 1TITLE PAGE
RFP TITLE:
COMPANY l{AME:
CONTACI PERSON:
ADDRESS:
PROPOSAL DUE DATE:
IRS Code Section 115 Trust Provider Services
Public Agency Retirement Services (PARS)
Mitch Barkef, PARS Executive Vice President
(800) s40-6369 Ext. 116
mbarker@pars.org
4350 Von Karman Ave, Suite 100
Newport Beach, CA 92660
May 30, 2017 by 5.00pm
#IPARS
TnlJsIIr cr.uTuts Lf,sn3 ffsfls.
TA BLE OF CONTENTS
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Transmittal Letter
Executive Summary
Experience
Program Team & Relationship Services
Private Letter Ruling
Trustee & Trust Administration Services
lnvestment Requirements & Performance
Fees
References
Proposer Warranties
Appendix
- lnvestment Portfolios
- IRS PLR
- Client List
- Form ADV
- Trust Documents
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SECTION PAGE
PUAUC
AGENCY
RE IREMENT
sa\rcE5 lpnns
TRUSTEB SOTUTI()IIS. LASTINO RESUI.IS
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 1 l5 Trust provider Services
Dear Mr- Conway,
Public Agenry 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 program's 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, lndustry Leading Trust Administrator - With Z0+ years of experience, and 9yq1
250 Section 115 Trust accounts under administration, including !Q1 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 5n largest bank
in the nation, and one of the largest trustees for these types of public agency assets in the
country.
successful, Highly-Respected lnvestment 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 $l billion in section 115 trust assets,
provides the highest levels of fiduciary protection and offers multiple investment options to fit
your current and changing needs.
lnnovative Trust Design - The PARS pRSp is a unique, industry-leading trust approach which
allows oth oension nd OPEB to b e pre-fu nded within one sino le trust.This structure helps to
bring economies of scale and cost efficiencies to the Town, while still allowing for local control
and customization.
llPage
'lil50 Von Karman Ave., Ste. 100
Newport Beach. CA 92660-20$
800.540.6369
fax 800.660.8057
www.pars.0rg
PARS is committed to meeting the needs of the Town outlined in the scope of wor( 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 Borket, PARS Executive Vice President
Phone: (800) 540-6369 Ext. 1 16
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 Joh
President,
2lP a g e
Town oI Los Gatos
IRS Code Section 115 Trust Provider Services
E)(ESUIIVE SUMMARY
With many years of expe rience and over 250 Section 115 Trust aoenc includinq 80+ in CA for pension
pEfu!!d!!!!L we have developed a unique, comprehensive program that combines the following services
The turn-key, PARS PRSP operates as a collaboration of the following 3 industry leaders:
1. PABS - TRUST A0tllllStRAT0S - Dedicated to the retirement plan and trust needs of California public
agencies since 1984, PARS administers over 250 Section 115 trust plans w;th $1.3 billion in assets. As
administrator of the la rdest and faatest drowind Den n orefundino trusl tn the nati on PARS will
handle all recordkeeping, reporting. servicing, compliance monitoring and program coordination for
your account.
2. U.S. BAI{I( - TRUSIEE/CUSI00|AIi - The laroest trustee for oension pre-fundino 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 'll5 trust assets under administration, and will act in a
fiduciary role to safeguard the Town's assets.
3. HlSHilARf - lilVtSfil0{T ilAI{A0tB - Operating as a discretionary investment manager and sub-advisor to
U.5. Bank, HighMark will provide active portfolio management for your account. Serving ove. 5OO
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.
tl,HY IS THE PASS PRSP THE BEST S()LUTI(}II F(}R THE TOt{TI OF I.OS OATOS?
PARS has continually fine-tuned its Section 1 15 Trust Programs to meet the needs of California public agencies.
Today, our program includes the following key features:
tlJHO ARE THE PBOGBAM PROVIOTRS?
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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 1 15 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 fi5 trust which provides economies of scale for
investment, administrative, and trustee services while at the same time minimizing staff burdens and costs.
. Trust administration and recordkeeping
. Signature-ready trust documents
. Trustee and custodial services
. Fiduciaryinvestmentmanagement/advisoryservices
. Consulting and advisory
. Comprehensive reporting and performance monitoring
Fitst-of-its-kind, multiple-employer trust approach that allows pension and/or OPEB liabilities to
be funded within the same trust
Town oI Los Gatos
IRS Code Section 115 Trust Provider Services
. Ready-to-use, simply-otganized irrevocable Section 115 multiple employer trust and investment
program that is compliant with California and federal law, as well as GASB rules
. Morket leading providet with Sl pension prefunding clients in California
. Robust, well-estoblished fduciory 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
. Dtscretionory 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 passlve strategy
. lnvestment policy development, asset ollocation ossistance ond ongoing portfolio analysb lo
meet the Town's objectives
. Hands-on, individualized ottentio, from highly experienced PARS/HighMark services team
. Regular reporting that includes monthly statements, quafte y reports, and periodic onsite rcviews
. Streamlined implementation process with signature-ready documents
. Strong, histotical investment returns- We show true, historical return information
. No stort up costs, minimum contribution requirements, tronsaction fees, troding fees or ongoing
legal and complionce costs
. Fees that decrease as assets accumulate
. Simple and financially sound process for disbursement of funds
. Ongoing consulting ond technkol guidance led by the Town's assigned Lead Consultant
. No red tape lo enter or leave the trust in addition to a no-cost 30-day termination option
. Locol cortrol that enables the Town to determine its own discount rate assumptions, distribution
frequencies, and risk tolerance !evels
. Fiduciary protection from the 5th largest bank and one ofthe largest section 115 trustees in the
nation, U.S. Bank
. Experience trom PARS, o pioneet of pension prcfunding and 30 yeor veterun in the administration
of retirement plans and trusts for public agencies as well as a specialist in Section I 15 retirement trust
programs - PRSP is our cole business
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Town of tos Gatos
IRS Code Sedion 115 Trust Provider Services
EXPERIENCE
Describe yout firm's experience serving California local government clients in establishing IRS Section
1 15 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 last 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 l,4oo plans for more than g5o public entities, including !f! in california. 250+ Section 115 trust clients with ovet $1.3 billion in assets under management
' Development of the first multiple-employer Section 1 15 Trust Program for pension pre-funding in the
nation ... /n the first 18 months, over 80 Cotifornio public ogencies joined the trust, moking 1ARS the
fostest growing provider ond the pioneer of this ampoftont concept. First provider to obtain lRs 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 1 '15 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
ln 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.5 Bank serves as trustee to over 2.OOO government clients nationwide, including all of PARS, g5O+ cljents.
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 go+ members of the pARs pRsp.
PARS PR00RAtl AIII|AJ{IA0ES - es tne Rrst firm in the nation to devetop a section 1 15 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:
' SlltlPtt IURI{-|GY TBISI A0f,ll{EIRAn0il - 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
a rdi
record keepino. emo r statements reDortino. ol an communica ons and materi als, and
ongoino Glient s€rvices. As program administrator, PARS will also serve as liaison between the Town
and U.S. Bank/HighMark.
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Town of Los Gatos
IRS Code Section 115 Trust Provider Services
USIR FnlEIlDtY TBUST APPf,IIACH - Our program was designed to maximize ease of administration. We have
no minimum fees. no required contribution amounts (either initiallv or annuallyL 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.
ExERlEl{ct0, l(il0rlr0GEA8tt PHlvlllEB - By joining the pARs pRsp, the Town wi be utitizing a program
provider who was the pioneer of oension orefundino and whose core bu ness is niche retirement
Plan and trust administration for public aggncies. 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 oyer 80 clients.
PEBS0I{AL|ZE0 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.
SlttlPl-t BtlI FLtXlBtt lilVt$|il0 - The trust is designed to give participating agencies investment ftexibility
using an industry leading investment manager, HighMark which has worked alonqside PARS for the
last 21 years. offering five pre-established investment portfolios. a customized allocation, and
both active and Dassive 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 lnvestment 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.,
L0cAL c0l{TB0L - 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 admi nistrative burden will be , but vour staff wi ll still have
ibit lic on ution I nd
freouency
U0tUtE 0t SEfil0l{ I lS IBUST BJEIITS - pARs serves over 250 section I 1s rrust ctients with $ 1.3 bi ion in assets
under management. Out of these 2SO clients, over gO are members of the PARS pRSp.
6lPa9e
Ul{l0ut, c0ilBll{All0ll TIUSI - rhe PARS Program is structured as a muttipte emptoyer, combination trust
option which allows both pension and oPEB assets to be pre-funded within the same trust, This
unique approach brings e(onomies of scale. as well as administrative and fee efficiencies to
members of the program.
Town of tos Gatos
IRS Code Section 115 Trust Provider Services
PROOBAM TTAM A1{D RETATIOIiSHIP SEBI/ICES
. 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 BARl(ER, PR()JECI IIAI{AGER E EXffUIIl/E t,ICE PBESIDEITI, PARS
R0lt - N4itch 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 coordinatinq services between
PARS, U.S. Bank, and HighMark. l\4itch 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.
EXPEBIEI{CE - 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 distrias, 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 yea6. Prior to this, he also held many other positions in the healthcare field.
E0ucATl0ll - Mitch holds a bachelor's degree in Biomedical sciences from Texas A&N/ university.
AIiOBEtlj BB(}ll,I{, CTA, I/ICT PBESII}ET{T T SEIIMR MRIF(!I.I(} MA]IAOER. HIGHMABK
fi0Lt - As a Senior Portfolio Manager, Andrew is responsible for managing investment
portfolios on behalf of pension prefunding trust clients, retirement plans, foundations, not-
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 lnvestment 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.
[XPERIE[{C[ - 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 experi€nce includes three years as a lapanese Equity
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Fr
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Town of Los Gatos
IRS Code Section 1 15 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.
El)UCAIl0ll - Andrew received a BA in lnternational Relations, concentrating in Asia-Politics/Economy, and an MBA
with an emphasis in Finance/N4arketing, both from the University of Southern California. ln addition, Andrew is
also a Chartered Financial Analyst (CFA) charter-holder.
JE[1{ttEB ilEZA, SUprHVtS0R, Ct-tEt{T SERIIICES, PARS
Blll"E - 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- specifica y,
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.
EXPEBIEI{CE - Jennifer has 1o years of customer service experience in various private sector industries including
31/2 yearc in the retirement plan industry. She joined PARS in February of 20l3 as an Administration Specialist.
and then transitioned to her current position as a client services coordinator in November 2013.
E0USAT|0I{ - Jennifer has a bachelo/s degree in Business Administration from the California state university,
Fullerton. She has also received her Certified Employee Benefit Specialist (CEBS) designation from the
lnternational Foundation of Emproyee Benefits and the wharton school of Business.
SHAUIIA UOTCAI{, l/ICE PBESIt)TI{T, II{PtE[IEI{IATIOtI, PARS
[0[E - Shauna will manage implementation of the Town's Section 'l 15 Pension Trust account, as well as oversee
document compliance on an ongoing basis. lf 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 prefundin g in 2004,
and has managed implementation of all 250+ client accounts since this time.
u(PERlEt{Ct - 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 5OO retirement plans. Shauna worked 15 years in the legal field before coming to
PARS in 2001.
E0ucATl0l{ - shauna has a bachelor's degree in spanish from california state university, Long Beach.
PIII1UP IIUSCHTTIII, UIE ME$IIEIII, PI.{I{ ACCIIUIITIIIG, PABS
E
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Iown of Los Gatos
IRS Code Section 1'15 Trust Provider Services
Rll[E - As Vice President of Plan Accounting, Phillip provides accounting services to all of PARS' 8Or Section 1 15
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.
EXPIBIEI{CE - Phillip joined PARS 12 years ago. working his way up through the Accounting Depa(ment 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.
t[)UCAIl0il - 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 o, the Section l 15 Trust and
as trust administrator, including a description of their background and experience with these types of
trusts.
U.S. BAIIl( ITRUSI EE/CUST00|AI0 - Estabtished in t8G3 , U.S. Bank is the fifth largest bank and highest rated in the
country. U.5. Bank has offices throughout the U.s., including many in california, and manages over $500 billion
in assets. The Bank's lnstitutional Trust & Custody division, which is responsible for Section l15 pension
Prefunding Trust services, manages more than 2,600 clients in 27 locations and $7G4 billion in client assets,
including over 1,300 government and related clients with over g2O 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 lnstitutional Trust and Custody. This division that provides advisory,
trustee, and investment management services to PARS PRSP clients prides itself on the following qualifications:
Sixth largest custodian in the United States with more than 2.600 clients in 2? locations
Over 31 trillion in client assets
Provides trust and investment services to over 1,3(X, govemment 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 I 15 Retirement Trust assets in the country with 33 billion and
growing
SECIl0tl I 15 PEllSl0t{ Tf,USI H(PtfllEI{cE - First established in 1863, u.5. 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-2ooo,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 2Oo4 when it took on a
large school board association trust with PARS as the administrator. ln the years since, u.s. Bank has become
trustee to all of PARS' 850+ client's, including the 80+ in our Section 1 15 pension Rate Stabilization program.
ln total, the Bank now acts as trusteei/custodian to more than 3oo Section 1 1s trust clients, making it one of the
largest trustees for Section I 15 Trust funding in the nation.
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Town of Los Gatos
IRS Code Section 115 Trust Provider Services
PARS fiRUST A0MIi{ISTBAT0B) - 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 groMh and has built a long track record of service which includes the
following key accomplishments:
. Administration of over 1.400 plans for more than !!Q public entities, including 6?5 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 1 15 Trust Program's for both pension and oPEB prefunding.
Obtained fi6t 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 Califomia
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
SECTl0ll ll5 PtllSl0U0PtB TBUST txPlf,ltll0t - 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 oi 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 occounts ond over $1.3 billion in ossets under monoqement.
. 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 thei: 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 (Highlvlark) serves as investment manager for the PARS Section 1 15 Trust, and
has served PARS clients in an investment management role since I994. Below is information on the firm's
background and Section 1 15 trust experience:
BA0l((inflrilll - Originally established as Union Bank in 1919, HighMark manages approximately $15 billion in U.5
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
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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.
Stfil0ll I l5 PNP/0P[B TRUSI EXPIRIEI{CE - 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 1 15 trust clients, including all 80+ in the PRSP. ln total, the firm manages in
excess of $1 billion in Section 1 15 Trust assets.
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. ln order to implement the PARS PRSP, a board
resolution would need to be adopted and the following documents signed:
. Master Plan Document
. Trust Agreement
o Adoption Agreement
o AdministrationAgreement
o Resolution
. Trustee Forms
. Explain if your firm or subcontractor is a registered investment advisor under the lnvestment 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 lnvestment
Advisor's Act of 1940.
Sample implementation documents can be viewed in the App€ndix unde( "LSS!_D9S!D9D!L"
11 lP a 9 e
. 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,
Town of [os Gatos
IRS Code Section 115 Trust Provider Services
A copy of the firm's Form ADV Part 2A can be viewed in the Appendix undet "Fom ADV."
. Describe any SEC, FINRA, oi 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.
PARS - On January 7,2011, San Francisco Unified School District filed a lawsuit against phase ll 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. ln a related case, three plan participants in the same
retirement plan filed a Putative class action against the company on )une 22,201'1. 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
)uly -10' 2014. ln .,anuary 201 5, all parties to the putative class action filed by the three pla n pa rticipa nts entered
into a class settlement agreement. A final order and judgment was entered on November 25, 20i5, approving
the settlement and dismissing the class action with prejudice.
U.S. BAI{K - As a large financial institution, U.5. 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 filings with the SEC and the latest 1O-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.5. Bank, nor impact the delivery of services to our clients.
Hl0llllAflK - trere is no litigation to which HighMark is currently a party that would a) materia y impair its abitity
to perform investment advisory services, or b) materially affect the financial condition of the firm if decid€d in
an adverse manner.
12 lPage
tmGATI0ti
Town of Los Gatos
IRS Code Section 115 Trust Provider Services
PBIVATI IETTEB RULIl{O
' 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 Standa.ds Board (GASB).
PARS' proposed trust solution is a section 1 15, IRs-approved multiple-employer trust which brings investment,
administrative and legal economies of scale to PRSP member agencies. The program is formulated as an
aggreqation 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:
seporote Accounts.' separate accounts (or sub-trusts) are maintained for each employer and assets
are segregated by individual agency. ln addition, agencies can create separate sub-accounts by
PERS plan (e.9., Misc, Safety, etc) if required.
separute Liabilities: Employer contributions provide benefits only for employees of that employer.
This means there is no cross-liability or ioint liabilitv among participating public agencies, and 49
shari of investm t earninq s or losses.
Economies of scole: 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.
Toiloted lnvestments.' 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.
011001il0 C0ilruAilCE - The PARS OPEB Trust was designed in conjunction with pARS' attorney pi sbury winthrop
Shaw Pittman LLC to comply with state and federal Iaw 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 lmplementation 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 lmplementation 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. ln 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.
13 | P a g e
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 yeal breaking out the appropriate
plan contributions, plan withdrawals. expenses, and investment eamings
. A year-end audited financial statement of the Trust as a whole (not on an individual plan basis)
completed by PARS'S auditot 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
. lnvestment 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 tRs in June, 20'15 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 1 15 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 un der,,lgtalg."
' 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:
Lt0At scBlIIlilY - 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 flrms
throughout the country.
ImaPPRWAIAII0Pfl0IECII0N - 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.
sEcunt, RtH,LrTE0 TflusrEE - u.s. Bank, the program's discretionary trustee is a federaly chartered bank
that acts as an independent trustee for qualified ERISA and governmental r€tirement 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
14 lPage
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. lt also provides the Town
protections beyond what a smaller, state-chartered trust company can provide.
FI0IUARY m0lECII0ll - 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 manaqement decisions related to the OPEB trust
account. ln 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.
DE0ICATED mBIf[)Ul! ilAIIAliIB - 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.
lilVtSItEI{I llAIlA0EllEI{I SERVICES - lnvestment 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
HighN4ark 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.
15 | P a g e
Town of Los Gatos
IRS Code section '115 Trust Provider Services
IBUSTEE AND TRUSI ADMINISTBATIOl{ SERt,ICES
. Please Provide a comprehensive list of trustee services and Section 115 trust administration s€rvices
you will provide.
PARS' Section 'l 15 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.
SECTIOI{ I I s IBUSI ADiIII{ISIRAIIOI{ SERIIICES tPAf,Sl
. Maintenance of detailed accounting records, which includes individual recordkeeping of the Town's
contributions, earnings, and assets
o Reconciliation of contributions to the trust account
o 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 supporto Administrative training meeting at implementation as well 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 ofthe trust
. Preparation and submission of documents as required by the Town,s auditors for GASB 6g15
reporting
o 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
TBUSTEE STBllICES tU.S. BAIiK}
. Safeguarding of assets for the exclusive benefit of the Town's employees, retirees, and beneficiarieso Receipt and investment of the Town's contributions according to selected investment strategy. Electronic interface and reporting to the trust administrator
o Reimbursements for pension related costs made to the Town, or directly to the provider based on
direction from the Trust Administrator
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
. Please note if there are any additional costs ,or any of the above mentioned services.
16 | P a 9 e
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
C0l{IRlUfil0llS - 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.
IllStRlBlIIl0l{S - 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 1'15 Trust Program. We simply
require a 30 day notice period in order to transfer assets to a like Section I 15 trust.
lTlPage
Town of Los Gatos
IRS Code Section 1'15 Trust Provider Services
. ls there an initial minimum balance requirement for the 1 15 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 1 15 Trust including:
The PARS Section 115 PRSP offers discretionary management of assets utilizing the program's truste€, 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 flduciary protections
lnvestment 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? lf 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 tocus on
determining a diversified, multi-asset portfolio structure that represents an optimal asset mix based on the
Town's time horizon, risk tolerance l€vel and liquidity needs. Primary consideration for asset allocations is given
to the following:
. lnvestable Cosh Flow - How does the Town plan to fund its pRSp account?
. Retum Expedatiors - What are the actuarial assumptions forthe plan?
. Risk Tolerunce - What is the comfort level with investments and varying risk?. lncome ond Liquidity Needs -What are needs for income to pay current liabilities?
18 | P a 9 e
It{VESIMEI{I BEOUIBEltlEI{TS AI{D ItiI,ESIMEIiT PERTOBMANCE
Town of Los Gatos
IRS Code Section 115 Trust Provider Services
After receiving input from staff, Andrew will craft an lnvestment 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 Hightvlark for PARS Section 1 '15 trust clients,
benchmarks are as follows:
ML US High Yield Mstr ll lndex
. 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 benchma* against yields
obtained from similar 1 15 Trusts such as the California Employee Retirement Benefit Trust? lf 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
Denses hove olrcodv been netted out of
S&P 500 Composite lnder 39.50%
BC US Aggregate Bd lndex (USD)16.00%
Russell 2000 lndex (USD)10.5070
MSCI EAFE lndex (Net)10.250/0
Russell Midcap lndex 7.50%
MSCI EM Free lndex (Net USD)525%
Citigroup 1 Month T-8ill lndex 5.00./.
ML 1-3 Yr US Corplcovt 3.00"/.
Wilshire REIT lndex
1.OOa/.
S&P 500 Composite lndex 32.00"/.
Russell Midcap lndex 6.00%
9.00%
Wilshire REIT lndex 2.O0%
MSCI Ef.4 Free lndex (Net USD)4.00%
MSCI EAFE lndex (Net)7.00%
BC US Aggregate 8d lndex (USD)
ML 1-3 Yr US Corplcovt 6.75%
ML US High Yield Mnr ll lndex 1.25v"
Citigroup 1 Month T-Bill lndex 5.00"/.
S&P 500 Composite lndex 26.50%
Russell Midcap lndex 5.000/.
Russell 2000 lndex (USD)7.500/.
Wilshire REIT index 1.75%
MSCI EM Free lnder (Net USD)3.250/.
MSCI EAFE lndex (Net)6.000/o
BC US Aggregate Bd lndex (USD)
ML 1-3 Yr US Corplcovt 10.00%
ML US High Yield i,4str tndex 1.500/.
Citigroup 1 Month T-Bill lndex 5.000/.
S&P 500 Composite lndex 15.50%
Russell Midcap lndex 3 00"/.
Russell 2000 lndex (USD)4.50%
Wilshire REIT lndex
MSCI EM Free lndex (Net USD)2.00v.
MSCI EAFE lndex (Net)4.00%
BC US Aggregate Bd lndex (USD)4925%
ML 1-3 Yr US Corplco!,t 14.00%
ML US High Yield Mstr ll lndex 1.75v"
Citigroup 1 Month T-Bill lndex 5.00/.
S&P 500 Composite lndex 7s0%
Russell Midcap lndex 1.50%
Russell 2000 lndex (USD)2.50"/o
Wilshire REIT lndex 0.50%
MSCI EM Free lndex (Net USD)1.00%
MSCI EAFE lndex (Net)2.00%
BC US Aggregate Bd lndex (USD)52.254/.
ML'l-3 Yr US Corp,/covt
ML US High Yield Mstr ll tndex 2.00./"
Citigroup 1 Month T-Bill lndex 5.00%
PABS C(lTiSERVATIl/E
for 10 yea ts. Pleose note thot fund level ex.
19 | P a g e
e Derformonce returns.
PABS BATAI{CTO
Russell 2000 lndex (USD)
27.00%
PARS MOt}ERATTLY CO]iSEBl/AIIVE
1.OOa/o
25.75%
PARS-CAPITAt APPRECIATIt)II
2.00%
PARS M(}DERATE
33.50%
7.160/o 5.06%11.25voBAI-AI{CED
63470 4.97%9.670/oM()I]EBATE
4.85vo 4.730/o6.440/0M()OEBATELY Ct)IiSEfl VATIl,E
3.674/o 4.25%Ct)NSERllATIl/E 4.070/o
Town of Los Gatos
IRS Code Section 115 Trust Provider Services
ACTIVELY MAI{A6TD PORTFOI.IOS
BLEI{DED ACTIVE/ItIDEX PORTFOTIOS
*lnception to dote - 01/2009
Comparative Benchmo*s - HighMark is able to benchmark against yields for similar 115 trusts (including the
California Employee Benefit Trust) during our regular performance reviews to the e)dent that the information is
available coincident with our meeting schedules. As the data can only be obtained from CaIPERS diredly, our
ability to provide a comparison depends on their regular communication of returns.
. Describe the investment and risk options available for the 1 15 Trust.
The PARS PRSP was designed to give client agencies maximum investment flexibility. Utilizing HighMark as
discretionary investment managel the Town will have the following investment/risk choices available for the
investment of its funds:
1. FIllE HISKT()LEflAI{CT TE\ITI.S
The Town can participate in one of five risk tolerance levels that have been developed specifically for clients in
PARS' Section 1 15 Trust. The five portfolios include: (a) actively-managed underlying mutual funds intended to
outperform benchmarks or (b) Iow-cost lndevExchange-Traded Funds (ETFS) which are baskets of stocks
tracking the composition and performance of most leading market indices.
0.560/0
0.53Vo
0.490/.
0.444/"
1 3.08%839%10.460/0.CAPIIAL APPRECIATIOIi
5 YEAB 1O YEABSI YEAfi
0.590/0
EXPEIiSE BATI(l
7.220/0 4.7 50/oBAI-ANCEIj 10.51%
6394/0 5.08"/o8.750/a
4.27"/oMt]DEfl ATELY Ct]I{SERllATIl,E 5.40"/a 4.654/0
3.81"/oc0tisERvATtvE2.91%3.284/a
POBTFOI.IO
0.14%
0.13%
0.110/o
0.104/o
20 lPag e
PORTFOTIO I YEAB SYEARS IOYEARS
[{BEX P0B]F0Lt0S
I YEAR 5 YTIR IIIYTARS
MOOERATE
EXPEI{SE RATIO
E)(PEI{SE fiATI(}
The following table provides an overview of the investment objectives for each of the five portfolios:
P0BTt0U0
A full breakdown of the funds within the pre-established portfolios can be viewed in the Appendix under
" I nvestrnco!_Pofu!!9s."
2. CUSII)MIZTI}APPR(]ACH
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 1 15 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. ln many cases, this process has demonstrated HighMark's ability to add risk-adjusted return
versus passive benchmarks. ln 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 o, 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. Po(folio rebalancing is largely focused on market developments
(e.9. 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.
CAP[AL APPRECIATIOI{Provide groMh of principal and income
BAI.AI{CEI]Provide groMh of principal and income 50-700/o
Mt)I)ERATT Provide gromh of principal and income 40-604/0
IT(lDTfl ATEI.Y C()I{SERVATIllE
Provide current income and moderate capital
appreciation 20 40v.
C(}I{SEBllATIl/E
Provide a consistent level of inflation-protected income
over the long-term 5-200/0
21 lPage
Town of Los Gatos
IRS Code Section 115 Trust Provider Services
STRATEGY [{vESTMEt{t 0BJtcTrvE TOUTTY ALLOCATIOI{
65-854/0
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), Highl,,4ark 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. Highi,4ark 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 call 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 i 15 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.
22 lPa9e
FEES
ln 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. ln 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? lf 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.
. ldentify 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.
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.
Trustee and investment management fees are paid to U.S. Bank. These fees include investment policy
d€velopment, asset allocation recommendations, asset management, and all custodial services.
PARS 0.25% for assets under $'10 million
0.20% for assets $10-'15 million
0.157o for assets $15-50 million
0.107o for assets over $50 million
23 lPaqe
Town of Los Gatos
IRS Code Section 115 Trust Provider Services
TBUSI ADrffiISIRAIt0t{/C0ilslJrTt!0 f EEs
C(}MPAI|lY 0t{00tt{G FEt
DISCRETI()ilARY TRUSTEE/II{VESIMEIIT MAIlA6TMEI{I TtES
Town of Los Gatos
IRS Code Section 115 Trust Provider Services
*These fees represent the highest weighted investment monogement fee that can be chorged. Fees for HighMork's
five risk toleronce portfolios os of Morch 31, 2017 ronge from 0.25% to 0.34/o for ossets under $5 million,
depending on risk toleronce levet. Subject to change due to reboloncing. fhis is because all investment
monogement fees ore woived on the First Americon Prime Obllgotion Z fund os we os ony funds within the
pottfoLio thot HighMork serves os sub-odviser/odviser.
. Provide historical fees for each of the prior five years (2012 through 20l6).
The asset based fees for PARS' Section 115 Trust Program have seen no change since 2012. Prior to 2O'12
however, the asset based program fees were reduced on 2 separate occasions.
' ldentify 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 eithe[
(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 andlor
subcontractors, insurance providers, and any remuneration that the firm derives from investment
managers and/or sub-advisors. lnclude any 12b-1, service, distributor, or platform fees that the firm
derives from investment managers and/or sub-advisors.
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.
U.S. BAI{l(/HIOHMABK Trustee fees - 0.00% (fee waived)
lnvestment N,lanagement Fees
0.35% for assets under $5 million'
0.25% for assets $5-$10 million
0.207o for assets $10-$15 million
0.150,6 for assets $'l 5-$50 million
0.10% for assets over $50 million
0r{00tt{0 FEr
24lP a g e
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 N/'lanagement (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 600,6 of the annual managemenvdiscretionary trustee fee for assets sub-
advised by HighMark.
C()MPAI{Y
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 porffolio. Listed below are the embedded fund fees for the pre-established portfolio options as of March
31,2017 Pleose note thot these fund leveL fees ore ol v netted out of reDofted De monce returns.
CAPITAL APPflECIATIt]I{0.1svo
EAI.AIICED 0.560/0 0.140k
M(]OEBATE 0.530/0 0.13%
MODERATTLY COI{SEBllATIVE 0.490/"0.110/o
c0risrf,vATtvt 0.440/.0.100/"
()PER/ITIl{G EXPEI{SE BATIO
II{l/ESTMEI{T POBTFOLIO
PASSIl/E
' Describe in detail any and all surrender, withdrawal, trander, 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 tran#er 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 l.l5 trust.
25 lPage
ACTIl/E
0.59%
Town oI Los Gatos
IRS Code Section '1 15 Trust Provider Services
BEFEEEt{CES
Please list the name, address, contact name, telephone number and e-mail address o, 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.
A full PARS Section 1 15 Trust client list can be viewed in the appendix under ,,Client list.
CIIY OF PAL(} ALTO
Lalo Perez. Chief Financial Officer
250 Hamilton Avenue
Palo Alto, CA 94301
Phone: 650.329.2575
Email: Lalo.Perez@cityofpaloalto.org
CITY OT DALY CITY
Lowrence Chiu, Diredor of Finance 6t Admin. Services
333 90th Street
Daly City, CA 94105
Phone: 650-991-8048
Email:lchiu@dalycity.org
CITY OF AI.AMTDA
Phone:510-747-4888
Email: eadair@alamedaca.gov
CITY OF DIJBLIIT
Colleen Tribby, Directot of Administtotive Services
100 Civic Plaza,
Dublin, CA 94568
Phone: (925) 833-6654
Email:colleen.tribby@dublin.ca.gov
clTY 0F ut{t(}ti cm
Mork Corlson, Diredor, Finonce
34009 Alvarado-Niles Road
Union City, CA 94587
Phone: 510-675-5431
Email: mcarlson@unioncity.org
AGEI|lCY c0l{TAcT tt{t0BMATI0ti
25 lPage
Elena Adoir, Director, Finance
2263 Santa Clara Ave., Suite 220
AIameda, CA 94501
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 servlces to be provided. coverage
limits shall be 52,000,000 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 J
Title: President
Firm: Public Agenry Retirement Services (PARS)
Date:5124120\7
**Signed contingent on the proposed exceptions set forth on the Jollowing page++.
27 lPage
Town of Los Gatos
IRS Code Section 115 Trust Provider Services
E)(CEPIIONS IO IHE PR{)POSAT BEOUIBEMEI{TS
The proposal is submitted contingent on the Town of Los Gatos consideration of the following exceptions and/or
modiflcations:
1. APPEtlOlX A: PB0P0SER WABRAI{IIES
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. SAMPI.E T(}tllil COIITBACT
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-
23lPage
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CAPITAL MANAGEMENT
WHY THE PARS DIVERSIFIED
CONSERVATIVE PORTFOLIO?
Cgmprehensive lnvestment Solution
HighMark@ Capital Management. lnc.'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 lvlanager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investrnent
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 lnvestment Options
ln order to meet the unique needs of our clients,
we offer access to flexible implementation strategies
HighMark Plus utilizes actively managed mutuat
funds while lndex Plus utitizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark's active asset
allocation approach.
Risk l!!anagement
The portfolio is constructed to control risk through
Iour layers ol diversification - asset classes (cash.
fixed income, equity), investment styles (targe cap,
small cap, international, value, growlh). managers
and securities. Disciplined mutual fund selection and
monatoring process helps to drive return potential
while reducing portfolio risk.
INVESTMENT OBJECTIVE
To provide a consistent level of a
inflation-protected income over I
the long-term. The major portion :
of the assets will be fixed €
income reiated. Equity securities :
are utilized to provide inflation :protection
Mode.alely ConsryEuvo
lncex F
2008
2009
2010
2011
2012
2013
2011
2015
2016
-6.70%
10j9%
7.67%
3.701k
a.D%
3A0%
4.32%
0.06%
3.75%
ANNUALIZED ToTAL RETURNS (Gross of tnveslmenl Management Fees, but
Net of Embedded Fund Fees)
Cunent Quarter' 1.88% Cuneot euarler. 1.14%
Blended Benchfia*" 1.13% Btended Berchma*,, 1.43%
Year To Dale 1 .88% year To Date 1 .44oA
Blended Benchma* 1.43Vo Btended Benchfia* 1.43%
l Year +ut% l year 2.91%
Blended Benchma* 3.26% Btended Benchrnark 3.26%
3 Year 2.97% 3 Yea, 2.22%
Blended Eenchma* 2.99% Blended Benchma* 2 gg"/.
5 Year 3.67% 5 year 3.28%
Blended Benchmad< 3.27% Btended Benchfia* 3.27%
'10 Year 4.25% 10 year 3.81%
Blended Benchfiarl< 3.88% Btended Benchma* 3.BB%
Retuns r.srh r-yerare d a.ndtE.d -BE.kdMror Breided gencnrod( 7 S"r S&p5aO I 5ri Rrs*I Md C.o 2 5,!Ru3*r2000 rei MscrEM FREE 25! MsctF:aFE 52 2sc,!ac usrgg :s;s..vr I r v, uicoo e",i 1"" iii i_ini,"rManerrr 0 sv. rtirrh'6 RE T aid5ro ci' 1 Mf'T-Bil priorro Octobe;-:or2 rie bbnd.o u"n"r,."ir,. *e r:q, s.l,dsoo r.tRrssel2000 2""usc. farE.06! VL. 3 vEr,colp cof, rc..3:4qq :..:n, Mh T.B,n plo,,oAoa ?oo7 rheoenedb.rcieds dr '50" SAP t0 .0'.UL r.3v.Co@ Co! .o . EC aso .ro 5.. C{, r rft - g,t,
ANNUAL RETURNS
2008
2009
2010
2411
2012
2013
2014
2015
2016
PORTFOLIO FACTS
lnceplion Dala
No of Funds in Portfolio
07t2004
1g
index PIls (Passtve)
lnceplion Oata
No of Funds in Portfolio
07t200,4
't3
PARS DIVERSIFIED PORTFOLIOS
CONSERVATIVE Ql 2017
a sk iSlanoard aevraron,
ASSET ALLOCATION _ CONSERVATIVE PORTFOLIO
Strategrc Range poticy Tacticat
Equity 5-20% 1so/r 15./.
Fixed lncome 60 - 95% 80% Tgyo
Cash O - 2Oo/. 5"/. 60/6
-9.04%
15 59%
8.68%
2.190k
8.45%
3.69%
3.88%
0.29%
4.14%
HighMark Plus (Active)
COLUMSA Coi{TRARXAN CORE Z
VAI]GUARD GROWTH & INCOME.ADI'
DODGE E @X ST@K FUND
MRBOR CAPIAL APPREC]A-IIIST
T ROWE PR GROIIVIH STOCK.I
ISMFES RUSSEU ITIDTAP ETF
NTJVEEN REAL ESTA]E SECUR.I
UND|SC MGRS BEIIAV VAL.I.
T ROWE PR NEW I.IORIZON$I
NATIONW M[F' INI EGINST
OODGE & cox IML STOCK FUND
MFS INTL GROWTH-]
HRTFRD SCHR EM MRKT EGI
VAI'IGIJARD S/T INVEST GR-AD['
PIMCO TOTAL RETURN FUN}INST
PRUDE}ITIAL TOTAL RETRT{ 8II}Q
NATIONW HIGHI,IARK BNDR6
EATOI,I VAI{ [L RT A H NGII,IS
FIRST AM GOV OSIJGZ
lndex Plus (Passive)
ISHARES CORE S&P 5OO EIF
ISHARES S&P 50 VAUJE ETF
ISH RES S&P 5(D GRO',VTH EIF
ISTiARES RIJSSELL MID{IP ETF
VAI.IGUARD REIT ETF
ISHARES RUSSELL 2M VALUE E
ISHARES RUSSE[ Zu) GROWTH
ISHARES I'SCI EAFE ETF
VAIIGTJARD FISE EMERGIITG IIAR'€
VAI'IGIJARD VT INVEST GR-ADM
ISHARES CORE U.S. AGGFEGAIE
POWERST1ARES SENIOR LOAN
FIRST Atil GOV 08UGZ
HOLDINGS
STYLE
Holdings arc subject to chahge at the
discrction of the investment managet.
2-5%
3.5%
TM edolmlr Mrds shM rer6st rze{erchl€d c4rEos(es oi tar eEnpl .@6ls lhar irEel tlE foLlNng cnlena
Co;bo.rl€! are mMqed Dy Hrohria s Hrghuad( aapd Ad,sors
'
lCA) wlh tull n@$rEnl adhonry a@d'ng b ln€
PARS Co.s€.vatva a.tve and p€ssve oDFctEs and do tr h.v. equ'$ co(ent-aton ol 2!
The adus ro the PARS @dohos rs US Bank. and Hrohlraft !€to.s as sucadv ssr lo us Bel lo nran69e tr.s€ ponloros
irq E";i M,.na@d;;ls,sm-h aso6oqt annuairunaaefitsnl f*baseo. a $rdrnq scale asolMarch31 2017.the
a6id€d relds o 5d9" uS &n& Bs lt@Maft 60nb ol lne aMua nrMc,rErn Ge lor ass€ls slbidrs€d bv HiEnMa't
un,s s su*desorv aq/eenHi *it US Bglk Tho 36 bass po lls p.d lo HEnMrt a {ell 3s dnd e4ens€3 hal tr€j
Oa ,nomo
'n
rne ru'naqtm€nl ot lh. porfolo. rll €duc6 lrle iDrnolro €Uns Assumng an 'n!€strierl for frv6 vear s a 5qo
;.n"ar rorar ra"n ,nd in annGl eb:ades@ te€ als ol 0 36% d*,uded lrom tt€ asG al dB*ei al lhe end ol ead voar
a 1o mrlon r.ltd ;l@ *qid orolv lo S 12 54 ;r ron aner ls rlt6ld.Fees) and S 12 76 mrl'on oelo.e lses rcro$of_Fesr
addftonal d,onrHrm l!@d,rE the hm s oolrc6 and ,ocedurcs fd c5@latnq a.d reponng petronr'a@ resr ts is
,€rtebb uM eu6st ti 01 2-ol o tl'€ PaRs cotrEos le detrn'tmwas ch.r!€d rro. !750 o,0o mnrnrrm lo no m'n'tum
pertqrran& resuits ae etoEled snd presenlEd h u S d,rars and do rcl re'l4l th€ dedJciro. ol '.venrEnt advi$ry
,€€s. @stody iees o. laxes brn do .enod 0p d€du.ts ol lading erpe.es Retums are calcllaled b5s€d s lGrledale
Brenoed benchrsks r.oB*nl HrchM6.t s svalaoE all@l,@s b€l*6 equ'! 4red '1@_€ and 6h and a€ rebalancsd
mnti v B6i.trMrt edrms do rcl- €ned the deddo4 ol advrso.Y res or ollltr ep€.s€s ol rnestnq bll assurnes h€
crrein€d ol (tvdsrlds and otE eam.Es A. nvssld Hrcl 'n!€$ dre.dr rn an 'n&x the ulmEgEd saP 500 hde'
is rebrenl.bE ol tns ertol1lrc ol lad @nD.toes n fF u s nel roll(et Th€ Mscl E:aFE lrE€r is a ft4 nod'
aa,,iiea mn a oorut)aro rn6ox d6s,o;ed to;€3s!rs de@lo!€d rurtet equrry p€dffic€ ercludrne he J S and
aiada The MsCi Ererqrnq Marters FEe ln €r rs.lreo ioalndlned narkel €Pl.lrzuon mder lhd rs &sgned to
n;tuE drrv rdker e-rtdm6@ rn tE dooal eJrBrllno rEneis rhe RJssell M'*rp lnd€x iEasuBs tlE pcrfomBnc€ or
ir; didao sd,ffir ol rE u S o,tv orirse the R-!sae{ 2000 lndet lr!.$85 rE perlon€@ of iE srollqp
srem oi trE"u S eourtv unrverEi lhs LrS H'oh Y Eld Mastd ll ln6e\ lracr e lhe perlorun@ ol Deros rtuBLtml grar,€
l r ( .dr*.d6mEr;d &66le bonds oublrdv rss,€{ rn llle U S oomst'c tr€ltel Wisnft REIT 'nd€l masr€s U s
o,u,a, i'aaeo nea e<ate thwsrrE T^i$s The uhmane€d Bl@rtEro Batsavs C+lal'Bcr u S a99ega3 Bdd hdex
ia;;dar";em;erarE oltE rJ s la abre borld mnd -as a *t'ole Tl; MenliLvnch\ML,1J Ye Us coad.le a
co-vemmfu lider tEd<s h€ bond o€rlomn@ ot Ine ML U S Corporale A Govemrenl ho6i. sth a reroinrng lem lo
fnaltrEtunrr less lrar 3 yea6 I he unmnaged c'tE oup - .vonlh TreasLry &'l ..(,€r res lhe /ield ol lhe l _@nlh u 5
H'dhMert CaolalMan@mnl lnc rhrohMai(l an SEc{eqrste6d rn€sln€ adeser rsa vhq'v oPr|eo sr'dary or
rirlFc r h'.n Fran* i! a', MdB, H,ohMa-i{ mnies rnsl'lu!6%r s6oaEle ac.ounl pdnolros ld a sd€ valetv oi ror 'prolil
ina *noolr oron'zatcirs tu'b[c;o€aoes oubl( d on,aE r€tcm.l prans arE peros! lrusls oi .ll s Tes lltrBv3Ls.
sft ad sb-3d-us ld frnilal tunda c.lmi. fGl tunds and cdl*tve 'nvstrE.l fuds MIJB a srbsdarv ol MUFG
amn€s Hd6ms cffiauon omeales ertarn eMces lo H'qhM t and 's
@rp6Gded ior lhese *Mes Past
aartomanm a*i mt ri,aam6€ hllurs resJtls tndudra eoid l@aa€rer and @shrd'onw.rvarv +pendrng on
:;]' d,;lnis n6<mfi ll#s and obb.r,ves ttv..tm.d. emolovinq Hlqhilltt ntesle..rc oT lBur.d bv th'
aoic o. by v dh€. Fed...l GoveniBt Aearcv, ..! tlOT B.it d!Po!i't3 .rc NOT gu.r.de.d ry OE B.nr or .nv
B&r .lngde,_md MAY lo.. fld. lnclld5ti po5c6r. los o, Pritrcip.l.
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco. CA 94104
aoo-58247U
Christiane Tsuda
Senior Portfolio Manager
lnvestmenl Experience: since 1987
HighMark Tenure: since 2010
Educationr BA, lntemational Ch.istiar
Arne Wimmer, CFA€
Senior Portfolio Manager
lnveslment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of Caldomi S
lJniveasitv. Tokvo
vww highmarkcaprta
ABOUT THE ADVISER
HighMarka Capital Management, lnc. (HighMark) has
over 90 years (including predecessor organizations) of
institutional money management experience wilh more
than $'15.9 billion in assels under management.
HighMark has a long term disciplined app.oach to
money managemenl and cunently manages assets tor
a wide array of clients.
ABOUT THE PORTFOLIO TIANAGEMENT TEAT{
Andrew Brown, CFA@
Senior Portfolio Manager
lnvestrnent Experience: since 1994
HighMad( Tenure: since 1997
Education: MBA. University of Sodhem Cahfomia.
BA, Unaversity of Southem Califomia
Andrry Bates, CFAd
Portfolio Manager
lnvestment Experience: since 2008
HighMa* Tenute: since 2015
Educalion: BS. University of Colorado
SalYato.e *Tory" f,ihzzo lll, CFA$
Senior Portfolio Manager
lnvestmeol Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stdbling, CFA€
Senior Portfolio Manager
lnrrestment B(perience: sinc€ 1985
HighMa* Tenure: since 1995
Educatioi: BA. Stetson University
Asset Allocation Committee
Number of Membersi 16
Average Years of Experience: 26
Average Tenure (Yeaas): 13
l*anagsr Review Gioup
Number oI Members: 8
Ave.age Years of Experience: 19
Average Tenure (Years): 7
PARS DIVERSIFIED PORTFOLIOS
MODERATE LY CON S ERVATIVE
-,/H,crlVlAnr.
CAPITAL MANA6EMENT
WHY THE PARS DIVERSIFIED
MODERATELY CONSERVATIVE PORTFOLIO?
Comprehensive Investment Solution
HighMark@ Capital Management, lnc. 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 oI
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 investrnent
managers and styles that have not only produced
abov+average retums within acceptable risk
parameters. but have the resources and commitmenl
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This ls a highly specialized. trme consumrng
approach dedicated to one goal: competitive and
consistent performance
Flexible lnvestment Options
ln order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
,unds while lndex Plus utilizes index-based
securities, including exchange.traded funds. Both
investment options leverage HighMark's active asset
allocation approach.
INVESTMENT OBJECTIVE
To provide current income and
moderate capital appreciation.
The major portion of the assets
is committed to income-
producing securities. Market
fluctuataons should be expected.
2008
2009
2010
2011
2012
2013
2011
2015
2016
PORTFOLIO FACTS
hi.al,lark P us r:cir!E,
lnception Data
No of Funds in Portfolio
E
I
LpI
R,sk rSlandard Devrano.,
ASSET ALLOCATION _ MOOERATELY CONSERVATIVE PORTFOLIO
Strategic Range poticy Taclicat
Equrty 20 - 40ok 30% 30%
Fixed lncome 50 - 80% 65% 62./"
Cash 0-20% Syo 3%
ANNUALTZED TorAL RETURNs L"J,T.1[J.".T?ll#anas€menr
Fees but
Cunent Quarter' 2.8% Cunenl OuarteF 2:|60'
Blended Benchhad" 2.21% Btended Benchmafl,, 2.21%
Year To Date 2-68% Year To Date 2.16.a
Blended Benchma 2_21% Blended Benchmark 2.21/0
't Year 6.4./" 1 year 5.4o%
Blended Eenchna* 5.61% Btended Benchma* S 61%
3 Year 3.U% 3 year 3.72%
Blended Benchma* 1.01% Blended Benchma* LOl%
5 Yeat 4.85% 5 year 4.65%
Blended Behchmark 1.82% Blended Benchmark t 82%
10 Year 1.73% 10 year 1.22o/o
Blended Benchmatk 157% Btencted Benchaa* t.S7%
r..noaized -BE.kdMrdr Br.ndea B.^chrur( r5 5:. SAP5C!. 3; Rus*n M d Cap 1 5:..Ru*.fi2000 :q. Msc EM FR;E r!,i Mscr€aFE .19 25 ! ac !s a3q 14 . ML r.3 yr us co@ co\ I I it% us H,;h y€rd
Masr.r r 1'1Wr5h,re RE T and5eicrr I u$T ain pnor,oodo*rtar2 .Jir btend€c b..cj rurrs @E 2 5 ! s&p 5?)o i 5.,1Rlsse a00C 35i:MSC!€:AFE 250!UL,.3yearooa Gcd lDrigCloq j.:Crr MrhT Ait Fno,i.Aon !OO7 rhebreidedb€icfha*s €r. 30:. SaP500 25:r Mt t,3YrCo,p co! 4O:: Bc Aqo and 5:. C u I Mfi T A r
ANNUAL RETURNS
-15.37%
14.710k
,0.46%
1_75Vo
10.88%
7.300h
,t.41%
0.32./.
4.93%
20oa
2009
2010
2011
2012
2013
2014
2015
2016
-12.40%
11.92v.
9.72%
3.24"h
821%
6.74%
5.40%
-0 lavo
5.12%
Pass
08/2004
19
lnception Dala
No of Funds in Portfolio
05t2005
13
Q1 2017
Moderatsly Conserv-ativa
Risk Management
The portfolio is constructed to control risk through
four laye.s of diversification - asset classes (cash,
fixed income. equity), investrnent stytes (large cap.
small cap, international, value, growth), managers
and securilies. Disciplined mutual fund selection and
monitoring process helps to drive return potential
whiie reducing portfolio risk.
HOLDINGS
High la.k Plus (Active)
COLUUEIA @NTRARAN coRE,Z
VANGT]ARD GROWTH & I MME-ADiI
INOGE & cox STOCK FUND
HARBOR CAPTAL APPRECIA.INST
T ROV{E PR GROWTH STOCXN
ISHARES RUSSETI MIO.CAP EIF
NLJVEEI'I REAI ESTATE SECUR-I
UNDISC MGRS EEMV VAL,L
T ROWE PR NEW HORIZONSI
MTIONW BAII.RD INT EGINST
DODGE A @X II{TL STOCK FUNO
MFS II{TL GROWTH-I
HRIEROSCHR EM RXI ECII
VAIIGTJARD S/T INVEST GR.ADM
PIMCO TOTAL FEruRI FUNSINST
PRUOENT]IL TOTAT REIRN gN}Q
MTIoNW HIGHIiIARX BNIIR6
EATON VAiI FL RT & HI INCINS
FIRST AM GOV OSUGZ
SWLE
lnder Plus (Passive)
ISITARES CORE S&P 5OO ETF
ISHARES S&P 5m VALUE ETI
ISHARES SEP 50 GROWTH ETF
ISHARES RUSSEI.I MIO€AP ETF
VAI{GIARD RE]T EtF
ISHARES RUSSEU AM VAIIJE E
ISHARES RUSSEII M GROWIH
SH,ANES MSCI EAFE ETI
VAIGIJARD FISE EMERGING i.tARXE
VAi]GIJARD S/T INVEST GR,ADU
ISTIARES CORE U.S, AGGREGATE
POWERSHARES SEXOR I,OAN
FIRST AM GOV OBUCZ
Holdings ae subject to change at the
disqetion of the investfient managet-
\
The erlolrM@ re(fis shdn reo.esenl ue-weEhled c..rpos'tes ol la, ereng a@dls lhal 'Eel m. loll@ng otena
C;i;sries ara ;aEoed ov H'ahrir\ s HrohMa,t -CaSlal Ad"s6 (HCA, uh tull n€nnErlr adionly erding lo dE
PARS Mode.aBy Con--s€Ni!v€1o"e aoa ftse oOpo"es and do rcl have equtv @@nt aton or ?5p; q mre 'n
me
IE adss ro trle PARS Mtlor,os rs US 8anr. and H'ohuaft setues 6 eb adsser ro Us Banr
'o
6a,l39€ fFe po.tid'os
r,au,;aG;.ntre d;E.. tuh as O 60%.nnui rlanaoehsnl fe based o. a sJrdmq sle A!olMarch31.2017 lt€
.d;d ,alei;o 5d,i" us aank @es HrohMa( 6o'i ol lh. ainLal mn.F,El lee lor asaels sub'a<,rsed bv FrghMafi
dder,rs susadusory aarffii {;h US Bank The 36 basrs ponls Pad lo hrghMrr as well a olha epenses ulal rul
F ,tured n $e ft,iD&rent ol rtE oordolo s reducs sE Dorndro telJ% As!ftnq an mveslrBl for f ve vears a ,%
annu:r iorar rdtm and ;n annuar efuosm le€ rds ol 0 36c! d€duded lrm fE assds a a€rtel al lh6 erd of eacn ,ear
; 10 mllrq rn ral ,alu6 eu'd orow to S l2 54 itl[on afier 16 (NEl4r-F ees) and S 12 76 m'.lron b€loe lBes (Gross_o'rees)
A.id'hdEr 'nlmfion rmrrdr6 tlp hm s Dolroes and o,oceduBs td calculatno a.d rerdnnq p€nom€.e r6Lrts 'saEtrhle LrM rsuesr li 01 2b1O he PARS ConEo$le definrtm was chanq€d lrm Si50 000 fr4jmJm lo m mn'rum
pedcmne 6ui a@ El@laled and ores€nl.d n U S drclla's arc do rcl rcned
'ne
{leouclion ol rn€su-rern edesorv
iees osrooy tees or ri,es o,,r do Efed he de.ucton of trading e4e.!65 Reums are calolated based o. trad€dale
Blmd€d benchmfts lBrrenl HighMaft's stralegic alio.stons bellveeri equrl, f x€{ r@re- and cash and aE tebalanced
-"h u.n nmd, rul;ms do mi ened tE d6d-ucmn ol adusorv res or atrlar €,!en$3 ol 'nveslnq bul assumes the
eneirrenr ot oi"oer'd: ao olhs esrn'ngs an n€slo. canml riwsl dtre.dv,n an rndel Ihe !.r€naged saP 5m ln<l€r
'! Go.6sr,t€ o, tl6 edolr1rc ot hroa conDanes 'n
tlE u s stod( @fta The rrscl EAFE lnde,
'3
e te f@l_
"a-ii.a-"nnii"i.l;t..t'&lnoei os"S.a io tuas,e oeverooed rolrer equry perrffie eidudns rne u s .nd
a;.a 1 tE tsci rmE,m M5nels Fr;e ln.,6r 's a rre€ noa€4ired @*el .3p'talEr.@ hd€r
'I'er 's .l6egn6d io
*;; iiitr *,'G i&io7"ir,* iir oe cooer e"E E,ns m*ai rhe R.sgrr Mtdcap hder rEaees tne rBrdrur'c. o(
tu frd#; r;m.n .'ihe tr s eurN 6rtee The Russer 2m0 lft,er n?.!res the perronnsrlc4 or trE ffill_clp
*reni oi het S eo.t ,n,versd fh€ US Hroh weld Masler , t tndex rracrs tr e perfo@r@ ol b€lM nvBlrent grade
l r ( ddp ,tuMr& 6,dare bon& ebniiv 'seo rn he U S donEsuc mad Wishtre RErT in<,er @su€s u s
;n,;;;.dn iear=a;G tfusiftm idsts rri€ unmanaed BrdtEro EardaF c+lal (ac) u s AggiElEte Eond rtu.r
ii*aiatt, ,tryesenrate ot the Ll s laEble boid trErtd:s a *hde lhe MemliLrn i (ML,1 3 vear u s cqPorae &
G";mm i;de, racrs lhe bond e.lofrM@ ol lheM! U S ColDoral€ &Goverlrl lnde.. flt aremaining l.mlo
h;l maudy l6s lrEr 3 ye2rs I# untunaged C'igtup 1-Moh 1€]6sLrv &lr l(ler L'.crs uE /eld ol lhe 1 nfirh U s
HEhMark caorral Manaemed .nc I HiohMart). an SECreq' slered .nvssugl advser 's a wholl, Med subsrdrary ol
MJIG utud Eank N i{MtrBr H,ohMaik mnai:€r rnsnlut@lseparaE adud pdtblios lol a {de v.nery o orPoal
.,,o namt r d!4'atom o'ut'c 5oe@6 ouDllc and ,lvale rctrsr€nl pl* and pqsonal rusE ol all srz6 ll nay de
seDe aa subrd;ser ld mdirar tunda colmih rust tunds and @necave rn6vrBm !1(h MUB . ebsi(ll.ry ol MUIG
ereres troti'nos corpoeoon oro{dss eilr'n seMces lo dEnMa4 and rs @mpeEaled ror lh€s. eM@s Pasl
.-tmne oel mt rilj@nri turure rer..ds l@edual ac.dinl lBas€lHl and dsltucton sll vary (lepe.d,ng M
Lacn cr'or s -nestm-t reeos 5id ob€c!€ hEslttr.rt cnplovhq Htghlllrt .frgl€s.nl itOT tNEd Dy lhc
FOIC or bv anv other Fcdml Go*nmd aeen v, .r! nol B.nt d.Po.E, .E NOT guannlEd by ure B.nk ot .ny
B k .ftliste, and rr Ylosv.lE,in ludir4ipGslbl€ ro$ ot PrielP.l.
HIGHMARK CAPITAL MANAGEMENT
an University. Tokyo
350 Caliicrnia Street
Suite 1600
San Francisco, CA 94
800-5824734
w nrghmarl(caprtal.com
Ch.istiane Tsuda
Senior Portfolio Manager
lnvestmenl Experience: sir
HighMark Tenure: sincr 2(
Education: BA. lntemationF,"*,,!R.,.N*.,,/
ABOUT THE ADVISER
HighMafto Capilal Management. lnc. (HighMark) has
over 90 years (including predecessor organizations) of
institutional money management experience with more
than $15.9 billion in assets under managemenl.
HighMark has a long term disciplined approach to
money managehent and curently manages assets for
a wide ar,ay of clients.
AAOUT THE PORTFOLIO A}IAGE E]{T TEA}I
And.ew Brown, CFAo
Senior Por$olio Manager
lnvestment Experaenc€: since 1994
HighMark Tenure. since i 997
Edrcation: MBA. Unrversity of Soulhem Califomra:
BA. Ljniversity of Southem Califomia
Andrew Bat6, CFAo
Portfolio Manager
lolrestment Expetience: since 2008
HighMark Tenure: sinc€ 2015
Educalion: &S. University of Colorado
Salvatore "Torye' ilazzo lll, CFAo
Senior Portlolio Manager
lnveslment Experience: since 2004
HighMark Tenure: since 2014
Educalion: BA, Colgale University
J. Keith Stribling, CFAa
Senior Portfolio Manager
ln\restment Experience: since 1985
HighMa* Tenure: since 1995
Education: BA. Stelson University
Aine Wimrner, CFAo
Senior Portfolio Manager
ln eslrner{ E perience: sirrce 1 987
HighMark Tenure: since 2007
Education: BA, University ot Calitomia. Santa Barbara
Asset Alocatior Committee
Number ol Members: 16
Ai/erage Years of Expe.ience: 26
Average Teflure (Years): 13
aoaggr Review Group
Number of Members: g
Average Years of Experience: 19
Average Tenure (Years): 7
-,/H,crlVlAnr*
CA P ITA I. MANAGEMENT
I PARS DTVERSTFTED PORTFOLTOSI MODERATE Q1 2017
WHY THE PARS DIVERSIFIED
MODERATE PORTFOLIO?
Comprehensive lnvestment Solution
HighMark@ Capital Management, lnc.'s (HighMark)
diversified investrnent portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimzation 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
screenjng 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 tunds.
Thrs E a highly specialized. hme consumrng
approach dedicated to one goali competitive and
consistent performance.
Flexible lnvestment Options
ln order to meet the unique needs of our clients.
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while lndex 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 diveGification - assel classes (cash,
flxed income, equity), inveslment styles (large cap,
small cap, international. value, groMh), managers
and securities. Disciplined mutual fund selection and
monitodng process helps to dnve return totential
while reducing portfoiio risk.
ASSET ALLOCATION _ MODERATE PORTFOLIO
Strategic Range Policy
Equity 40 -60% 50To
Fixed lncome 40 - 600/0 45o/d
Cash 0-2ooh 5%
INVESTMENT OBJECTIVE
To provide growth oI principal
and income. lt is expected that
dividend and interest income will
comprise a significant portion of
total return, although growth
through capital appreciation is
equally imponant.
2008
2009
2010
2011
2012
2013
2014
2015
2016
PORTFOLIO FACTS
E
Taclical
50%
47yo
3'/o
-22.8%
21.470h
12r''z%
0.550/0
1225%
13.06%
4.U%
0.14yo
6.41%
-18.1,1%
16.050/6
11.77%
2.29
10.91%
12.79%
5.72%
-0.52v.
7.23%
ANNUALIZED TOTAL RETURNS (Gross of lnvestment Managemenl Fees. bul
Net of Embedded FLrnd Fees)
Cunenl Quaner' 3.72% Cunent Quarter' 3.08%
Blended Behchma** 3.20% Blended Benchma*" 3.20%
Year To Date 3.72% Year To Dale 3.08%
Blended Benchma* 3.20% Blended Benctuna* 3.20%
l Year 9.67% l Year 8.75oh
Blended Benchmad< 8.96% Blended Benchrna* E.96%
3Year 4.58% 3 Year 1.67%
Blended Benchmad 5.21% Blended Benchnad 5.21%
5 Year 6.34% 5 Year 6.39%
Blended Benchma* 6.79% Blended Benchmad< 6-79%
10 Year 4.97% 10 Year 5.0806
Blended Benchmatu 5.25% Etended Benchnart 5.25%
Retuos r.rs lhan r ,€ar.E nor a^.larEed -BEakdM ro. BEnd.d BenchE.r 26 5tr S&P500 5% Russen M'd Cap 7 5*
Russ.n2000 325%MSC|Ei' FREE 6% USCIEAFE 33 50.ri BCUSAqg t0+ ML 1.3 yr US Corprcovt I 50./.USHgh yEld
M.si.r rr 1 75% W sh'G RE|I aidsoa ctu 1 Mth T 6 t ?n..t. ocro5er2ot: rh. bt id.lben.,r@*3*re 43!i stP 50! :1Rrs*( 1000 5t! MsclE;FE ,5'1ML r 3 Y..rco.p Go, 30.r 3C Aqg 5'. Cc t itlln T-Bir PnortoApnr200T rh.hl€nJen
ben.n@rks *r.509.: saP500 15i.ML 1 3YrCorp,Gov ,i!::0CA!9 and 5i: Cd' I MihT-Blt
ANNUAL RETURNS
lnceptioh Data
No of Funds in Portfolio
05/2006
13
naiex Plus iPassive)
2008
2009
2010
201',|
20't2
2013
2014
2015
20r6
ndex Plus iPassive)
lnception Data
No of Funds in Portlolio
10t2004
19
HOLDINGS
HighMark Plus (Active)
COIIjMBh MNIRAR N coRE Z
VANGUARO GROMH & INCOME AOM
mmE & cox sTocx FUND
HARBOR CAMAL APPRECIA-INST
T ROI'VE PR GROWT}I STOCK]
ISHARES RUSSELI I'ID{AP ETF
i{LJVEEI{ REAL ESTAIE SECUR-I
UNDISC I'GRS BEMV VAL-T
T ROWE PR r.rEW riORUoNSr
MNONW BA]LFD INT EGINST
D00GE A COX r{tl STOCK EUID
MFS IN'IL GROWT}i]
HRIIRD SCHR EM MRKT ETII
VAIIGUARD S,T INVEST GR.ADTI
PltICO TOTAL REIURN FUND]NST
PRUDEJ'JI]AI. TOTAI REIRX SND{
itATloNvJ H|GHMARj( 8 tlR6
EATON VAN FL RT & HI IIICINS
FIRST AM GOV OBUGZ
STYLE
12 5%
36%
lndex Plus {Passive)
ISHAFES CORE stP M ETF
ISHAFES S&P M VAUE ETF
tsr{AfiEs s0P 5m GRowfi ErF
ISHARES RUSSEIL IIID.CAP EIT
VAI,IGIARO REIT ETF
ISITARES RUSSEIT 2MO VALUE E
ISHAfiES RUSSEI2 N GROIYIH
ISHARES MSCI EAFE EIF
VAIGTJARO FTS€ EIIERGING MARIG
VAI{GUARo $T lt{VEST GR-ADlil
ISHARES CORE U.S. AGGREGATE
POWERSI.{ARES SEI{IOR TOAN
FIRST AI' GOV OEUGZ
Hodings are subject to change at the
discetion ol the investment fianaget.
Lame caDvalue I'a3;/. I I SmllCap
381%
6.3%
J
Tns p€noflnanc€ records sho{n repres€nt size-vesEhleo composrles ol la, etenpl acc.lnrs lhar rEet he torl ing cnteria
Cdrposles aF nBaged by H,ghM t s tl'ghMalr C€prlar Aduws (hCA, stn tuh nvenlHr aurDnry ac@.orng ro uE
PARS Mo&rale aciE 4rd p.ss€ oq6.tc ad do nd ttsw equry @il@raoo ot 25% d ltm in @ ffi slo<k
Th€ adMer ro trE PARS Midros rs Js Bank ed H,ont aR *lw as sJD-.drer lo us Bank lo ll1ar13@ rhoe ontotos
us 8an may chaq€ d'ills as nnEh as o6oq4 annuaimanaqonEd le€ o3-sed oi. sr'd'ns s(.re Asorirarch31.2o1? n€
blend€d rale rs 0 5a% US Bank @vs H'shMark 60% oI lhe annud manaqeflr€ lee fot assels sub€dvise<t by HighMaft
und6 rG suEadrsdy aqremni ;tn us Bak The 36 basis poinB padto H€hM-k. as well €s olner e4ds€s-ltlal nEy
b€ 'n@ed 'n rhe runagemsr of the porfol,o sn Ed@ lhe pornolB rgtums Asslring an invesrrEnt for tlve years. a 5%
annual iorar r€rum and d an@/ sub{<lrs4y re rare of 0 36% dedcred fin rhe ass€G ar mrta at lh€ end of edr y@r.
a l0 mllim 'nual value wdld gr* lo S 12 5,t mrlron afrd ts (Nad-Fs) and 512 76 mllim b€ltre tees (Gross-ol-Fs)
Addtonal nlorn1ato. r€q3rdrnq he fim s polross a.d pl@iues fd Bl@laing a.d flportng p€rlorene r&tts E
avarrabre L@4.equesl rnol 2010 he PARS composrle osnnrron w3s o.nqsd lrm s750 m0 atotum lo nomnrtum
PenonrEft€ results a.e cal@lared and p.esenGd rn u s i,olltrs and do mt r€ned he dedLrcnon oa rnvesrlrl r advisory
Ges @slody Ges q iares bi, do Ened the dedldlon ol ralng expens€s RoInns ar€ calculared based o.r t-ade{atE
El.nded b€ncntrErts ropresef,r HignMart s $raleolc all()@ons belw€en equrry tted 'n@m and cash and e rebalanced
flDnlhry Eendyna ret ns do nol retecl Ur€ dedJ(.ld ol advisdy i3€s d orh€r erp€ns€3 or rnvastng brr assnE th6
rernvesErEnr ot divdends and orh€. eamrngs. An mv€stor cannot inves .,rredt rn m ind€r lt'e umnag€d saP 500 hder
rs €pre atiw ot in6 perlormane ol la.q€ @npanies in tn€ u s srocl( rofiet TrE MScr a:aFE hd€r rs a fi4 noar-
ediuared M*et errarizaton rd* deegned 1o @asur6 d€v6loped mlket equrty pertonnane, excludng th€ u.s andC-.da TrE MsCr Em€rgnq Mertets F@ rft,€, 's a t@ nod€dpsrd trsker c4italiz.tofl ind€x $a is @sign€d ro
masrc eqully nster pdidror rn tha grobar eGg!.g nrartets Th€ RlJssell Midcap hdex [ra.ures lhe p€rfoftrBn a ol
th6 nid€p seqml ot the u s equrty mrlEe The Russell2o0o lnaer rcas!€s the Prforman € of rn€ smll-.3P
saqrenr ol rh€ LJ S eaJi'l Lnrvoe Tr'a US H'qh Y'eld M5ste, ll '1der l,E ls Lh€ perrormance or belo* investrErr ara.,€
u s od,a{€nmnardd @rDorare bqlds outlidr 5sJ€d n t}E u s do./Estc i€fier wJshrre RE|T rftl€r rrEasues u s
p{blrdt trad.d Rear Esrale ln6st Enr Ttust5 The untrsalEd Bloomberg aarcrars c4llal (Bc) u s aggmgate Bond .'der
,5 qffirry r6o'esllrE ot rh€ rJ s larDre borE malter a3 a wtde Thevem lyn.n lMl,13Y€a u s coQo€r. &
Govemthr lndex tE*s lne boDd perloll@e ol Tl.e UL U S CoDord€ a Goverlm hde. h a re@'n'ng tem lo
final mrunly less lnan 3 yeats The unmanaqed C,uErorO 1 .Monh Treasury &ll lftFr ra.(s tE y'€ld ol ln€ lffilh U S
HEhMa CaErarMsnsqemnt rnc (H'ohMarl) an SEcieqrslded dvastrre adrser. rs a llErry *rEd subsdary ot
MUFG Unron Bank N A (MUB) HrqhMaii h6naE€s rnslriulo.al separate a@!nl pdtfolios fd a wd€ vanely of ioGprofl
arld nop.ofil oaanErons puDr'c age4oes plblc and pnraE rebem.l DraB .nd porsal ltusls of .ll $zes ll msv alsere ai sub-adi!*r rd rrnir, tud-s codnin rlsr tuds ald 6lle.tve in6lrHr iinds MUB a $bedary or MUFG
AnE i6s Hordings coDoraton, lrovides c€iain seMces ro Highrrart and 6 @np€nsal6d fq lhos. s4ices Psl
pedorr€nce d@s nor quranteg nnlre results hdrudual a..@fl tunaqemnl and @nsltuct@ * I vary dep€nding on
each dre s 'nresti€nr reds am @f.tves lnv..lrnenlt .mploylng HlghlArt 5lr.l.916 .rE tloT irsucd by the
FDE or by .ny oth.r F.dml Govc. n€nl Ageocy, .c NOI B.Dl d.po3iL, .G NoT g@nr..d by th€ B.nk o, .ny
B.nr .rfillrre, .rd llAY loar v.l*, i*ludlng 9GCblc los of prhclp.l.
350 California Street
Suite 1600
San Francisco, CA 94104
aoo-5424734
www. highmarkcapital. com
HIGHMARK CAPITAL MANAGEMENT
ABOUT THE ADVISER
HighMa*6 Capital Managemeit. lnc. (HighMark) has
over 90 years (including predecessor organizations) ol
instilutional money manaqement experience wrth more
than $15.9 billioo in assels urder mamgemenl.
HighMark has a long term disciplined approach to
money management and cunently manages assets for
a wide array oI clients.
AAOUT THE PORTFOLIO IANAGE ENT TEAII
Andrqw Brgwn, CFAe
Senior Portfolio Manager
ln!,/estment Expeieocei since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA. University of Southem Califomia
Andrew BatBs, CFA@
Portfolio Manager
lnveslment Experience: since 2008
HighMaft Tenure: since 2015
Ed(,cation: BS, University of Colorado
Salvatore "ToOr" t{ilazzo lll, CFAo
Senio. Portfolio Manager
lnr€stment beeriencei since 2004
HighMark Tenure: since 20'14
Educalion: BA, Colgale UniveGity
J. Keith Stribling, CFA.
Senior Portfolio Manager
lnveslment Experience: since 1985
HighMark Tenure: since 1995
Education: BA. Stetson University
Christiane Tsuda
Senior Portfolio Manager
lnveslrnent Elperience: since 1987
HighMark Tenure: since 201 0
Education: BA, lnlemational Chrislian University, Tokyo
Anne Wimmer, CFA@
Senior Portfolio Manager
lnvestment E eerience: since 1987
HighMa* Tenure: since 2007
Education: BA, university of Califomia, Santa Barbara
Assel Allocadon Commitiee
Number oI Members: 1 6
Average Yea6 ol Experbnce: 26
Average Tenure (Years): '13
f,anager Review Group
Number of Membe's; I
Average Years of Experience: 19
Average Tenue (Years): 7
,/H,onlVIARr
CAPITAT MANA6EMENT
01 2017
WHY THE PARS DIVERSIFIED
BALANCED PORTFOLIO?
Comprehensive lnvestment Solution
HighMark@ Capital Management, lnc.'s (HighMark)
diversified investment port olios 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
abovcaverage 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 hrghly specialized. time consumrng
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
ln order to meet the unique needs ot our clients,
we offer access to flexible implementation strategiesl
HighMark Plus utilizes actively managed mutual
tunds while lndex Plus utilizes index-based
secu.ities, including exchange-traded funds. Both
investment options leverage HighMa*'s active asset
allocation approach.
Risk [4anagement
The portfolio is constructed to control risk through
four layers of diversiflcation - as6et classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk
INVESTMENT OBJECTIVE
To provide growth of principal
and income. While dividend and
interest income are an important
component of the objective's
total return. it is expected that
capital appreciation will
comprise a larger portion of the
total return.Rsk Sra.dard D-Ev'al o.
ASSET ALLOCATION _ BALANCED PORTFOLIO
Strategic Range Policy Tactical
Equity 50 - 7Oo/" 60% 60%
Fixed lncome 30 - 50% 35% 37Y.
Cash 0-20Y" 5'/o 3'/o
ANNUALTZED TorAL RETURNs [,'JTJ;IJr?9"*#anasemenr
Fees b'[ir
Cu.rent Quartef 4-34ok Curent Quarler' 3-57"k
Blended Benchna**' 3.71% Blended Benchna*" 3.71%
Year To Date 4 .Uy. Year To Date 3.57o/o
Blended Benchnark 3 71% Blended Benchmark 3.7170
l Year 11.25ok l Year 10.51o/o
Blended Benchmark 10.64% Blended Eenchnark 10.64%
3 Year 4.86% 3 Year 5.14o/o
Blended Benchmark 5.81% Blended Benchmark 5 81%
5 Year 7.16% 5 Year 7 -22o4
Blended Benchfia* 7 80% Blended Benchna* 7.80%
10 Yea. 5.06% lnception lo Date (114-Mos.) 4.75'/.
Blended Benchmark 5.61% Blended Benchmatu 5.28%
'Retlmslesslhanl-yea.acnola^ns.lEd-AeakdoMroreEndedA..chrui32:,:56P5006
2000 4jr! MscrEM FREE 7:1MSC E]CFE 27t! BC US A9o 6 75t: ML r-3YrUSCo,prcovl 125:': US Hsh Yierd Manerrr
2Twrsi,eRElT and5:!CLIM$TBil PnorroOcrob"r20l2 lhe bleided benchmrk €re 51c'. S&P 500 3:iRussell?0006I MSCT EAFE 5q! UL r 3 Year corp ,covl 301 Bc Agg 5ei c i 1 Mln T Br r PnortoApn 2007 Ihe blended benchro s*re
a01saP500 Si ML 1 3Y.Corp,Gov 30o6 BC Aqg anJ5:r: C b r Mrh T B r
ANNUAL RETURNS
!
Bala
Mode.alely Conserya|ve
-23.22./o
17.62%
12.76./.
1 604/0
11.930/0
15.63%
6.080/0
-o 81%
8.26./.
2008
2AA9
2010
2411
2012
2013
2014
2415
2016
PORTFOLIO FACTS
lnception Data
No of Funds in Porfolio
:nCer F !s,Pass ve,
2008
2009
2010
201',|
2012
2013
20't4
2015
2016
-25.72%
21.360/o
11.11%
,0.46vo
13.25Yo
16.61%
4.70%
o.u%
6.82%
10i2006
19
lnder Flus (Passive)
lnception Data
No of Funds in Portfolio
10t2007
13
PARS DIVERSIFIED PORTFOLIOS
BALANCED
HOLDINGS
HighMark PIus {Activei
COLUMEIA COMTRARXAN CORE Z
VANGTJARD GROWTH & INCoME.ADTJ
DODGE & CoX STOCK FUND
HARBOR CAPITAL APPRECIA.INST
T ROWE PR GROWT}I STOCK.|
ISHARES RUSSELL MID{AP EIF
NWEEN REAL ESTATE SECUR-]
UNDISC MGRS BEHAV VAL.L
T ROWE PR NEW IORZON$I
NA]]ONW BAITRD INI EGINST
DODGE & MX IITL STOCK FUND
MFS IN]L GROIA'TI.I
HRIFRD SCHR EM MRX(r EQ.I
VANGIJARD S,T INVEST GR.ADM
PIMco TOTAL RETUR},I FUNDINST
PRIiDIi'ITIAL TOTAL RErRN BNDO
NANONW HIGHMARK BN}R6
EAION VAN FL RT & HI INC.INS
FIRSTAMGOVOBUGZ
STYLE
155%
taEe caP varu.
ca;l6t I
5 0"1"
\ Floatno Rsts Noie
I 20%
4.5%
The perofiEnae .e@rds shown repreenl sE+werghted @mDos es oi la eEfiu a@unts rhal rcr Ifle folltuing crilena:
Cohboetes are @rased by h,sl-rit s H,ghMad eap tar aaisors , cCe, un trirtrnvesmr amonlaomrns io u.e
PARS Balaned acnve aFd passrveobldvas anddo nor rave equrry oient?Lon or 25q" or mrc rn one @mrcn stc
The @rposrre nare nas been changed trDm PARS Baranced roderalery Aqg.essive lo PARS Balanced on 5/112013 The
adMser ro rhe PARS porforros rs us Bank and HrghMa* serves as sub adviser ro us eank to mnage thee pordolios u5
Banl my charoe cLLenG as much as 0 60% annual ronalerenl re based o a sliding sele As ot Ma.ch 31 . 2017, tE
blended iale 's-o 53q" US Bank p3ys HrqhMarl60% o' th; annual@agerent tee loia*rs sub€dvised by HighMaft
under its sub-advrsory agreer€ with US Bak The 36 bas points paid ro HiqhMark as rerr as orher e)@en*s lll3l roy
be lntured ,n lhe oamgeme l of rhe pollfolio. ell redu@ l,he port dE relums ,suminq d rnvesimrn fd fve yea6 a 5o4
annual toral relum and an annual sub€dvsory fe rate of 0 36% deducted fom lhe assets at m.ket at ine end of eech y€er
a 10 mllron rnrralvalue would qr@ lo 512 54 mlrron afrer fs (Nelof-Fees) and 512 76 mrrrlo. beice lees (Grossnf-F6es)
Additional infomlion regardinq d'e fim s po roes and procedu.es icr calculaling and reponinq Ferfomne Ellts is
av.i'able Jpon requesr 11012010 rE PARS co-poi e de'rluo.sas crdlqed fi6 si50 000 mlrum tono mn,tumPerlomne r6ulrs a€ €ld are and ocs6n,6 r. J S dol,ar s rt @ rcl
'
erled t1e dedJ(ton d rlvestrre adusry
lees cusiody lees or tares bul do reied the deduclDn of r€ding expenses Reiums are calc{lated based on tEde-daie
Blended benchnErks repcent HighMa& s srrareEc arl@nons berwen equrry fxed rncome, and cash and are €batan@dmnthly Bench,rErk retrms do not Efled the deduclDn of ad, sory lees d od|er e4'€ns€s of mvestrnq oul asms lhe
reinvestsEnl of divideMs and olhs eamings An invesror 6nnot inve$ dtsdy rn an index The unronaqed s&P 500 hdex
rs represe atv6 ol rh€ perfoman@ of larqe @rpani6 in lte u s sl@i rorker The Mscl E{FE lnd6x is a lree f@r
adlusted crkel €pilalization index dsiqned lo reasure developed m et equ y perfol]M@ exdudrno h€ U S and
canada The Mscl EreBing Marke$ Fre6 lndex is a t_e ioar.adlusted mfr(er cap,tarEaton nder rhar ra desrqned tolEsuG equty mrket perromance rn he qlobal emerqin! rorters The Rcsell MidGp lnde. reaures rhe perfomn@ ol
the rid+p seqrenr oi he U S equrtv unrvoG€ Ihe Russell2O0O lndex reasuEs ihe perfom@ ot fE smrl€psegMl oi $e-U S equrry unrvetse T'he US HEh \ Eld Ma$er ll lndex t acks the perfo.iEn@ ot bdw nvslrent a6de
U S dollr{enoriMled @Dorale bonds publrcly rssued in tTe U S doiEstic narlel Wilshire REIT index masures U Splblrcly rraded Real EsEre Ln@stmnt Ttusrs The unmanagst Broonb€rg &rcrays C+ilar (BC) U S Aggregare Bod
lndex is gererally representalive of ttle U S taMbJe bond mart\€l as a Mlol€ Ihe Msml Lynch (ML) 1 3 Year LJ S Corporate
e Govmrenl lnder lracks lne bqt perirmn@ oI The ML U S Corpo6le a Govemmir hder. sh a reflra ninq terin tofnalrotlnty le$ lh.n 3 yea6 The u'nmnaged Crlgroup 1-Month Ti&BUry Bill hdex t6.ks lhe yield or lhe 1 mon-th U S
HighMark Caprlal Manaqemern, lnc (HighMad<), an SEciegiste.ed inveslrnmt adviser sawnorry tuned subsidr.ryor
u JI G Unron Ba1{ \ A tM L B) H thMaa manaees rnsLrLtonal separare a@unr pordolos 'd a {de var ely ol tor p.of r
and 1onp orlo,garzarions publicag c6 public and pnvale relirerenr pla4s and peEonal rtusts ol all sr2es llry also
setue as sub advier for mulual tunds, @,rmn lrust tunds and @llectile invest!renl tsds MUB, a subsidiary or MUFG
Arun€s Holdings Cofpqarion, provides @rtain setoiB to H€hMdk and is (mpeMred ttrtnee *Mces Pasr
perf()lmne does rct quaratee tulure results lndluduala.@nl lMagemnt and dnsituclion willvary r,€pendinq on%ci clienl s investrEnt reeds and obFctrves lnEstments employlnq Htght .rt strategies arc ttol insued by lh.
FDIC or by rny oth- Fedehl GovemreEt Age.cy, irc NOT Bank depo5ils, arc NOi guaEnteed by the Bani or .ny
Bank afiliate, and iIAY los. vale, inctuding possible lo$ of principal.
lndex Plus (Passive)
ISHARfS CORE S8P 5M ETF
ISHARES SAP 5M VALUE EIF
ISHAFES S&P 5M GROWTH ETF
ISHARES RUSSELL MID-CAP EIF
VAIIGUARD FEIT FIF
ISHARES RUSSEI AM VALUE E
ISIIAFES RUSSETL 2MO GROMH
ISHAFES MSCI EAFE EIF
VANGUARD FISE EI'ERGING MARXE
VAIIGUARD S{ INVEST GR-ADNI{
ISHARES CORE U.S, AGGREGATE
POWERSTIARES SENIOR LOAN
FIRST AM GOV OBUGZ
Holdings are subject to chahge at the
discretion of the investment manager.
30.8%
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
80u5824734
www highmarkcapital com
ABOUT THE ADVISER
HighMari€ Capital Management, lnc. (HighMark) has
over 90 years (including predecessor organizations) oI
institutional money management experience with more
than $15-9 billion in assets under managemenl.
HighMark has a long lerm disciplined approach to
money management and cunently manages assets for
a u,ide anay of clients-
ABOUT THE PORTFOLIO
'JIANAGEIIIEI{T
TEAM
Ardrew Brown, CFA@
Senior Portfolio Manager
lnvestment Expe ence: since 1994
HighMark Tenure: since 1997
Educationi MBA, University of Southem Califomia:
BA, Uni\,/ersity ot Southem Califomia
Andrsw Bates, CFAo
Portfolio Manager
lnveslment Experience: sinc€ 2008
HighMark Tenure: since 2015
Education: BS, University of Colorado
Satuatore "Tory" Itlilazzo lll, CFAo
Senior Po,tfolio Manager
lnwstment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFAo
Senior Portfolio Manager
lnvestment Experience: since 1 985
Highl\4ark Tenure: since 'l 995
Education: BA. Stetson University
Christiane Tsuda
Senior Portfolio Manager
lnvestment Experience: since 1987
HighMa.k Tenure: since 2010
Education: BA. Internalional Chistian University. Tokyo
Anne Wimmer, CFA.
Senior Portfolio Manager
lnvestment Experience: since 1987
Highl\4ark Tenure: since 2007
Education: BA, Universily of California. Santa Barbara
Asset Allocation Committee
Number of Members: 16
Average Years of Experiencer 26
Average Tenure (Years): 13
tt anager Review Group
Number of Members: B
Average Years of Experience: 19
Average Tenure (Years): 7
-,/H,orlVIRnr.
CAPITAL MANAGEMENT
WHY THE PARS DIVERSIFIED
CAPITAL APPRECIATION PORTFOLIO?
Comprehensive I nvestment Solution
HighMark@ Capital Management. lnc's (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimLation techniques, four layers ol
diversifrcation (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
abov+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 s a highly specElized. hme consumrng
approach dedicated to one goal: competitive and
consistent performance.
Flexible lnt estment Options
ln order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
tunds while lndex Plus utilizes iodex-based
securities, including exchange-traded funds. Both
investment options leverage HighMark's active asset
allocation approach.
INVESTMENT OBJECTIVE
The primary goa, ol the Capital
Appreciation objective is groMh
of principal. The major portion
of the assets are invested in
equity securities and market
fl uctuations are expected.P
CapitalAppreciation
Moderate y ConsetoatNe
Curent Quarter' 1.18%
Blended Benchma** 4.54%
Year To Date ,1.,€%
Blended Benchmatu 4.54%
l Year 13.08%
Blended Benchma* 13.11%
3Year 5.87%
Blended Benchma* 6.48%
5 Year 8.39%
Bleoded Benchmatu 8.96%
lnception to Date (99-Mos.) '10.,16%
Blended Benchnark 11.29%
'Rerumsr.rsrh.nr-y..r.6.or..^u.rtred'.ae.kdoMro.Brend€dB.nchrorr39sqrsaP50075%RussenM'dCrp105i!
Ruser2000 525+:MSCTEMFREE l025ltilSC E^FE 16+BCUSA9g 3\ML1-3YruSCo.PGovl r'r!uSH'EhY'eld
Mrierr ?n wish@ RE|T .^d 51c,! 1 r&rr T B
Rrsk,SIa.dard Devralc.r
ASSET ALLOCATION _ CAPITAL APPRECIATION PORTFOLIO
Stralegic Range Policy Tactical
Equity 65 - 85% 75oA 75'/.
Fixed lncome 10 - 30% 20% 23Yo
Cash 0 - 20'k sok 2%
ANNUALTzED ToTAL RETU RNS lr"J,Tfl'ffiS"J.lIanasement
Fees bd
ANNUAL RETURNS
2008
2009
2010
2011
2012
2013
2014
2015
2016
PORTFOLIO FACTS
Hrghl.iark Plus (Aciive)
lnception Data
No of Funds in Portfolio
N/A%
23.770
12.95%
-1 35%
13.87%
20.33%
6.05%
-0.279/.
8.81%
lnder Pius lPassrve,
lnception Data
No of Funds in Portfolio
N/A
13
PARS DIVERSIFIED PORTFOLIOS
CAPITAL APPRECIATION Q1 2017
Risk Management
The portfolio is constructed to cont.ol risk through
four layers of diversification - asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, groMh), managers
and securities. Disciplined mutual fund selection and
monito.ing process helps to drive return polential
while reducing portfolio risk.
01i2009
'19
HOLDINGS
STYLE
\- Shqt-Tem Born
s
ATE NOT B
HIGHMARK CAPITAL MANAGEMENT
350 Califomia Street
Suite 1600
San Francisco, CA 94104
800-5824734
www highmarkcapital.com
AAOUT THE ADVISER
HighMark€ Capilal Management. lnc. (HighMark) has
over 90 years (including predecessor organizations) ot
institutional money management experience wilh more
than $15.9 billion in assels under management.
HighMa* has a long te.m disciplined approach lo
money management and cunently manages assets for
a wide anay oI clienls.
ABOUT THE PORTFOLIO MANAGETIIE T TEAi'
Andrew Brown, CFA€
Senior Portfolio Manage.
lnveslmenl Experience: since 1994
HighMark Tenure: since 1997
Education: MBA. University of Southem Calilornia;
BA. University of Soulhem California
Andrew Bates, CFA!
Portfolio Manager
lnvestment E)eerience: since 2008
HighMark Tenure: since 2015
Education: BS. unaversity of Colorado
Salvatore "Tory" t{ilazzo lll, CFAE
Senior Portfolio Manager
lnvestment Experience: since 2004
HighMark Tenure: since 2014
Educataonr BA. Colgate University
J. Keith Stribling, CFAc
Senior Portfolio Manager
lnveslment Experience: since 1985
HighMark Tenure: since 1995
Educalion: BA, Slelson University
Christiaoe Tsuda
Senior Po{tiolio Manager
lnvestment E)eerience: since 1987
HighMark Tenure: since 2010
Educalion: BA. lntemalional Christian universily, Tokyo
Anne Wimmer, CFN
Senior Portfolio Manager
lnvestmenl Experience: since'1987
HighMark Tenure: since 2007
Education: BA. University of Califomia. Santa Barbara
Assol Allocation Committee
Number of Members: 16
Average Years of Experience: 26
Average Tenure (Years)i 13
Manager Review Group
Number oI Members: 8
Average Years of Experience: 19
Average Tenure (Years): 7
fOlC or by any olher Fedeal Govemm€nt Ag.ncy,
B..l.tllla.te, and AY losevalue. includlng Possi
HighMark Plus (Activo)
COLUMBN CoNTRARJAN coFE.Z
VAfiGUARD GROWIH & INCOME AOM
DODGE 8 cox STOCK FUND
HMAOR CAPIIAI APPfi ECIA]NST
T ROWE PR GROWT]] STOCKi
ISHAFES RUSSETT MIDTAP EIF
NTJVEEJ{ REAL ESTATE SECUR.I
UNDISC MGRS 8EI]AV VAL{
T ROWE PR NEW HORIZONSI
NATIONW g{ITFD INI ECIINST
000GE E cox tr{Tl- sTocx FUND
TIFS II{TL GROWTIII
HRITRD SCHR EM MRKT EGI
VANGTJARD S,T INVEST GR.ADM
PIMCO TOTAI. RETUFN FUNI}INST
PRUDEI{TIAL TOTAL REIRiI BNDO
NATIONW HIGHMARX BNI}R6
EATON VAN FL RT & HI INCINS
FIRST AM GOV OSUC}Z
5 sa6
6.2%
105%
lndex Plus (Passive)
ISHAFES CORE S&P 5M EIF
ISIIAFES SEP 5M VALUE ETF
ISRARES SEP 5M GROWI]T EIF
S|IANES RUSSEL]- iIItrCAP EIF
VANGUARO REIT FTF
ISHARES RUSSEI M VALUE E
ISHARES RUSSEI 2M) GROViTTH
ISHARES IISCI EAFE ETF
VAI.IGUARD FTSE EMERGING I,iARXE
VANGI]ARD $'T II,IVEST GR.ADII
ISHARES coRE U,S. AGGREGAIE
POV{ERSRARES SEI{IOR TOAN
FIRST AM GOV OBUGZ
Holdings are subject to change at the
disqetion ol the investfienl fianaget.
Th€ p6rom@ records sno*n ,epresed sE€-weqhed conpos es ol tax ercnpr a&ounrs lhat meer the toll@ng mt6n.:
Cmposiles ae ma.ag€d by H'ghMsrt s H,gnMaa Csp alAdv'sors rHCAI nn turr'nve$mr aut'o.ty a@d'ng io th€
PARS CaPrl.r Appr€oato. a.tv€ *rd p.ssrve oqerws and dc not he equry @@ntraio o125.6 d mre.n on€drrnon sioct secun9
Ihe aMser !o UE PARS po.dol'c rs uS B.nr e HrqhMalt s€iE 6 sb€dvs€r ro uS Sanr to nBnao€ these portohos
US Eanx fta, 6{9€ cl'eiE .s lrh .s O 50\ annual man3gffErl l* based on a slrdrnq s.lie A! ol tia.ci 31 2017 the
blEnd€d..re
's
0 5a% US Bank pars H'ghMa.t 6S.r ol rE annual lilegeffir e6ld ass€rs *tr.<tvsed b, H€hMar*
un&r rG sub a{,visory .gre€irErn wif us Bek rh€ 36 bd.s poinrs pard ro H,ghMrt as we{r as oh.r epenses th3t riay
be rnclnod 'n he man€Serent ol $e ponfolro {ll redr@ tE por(orc eums Assumrng e rnvssnErn lor, ve ye6.s a 5%
annual
'otal
retum and En annual *b{dv'so1 fe Ele ol 0 36% dedudod lrom ltu ass6rs al marker ar lhe end ol €acn ,eaa 10 frllion inital vd6 *ould grtu to S 12 5rr mll'M aner lees (Nerd r€es) and S 12 76 mrrhon b€lore lees (Crossor-FEs)
Adrttdral infqmtm rsQardrm OE tm s Dolroes and O.aaadues ld ca,oJlainO and reoo.tnq D€nonrE@ reerts 'sa6ilabr6 L@on equ.n h ol ?0r0 tr€ PARS co4posrl€ delftuon *?s chanqed rrdn s r5o 0@ mdrum to m mn,tumPe.bm@ resrlls are calanlared and prei€nl€d rn U S &trars aE do mr rd€cr Br€ dedrcton o, 'n6rnHn advery
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lnternal Revenue Service
lndex Number: 1 15.00-00
U.S. Bank National Association
c/o Susan Hughes, Vice President
3121 Michelson Drive (Suite 300)
lrvine, CA 92612
Legend
Trust
Trust Agreement
Trustee
Department of the Treasury
Washington, DC 20224
Third Party Communication: None
Date of Communication: Not Applicable
Person To Conbcl:
Robin J. Ehrenberg, lD 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
Public Agencies Post-Employment Benefits Trust
Agreement
U.S. Bank National Association
Dear Ms. Hughes:
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 1 '15 of the lntemal Revenue code (lRC) and (2) the Trusi 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 .1 15. The employer,s goveming 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. ln 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
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 Trust's assets may not be used for any other
purpose. Each employe/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 employe/s health and welfare benefit obligation or the
employe/s pension obligation may only be used for purposes of satisfying that
particular obligation. The assets held in an employe/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{hirds of all employers then
participating in the Trust. The employers may terminate the Trust by unanimous
agreement of all employers.
IRC section 1 15(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.8.45, 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 1 15('l ), because
such investment constitutes an essential govemmental 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.
2
Upon termination of the Trust, any assets remaining in an employeis 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 IRC section 1 15.
LAW AND ANALYSIS
lssue'l - IRC section 115(1)
PLR-146796-'t4
Rev. Rul. 90-74, 1990-2 c.B. 34, hords 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 excludablelro, gro.i '
income under IRC section 115(1), because the organization is performing ai essentialgovernmental function. The revenue ruling states that the income of such an
organization ls excludable from gross income so long as private interests do notparticipate in the organization or benefit more than incidentally from the organization.
The.benefrt to the employees of the insurance coverage obtained by the m-emberpolitical subdivisions was deemed incidental to the public benefit.
Through the Trust, participating public agency employers fund health and welfare andpension obligations for retired employees. Each of the Trust,s participating employers isrequired to be a state, political subdivision of a state or an entity the incom"e or wntn isexcludable from gross income under IRC section 1 1s. providing health, welfare andpension benefits to cunent and former employees constitutes th-e performance of anessential govemment function within the meaning of IRC section itsll;. see Rev. Rul.90-74 and Rev. Rut. 77-261.
The Trust's income accrues to its participating employers, all of which are poritical
subdivisions of a state or entities the income of which is excludable from gross incomeunder IRC section 115. No private interests will participate in, or benefit fiom, the
operation of rrust, other than as providers of goods or services. The benefit toemployees is incidental to the public benefit. See Rev. Rul. 90_74.
ln no event, including dissolution, will the Trust's assets be diskibuted or revert to anyentity that is_ not a state, a political subdivision of a state, or entity the income of whicir isexcludable from its gross income by application of IRC section 1iS(1).
lssue 2- IRC 6012(aX4)
section 301.7701-1(b) of the procedure and Administration Regulations (Regurations)provides that the classification of organizations that are recogniied as separlte entitiesis determined under sections 3o1.7T01-2, 301 .770'r-a, and ior ]7ol4, unress aprovision of the IRC provides for special treatment of that organization.
section 301.77014(a) of the Regurations provides that, in general, an arrangement wibe treated as if it can be shown that the purpose of the arrangement is to veit intrustees responsibility for the protection and conservation of firoperty for beneficiarieswho cannot share in the discharge of this responsibirity and, iheiefoie, are notassociates in a joint enterprise for the conduct of business for profit.
The Trust.enables pubric-agency emproyers to set aside funds to be used to satisfyeach employeis separate pension and health and werfare benefit obligations. The
PLR-146796-14
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. IRC 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 1 15(1 ).
2. The Trust is classified as a trust within the meaning of IRC section 7701(a)
and section 3O1 .77014(a) of the Regulations. Because Trust's income is
excludable from gross income under IRC section 1 15, the Trust is not
required by IRC section 6012(a)(4) to file an annual income tax return.
Except as expressly provided herein, no opinion is expressed or implied conceming the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. This ruling concems 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.
4
This ruling is directed only to the taxpayer who requested it. IRC section 61 10(kX3)
provides that it may not be used or cited as precedent.
ln accordance with the Power of Attomey 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 siatement executed
by an appropriate party. while this office has not verified ,ny of tnl material submitted
in support of the request for rulings, it is subject to verification on examination.
Sincerely,
Ke neth M n
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
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Form ADV Part 2A
HighMark Capital Management, Inc.
350 Califomia Street, Suite 1600
Saa Francisco, CA 94104
www.highmarkcapital.com
Contact Info: I -800-582-4734
this Form ADV Part 2A ( 'the Brcchure") provides information dboul the qtalifrcations dnd business praetices ofHighMark
CaPilol Management, Inc. lfyou hate ant questions about the contents ofthis brochure, pleose contdct us at I-800-582-1734.
the inlornation in this btochure hds nol been approved or wrified by the united States Securities and Exchange Commission or
b)) ahy state securities authoily.
HiEhMark CaPilal Maiagenern, Inc. is a regiskred imeslmeal adviser. Registration ofan irNestment adviset does not imply aot
level ofskill or training.
Additionol informotion aboul HighMark Capital llarmgemen\ In . is aroilable on the SEC's website at vrv,w.adviserinfo-sec.tov
HrcsIVIanr"
CAPI TAI- MAiIAG E MENT
YlCor, Dlsclp[nG Rleilt !"
March 29, 2016
HighMark Capital Management, Inc. ("HCM") has not made any material changes to its Form ADV Part
24. (the "Brochure) since its last update on October 26, 2015.
Additional non-material changes that update, enhance or further clariry 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 Nalionwide in lhe fall of20l3, and that HCM may receive additional
compensation from Nationwide in the fall of20l6 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 ofthe Brochure by calling l-800-582-4734 or by visiting
www.highmarkcapital.com.
HighMark Capital Management, lnc. I
Item 2: Material Changes
2
Iteml:CoverPage
Ilem 2: Material Changes
Item 4: Adr isory Business ... . .... . .
Item 5: Fees and Compensation
Item 6: Performance-Based Fees and Side-By-Side Management ..
Item 8: Methods ofAnalysis, lnvestment Strategies and Risk ofLoss
Item 9: Disciplinary Information
Item l3: Review ofAccoun6 ........
ltem l4: Client Referrals and Other Compensation
Item l5: Custody ....
ltem l6: lnvestment Discretion
Item l7: Voting Client Securilies
Item l8: Financial Information
. ...Page I
Item 3: Table ofContents ..............-.. .......page 3
Page 2
Page 4
........Page 6
..................Page 9
Item l0: Other Financial Industry Acrivilies and Affiliations . ....Page 12
Item I l: code ofEthics, Panicipation or Interest in Client Transactions and personal rrading .....page l2
Item 12: Brokerage Practices
........................Page I I
Page l0
Page 17
Page 17
.Page l8
Page 18
Page l8
Page 19
HighMark Capital Management. Inc. I
Table of Contents
3
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 MLIFG Union Banks's uhimate parent company is Mitsubishi
UFJ Financial Group, Inc. ("MUFG"), a Japanese-based financial institution. Please refer to Item l0:
Other Financial Industry Activities and Affiliations, for additional information regarding HCM's
af{iliates.
lncluding 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 ofDecember 31,2015, HCM had $16.3
billion assets under management, S15.1 billion ofthese 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.
Manaqed Accounts
HCM manages accounts for clients with which it has a direct investment man€ement agreement ("direct
accounts") and also manages accounts for MUFG Union Bank, certain MUFG Union Bank affiliates ard
US Bank, National Association (''U.S. Bank") under applicable investment advisory services agreements
("indirect accounts"). HighMark also manages institulional separate account portfolios for a wide variety
offor-profit and nonprofit organizations, public agencies, public and private retirement Plans, and
personal trusts ofall 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 ofthe following:
o Assisting the client in developing and modifying investment objectives, guidelines and
restrictions.
o Determining an appropriate investment strategy, including asset allocation, consistent with the
investment objectives, guidelines and restrictions established by the client. and reviewing and
periodically modirying the strategy through meetings and consultations with the client or its
agent.
. Implementing the client's investment stratery tfuough the purchase and sale ofsecurities and
olher financial instruments, the exercise ofoptions, warrants, and subscription rights, and the
investment and re-investment of cash balances for the account.
o 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 manier.
o Reconciling its records with those ofthe client or its cuslodian (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 stratery, as well as the client's
investment objectives, guidelines and restrictions.
o Fumishing repons to the client on a periodic basis concerning account activily and performance.
For certain clients, HCM engages unafiiliated sub-advisers to assist it in providing is services, or to
provide clients access to third party investment platforms, some ofwhich include private equity or hedge
fund investment options.
As a whotly owned subsidiary and the sub-adviser to MUFG Union Bank's managed account business,
HCM is required to comply with MLIFG Union Bank's applicable compliance policies and procedures,
which include reporting obligations thal are not generally required by third party clients.
HighMark Capital Management, lnc. I r
Item 4: Advisory Business
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 trusl and the Nationwide Variable hsurance Trusl (collectively "Nationwide")
under sub-advisory agreements with Nationwide. Please see Item 5: Fees and Compensation for a listing
ofthe 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 ofservices HCM provides for these indirect accounts is similar to the services iI 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 B"nk
HCM serves as a sub-adviser to MUIG Union Bank with respect to certain client accounts, including
retirement plans, for which MIIFG 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 ofthe account, client investment objectives. guidelines, restrictions, and other
circumstances, HCM may invest some or all ofthe 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, *hich are available through an arrangement with SEI
lnvestment Management Corporation.
HCM also serves as sub-adviser to the HighMark Management Account Strategies. which are MUFG
Union Bank-sponsored wrap accounts. A \lrap account is an account for which the sponsor charges a fee
that is not based dhectly upon transactions in a client's account but instead is charged for investment
advisory services and the execution ofclient 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 ofindividual fiduciary accounls for which MUFG Union Bank has
investment responsibility. The assets ofsuch accounts are combined into one or more investment funds,
each with its own specific investment stmtery. Although similar in some respects to mutual funds,
collective investment funds are adminislered by banls under applicable barking 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 ofthe fees it receives as compensation for these sub-advisory
sewices, as described in the agreement between MUFG Union Bank and HCM. The range ofservices
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
inveslment 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 inveslment models in
HighMark Capital Managemenl. tnc. I
managing the client's assets. Generally, the models cover a range of investment strategies from income to
capital appreciation. HCM offers these investmenl models to clienls through MUFG Union Bank's
Personal Trust's platform. MUFG Union Banl pays a fee to HCM based on assets under management.
HCM also has a non-exclusive licensing arrangement with Enveslnel Asset Management, Inc., and its
legal affiliates (collectively. "Envestnet") to provide various investment models for use in Envestnet's
Third Party Models Program. Under the anangement with Envestnet, HCM is responsible for
constructing and maintaining each model, while Envestnet is responsible for implementing and executing
all trade orders for each Envestnet client based on the respective inveslment models. The HCM Models
are accessed through the Envestnet platform.
HCM pays Envestnet a one-lime set up fee for the construction and installation ofeach model on its
platform. HCM, as the model provider, eams a fee paid by Envestnet pursuant to the model licensing
agreement between HCM and Envestnet. UnionBanc Investment Services, LLC ("UBlS"), a subsidiary of
MUFG Union Bank and a registered broker dealer and investrnent adviser, may utilize the
aforementioned HCM Models in providing advisory sewices to its clients. Please consult Envestnet
Asset Management's Form ADV, Part 2,A. for a detailed description ofthe Third Party Models Program.
A copy ofthe ADV may be obtained by visiting www.adviserinfo.sec.gov.
Consulting Sen'ices
HCM provides investmenl 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 ofcertain securities markets, or similar services. HCM also assiss MUFG
Union Bank in the evaluation ofsub-advisers retained or proposed to be retained by MTIFG Union Bank
in connection with MUFC 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 ofthe
sewices to be provided. Such fees may be fixed or based on a percentage ofthe assets subject to the
consulting arrangemenl and such fees are generally payable upon provision ofthe services.
Item 5:
Fees are generally charged as a percentage ofassets under management as described in the investmenl
advisory agreement between HCM and the client. Fees may be negotiated on a relationship basis.
In addition 1o the investmenl advisory fee, it is possible that clients would pay other fees related to the
management oftheir account depending on the type ofaccount and investment such as, brokerage, trading
cost, custody, transfer agent, fund accounting and administration, l2b-1, shareholder servicing and
investment management fees associated with any third-pafiy fund. Please see ltem l2: 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 olher 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. I 6
Customized Investment Management Fee schedule: Multi-Assets and Specialized Accounts
0.85% on the first $10 million
0.75% on the next $15 million
0.65010 on the next $25 million
0.50olo on amounts over $50 million
Fixed Income Fee Schedule: Liquidity/Cash Management Accounts
0.15% on rhe first $10 million
0.l2oZ on the next $10 million
0.10olo on amounts over $20 million
Fixed Income Fee Schedule: Short Term Fixed Income Accounts
0.30% on the first $10 million
0.25olo on the next $15 million
0.20olo on the next $25 million
0.15olo on the next $50 million
0.10olo on amounts over $ 100 million
Fixed Income Fee Schedule: Core Fixed Income Accounts
0.50% on the first Sl0 million
0.3502 on the next $15 million
0.300% on the next $25 million
0.250 on the next $50 million
0.2002 on amounts over $100 million
Fixed Income Fee Schedule: Municipal Accounts
0.50% on the first $10 million
0.35olo on the next $15 million
0.3002 on the next $25 million
0.2504 on the next $50 million
0.20olo on arnounts over $100 million
Equity Fee Schedule: U.S. Large Cap Fundamental Accounts
0.75% on lhe first $10 million
0.60010 on the next $15 million
0.50olo on the next $25 million
0.45olo on amounts over $50 million
Equity Fee Schedule: U.S. Large Cap Disciplined Equity Accounts
0.650lo on the first $10 million
0.50olo on the next $15 million
0.40olo on the next $25 million
0.3502 on amounts over S50 million
Equity Fee Schedule: U.S. Small Cap Accounts
0.90% on the first Sl0 million
0.70olo on the next $15 million
0.650 on the next $25 million
0.6002 on amounts over $50 million
HighMark Capital Management, Inc. I 7
Equity Fee Schedule: U.S. Micro Cap Accounts
1.05olo on the first $10 million
1.00olo on the next Sl5 million
0.957o on the next $25 million
0.90olo on amounts over 550 million
HCM requires a minimum annual fee ofSl0,000 for managed account investment management services.
In certain circumstances, the minimum fee may be negotiable.
For clients' assets cuslodied 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 oIMUFG Union Bank, clients
will be invoiced. Fees are paid in arrears and clienls have lhe option to pay fees monthly or quarterly.
Based on investment advice provided by HCM, MUFG Union Bank as discretionary trustee or agent may
place a MUFG Union Bank client's assels in a fund sub-advised by HCM. Because HCM is paid an
advisory fee by the sub-advised fund with respect to those assels, MUFG Union Bank credits each MUFG
Union Bank managed accounl for those assets an amount equal to the sub-advisory fee which HCM
receives. lfa client accounl for which MUFG Union Bank acts as discretionary tn:stee or agenl, 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 l2b-1 fee.
HCM may recommend that a non-discretionary client invest in a fund that is sub-advised by HCM. Ifthe
non-discrelionary client chooses to invest in lhe sub-advised fund, the clienl will generally not receive any
fee waivers or reduclions. It is possible that such a client could select a class ofshares ofa sub-advised
fund that charges both a sales load and a Rule l2b-l fee. In that event, the client will, in essence, pay
advisory fees at two levels, thal is, a separate advisory fee paid to HCM by the client, and the advisory fee
lhat 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-Adr ised Funds
The table below shows the fees received by HCM as sub-adviser to Nationwide.
Sub-Advased Funds Fee Received (Annual Ratel t
Nationwide HighMark Bond Fund 0.15% on Subadviser Assets up to $250 million;
0.125% on Subadviser Assets of $250 million and more but less than $1
billioni
0.10% o.l Subadviser Assets of $'l billion and more
Nationwide HighMark Califomia lnler.nediate Tar-F.ee
Bond Fund
Nationwide HighMark Nalional lntermediate Tax-Free
Bond Fund
0.25olo on all Subadviser Assets
Nationwide HighMark Shon Term Bond Fund 0.10o/o on Subadviser Assets up to $500 million;
HighMark Capital Management, Inc. I
Fees are prorated for the billing period aI the beginning or end ofa client relationship. The method offee
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 agreemenl between HCM and the respective party.
8
Item 6:
tFee is based on Subadviser Assets. whicfi are that portion of the assels o,a Fund that the investment adviser to such Fund
allocates and puls under the control of HCM as the sub-adviser
tt The term "Aggregate Subadviser Assets" means the aggregate amount resuiting fiom the cornbination oI Subadviser Assets of
the Nationwide Fund together wiitt Subadviser Assets of the NVIT Natjonwide Fund, a series of Nationwide Variable lnsuEnce
Trust.
HCM sold its mutual fund sponsorship business to Nationwide in the fall of20l3. HCM may receive
additional compensation from Nationwide in the fall of20l6 based on the total amount ofassets in the
Nationwide Funds, including assets held in accounts advised or sub-advised by HCM. connected to that
transaclion.
Generally, performance-based fee structures create a potential conflict ofinterest by creating incenlives
regarding portfolio investments that could compromise the independent judgment ofthe investment
adviser. Although there are currently none, it is possible that HCM might enler 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 circumslances.
Sub-Advised Funds Fee Roceived (Annual Rate) t
0.0975% on Subadviser Assets of $500 million and more but less than g1
billion:
0.0925% on Subadviser Assets of $1 billion aM more
Nationwide HighMark Large Cap Core Equity Fund 0.27% on all Subadviser Assets
Nationwide HighN4ark Small Cap Core Fund 0.475olo on all Subadviser Assets
NVIT Nationwide Fund 0.25% on Aggregate Subadviser Assetsttup to $250 mi ion;
0.20% on Aggregate Subadviser Assetstt of g2S0 and more but tess
than $1 billion:
0.18% on Aggregate Subadviser Assetstt of g1 billion and more
Nationwide Fund 0.25% on Aggregate Subadviser Assetsttup to $250 mi[ion:
0.20% on Aggregate Subadviser Assetstt of 9250 and more but less
than $1 billion:
0.18% on Aggregate Subadviser Asselsttof S't billion and more
HighMark Capital Management, lnc. I
Portfolio managers for each Fund sub advised by HCM receive a salary from HCM and participate in the
MtrFG union Banl's incentive compensation plan, which is an annual plan that pays a bonus. A portfolio
manager's bonus is generally a percentage ofhis or her salary and is based on (l) an evaluation ofthe
manager's investment performance, (2) achievement ofbudgeted financial goals and (3) meeting of
business objectives determined by a portfolio manager's direct supervisor. In evaluating investment
performance. the plan generally considen the one-and three-year (or shorter period ifapplicable)
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 ofa portfolio manager's investment performance evalualion is also based on the performance of
other Funds or other accounts that the porfolio manager does not manage. A portfolio manager may also
be compensated for providing securities/quantitative analysis for certain Funds, where applicable.
9
Item 7:
HCM provides investment advice to individuals, high net worth individuals. investment companies,
pension and profit sharing plans, pooled investment vehicles, charitable organizalions, corporations, state
and municipal govemment entities, corporate employee benefit plans, public agencies, foundations and
endowments, Taft-Hartley plans, hospiral 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 $ l0 million for liquidi$ accounts. HCM may lower the minimum
account size in its sole discretion.
Item 8:
Methods of Analysis
HCM equity professionals combine fundamental, quantilalive, 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 growlh rates that have
suslainable competitive advantages. The Core team uses information-based analysis to find companies
where informed investon have positive outlooks. All managers consider the risks involved in their
holdings and how such risk might affect their ponfolio.
HCM's fxed income investment professionals perform intensive market and credit research to identif
high-quality issues. To minimize volatility in client portfolios, HCM carefully manages interest rate and
credit risk and reposilions portfolios it deems appropriate 1o take advantage ofopportunities 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 ofinvestment grade
domestic and foreign dollar-denominated securities according to each client's specific liquidity needs.
Inveslment Stratesies
HCM provides a range ofstyle-specific strategies using both intemal and ex:temal managers. HCM's
approach is a disciplined. consistent process to aclively 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 Califomia
Tax-Free. For management ofinstilutions' cash and excess working capital, HCM offers both domestic
and non-U.S. liquidity strategies invested principally in money market instruments. Muhi-asset strategies
include a variety of risk/retum balanced portfolios and Custom lnvestment Management. HCM offers
other strategies through third-party sub-adviser relationships.
Risk ofLoss
tnvestments in HCM strategies are not bank deposits, are not guaranteed by any agency ofthe U.S-
govemment, and involve risk, including the possible loss ofprincipal, a risk that clients should be
prepared to bear.
HighMark Capital Management, Inc. I r
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 ofa security, or the counlerparty to a contract, will default or
otherwise become unable to honor a financial obligation. Generally speaking, the lo\r'er a
securit-v's credit rating, the higher its credit risks. Ifa 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 i erest rates. Interest rate risk usually is modest for shorler-term securilies, moderate for
inlermediate-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 atso could
make it more difficult to value a fixed income security.
Counterparty Nsk: 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 ofthe
investment to decline.
Foreign Risk: Compared with investing in the United States, investing in foreign markets
involves a greater degree and variety ofrisks including the possibility ofdelayed 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 ofsuch debt.
Finally, the value offoreign 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 govemmental restructuring or collapse.
Reinveslment Risk: The risk that the proceeds, dividends, or interest generated from an
investment are reinvested in a security that offers a lower mte of retum compared to the retums
generated by the original investment.
Non4iversif cation Rist The risk involved with excessive exposure to securities in any one
issuer, industry or sector.
Alternatite Investmen, RrJk Altemalive mutual funds and other managers that employ altemative
investment slrategies primarily invest in non-traditional asset classes and implement speculative
investment techniques. Altemative inveslments often offer investment retum characteristics that
are not correlated to traditional investments, but also present greater and/or unique risks to
investors. Such risks include: loss ofall or a substantial portion ofthe investment due to
HighMark Capital Management. Inc. I
Investment f,erformance can also be affected by other risks such as:
o Market Risk: The risk ofa 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.
11
leveraging, short selling or other speculative practices; management risk; lack ofliquidity;
restrictions on transferring interests; higher or excessive volatility; absence ofinformation for
valuations and pricing; less transparency on underlying investments, complex tax structures and
delays in tax reporting; less regulation; and potentially higher fees than [aditional investments.
Management Risk: The risk lhat a stratery or investment technique used by HighMark may fail to
produce the intended result or achieve its investment objective.
Tax Risk: The risk of unfavorable tax consequences to a client that could result from the
administration ofa client account pursuant to the advisory services described in this Brochure
Item 9:
HCM has not been involved in legal or disciplinary events thal are material to its advisory business or the
integrity of its management.
Material Related Partv Arrangements
As noted in ltem 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 rum, is a wholly
owned subsidiary of Mitsubishi tlFJ Financial Group. lnc. C'MUFG).
HCM's ultimate parent company, MUFG, beneficially owns 22.5o2 of the common stock of Morgan
Stanley as ofDecember 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 MUIG'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 accounl, without your written consent, and, in some
cases, will wholly prevent such purchases and/or the use of Morgan Stanley brokerage services.
All employees ofHCM including its board ofdirectors are also employees of MUFG Union Bank. The
employees ofHCM generally perform work for HCM only. Pursuant 1o 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 ofthe 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 wilh UBIS to use UBIS or any of its registered
representalives or principals to provide broker-dealer services to HCM or its advisory clients. UBIS may
refer a client to HCM for advisory services.
4
Item l0: Other Financial Industry Activities and Affiliations
HighMark Capital Management, Inc. I
Personal Transactions in Recommended Securities
HCM generally does not buy or sell securities that it recommends to clients. HCM's related penons 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 ofthe Investment
Advisers Act of 1940 and Rule l7j-l ofthe lnvestment 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 ofHCM clients. The Code ofEthics mitigates potential conflicts ofinterest by requiring, among
other things, prior approval of certain securities transactions and a holding period for sub-advised funds.
The Code ofEthics also requires regular employee certification and reporting and outlines disciplinary
actions for exceptions. All Code ofEthics exceptions are reported to HCM's Board ofDirectoB and to the
Board of any sub-advised funds. A copy of HCM's Code ofEthics is available upon request by calling l-
800-582-4734.
Principal Transactions
HCM does not, as principal, buy securities from or sell securities to its clients. HCM also does not use is
investmenl discretion to direct or aulhorize securities transactions between its related persons and its
clients except in accordance with HCM policy, and Io the exlent 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 sepfiate 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 lo direct or authorize client securilies transactions in which a
related person is a broker or agent excepl in accordance wilh HCM policy, and to lhe extent permitted by
law. Certain related persons of HCM, such as BTMU, MUFG Union Bank and UBIS, from lime to time,
may effect securities transactions for compensation as broker or agent for clients ofHCM or their
counterparties in connection with their own separate relationships with such clienls 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 praclice and applicable federal and state regulations
MUFG'S Investment in Morqan Stanley
Please see ltem l0: Other Financial Industry Activities and Afiitiations which discusses MUFG's
investment in Morgan Stanley. Although HCM does not consider this investment an arangemenl thal is
material to its advisory business, this indirect affiliation prevents HCM liom effecting certain broker
transactions with Morgan Stanley on behalfofcertain 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. I
Item I l: C'ode of llthics. Participation or Interest in Client Transactions and
Persona I -trading
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
collectiye 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 ofthe 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 ofthe sub-advised funds as an investment option in its panicipant
directed relirement plans. To the extent that HCM receives an advisory fee from the sub-advised fund(s),
HCM could be considered to indirectly benefit fiom the recommendations and investments made by
MUFG Union Bank.
UBIS receives Rule l2b-l or other fees in connection with its sales ofshares ofNationwide 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 ofthe potential holdings of HCM'S relaled persons, and the range ofthe
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 ofthese potential conflicts ofinterest. HCM makes portfolio transaction
decisions or recommendalions independently and not based on the interests ofany related person.
HCM may also engage in cross transactions, most likely in a format where client accounls are matched to
provide liquidity and avoid brokerage fees. These are broker-less and non-principal transactions and there
is no compensation eamed by HCM. There may be nominal transaclion processing fees involved in cross
transactions. Cross transaclions are done in compliance with applicable rules and procedures.
Item 12:
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 1o ltem 4: Advisory Business.
Client Direcled Brokerase
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. [n 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 ofsecu.ities transactions for the client. Cliens acknowledge
the possibility ofpaying 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.
HighMark Capital Management, Inc. I
Most clients authorize HCM to use broker-dealers selected by HCM, and to pay commission rates
negoliated 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."
t4
Although HCM has no brokerage commission recapture program, from time to time, certain clients may
direct HCM to a certain broker as part oftheir participation in such a program. Where a client directs the
use ofa particular broker-dealer, HCM may be unable to achieve most favorable execution ofclient
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 ofhow 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 olher 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 Io execute the transaction for the client's
account.
Broker Selection
In selecting a broker-dealer for a transaclion, HCM endeavors to choose the broker-dealer most capable of
providing the services necessary to obtain best execution ofthe 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 comminee ("lPC"), a committee composed of HCM's Chief Equitv Officer and Chief
Fixed Income Officer and other senior investment personnel reviews and determines lhe approved broker-
dealers list at least once a year. Broker-dealers are evaluated on various crileri4 including the
commissions charged, as well as the reliability, integrity, and financial condition ofrhe firm, the
timeliness and accuracy oftrade execution skills. operational and settlement capabilities. and any research
services or producls offered. HCM does not commit a specific amount ofbusiness 10 any broker-dealer,
but does set an overall target based on whal is required to gain the best arrangement ofservices, products,
and besl execution ofclient 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 [IBIS, 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 ofthe transaction,
the type and level ofbusiness done with a firm over a period of time, and the exlent 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 besl execution ofa specific transaction. Consideration is given 1o various factors including
consislency of quality execution, general order flow. market-making skills, ability or willingness to
commit capital and provide liquidity, and sales trading and coverage skills. HCM'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 attempl to find
liquidity per price improvement not available through traditional trading methods. [n selecting among
market makers, and non-market makers or ECNs. HCM generally seeks to select those it believes lo be
actively and effectively trading the security being purchased or sold. HCM may select an ECN offered by
a provider ofservices to HCM and any sub-advised funds in addition to ECNs offered by other vendors.
ln 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 ofthe securilies purchased or sold ofall participating clients will be
HighMark Capital Management. Inc. I 15
the average share price for the block transaction with commissions and costs shared among the
pafiicipating clients on a pro-rata basis. There can be no assurance. ho*ever, 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 thal the use ofblock transactions may prevent the transaction ofone
client fiom affecting the purchase or sale price ofa transaction for another client, and thal the use ofblock
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
ofthe amount of commission another broker would have charged. In selecting such broker-dealel HCM
will make a good faith determination that the amount of commission is reasonable in relation to the value
ofthe brokerage services, research and investment information, viewed in terms ofeither the specific
transaction or HCM's overall responsibility to the accounts for which il 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 ofsuch services include the use ofor delivery
ofquotation or computer systems whose software components are provided to HCM as part ofthe
services.
In any case in which information and other services can be used for both research and non-research
puposes, HCM will make an appropriate good faith allocation ofthose uses and will pay directly for that
portion ofthe services to be used for non-research purposes.
HCM uses investment information and research services that it receives liom broker-dealers to evaluate
securities and formulate investmenl 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 affiliales 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 thmugh commission paid by other clients.
The procedure to determine the allocation amounts includes an evaluation by HCM's traders ofthe
broker-dealers' execution capability, and an evaluation by a committee ofHCM's equity advisory
personnel ofthe quality and usefulness ofthe broker-dealers' research. The minutes ofthis committee are
then reviewed and approved by HCM's IPC. No absolute dollar anounts 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 ofa
particular transaction in light ofall the factors HCM considers. HCM does endeavor to direct sufficient
orders 1o such broker-dealers to ensure continued receipt of research services that HCM believes are
useful to all HCM accounts. Substantial portions ofbrokerage commissions are paid to broker-dealers
who supply investment information and research services to HCM.
At HCM'S discretion, HCM can choose Io trade on an execution-only basis for a particular transaction or
client account.
HighMark Capital Management, Inc. I 16
Initial Public Offerings
From time to time, HCM may be offered securities in an initial public offering ("lPO") and HCM will
determine in its sole discrelion whether to accept any such offer. Generally, HCM does not accept offers
to participate in IPOS. ln 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 offactors, including but not limited Io, investment goals, existing securities in the ponfolio
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 thal allocation among more than one portfolio would be inefficient for
client accounts. While generally based on objective criteri4 HCM does not make IPO allocations based
on strict, mathematical formulas. HCM's allocation ofany specific IpO offering may not result in
proportional allocation across all its client portfolios. HCM however, will treal all client portfolios fairly
and will not give preferences to any parlicular client or type ofclients when allocating IpOs.
Item
Account Review Process
lnvestment slrategies. 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
ofclient investments relative to the investment strate$/ and in accordance with the client,s specific
investment objective, guidelines and restrictions for the account. HCM Operations routinely ieviews
direct account custodian reconciliations. For indirect accounts, annual review and oversight is performed
by the appropriate personnel and./or committees at MUFC Union Bant and U.S. Bank.
HCM issues periodic reports to direct clients, which include trarsaction summaries, portfolio valuation,
and performance data. These reports often include information compiled by others including MUFG
Union Bark and U.S. BanI. 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 repons described above.
Trade Erron
It is HCM's policy to ensure trading errors are handled and corrected in a timely manner in the best
interests ofthe client affected by the error. AII trade errors should be corrected within a reasonable period
of time following discovery ofthe error. HCM will not use commissions from client accounts to correcl
trade errors. It is the strict policy ofHCM that HCM employees are not permitted to make payments to
clients or to client accounts.
Reoorts to Clients
HCM or its related persons may from time to time receive some economic benefit from non-clients, such
as a broker-dealer, in comection with giving advice to clients. See Item 12, Brokerage praclices.
ComDensali on for Client Referrals to MUFG Union Bank an Relationshio Manasem of Clients
Partic iDati ln MUFG Union B Services
MUIG Union Bank generally compensates certain employees and employees of its affiliates, such as
LrBIS and HCM, when clients they refer to MUFG Union Bank establish an account, relationship or
HighMark Capital Management, lnc. I
Item 14: Client Referrals and Other Compensation
L7
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 oflhe review, recommendation and integration ofsuitable
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 lhe account,
relationship or service.
Other Referral Arransemelrts
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 oflhe Investment
Advisers Act of 1940, and compensate refenals with respect to such aclivities in accordance with Rule
206(4)-3 or other applicable regulations. The amounts ofsuch fees are individually negotiated.
Item
The custodian ofeach client account (either MUFG Union Bank or a client-directed custodian) sends a
periodic statement ofthe account to the client on at least a quarterly basis. HCM recommends that each
client should compare the secudty positions shown on the investment statement they receive from HCM
to those shown on lhe statement they receive from the applicable custodian. Differences in reported
security positions may exist because investment statements are presenled 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 ofposting ofaccrued but uncollecled income and/or the use ofdiffering
valuation sources and methods by HCM and the custodian.
Clients who have their agreements directly with HCM gant discretionary authorify to HCM at the outset
ofan advisory relationship when they execute the HCM Advisory Sewices 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 goveming trust instrument or Mt FG 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
wilh respect to such MUFG Union Bank clients.
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 ofthe clients.
For assets managed by a sub-adviseq HCM detegates 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.r
Item l6: Investment Discretion
Item 17: Voting Client Securities
HighMark Capital Management, Inc. I
For other portfolios. HCM retains ISS Govemance Services ("lSS"). an independent proxy voting service,
as its agent. HCM delegates to ISS the authority to vote the proxies according to ISS' policies, subject to
monitoring and review by HCM. HCM reserves the right to withdraw any proxy from ISS and vote the
prory with review and approval by the IPC. HCM will withdraw a proposed proxy vole 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 lpc will take steps to determine if
HCM has a conflict of interest in voting the proxy. Ifthe IPC finds that a material conflict eists, 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 ofthe 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 calting l-800-582-4734.
Item 18:
HCM is not aware ofany financial condition that is reasonably likely to impair its ability to meet
contractual commitments. HCM has not been the subject ofa bankruptcy petirion.
HighMark Capital Managemenr. Inc. I 19
PUBLIC AGENCIES
POST-EMPLOYMENT HEALTH CARE PLAN
MASTER PLAN DOCUMENT
(Effective as of November 5,20l4l
INTRODUCTION
The Employer specified in the Adoption Agreement has adopted this qualified
governmental posremployment 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 Eust (the "Trust")
evidencetl by a trust agreement (the "Trust Agreement"). Each Employer's sepalate 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 qualifu as a tax-exempt trust performing
an essential govemmental function within the meaaing of section il5 of the code and any
regulations issued thereunder aud as a tax-exempt trust under the provisions of the relevant
stale,s statutory provisions of each Employer. It is intended that contributions to the Employer's
opEB Account shall qualify as 'p1an assets" within the meaning of GASB Statement No. 45
(Accounting and Financial Reportiag by Employers for Postemployment Benefits Other Than
iensions). 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 &.,erted to, any purpose other than funding the Employer's OPEB Obligation and defraying
the reasonable expenses associated with the same
Page 1 of6
ARTICLE I
PLd\ A\D TRUST L\FORNIATION
1.1 Plan Namc.
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 begirning on
Jar:uary 1 and ending on Decemtrer 31.
ARTICLE II
EI\IPLOYER INFOR,.,}IATION
Z.l l-mplover.
The name and address of the Employer sponsorhg this OPEB Plan (the "Employer") are as set
forth in Section A,2.1 of the Adoption Agreement. The Adoption Ageernent can only be used
by a govemmental 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 I 15 of the Code to establish a plan.
ARTICLE III
3.1 Elisible Persons
Each employee of the Employer who is or becomes eligible for post-anployment healdr 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 additioq 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 of6
ELIGIBLE E}IPLOYEES
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.
AR'TICLE IV
CONTRIBUTIONS
4.1 Amo unt of N{ember Asency 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 limitatioq 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 shatl be considered an Employer contribution and shall not be
segregated within Employer's OPEB Account from aly other Employer contributions). Each
Empioyer sha'll from time-to-time contribute to its OPEB Account afl amount determined by
s,uch Employer in its sole discretion. Such amount may, but need not, equal such Employer's
"annual required contribution" C'ARC') as determined in accordance with GASB 45.
4.2 Admin istrative Expenses
The Employer may make contributions to its OPEB Account sufficient to defray all or part of the
expanses of administering the OPEB Plal or may pay such expenses directly.
4.3 Allocation of Administrative Ex oenscs
lf 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 retum of contributions from this OPEB Plan only if the
conditions for such retum set forth in the Trust Agreement are satisfied.
Page 3 of6
ARTICLE V
DISTRIBUTION OF BE,NERII'S
5.1 Payment of Distribution
Distribution shall only be made to the insurers, thtd 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
Adminisfator or its Delegatee shall provide inskuctions to the Trustee regarding how
distributions and reimbursements are to be made.
ARTICLE VI
6.1 Fundilg and InYestment
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 investmant
strategy selection and disclosure form. If the Employer elects a directed investneflt approach,
the Employer, in accordance with the Trust Agreement, shall have absolute discretion over tle
investment of the assets of its OPEB Account.
6.2 lype and Nature of PIan and Trust
Neither the faith and credit nor the taxing power of each Employer is pledged to the diskibution
ofbenefits hereunder. Except lor contributions, eamings 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 firlly 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 ate not
a debt of the Employer within the meaning of any constitutional or statutory limitation or
restriction. Distributions are not a legal or equitable pledgq chmge, lien or encumbrance, upon
any of the Employer's property, or upon any ofits income, receipts or revenues.
Page 4 of6
FUNDING AND INVESTMENT
In Section A.2.2 of the Adoptioo Agreement, the Employer shall provide the name of the Plan
Administrator that has been duly authorized and designated by the goveming body of the
Employer to act on its behalf in all matters pertaining to the OPEB Plan and the Trust pusuant to
sectio; 3.4 of the Trust Agreerrent. 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 appointnent of
such Delegatee certified to the Trust Administrator. Except where the context requires
otherwise, ih" t".. "Employer" as used in this Article shall mean the Plan Adminiskator or
Delegatee rrhere responsibility for administration of the oPEB Plan has been given to such
ARTICLE VII
AD}IINISTRATION, AIVIENDMENT A,\D TERMINATION OF PLAN
7.1 Designation of Plan Administrator
Rules and Rezulations
(d)
(e)
To authorize all disbursements from its oPEB Account;
To maintain al1 records that may be necessary for the administration of the oPEB Plan
other than those maintained by the Trustee; and
To appoint a Plan Adrninistrator or, any other agent, and to delegate to them or to the
Trusiee such powers and duties in cormection with the adminiskation of the OPEB Plan
as it may from time to time prescribe.
pmties.
7.2
The Employer has fuIl discretionary authority to supervise and control the operation of this
oPEB Plan in accordance with its terms and may make ru1es 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,
em]loyment, 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 powent 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 ofthe OPEB Plan;
(c) To compute, certifo to, and direct the Trustee with regard to the amount and kind of
benefits payable to health care providers;
(0
Page 5 of6
Expenses and fees incuned in connection with the administration of the OPEB Plan and the
Trust shall be paid from the Trust assets to the firllest 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.
The Employer shall have the right to amend, modifu or terminate the OPEB Plan at any time. If
an Employer tenninates the OPEB Plan, the Assets held in its OPEB Account shall be distributed
by the Trustee as provided in Section 7.3 ofthe Trust Agreement.
ARTICLE VIII
NIISCELLANEOUS
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,
gamishment, assigrment 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.
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 10 this
OPEB Plan. The OPEB Plan is only a funding source for such Employer's poslemployment
health care and welfare beuefits and does not increase the rights of any Eligible Employee,
Eligible Beneficiary or union.
8.4 Confiden tial }I al 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 of6
7.3 Amendment and Termination
8.1 Nonalienation
8,2 Investment
PUBLIC AGENCIES
POST.EMPLOYMENT BENEFITS
TRUST AGREEMENT
@ffective Noyember 5, 2014)
1.1
ARTICLE I
DEFINTTIONS
"Adoption Agreement" shall have the meaning given to such term in Section 2.3.
"Agency Account'' shall have the meaning given to such term in Section 2.4.
"Agreement for Administrative Services" shall mean the agreement executed
between the Employer and the Trust Administatu which authorizes the Trust
Administrator to perform specific duties of administering the Agency Account of
the Employer.
"Assets" shall have the meaning given to such term in Section 2-5.
"Code" shall mean the Internal Revenue Code of 1986 as amended from time to
time.
1.11 "GASB" shall mean the Govemmental Accounting Standards Board.
1.2
1.3
1.4
1.5
1.6
1.7
1.8
t.9
1.10
"Delegatee" shall mean an individual or entity, appointed by the Plan
Administrator or Employer to act il such matters as are specified in the
appointnent.
"Effective Date" shall mean the date first written above, the date the Tnrst was
established, and with respect to each Employeq the Effective Date shall be the
date on which the Employer executes the Adoption Agreernert.
"Eligible Beneficiary" shall mean any p€rson who, due to his or her relationship
to an Eligible Employee, is entitled to postemployment benefits pursuant to the
Employei's Pension Plan or OPEB Plaq including but not limited to the Eligible
Employee's current or former spouse or domestic partner, child, dependent, or
survivor.
"Eligible Employee" shall mean any employee of an Employer who is entitled to
post-employment benefits pursrunt to the Employer's Pension Plan or OPEB
Ft*. Unto. the context otherwise requires, the term "Eligible Employee" as
used herein shall include any Eligible Beneficiaries.
"Employer" shall mean a public agency that executes the Adoption Agreernent
thereby adopting the provisions of this Trust Agreement, provided that such
agency is a stat;, a political subdivision of a state, or an entity the income of
which is excludible from gross income under Section 115 of the Code.
l.l2 "Omnibus Account" shall mean an account, established for record keeping
purposes or y, to aggregate the balances of the Assets credited to the Agency
Accounts. The Trust Admilistrator shall maintain and reconcile, at the Agency
Account level (and subaccount levei), the investments of the Agency Accounts
Page 1 of25
and will provide reports to the Plan Administrator with respect to such
investments. The Trustee will mailtain a record of the aggregate balance
(principal and eamings) for all Agency Accounts. The Trust Admir:istrator will in
the ordinary course of business maintain a record of the name, address, taxpayer
identification nrmrber, account number and arnount of funds, including eamings,
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 pursuaot
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 banefits.
l.l4 "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 PIan" 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 mder the Pension Plan to the
Employer's Eligible Employees.
l,l7 "Pension Plan" shall mean an Employer's defined-benefit peruion 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 retirernent benefits to its Eligible Employees,
and (iii) partly or wholly funded by &e Employer's contributions to a Qualified
Trust.
1.18 "Plan Administrator" shall mean the individual designated by position of
ernploym.ent at the Employer to act on its behalf in all matters relating to the
Employer's participation in the Tmst.
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.
l.2l "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 Adminisfator resigls or is
removed as provided in Article III.
1.22 "Trust Agreement' shall mean this Public Agencies Post-Employment Benefits
trust document adopted by each Employer upon execution of an Adoption
Ageement, 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 Agreernent until
such Trustee resigns or is removed as provided in Article III.
ARTICLE II
TIIE 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 firnd the agency's OPEB Obligation ol Pension
Obligation or both. The Trust is divided into Agency Accounts to hold the Assets
of each Employer as desoibed in Section 2.4.
))Purpose
The Trust is established with the intention that it qualifo as a tax-exempt kust
performing an essential governmental function within the meaning of Section 115
ofthe Code and any regulations issued thereunder and as a tax-exempt trust under
the provisions of the relevant stato's statutory provisions ofeach Employer. This
Trust Agreement shall be construed and the Trust shall be administered in a
manner consistent with such intention. The fundamental purpose ofthe 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 ofsuch assets once distributed. The Employer
hereby acknowledges that the Trust does not constitute a qualified trust under
Code Section 401(a).
Page 3 of25
Employers
Any public agency may, by action of its goveming 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
2.3
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 Tnrst 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, fumish the Trust Administrator with the
following documents to support its adoption of the Trust:
G) a certified copy ofthe resolution(s) ofthe governing body ofthe Employer
authorizing the adoption ofthe Trust Agreement and the appointrnent of the Plan
Admiai strator for such Employer;
(b) an original ofthe Adoption Agreoment executed by the Plan Administrator
or other duly authorized Employer employee;
(c) an origi:lal of the Agreement for Adminisu'ative Services with Public
Agency Retirernent 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-
(0 Any action taken by the Plan Administrator for an Employer shall be
deemed to have beer taken by such Employer. Any notice given to or delivered
by the Plan Administrator for an Employer shall be deerred to have been gtven 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 Accounf' 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 Accormt will be available only to fund the Employer's OPEB Obligation
and defray the reasonable expenses associated with the same.
(c) The Assets ofthe Trust that are held in an Employer's Agency Account
shall not be available to pay any obligations incuned by any other Employer as
provided in Section 2.8.
Page 4 of 25
(d) All contributioos and transfers received by the Trust on behalf of the
tmployo will be held in the Employer's Agency Accowrt and will be allocated to
the subaccounts under the Agency Account as follows:
(l) If the Employer maintains a Pension Account or OPEB Account
(and not both a Peosion Account and an OPEB Account), all contributionq
and transfers received by the Trust on the Employer's behalf will be
allocated to that subaccount.
@ If the Employer maintains both a Pension Account and an OPEB
e"t".-t, contributions and transfers received by the Trust on the
Employer's behalf will be ailocated to either the Pension Account or
OPi,B Account, as directed by the Plan Administrator' To the extent the
Pian 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
por"hur" a position in the sweep vehicle identified on an exhibit hereto or'
if noo" it identified, to hold such assets un-invested' The Plan
Administrator may at any time dtect the reallocation of cash from the
Suspense Account to either the Pansion Account or the OPEB Account'
(3) Once allocated to the Pension Account or the OPEB Account'
amounts under the Trust may not subsequently be trarsferred to the other
subaccount.
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 eamings from such contributions and transfers, and any increments
accruing to the AgJncy Account, net of any investment losses' benefits, expenses
or other costs (..issets,,). A11 contributions or translers shall be received by the
Trustee in cash or in other property acceptable to the Trustee' The Trustee shall
manage and administer thiAssets held ir Agency Accounts without distinction
berwelen principal antl income. The Trustee and the Trust Administrator shail
have no duty to compute any amount to be transferred or paid to the Aggncy
Account by ihe nmptoyer, and the Trustee and the Trust Adrninistrator shall not
be resporrsible for tLe collection of any contributions or transfers to the Agency
Account.
Aggregate Batance 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
aiministrative puposes, to provide economies of scale and elficiency of
administration to the Agency Accounts. The responsibility for Agency Account
level accounting (including subaccount-level accounting within each Agency
Account) within-this Omnio-us Account(s) shall be that of the Trust Administrator.
2.5
2.6
Page 5 of25
2,7 Trustee Accounting
The Trustee shall be responsible only for maintaining records and maintaining
accounts for the aggtegate 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 Trusl Administrator.
2.8 No Diversion of Assets
2.9 Type and Nature of Trust
Neither the fulI faith and credit nor the taxing power of each Employer is pledged
to the distribution of amounts hereunder. Except for contributiors and other
amounts hereunder, no other amounts are pledged to the dishibution of benefits
herermder. Distributions of benefits are neither general nor speciai obligations of
any Employer, but are payable solely from the Assets held in such Employer's
Agency Accoun! as more fu1ly 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 ofany 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 ofany Employer nor its ofEcers, employees, agents or volunteers
are liable hereunder.
2.10 Loss of Tax-Exempt Status as to Any Employer
If any Employer participadng i:r the Trust receives notice from the Intemal
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
lntemal 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
Intemal Revenue Service's determination. Each Empioyer participating in the
Trust ag'ees to irn:nediately notifu the Trust Administrator upon receiving such
Page 6 of 25
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 Pansion Obligation or OPEB Obligation.
notice or giving such consent. The separate trust provided for in this Section 2' i 0
shall thereafter be considered as a separate trust containing all of the provisions of
this Trust Ageernent until terminated as provided in this Trust Agreement'
3.1
3.2
-t --1
Appointrnent of Trustee
The Employers may, with the approval of two-thirds (213) or more of the
Employeis then participating in the Trust, act to appoint a bank, trust company'
retiiement 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 shali become the Trustee of the Trust' H the
Trustee is removed or resigrrs 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.
Resignation or Removal of Trustee
The Employers may act to remove the Trustee, provided that such action must
satisfu lhe voting requirernents set forth in Section 3'1 and notice of such action
,rr.rst i" pro-ptl-y deiivered to the Trust Administrator, the Trustee and each Plan
Administrator. The Trustee may also resign at any time by g''iog at least ninety
(90) days prior written notici to the Trust Administrator and to the Plan
eO*i"i.tt"tot of each Employer that has adopted the Trust Agreement and not
terminated its participation in the Trust; provided, however, that the Trustee may
,""ip i_."aii"ty upon the earlier of the approval date or the effective date of
any-amendment oi tlr" T-tt Agreement by the Employers that would change or
-oairy tn" duties, powers ot liubiliti"t 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 ald all records relating to the
Trust to the successor, after resewing such reasonable a$ount as it shall deem
necessauy to provide for its fees and expenses and any sums chargeable against
the Trusi for which it may be liable. The Trustee shall do all acts necessary to
vest title ofrecord in the successor trustee.
Withdrawal of EmPloYer
An Employer may elect to rvithdraw from the Trust by giviflg at least thirty (30)
auys paoi written notice to the Trustee and the Trust Administrator' If an
grnpfoyo so elects to withdraw, Assets having a value equal to the fi:nds held in
.r"ir E-ploy"r's Agency Account shall be segregated by the Trustee and, as soon
as practicable, sUatt Ue Eansferred to one or more trusts maintained by the
nmployrr, provided that (i) for Assets transferred from the OPEB Account' any
*"ir trort'ti.tutt satisfu the requirements of Section 1 1 5 of the Code, (ii) for Assets
ARTICLE III
AD}IINISTRATIVE MATTERS
Page 7 of25
3.4 The PIan Admi.nislrator
The goveming body of each Employer shall have plenary authority for the
administration and investrnert of such Employer's Agency Account pursuant to
any applicable state laws and applicable federal laws and regulations. Each
Employer shall by resolution desipate a Plan Administrator. Unless otherwise
specified in the instrument the Plan Administator shall be deemed to have
authority to act on behalf of the Employer in al1 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 acknowledgrnent by the Trustee and the Trust Adminishator and shall
be effective mtil the Trustee and the Trust Admfuistrator are fumished with a
resolution of the Employer that the appointment has been modified or terrninated.
3,5 Failure to Appoint PIan Administrator
If a Plan Adminisfrator 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 Administator has not be€n 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 Deiegatee, 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 cedfied 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 of25
transfeffed from the Pension Account, any such trust shall satisfu the
requirements of either Section 115 or 401(a) ofthe Code, and (iii) all assets held
by any zuch trust and previously held in the Employer's Pension Account or
OPEB Account shall quali$ as "plan assets" within the meaning of GASB
Statement No. 68 (Accomting 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 kustee for such Employer's s€parate trust and, upon the
trustee's acceptance ofthat appointrn€'nt, the trustee will be vested with title to the
transferred Assets.
3.7 Certification to Trustee
3.8
The goveming body of each Employer, or other duly authorized official, shall
certifu in writing to the Trustee and the Trust Administrator the names and
specimen sipatures 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
aithorized officer or goveming body of the Employer. The Trustee and the Trust
Administrator shall have no liatrility 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.
I)irections to Trustee
All directions to the Trustee from the Plao AdminisEatol or Delegatee must be in
writi::g anal must be signed by the Plan Administrator or Delegatee, as the case
may b-e. For all purpoies of this Trust Agreement, direction shall include any
ciification, notice,- authorization, application or instruction of the Plan
Admhistrator, Delegatee or Trustee appropriately communicated' The above
notwithstanding, direction may be implied if the Plan Administratfi or Delegatee
has knowledge of the Trustee's intenfions and fails to file written objection'
The Trustee shall have the power and duty to comply promptly with all propel
directions of the Plan Admini.t utor or Delegatee, appointed in accordance with
the provisions of this Trust Agreement. In the case of any-direction deemed by
the irustee 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 marmer that in its discretion seems advisable rmder the
circumstances ior carrying out the purposes of the Trust and/or the applicable
Agency Account which may include not taking any action' The Trustee may
r"iu"ri directioos or clarification of directions received and may delay acting
,niil "lurifi*tio, is received. In the absence of timely direction or clarification,
or if the Trustee considers any direction to be a violation ofthe Trust Agreement
or any applicable law, the Trustee shall in its sole discretion take appropriate
action, or refuse to act upon a direction.
Appointment of Trust Administrator
The Employers may, with the approval of two-thirds (213) or more of the
Employers then participating in the Trust, act to appoint a bark, trust company'
retirerrrent board, rnsurer, 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
Pase 9 of25
3.9
the Trust. If the Trust Administrator is rernoved or resigns pursuant to Section
3.13, the Employers shall appoint a su@essor Trust Administrator in accordance
urith the voting requirements set forth in this Section 3.9.
The Trust Administrator's duties involve the performance of the following
services pursuant to the provisiors 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;
(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 Adminiskator shall be entitled to rely on, and shall be under no duty to
question, any diection 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 Tn$t, 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
detemined under any applicable GASB 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 *'hich are required of the Employer or the Plan Administrator by
this Trust Agreement or by the Employer's policies and/or applicable collective
bargaining agreernents. The Trust Administrator shall be separately compensated
3.10 TrustAdminisEator
(d) Directing the Trustee to pay the fees ofthe Trust Administrator and to do
such other acts as shall be appropriate to carry out the htent of the Trust;
Page l0 of25
for such service and such services shall not be deemed to be contrary to the Trust
Agreement.
3.12 Trust Administrator's C ompersation
As may be agreed upon from time to time by the Employer and Trust
Adminiitrator, ttre Trust Administator will be paid reasonable compensation for
services rendered or reimbursed for expanses properly and actually incurred in the
performance of duties with respect to such Employer's Agency Account and to
the TrusL
THE TRUSTEE
3.13 Resignation or Removal of Trust Administrator
The Employers may act to rernove the Trust Administrator, provided that such
action musi satisfo the voting requirernents set forth in Section 3.9 and notice of
such action must be promptly delivered to the Trust Administator, the Trustee
and each Plan Administrator. The Trust Administrator may also resign at any
timebygivingatleastonehundredandtwenty(120)dayspriorwrittennoticelo
the Trusiee 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 &e earlier of
theapprovaldateortheeffectivedateofanyamendmentoftheTrustAgreement
by the Employas that would change or modifu the duties, powers or liabilities of
the Trust Administrator hereunder without the Trust Administrator's consent.
The Trust Administrator shall, upon the appointment and acceptance of a
successor trust admiDistator, transfer all records relating to the Trust to the
successor.
ARTICLE IV
1.1 Powers and Duties of the Trustee
Except as otherwise provided in Article V and subject to Article VI, the Trustee
shall iave full power and authority with respect to property held in the Trust to do
all such acts, iake all proceedings, and exercise all such rights and pdvileges,
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 ary one or more
ti"a, typ", class, item or parcel of property, real, personal or mixed, tangible or
intangible; or in any one or more kind, type, class, itern or issue of investrrent or
,""rrity; or in any one or more kind, type, class or itan of obligation, secured or
unsecured; or in any combination of them (including those issued by the Trustee
ofany of iis affiliates, to the extent permifted by applicable law), and to retain the
property for the period of time that the Trustee deerns appropriate;
Page I 1 of25
(b) To acquire and sell options to buy securities (,'call" options) aod to acquire
and sell options to sell securities ("put" options);
(") To buy, sell, assign, transfel acquire, loan, lease (for any purposg
iqcluding mineral leases), exchange and in any other mamer to acquire, manage,
deal with and dispose of all or any part of the Trust property, for iash or cretit
and upon any reasonable terms and conditions;
(d) To make deposits, with any balk or savings and loan institution, including
auy such facility of the Trustee or an affiliate thereof provided that the deposit
bears a reasonable rate ofinterest;
(e) To invest and reinvest the Assets, or any part thereof in any one or more
collective investment trust funds, including corlmon and group trust firnds that
consist exclusively of assets of exernpt pension and profit sharing trusts and
individual retiretrrent accounts qualified and tax exempiunder the c6de, that are
maintained by the Trustee or an affiliate thereof. The declaration of trust or planof operations for any such coln.,on or collective fund is hereby incorpor'ated
herein and adopted into this Trust Agreement by this reference. Thi 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 firll
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 inve.strnent funds, the Trustee shall within 30 days of notice of such lossof tax exonpt stahrs, Iiquidate the Trusfs units of thi collective investment
fund(s) and invest the proceeds in a money market fund pending investrnent or
other instructions from the Plan Administrator. The Trustei shall not be liable for
any loss or gain or taxes, ifany, resulting from said liquidation;
(D 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 afEliates, and to receive compeniation from
the sponsor of such fund(s) for services rendered, separate and apart Aom any
Tmstee's fees hereunder. The Trustee or its affiliate may also be compensated foiproviding investment advisory services to any mutual fimd or commingled
investment funds;
(g) To borrow mouey 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 ofthe following actions: to vote proxies ofany 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 aay 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 ofan owner with respect to stocks, bonds, securities or other property
held in the Trust;
(r) 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;
0) To raze or move existing buildings; to make ordinary or extraordinary
r-epairs, alterations or additions h and to buildings; to constuct buildings and
other structures and to install fixtures and equipment therein;
(k) To pay or @use 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;
0) To exercise all the further rights, powers, options and privileges granled,
piovided 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 olherwise
provided, the powers conferred upon the Trustee herein shall not be construed as
Leing in limitition of any authority conferred by law, but shall be construed as
4.2
consistent or in addition thereto.
Additional Trustee Powers
I-n 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 t)?e 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
investrnent fund ("Fund'), whether sponsored ol advised by the Trustee or any
affiliate thereof); the Trustee or its a{Eliates may be compensated for providing
such investrnent advice and providing other service to such Fund, in addition to
any Trustee's fees received pursuant to this Trust Agreement;
O) To cause all or any part of the Trust to be held in the name of the Trustee
(*fri"t l" such instance need not disciose its fiduciary capacity) or, as permitted
by law, in the name of any nominee, and to acquire for the Trust any investrnent
in bearer form, but the books and records of the Trust shall at a'll 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 of25
(c) To serve as custodian with respect to the Trust Assets;
(d) To ernploy such custodians, agents and counsel as may be reasonably
necessary in managing and protecting the Assets and to pay them reasolable
compensation from the Trust; to ernploy any broker{ealer or other agent,
including any broker-dealer or other agent afEliated with the Trustee, and pay to
such broker-dealer or other agent, at the expeuse 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 prernium on bonds
purchased at par value to the principal of the Trust without amortization from the
Trust, regardless of any law relating thereto;
(e) ln addition to the powers listed herein, to do all other acts necessary or
desirable for the proper administration of the Trust, as though the absolute owner
thereof;
(D To prosecute, compromise and defend 'lawsuits, but without obligation to
do so, all at the risk and expense of the Trusq and to teuder its defense to the
Employer in any legal proceeding where the interests ol the Trustee and the
Employer are not adverse;
(S) To exercise and perform any and all of the other powers and duties
specified in this Trust Agreement or the ?lan;
(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;
0) To seek written instructions fiom 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 zuch executive, consultant, actuarial, accounting,
investmenl, appraisal, administrative, clerical, secretarial, medical, custodial,
depository and legal firms, personnel and other employees or assistants as are
engaged by the Plan Administrator in corurection with funding the Employer's
OPEB Obligation or Pension Obligation or both and to pay from the Trust the
necessary expenses of such frrms, personnel and assistants, to the exteut not paid
by the Plan Administrator;
Page l4 of 25
( ) To act upon proper written directions of the Plan Administrator or
Delegatee, including directions given by photostatic kansmissions using facsimile
sigrrature, and such other forms of directions as the parties shall agree;
(m) To pay from the Trust
adminishati on of the Tmst;
the expenses reasonably incurred in the
5.1
<,
ARTICLEV
INVESTMENTS
Discretionary Yersus I)irected Investment
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
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 invesftnent
strategies offered and the Trustee, in accordance with Article IV, shall have
absolute discretion over the investrnent of the Assets held in such subaccount
under the Employer's Agency Accormt. If the Employer elects a dtected
investment approach for a subaccount, the Trustee shall direct the irvestment of
the Assets of such subaccount under the Empioyer's Agency Account in
accordance with the direction provided by such Employer.
(n) To maintain insurance for such puPoses, in such arnounts and with such
companies as the Plan Administrator shall elect, including i:rsurance to covsr
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 ofa fiduciary obligation by such fiduciary.
Eligible Employees are not permitted to make conkibutions to the Trust The
plan administtator 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 reinvestrnent pursuant to the terms of this Trust Agreement' The
Trustee shall not have any duty to determine or inquire whether any contributions
Page l5 of 25
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
inveshnents, receipts, disbuneme.lrts and other transactions hereunder at the Trust
level. Such records shall be available at all reasonable tirnes for inspection by the
Trust Adminisbator. The Truste€ 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 deern reliable; provided, however, that the Plan
Administrator shall instruct the Trustee as lo valuation of assets which are not
readily deterrninable on an established market. The Trustee may rely
cnnclusively 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 Plau Administrator fails to provide such values, the Trustee may take
whatever action it deems reasonablg including employment of attomeys,
appraisers or other professionals, the expense of which will be aa expense of
administsation of the Trust. Transactions in the account involving such hard to
value assets may be posQoned until appropriate valuations have been received
and Trustee shall have no liability therefore.
(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 sunmary the
investments, rcceipts, 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 assas and liabilities of the Tmst valued as ofthe end of
g1s 6ss6unling pedod.
(b) The Trust Administrator may approve such statements either by written
notice or by failure to express objections to such statements by rvritten 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 of25
5.5 Statements
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 sucll other security procedure as selected by the party providing
wire transfer directions, prior to wirtrg 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 tnxt for the
exclusive purpose of fimding 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 retaln
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
Atlministrator 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 tiDe, 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 providi:rg benefits or seryices under the OPEB P1an, 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
b€nefits 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 l7 of 25
(b) In addition, the Trustee shall, from time to time, upon the wriften direction
of the Plan Administrator or Delegatee, make distributions from the Assets of the
Trust under the Pension Account directly to O the Qualified Trust as employer
contributions, (ii) any insurers, thAd 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
paJment of amormts 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 zuch distributions are in accordance with the Employer's
OPEB Plan, Perrsi6l p1*, policies, or applicable collective bargaining
agreements.
ARTICLE VI
FIDUCIARY RESPONSIBII,ITIES
6.1 l\Iore 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 \Mith
reE)ect 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 fiducimy'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 experses 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 tre 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 of25
6.4
6.5
6.6
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 fiom 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 appropri ate.
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) indemnifu, defend (as set out in Section
6.8 of this Trust Agreement), and hold the Trustee (including its officers, agants,
employees and attomeys) and other Employers hannless from and against any
claims, demands, loss, costs, expense or liability imposed on the indemnified
party, including reasonable attomeys' fees and costs incurred by the indemnified
party, arising as a result of Employer's active or passive negligent act or omission
ir wi11ful misconduct in the execution or performance of its duties under this
Trust Agreement.
Inilemnification 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) indemnifl', defend (as set out in Sectio
6.8 of this Trust Agreement), and hold the Employer (including its officers,
agents, employees and attomeys) and other Employers harmless from and against
any claims, demands, loss, costs, expense or liability imposed on ihe indernnified
party, including reasonable attomeys' fees and costs incurred by the indemnified
party, arising as a result of Trustee's acfive or passive negligent act or omission or
willful misconduct in lhe execution or performance of its duties under this Trust
Agrcement.
Indemnification of Trustee by Trust Adrninistrator
The Trustee shall not be liable for, and Trust Administrator shall (to tle 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 attomeys' fees and costs incurred by the
indemnifiod party, arising as a result of Trust Administrator's active or passive
negligent act or omission or willful misconduct il 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 (o the extent
allowed by the laws of the state of each Employer) indemnify and hold the Trust
Page 19 of25
Arlministrator (including its officers, agents, employees and attomeys) harmless
fiom and against any claims, dernands, loss, costs, expense or liability imposed on
the intlernnified party, including reasonable attomeys' fees and costs incurred by
the indemnified party, arising as a result of Trustee's active or passive negligant
act or omission or wi1lful misconduct in the execution or performance of its duties
under this Trust Agreement.
6,8 IndenrnificationProcedures
Promptly after receipt by an indemnified party of notice or receipt of a claim or
the commencemsnt of any action for which indemnification may be souglrl the
indemnified party will noti! the indemnifying party in wfiting of the receipt or
commencement thereof. When the indemniffing parry has agreed to provide a
defense as set out above that party shall assume the defense of such action
(inclutling the employment of counsel, who shall be counsel reasonably
satisfactory to such indenrnitee) and the payrnent of expenses, insofm as such
action shall rclate to any alleged liability in respect of which indemnity may be
sought against the indemnifuing party Any indemnified party shall have the right
to employ separate cormsel in any such action and to participate in the tlefense
thereof, but the fees and expenses of such counsel shall not be at the expense of
ttre indemniffing party unless (i) the ernployment of such counsei has been
specifically authorized by the indemniflng party or (ii) the named parties to any
such action (hcluding 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 ditrering interest between them.
The indemnifying party shall not be liable to indemnifo any person for any
settlement of any such action effected without the indemnifuing party's consent.
The ildernrdfication procedures of this Trust Ageement shall survive the
termination of the Tmst, any Employer's participation in the Trust and/or this
Trust Agreement.
6.9 No Joint and Several LiabilitY
This document is not intended to and does not create any joint porvers agreement
or any joilt and several liability. No Employer shall be responsible for any
contributions, costs or distributions ofany other Ernployer.
ARTICLE VII
AMENDMENT, TERMINATION AND MERGER
7.1 No Contoactual 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
Page 20 of25
the Trust to continue providiag benefits under its Pension Plan or OPEB Plan or
to make contributions to the Trust.
7 ,2 Amendment of Trust
7.3
(a) The Trust Agreernent may be amended only by the approval of two-thirds
(213) or more of the Employers then participating in the Trust. Any such
amendment by the Employers shall be set forth in an instnrment 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
effectil-e date of such amendment; provided, however, that any party may waive
in writing zuch l8Gday requiremalt 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 requironent by two-
furi.a. (Zll) or more of the Plan Administrators of the Employers participating in
the Trust as ofthe date the amendment is adopted shall constitute a waiver of such
180-day requirement by al1 of the Employers then participating in the Trust' In
addition, thi Trust Adminishator 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 law. 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.
O) 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 puposes 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) Pennit the Assets ofany Agency Account to be used for the benefit
of any other EmploYer.
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 Pensiou Plan or OPEB 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 termi:ration and ultil final distribution of all Assets under
the Employer's Agency Account, the Trustee shall continue to have all the powers
Page 2l of 25
provided herein as are n@essary 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 remaini:rg in the Pension
Account or OPEB Account will be used firct to satisry any ranaining 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 governmantal function" within the meaning of Section 115 of the
Code) and to satisf, any of such Employer's obligations under this Trust
Agreement. Any Assets lslnaining 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 ofSection 1 l5 of the Code.
7.4 Fund Recovery Based on lVlistake 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 contribufion relating to the
mistake of fact (exclusive of any eamings or losses attributable thereto) may be
retumed to the Employer, provided such retum occurs within two (2) years after
discovery by the Employer of the mistake. If any repayment is payable to the
Emptoyer, then, as a condition to such repayment, and only if requested by
Trustee, the Employer shall executg acknowledge and deliver to the Trustee its
written undertaking, in a form satisfactory to the Trustee, to indemnifu, defend
and hold the Trustee harmless from all claims, actions, demands or liabilities
a6sing 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 must 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
Adminisfiator 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 Accoult shall continue until the Assets have been
completely distributed. Any Assets remaining in the Pension Account or OPEB
Account will be used fust to satis! 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
govemmental fi:nction" within the meaning of Section 115 of the Code) and to
Page 22 of 25
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, gamishment, 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 Etigible Employee or any other party.
irust Assets shall not be subject to the claims of any Employer or the claims of its
creditors.
Saving Clause
ln the event any provision of this Trust Agr€sment 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 nwer been included.
Applicable Law
This Trust Agreement and the Trust shall be construed, administered and
governed under the Code and the law ofthe State of Califomia. To the extent any
ARTICLE VIII
MISC ELLAi\ EOUS PROVISIONS
8.3
Page 23 of 25
satisfu any of such Employer's obligations under this Trust AgreefiIent' Any
Assets remaining in the Employer's Peosion Account or OPEB Account (as
applicable) after giving effect to the preceding sentence will be paid to the
Empioyer to the extent permitted by law and consistent with the requirements of
Section 1 15 ofthe Code.
O) Contributions to the Trust me conditioned on initial quaLification of the
Tnrst 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 witl automatically terminate without any action by aay Employer or
other parties. After such termination, the Assets of each Employer's Pension
Account or OPEB Account, as applicable, will be retumed 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 ths requirements of
Section ll5 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.
G) The Tmst 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 incame under Section 115 of
the Code.
8.2
8.7
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 iaterpretation,
such interpretation shall be given thereto as is consistent with the Trust
Agreernent 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 Ageement, it shal1
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 sha11 be entitled to any notice or service of process urless
otherwise required by law. Any judgment entered in such a proceeding or action
sha1l be binding on all persons claiming under this Trust Agreement; plovided,
however, that nothing in this Trust Agreement sha11 be construed as to deprive a
participant of such participanfs right to seek adjudication of such participant's
rights under applicable law.
8.5 Employment of Counsel
The Trustee may consult with iegal counsel (who may be counsel for the Trustee,
the Trust Administrator or any Emplo.ver) with respect to the interprctation of this
Agreement or the Trustee's duties hereunder or with respect to any legal
proceedings or ar:y 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, ferninine or neuter gender shall eacb 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 cotrtext
so requires.
Headings
Heatlings used in this Trust Agreement are inserted for convenience of refaence
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 Admttistrator (executing an Adoption Agreenent), the
Trust Atlministrator ald the Trustee, each of which shall be deemed to be an
original of the one and the same instrument.
Page 24 of 25
Typed or Printed name
Its: Vice President & Relationship Manaser
IN WITNESS WHEREOF, the Plan Administrator (by executing the Adoption
Agreernent), 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 PUBLIC AGENCY
RETIREMENT SERVICES
"Trustee""Trust AdministratorD
By:By:
Si
Susan M.Huehes Daniel Johnson
Typed or printed name
Its:President
Page 25 of 25
ADOPTION AGREEMENT
for the
POST.EMPLOYMENT SECTION 115 TRUST
A.l .l . Trust ageement with U.S. Bank National Association (rhe ' EgDk") (the "Trust Asreement"):
Post-Employment Section I l5 Trust.Public Agencies Post-Employment Benefits-Trust
Agreement, effective November 5, 2014
A.1.2. OPEB Plan:Public Agencies Post-Emplo\ ment Health Care Plan
The plan document for the OPEB Plan is the Public Agencies Post-
Employment Health Care Plan-Master Plan Document, effective as of
November 5, 201 4 (the ' E!e4 DAe!rnE4").
A.1.3. Pension Plan:
A.1.4. Pension Plan's
effective date:
o (Check if applicable) Additional Pension Plans (and their respective
effective dates) are listed on an exhibit attached hereto.
A.2.t.
A.2.2.
Employer:
Name:
U.S. mail address:
Phone number:
EIN:
Fiscal year end:
Plan Administrator:
Position at Employer:
Incumbent:
U.S. mail address:
Phone number:
Email address:
Page I of4
EXHIBIT "A" TO PUBLIC ACENCIES POST.EMPLOYMENT BENEFITS TRUST AGREEMENT
A.3.t Adoption. The Employer hereby:
A.3.l.l.Adopts the Trust Agreement as part of the (Check one or both of the following boxes.):
n OPEB Plan
tr Pension Plan
(each such plan separately, the'8!a4") and agrees to be bound by the Trust Agreement's terms, effective
as ofthe Employer's signature date below and subject to the investment approach selected below.
A.3.l.2.The following provisions apply if and only if the OPEB Plan box above is checked: (i)
Adops 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
Eligibte Beneficiaries is finally and conclusively made by the Employer according to the Employer's
applicable policies and collective bargaining agreements and rvithout reference to the Trust Agreement.
A.3.l.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.l.4.Agrees that capitalized terms used herein but not defined herein shall have the same
meaning attributed to them as in the Trust Agrcement or Plan Document, as the case may be.
A.4.1. The Employer hereby represents and warants 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 cenified copy of a resolution of
the Employer's goveming body authorizing the adoption ofthe 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 behalfin all matters relating to the trust;
A.4.1.3. Tax Status. The Plan is a "govemmental 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 20ll-l; and is not subject to Federal income taxation. The Plan's governing
document expressly provides that it is irrevocably impossible for any pan ofthe corpus or income ofthe
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). (ln 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
EXHIBTT'A" TO PI]BLIC AGENCIES POST.EMPLOYMENT BENEFITS TRUST AGREEMENT
A.4.2- Itrvestment Approach.
4.2.1. The following proyisions apply if and only if the OPEB PIan box above is checked:
OPEB Account. OPEB Account assets are invested in the discretion of (check one and only one of the
following boxes):
Discretionarv'investment aDDroach:
o The Plan Administrator.
D The following registered investrnent adviser, bank (other than the Bank), or insurance
company (a ' ! hi4L!445dv!snag9!"):
,ff#:ffi
Tvith the above appointed Third Party Manager.
4.2.2. The following provisions apply if ond only if the Pension Plon box above is checked:
Pension AccounL Pension Account assets are invested in the discretion of (check one and only one of
the .following boxes):
Discretiona{y investsnent approach:
tr The Bank, subject to Erhibit A (Investment Strategr Selection rnd Disclosure Form)
hereto.
Directed investrnent aooroach:
tr The Plan Administrator.
n The following registered investment adviser. bank (other than the Bank), or insurance
company (a "Third-Paqv Manaqer"):
The Employer
hereby represents and warrants that attached hereto is ar executed copy ofthe agreement
rvith the above appointed Third Party Manager.
I signa ture page fo I low s]
Page 3 of4
DGIBIT'A" TO PUBLIC AGENCIES POST-EMPLOYMENT BENEFM TRUST AGREEMENT
tr The Bank, subject to Exhibit A (Inv€stment Strate$/ Selection and Disclosure Form)
hereto.
Directed investment aoproach:
E]!IPLOI'ER
Accepted by:
By:
Its:
Date:
PHASE II SYSTEMS, DBA PUBLIC AGENCY
RETIREMENT SERVICES (PARS)
By:
Its: President
Date:
U.S. BANK NATIONAL ASSOCIATION
B5
Its: Vice President and Relationship Manaeer
Date;
Page 4 of4
EXHIBIT'A" TO PTJBLIC AGENCIES POST.EMPLOYMENT EENEFTTS TRUST AGREEMENT
AGREEMENT FOR ADMINISTRATIVE SERVICES
This agreement ("Agreement'') is made this _ day of 2017, between
Phase II 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:
l. Services. PARS will provide the services pertaining to the Plan as described in the
exhibit attached hereto as "Exhibit 1A" ("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. Pa).rnent for the Services will be remiued 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 wirhin thirty (30) days ol
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 ofthe 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 ofthe 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 lC" ("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 lA. PARS shall be under
no duty to question Data received from the Agency, to compute contributions made to the
Page I
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. [n addition, PARS shall not be
liable for non performance of Services to the extent such non perlormance 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 lC, 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 fumished 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 lor 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 indemnifo each other and hold the other
harmless, including their respective officers, directors, employees, agents and attomeys,
from any claim, loss, demand, liability. or expense, including reasonable attomeys' fees
and costs, incuned 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 ol
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
I l. Applicable Law. This Agrcement shall be govemed by and construed in accordance
with the laws of the State of Califomia. 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 ofthe party not performing. a party shall be excused fiom 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 govemment, or a material act or omission by the
other party.
13. Ownership of Reports and Documents. The originals ofall 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 fumished 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
Goveming 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 ofthe rights ofPARS as set forth in this Agreement.
15. Notices. All notices hereunder and communications regarding the interpretation of the
terms of this Agreemen! 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 fo[[ows:
(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
ofthe intent to terminate. Absent a thirty (30) day written notice to the other party ofthe
intent to terminate, this Agreement will continue unchanged for successive twelve month
periods following the Term.
I 7. 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 ofthe 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 ofthis 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. Aftorneys Fees. In the event any action is taken by a party hereto to enforce the terms of
this Agreement the prevailing party herein shall be entitled to receive its reasonable
attomey's fees.
20. Counterparts. This Agreement may be executed in any number of counterparts, and in
that event, each counterpart shal[ be deemed a complete original and be enforceable
without reference to any other counterpart.
2t. 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 hrst above written, and
also shall be the date the Agreement is executed.
AGENCY:
BY:
TITLE
DATE:
PARS:
BY:
TITLE:
DATE:
Page 4
PARS will provide the following services for the [Agency Name] Public Agencies Post-
Employment Benefits Trust:
1. Plan lnstallation 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 ofPlan contributions made by the Agency to the trustee ofthe
PARS Public Agencies Post-Employnent 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 fiom the Agency and/or
Trustee;
(C) Coordinating the processing of distribution palrnents pursuant to authorized direction
by the Agency, and the provisions ofthe 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) Facilitating actuarial valuation updates and funding modifications for compliance
with GASB 45175, if prefunding OPEB obligations;
(H) Coordinating periodic audits of the Trust;
(I) Monitoring Plan and Trust compliance with federal and state laws.
3. PARS is not licensed to provide and does not offer tax, accounting, legal, investment or
actuarial advice.
Page 5
EXHIBIT IA
SERVICES
PARS will be compensated for performance of Services, as described in Exhibit lA 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:
0.25%
0.200
0.15o/o
0.10%
S0 to
$ 10,000,001 to
$15,000,001 to
$50,000,001 and
$ 10,000,000
$ l s,000,000
$s0,000,000
above
Annual rates are prorated and paid monthly. The annual asset fee shall be calculated by
the following formula [Annual Rate divided by l2 (months of the year) multiplied by the
PIan asset balance at the end ofthe month]. Trustee and Investment Management Fees
are not included.
Page 6
EXHIBIT IB
FEES FOR SERVICES
PARS will provide the Services under this Agreement contingent upon receiving the
following information:
Executed Legal Documents:
(A) Cetified Resolution
(B) Adoption Agreement to the Public Agencies Post-Employment Benefits Trust
(C) Trustee Investment Forms
Contribution - completed Contribution Transmittal Form signed by the plan
Administrator (or authorized Designee) which contains the following information:
(A) Agency name
(B) Contributionamount
(C) Contribution date
(D) Contribution method (Checlg ACH, Wire)
Distribution - completed Payment Reimbursement/Distribution Form signed by the
Plan Administrator (or authorized Designee) which contains the following
information:
(A) Agency name
(B) Paymentreimbursement/distribution amount
(C) Applicable statement date
(D) Copy of applicable premium, claim, statement, warrant, and/or administrative
expense evidencing payment
(E) Signed ce(ification of reimbursement/distribution from the Plan Administrator
(or authorized Designee)
Other information pertinent to the Services as reasonably requested by PARS and
Actuarial Provider.
J
Page 7
I
EXHIBIT 1C
DATA REOUIREMENTS
4.
2.
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 Agencles 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 Sovernmental function within the meaning of Section 115 of the lnternal 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 Programj 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:
The Town Council hereby adopts the PARS Public Agencies post-Employment Benefits Trust, effective1
2OL7; and
2. The Town Council hereby appoints the IPOSITION OR TITLE)or his/her successor or his/her designee as
the Town's Plan Administrator for the Program; and
3. The Town's Pian 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.
Town Clerk
lN WITNESS WHEREOF I have hereunto set my hand and seat this .2017.
lnvestment Strategy Selection and Disclosure Form
PARS Pension / OPEB Trust Program
I This document is entered into by client and U.S. Bank National Association ("U.S. Bank'), as truslee.
! Employer:
I Plan/Trust Name: Public Aoencies PosFEm ployment Benefits Trust
a
9
J
0
II
Ft
0I
0I
lr
a
E
lll
:
o
r To: HighMark Capital Management, Inc. and U.S. Bank:
U.S. Bank has been or is hereby appointed lnvesfnent Manager of the above-referenced Plan/Trust. Please invest the assets
of the above-referenced Plan/Trust for which you have been appointed lnvestment Manager in the (select one of the
strategies listed below tor each Plan funded by the Trust):
t{ot€: HighMa* PLUS porfolios are diversfied porrolbs ot actively managed mutral frnds. lndex P LUS po.tfotios er divelsifed porrotios ot tndex-based mutuat tnds
or exc+langa-f aded tunds_
PEISION OPEB HM IiAI{AGED
Liquidity Management (US Treasury)
Provid€ ojr.€nt incom€ wih liquUity
and sbbility of principal hrough
investnenb in sl|ort-lsrm U.S.
Treasury ouigations-
Money [.lafiet Fund
Liquidity ilanagcment {Prime Obligation)tr Liqlidity ilanagem.nl (Prime Obligation) GeneEle orn€nt inccrne wih liquijity Money Ma*el Fund
CoGGrYative Hight!,hfi PLI.JS
Conservative lndex PLUS
Conservative HighMa* PLUS
ConsorvatiY. lnder PtUS
Provile a consislent ler€l of infalioi-
protecled income ov€r the loiglenn.
5-20%
6G95'/6
0-20%
Eqr$r
F[ed lncome
Cash:
irod.rEtely Con.€.valive HighMa* PLUS
uoderatdy CongoNative lnder PLUS
Provih qlflEnt hcome wih c€pital
appredalion as a secoodary otjeclive.
20400/"
50{0%
0-20%
Eqlty:
Fixsd lnaome:
Cash:
ntr
,rod€rale HighMad( PLUS
Moderate lnder PLUS
tr
tr
Proviie qrneot hcorne and moderale
capital appr€ciatm.
10-50%
40$0%
0-200/o
E$ftv:
Fixed lncome:
Cash:
Balanced HEhMa* PLUS
Balanced lndex PLUS
E.hnced Hbhira* PtUS
Balanc€d lndex PLIJS
Prol/ije grlrvh of pdncipal and income.
50-70%
30-50%
0"200/,
Equ'tyr
Fixed lncome:
Cash:
Capital AppEci.tion HEh[.ia* PLI,S
C.pit l Appricirtion lnder PLUS
Capital Appr.cirtion Highl,lark PIUS
Capital Appcciation lndex PLUS
Primary goal is gro,vh of pdn ipal.
65'{5%
10-30%
0-20%
ECnty:
F ed lnaoflE:
Cash:
tr Custom Custom Spedf,.
OPEB Account Pension Account
Signature of Arrthorized Signer Tifle
Print Name ot Authorized Signer Dale
I
Exhibit Ato the Adoption Agreement
bank
'?' lq
L-.
Ack nowled g ed and Approved
tr tr Primary Goal Strategic
Range
Liqlidity Ian.geme (US Tr€sury)
tr
tr
tr tr
tr
Moderately Coi.e atiye Hrghtlar( PLUS
Moderately Conssrvative lndex PLUS
Moderate HighMa* PLUS
Mode6te lnder PLI.JS
tr
tr
Discretionary Trustee Fees are based on the lnvestment Strategy you select. Following is a list of the Discretionary
Trustee Fees applicable to each lnvestment Strategy:
r Liquidity - FirstAmerican U.S. Treasury Money Market - Fund level fees only (see prospectus)
t Liquidity - FirstAmerican Prime obligation Fund class Z - Fund levelfees only (see prospectus)
r Diversified Portfolios (Conservatiye, Moderately Conservative, Moderate, Balanced, Capital Apprcciation)
Per Annum Charges*
35% on the first $5,000,000
25% on the next $5,000,000
20% on the next $5,000,000
.15% on the next $35,000,000
-.191/r gn 4Ey9, _ $s0,000.000
'lvaived lor plan 6sets invested in First Amedcan and NationwiddHighMa* tunds rlilere HrghMak Capilal ManagerEnt is he sutadviser d t|e fund
Other Fe6
First American Mutual Funds (see prospectus)
Maket values used for fee calculations on fee invoices may differ slightly from market values on client statements
due to posting of accruals, late pricing of securities and/or other timing issues.
Fees are calculated and charged to the accounl monthly. lf account cannot be charged after 30 days, fees not paid
will be subject to a late charge of 'l% per month on the unpaid balance.
Changes to this Fee Schedule may be made at any time by U.S. Bank upon a sixty (60) days notice.I
Discretionary Tru stee Fees
Payment of Fees
ent Benefits Trust
Name of Employer
Name o, Authorized Signer Employer
Signature of Aulhorized Signer for Employer
Trlle
Date
Public encies Post-Em
Name of Plan/Trusl
I Acknowledged and Ap proved
PEN$O @E8 HM IAIAGEO
IEESC'{ 103 07.25 2016 Ebank
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.
info,malim concemirE heiparliollarsitralim.
Notices . Disclosures
U.S. Bank
Acknowledgment
' To hdp he govemmenl fEht he fundirE d tenorbm and money laundering elivities, federal la^, requires all fnancial institutiom to obtain, veriry and record
information that identifies eadt person who opens an acmunt.
What his means for yan: Whefl you operl an account, we will ask fo( your name, address, tax identification number, and ober inlormalion hat will allow us lo
idediry you. We may also ask for identifying documents.
' Truslee may from tms to lime hold unin\,€sled c€sh ai/aililE disbuGement without paying interest hereon, and as a result may recdve indireci @rnpensation on
such fun&.
lm porta nt lnf ormation
' FoI a prospeclus containing more complete information on First American Funds, including investmeflt policies, risks, fees, and expenses, please contact your
investment prolessional, call Flrst American FunG lnvestor servic€s at (800) 67-FUND (?363), or vhit frstamericanfunds.com. please read the prospectus
carefully belore you invest or send money.
the First An€rican Funds as disclced in the funds' prospectuses.
.S. Banlq seryices 6 the investrnent advisor to lhe First American
affiliate.F
S,U kBan and other SU verecei nco ns forat on rendservEes l0eredp€
s.U Ban Asset nc a veslmetn 1ncorp L]s bsid a Uofregisteredry
F unds The rst butedFundsAmerican 0 0istdbulo6asar a s.U BanLtc,
First American Funds Related Disclosures
Employer:
gment
PlanlTrust l,lame
Print Name of Auhorized Signer lor Ehptoya
Sonatrre of tu$o.ized Signer for Emptoye.
. The undeEigned (the "e!gE@f) hereby acknovdedgB thd;
1. The Customel is indepeodeot of U.S. Bank National Associalion fUSBNAI, U.S. Bancorp Asset Management lnc. ('USBAM'), U.S. Bancorp Fund
Services, LLC ("USBFS'), Ouasar Disributors, LLC ('Quasa/), and all olher affiliates ot Li.S. eancup liottectivety, 'U.S. Bank'i and has authority to
approve the fee schedule provided for the account named above (the ,Account').
2 The Customer has read and understan& lie adoption agreement and fust agreement witi USEf,lA with respect lo ttre AccoJnt, induding tie Discretionary
Trustee Fee Schedule (the 'Acc9[!!gycl-Eees'). Within the adoption ageement, the Customer elected a discrelionary investnent approach for Accouni
asseb. The qlstomer approves the Acmunt-levd Fees.
3 USBAM is the inve6tment advisor to the_opei-end investmffl companies registered under the lnvestment Company Act of 1940 (the ,llOlu") in the First
American Funds, lnc. family (each, a 'EU!L). U.S. Bank may enter into a0reemenls with Funds or with Fun6' service providis linduding-' invesfnent
adr,/iseJs,.administrators, transfer 4€nts. or dislributoG) whereby U.S. Bank provides services to the Funds, including, as applicable, services provided by
USBAM {invesfnent advisory, shareholder seryices), by USBiIA (custody, seqrrities-lending), by USBFS (accounting-, administrator, transfer agency), and
by Quasal (distihJtion, pdncipal underwriling) and receives fees for these services. The faes ire received hom th; Fund, are baed on investment in a
Fund' may vary by Fund and by class
_of
shares issrcd-by the Fund, are charged against the Fund's assels, and reduce the Fund's average daily balance
and invesfnent yields (colleclively, tle 'E!!!Eeygl@').
4. The Customer has received, read, and undeGtands the prospeclus for each Fund, includi0g the sectbns thereof regarding fees, expenses, and
compensation. The customer apFoves the Fund-level Fees.
5. From lime to time, a Fund's seryice provider may voluntarily waive a portion of the fee it is entiUed to receive for serving the Fund. ll a waiver is in efect,
$en llle Custome/s appmval of Fund-level Fees indudes approval up to fie Fund's total annual operating expenses dore waivers; if tle service pmvider
te.minates the waiver as provided in the Fund's prospeclus, then lhe approval persists.
6. I lSBl'lA will not vote proxies wih respecl to Fund shales held in the Account hrt will instead fonvard sudr proxies to lhe Plan Administrator (as detned in he
aforementioned trusl agreement).
7. Shares of registered inveslment companies are not deposib or obligalions of or guaranteed by, any bank, including any bank affiliated wib U.S. Banryp.
Nor does the Federal Deposit lnsurance Corporation, the Federal Reserve Board, or any other govemmental agency insure such products. An investrnent in
such producb involves invesfnent risks, including the possible lcs of principal, dueto fluctuati;s in each prodiucti na asset value.
Cuslomer Acknowledgmeft
Tlle
NOT]CES. DISCLOSURES
FRI' 501 03 22516 Ebank
andadv sor[.4anagement,
F irst American Funds Acknowled
CAPITAT MANAGTMENT
Mutual Fund Disclosure Statement for
U.S. Bank Account Sub-Advised by HighMark Capital Management, lnc.
Effective September 16, 2013
HighMark Capital Management, lnc. ("HCM") has a sub-advisory relationship with U.S. Bank National Association ("US BANK') with
respect to various trust a@ounts ('Client Accounts'). Under the sub-advisory relationship, HighMark has the authority to invest Client
Accounts in a variety of mutual funds. Among the funds cunently available are the mutual funds that are sub-advised by HCM, an SEC
registered investment adviser and wholly owned investrnent management subsidiary of Union Bank, N.A., fUNION 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 invesfnent management,
custody,'and other services. "Accounfl means the client trust managed by US BANK and sub-advised by HCM ("SutrAdvised
Accounts'1. To avoid management fee duplication for Sub-Advised Accounts, HCM and US BANK will reduce or waive the account
level inve;tment management fee with respect to any shares in any mutual funds sutadvised by HCM held in the Sub-Advised
Accounts. You can crntact 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 tunds sub-advised by HCM
because sub-advisory fees paid to HCM are based on the size ofthe sub-advised funds
you have or will separately receive by mail or through electronic delivery prospectuses that contain informataon on the investrnent
objectives, operation and bes for all mutual tunds suLadvised by HCM that are available to Accounts of the type you have. Read the
prospectuses carefully. Please review the prospecluses for mutual funds carefully to identify risks, investment objectives, any
investnent limitatjons and restrictions, and msts and expenses of investing in any mutual fund you purchase, including fees paid to
service providers.
lnvestnenls in muttal funds are not insured by the FDIC or any other govemment 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 suFadvisory agreements with Nationwide Mutual Funds, Nationwide Variable lnsurance Trust and Nationwide Fund
Advisers. HCM also has a sub-advisory agreement with American lndependence Financial Services, LLC to suEadvise the American
lndependence Strategic lncome Fund (iee below the "Sub-Advised Funds' for iees received from American lndependence). HCM
may, from time to tim;, enter into sub-advisory agreemenb with other mutual fund companies to su advise their funds. HCM'S fees
for such seMces 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
lnvestment Adviser s (Sub-Advised Funds):
The table below shows the fees received by HCM as sub-adviser to Nationwide Mutual Funds,Nationwide Variable lnsurance Trust,
Nationwide Fund Advisers, and American lndependence Financial Services, LLC
Sub-Advised Funds Feo Roceived (Annual Rato)
Fiduciary Class
Nationwide HighMark Bond Fund 0.,|5% on SubadviserAssetst up to $250 million;
0.125% on Subadviser Assetst of $250 million and more but less than $1 billion;
0.10% on Subadviser Agsetst of$1 billion and more
Nationwide HighMark California lnlermediate Tax-Free Bond
Fund
Nationwide HighMark Nalional lntermediate Tax-Free Bond
Fund
0.25% on all Subadviser Assetst
NatiorMide HighMark Shod Term Bond Fund 0.10olo on Aggregate Subadviser Assetstt up to $500 million;
0.0975% on Aggregate Subadviser Assetstt ol $500 million and more but less than
$1 billion;
0.0925% on Subadviser Assets of 51 billion and mo.e
Nationwide HiqhMark Large Cap Growth Fund 0.30% on all Subadviser As
JHrcHIMnnp
ilutual Fund Disclosure Statement
tsubadviser Assets are
suUadviser.
that portion ofthe assets o{ a Fund that the investrnent adviser to such F und allocates and puls under the controt of HCM as the
ttThe lerm "Aggregate Subadviser Assels" means the aggregate amount resulting ftom ttle combination of Subadviser Assets ot the Nationwide
!111"::911"919llld, Nationwide HighMark Shod Term Borrd Fund and Natio;^/ide Shorr Duration aono iuno. tog;tner Gin tne suoaoviser essetsol tne NVI I Enhanced lncome Fund. a sefies of Natio
^/ide
Va.iable lnsurance Trust. These fees will be paid to Hc for its sub-adMsory seMces.
ttt The term "Aggregate Subadviser Assets" means the aggregate amount resulting from the combination of Subadviser Assets ofthe NaUonwide Fundlogether with Subadviser Assets of the twlT Nationwide Fund, a se.ies of Nationwi;e variabte tnsurance Trust. These Fees wi be paid to HCM for itssuFadvjsory seMces.
Sub-Advised Funds Fes Received (Annual Rate)
Fiduciary Class
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 Assetsf
Natjonwide HighMark Small Cap Core Fund 0.475% on all Subadviser Assetst
NVIT Enhanced lncome Fund 0.10% on Aggregate Subadviser Assetstt up to $500 miflion;
0.0975% on Aggregate Subadviser Assetstt of $500 and more but tess than $1
billioni
0.09250?6 on Aggregate Subadviser Assetstt of gl billion and more
NVIT Nationwide Fund 0.25%on Aggregate Subadviser Assetsffi up to 9250 million;
0.20016 on Aggregate Subadviser Assetstft of $250 and more bul tess than $.1
billion;
0.18% on Aggregale Subadviser Assetsffi ol g1 billion and more
Nationwide Fund o25%on Aggregate Subadviser Assetstft up to 9250 mifiion:
0.20% on Aggregate Subadviser Assetsfl-t of $250 and more but less than gl
billion:
0.18% on Aggregate Subadviser Assebtft of $1 biflion and more
N ationwide Shorl Duration Bond Fund 0.10% on Aggregate Subad viserAssetsft up to $500 million:
0.09750,6 on Aggregate Subadviser Assetstt of g5OO and more but tess than $1
billion;
0.0925% on Aggregate Subadviser Assetstt ofgl biltion and more
Nationwide Enhanced lncorne Fund 0.'l 0% on Aggrcgate Subadviser Asselstf up lo $500 million
0.0975% on Aggregate Subadviser Assetstt of $SOO and more but tess than S1
blllion:
0.0925% on Aggregate Subadviser Assetstt of $1 bi ion and mo.e
American lndependence Strategic lncome Fund 0.2070 on Subadvi ser Assetsf less 50% of any fee waivers
Mutual Fund Disclosure Statement
Additional Services ProYided To M utual Funds Sub-Advised bv HCM:
Other Services: HCM reserve the ri ght to direcl that certaan brokerage transactions be performed through their affiliated broker. Such 1
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. ln the event of such transaciions, the
affiliates would be paid brokerage fees by mutualfunds sub-advised by HCM.
HCM may receive soft dollar mmpensation from brokers consistent with section 28(e) of the Securities Exchange Act of '1934.
Transactions involvinq Morqan Stanlav:
HCM'S ultimate parent company, Mitsubishi UFJ Financial Group, lnc. ("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 brokeriealers, among other businesses. lf HCM sub-advises your Account, the fact of MUFG's
beneficial ownershap 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 preveni 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 arrangemenl with unaffiliated third parties and their
iespeaive investrnent advisers who may invest in and/or may recommend mutual funds, ETFS, or other invesfnent products of Morgan
Stanley companies or its affiliates, if such securities or products meet applicable inveslment criteria, and may use Morgan Stanley
brokerage servi@s or one of its related persons as the broker{ealer for securities trades in seeking best execution or when they
otheMise deem it appropriate.
USE OF MUTUAL FUNDS SUB.ADVISED BY HCM
lnvestrnent in the mutual funds sub-advised by HCM may be benefcial because it gives portability to Account holders whose Acrounts
provide for in*ind distuibutions or rolloversi results in diversification of Account assets, thereby potentially lowering overall investrnent
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 ine&ensive movement between funds in response to market shifts or changes in inlestment
objectives. lf we manage your Account, you can withdraw your cons€nt to use of mutual funds sub-advised by HCM at any time by
noiirying, in writing, you-r A-ccount's trust ;ffcer. lf you direct in\€strneots in your Account, you may direct redemptions of investrnents in
any itC-tr, suO-aari"id mutual fund at any t,me as is the case with any mutual fund investnents you hold in your Account.
Applicable fiduciary law and regulation require disclosure of relevant be information for Su Advised Accounts so that the client or an
independent fiduciiry acting o;the client's behalf may monitor the reasonableness of the total fees being received by HCM for its
seMces 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 acknowtedge receipt of the prospectuses of the mutual funds. I also approve the receipt of fees by HCM in accordance with the
information set brth in the Disclosure, in the funds' prospectuses' and in my Account Fee Schedule'
Authorized Signer:
Title:
Signature of Authorized Signer:
Date:
Authorized Signer:
Title:
Signature ot Authorized Signer:
Dale:
tl
CLIENT
'
COMPANY
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ENTITY NA E: