HIGHMARK FUNDS /MA/, 497, 1997-12-22

HIGHMARK FUNDS /MA/
497, 1997-12-22

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<PAGE> 1

Money Market Funds

PROSPECTUS

Retail Shares
November 30, 1997
<PAGE> 2

HIGHMARK FUNDS

MONEY MARKET FUNDS

HighMark Funds ("HighMark") is an open-end, diversified, registered investment
company that offers a convenient means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to the
Class A and Class B Shares of HighMark's:

- Diversified Money Market Fund
- U.S. Government Money Market Fund
- 100% U.S. Treasury Money Market Fund
- California Tax-Free Money Market Fund

RETAIL SHARES

HighMark's Retail Shares are offered to investors who are not fiduciary
clients of Union Bank of California, N.A., and who are not otherwise eligible
for HighMark's Fiduciary Shares.

This Prospectus sets forth concisely the information about HighMark and the
Funds that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated the same date as this Prospectus has been filed
with the Securities and Exchange Commission and is available without charge by
writing the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania
19456, or by calling 1-800-433-6884. The SEC maintains a World Wide Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information. The Statement of
Additional Information is incorporated into this Prospectus by reference. This
Prospectus relates only to the Retail Shares of the Money Market Funds.
Interested persons who wish to obtain a prospectus for the other Funds of
HighMark may contact the Distributor at the above address and telephone number.

BECAUSE THE CALIFORNIA TAX-FREE MONEY MARKET FUND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER, INVESTMENT IN THE FUND MAY BE
RISKIER THAN INVESTMENT IN OTHER MONEY MARKET FUNDS.

AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

HIGHMARK'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, INCLUDING UNION BANK OF CALIFORNIA, N.A., BANK OF
TOKYO-MITSUBISHI, LIMITED OR ANY OF THEIR AFFILIATES OR CORRESPONDENTS.
HIGHMARK'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN HIGHMARK INVOLVES
RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

November 30, 1997

Retail Shares
<PAGE> 3

SUMMARY

HIGHMARK FUNDS ("HighMark") is an open-end, diversified, registered investment
company providing a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
Class A Shares of the Diversified Money Market, U.S. Government Money Market,
100% U.S. Treasury Money Market, and California Tax-Free Money Market Funds and
the Class B Shares of the U.S. Government Money Market Fund (each a "Fund" and
sometimes referred to in this prospectus as the "Funds"). Class A and Class B
Shares are collectively "Retail Shares." This summary is qualified in its
entirety by reference to the more detailed information provided elsewhere in the
Prospectus and in the Statement of Additional Information.

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES? The Diversified Money Market Fund,
the U.S. Government Money Market Fund, and the 100% U.S. Treasury Money Market
Fund seek current income with liquidity and stability of principal. The
California Tax-Free Money Market Fund seeks as high a level of current interest
income free from federal income tax and California personal income tax as is
consistent with the preservation of capital and relative stability of principal.
(See "INVESTMENT OBJECTIVES")

WHAT ARE THE FUNDS' PERMITTED INVESTMENTS? THE DIVERSIFIED MONEY MARKET FUND
invests in obligations with maturities deemed under SEC rules to be 397 days or
less ("short-term investments") issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, in high-quality short-term obligations issued by
banks and corporations, and other high-quality rated and unrated short-term
instruments; some of the obligations and short-term instruments in which the
Fund invests may be subject to repurchase agreements. THE U.S. GOVERNMENT MONEY
MARKET FUND invests in short-term obligations issued or guaranteed by the U.S.
Treasury, and additionally invests in obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government; some of the obligations in
which the Fund invests may be subject to repurchase agreements. THE 100% U.S.
TREASURY MONEY MARKET FUND invests exclusively in direct U.S. Treasury
short-term obligations. THE CALIFORNIA TAX-FREE MONEY MARKET FUND invests
primarily in bonds and notes issued by or on behalf of the State of California
and other states, territories, possessions of the United States, and the
District of Columbia and their respective authorities, agencies,
instrumentalities and political sub-divisions, the interest on which is excluded
from gross income for federal income and California personal income tax purposes
and is not treated as a preference item for individuals for purposes of the
federal alternative minimum tax. (See "INVESTMENT POLICIES")

WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? Each Fund seeks
to maintain a net asset value of $1.00 per share. There can be no assurance that
a Fund will be able to maintain a net asset value of $1.00 per share on a
continuous basis. The California Tax-Free Money Market Fund concentrates its
investments in California municipal securities, and an investment in the Fund
therefore may be riskier than an investment in other types of money market
funds. (See "Risk Factors")

ARE MY INVESTMENTS INSURED? HighMark's Shares are not federally insured by the
FDIC or any other government agency. Any guarantee by the U.S. Government, its
agencies or any instrumentalities of the securities in which any Fund invests
guarantees only the payment of principal and interest on the guaranteed
security, and does not guarantee the yield or value of the security or yield or
value of Shares of that Fund.

2
<PAGE> 4

WHO IS THE ADVISOR? Pacific Alliance, a division of Union Bank of California,
N.A., serves as the Advisor to HighMark. (See "The Advisor")

WHO IS THE ADMINISTRATOR? SEI Investments Fund Resources serves as the
Administrator of HighMark. (See "The Administrator")

WHO IS THE CUSTODIAN? Union Bank of California, N.A. (the "Bank") serves as
the Custodian of HighMark's assets. (See "The Custodian")

WHO IS THE DISTRIBUTOR? SEI Investments Distribution Co. acts as distributor
of HighMark's Shares. (See "The Distributor")

HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions of Class A
Shares may be made through the Distributor on days on which both the New York
Stock Exchange and the Federal Reserve wire system are open for business
("Business Days"). The minimum initial investment is generally $1,000 per Fund.
In order to be effective on the Business Day received, orders to purchase Class
A Shares and to redeem Class A and Class B Shares must be placed prior to 8:00
a.m., Pacific time (11:00 a.m., Eastern time) for the California Tax-Free Money
Market Fund; prior to 9:00 a.m., Pacific time (12:00 noon, Eastern time) for the
100% U.S. Treasury Money Market Fund; and prior to 10:00 a.m., Pacific time
(1:00 p.m., Eastern time) for the Diversified Money Market and U.S. Government
Money Market Funds on any Business Day. Otherwise, the order will be effective
the next Business Day. In addition, effectiveness of a purchase is contingent on
the Custodian's receipt of Federal funds before 11:00 a.m., Pacific time (2:00
p.m., Eastern time). Class B Shares are only available pursuant to an exchange
for Class B Shares of another HighMark Fund. (See "HOW TO PURCHASE SHARES and
REDEMPTION OF SHARES")

HOW ARE DIVIDENDS PAID? The net investment income (exclusive of short-term
capital gains) of the Funds is determined and declared on each Business Day as a
dividend for Shareholders of record as of the close of business on that day.
Dividends are paid monthly in additional shares unless the Shareholder elects to
take the payment in cash. (See "DIVIDENDS")

3
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................................... 2
Money Market Funds Fee Table.......................................................... 5
Financial Highlights.................................................................. 7
Fund Description...................................................................... 12
Investment Objectives................................................................. 12
Investment Policies................................................................... 12
Diversified Money Market Fund....................................................... 13
U.S. Government Money Market Fund................................................... 14
The 100% U.S. Treasury Money Market Fund............................................ 14
California Tax-Free Money Market Fund............................................... 14
General............................................................................... 16
Illiquid and Restricted Securities.................................................. 16
Municipal Securities................................................................ 17
Lending of Portfolio Securities..................................................... 18
Other Investments................................................................... 18
Risk Factors........................................................................ 18
Valuation of Shares................................................................... 19
How to Purchase Shares................................................................ 20
How to Purchase By Mail............................................................. 21
How to Purchase By Wire............................................................. 21
How to Purchase through an Automatic Investment Plan ("AIP")........................ 21
How to Purchase Through Financial Institutions...................................... 22
Alternative Purchase Options........................................................ 22
Exchange Privileges................................................................... 24
Redemption of Shares.................................................................. 25
By Mail............................................................................. 25
Telephone Transactions.............................................................. 25
Systematic Withdrawal Plan ("SWP").................................................. 26
Other Information Regarding Redemptions............................................. 26
Dividends............................................................................. 27
Federal Taxation...................................................................... 28
Service Arrangements.................................................................. 30
The Advisor......................................................................... 30
Administrator....................................................................... 31
The Transfer Agent.................................................................. 31
Shareholder Service Plan............................................................ 31
Distributor......................................................................... 31
The Distribution Plans.............................................................. 32
Banking Laws........................................................................ 33
Custodian........................................................................... 33
General Information................................................................... 33
Description of HighMark & Its Shares................................................ 33
Performance Information............................................................. 34
Miscellaneous....................................................................... 35
Description of Permitted Investments.................................................. 35
</TABLE>

4
<PAGE> 6

MONEY MARKET FUNDS FEE TABLE

<TABLE>
<CAPTION>
100% U.S. CALIFORNIA
DIVERSIFIED U.S. GOVERNMENT TREASURY TAX-FREE
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
----------------- -------------------- ----------------- -----------------
CLASS A CLASS A CLASS B CLASS A CLASS A
SHARES SHARES SHARES SHARES SHARES
----------------- ------- ------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES(A)
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)................ 0% 0% 0% 0% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)......................... 0% 0% 0% 0% 0%
Deferred Sales Load (as a
percentage of original purchase
price or redemption proceeds,
as applicable)(b).............. 0% 0% 5.00% 0% 0%
Redemption Fees (as a percentage
of amount redeemed, if
applicable)(c)................. 0% 0% 0% 0% 0%
Exchange Fee(a).................. $ 0 $ 0 $ 0 $ 0 $ 0
ANNUAL OPERATING EXPENSES
(as a percentage of net assets)
Management Fees (after
voluntary reduction)(d)...... 0.30% 0.30% 0.30% 0.25% 0.10%
12b-1 Fees..................... 0.25% 0.25% 0.75% 0.25% 0.25%
Other Expenses (after voluntary
reduction)(e)................ 0.20% 0.20% 0.45% 0.20% 0.20%
---- ---- ---- ---- ----
Total Fund Operating
Expenses(f).................. 0.75% 0.75% 1.50% 0.70% 0.55%
==== ==== ==== ==== ====
</TABLE>

- ---------------
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
------ ------- ------- ---------
<S> <C> <C> <C> <C>
Diversified Money Market Fund Class A Shares............ $ 8 $24 $ 42 $ 93
U.S. Government Money Market Fund
Class A Shares........................................ $ 8 $24 $ 42 $ 93
Class B Shares (assuming a complete redemption at end
of period)......................................... $ 65 $77 $ 102 $ 159
Class B Shares (assuming no redemptions).............. $ 15 $47 $ 82 $ 159
100% U.S. Treasury Money Market Fund Class A Shares..... $ 7 $22 $ 39 $ 87
California Tax-Free Money Market Fund Class A Shares.... $ 6 $18 $ 31 $ 69
</TABLE>

* Class B Shares automatically convert to Class A Shares after eight years.

5
<PAGE> 7

SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

(a) Certain entities (including Union Bank of California, N.A. and its
affiliates) making investments in the Funds on behalf of their customers may
charge customers fees for services provided in connection with the
investment in, redemption of, and exchange of Shares. (See HOW TO PURCHASE
SHARES, EXCHANGE PRIVILEGES, REDEMPTION OF SHARES, and SERVICE ARRANGEMENTS
below.)

(b) Class B Shares of the U.S. Government Money Market Fund are only available
pursuant to an exchange for Class B Shares of another HighMark Fund. The
deferred sales charge applied to Class B Shares of the U.S. Government Money
Market Fund at the time of redemption will be equal to the deferred sales
charge that would have been applied to the shares of such other HighMark
Fund. Currently, the maximum deferred sales charge on such shares is 5.00%.

(c) A wire redemption charge of $15 is deducted from the amount of a wire
redemption payment made at the request of a Shareholder. (See REDEMPTION OF
SHARES below.)

(d) Absent voluntary fee waivers, MANAGEMENT FEES would be 0.30% for the 100%
U.S. Treasury Money Market Fund and the California Tax-Free Money Market
Fund.

(e) Absent voluntary fee waivers, OTHER EXPENSES would be 0.47% for the Class A
Shares of the Diversified Money Market Fund, the Class A Shares of each of
the U.S. Government Money Market Fund, the 100% U.S. Treasury Money Market
Fund and the California Tax-Free Money Market Fund and 0.48% for the Class B
Shares of the U.S. Government Money Market Fund.

(f) Absent voluntary fee waivers, TOTAL FUND OPERATING EXPENSES would be 1.02%
for the Class A Shares of the Diversified Money Market Fund, the Class A
Shares of each of the U.S. Government Money Market Fund, the 100% U.S.
Treasury Money Market Fund, and the California Tax-Free Money Market Fund
and 1.53% for the Class B Shares of the U.S. Government Money Market Fund.

6
<PAGE> 8

FINANCIAL HIGHLIGHTS

The tables below set forth certain financial information with respect to the
Class A Shares (formerly Retail Shares) of the U.S. Government Money Market Fund
and the 100% U.S. Treasury Money Market Fund. Financial highlights for the Funds
for the period ended July 31, 1997 have been derived from financial statements
audited by Deloitte & Touche LLP, independent auditors for HighMark, whose
report thereon is included in the 1997 Annual Report for the HighMark Funds,
which is incorporated by reference into the Statement of Additional Information.
Financial highlights for the Funds prior to the fiscal year ended July 31, 1996
have been derived from financial statements examined by other auditors whose
report thereon is on file with the Securities and Exchange Commission.

The tables below also set forth certain financial information with respect to
the Class A Shares (formerly Retail Shares) of the Diversified Money Market Fund
and the California Tax-Free Money Market Fund. Upon reorganizing as funds of
HighMark Funds on April 28, 1997, Stepstone Money Market Fund became HighMark
Diversified Money Market Fund and Stepstone California Tax-Free Money Market
Fund became HighMark California Tax-Free Money Market Fund. Financial highlights
through January 31, 1997 represent the Investment Class Shares (now Class A
Shares) of Stepstone Money Market and Stepstone California Tax-Free Money Market
Funds, and have been derived from financial statements audited by Arthur
Andersen LLP, independent auditors for the Stepstone Funds.

As of the date of this Prospectus, the U.S. Government Money Market Fund has
not offered Class B Shares.

7
<PAGE> 9

CALIFORNIA TAX-FREE MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE SIX
MONTH PERIOD
ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, --------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning
of Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ -------- ------- ------- ------- -------
Investment Activities
Net investment income.... 0.015 0.027 0.031 0.023 0.018 0.022
Net realized and
unrealized gain (loss)
on investments........ -- -- -- -- -- --
------------ -------- ------- ------- ------- -------
Distributions
Net investment income.... (0.015) (0.027) (0.031) (0.023) (0.018) (0.022)
Capital gains............ -- -- -- -- -- --
Net Asset Value, End of
Period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ======= ======= ======= =======
Total Return............... 2.99%* 2.78% 3.14% 2.33% 1.80% 2.27%
Net Assets, end of period
(000)................. $217,229 $150,688 $81,177 $49,494 $52,220 $ 8,542
Ratio of expenses to
average net assets.... 0.55%* 0.60% 0.61% 0.62% 0.63% 0.63%
Ratio of expenses to
average net assets
excluding fee
waivers............... 0.97%* 0.88% 0.88% 0.90% 0.94% 0.94%
Ratio of net investment
income to average net
assets................ 3.02%* 2.75% 3.09% 2.33% 1.76% 2.21%
Ratio of net investment
income to average net
assets excluding fee
waivers............... 2.59%* 2.47% 2.82% 2.05% 1.45% 1.90%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized.

8
<PAGE> 10

100% U.S. TREASURY MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- -------
Investment Activities
Net investment income................ 0.045 0.046 0.046 0.026 0.026
Net realized and unrealized gain
(loss) on investments............. -- -- -- -- --
-------- -------- ------- ------- -------
Distributions
Net investment income................ (0.045) (0.046) (0.046) (0.026) (0.026)
Capital gains........................ -- -- -- -- --
-------- -------- ------- ------- -------
Contribution of capital................ -- -- -- -- --
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= =======
Total Return........................... 4.58% 4.74% 4.69% 2.68% 2.64%
Net Assets, end of period (000)........ $558,972 $100,623 $88,660 $39,157 $32,629
Ratio of expenses to average net
assets............................... 0.72% 0.74% 0.73% 0.74% 0.67%
Ratio of expenses to average net assets
excluding fee waivers................ 1.10% 1.23% 1.22% 1.15% 0.75%
Ratio of net investment income to
average net assets................... 4.55% 4.64% 4.68% 2.68% 2.60%
Ratio of net investment income to
average net assets excluding fee
waivers.............................. 4.17% 4.15% 4.19% 2.27% 2.52%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.

9
<PAGE> 11

DIVERSIFIED MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD
ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, ----------------------------------------------------------
1997 1997 1996 1995 1994 1993
--------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value,
Beginning of Period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- -------- -------- -------- ------- -------
Investment Activities
Net investment income.... 0.024 0.047 0.052 0.037 0.027 0.033
Net realized and
unrealized gain (loss)
on investments........ -- -- -- -- -- --
--------- -------- -------- -------- ------- -------
Distributions
Net investment income.... (0.024) (0.047) (0.052) (0.037) (0.027) (0.033)
Capital gains............ -- -- -- -- -- --
--------- -------- -------- -------- ------- -------
Contribution of capital.... -- -- -- -- -- --
Net Asset Value,
End of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======= =======
Total Return............... 4.86% * 4.78% 5.31% 3.78% 2.77% 3.36%
Net Assets,
end of period (000)...... $799,657 $576,566 $259,608 $111,267 $86,291 $79,253
Ratio of expenses to
average net assets....... 0.72% * 0.73% 0.75% 0.70% 0.70% 0.69%
Ratio of expenses to
average net assets
excluding fee waivers.... 0.95% * 0.88% 0.90% 0.90% 0.89% 0.86%
Ratio of net investment
income to average
net assets............... 4.82% * 4.69% 5.16% 3.79% 2.71% 3.41%
Ratio of net investment
income to average net
assets excluding fee
waivers.................. 4.59% * 4.54% 5.01% 3.59% 2.52% 3.24%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.

* Annualized.

10
<PAGE> 12

U.S. GOVERNMENT MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of
Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------- ------- ------- -------
Investment Activities
Net investment income............... 0.046 0.048 0.048 0.027 0.027
Net realized and unrealized gain
(loss) on investments............ -- -- -- -- --
------------ ------- ------- ------- -------
Distributions
Net investment income............... (0.046) (0.048) (0.048) (0.027) (0.027)
Capital gains....................... -- -- -- -- --
------------ ------- ------- ------- -------
Net Asset Value, End of Period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======= ======= ======= =======
Total Return.......................... 4.70% 4.86% 4.86% 2.74% 2.72%
Net Assets, end of period (000)..... $ 42,797 $75,714 $48,474 $24,055 $37,332
Ratio of expenses to average net
assets........................... 0.78% 0.79% 0.78% 0.77% 0.71%
Ratio of expenses to average net
assets excluding fee waivers..... 1.22% 1.26% 1.27% 1.17% 0.79%
Ratio of net investment income to
average net assets............... 4.60% 4.77% 4.82% 2.63% 2.67%
Ratio of net investment income to
average net assets excluding fee
waivers.......................... 4.16% 4.30% 4.33% 2.23% 2.59%
</TABLE>

- ---------------

Amounts designated as "--" are either $0 or have been rounded to $0.

* Annualized.

11
<PAGE> 13

FUND DESCRIPTION

HighMark is an open-end, diversified, registered investment company that
currently offers units of beneficial interest ("Shares") in sixteen separate
investment portfolios ("Funds"). All of the Funds are advised by Pacific
Alliance, a division of Union Bank of California, N.A. (the "Advisor").
Shareholders may purchase Shares of selected Funds through three separate
classes (Class A and Class B Shares (collectively, the "Retail Shares") and
Fiduciary Shares). These classes may have different sales charges and other
expenses, which may affect performance. Information regarding HighMark's other
Funds and other classes is contained in separate prospectuses that may be
obtained from HighMark's Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania, 19456, or by calling 1-800-433-6884.

For information concerning those investors who qualify to purchase Retail
Shares and the operation of HighMark's Distribution Plan, see HOW TO PURCHASE
SHARES and SERVICE ARRANGEMENTS below. (Retail Shares may be hereinafter
referred to as "Shares.")

INVESTMENT OBJECTIVES

The investment objectives of the Funds are as follows:

The DIVERSIFIED MONEY MARKET FUND, the U.S. GOVERNMENT MONEY MARKET FUND and
the 100% U.S. TREASURY MONEY MARKET FUND each seek current income with liquidity
and stability of principal.

The CALIFORNIA TAX-FREE MONEY MARKET FUND seeks as high a level of current
interest income free from federal income tax and California personal income tax
as is consistent with the preservation of capital and relative stability of
principal.

There can be no assurance that a Fund will achieve its investment objective.

The investment objectives and certain of the investment limitations of the
Diversified Money Market Fund, the U.S. Government Money Market Fund, the 100%
U.S. Treasury Money Market Fund, and the California Tax-Free Money Market Fund
may not be changed without a vote of the holders of a majority of the
outstanding Shares of the respective Fund (as defined under GENERAL
INFORMATION--Miscellaneous below).

INVESTMENT POLICIES

While the Diversified Money Market Fund, the U.S. Government Money Market Fund
and the 100% U.S. Treasury Money Market Fund have the same investment objective,
they differ as follows with respect to the types of instruments that may be
purchased. Each Fund may invest only in U.S. dollar-denominated obligations
determined by the Advisor to present minimal credit risks under guidelines
adopted by HighMark's Board of Trustees.

12
<PAGE> 14

Diversified Money Market Fund

The Diversified Money Market Fund may invest in the following obligations:

(i) obligations issued by the U.S. Government, and backed by its full faith
and credit, and obligations issued or guaranteed as to principal and interest by
the agencies or instrumentalities of the U.S. Government (e.g., obligations
issued by Farmers Home Administration, Government National Mortgage Association,
Federal Farm Credit Bank and Federal Housing Administration);

(ii) obligations such as bankers' acceptances, bank notes, certificates of
deposit and time deposits of thrift institutions, savings and loans, U.S.
commercial banks (including foreign branches of such banks), and U.S. and
foreign branches of foreign banks, provided that such institutions (or, in the
case of a branch, the parent institution) have total assets of $1 billion or
more as shown on their last published financial statements at the time of
investment;

(iii) short-term promissory notes issued by corporations, including Canadian
Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper
issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and Europaper, which is U.S. dollar-denominated commercial paper of
a foreign issuer;

(iv) U.S. dollar-denominated securities issued or guaranteed by foreign
governments, their political subdivisions, agencies or instrumentalities, and
obligations of supranational entities such as the World Bank and the Asian
Development Bank (provided that the Fund invests no more than 5% of its assets
in any such instrument and invests no more than 25% of its assets in such
instruments in the aggregate);

(v) up to 5% of its total assets in loan participations issued by a bank in
the United States with assets exceeding $1 billion where the underlying loan is
made to a borrower in whose obligations the Fund may invest and the underlying
loan has a remaining maturity of 397 days or less;

(vi) readily-marketable, short-term debt securities including, but not limited
to, those backed by company receivables, truck and auto loans, leases, and
credit card loans;

(vii) Treasury receipts, including TRs, TIGRs and CATs; and

(viii) repurchase agreements involving such obligations.

Certain of the obligations in which the Funds may invest may be variable or
floating rate instruments, may involve a conditional or unconditional demand
feature, and may include variable amount master demand notes.

Subject to the provisions of Rule 2a-7 under the Investment Company Act of
1940 (the "1940 Act"), investments of the Diversified Money Market Fund will
consist of those obligations that, at the time of purchase, possess the highest
short-term rating from at least one nationally recognized statistical rating
organization ("NRSRO") (for example, commercial paper rated "A-1" by Standard &
Poor's Corporation ("S&P") or "P-1" by Moody's Investors Service, Inc.
("Moody's")). Although the Diversified Money Market Fund does not presently
expect to do so, it may also invest up to 5% of its net assets in obligations
that, at the time of purchase, possess one of the two highest short-term ratings
from at least one NRSRO, and in

13
<PAGE> 15

obligations that do not possess an equivalent short-term rating (i.e., are
unrated) but are determined by the Advisor to be of comparable quality to the
rated instruments eligible for purchase by the Fund under guidelines adopted by
the Board of Trustees.

The Diversified Money Market Fund will not invest more than 5% of its total
assets in the securities of any one first tier issuer, except that the Fund may
invest up to 25% of its total assets in the securities of a single first tier
issuer for a period of up to three business days. There is no limit on the
percentage of the Fund's assets that may be invested in obligations issued or
guaranteed by the U.S. Government, its agencies, or instrumentalities and
repurchase agreements fully collateralized by such obligations.

The Fund may concentrate its investments in certain instruments issued by U.S.
banks, U.S. branches of foreign banks, and foreign branches of U.S. banks, but
only so long as the investment risk associated with investing in foreign
branches of U.S. banks is the same as that associated with investing in
instruments issued by the U.S. parent. Domestic certificates of deposit and
bankers' acceptances include those issued by domestic branches of a foreign bank
to the extent permitted by the rules of the Securities and Exchange Commission.
The rules currently permit U.S. branches of foreign banks to be treated as a
domestic bank if it can be demonstrated that they are subject to the same
regulations as domestic banks.

U.S. Government Money Market Fund

As a fundamental policy, the U.S. Government Money Market Fund may not
purchase securities other than U.S. Treasury bills, notes, and other obligations
issued or guaranteed by the U.S. Government, its agencies, or instrumentalities
(such as obligations issued by the Government National Mortgage Association and
the Export-Import Bank of the United States) some of which may be subject to
repurchase agreements.

The 100% U.S. Treasury Money Market Fund

The 100% U.S. Treasury Money Market Fund invests exclusively in direct U.S.
Treasury obligations and separately traded component parts of such obligations
transferable through the Federal Reserve book-entry system ("STRIPs").

California Tax-Free Money Market Fund

The California Tax-Free Money Market Fund invests in obligations issued by the
State of California and its political subdivisions or municipal authorities and
obligations issued by territories or possessions of the United States
("Municipal Securities").

Under normal market conditions and, as a matter of fundamental policy, at
least 80% of the value of the total assets of the California Tax-Free Money
Market Fund will be invested in Municipal Securities, the interest on which, in
the opinion of bond counsel, is excluded from gross income both for federal
income tax purposes and for California personal income tax purposes, and does
not constitute a preference item for individuals for purposes of the federal
alternative minimum tax.

Certain of the obligations in which the Fund may invest may be variable or
floating rate instruments and may involve a conditional or unconditional demand
feature.

14
<PAGE> 16

Under normal market conditions, up to 20% of the California Tax-Free Money
Market Fund's total assets may be invested in short-term obligations, the
interest on which is treated as a preference item for individuals for purposes
of the federal alternative minimum tax or subject to federal or California
personal income tax ("Taxable Obligations"). These short-term obligations may
include bonds from other states and cash equivalents as described below.

In general, dividends paid by the California Tax-Free Money Market Fund that
are derived from obligations, the interest on which is exempt from California
taxation when received by an individual ("California Exempt-Interest
Securities"), are excluded from gross income for California personal income tax
purposes. Dividends derived from interest on obligations other than California
Exempt-Interest Securities may be excluded from gross income for federal income
tax purposes but will be subject to California personal income tax.

In order for the California Tax-Free Money Market Fund to pay exempt-interest
dividends, at least 50% of its total assets must be invested in California
Exempt-Interest Securities at the close of each quarter of its taxable year.
Dividends, regardless of their source, may be subject to local taxes.

In seeking to achieve its investment objective, the California Tax-Free Money
Market Fund may invest all or any part of its assets in Municipal Securities
that are private activity bonds, including those known as industrial development
bonds under prior federal law. (Any reference herein to private activity bonds
includes industrial development bonds.) Interest on private activity bonds is
excluded from gross income for federal income tax purposes only if the bonds
fall within certain defined categories of qualified private activity bonds and
meet the requirements specified for those respective categories. However, even
if the California Tax-Free Money Market Fund invests in private activity bonds
that fall within these categories, Shareholders may become subject to the
federal alternative minimum tax on that part of such Fund's distributions
derived from interest on such bonds. For further information, see FEDERAL
TAXATION below.

The California Tax-Free Money Market Fund may invest up to 10% of its total
assets in shares of other investment companies with like investment objectives.
As a shareholder of an investment company, a Fund may indirectly bear investment
management fees of that investment company, which are in addition to the
management fees the Fund pays its own Advisor.

Investments of the California Tax-Free Money Market Fund will consist of those
obligations that, at the time of purchase, possess one of the two highest
short-term ratings by a NRSRO, and in obligations that do not possess a rating
(i.e., are unrated) but are determined by the Advisor to be of comparable
quality to the rated instruments eligible for purchase by the Fund under the
guidelines adopted by the Board of Trustees.

The California Tax-Free Money Market Fund may hold uninvested cash reserves
pending investment during temporary "defensive" periods or if, in the opinion of
the Advisor, desirable tax-exempt obligations are unavailable. In accordance
with the Fund's investment objective and subject to its fundamental policies,
investments may be made in Taxable Obligations if, for example, suitable
tax-exempt obligations are unavailable or if acquisition of U.S. Government or
other taxable securities is deemed appropriate for temporary "defensive"
purposes.

15
<PAGE> 17

As discussed in greater detail in the Statement of Additional Information,
Taxable Obligations may include obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities (some of which may be subject to
repurchase agreements), certificates of deposit, bankers' acceptances, and
commercial paper. As noted above, Taxable Obligations may also include private
activity bonds depending on their tax treatment.

The California Tax-Free Money Market Fund is not intended to constitute a
balanced investment program and is not designed for investors seeking capital
appreciation nor maximum tax-exempt income irrespective of fluctuations in
principal. Investment in the California Tax-Free Money Market Fund would not be
appropriate for tax-deferred plans, such as IRA and Keogh plans, and investors
should consult a tax or other financial advisor to determine whether investment
in the California Tax-Free Fund would be appropriate for them.

GENERAL

The Funds intend to comply with Rule 2a-7 under the 1940 Act. Shares of each
Fund are priced pursuant to the amortized cost method whereby HighMark seeks to
maintain each Fund's net asset value per Share at $1.00. There can be, however,
no assurance that a stable net asset value of $1.00 per Share will be
maintained.

Securities or instruments in which each Fund invests have remaining maturities
of 397 days or less, although instruments subject to repurchase agreements and
certain adjustable rate instruments may bear longer maturities. The
dollar-weighted average portfolio maturity of each Fund will not exceed 90 days.

Although the Diversified Money Market Fund, the U.S. Government Money Market
Fund and the 100% U.S. Treasury Money Market Fund have the same investment
advisor and the same investment objective, particular securities held and
respective yields of these Funds may differ due to differences in the types of
permitted investments, cash flow, and the availability of particular
investments.

Additional information concerning each Fund's investments, including certain
investment restrictions that may not be changed with respect to a particular
Fund without a vote of the holders of a majority of the outstanding Shares of
that Fund, is set forth below and in the Statement of Additional Information.
For further information concerning the rating and other requirements governing
the investments (including the treatment of securities subject to a tender or
demand feature or deemed to possess a rating based on comparable rated
securities of the same issuer) of a Fund, see the Statement of Additional
Information. The Statement of Additional Information also identifies the NRSROs
that may be utilized by the Advisor with respect to portfolio investments for
the Funds and provides a description of the relevant ratings assigned by each
such NRSRO.

In the event that a security owned by a Fund is downgraded below the stated
rating categories, the Advisor will take appropriate action with regard to that
security.

Illiquid and Restricted Securities

16
<PAGE> 18

approximately the amount at which the Fund has valued the instrument. The
absence of a trading market can make it difficult to ascertain the market value
of illiquid securities. Each Fund may purchase restricted securities which have
not been registered under the Securities Act of 1933 (e.g., Rule 144A Securities
and Section 4(2) commercial paper) subject to policies approved by the Board of
Trustees. See INVESTMENT RESTRICTIONS in the Statement of Additional
Information.

Time deposits, including ETDs and CTDs (but not including certificates of
deposit) and repurchase agreements, which have maturities in excess of seven
days are considered to be illiquid.

Municipal Securities

The two principal classifications of Municipal Securities that may be held by
the California Tax-Free Money Market Fund are "general obligation" securities
and "revenue" securities.

General obligation securities are secured by the issuer's pledge of its full
faith and credit and general taxing power for the payment of principal and
interest.

Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the California Tax-Free
Money Market Fund are in most cases revenue securities and are not payable from
the unrestricted revenues of the issuer. Consequently, the credit quality of
private activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved.

In addition, Municipal Securities may include "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.

Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from federal income tax or California personal income tax
are rendered at the time of issuance by counsel experienced in matters relating
to the validity of and tax exemption of interest on bonds issued by states and
their political sub-divisions. Neither the California Tax-Free Money Market Fund
nor the Advisor will review the proceedings relating to the issuance of
Municipal Securities or the basis for such opinions.

Municipal Securities purchased by the California Tax-Free Money Market Fund
may include adjustable rate tax-exempt notes which may have a stated maturity in
excess of 397 days, but which will be subject to a demand feature that will
permit the Fund to demand payment of the principal of the note either (i) at any
time upon not more than thirty days' notice or (ii) at specified intervals not
exceeding 397 days and upon no more than thirty days' notice. There may be no
active secondary market with respect to a particular adjustable rate note.
Nevertheless, as described in greater detail in the Statement of Additional
Information, the adjustable interest rate feature included in this type of note
is intended generally to assure that the value of the note to the Fund will
approximate its par value.

17
<PAGE> 19

issued in anticipation of the receipt of tax funds, the proceeds of bond
placements, or other revenues. In addition, the California Tax-Free Money Market
Fund may purchase tax-exempt commercial paper. Under certain circumstances, and
subject to the limitations described in the Statement of Additional Information,
the California Tax-Free Money Market Fund may invest indirectly in Municipal
Securities by purchasing shares of other tax-exempt money market mutual funds.

The California Tax-Free Money Market Fund may also acquire Municipal
Securities that have "put" features. Under a put feature, the Fund has the right
to sell the Municipal Security within a specified period of time at a specified
price. The put feature cannot be sold, transferred, or assigned separately from
the Municipal Security. Each Fund may buy Municipal Securities with put features
to facilitate portfolio liquidity, shorten the maturity of the underlying
Municipal Securities, or permit investment at a more favorable rate of return.
The aggregate price of a security subject to a put may be higher than the price
that otherwise would be paid for the security without such a feature, thereby
increasing the security's cost and reducing its yield.

Lending of Portfolio Securities

In order to generate additional income, each Fund (except the California
Tax-Free Money Market Fund) may lend its portfolio securities to broker-dealers,
banks or other institutions. A Fund may lend portfolio securities in an amount
representing up to 33 1/3% of the value of the Fund's total assets.

Other Investments

The Diversified Money Market Fund, the U.S. Government Money Market Fund, and
the California Tax-Free Money Market Fund may enter into repurchase agreements
and reverse repurchase agreements. Each Fund intends to limit its respective
activity in reverse repurchase agreements to no more than 10% of the Fund's
total assets.

The Funds may enter into forward commitments or purchase securities on a
"when-issued" basis. Each Fund expects that commitments by a Fund to enter into
forward commitments or purchase when-issued securities will not exceed 25% of
the value of the Fund's total assets under normal market conditions. The Funds
do not intend to purchase when-issued securities or enter into forward
commitments for speculative or leveraging purposes but only for the purpose of
acquiring portfolio securities.

For further information, see "DESCRIPTION OF PERMITTED INVESTMENTS."

Risk Factors

Investments by the Funds in obligations of certain agencies and
instrumentalities of the U.S. Government may not be guaranteed by the full faith
and credit of the U.S. Treasury, and there can be no assurance that the U.S.
Government would provide financial support to U.S. Government-sponsored agencies
or instrumentalities if it is not obligated to do so by law.

As in the case of mortgage-related securities, loan participations and certain
asset-backed securities are subject to prepayments and there can be no assurance
that the Diversified Money Market Fund will be able to

18
<PAGE> 20

reinvest the proceeds of any prepayment at the same interest rate or on the same
terms as the original investment.

With regard to loan participations, although a Fund's ability to receive
payments of principal and interest in connection with a particular loan is
primarily dependent on the financial condition of the underlying borrower, the
lending institution or bank may provide assistance in collecting interest and
principal from the borrower and in enforcing its rights against the borrower in
the event of a default. In selecting loan participations on behalf of a Fund,
the Advisor will evaluate the creditworthiness of both the borrower and the loan
originator and will treat both as an "issuer" of the loan participation for
purposes of the Fund's investment policies and restrictions (see INVESTMENT
RESTRICTIONS in the Statement of Additional Information).

Foreign securities which the Diversified Money Market Fund may purchase may
subject the Fund to investment risks that differ in some respects from those
related to investments in obligations of U.S. issuers. These risks include
adverse political and economic developments, possible imposition of withholding
taxes on interest income, possible seizure, nationalization, or expropriation of
foreign investments, possible establishment of exchange controls, or adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on such obligations. In addition, foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements and different accounting, auditing, reporting, and recordkeeping
standards than those applicable to domestic branches of U.S. banks.

Certain risks are inherent in the California Tax-Free Money Market Fund's
concentrated investment in California Municipal Securities, which may make an
investment in the Fund riskier than an investment in other types of money market
funds. Because of the California Tax-Free Money Market Fund's investment
objective, many of the securities in its portfolio are likely to be obligations
of California governmental issuers that rely in whole or in part, directly or
indirectly, on real property taxes as a source of revenue. The ability of the
State of California and its political sub-divisions to generate revenue through
real property and other taxes and to increase spending has been significantly
restricted by various constitutional and statutory amendments and voter-passed
initiatives. Such limitations could affect the ability of California state and
municipal issuers to pay interest or repay principal on their obligations. In
addition, during the first half of the decade, California faced severe economic
and fiscal conditions and experienced recurring budget deficits that caused it
to deplete its available cash resources and to become increasingly dependent
upon external borrowings to meet its cash needs.

The financial difficulties experienced by the State of California and other
issuers of California Municipal Securities during the recession have resulted in
the credit ratings of certain of their obligations being downgraded
significantly by the major rating agencies.

A more detailed description of special factors affecting investments in
obligations of California governmental issuers of which investors should be
aware is set forth in the Statement of Additional Information.

VALUATION OF SHARES

19
<PAGE> 21

Net asset value per share for purposes of pricing sales and redemptions for each
of the Funds is calculated by adding the value of all securities and other
assets belonging to a Fund, subtracting its liabilities, and dividing the result
by the total number of the Fund's outstanding shares, irrespective of class.

The assets in each Fund are valued based upon the amortized cost method
whereby HighMark seeks to maintain a Fund's net asset value per Share at $1.00,
although there can be no assurance that a stable net asset value of $1.00 per
Share will be maintained. For further information concerning the use of the
amortized cost method of valuation, see the Statement of Additional Information.

HOW TO PURCHASE SHARES

Class A Shares are sold on a continuous basis by HighMark's Distributor, SEI
Investments Distribution Co. The principal office of the Distributor is Oaks,
Pennsylvania 19456. If you wish to purchase Shares, you may contact your
investment professional or telephone HighMark at 1-800-433-6884. Investors may
be charged a fee if they effect transactions in fund shares through a broker or
agent.

The minimum initial investment is generally $1,000 for each Fund and the
minimum subsequent investment is generally only $100. For present and retired
directors, officers, and employees (and their spouses and children under the age
of 21) of Union Bank of California, N.A., SEI Financial Services Company and
their affiliates, the minimum initial investment is $250 per Fund and the
minimum subsequent investment is $50. A Fund's initial and subsequent minimum
purchase amounts may be waived if purchases are made in connection with
Individual Retirement Accounts, Keoghs, payroll deduction plans, 401(k) or
similar programs or accounts. Purchases and redemption of Shares of the Funds
may be made on any Business Day.

Purchase orders will be effective on the Business Day made if the Distributor
receives an order before 8:00 a.m., Pacific time (11:00 a.m., Eastern time) for
the California Tax-Free Money Market Fund, 9:00 a.m., Pacific time (12:00 noon,
Eastern time) for the 100% U.S. Treasury Money Market Fund and 10:00 a.m.,
Pacific time (1:00 p.m., Eastern time) for the Diversified Money Market and U.S.
Government Money Market Funds, on any Business Day. Otherwise, the purchase
order will be effective the next Business Day. Effectiveness of a purchase order
on any Business Day is contingent on the Custodian's receipt of Federal funds
before 11:00 a.m., Pacific time (2:00 p.m., Eastern time), on such day. The
purchase price of Class A Shares is the net asset value per Share, which is
expected to remain constant at $1.00. Class B Shares are only available pursuant
to an exchange for Class B Shares of another HighMark Fund. The net asset value
per Share is calculated as of 10:00 a.m., Pacific time (1:00 p.m., Eastern time)
each Business Day based on the amortized cost method. The net asset value per
Share of a Fund is determined by dividing the total value of its

20
<PAGE> 22

investments and other assets, less any liabilities, by the total number of its
outstanding Shares. Although the methodology and procedure for determining net
asset value are identical for Class A and Class B Shares, the net asset value
per share of such classes may differ because of the higher distribution expenses
charged to B Class Shares. HighMark reserves the right to reject a purchase
order when the Distributor or the Advisor determines that it is not in the best
interest of HighMark and/or Shareholder(s).

Shares of the Funds are offered only to residents of states in which the
shares are eligible for purchase.

How to Purchase By Mail

You may purchase Class A Shares of the Diversified Money Market, U.S.
Government Money Market, 100% U.S. Treasury Money Market, and California
Tax-Free Money Market Funds by completing and signing an Account Application
form and mailing it, along with a check (or other negotiable bank instrument or
money order) payable to "HighMark Funds," to the transfer agent at P.O. Box
8416, Boston, Massachusetts 02266-8416. All purchases made by check should be in
U.S. dollars and made payable to "HighMark Funds." Third party checks, credit
card checks or cash will not be accepted. You may purchase more Class A Shares
at any time by mailing payment also to the transfer agent at the above address.
Orders placed by mail will be executed on receipt of your payment. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees incurred.

You may obtain Account Application Forms for the Diversified Money Market,
U.S. Government Money Market, 100% U.S. Treasury Money Market, and California
Tax-Free Money Market Funds by calling the Distributor at 1-800-433-6884.

How to Purchase By Wire

You may purchase Class A Shares of the Diversified Money Market, U.S.
Government Money Market, 100% U.S. Treasury Money Market, and California
Tax-Free Money Market Funds by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to the transfer
agent and the wire instructions must include your account number. You must call
the transfer agent at 1-800-433-6884 before wiring any funds. An order to
purchase Class A Shares by Federal funds wire will be deemed to have been
received by a Fund on the Business Day of the wire; provided that the
Shareholder wires funds to the transfer agent prior to 11:00 a.m., Pacific time
(2:00 p.m., Eastern time). If the transfer agent does not receive the wire by
11:00 a.m., Pacific time (2:00 p.m. Eastern time), the order will be executed on
the next Business Day.

How to Purchase through an Automatic Investment Plan ("AIP")

You may arrange for periodic additional investments in Class A Shares of the
Diversified Money Market, U.S. Government Money Market, 100% U.S. Treasury Money
Market, and California Tax-Free Money Market Funds through automatic deductions
by Automated Clearing House ("ACH") from a checking account by completing this
section in the Account Application form. The minimum pre-authorized investment
amount is $100 per month per Fund. For present and retired directors, officers,
and employees (and their spouses and children under the age of 21) of Union Bank
of California, SEI Investments

21
<PAGE> 23

Distribution Co., and their affiliates the minimum pre-authorized investment
amount is $50 per month per Fund. The AIP is available only for additional
investments to an existing account.

How to Purchase Through Financial Institutions

Class A Shares of the Funds may be purchased through financial institutions,
including the Advisor, that provide distribution assistance or Shareholder
services. Class A Shares purchased by persons ("Customers") through financial
institutions may be held of record by the financial institution. Financial
institutions may impose an earlier cut-off time for receipt of purchase orders
directed through them to allow for processing and transmittal of these orders to
the transfer agent for effectiveness the same day. Customers should contact
their financial institution for information as to that institution's procedures
for transmitting purchase, exchange or redemption orders to HighMark.

Customers who desire to transfer the registration of Class A Shares
beneficially owned by them but held of record by a financial institution should
contact the institution to accomplish such change.

Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.

Alternative Purchase Options

Class A Shares and Class B Shares represent a Fund's interest in the portfolio
of investments. The classes have the same rights and are identical in all
respects except that (i) Class B shares bear the expenses of the deferred sales
arrangement and distribution and service fees resulting from such sales
arrangement, (ii) each class has exclusive voting rights with respect to
approvals of any Rule 12b-1 distribution plan related to that specific class
(although Class B shareholders may vote on any distribution fees imposed on
Class A shares so long as Class B shares convert into Class A shares), (iii)
only Class B shares carry a conversion feature and (iv) each class has different
exchange privileges. See "Exchange Privileges." Sales personnel of
broker-dealers distributing the Funds' shares, and other persons entitled to
receive compensation for selling such shares, may receive differing compensation
for selling Class A or Class B shares.

The Trustees of HighMark have determined that currently no conflict of
interest exists between the Class A and Class B shares. On an ongoing basis, the
Trustees of HighMark, pursuant to their fiduciary duties under the Investment
Company Act of 1940, as amended (the "1940 Act"), and state laws, will seek to
ensure that no such conflict arises.

Class A Shares. The Funds' Class A Shares are offered on a continuous basis,
at their next determined offering price, which is net asset value. There is no
initial or contingent deferred sales charge on purchases of Class A Shares.

Class B Shares. Class B Shares are sold at net asset value without any
initial sales charge. Class B Shares are only available for purchase pursuant to
an exchange for Class B Shares of another HighMark Fund (the "Exchange Class
Shares"). Currently, only the Class B Shares of the HighMark Funds assess a
contingent deferred sales charge. If an investor redeems Class B Shares of the
U.S. Government Money Market Fund

22
<PAGE> 24

within six years of purchase of the Exchange Class Shares and is not eligible
for a waiver, he or she will pay a contingent deferred sales charge in an amount
equal to the contingent deferred sales charge he or she would have paid on the
Exchange Class Shares, assuming no exchange had occurred. Consequently, if a
shareholder exchanges Exchange Class Shares for Class B Shares of the U.S.
Government Money Market Fund, the transaction will not be subject to a
contingent deferred sales charge; however, when Class B Shares acquired through
the exchange are redeemed, the shareholder will be treated as if no exchange
took place for the purpose of determining the contingent deferred sales charge
and will be charged a contingent deferred sales charge at the rates set forth
below. This charge is assessed on an amount equal to the lesser of the
then-current market value or the cost of the shares being redeemed. Accordingly,
no sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no charge is assessed on shares derived from
reinvestment of dividends or capital gain distributions.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGES
AS A PERCENTAGE OF DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHANGE
------------------------------------------------- ---------------------------------
<S> <C>
First............................................ 5.00%
Second........................................... 4.00%
Third............................................ 3.00%
Fourth........................................... 3.00%
Fifth............................................ 2.00%
Sixth............................................ 1.00%
Seventh.......................................... None
Eighth........................................... None
</TABLE>

In determining whether a particular redemption is subject to a contingent
deferred sales charge, it is assumed that the redemption is first of any Class A
Shares in the shareholder's Fund account, second of Class B Shares held for over
six years or Class B Shares acquired pursuant to reinvestment of dividends or
other distributions and third of Class B Shares held longest during the six year
period. This method should result in the lowest possible sales charge.

The contingent deferred sales charge is waived on redemption of shares (i)
following the death or disability (as defined in the Code) of a shareholder, or
(ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70 1/2. A Shareholder, or his or her
representative, must notify the Transfer Agent prior to the time of redemption
if such circumstances exist and the shareholder is eligible for a waiver.

Conversion Feature. At the end of the period ending eight years after the
beginning of the month in which the shares were issued, Class B shares will
automatically convert to Class A Shares and will no longer be subject to the
Class B distribution and service fees. Such conversion will be on the basis of
the relative net asset value of the two classes.

23
<PAGE> 25

EXCHANGE PRIVILEGES

As indicated under GENERAL INFORMATION--Description of HighMark & Its Shares,
certain of HighMark's Funds issue three classes of Shares (Class A and Class B
Shares (collectively, "Retail Shares") and Fiduciary Shares); as of the date of
this Prospectus, the Distribution Plan and distribution fee payable thereunder
are applicable only to such Fund's Retail Shares. A Shareholder's eligibility to
exchange into a particular class of Shares will be determined at the time of the
exchange. The Shareholder must supply, at the time of the exchange, the
necessary information to permit confirmation of qualification.

Each Fund's Class A or Class B Shares may be exchanged for Class A or Class B
Shares, respectively, of the class of the various other Funds of HighMark which
the Shareholder qualifies to purchase directly so long as the Shareholder
maintains the applicable minimum account balance in each Fund in which he or she
owns Class A or Class B Shares and satisfies the minimum initial and subsequent
purchase amounts of the Fund into which the Shares are exchanged. Shareholders
may exchange their Class A Shares for Class A Shares of a Fund with the same or
lower sales charge on the basis of the relative net asset value of the Class A
Shares exchanged. Shareholders may exchange their Class A Shares for Class A
Shares of a Fund with a higher sales charge by paying the difference between the
two sales charges.

Shareholders may also exchange Class A Shares of a money market fund for which
no sales load was paid for Class A Shares of another HighMark Fund. Under such
circumstances, the cost of the acquired Class A Shares will be the net asset
value per share plus the appropriate sales load. If Class A Shares of the money
market fund were acquired in a previous exchange involving Class A Shares of a
non-money market HighMark Fund, then such Class A Shares of the money market
fund may be exchanged for Class A Shares of the non-money market HighMark Fund
without payment of any additional sales load within a twelve month period. In
order to receive a reduced sales charge when exchanging into a Fund, the
Shareholder must notify HighMark that a sales charge was originally paid and
provide sufficient information to permit confirmation of qualification.

For purposes of calculating the Class B Shares' eight year conversion period
or contingent deferred sales charge payable upon redemption, the holding period
of Class B Shares of the "old" Fund and the holding period for Class B Shares of
the "new" Fund are aggregated.

Exchanges will be made on the basis of the relative net asset values of the
Shares exchanged plus any applicable sales charge. Exchanges are subject to the
terms and conditions stated herein and the terms and conditions stated in the
respective prospectuses of the Funds.

Certain entities (including Participating Organizations and Union Bank of
California, N.A. and its affiliates), however, may charge customers a fee with
respect to exchanges made on the customer's behalf. Information about these
charges, if any, can be obtained by the entity effecting the exchange and this
Prospectus should be read in conjunction with that information.

A Shareholder wishing to exchange Shares in a Fund may do so by contacting the
transfer agent at 1-800-433-6884. Exchanges will be effected on any Business Day
at the net asset value of the Funds involved in the exchange next determined
after the exchange request is received by the transfer agent.

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<PAGE> 26

An exchange is considered to be a sale of Shares for federal income tax
purposes on which a Shareholder may realize a capital gain or loss. Exchange
privileges may be exercised only in those states where Shares of such other
Funds of HighMark may legally be sold. HighMark may materially amend or
terminate the exchange privileges described herein upon sixty days' notice.

REDEMPTION OF SHARES

You may redeem your Shares of the Diversified Money Market, U.S. Government
Money Market, 100% U.S. Treasury Money Market, and California Tax-Free Money
Market Funds without charge on any Business Day. There is presently a $15 charge
for wiring redemption proceeds to a Shareholder's designated account. Shares may
be redeemed by mail, by telephone or through a pre-arranged systematic
withdrawal plan. Investors who own Shares held by a financial institution should
contact that institution for information on how to redeem Shares.

By Mail

A written request for redemption of Shares of the Diversified Money Market,
U.S. Government Money Market, 100% U.S. Treasury Money Market, and California
Tax-Free Money Market Funds must be received by the transfer agent, P.O. Box
8416, Boston, Massachusetts 02266-8416 in order to constitute a valid redemption
request.

If the redemption request exceeds $5,000, or if the request directs the
proceeds to be sent or wired to an address different from that of record, the
transfer agent may require that the signature on the written redemption request
be guaranteed. You should be able to obtain a signature guarantee from a bank,
broker dealer, credit union, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
Shares, (2) the redemption check is payable to the shareholder(s) of record, and
(3) the redemption check is mailed to the shareholder(s) at his or her address
of record.

Telephone Transactions

You may redeem your Shares of the Diversified Money Market, U.S. Government
Money Market, 100% U.S. Treasury Money Market, and California Tax-Free Money
Market Funds by calling the transfer agent at 1-800-433-6884. Under most
circumstances, payments will be transmitted on the next Business Day following
receipt of a valid request for redemption. You may have the proceeds mailed to
your address or wired to a commercial bank account previously designated on your
Account Application. There is no charge for having redemption proceeds mailed to
you, but there is a $15 charge for wiring redemption proceeds.

You may request a wire redemption for redemptions of Shares of the Diversified
Money Market, U.S. Government Money Market, 100% U.S. Treasury Money Market, and
California Tax-Free Money Market Funds in excess of $500 by calling the transfer
agent at 1-800-433-6884 who will deduct a wire charge of $15

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<PAGE> 27

from the amount of the wire redemption. Shares cannot be redeemed by Federal
Reserve wire on Federal holidays restricting wire transfers.

Neither the transfer agent nor HighMark will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. HighMark and the transfer agent will each
employ reasonable procedures to confirm that instructions, communicated by
telephone are genuine. Such procedures may include taping of telephone
conversations.

If market conditions are extraordinarily active or other extraordinary
circumstances exist, and you experience difficulties placing redemption orders
by telephone, you may wish to consider placing your order by mail.

Systematic Withdrawal Plan ("SWP")

The Diversified Money Market, U.S. Government Money Market, 100% U.S. Treasury
Money Market, and California Tax-Free Money Market Funds offer a Systematic
Withdrawal Plan ("SWP"), which you may use to receive regular distributions from
your account. Upon commencement of the SWP, your account must have a current net
asset value of $5,000 or more per Fund. You may elect to receive automatic
payments via check or ACH of $100 or more per Fund on a monthly, quarterly,
semi-annual or annual basis. You may arrange to receive regular distributions
from your account via check or ACH by completing this section in the Account
Application form.

To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per Share, your original investment could be
exhausted entirely. You may change or cancel the SWP at any time on written
notice to the transfer agent. The transfer agent may require that the signature
on the written notice be guaranteed.

The aggregate withdrawals of Class B Shares in any year pursuant to the SWP
will not be subject to the contingent deferred sales charge in an amount up to
10% of the value of the account at the time of the establishment of the SWP.
Because automatic withdrawals of Class B Shares in amounts greater than 10% of
the initial value of the account will be subject to the contingent deferred
sales charge, it may not be in the best interests of Class B Shareholders to
participate in the SWP for such amounts.

Other Information Regarding Redemptions

HighMark is required to redeem for cash all full and fractional shares of
HighMark. The redemption price is the net asset value per share of a Fund
(normally $1.00 per share), reduced by any applicable contingent deferred sales
charge for Class B Shares.

Redemption orders may be made any time before 8:00 a.m., Pacific time (11:00
a.m., Eastern time) for the California Tax-Free Money Market Fund; 9:00 a.m.,
Pacific time (12:00 noon, Eastern time) for the 100% U.S. Treasury Money Market
Fund; and 10:00 a.m., Pacific time (1:00 p.m., Eastern time) for the Diversified
Money Market and U.S. Government Money Market Funds in order to receive that
day's redemption price

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<PAGE> 28

(i.e., the next determined net asset value per share). For redemption orders
received before such times, payment will be made the same day by transfer of
federal funds. Otherwise, payment will be made on the next Business Day.
Redeemed Shares are not entitled to dividends declared the day the redemption
order is effective. The Funds reserve the right to make payment on redemptions
in securities rather than cash.

Payment to the Shareholders for Shares redeemed will be made within seven days
after the Transfer Agent receives the valid redemption request. At various
times, however, a Fund may be requested to redeem Shares for which it has not
yet received good payment; collection of payment may take ten or more days. In
such circumstances, the redemption request will be rejected by the Fund. Once a
Fund has received good payment for the Shares a Shareholder may submit another
request for redemption.

Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your Shares at net asset value, less any applicable
contingent deferred sales charge, if your account in any Fund has a value of
less than the minimum initial purchase amount. Accordingly, if you purchase
Shares of any Fund in only the minimum investment amount, you may be subject to
involuntary redemption if you redeem any Shares. Before any Fund exercises its
right to redeem such Shares you will be given notice that the value of the
Shares in your account is less than the minimum amount and will be allowed 60
days to make an additional investment in such Fund in an amount which will
increase the value of the account to at least the minimum amount.

DIVIDENDS

The net income of each Fund is declared daily as a dividend to Shareholders of
record at the close of business on the day of declaration. The net income
attributable to a Fund's Retail Shares and the dividends payable on Retail
Shares will be reduced by the distribution fee assessed against such Shares
under the Distribution Plan (see SERVICE ARRANGEMENTS--The Distribution Plan
below). The amount of dividends payable on Class A Shares will be more than the
dividends payable on the Class B Shares because of the higher distribution fee
paid by Class B Shares.

Dividends with respect to each Fund are paid monthly in additional full and
fractional Shares of the Fund at net asset value as of the date of payment,
unless the Shareholder elects to receive such dividends in cash as described
below. Shareholders will automatically receive all income dividends and capital
gains distributions (if any) paid in respect of a Fund's Shares in additional
full and fractional Shares of the same class. Shareholders wishing to receive
their dividends in cash (or wishing to revoke a previously made election) must
notify the transfer agent at P.O. Box 8416, Boston, MA 02266-8416, and such
election (or revocation thereof) will become effective with respect to dividends
having record dates after notice has been received. Dividends paid in additional
Shares receive the same tax treatment as dividends paid in cash. Dividends are
paid in cash not later than seven Business Days after a Shareholder's complete
redemption of his or her Shares. Net realized capital gains, if any, are
distributed at least annually to Shareholders of record.

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<PAGE> 29

FEDERAL TAXATION

Each Fund intends to qualify for treatment as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), and to
distribute substantially all of its net investment income so that it is not
required to pay federal taxes on these amounts. Because all of the net
investment income of the Diversified Money Market Fund, the U.S. Government
Money Market Fund, the 100% U.S. Treasury Money Market Fund and the California
Tax-Free Money Market Fund is expected to be derived from interest, it is
anticipated that no part of any distribution will be eligible for the federal
dividends received deduction for corporations. The Funds are not managed to
generate any long-term capital gains and, therefore, the Funds do not foresee
paying any significant "capital gains dividends" as described in the Code.

Shareholders will be subject to federal income tax with respect to dividends
paid by the Diversified Money Market Fund, the U.S. Government Money Market Fund
and the 100% U.S. Treasury Money Market Fund (including any capital gains
dividends). Dividends that are attributable to interest on U.S. Government
obligations earned by the Funds may be exempt from state and local tax, and
Shareholders should consult their own tax advisors to determine whether these
dividends are eligible for the state and local tax exemption. Dividends (except
to the extent attributable to gains or securities lending income) paid by the
100% U.S. Treasury Money Market Fund will be exempt from California and Oregon
personal income taxes. HighMark intends to advise Shareholders annually of the
proportion of a Fund's dividends that consists of interest on U.S. Government
obligations.

Exempt-interest dividends from the California Tax-Free Money Market Fund are
excludable from gross income for federal income tax purposes. Such dividends may
be taxable to Shareholders under state or local law as ordinary income even
though all or a portion of the amounts may be derived from interest on tax-
exempt obligations which, if realized directly, would be exempt from such taxes.
Shareholders are advised to consult a tax advisor with respect to whether
exempt-interest dividends retain the exclusion if such Shareholder would be
treated as a "substantial user" of a facility Financed through certain private
activity bonds or a "related person" to such a user under the Code.

Under the Code, interest on indebtedness incurred or continued by a
Shareholder to purchase or carry Shares of the California Tax-Free Money Market
Fund is not deductible for federal income tax purposes to the extent the Fund
distributes exempt-interest dividends during the Shareholder's taxable year.

Under the Code, if a Shareholder sells a Share of the California Tax-Free
Money Market Fund after holding it for six months or less, any loss on the sale
or exchange of such Share will be disallowed to the extent of the amount of any
exempt-interest dividends that the Shareholder has received with respect to the
Share that is sold.

In addition, any loss (not already disallowed as provided in the preceding
sentence) realized upon a taxable disposition of shares held for six months or
less will be treated as long-term, rather than short-term, to the extent of any
long-term capital gain distributions received by the shareholder with respect to
the shares.

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<PAGE> 30

discount will be included in the California Tax-Free Money Market Fund's
ordinary income and will be taxable to Shareholders as such when it is
distributed to them.

To the extent dividends paid to Shareholders are derived from taxable income
(for example, from interest on certificates of deposit or repurchase
agreements), or from long-term or short-term capital gains, such dividends will
be subject to federal income tax, whether such dividends are paid in the form of
cash or additional Shares. A Shareholder should consult his or her tax advisor
for special advice.

Under the Code, dividends attributable to interest on certain private activity
bonds issued after August 7, 1986 must be included in alternative minimum
taxable income for the purpose of determining liability (if any) for the federal
alternative minimum tax. In addition, exempt-interest dividends will be included
in a corporation's "adjusted current earnings" for purposes of the alternative
minimum tax (except to the extent derived from interest on certain private
activity bonds issued after August 7, 1986, which interest would already be
included in alternative minimum taxable income as a specific item of tax
preference). Shareholders of the California Tax-Free Money Market Fund receiving
social security or railroad retirement benefits may be taxed on a portion of
those benefits as a result of receiving tax-exempt income (including
exempt-interest dividends distributed by the California Tax-Free Money Market
Fund).

If, at the close of each quarter of its taxable year, the California Tax-Free
Money Market Fund continues to qualify for the special federal income tax
treatment afforded regulated investment companies and at least 50% of the value
of the Fund's total assets consists of California Exempt-Interest Securities,
then "California-exempt interest dividends" attributable to these securities
will be exempt from California personal income tax. A "California-exempt
interest dividend" is any dividend distributed by the Fund to the extent that it
is derived from the interest received by the Fund on California Exempt-Interest
Securities (less related expenses) and designated as such by written notice to
Shareholders. For further details, see the Statement of Additional Information.
Dividends received by Shareholders subject to California state corporate
franchise tax will be taxed as ordinary dividends notwithstanding that all or a
portion of such dividends are exempt from California personal income tax.
Distributions other than "California-exempt interest dividends" by the Fund to
California residents will be subject to California personal income tax, whether
or not such dividends are reinvested.

Additional information regarding federal and California taxes is contained in
the Statement of Additional Information. However, the foregoing and the material
in the Statement of Additional Information are only brief summaries of some of
the important tax considerations generally affecting a money market fund and its
Shareholders. In addition, the foregoing discussion and the federal and
California tax information in the Statement of Additional Information are based
on tax laws and regulations which are in effect as of the date of this
Prospectus; these laws and regulations may subsequently change, and such changes
could be retroactive. Shareholders will be advised at least annually as to the
federal income tax status, and, in the case of Shareholders of the California
Tax-Free Money Market Fund, as to the California income tax status, of
distributions made during the year.

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<PAGE> 31

SERVICE ARRANGEMENTS

The Advisor

Pacific Alliance, a division of Union Bank of California, N.A., serves as the
Funds' investment advisor. Subject to the general supervision of HighMark's
Board of Trustees, the Advisor manages each Fund in accordance with its
investment objective and policies, makes decisions with respect to and places
orders for all purchases and sales of the Fund's investment securities, and
maintains the Fund's records relating to such purchases and sales.

For the expenses assumed and services provided by the Advisor as each Fund's
investment advisor, Union Bank of California, N.A. receives a fee from the
Diversified Money Market Fund, the U.S. Government Money Market Fund, the 100%
U.S. Treasury Money Market Fund and the California Tax-Free Money Market Fund,
computed daily and paid monthly, at the annual rate of thirty one-hundredths of
one percent (.30%) of each Fund's average daily net assets. Union Bank of
California, N.A. may from time to time agree to voluntarily reduce its advisory
fee. While there can be no assurance that Union Bank of California, N.A. will
choose to make such an agreement, any voluntary reductions in Union Bank of
California, N.A.'s advisory fee will lower the Fund's expenses, and thus
increase the Fund's yield and total return, during the period such voluntary
reductions are in effect. Prior to April 28, 1997, the Diversified Money Market
Fund and the California Tax-Free Money Market Fund did not yet operate as
HighMark Funds. Fee and other information presented regarding these Funds after
that time only represents their operation as HighMark Funds. Prior to operating
as HighMark Funds, these Funds had a fiscal year end of January 31.

During HighMark's fiscal year ended July 31, 1997, Union Bank of California
received investment advisory fees from the Diversified Money Market Fund
(February 1, 1997 through July 31, 1997) aggregating 0.30% of the Fund's average
daily net assets, from the U.S. Government Money Market Fund aggregating 0.30%
of the Fund's average daily net assets, from the 100% U.S. Treasury Money Market
Fund aggregating 0.25% of the Fund's average daily net assets, and from the
California Tax-Free Money Market Fund (February 1, 1997 through July 31, 1997)
aggregating 0.10% of the Fund's average daily net assets. For the period
February 1, 1996 through January 31, 1997, Union Bank of California received
investment advisory fees from the Diversified Money Market Fund aggregating
0.30% of the Fund's average daily net assets and from the California Tax-Free
Money Market Fund aggregating 0.10% of the Fund's average daily net assets.

On April 1, 1996, The Bank of California, N.A., HighMark's then investment
advisor, combined with Union Bank and the resulting bank changed its name to
Union Bank of California, N.A. At the same time, the banks' investment
management divisions were combined. Each of Union Bank and The Bank of
California, N.A. (or their predecessor banks) has been in banking since the
early 1900's and, historically, each has had significant investment functions
within its trust and investment division. UnionBanCal Corporation, the parent of
Union Bank of California, N.A., is a publicly held corporation, but is
principally held by the Bank of Tokyo-Mitsubishi, Limited. As of September 30,
1997, UnionBanCal Corporation and its subsidiaries had approximately $31 billion
in consolidated assets. Pacific Alliance, a division of Union Bank of
California, N.A.'s Trust and Investment Management Group, as of September 30,
1997, had approximately $14.6 billion of assets under management. The Advisor,
with a team of approximately 43 stock and bond research analysts, portfolio

30
<PAGE> 32

managers and traders, has been providing investment management services to
individuals, institutions and large corporations since 1917.

Administrator

SEI Investments Fund Resources (the "Administrator") and HighMark are parties
to an administration agreement (the "Administration Agreement"). Under the terms
of the Administration Agreement, the Administrator provides HighMark with
certain management services, including all necessary office space, equipment,
personnel, and facilities.

The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of the Funds.
The Administrator may waive its fee or reimburse various expenses to the extent
necessary to limit the total operating expenses of a Fund's Retail Shares. Any
such waiver is voluntary and may be terminated at any time in the
Administrator's sole discretion. Currently, the Administrator has agreed to
waive its fee to the rate of 0.18% of the average daily net assets of the Funds.

Pursuant to a separate agreement with the Administrator, Union Bank of
California, N.A. performs sub-administration services on behalf of each Fund,
for which it receives a fee paid by the Administrator at the annual rate of up
to 0.05% of the average daily net assets of the Funds. A description of the
services performed by Union Bank of California, N.A. pursuant to this Agreement
is contained in the Statement of Additional Information.

The Transfer Agent

State Street Bank and Trust Company serves as the transfer agent, dividend
disbursing agent, and as a shareholder servicing agent for the Retail Shares of
HighMark, for which services it receives a fee.

Shareholder Service Plan

To support the provision of Shareholder services to all classes of Shares,
HighMark has adopted a Shareholder Service Plan for Fiduciary Class and Class A
Shares and a Shareholder Service Plan for Class B Shares. A description of the
services performed by service providers pursuant to each Shareholder Service
Plan is contained in the Statement of Additional Information. Under these plans,
in consideration of services provided by any service provider, which may include
Union Bank of California, N.A., Bank of Tokyo-Mitsubishi, Ltd., or their
respective affiliates, each Fund may pay a fee at the rate of up to 0.25% of its
average daily net assets to such service provider. The service provider may
waive such fees at any time. Any such waiver is voluntary and may be terminated
at any time. Currently, such fees are being waived to the rate of 0.00% of
average daily net assets for Class A Shares.

Distributor

SEI Investments Distribution Co. (the "Distributor") and HighMark are parties
to two distribution agreements, one for Fiduciary Class and Class A Shares and
one for Class B Shares (collectively, the "Distribution Agreements"). Each
Distribution Agreement is renewable annually and may be terminated by the
Distributor, by a majority vote of the Disinterested Trustees or by a majority
vote of the outstanding

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<PAGE> 33

securities of HighMark upon not more than 60 days written notice by either
party, or upon assignment by the Distributor.

The Distribution Plans

Pursuant to HighMark's Distribution Plans, each Fund pays the Distributor as
compensation for its services in connection with the Distribution Plans a
distribution fee, computed daily and paid monthly, equal to twenty-five
one-hundredths of one percent (0.25%) of the average daily net assets
attributable to that Fund's Class A Shares, pursuant to the Class A Distribution
Plan, and seventy-five-one-hundredths of one percent (0.75%) of the average
daily net assets attributable to the Fund's Class B Shares, pursuant to the
Class B Distribution Plan.

The Distributor may use the distribution fee applicable to a Fund's Class A
and Class B Shares to provide distribution assistance with respect to the sale
of the Fund's Class A and Class B Shares or to provide Shareholder services to
the holders of the Fund's Class A and Class B Shares. The Distributor may also
use the distribution fee (i) to pay financial institutions and intermediaries
(such as insurance companies and investment counselors but not including banks
and savings and loan associations), broker-dealers, and the Distributor's
affiliates and subsidiaries compensation for services or reimbursement of
expenses incurred in connection with the distribution of a Fund's Class A and
Class B Shares to their customers or (ii) to pay banks, savings and loan
associations, other financial institutions and intermediaries, broker-dealers,
and the Distributor's affiliates and subsidiaries compensation for services or
reimbursement of expenses incurred in connection with the provision of
Shareholder services to their customers owning a Fund's Class A and Class B
Shares. All payments by the Distributor for distribution assistance or
Shareholder services under the Distribution Plans will be made pursuant to an
agreement between the Distributor and such bank, savings and loan association,
other financial institution or intermediary, broker-dealer, or affiliate or
subsidiary of the Distributor (a "Servicing Agreement"; banks, savings and loan
associations, other financial institutions and intermediaries, broker-dealers,
and the Distributor's affiliates and subsidiaries that may enter into a
Servicing Agreement are hereinafter referred to individually as a "Participating
Organization"). A Participating Organization may include Union Bank of
California, N.A., its subsidiaries and its affiliates.

Participating Organizations may charge customers fees in connection with
investments in a Fund on their customers' behalf. Such fees would be in addition
to any amounts the Participating Organization may receive pursuant to its
Servicing Agreement. Under the terms of the Servicing Agreements, Participating
Organizations are required to provide their customers with a schedule of fees
charged directly to such customers in connection with investments in a Fund.
Customers of Participating Organizations should read this Prospectus in light of
the terms governing their accounts with the Participating Organization.

The distribution fees under the Distribution Plans will be payable without
regard to whether the amount of the fee is more or less than the actual expenses
incurred in a particular year by the Distributor in connection with distribution
assistance or Shareholder services rendered by the Distributor itself or
incurred by the Distributor pursuant to the Servicing Agreements entered into
under the Distribution Plans. The Distributor may from time to time voluntarily
reduce its distribution fees with respect to a Fund in significant amounts for
substantial periods of time pursuant to an agreement with HighMark. While there
can be no assurance that the Distributor will choose to make such an agreement,
any voluntary reduction in the Distributor's

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<PAGE> 34

distribution fees will lower such Fund's expenses, and thus increase such Fund's
yield and total returns, during the period such voluntary reductions are in
effect.

Banking Laws

Union Bank of California, N.A. believes that it may perform the services for
the Funds contemplated by its investment advisory agreement with HighMark
without a violation of applicable banking laws and regulations. Union Bank of
California, N.A. also believes that it may perform sub-administration and
sub-accounting services on behalf of each Fund without a violation of applicable
banking laws and regulations. Future changes in federal or state statutes and
regulations relating to permissible activities of banks or bank holding
companies and their subsidiaries and affiliates, as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations, could change the manner in which Union Bank of California, N.A. or
the Advisor could continue to perform such services for the Funds. For a further
discussion of applicable banking laws and regulations, see the Statement of
Additional Information.

Custodian

Union Bank of California, N.A. also serves as the custodian and as a
shareholder servicing agent for the Funds. The Custodian holds cash, securities
and other assets of HighMark as required by the 1940 Act.

Services performed by Union Bank of California, N.A., as the Funds'
shareholder servicing agent and custodian, as well as the basis of remuneration
for such services, are described in the Statement of Additional Information.

GENERAL INFORMATION

Description of HighMark & Its Shares

HighMark was organized as a Massachusetts business trust on March 10, 1987,
and consists of sixteen series of Shares open for investment representing units
of beneficial interest in HighMark's Growth Fund, Income Equity Fund, Balanced
Fund, Value Momentum Fund, Blue Chip Growth Fund, Emerging Growth Fund,
International Equity Fund, Bond Fund, Intermediate-Term Bond Fund, Government
Securities Fund, Convertible Securities Fund, California Intermediate Tax-Free
Bond Fund, Diversified Money Market Fund, U.S. Government Money Market Fund,
100% U.S. Treasury Money Market Fund and California Tax-Free Money Market Fund.
Shares of each Fund are freely transferable, are entitled to distributions from
the assets of the Fund as declared by the Board of Trustees, and, if HighMark
were liquidated, would receive the a pro rata share of net assets attributable
to that Fund. Shares are without par value.

As noted above, pursuant to a Multiple Class Plan on file with the Securities
and Exchange Commission permitting the issuance and sale of three classes of
Shares in selected Funds, Shares of such Funds have been divided into three
classes, designated Class A and Class B Shares (collectively "Retail Shares")
and Fiduciary Shares. For information regarding the Fiduciary Shares of the
Funds, interested persons may contact the Distributor for a prospectus at
1-800-433-6884.

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<PAGE> 35

HighMark believes that as of November 1, 1997, there was no person who owned
of record or beneficially more than 25% of the Class A Shares of the Diversified
Money Market Fund, the U.S. Government Money Market Fund, the 100% U.S. Treasury
Money Market Fund, or the California Tax-Free Money Market Fund or of the Class
B Shares of the U.S. Government Money Market Fund.

Performance Information

From time to time, HighMark may advertise the "yield" and "effective yield"
with respect to the Retail Shares of each Fund and a "tax-equivalent yield" and
"tax-equivalent effective yield" for federal, California and Oregon income tax
purposes with regard to the Retail Shares of each of the 100% U.S. Treasury
Money Market Fund and the California Tax-Free Money Market Fund. Performance
information is computed separately for a Fund's Retail and Fiduciary Shares in
accordance with the formulas described below. Each yield figure is based on
historical earnings and is not intended to indicate future performance.

The "yield" of a Fund's Retail Shares refers to the income generated by an
investment in the class over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the class is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.

The 100% U.S. Treasury Money Market Fund's tax-equivalent yield and
tax-equivalent effective yield will reflect the amount of income subject to
California or Oregon personal income taxation at the rate specified in the
advertisement that a taxpayer would have to earn in order to obtain the same
after tax income as that derived from the yield and effective yield of the
Retail class. The California Tax-Free Money Market Fund's tax-equivalent yield
and tax-equivalent effective yield reflect the amount of income subject to
federal income taxation and California personal income taxation at the rate
specified in the advertisement that a taxpayer would have to earn in order to
obtain the same after tax income as that derived from the yield and effective
yield of the Retail class.

Tax-equivalent yields and tax-equivalent effective yields with respect to a
class will be significantly higher than the yield and effective yield of that
class.

From time to time, HighMark may advertise the aggregate total return and
average annual total return of the Funds. The aggregate total return and average
annual total return of each Fund may be quoted for the life of each Fund and for
five-year and one-year periods, in each case, through the most recent calendar
quarter. Aggregate total return is determined by calculating the change in the
value of a hypothetical $1,000 investment in a Fund over the applicable period
that would equate the initial amount invested to the ending redeemable value of
the investment. The ending redeemable value includes dividends and capital gain
distributions reinvested at net asset value. Average annual total return is
calculated by annualizing a Fund's aggregate total return over the relevant
number of years. The resulting percentage indicates the positive or negative
investment results that an investor in a Fund would have experienced from
changes in Share price and reinvestment of dividends and capital gain
distributions. Average annual total return will reflect deduction

34
<PAGE> 36

of all charges and expenses, including, as applicable, the contingent deferred
sales charge imposed on Class B Shares redeemed at the end of the specified
period covered by the total return figure.

Each Fund may periodically compare its performance to the performance of:
other mutual funds tracked by mutual-fund rating services (such as Lipper
Analytical), financial and business publications and periodicals; broad groups
of comparable mutual funds; unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or other investment alternatives. Certain Funds may advertise
performance that includes results from periods in which the Fund's assets were
managed in a non-registered predecessor vehicle.

Because the Class A and Class B Shares of the Funds have different sales
charge structures and differing distribution and shareholder servicing fees, the
performance of each class will differ.

Miscellaneous

Shareholders will be sent unaudited semi-annual reports and annual reports
audited by independent public accountants.

Shareholders are entitled to one vote for each Share held in a Fund as
determined on the record date for any action requiring a vote by the
Shareholders, and a proportionate fractional vote for each fractional Share
held. Shareholders of HighMark will vote in the aggregate and not by series or
class except (i) as otherwise expressly required by law or when HighMark's Board
of Trustees determines that the matter to be voted upon affects only the
interests of the Shareholders of a particular series or particular class, and
(ii) only Retail Shares will be entitled to vote on matters submitted to a
Shareholder vote relating to the Distribution Plan. HighMark is not required to
hold regular annual meetings of Shareholders, but may hold special meetings from
time to time.

HighMark's Trustees are elected by Shareholders, except that vacancies may be
filled by vote of the Board of Trustees. Trustees may be removed by the Board of
Trustees, or by Shareholders at a meeting called for such purpose. For
information about how Shareholders may call such a meeting and communicate with
other Shareholders for that purpose, see ADDITIONAL INFORMATION--Miscellaneous
in the Statement of Additional Information.

Inquiries may be directed in writing to SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling toll free 1-800-433-6884.

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of permitted investments for the HighMark Money
Market Funds.

35
<PAGE> 37

owning such assets and issuing such debt. The purchase of non-mortgage
asset-backed securities raises risk considerations peculiar to the financing of
the instruments underlying such securities. Asset-backed securities entail
prepayment risk, which may vary depending on the type of asset, but is generally
less than the prepayment risk associated with mortgage-backed securities.

Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to substantial prepayment
risk, which may reduce the overall return to certificate holders. Nevertheless,
principal prepayment rates tend not to vary as much in response to changes in
interest rates and the short-term nature of the underlying car loans or other
receivables tend to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying sales contracts or receivables are not
realized by the trust because of unanticipated legal or administrative costs of
enforcing the contracts or because of depreciation or damage to the collateral
(usually automobiles) securing certain contracts, or other factors. If
consistent with their investment objectives and policies, the Money Market Funds
may invest in other asset-backed securities that may be developed in the future.

BANKERS' ACCEPTANCES--Bills of exchange or time drafts drawn on and accepted
by commercial banks. They are used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.

CERTIFICATES OF DEPOSIT--Negotiable interest-bearing instruments with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity.

COMMERCIAL PAPER--Unsecured short-term promissory notes issued by corporations
and other entities. Maturities on these issues vary from a few days to nine
months. Purchase of such instruments involves a risk of default by the issuer.

DERIVATIVES--Instruments whose value is derived from an underlying contract,
index or security, or any combination thereof, including futures, options (e.g.,
puts and calls), options on futures, swap agreements, and some mortgage-backed
securities (CMOs, REMICs, IOs and POs). See elsewhere in this "DESCRIPTION OF
PERMITTED INVESTMENTS" for discussions of these various instruments, and see
"INVESTMENT OBJECTIVES" and "INVESTMENT POLICIES" for more information about any
policies and limitations applicable to their use.

INVESTMENT GRADE BONDS--Interest-bearing or discounted government or corporate
securities that obligate the issuer to pay the bondholder a specified sum of
money, usually at specific intervals, and to repay the principal amount of the
loan at maturity. Investment grade bonds are those rated BBB or better by S&P or
Baa or better by Moody's or similarly rated by other NRSROs, or, if not rated,
determined to be of comparable quality by the Advisor.

36
<PAGE> 38

Fund derives its rights from the intermediary bank). Because the intermediary
bank does not guarantee a loan participation in any way, a loan participation is
subject to the credit risks associated with the underlying corporate borrower.
In addition, in the event the underlying corporate borrower fails to pay
principal and interest when due, a Fund may encounter delays, expenses and risks
that are greater than those that would have been involved if the Fund had
purchased a direct obligation (such as commercial paper) of such borrower
because it may be necessary under the terms of the loan participation, for the
Fund to assert its rights against the borrower through the intermediary bank.
Moreover, under the terms of a loan participation, the purchasing Fund may be
regarded as a creditor of the intermediary bank (rather than of the underlying
corporate borrower), so that a Fund may also be subject to the risk that the
issuing bank may become insolvent. Further, in the event of the bankruptcy or
insolvency of the corporate borrower, a loan participation may be subject to
certain defenses that can be asserted by such borrower as a result of improper
conduct by the issuing bank. The secondary market, if any, for these loan
participations is limited, and any such participation purchased by a Fund may be
regarded as illiquid.

MUNICIPAL FORWARDS--Municipal Forwards are forward commitments for the
purchase of tax-exempt bonds with a specified coupon to be delivered by an
issuer at a future date, typically exceeding 45 days but normally less than one
year after the commitment date. Municipal forwards are normally used as a
refunding mechanism for bonds that may only be redeemed on a designated future
date. As with forward commitments and when-issued securities, municipal forwards
are subject to market fluctuations due to changes, real or anticipated, in
market interest rates between the commitment date and the settlement date and
will have the effect of leveraging the Fund's assets. Municipal forwards may be
considered to be illiquid investments. The Fund will maintain liquid, high-grade
securities in a segregated account in an amount at least equal to the purchase
price of the municipal forward.

MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
Municipal notes include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes. Municipal bonds include
general obligation bonds, revenue or special obligation bonds, private activity
and industrial development bonds. General obligation bonds are backed by the
taxing power of the issuing municipality. Revenue bonds are backed by the
revenues of a project or facility, tolls from a toll bridge, for example. The
payment of principal and interest on private activity and industrial development
bonds generally is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment.

37
<PAGE> 39

federal income tax. The Fund invests in these participation interests in order
to obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying municipal securities.

RECEIPTS--Interests in separately traded interest and principal component
parts of U.S. Treasury obligations that are issued by banks and brokerage firms
and are created by depositing Treasury notes and Treasury bonds into a special
account at a custodian bank. The custodian holds the interest and principal
payments for the benefit of the registered owners of the certificates of such
receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TR's"), "Treasury Investment Growth Receipts" ("TIGR's"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). TR's, TIGR's and
CATS are sold as zero coupon securities, which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on the security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than
interest-paying securities. See also "FEDERAL TAXATION."

REPURCHASE AGREEMENTS--Agreements whereby a Fund will acquire securities from
approved financial institutions or registered broker-dealers that agree to
repurchase the securities at a mutually agreed-upon date and price. The
repurchase agreements entered into by the Funds will provide that the underlying
security at all times shall have a value equal to 102% of the resale price
stated in the agreement. Repurchase agreements involving government securities
are not subject to a Fund's fundamental investment limitation on purchasing
securities of any one issuer. If the seller defaults on its repurchase
obligation or becomes insolvent, the Fund holding such obligations would suffer
a loss to the extent that either the proceeds from a sale of the underlying
portfolio securities were less than the repurchase price or the Fund's
disposition of the securities was delayed pending court action. Securities
subject to repurchase agreements will be held by a qualified custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are considered
to be loans by a Fund under the Investment Company Act of 1940 (the "1940 Act").

REVERSE REPURCHASE AGREEMENTS--A Fund may borrow funds for temporary purposes
by entering into reverse repurchase agreements, provided such action is
consistent with the Fund's investment objective and fundamental investment
restrictions; as a matter of non-fundamental policy, each Fund intends to limit
such investments to no more than 10% of the value of its total assets. Pursuant
to a reverse repurchase agreement, a Fund will sell portfolio securities to
financial institutions such as banks or to broker-dealers, and agree to
repurchase the securities at a mutually agreed-upon date and price. A Fund
intends to enter into reverse repurchase agreements only to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions. At
the time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets such as U.S. Government securities or other
liquid, high-quality debt securities consistent with the Fund's investment
objective having a value equal to 102% of the repurchase price (including
accrued interest), and will subsequently monitor the account to ensure that an
equivalent value is maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which a Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.

38
<PAGE> 40

RULE 144A SECURITIES--Rule 144A Securities are securities that have not been
registered under the Securities Act of 1933, but which may be traded between
certain qualified institutional investors, including investment companies. The
absence of a secondary market may affect the value of the Rule 144A Securities.
The Board of Trustees of the Group has established guidelines and procedures to
be utilized to determine the liquidity of such securities.

SECURITIES ISSUED ON A FORWARD COMMITMENT BASIS OR WHEN-ISSUED
SECURITIES--Securities purchased for delivery beyond the normal settlement date
at a stated price and yield and which thereby involve a risk that the yield
obtained in the transaction will be less than that available in the market when
delivery takes place. When a Fund agrees to purchase when-issued securities or
enter into forward commitments, the Group's custodian will be instructed to set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a segregated account. A Fund will generally not pay for such securities and
no income will accrue on the securities until they are received. These
securities are recorded as an asset and are subject to changes in value based
upon changes in the general level of interest rates. Therefore, the purchase of
securities on a "when-issued" basis or forward commitments may increase the risk
of fluctuations in a Fund's net asset value.

SECURITIES LENDING--During the time portfolio securities are on loan from a
Fund, the borrower will pay the Fund any dividends or interest paid on the
securities. In addition, loans will be subject to termination by the Fund or the
borrower at any time and, while a Fund will generally not have the right to vote
securities on loan, it will terminate the loan and regain the right to vote if
that is considered important with respect to the investment. While the lending
of securities may subject a Fund to certain risks, such as delays or an
inability to regain the securities in the event the borrower were to default on
its lending agreement or enter into bankruptcy, a Fund will receive 100%
collateral in the form of cash or U.S. Government securities. This collateral
will be valued daily by the lending agent, with oversight by the Advisor, and,
should the market value of the loaned securities increase, the borrower will be
required to furnish additional collateral to the Fund.

SECURITIES SUBJECT TO A PUT FEATURE--A "put" feature permits a Fund to sell a
fixed income security at a fixed price prior to maturity. The underlying fixed
income securities subject to a put may be sold at any time at the market rates.
However, unless the put was an integral part of the fixed income security as
originally issued, it may not be marketable or assignable. Generally, a premium
is paid for a put feature or a put feature is purchased separately which results
in a lower yield than would otherwise be available for the same fixed income
securities.

TAX-EXEMPT COMMERCIAL PAPER--Commercial paper, which is commercial paper
issued by governments and political sub-divisions.

TIME DEPOSITS--Non-negotiable receipts issued by U.S. or foreign banks in
exchange for the deposit of funds. Like certificates of deposit, they earn a
specified rate of interest over a definite period of time; however, they cannot
be traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.

U.S. GOVERNMENT AGENCY SECURITIES--Certain Federal agencies have been
established as instrumentalities of the U.S. Government to supervise and finance
certain types of activities. Issues of these

39
<PAGE> 41

agencies, while not direct obligations of the U.S. Government, are either backed
by the full faith and credit of the United States (e.g., GNMA securities) or
supported by the issuing agencies' right to borrow from the U.S. Treasury. The
issues of other agencies are supported only by the credit of the instrumentality
(e.g., FNMA securities).

U.S. TREASURY OBLIGATIONS--Bills, notes, and bonds issued by the U.S.
Treasury, as well as separately traded interest and principal component parts of
such obligations known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") that are transferable through the Federal book-entry
system.

U.S. Government Securities generally do not involve the credit risks
associated with investments in other types of fixed-income securities, although,
as a result, the yields available from U.S. Government Securities are generally
lower than the yields available from otherwise comparable corporate fixed-income
securities. Like other fixed-income securities, however, the values of U.S.
Government Securities change as interest rates fluctuate. Fluctuations in the
value of portfolio securities will in many cases not affect interest income on
existing portfolio securities, but will be reflected in the Fund's net asset
value. Because the magnitude of these fluctuations will generally be greater at
times when a Fund's average maturity is longer, under certain market conditions
the Fund may invest in short-term investments yielding lower current income
rather than investing in higher yielding longer-term securities.

VARIABLE AMOUNT MASTER DEMAND NOTES--Unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because master demand
notes are direct lending arrangements between HighMark and the issuer, they are
not normally traded. Although there is no secondary market in these notes, the
Fund may demand payment of principal and accrued interest at specified
intervals. For purposes of the Fund's investment policies, a variable amount
master demand note will be deemed to have a maturity equal to the longer of the
period of time remaining until the next readjustment of its interest rate or the
period of time remaining until the principal amount can be recovered from the
issuer through demand.

VARIABLE AND FLOATING RATE INSTRUMENTS--Obligations that may carry variable or
floating rates of interest, may involve conditional or unconditional demand
features and may include variable amount master demand notes. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if there is no secondary
market for such security.

YANKEE BONDS--Dollar-denominated securities issued by foreign-domiciled
issuers that obligate the issuer to pay the bondholder a specified sum of money,
usually semiannually, and to repay the principal amount of the loan at maturity.
Sovereign bonds are bonds issued by the governments of foreign countries.
Supranational bonds are those issued by supranational entities, such as the
World Bank and European Investment Bank. Canadian bonds are bonds issued by
Canadian provinces.

ZERO-COUPON OBLIGATIONS--Non-income producing securities evidencing ownership
of future interest and principal payments on bonds. These obligations pay no
current interest and are typically sold at

40
<PAGE> 42

prices greatly discounted from par value. The return on a zero-coupon
obligation, when held to maturity, equals the difference between the par value
and the original purchase price.

For federal income tax purposes, the difference between the par value and the
original issue price (original issue discount) is included in the income of a
holder of a zero-coupon obligation over the term of the obligation even though
the interest is not paid until maturity. The amount included in income is
determined under a constant interest rate method. In addition, if an obligation
is purchased subsequent to its original issue, a holder such as the Income Funds
may elect to include market discount in income currently on a ratable accrual
method or a constant interest rate method. Market discount is the difference
between the obligation's "adjusted issue price" (the original issue price plus
original issue discount accrued to date) and the holder's purchase price. If no
such election is made, gain on the disposition of a market discount obligation
is treated as ordinary income (rather than capital gain) to the extent it does
not exceed the accrued market discount.

Zero-coupon obligations have greater price volatility than other fixed-income
obligations of similar maturity and such obligations will be purchased when the
yield spread, in light of the obligation's duration, is considered advantageous.

41
<PAGE> 43
HighMark Funds Prospectus

INVESTMENT ADVISOR
Pacific Alliance
a division of Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

ADMINISTRATOR & DISTRIBUTOR
SEI Investments Fund Resources and
SEI Investments Distribution Co.
Once Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005

AUDITORS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, CA 94105-2230

For further information call
1-800-433-6884
or visit our web site at
www.highmark-funds.com

[HIGHMARK FUNDS LOGO]
<PAGE> 44

MONEY MARKET FUNDS

FIDUCIARY SHARES
NOVEMBER 30, 1997
<PAGE> 45

HIGHMARK FUNDS

MONEY MARKET FUNDS

FIDUCIARY SHARES

HighMark's Fiduciary Shares are offered to the following investors: (i)
fiduciary, advisory, agency, custodial and other similar accounts maintained
with Union Bank of California, N.A. or its affiliates; (ii) SelectIRA accounts
established with The Bank of California, N.A. and invested in any of HighMark's
Equity or Fixed Income Funds prior to June 20, 1994, which have remained
continuously open thereafter and which are not considered to be fiduciary
accounts; (iii) Shareholders who currently own Shares of HighMark's Equity or
Fixed Income Funds that were purchased prior to June 20, 1994 within an account
registered in their name with the Funds; and (iv) present and retired directors,
officers and employees (and their spouses and children under the age of 21) of
Union Bank of California, N.A., HighMark's current or former distributors or
their respective affiliated companies who currently own Shares of HighMark Funds
which were purchased before April 30, 1997.

This Prospectus sets forth concisely the information about HighMark and the
Funds that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated the same date as this Prospectus has been filed
with the Securities and Exchange Commission and is available without charge by
writing the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania
19456, or by calling 1-800-433-6884. The SEC maintains a World Wide Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information. The Statement of
Additional Information is incorporated into this Prospectus by reference. This
Prospectus relates only to the Fiduciary Shares of the Money Market Funds.
Interested persons who wish to obtain a prospectus for the other Funds of
HighMark may contact the Distributor at the above address and telephone number.

AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.

November 30, 1997
Fiduciary Shares
<PAGE> 46

SUMMARY

HIGHMARK FUNDS ("HighMark") is an open-end, diversified, registered investment
company providing a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
Fiduciary Shares of the Diversified Money Market, U.S. Government Money Market,
100% U.S. Treasury Money Market, and California Tax-Free Money Market Funds
(each a "Fund" and sometimes referred to in this prospectus as the "Funds").
This summary is qualified in its entirety by reference to the more detailed
information provided elsewhere in the Prospectus and in the Statement of
Additional Information.

WHAT ARE THE FUNDS' PERMITTED INVESTMENTS? THE DIVERSIFIED MONEY MARKET FUND
invests in obligations with maturities deemed under SEC rules to be 397 days or
less ("short-term investments") issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, in high-quality short-term obligations issued by
banks and corporations, and in other high-quality rated and unrated short-term
instruments; some of the obligations and short-term instruments in which the
Fund invests may be subject to repurchase agreements. THE U.S. GOVERNMENT MONEY
MARKET FUND invests in short-term obligations issued or guaranteed by the U.S.
Treasury, and additionally invests in obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government; some of the obligations in
which the Fund invests may be subject to repurchase agreements. THE 100% U.S.
TREASURY MONEY MARKET FUND invests exclusively in direct U.S. Treasury
short-term obligations. THE CALIFORNIA TAX-FREE MONEY MARKET FUND invests
primarily in bonds and notes issued by or on behalf of the State of California
and other states, territories, possessions of the United States, and the
District of Columbia and their respective authorities, agencies,
instrumentalities and political sub-divisions, the interest on which is excluded
from gross income for federal income and California personal income tax purposes
and is not treated as a preference item for individuals for purposes of the
federal alternative minimum tax. (See "INVESTMENT POLICIES")

WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? Each Fund seeks to
maintain a net asset value of $1.00 per share. There can be no assurance that a
Fund will be able to maintain a net asset value of $1.00 per share on a
continuous basis. The California Tax-Free Money Market Fund concentrates its
investments in California municipal securities, and an investment in the Fund
therefore may be riskier than an investment in other types of money market
funds. (See "Risk Factors")

WHO IS THE ADVISOR? Pacific Alliance, a division of Union Bank of California,
N.A., serves as the Advisor to HighMark. (See "The Advisor")

2
<PAGE> 47

WHO IS THE ADMINISTRATOR? SEI Investments Fund Resources serves as the
Administrator of HighMark. (See "The Administrator")

WHO IS THE CUSTODIAN? Union Bank of California, N.A. (the "Bank") serves as the
custodian of HighMark's assets. (See "The Custodian")

WHO IS THE DISTRIBUTOR? SEI Investments Distribution Co. acts as distributor of
HighMark's Shares. (See "The Distributor")

HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on days on which both the New York Stock Exchange and
the Federal Reserve wire system are open for business ("Business Days"). The
minimum initial investment is generally $1,000 per Fund. In order to be
effective on the Business Day received, orders to purchase and redeem must be
placed prior to 8:00 a.m., Pacific time (11:00 a.m., Eastern time) for the
California Tax-Free Money Market Fund; prior to 9:00 a.m., Pacific time (12:00
noon, Eastern time) for the 100% U.S. Treasury Money Market Fund; and prior to
10:00 a.m., Pacific time (1:00 p.m. Eastern time) for the Diversified Money
Market and U.S. Government Money Market Funds on any Business Day. Otherwise,
the order will be effective the next Business Day. In addition, effectiveness of
a purchase is contingent on the Custodian's receipt of Federal funds before
11:00 a.m., Pacific time (2:00 p.m., Eastern time). (See "PURCHASE AND
REDEMPTION OF SHARES")

TABLE OF CONTENTS

3
<PAGE> 48

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Valuation of Shares................................................................... 20
Purchase and Redemption of Shares..................................................... 20
Exchange Privileges................................................................... 21
Dividends............................................................................. 22
Federal Taxation...................................................................... 22
Service Arrangements.................................................................. 24
The Advisor......................................................................... 24
Administrator....................................................................... 25
The Transfer Agent.................................................................. 26
Shareholder Service Plan............................................................ 26
Distributor......................................................................... 26
Banking Laws........................................................................ 26
Custodian........................................................................... 27
General Information................................................................... 27
Description of HighMark & Its Shares................................................ 27
Performance Information............................................................. 28
Miscellaneous....................................................................... 29
Description of Permitted Investments.................................................. 29
</TABLE>

4
<PAGE> 49

MONEY MARKET FUNDS FEE TABLE

<TABLE>
<CAPTION>
100% U.S. CALIFORNIA
DIVERSIFIED U.S. GOVERNMENT TREASURY TAX-FREE
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
FIDUCIARY FIDUCIARY FIDUCIARY FIDUCIARY
SHARES SHARES SHARES SHARES
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(a)
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price)...................................... 0% 0% 0% 0%
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)........................... 0% 0% 0% 0%
Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds, as applicable)............ 0% 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed, if
applicable)(b).......................................... 0% 0% 0% 0%
Exchange Fee(a)........................................... $ 0 $ 0 $ 0 $ 0
ANNUAL OPERATING EXPENSES (as a percentage of net assets)
Management Fees (after voluntary reduction)(c)............ 0.30% 0.30% 0.25% 0.10%
12b-1 Fees................................................ 0.00% 0.00% 0.00% 0.00%
Other Expenses (after voluntary reduction)(d)............. 0.20% 0.20% 0.20% 0.20%
---- ---- ---- ----
Total Fund Operating Expenses(d).......................... 0.50% 0.50% 0.45% 0.30%
==== ==== ==== ====
</TABLE>

EXAMPLE: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Diversified Money Market Fund Fiduciary Shares................. $5 $16 $28 $ 63
U.S. Government Money Market Fund Fiduciary Shares............. $5 $16 $28 $ 63
100% U.S. Treasury Money Market Fund Fiduciary Shares.......... $5 $14 $25 $ 57
California Tax-Free Money Market Fund Fiduciary Shares......... $3 $10 $17 $ 38
</TABLE>

(a) Certain entities (including Union Bank of California, N.A. and its
affiliates) making investments in the Funds on behalf of their customers may
charge customers fees for services provided in connection with the
investment in, redemption of, and exchange of Shares. (See PURCHASE AND
REDEMPTION OF SHARES, EXCHANGE PRIVILEGES and SERVICE ARRANGEMENTS below.)

(b) A wire redemption charge of $15 is deducted from the amount of a wire
redemption payment made at the request of a Shareholder. (See PURCHASE AND
REDEMPTION OF SHARES below.)

5
<PAGE> 50

(c) Absent voluntary fee waivers, MANAGEMENT FEES would be 0.30% for the
Fiduciary Shares of the U.S. Government Money Market Fund the 100% U.S.
Treasury Money Market Fund, and the California Tax-Free Money Market Fund.

(d) Absent voluntary fee waivers, OTHER EXPENSES would be 0.47% for the
Fiduciary Shares of the Diversified Money Market Fund, the U.S. Government
Money Market Fund, the 100% U.S. Treasury Money Market Fund and the
California Tax-Free Money Market Fund.

(e) Absent voluntary fee waivers, TOTAL FUND OPERATING EXPENSES would be: 0.77%
for the Fiduciary Shares of the Diversified Money Market Fund, the U.S.
Government Money Market Fund, the 100% U.S. Treasury Money Market Fund, and
the California Tax-Free Money Market Fund.

6
<PAGE> 51

FINANCIAL HIGHLIGHTS

The tables below set forth certain financial information with respect to the
Fiduciary Shares of the U.S. Government Money Market Fund and the 100% U.S.
Treasury Money Market Fund. Financial highlights for the Funds for the period
ended July 31, 1997 have been derived from financial statements audited by
Deloitte & Touche LLP, independent auditors for HighMark, whose report thereon
is included in the 1997 Annual Report for the HighMark Funds, which is
incorporated by reference into the Statement of Additional Information.
Financial highlights for the Funds prior to the fiscal year ended July 31, 1996
have been derived from financial statements examined by other auditors whose
report thereon is on file with the Securities and Exchange Commission.

The tables below also set forth certain financial information with respect to
the Fiduciary Shares of the Diversified Money Market Fund and the California
Tax-Free Money Market Fund. Upon reorganizing as funds of HighMark Funds on
April 28, 1997, Stepstone Money Market Fund became HighMark Diversified Money
Market Fund and Stepstone California Tax-Free Money Market Fund became HighMark
California Tax-Free Money Market Fund. Financial highlights through January 31,
1997 represent the Institutional Class Shares (now Fiduciary Shares) of
Stepstone Money Market and Stepstone California Tax-Free Money Market Funds, and
have been derived from financial statements audited by Arthur Andersen LLP,
independent auditors for the Stepstone Funds.

7
<PAGE> 52

CALIFORNIA TAX-FREE MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning
of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------- ------- ------- ------- -------
Investment Activities
Net investment income..... 0.016 0.031 0.034 0.026 0.021 0.025
Net realized and
unrealized gain (loss)
on investments......... -- -- -- -- -- --
------------ ------- ------- ------- ------- -------
Distributions
Net investment income..... (0.016) (0.031) (0.034) (0.026) (0.021) (0.025)
Capital gains............. -- -- -- -- -- --
------------ ------- ------- ------- ------- -------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======= ======= ======= ======= =======
Total Return................ 3.28%* 3.12% 3.48% 2.67% 2.13% 2.61%
Net assets, end of period
(000).................. $159,297 $36,207 $42,923 $52,050 $52,982 $45,521
Ratio of expenses to
average net assets..... 0.28%* 0.27% 0.28% 0.29% 0.30% 0.30%
Ratio of expenses to
average net assets
excluding fee
waivers................ 0.69%* 0.49% 0.49% 0.50% 0.54% 0.54%
Ratio of net investment
income to average net
assets................. 3.36%* 3.08% 3.43% 2.66% 2.09% 2.53%
Ratio of net investment
income to average net
assets excluding fee
waivers................ 2.96%* 2.86% 3.22% 2.45% 1.85% 2.29%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized.

8
<PAGE> 53

100% U.S. TREASURY MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Investment Activities
Net investment income................. 0.046 0.046 0.046 0.026 0.026
Net realized and unrealized gain
(loss) on investments.............. -- -- -- -- --
-------- -------- -------- -------- --------
Distributions
Net investment income................. (0.046) (0.046) (0.046) (0.026) (0.026)
Capital gains......................... -- -- -- -- --
-------- -------- -------- -------- --------
Contribution of capital................. -- -- -- -- --
Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return............................ 4.65% 4.74% 4.69% 2.68% 2.64%
Net Assets, end of period (000)......... $243,464 $173,340 $190,604 $160,721 $191,946
Ratio of expenses to average net
assets................................ 0.64% 0.74% 0.73% 0.74% 0.67%
Ratio of expenses to average net assets
excluding fee waivers................. 0.92% 0.97% 0.97% 0.90% 0.72%
Ratio of net investment income to
average net assets.................... 4.61% 4.64% 4.60% 2.63% 2.60%
Ratio of net investment income to
average net assets excluding fee
waivers............................... 4.33% 4.41% 4.36% 2.48% 2.55%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.

9
<PAGE> 54

U.S. GOVERNMENT MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of
Period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- -------- -------- -------- --------
Investment Activities
Net investment income........... 0.047 0.048 0.048 0.027 0.027
Net realized and unrealized gain
(loss) on investments........ -- -- -- -- --
------------- -------- -------- -------- --------
Distributions
Net investment income........... (0.047) (0.048) (0.048) (0.027) (0.027)
Capital gains................... -- -- -- -- --
------------- -------- -------- -------- --------
Net Asset Value, End of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ======== ======== ========
Total Return...................... 4.78% 4.88% 4.87% 2.74% 2.72%
Net assets, end of period
(000)........................ $ 252,995 $151,483 $159,747 $162,094 $166,182
Ratio of expenses to average net
assets....................... 0.70% 0.77% 0.78% 0.78% 0.71%
Ratio of expenses to average net
assets excluding fee
waivers...................... 0.95% 1.00% 1.02% 0.94% 0.74%
Ratio of net investment income
to average net assets........ 4.69% 4.76% 4.76% 2.70% 2.67%
Ratio of net investment income
to average net assets
excluding fee waivers........ 4.44% 4.53% 4.52% 2.54% 2.65%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized.

10
<PAGE> 55

DIVERSIFIED MONEY MARKET FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD
ENDED
JULY 31, FOR THE YEARS ENDED JANUARY 31,
--------- --------------------------------------------------------
1997 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- -------- -------- -------- -------- --------
Investment Activities
Net investment income....... 0.025 0.049 0.054 0.039 0.029 0.035
Net realized and unrealized
gain (loss) on
investments.............. -- -- -- (0.001) -- --
--------- -------- -------- -------- -------- --------
Distributions
Net investment income....... (0.025) (0.049) (0.054) (0.039) (0.029) (0.035)
Capital gains............... -- -- -- -- -- --
--------- -------- -------- -------- -------- --------
Contribution of capital....... -- -- -- 0.001 -- --
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return.................. 5.11% * 5.03% 5.57% 3.99% 2.99% 3.61%
Net Assets, end of period
(000)....................... $971,858 $523,571 $503,080 $536,754 $498,795 $521,664
Ratio of expenses to average
net assets.................. 0.48% * 0.49% 0.50% 0.50% 0.49% 0.46%
Ratio of expenses to average
net assets excluding fee
waivers..................... 0.64% * 0.49% 0.50% 0.50% 0.49% 0.46%
Ratio of net investment income
to average net assets....... 5.07% * 4.93% 5.43% 3.93% 2.93% 3.47%
Ratio of net investment income
to average net assets
excluding fee waivers....... 4.90% * 4.93% 5.43% 3.93% 2.93% 3.47%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized.

11
<PAGE> 56

FUND DESCRIPTION

HighMark Funds ("HighMark") is an open-end, diversified, registered investment
company that currently offers units of beneficial interest ("Shares") in sixteen
separate investment portfolios ("Funds"). All of the Funds are advised by
Pacific Alliance, a division of Union Bank of California, N.A. (the "Advisor").
Shareholders may purchase Shares of selected Funds through three separate
classes (Class A and Class B Shares (collectively, the "Retail Shares") and
Fiduciary Shares). These classes may have different sales charges and other
expenses, which may affect performance. Information regarding HighMark's other
Funds and other classes is contained in separate prospectuses that may be
obtained from HighMark's Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-433-6884.

For information concerning those investors who qualify to purchase Fiduciary
Shares, see PURCHASE AND REDEMPTION OF SHARES below. (Fiduciary Shares may be
hereinafter referred to as "Shares.")

INVESTMENT OBJECTIVES

The investment objectives of the Funds are as follows:

The DIVERSIFIED MONEY MARKET FUND, the U.S. GOVERNMENT MONEY MARKET FUND and
the 100% U.S. TREASURY MONEY MARKET FUND each seek current income with liquidity
and stability of principal.

There can be no assurance that a Fund will achieve its investment objective.

INVESTMENT POLICIES

12
<PAGE> 57

Diversified Money Market Fund

The Diversified Money Market Fund may invest in the following obligations:

(vi) readily-marketable, short-term debt securities including, but not limited
to, those backed by company receivables, truck and auto loans, leases, and
credit card loans;

(vii) Treasury receipts, including TRs, TIGRs and CATs; and

(viii) repurchase agreements involving such obligations.

Certain of the obligations in which the Fund may invest may be variable or
floating rate instruments, may involve a conditional or unconditional demand
feature, and may include variable amount master demand notes.

13
<PAGE> 58

U.S. Government Money Market Fund

The 100% U.S. Treasury Money Market Fund

California Tax-Free Money Market Fund

Under normal market conditions and, as a matter of fundamental policy, at
least 80% of the value of the total assets of the California Tax-Free Money
Market Fund will be invested in Municipal Securities, the interest on which, in
the opinion of bond counsel, is both excluded from gross income both for federal
income tax purposes and for California personal income tax purposes, and does
not constitute a preference item for individuals for purposes of the federal
alternative minimum tax.

Certain of the obligations in which the Fund may invest may be variable or
floating rate instruments and may involve a conditional or unconditional demand
feature.

14
<PAGE> 59

15
<PAGE> 60

MUNICIPAL SECURITIES

The two principal classifications of Municipal Securities that may be held by
the California Tax-Free Money Market Fund are "general obligation" securities
and "revenue" securities.

General obligation securities are secured by the issuer's pledge of its full
faith and credit and general taxing power for the payment of principal and
interest.

16
<PAGE> 61

adjustable interest rate feature included in this type of note is intended
generally to assure that the value of the note to the Fund will approximate its
par value.

Municipal Securities may include, but are not limited to, short-term
anticipation notes, bond anticipation notes, revenue anticipation notes, and
other forms of short-term tax-exempt securities. These instruments are issued in
anticipation of the receipt of tax funds, the proceeds of bond placements, or
other revenues. In addition, the California Tax-Free Money Market Fund may
purchase tax-exempt commercial paper. Under certain circumstances, and subject
to the limitations described in the Statement of Additional Information, the
California Tax-Free Money Market Fund may invest indirectly in Municipal
Securities by purchasing shares of other tax-exempt money market mutual funds.

GENERAL

17
<PAGE> 62

In the event that a security owned by a Fund is downgraded below the stated
rating categories, the Advisor will take appropriate action with regard to that
security.

Illiquid and Restricted Securities

The Funds shall limit investments in illiquid securities to 10% or less of
their net assets. Generally, an "illiquid security" is any security that cannot
be disposed of promptly and in the ordinary course of business at approximately
the amount at which the Fund has valued the instrument. The absence of a trading
market can make it difficult to ascertain the market value of illiquid
securities. Each Fund may purchase restricted securities which have not been
registered under the Securities Act of 1933 (e.g., Rule 144A Securities and
Section 4(2) commercial paper) subject to policies approved by the Board of
Trustees. See INVESTMENT RESTRICTIONS in the Statement of Additional
Information.

Time deposits, including ETDs and CTDs (but not including certificates of
deposit) and repurchase agreements, which have maturities in excess of seven
days are considered to be illiquid.

Lending of Portfolio Securities

Other Investments

For further information, see "DESCRIPTION OF PERMITTED INVESTMENTS."

Risk Factors

18
<PAGE> 63

As in the case of mortgage-related securities, participations and certain
asset-backed securities are subject to prepayments and there can be no assurance
that the Diversified Money Market Fund will be able to reinvest the proceeds of
any prepayment at the same interest rate or on the same terms as the original
investment.

In addition, during the first half of the decade, California faced severe
economic and fiscal conditions and experienced recurring budget deficits that
caused it to deplete its available cash resources and to become increasingly
dependent upon external borrowings to meet its cash needs.

The financial difficulties experienced by the State of California and other
issuers of California Municipal Securities during the recession resulted in the
credit ratings of certain of their obligations being downgraded significantly by
the major rating agencies.

19
<PAGE> 64

VALUATION OF SHARES

Each Fund's net asset value per share is determined by the Administrator as of
1:00 p.m. Eastern Time on days on which both the New York Stock Exchange and the
Federal Reserve wire system are open for business. Net asset value per share for
purposes of pricing sales and redemptions for each of the Funds is calculated by
adding the value of all securities and other assets belonging to a Fund,
subtracting its liabilities, and dividing the result by the total number of the
Fund's outstanding shares, irrespective of class.

PURCHASE AND REDEMPTION OF SHARES

As noted above, the Diversified Money Market, 100% U.S. Treasury Money Market
and California Tax-Free Money Market Funds are divided into two classes of
Shares, Class A and Fiduciary. The U.S. Government Money Market Fund is divided
into three classes of Shares, Class A, Class B and Fiduciary. Only the following
investors qualify to purchase the Funds' Fiduciary Shares: (i) fiduciary,
advisory, agency, custodial and other similar accounts maintained with Union
Bank of California, N.A. or its affiliates; (ii) SelectIRA accounts established
with The Bank of California, N.A. and invested in any of HighMark's Equity or
Income Funds prior to June 20, 1994, which have remained continuously open
thereafter and which are not considered to be fiduciary accounts; (iii)
Shareholders who currently own Shares of HighMark's Equity or Income Funds that
were purchased prior to June 20, 1994 within an account registered in their name
with the Funds; and (iv) present and retired directors, officers and employees
(and their spouses and children under the age of 21) of Union Bank of
California, N.A., HighMark's current or former distributors or their respective
affiliated companies who currently own Shares of HighMark Funds which were
purchased before April 30, 1997. For a description of investors who qualify to
purchase Retail Shares, see the Retail Shares prospectus of the Money Market
Funds.

Purchases and redemptions of Shares of the Funds may be made on days on which
both the New York Stock Exchange and Federal Reserve wire system are open for
business ("Business Days"). The minimum initial investment is generally $1,000
per Fund and the minimum subsequent investment is generally $100 per Fund. For
present and retired directors, officers, and employees (and their spouses and
children under the age of 21) of Union Bank of California, N.A., SEI Investments
Distribution Co. and their affiliates, the minimum initial investment is $250
and the minimum subsequent investment is $50 per Fund. A Fund's initial and
subsequent minimum purchase amounts may be waived, in the Distributor's
discretion if purchases are made in connection with Individual Retirement
Accounts, Keoghs, payroll deduction plans, 401(k) or similar programs or
accounts. Shareholders may place orders by telephone.

20
<PAGE> 65

Pacific time (1:00 p.m., Eastern time) for the Diversified Money Market and U.S.
Government Money Market Funds, on such Business Day. Otherwise, the purchase
order will be effective the next Business Day. Effectiveness of a purchase order
on any Business Day is contingent on the Custodian's receipt of Federal funds
before 11:00 a.m., Pacific time (2:00 p.m., Eastern time), on such day. The
purchase price is the net asset value per Share, which is expected to remain
constant at $1.00. The net asset value per Share is calculated as of 10:00 a.m.,
Pacific time (1:00 p.m., Eastern time), each Business Day based on the amortized
cost method. The net asset value per Share of a Fund is determined by dividing
the total value of its investments and other assets, less any liabilities, by
the total number of its outstanding Shares. HighMark reserves the right to
reject a purchase order when the Distributor or the Advisor determines that it
is not in the best interest of HighMark and/or Shareholder(s).

Shares of the Fund are offered only to residents of states in which the shares
are eligible for purchase.

Redemption orders may be made any time before 8:00 a.m., Pacific time (11:00
a.m., Eastern time) for the California Tax-Free Money Market Fund, 9:00 a.m.,
Pacific time (12:00 noon, Eastern time) for the 100% U.S. Treasury Money Market
Fund, and 10:00 a.m., Pacific time (1:00 p.m., Eastern time) for the Diversified
Money Market and U.S. Government Money Market Funds in order to receive that
day's redemption price (i.e. the next determined net asset value per share). For
redemption orders received before such times for such Funds, payment will be
made the same day by transfer of Federal funds. Otherwise, payment will be made
on the next Business Day. Redeemed shares are not entitled to dividends declared
the day the redemption order is effective. The Funds reserve the right to make
payment on redemptions in securities rather than cash.

Neither HighMark's transfer agent nor HighMark will be responsible for any
loss, liability, cost or expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes are genuine. HighMark and its
transfer agent will each employ reasonable procedures to confirm that telephone
instructions are genuine. Such procedures may include taping of telephone
conversations. If market conditions are extraordinarily active or extraordinary
circumstances exist, and you experience difficulties placing redemption orders
by telephone, you may wish to consider placing your order by other means.

EXCHANGE PRIVILEGES

21
<PAGE> 66

Fiduciary Shares exchanged. Shareholders may also exchange Fiduciary Shares of a
Fund for Retail Shares of another Fund. Under such circumstances, the cost of
the acquired Retail Shares will be the net asset value per share plus the
appropriate sales load.

DIVIDENDS

The net income of each Fund is declared daily as a dividend to Shareholders of
record at the close of business on the day of declaration.

Dividends with respect to each Fund are paid monthly in additional full and
fractional Shares of the Fund at net asset value as of the date of payment,
unless the Shareholder elects to receive such dividends in cash as described
below. Shareholders will automatically receive all income dividends and capital
gains distributions (if any) paid in respect of a Fund's Shares in additional
full and fractional Shares of the same class. Shareholders wishing to receive
their dividends in cash (or wishing to revoke a previously made election) must
notify the transfer agent in writing at P.O. Box 8416, Boston, MA 02266-8416,
and such election (or revocation thereof) will become effective with respect to
dividends having record dates after notice has been received. Dividends paid in
additional Shares receive the same tax treatment as dividends paid in cash.
Dividends are paid in cash not later than seven Business Days after a
Shareholder's complete redemption of his or her Shares. Net realized capital
gains, if any, are distributed at least annually to Shareholders of record.

FEDERAL TAXATION

22
<PAGE> 67

Treasury Money Market Fund and the California Tax-Free Money Market Fund is
expected to be derived from interest, it is anticipated that no part of any
distribution will be eligible for the federal dividends received deduction for
corporations. The Funds are not managed to generate any long-term capital gains
and, therefore, the Funds do not foresee paying any significant "capital gains
dividends" as described in the Code.

Exempt-interest dividends from the California Tax-Free Money Market Fund are
excludable from gross income for federal income tax purposes. Such dividends may
be taxable to Shareholders under state or local law as ordinary income even
though all or a portion of the amounts may be derived from interest on tax-
exempt obligations which, if realized directly, would be exempt from such taxes.
Shareholders are advised to consult a tax advisor with respect to whether
exempt-interest dividends retain the exclusion if such Shareholder would be
treated as a "substantial user" of a facility financed through certain private
activity bonds or a "related person" to such a user under the Code.

The California Tax-Free Money Market Fund may at times purchase Municipal
Securities at a discount from the price at which they were originally issued.
For federal income tax purposes, some or all of this market discount will be
included in the California Tax-Free Money Market Fund's ordinary income and will
be taxable to Shareholders as such when it is distributed to them.

23
<PAGE> 68

If, at the close of each quarter of its taxable year, the California Tax-Free
Money Market Fund continues to qualify for the special federal income tax
treatment afforded regulated investment companies and at least 50% of the value
of the Fund's total assets consists of California Exempt-Interest Securities,
then "California exempt interest dividends" attributable to these securities
will be exempt from California personal income tax. A "California-exempt
interest dividend" is any dividend distributed by the Fund to the extent that it
is derived from the interest received by the Fund on California Exempt-Interest
Securities (less related expenses) and designated as such by written notice to
Shareholders. For further details, see the Statement of Additional Information.
Dividends received by Shareholders subject to California state corporate
franchise tax will be taxed as ordinary dividends notwithstanding that all or a
portion of such dividends are exempt from California personal income tax.
Distributions other than "California-exempt interest dividends" by the Fund to
California residents will be subject to California personal income tax, whether
or not such dividends are reinvested.

SERVICE ARRANGEMENTS

The Advisor

24
<PAGE> 69

For the expenses assumed and services provided by the Advisor as each Fund's
investment advisor, Union Bank of California, N.A. receives a fee from the
Diversified Money Market Fund, the U.S. Government Money Market Fund, the 100%
U.S. Treasury Money Market Fund, and the California Tax-Free Money Market Fund
computed daily and paid monthly, at the annual rate of thirty one-hundredths of
one percent (.30%) of each Fund's average daily net assets. Union Bank of
California, N.A. may from time to time agree to voluntarily reduce its advisory
fee. While there can be no assurance that Union Bank of California, N.A. will
choose to make such an agreement, any voluntary reductions in Union Bank of
California, N.A.'s advisory fee will lower the Fund's expenses, and thus
increase the Fund's yield and total return, during the period such voluntary
reductions are in effect. Prior to April 28, 1997, the Diversified Money Market
Fund and the California Tax-Free Money Market Fund did not yet operate as
HighMark Funds. Fee and other information presented regarding these Funds after
that time only represents their operation as HighMark Funds. Prior to operating
as HighMark Funds, these Funds had a fiscal year end of January 31.

Administrator

25
<PAGE> 70

The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of the Funds.
The Administrator may waive its fee or reimburse various expenses to the extent
necessary to limit the total operating expenses of a Fund's Fiduciary Shares.
Any such waiver is voluntary and may be terminated at any time in the
Administrator's sole discretion. Currently, the Administrator has agreed to
waive its fee to the rate of .18% of the average daily net assets of the Funds.

The Transfer Agent

State Street Bank and Trust Company serves as the transfer agent, dividend
disbursing agent, and as a shareholder servicing agent for the Fiduciary Shares
of HighMark, for which services it receives a fee.

Shareholder Service Plan

To support the provision of Shareholder services to both classes of Shares,
HighMark has adopted a Shareholder Service Plan. A description of the services
performed by service providers pursuant to the Shareholder Service Plan is
contained in the Statement of Additional Information. In consideration of
services provided by any service provider, which may include Union Bank of
California, N.A., Bank of Tokyo-Mitsubishi, Ltd., or their respective
affiliates, each Fund may pay a fee at the rate of up to 0.25% of its average
daily net assets to such service provider. The service provider may waive such
fees at any time. Any such waiver is voluntary and may be terminated at any
time. Currently, such fees are being waived to the rate of 0.00% of average
daily net assets.

Distributor

SEI Investments Distribution Co. (the "Distributor") and HighMark are parties
to a distribution agreement ("Distribution Agreement"). The Distribution
Agreement is renewable annually and may be terminated by the Distributor, by a
majority vote of the Disinterested Trustees or by a majority vote of the
outstanding securities of HighMark upon not more than 60 days written notice by
either party, or upon assignment by the Distributor. Fiduciary Shares are not
subject to HighMark's Distribution Plan or a distribution fee.

Banking Laws

26
<PAGE> 71

regulations relating to permissible activities of banks or bank holding
companies and their subsidiaries and affiliates, as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations, could change the manner in which Union Bank of California, N.A. or
the Advisor could continue to perform such services for the Funds. For a further
discussion of applicable banking laws and regulations, see the Statement of
Additional Information.

Custodian

GENERAL INFORMATION

Description of HighMark & Its Shares

HighMark was organized as a Massachusetts business trust on March 10, 1987,
and consists of sixteen series of Shares open for investment representing units
of beneficial interest in HighMark's Growth Fund, Income Equity Fund, Balanced
Fund, Value Momentum Fund, Blue Chip Growth Fund, Emerging Growth Fund,
International Equity Fund, Bond Fund, Intermediate-Term Bond Fund, Government
Securities Fund, Convertible Securities Fund, California Intermediate Tax-Free
Bond Fund, Diversified Money Market Fund, U.S. Government Money Market Fund,
100% U.S. Treasury Money Market Fund and California Tax-Free Money Market Fund.
Shares of each Fund are freely transferable, are entitled to distributions from
the assets of the Fund as declared by the Board of Trustees, and, if HighMark
were liquidated, would receive a pro rata share of the net assets attributable
to that Fund. Shares are without par value.

As noted above, pursuant to a Multiple Class Plan on file with the Securities
and Exchange Commission permitting the issuance and sale of three classes of
Shares in selected Funds, Shares of such Funds have been divided into three
classes, designated Class A and Class B Shares (collectively "Retail Shares")
and Fiduciary Shares. For information regarding the Retail Shares of the Funds,
interested persons may contact the Distributor for a prospectus at
1-800-433-6884.

HighMark believes that as of November 17, 1997 Union Bank of California, N.A.
(475 Sansome Street, Post Office Box 45000, San Francisco, CA 94104) was the
Shareholder of record of 98.42% of the Fiduciary Shares of the Diversified Money
Market Fund, 93.46% of the Fiduciary Shares of the U.S. Government Money Market
Fund, 95.03% of the Fiduciary Shares of the 100% U.S. Treasury Money Market
Fund, and substantially all of the Fiduciary Shares of the California Tax-Free
Money Market Fund.

27
<PAGE> 72

Performance Information

From time to time, HighMark may advertise the "yield" and "effective yield"
with respect to the Fiduciary Shares of each Fund and a "tax-equivalent yield"
and "tax-equivalent effective yield" for federal, California and Oregon income
tax purposes with regard to the Fiduciary Shares of each of the 100% U.S.
Treasury Money Market Fund and the California Tax-Free Money Market Fund.
Performance information is computed separately for a Fund's Retail and Fiduciary
Shares in accordance with the formulas described below. Each yield figure is
based on historical earnings and is not intended to indicate future performance.

The "yield" of a Fund's Fiduciary Shares refers to the income generated by an
investment in the class over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the class is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.

The 100% U.S. Treasury Money Market Fund's tax-equivalent yield and
tax-equivalent effective yield will reflect the amount of income subject to
California or Oregon personal income taxation at the rate specified in the
advertisement that a taxpayer would have to earn in order to obtain the same
after tax income as that derived from the yield and effective yield of the
Fiduciary class. The California Tax-Free Money Market Fund's tax-equivalent
yield and tax-equivalent effective yield reflect the amount of income subject to
federal income taxation and California personal income taxation at the rate
specified in the advertisement that a taxpayer would have to earn in order to
obtain the same after tax income as that derived from the yield and effective
yield of the Fiduciary class.

Tax-equivalent yields and tax-equivalent effective yields with respect to a
class will be significantly higher than the yield and effective yield of that
class.

28
<PAGE> 73

Certain Funds may advertise performance that includes results from periods in
which the Fund's assets were managed in a non-registered predecessor vehicle.

Miscellaneous

Shareholders will be sent unaudited semi-annual reports and annual reports
audited by independent public accountants.

Inquiries may be directed in writing to SEI Financial Services Company, Oaks,
Pennsylvania 19456, or by calling toll free 1-800-433-6884.

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of permitted investments for the HighMark Money
Market Funds.

ASSET-BACKED SECURITIES (NON-MORTGAGE)--Debt Instruments secured by company
receivables, truck and auto loans, leases, and credit card receivables. Such
securities are generally issued as pass-through certificates, which represent
undivided fractional ownership interests in the underlying pools of assets. Such
securities also may be debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of owning such assets and
issuing such debt. The purchase of non-mortgage asset-backed securities raises
risk considerations peculiar to the financing of the instruments underlying such
securities. Asset-backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than the prepayment risk
associated with mortgage-backed securities.

29
<PAGE> 74

any change in the prepayment level. Certificate holders may also experience
delays in payment on the certificates if the full amounts due on underlying
sales contracts or receivables are not realized by the trust because of
unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors. If consistent with their
investment objectives and policies, the Money Market Funds may invest in other
asset-backed securities that may be developed in the future.

LOAN PARTICIPATIONS--Loan participations are interests in loans to U.S.
corporations (i.e., borrowers) which are administered by the lending bank or
agent for a syndicate of lending banks, and sold by the lending bank or
syndicate member ("intermediary bank"). In a loan participation, the borrower of
the underlying loan will be deemed to be the issuer of the participation
interest (except to the extent a purchasing Fund derives its rights from the
intermediary bank). Because the intermediary bank does not guarantee a loan
participation in any way, a loan participation is subject to the credit risks
associated with the underlying corporate borrower. In addition, in the event the
underlying corporate borrower fails to pay principal and interest when due, a
Fund may encounter delays, expenses and risks that are greater than those that
would have been involved if the Fund had purchased a direct obligation (such as
commercial paper) of such borrower because it may be necessary under the terms
of the loan participation, for the Fund to assert its rights against the
borrower through the intermediary bank. Moreover, under the terms of a loan
participation, the purchasing Fund may be regarded as a creditor of the
intermediary bank (rather than of the underlying corporate borrower), so that a
Fund may also be subject to the risk that the issuing bank may become

30
<PAGE> 75

insolvent. Further, in the event of the bankruptcy or insolvency of the
corporate borrower, a loan participation may be subject to certain defenses that
can be asserted by such borrower as a result of improper conduct by the issuing
bank. The secondary market, if any, for these loan participations is limited,
and any such participation purchased by a Fund may be regarded as illiquid.

Municipal bonds include general obligation bonds, revenue or special
obligation bonds, private activity and industrial development bonds. General
obligation bonds are backed by the taxing power of the issuing municipality.
Revenue bonds are backed by the revenues of a project or facility, tolls from a
toll bridge, for example. The payment of principal and interest on private
activity and industrial development bonds generally is dependent solely on the
ability of the facility's user to meet its financial obligations and the pledge,
if any, of real and personal property so financed as security for such payment.

PARTICIPATION INTERESTS--Participation interests are interests in municipal
securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows the Fund to treat
the income from the investment as exempt from federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying municipal securities.

31
<PAGE> 76

securities, which means that they are sold at a substantial discount and
redeemed at face value at their maturity date without interim cash payments of
interest or principal. This discount is accreted over the life of the security,
and such accretion will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, such securities may be
subject to greater interest rate volatility than interest-paying securities. See
also "FEDERAL TAXATION."

32
<PAGE> 77

equal to the amount of the commitment in a segregated account. A Fund will
generally not pay for such securities and no income will accrue on the
securities until they are received. These securities are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. Therefore, the purchase of securities on a "when-issued" basis
or forward commitments may increase the risk of fluctuations in a Fund's net
asset value.

TAX-EXEMPT COMMERCIAL PAPER--Commercial paper, which is commercial paper
issued by governments and political sub-divisions.

U.S. GOVERNMENT AGENCY SECURITIES--Certain Federal agencies have been
established as instrumentalities of the U.S. Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the U.S. Government, are either backed by the full faith and
credit of the United States (e.g., GNMA securities) or supported by the issuing
agencies' right to borrow from the U.S. Treasury. The issues of other agencies
are supported only by the credit of the instrumentality (e.g., FNMA securities).

33
<PAGE> 78

ZERO-COUPON OBLIGATIONS--Non-income producing securities evidencing ownership
of future interest and principal payments on bonds. These obligations pay no
current interest and are typically sold at prices greatly discounted from par
value. The return on a zero-coupon obligation, when held to maturity, equals the
difference between the par value and the original purchase price.

34
<PAGE> 79

"adjusted issue price" (the original issue price plus original issue discount
accrued to date) and the holder's purchase price. If no such election is made,
gain on the disposition of a market discount obligation is treated as ordinary
income (rather than capital gain) to the extent it does not exceed the accrued
market discount.

35
<PAGE> 80

HIGHMARK FUNDS

For further information

call 1-(800) 433-6884

or visit our Web site at

www.highmark-funds.com

INVESTMENT ADVISOR

Pacific Alliance,

a division of Union Bank of California, N.A.

475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

ADMINISTRATOR & DISTRIBUTOR
SEI Investments Fund Resources and
SEI Investments Distribution Co.
Oaks, PA 19456

LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005

AUDITORS
Deloitte & Touche LLP

50 Fremont Street

San Francisco, CA 94105

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HIGHMARK OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE GROUP OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.

NOT FDIC INSURED
<PAGE> 81

HIGHMARK FUNDS PROSPECTUS

INVESTMENT ADVISOR
Pacific Alliance
a division of Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

ADMINISTRATOR & DISTRIBUTOR
SEI Investments Fund Resources and
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005

AUDITORS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, CA 94105-2230

For further information call
1-800-433-6884
or visit our web site at
www.highmark-funds.com

[HIGHMARK FUNDS LOGO]
<PAGE> 82

- Equity Funds
- Fixed Income Funds

PROSPECTUS

Retail Shares
November 30, 1997
<PAGE> 83

HIGHMARK FUNDS

EQUITY FUNDS
FIXED INCOME FUNDS

<TABLE>
<S> <C>
- - Income Equity Fund - Intermediate-Term Bond Fund
- - Value Momentum Fund - Bond Fund
- - Growth Fund - Balanced Fund
- - Emerging Growth Fund - California Intermediate Tax-Free
Bond Fund
</TABLE>

RETAIL SHARES

HighMark's Retail Shares are offered to investors who are not fiduciary
clients of Union Bank of California, N.A., and who are not otherwise eligible
for HighMark's Fiduciary Shares.

This Prospectus sets forth concisely the information about HighMark and the
Funds that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated the same date as this Prospectus has been filed
with the Securities and Exchange Commission and is available without charge by
writing the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania
19456, or by calling 1-800-433-6884. The SEC maintains a World Wide Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information. The Statement of
Additional Information is incorporated into this Prospectus by reference. This
Prospectus relates only to the Retail Shares of the Funds. Interested persons
who wish to obtain a prospectus for other Funds and classes of HighMark may
contact the Distributor at the above address and telephone number.

November 30, 1997

Retail Shares
<PAGE> 84

SUMMARY

HIGHMARK FUNDS ("HighMark") is an open-end, diversified, registered investment
company providing a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
Class A and Class B Shares (collectively, "Retail Shares") of the Income Equity,
Value Momentum, Growth and Balanced Funds, and the Class A Shares of the
Emerging Growth, Intermediate-Term Bond, Bond, and California Intermediate
Tax-Free Bond Funds (each a "Fund" and together the "Funds"). This summary is
qualified in its entirety by reference to the more detailed information provided
elsewhere in the Prospectus and in the Statement of Additional Information.

WHAT ARE THE FUNDS' PERMITTED INVESTMENTS? Each of the Equity Funds primarily
invests, consistent with its investment objective, in equity securities
including common stocks and securities convertible into common stocks. The
Intermediate-Term Bond Fund primarily invests in bonds. The Bond Fund primarily
invests in long-term bonds. Bonds include debt obligations such as bonds, notes,
debentures and securities convertible into or exercisable for debt obligations
that are issued by U.S. corporations or issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities; investments may also include
zero-coupon obligations, mortgage-related securities and asset-backed
securities. The Balanced Fund primarily invests, consistent with its investment
objective, in equity securities including common stocks and securities
convertible into common stocks and may also invest in fixed income securities.
The California Intermediate Tax-Free Bond Fund invests primarily in investment
grade or better bonds and notes issued by the State of California, its agencies,
instrumentalities and political sub-divisions, the income on which is exempt
from regular federal and State of California personal income taxes ("California
Municipal Securities"). Each Fund may also invest consistent with its investment
objective and investment policies in certain other instruments. (See "INVESTMENT
POLICIES.")

2
<PAGE> 85

to vary inversely with interest rates, and may be affected by other market and
economic factors as well. During periods of falling interest rates, the value of
outstanding fixed income securities generally rises. Conversely, during periods
of rising interest rates, the value of such securities generally declines.
Values of fixed income securities in which the California Intermediate Tax-Free
Bond Fund invests may be affected by other market and economic factors affecting
the State of California as well. In addition, the securities of the emerging
growth companies in which the Emerging Growth Fund may invest may be less
liquid, and subject to more abrupt or erratic market movements, than securities
of larger, more established growth companies. (See "Risk Factors.")

ARE MY INVESTMENTS INSURED? HighMark's Shares are not federally insured by the
FDIC or any other government agency. Any guarantee by the U.S. Government, its
agencies or any instrumentalities of the securities in which any Fund invests
guarantees only the payment of principal and interest on the guaranteed
security, and does not guarantee the total return or value of the security or
total return or value of Shares of that Fund.

WHO IS THE ADVISOR? Pacific Alliance, a division of Union Bank of California,
N.A., serves as the Advisor to HighMark. (See "The Advisor.")

WHO IS THE SUB-ADVISOR? Bank of Tokyo-Mitsubishi Trust Company serves as the
Sub-Advisor to the Emerging Growth Fund. (See "The Sub-Advisor.")

WHO IS THE ADMINISTRATOR? SEI Investments Fund Resources serves as the
Administrator of HighMark. (See "The Administrator.")

WHO IS THE CUSTODIAN? Union Bank of California, N.A. (the "Bank") serves as
the custodian of HighMark's assets. (See "The Custodian.")

WHO IS THE DISTRIBUTOR? SEI Investments Distribution Co. acts as distributor
of HighMark's Shares. (See "The Distributor.")

HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on days on which the New York Stock Exchange is open for
business ("Business Days"). The minimum initial investment is generally $1,000
per Fund. A purchase order will be effective if the Distributor receives an
order prior to 1:00 p.m., Pacific time (4:00 p.m., Eastern time). Purchase
orders for Class A Shares will be executed at a per Share price equal to the net
asset value next determined after the purchase order is effective (plus any
applicable sales charge). Purchase orders for Class B Shares will be executed at
a per Share price equal to the net asset value next determined after the
purchase order is effective, without an initial sales charge, but Class B Shares
will be subject to a contingent deferred sales charge if they are redeemed
within six years after purchase. Redemption orders must be placed prior to 1:00
p.m., Pacific time (4:00 p.m., Eastern time) on any Business Day for the order
to be effective that day. (See "HOW TO PURCHASE SHARES" and "REDEMPTION OF
SHARES.")

HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Funds is distributed in the form of monthly
dividends to Shareholders of record. Any capital gain is distributed at least
annually. Distributions are paid in additional Shares unless the Shareholder
elects to take the payment in cash. (See "DIVIDENDS.")

3
<PAGE> 86

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................................... 2
Class A Fee Table..................................................................... 6
Class B Fee Table..................................................................... 8
Financial Highlights.................................................................. 10
Fund Description...................................................................... 18
Investment Objectives................................................................. 18
Investment Policies................................................................... 19
Income Equity Fund.................................................................. 19
Value Momentum Fund................................................................. 19
Growth Fund......................................................................... 19
Emerging Growth Fund................................................................ 20
Intermediate-Term Bond Fund......................................................... 20
Bond Fund........................................................................... 21
Balanced Fund....................................................................... 21
California Intermediate Tax-Free Bond Fund.......................................... 22
General............................................................................... 22
Money Market Instruments............................................................ 22
Illiquid and Restricted Securities.................................................. 23
California Municipal Securities..................................................... 23
Lending of Portfolio Securities..................................................... 24
Other Investments................................................................... 24
Risk Factors........................................................................ 25
Portfolio Turnover.................................................................... 27
How To Purchase Shares................................................................ 27
How to Purchase By Mail............................................................. 28
How to Purchase By Wire............................................................. 29
How to Purchase Through an Automatic Investment Plan ("AIP")........................ 29
How to Purchase Through Financial Institutions...................................... 29
Alternative Sales Charge Options...................................................... 30
Overview............................................................................ 30
Class A Shares: Front-End Sales Charge.............................................. 31
Letter of Intent.................................................................... 32
Rights of Accumulation.............................................................. 32
Front-End Sales Charge Waivers...................................................... 33
Reductions for Qualified Groups..................................................... 34
Class B Shares: Contingent Deferred Sales Charge.................................... 34
Exchange Privileges................................................................... 35
Redemption of Shares.................................................................. 36
By Mail............................................................................. 37
Telephone Transactions.............................................................. 37
Systematic Withdrawal Plan ("SWP").................................................. 37
Other Information Regarding Redemptions............................................. 38
Dividends............................................................................. 39
Taxes................................................................................. 39
Federal Taxation.................................................................... 39
California Taxes.................................................................... 41
</TABLE>

4
<PAGE> 87

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Service Arrangements.................................................................. 42
The Advisor......................................................................... 42
The Sub-Advisor..................................................................... 44
Administrator....................................................................... 45
The Transfer Agent.................................................................. 45
Shareholder Service Plan............................................................ 45
Distributor......................................................................... 46
The Distribution Plans.............................................................. 46
Banking Laws........................................................................ 47
Custodian........................................................................... 47
General Information................................................................... 47
Description of HighMark & Its Shares................................................ 47
Performance Information............................................................. 48
Miscellaneous....................................................................... 49
Description of Permitted Investments.................................................. 49
</TABLE>

5
<PAGE> 88

CLASS A FEE TABLE

<TABLE>
<CAPTION>
CALIFORNIA
INCOME VALUE EMERGING INTERMEDIATE- INTERMEDIATE
EQUITY MOMENTUM GROWTH GROWTH TERM BOND BOND BALANCED TAX-FREE
FUND FUND FUND FUND FUND FUND FUND BOND FUND
------- -------- ------- -------- ------------- ------- -------- ------------
CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- -------- ------- -------- ------------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(a)
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)..................... 4.50% 4.50% 4.50% 4.50% 3.00% 3.00% 4.50% 3.00%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price)....... 0% 0% 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage
of original purchase price or
redemption proceeds, as
applicable)(b)...................... 0% 0% 0% 0% 0% 0% 0% 0%
Redemption Fees (as a percentage of
amount redeemed, if
applicable)(c)...................... 0% 0% 0% 0% 0% 0% 0% 0%
Exchange Fee(a)....................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
ANNUAL OPERATING EXPENSES (as a
percentage of net assets)
Management Fees (after voluntary
reduction)(d)..................... 0.60% 0.60% 0.60% 0.80% 0.50% 0.50% 0.60% 0.00%
12b-1 Fees (after voluntary
reduction)(e)..................... 0.25% 0.25% 0.25% 0.25% 0.00% 0.00% 0.25% 0.00%
Other Expenses (after voluntary
reduction)(f)..................... 0.31% 0.21% 0.30% 0.23% 0.25% 0.25% 0.30% 0.27%
---- ---- ---- ---- ---- ---- ---- ----
Total Fund Operating Expenses(g).... 1.16% 1.06% 1.15% 1.28% 0.75% 0.75% 1.15% 0.27%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>

- ---------------
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Income Equity Fund Class A Shares........................ $ 56 $80 $ 106 $180
Value Momentum Fund Class A Shares....................... $ 55 $77 $ 101 $169
Growth Fund Class A Shares............................... $ 56 $80 $ 105 $178
Emerging Growth Fund Class A Shares...................... $ 57 $84 $ 112 $193
Intermediate-Term Bond Fund Class A Shares............... $ 37 $53 $ 70 $120
Bond Fund Class A Shares................................. $ 37 $53 $ 70 $120
Balanced Fund Class A Share.............................. $ 56 $80 $ 105 $178
California Intermediate Tax-Free Bond Fund Class A
Shares................................................. $ 33 $38 $ 45 $ 63
</TABLE>

6
<PAGE> 89

Long-term shareholders of Class A Shares may pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by rules
of the National Association of Securities Dealers, Inc.

(a) Certain entities (including Union Bank of California and its affiliates)
making investments in the Funds on behalf of their customers may charge
customers fees for services provided in connection with the investment in,
redemption of, and exchange of Shares. (See HOW TO PURCHASE SHARES, EXCHANGE
PRIVILEGES, REDEMPTION OF SHARES, and SERVICE ARRANGEMENTS below.)

(b) A Contingent Deferred Sales Charge of 1.00% will be assessed against the
proceeds of any redemption request relating to Class A Shares of the Funds
that were purchased without a sales charge in reliance upon the waiver
accorded to purchases in the amount of $1 million or more, but only where
such redemption request is made within one year of the date the Shares were
purchased.

(c) A wire redemption charge of $15 is deducted from the amount of a wire
redemption payment made at the request of a Shareholder. (See REDEMPTION OF
SHARES below.)

(d) Absent voluntary fee waivers, MANAGEMENT FEES would be 0.50% for the Class A
Shares of the California Intermediate Tax-Free Bond Fund.

(e) As indicated under SERVICE ARRANGEMENTS -- the Distribution Plan below, the
Distributor may voluntarily reduce the 12b-1 fee. Absent voluntary fee
waivers, 12b-1 fees would 0.25% for the Intermediate-Term Bond Fund, Bond
Fund and California Intermediate Tax-Free Bond Fund. The Distributor
reserves the right to terminate its waiver at any time in its sole
discretion.

(f) Absent voluntary fee waivers, OTHER EXPENSES would be: 0.47% for the Class A
Shares of the Growth Fund and the Balanced Fund, 0.48% for the Class A
Shares of the Income Equity Fund and the Value Momentum Fund, 0.50% for the
Class A Shares of the Emerging Growth Fund, 0.49% for the Class A Shares of
the Intermediate-Term Bond Fund, 0.51% for the Class A Shares of the Bond
Fund, and 0.52% for the Class A Shares of the California Intermediate
Tax-Free Bond Fund.

(g) Absent voluntary fee waivers, TOTAL FUND OPERATING EXPENSES would be: 1.32%
for the Class A Shares of the Growth Fund and the Balanced Fund, 1.33% for
the Class A Shares of the Income Equity Fund and the Value Momentum Fund,
and 1.55% for the Class A Shares of the Emerging Growth Fund, 1.24% for the
Class A Shares of the Intermediate-Term Bond Fund, 1.26% for the Class A
Shares of the Bond Fund and 1.27% for the Class A Shares of the California
Intermediate Tax-Free Bond Fund.

7
<PAGE> 90

CLASS B FEE TABLE

<TABLE>
<CAPTION>
INCOME VALUE GROWTH
EQUITY FUND MOMENTUM FUND FUND BALANCED FUND
----------- ------------- ----------- -------------
CLASS B CLASS B CLASS B CLASS B
SHARES SHARES SHARES SHARES
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(a)
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price).................................... 0% 0% 0% 0%
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)......................... 0% 0% 0% 0%
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as
applicable)........................................... 5.00% 5.00% 5.00% 5.00%
Redemption Fees (as a percentage of amount redeemed, if
applicable)(b)........................................ 0% 0% 0% 0%
Exchange Fee(a)......................................... $ 0 $ 0 $ 0 $ 0
ANNUAL OPERATING EXPENSES (as a percentage of net
assets)
Management Fees....................................... 0.60% 0.60% 0.60% 0.60%
12b-1 Fees............................................ 0.75% 0.75% 0.75% 0.75%
Other Expenses (after voluntary reduction)(c)......... 0.46% 0.46% 0.45% 0.45%
---- ---- ---- ----
Total Fund Operating Expenses(d)...................... 1.81% 1.81% 1.80% 1.80%
==== ==== ==== ====
</TABLE>

- ---------------
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
------ ------- ------- ---------
<S> <C> <C> <C> <C>
Income Equity Fund
Class B Shares (assuming a complete redemption at end
of period)......................................... $ 68 $87 $ 118 $ 195
Class B Shares (assuming no redemptions).............. $ 18 $57 $ 98 $ 195
Value Momentum Fund
Class B Shares (assuming a complete redemption at end
of period)......................................... $ 68 $87 $ 118 $ 193
Class B Shares (assuming no redemptions).............. $ 18 $57 $ 98 $ 193
Growth Fund
Class B Shares (assuming a complete redemption at end
of period)......................................... $ 68 $87 $ 117 $ 194
Class B Shares (assuming no redemptions).............. $ 18 $57 $ 97 $ 194
Balanced Fund
Class B Shares (assuming a complete redemption at end
of period)......................................... $ 68 $87 $ 117 $ 194
Class B Shares (assuming no redemptions).............. $ 18 $57 $ 97 $ 194
</TABLE>

- ---------------
* Class B Shares automatically convert to Class A Shares after eight years.

8
<PAGE> 91

(b) A wire redemption charge of $15 is deducted from the amount of a wire
redemption payment made at the request of a Shareholder. (See REDEMPTION OF
SHARES below.)

(c) Absent voluntary fee waivers, OTHER EXPENSES would be: 0.48% for the Class B
Shares of the Income Equity Fund and the Value Momentum Fund, and 0.47% for
the Class B Shares of the Growth Fund and the Balanced Fund.

(d) Absent voluntary fee waivers, TOTAL FUND OPERATING EXPENSES would be: 1.83%
for the Class B Shares of the Income Equity Fund and the Value Momentum
Fund, and 1.82% for the Class B Shares of the Growth Fund and the Balanced
Fund.

9
<PAGE> 92

FINANCIAL HIGHLIGHTS

The tables below set forth certain financial information with respect to the
Class A Shares of the Bond Fund, Growth Fund, and Income Equity Fund. Financial
highlights for the Funds for the period ended July 31, 1997 have been derived
from financial statements audited by Deloitte & Touche LLP, independent auditors
for HighMark, whose report thereon is included in the 1997 Annual Report for the
HighMark Funds, which is incorporated by reference into the Statement of
Additional Information. Financial highlights for the Funds prior to the fiscal
year ended July 31, 1996 have been derived from financial statements examined by
other auditors whose report thereon is on file with the Securities and Exchange
Commission.

The tables below also set forth certain financial information with respect to
the Class A Shares of the Intermediate-Term Bond Fund, the California
Intermediate Tax-Free Bond Fund, the Balanced Fund, and the Value Momentum Fund.
Upon reorganizing as funds of HighMark Funds on April 28, 1997, Stepstone
Intermediate-Term Bond Fund became HighMark Intermediate-Term Bond Fund,
Stepstone California Intermediate Tax-Free Bond Fund became HighMark California
Intermediate Tax-Free Bond Fund, Stepstone Balanced Fund became HighMark
Balanced Fund, and Stepstone Value Momentum Fund became HighMark Value Momentum
Fund. Financial highlights through January 31, 1997 represent the Investment
Class Shares (now Class A Shares) of Stepstone Intermediate-Term Bond, Stepstone
California Intermediate Tax-Free Bond, Stepstone Balanced, and Stepstone Value
Momentum Funds, and have been derived from financial statements audited by
Arthur Andersen LLP, independent auditors for the Stepstone Funds.

As of the date of this Prospectus, Class B Shares have not been offered by any
of the Balanced Fund, the Growth Fund, the Value Momentum Fund, or the Income
Equity Fund.

10
<PAGE> 93

INTERMEDIATE-TERM BOND FUND

<TABLE>
<CAPTION>
FOR THE SIX
MONTH PERIOD
ENDED JULY FOR THE YEARS ENDED JANUARY 31,
31, -------------------------------------------------------
1997 1997 1996 1995 1994 1993(1)
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning
of Period................. $ 10.16 $ 10.61 $ 9.67 $ 10.72 $ 10.57 $ 10.49
------------ ------- ------- ------- ------- -------
Investment Activities
Net investment income..... 0.309 0.602 0.609 0.589 0.615 0.609
Net realized and
unrealized gain (loss)
on investments......... 0.128 (0.462) 0.940 (1.034) 0.335 0.450
------------ ------- ------- ------- ------- -------
Distributions
Net investment income..... (0.310) (0.595) (0.609) (0.590) (0.595) (0.636)
Capital gains............. -- -- -- (0.015) (0.205) (0.343)
Net Asset Value, End of
Period.................... $ 10.29 $ 10.16 $ 10.61 $ 9.67 $ 10.72 $ 10.57
========== ======= ======= ======= ======= =======
Total** Return.............. 4.44% 1.54% 16.48% (4.11)% 9.23% 10.59%*
Net Assets, end of period
(000).................. $ 5,124 $ 5,213 $ 6,417 $ 6,645 $ 9,308 $ 2,897
Ratio of expenses to
average net assets..... 0.69%* 0.67% 0.68% 0.71% 0.69% 0.65%*
Ratio of expenses to
average net assets
excluding fee
waivers................ 1.14%* 1.08% 1.09% 1.11% 1.09% 1.05%*
Ratio of net investment
income to average net
assets................. 6.17%* 5.91% 5.99% 5.87% 5.51% 6.01%*
Ratio of net investment
income to average net
assets excluding fee
waivers................ 5.71%* 5.50% 5.58% 5.47% 5.11% 5.61%*
Portfolio turnover rate..... 58% 106% 147% 95% 72% 88%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized.
** Total return does not reflect the sales charge.
(1) Commenced operations on February 3, 1992.

11
<PAGE> 94

CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND

<TABLE>
<CAPTION>
FOR THE SIX
MONTH PERIOD
ENDED JULY FOR THE YEARS ENDED JANUARY 31,
31, -------------------------------------------
1997 1997 1996 1995 1994(2)
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of
Period.............................. $ 9.74 $ 9.84 $ 8.94 $ 10.03 $ 10.00
------------ ------- ------- ------- -------
Investment Activities
Net investment income............... 0.222 0.458 0.470 0.439 0.115
Net realized and unrealized gain
(loss) on investments............ 0.240 (0.112) 0.918 (1.077) 0.020
------------ ------- ------- ------- -------
Distributions
Net investment income............... (0.215) (0.442) (0.487) (0.452) (0.105)
Capital gains....................... -- -- -- -- --
Net Asset Value, End of Period........ $ 9.99 $ 9.74 $ 9.84 $ 8.94 $ 10.03
========== ======= ======= ======= =======
Total** Return........................ 4.85% 3.62% 15.84% (6.33)% 4.67%*
Net Assets, end of period (000)..... $ 11,214 $ 5,791 $ 4,266 $ 4,882 $ 2,830
Ratio of expenses to average net
assets........................... 0.21%* 0.20% 0.23% 0.50% 0.50%*
Ratio of expenses to average net
assets excluding fee waivers..... 1.22%* 1.25% 1.12% 1.12% 1.13%*
Ratio of net investment income to
average net assets............... 4.55%* 4.69% 4.93% 4.92% 4.26%*
Ratio of net investment income to
average net assets excluding fee
waivers.......................... 3.54%* 3.64% 4.04% 4.30% 3.63%*
Portfolio turnover rate............... 5% 6% 30% 22% 19%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized.

** Total return does not reflect the sales charge.

(2) Commenced operations on October 15, 1993.

12
<PAGE> 95

BOND FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-------------------------------------------------
1997 1996 1995 1994
------------- ------- ------- -------
<S> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of Period......... $ 10.15 $ 10.29 $ 10.04 $ 10.12
------------- ------- ------- -------
Investment Activities
Net investment income...................... 0.642 0.690 0.660 0.070
Net realized and unrealized gain (loss) on
investments............................. 0.403 (0.180) 0.230 (0.050)
------------- ------- ------- -------
Distributions
Net investment income...................... (0.609) (0.650) (0.640) (0.100)
Capital gains.............................. -- -- -- --
Net Asset Value, End of Period............... $ 10.59 $ 10.15 $ 10.29 $ 10.04
========== ======= ======= =======
Total** Return............................... 10.68% 4.95% 9.29% (3.81)%(B)
Net Assets, end of period (000)............ $ 606 $ 1,157 $ 558 $ 7
Ratio of expenses to average net assets.... 0.85% 0.89% 0.92% 0.99%*
Ratio of expenses to average net assets
excluding fee waivers................... 1.68% 1.85% 1.89% 2.96%*
Ratio of net investment income to average
net assets.............................. 6.10% 6.10% 6.29% 5.77%*
Ratio of net investment income to average
net assets excluding fee waivers........ 5.27% 5.14% 5.32% 3.80%*
Portfolio turnover rate...................... 14% 21% 36% 44%
Average commission rate(A)................... n/a n/a n/a n/a
</TABLE>

- ---------------

<TABLE>
<C> <S>
Amounts designated as "--" are either $0 or have been rounded to $0.
(A) Average commission rate paid per share for security purchases and sales during the
period. Presentation of the rate is only required for fiscal years beginning after
September 1, 1995.
(B) Represents total return for the Fiduciary Shares for the period from August 1, 1993 to
June 19, 1994 plus the total return for the Investor Shares for the period from June
20, 1994 to July 31, 1994.
* Annualized.
** Total return does not reflect the sales charge.
</TABLE>

13
<PAGE> 96

BALANCED FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -------------------------------------------------
1997 1997 1996 1995 1994 1993(4)
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of
Period............................ $ 15.03 $ 13.91 $ 11.45 $ 12.21 $ 11.50 $ 11.30
------------ ------- ------- ------- ------- -------
Investment Activities
Net investment income............. 0.209 0.464 0.406 0.393 0.397 0.092
Net realized and unrealized gain
(loss) on investments.......... 1.712 1.706 2.825 (0.758) 0.925 0.404
------------ ------- ------- ------- ------- -------
Distributions
Net investment income............. (0.209) (0.455) (0.406) (0.392) (0.391) (0.098)
Capital gains..................... (0.290) (0.595) (0.362) (0.003) (0.221) (0.198)
Net Asset Value, End of Period...... $ 16.45 $ 15.03 $ 13.91 $ 11.45 $ 12.21 $ 11.50
========== ======= ======= ======= ======= =======
Total** Return...................... 13.22% 16.04% 28.73% (2.95)% 11.79% 4.45%*
Net Assets, end of period (000)... $ 9,214 $ 8,833 $ 8,422 $ 7,128 $ 7,292 $ 425
Ratio of expenses to average net
assets......................... 1.07%* 1.04% 0.89% 0.79% 0.69% 0.60%*
Ratio of expenses to average net
assets excluding fee waivers... 1.30%* 1.19% 1.20% 1.19% 1.19% 1.10%*
Ratio of net investment income to
average net assets............. 2.75%* 3.22% 3.12% 3.41% 3.26% 3.20%*
Ratio of net investment income to
average net assets excluding
fee waivers.................... 2.53%* 3.07% 2.81% 3.01% 2.76% 2.70%*
Portfolio turnover rate............. 10% 27% 26% 48% 49% 68%
Average commission rate(A).......... 0.0581 0.0604 n/a n/a n/a n/a
</TABLE>

- ---------------

<TABLE>
<C> <S>
Amounts designated as "--" are either $0 or have been rounded to $0.
(A) Average commission rate paid per share for security purchases and sales during the
period. Presentation of the rate is only required for fiscal years beginning after
September 1, 1995.
* Annualized.
** Total return does not reflect the sales charge.
(4) Commenced operations on November 13, 1992.
</TABLE>

14
<PAGE> 97

GROWTH FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-------------------------------------------------
1997 1996 1995 1994
------------- ------- ------- -------
<S> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of Period........ $ 12.60 $ 11.87 $ 9.77 $ 9.74
------------- ------- ------- -------
Investment Activities
Net investment income..................... 0.049 0.110 0.150 --
Net realized and unrealized gain (loss) on
investments............................ 5.784 1.380 2.250 0.040
------------- ------- ------- -------
Distributions
Net investment income..................... (0.048) (0.120) (0.150) (0.010)
Capital gains............................. (0.996) (0.640) (0.150) --
Net Asset Value, End of Period.............. $ 17.39 $ 12.60 $ 11.87 $ 9.77
========== ======= ======= =======
Total** Return.............................. 48.49% 12.88% 25.10% (1.77)%(B)
Net Assets, end of period (000)........... $ 7,816 $ 2,843 $ 1,218 $ --
Ratio of expenses to average net assets... 1.04% 0.93% 0.84% --
Ratio of expenses to average net assets
excluding fee waivers.................. 1.49% 1.91% 2.11% --
Ratio of net investment income to average
net assets............................. 0.28% 0.96% 1.17% --
Ratio of net investment income to average
net assets excluding fee waivers....... (0.18)% (0.02)% (0.10)% --
Portfolio turnover rate..................... 118% 79% 68% 123%
Average commission rate(A).................. 0.0598 n/a n/a n/a
</TABLE>

- ---------------

<TABLE>
<C> <S>
Amounts designated as "-" are either $0 or have been rounded to $0.
(A) Average commission rate paid per share for security purchases and sales during the
period. Presentation of the rate is only required for fiscal years beginning after
September 1, 1995.
(B) Represents total return for the Fiduciary Shares from commencement of operations to
June 19, 1994 plus the total return for Investor Shares for the period from June 20,
1994 to July 31, 1994.
* annualized
** Total return does not reflect the sales charge.
</TABLE>

15
<PAGE> 98

VALUE MOMENTUM FUND

<TABLE>
<CAPTION>
FOR THE SIX
MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, ---------------------------------------------------
1997 1997 1996 1995 1994 1993(5)
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of
Period......................... $ 21.57 $ 18.05 $ 13.40 $ 14.27 $ 12.75 $ 11.52
------------ ------- ------- ------- ------- -------
Investment Activities
Net investment income.......... 0.106 0.389 0.320 0.321 0.297 0.246
Net realized and unrealized
gain (loss) on
investments................. 3.953 4.368 5.060 (0.820) 1.543 1.257
------------ ------- ------- ------- ------- -------
Distributions
Net investment income.......... (0.147) (0.393) (0.323) (0.317) (0.290) (0.251)
Capital gains.................. -- (0.848) (0.408) (0.054) (0.030) (0.022)
Net Asset Value, End of Period... $ 25.48 $ 21.57 $ 18.05 $ 13.40 $ 14.27 $ 12.75
========== ======= ======= ======= ======= =======
Total** Return................... 18.90% 27.04% 40.77% (3.48)% 14.65% 15.97%*
Net assets, end of period
(000)....................... $ 20,750 $15,963 $11,801 $ 9,777 $ 9,346 $ 3,162
Ratio of expenses to average
net assets.................. 1.03%* 1.04% 0.89% 0.81% 0.77% 0.65%*
Ratio of expenses to average
net assets excluding fee
waivers..................... 1.25%* 1.19% 1.20% 1.21% 1.20% 1.15%*
Ratio of net investment income
to average net assets....... 1.40%* 2.01% 2.00% 2.37% 2.12% 2.53%*
Ratio of net investment income
to average net assets
excluding fee waivers....... 1.17%* 1.86% 1.69% 1.97% 1.69% 2.03%*
Portfolio turnover rate.......... 1% 9% 20% 6% 5% 3%
Average commission rate(A)....... 0.0600 0.0590 n/a n/a n/a n/a
</TABLE>

16
<PAGE> 99

INCOME EQUITY FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-------------------------------------------------
1997 1996 1995 1994(6)
------------- ------- ------- -------
<S> <C> <C> <C> <C>
RETAIL SHARES
Net Asset Value, Beginning of Period.......... $ 14.29 $ 13.03 $ 11.92 $ 11.85
------------- ------- ------- -------
Investment Activities
Net investment income....................... 0.363 0.420 0.420 0.040
Net realized and unrealized gain (loss) on
investments.............................. 5.028 1.920 1.550 0.080
------------- ------- ------- -------
Distributions
Net investment income....................... (0.358) (0.420) (0.440) (0.050)
Capital Gains............................... (1.083) (0.660) (0.420) --
Net Asset Value, End of Period................ $ 18.24 $ 14.29 $ 13.03 $ 11.92
========== ======= ======= =======
Total** Return................................ 39.97% 18.21% 17.52% 4.23%(B)
Net assets, end of period (000)............. $14,152 $10,143 $ 3,881 $ 24
Ratio of expenses to average net assets..... 1.06% 1.03% 1.06% 1.10%*
Ratio of expenses to average net assets
excluding fee waivers.................... 1.46% 1.51% 1.55% 1.33%*
Ratio of net investment income to average
net assets............................... 2.32% 2.89% 3.06% 0.93%*
Ratio of net investment income to average
net assets excluding fee waivers......... 1.92% 2.41% 2.57% 0.71%*
Portfolio turnover rate....................... 46% 42% 37% 34%
Average commission rate(A).................... 0.0583 n/a n/a n/a
</TABLE>

- ---------------
Amounts designated as "-" are either $0 or have been rounded to $0.
(A) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1995.
(B) Represents total return for the Fiduciary Shares for the period from August
1, 1993 to June 19, 1994 plus the total return for the Investor Shares for
the period from June 20, 1994 to July 31, 1994.
* Annualized.
** Total return does not reflect the sales charge.
(6) Commenced operations on June 20, 1994.

17
<PAGE> 100

FUND DESCRIPTION

For information concerning those investors who qualify to purchase Retail
Shares, sales charges and the operation of HighMark's Distribution Plan, see HOW
TO PURCHASE SHARES and SERVICE ARRANGEMENTS--Administrator & Distributor--The
Distribution Plan below. (Retail Shares may be hereinafter referred to as
"Shares.")

INVESTMENT OBJECTIVES

The investment objectives of the Funds are as follows:

The INCOME EQUITY FUND seeks investments in equity securities that provide
current income through the regular payment of dividends, with the goal that the
Income Equity Fund will have a high current yield and a low level of price
volatility. Opportunity for long-term growth of asset value is a secondary
consideration.

The VALUE MOMENTUM FUND seeks long-term capital growth with a secondary
objective of income.

The GROWTH FUND seeks long-term capital appreciation through investments in
equity securities. The production of current income is an incidental objective.

The EMERGING GROWTH FUND seeks long-term growth of capital by investing in a
diversified portfolio of equity securities of small capitalization, emerging
growth companies.

The INTERMEDIATE-TERM BOND FUND seeks total return through investments in
fixed-income securities.

The BOND FUND seeks current income through investments in long-term,
fixed-income securities.

The BALANCED FUND seeks capital appreciation and income. Conservation of
capital is a secondary consideration.

The CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND seeks to provide high current
income that is exempt from federal and State of California income taxes.

The investment objectives and certain of the investment limitations of the
Funds may not be changed without a vote of the holders of a majority of the
outstanding Shares of the respective Fund (as defined under GENERAL
INFORMATION--Miscellaneous below). There can be no assurance that a Fund will
achieve its investment objective.

18
<PAGE> 101

INVESTMENT POLICIES

Income Equity Fund

Under normal market conditions, the Income Equity Fund will invest at least
65% of its total assets in equity securities, including common stocks, warrants
to purchase common stocks, American Depositary Receipts ("ADRs"), preferred
stocks and securities (including debt securities) convertible into or
exercisable for common stocks. The Income Equity Fund's investments primarily
consist of the common stocks of U.S. corporations that regularly pay dividends,
although there can be no assurance that a corporation will continue to pay
dividends. Investments will be made in an attempt to keep the Income Equity
Fund's yield above the S&P 500's yield by approximately one-third to one-half
the difference between the S&P 500's yield and the yield on long-term U.S.
Government bonds.

The Income Equity Fund generally invests in stocks with favorable, long-term
fundamental characteristics when their current relative yields are at the upper
end of their historical yield ranges. Frequently, these stocks are out of favor
in the financial community and in which investors see little opportunity for
price appreciation. The Fund may also invest in major U.S. corporations in a
mature stage of development or operating in slower areas of the economy. While
it is anticipated that a significant part of the total growth in asset value
experienced by the Income Equity Fund will result from companies' improving
prospects (although there can be no assurance that this will in fact occur),
dividends will provide a substantial portion of the Fund's total return. When
yields on stocks held by the Income Equity Fund drop to the lower end of their
historical ranges, the Fund may begin to reduce its holdings. Similarly, if
there is a significant fundamental change that impairs a company's ability to
pay dividends, or if the yield on a stock dips below the yield of the general
market, the Income Equity Fund may eliminate its holdings in these stocks.

Value Momentum Fund

Under normal market conditions, the Value Momentum Fund will invest at least
65% of its total assets in equity securities, including common stocks, warrants
to purchase common stocks, ADRs, preferred stocks and securities (including debt
securities) convertible into or exercisable for common stocks. The Value
Momentum Fund will be invested primarily in securities which the Advisor
believes to be undervalued relative to the market and to the security's historic
valuation. Stocks are then screened for positive price or earnings momentum.
Securities purchased will generally have a medium to high market capitalization.
A majority of the securities in which the Value Momentum Fund invests will be
dividend paying.

Growth Fund

Under normal market conditions, the Growth Fund will invest at least 65% of
its total assets in equity securities, including common stocks, warrants to
purchase common stocks, ADRs, preferred stocks and securities (including debt
securities) convertible into or exercisable for common stocks, of
growth-oriented companies. The Growth Fund emphasizes a well diversified
portfolio of medium to large capitalization growth companies (capitalization in
excess of $500 million) with a record of above average growth in earnings. The
Fund focuses on companies that the Advisor believes to have enduring quality and
above average earnings

19
<PAGE> 102

growth. Among the criteria the Fund uses to screen for stock selection are
earnings growth, return on capital, brand identity, recurring revenues, price
and quality of management team.

Emerging Growth Fund

Under normal market conditions, the Emerging Growth Fund will invest at least
65% of its total assets in equity securities, including common stocks, warrants
to purchase common stocks, ADRs, preferred stocks and securities (including debt
securities) convertible into or exercisable for common stocks of small and
medium capitalization companies. Small and medium capitalization companies are
those with capitalization between $50 million and $1 billion and the potential
for growth or those which, in the Advisor's opinion, have potential for
above-average long-term capital appreciation. An emerging growth company is one
which, in the Advisor's judgment, is in the developing stages of its life cycle
and has demonstrated or is expected to achieve rapid growth in earnings and/or
revenues. Emerging growth companies are characterized by opportunities for rapid
growth rates and/or dynamic business changes. Emerging growth companies,
regardless of size, tend to offer the potential for accelerated earnings or
revenue growth because of new products or technologies, new channels of
distribution, revitalized management or industry conditions, or similar
opportunities. A company may or may not yet be profitable at the time the
Emerging Growth Fund invests in its securities. Current income will not be a
criterion of investment selection, and any such income should be considered
incidental. Many of the securities in which the Fund invests will not pay
dividends.

The Emerging Growth Fund may also invest in equity securities of companies in
"special equity situations," meaning companies experiencing unusual and possibly
non-repetitive developments, such as mergers; acquisitions; spin-offs;
liquidations; reorganizations; and new products, technology or management. Since
a special equity situation may involve a significant change from a company's
past experiences, the uncertainties in the appraisal of the future value of the
company's equity securities and the risk of a possible decline in the value of
the Emerging Growth Fund's investments are significant.

Intermediate-Term Bond Fund

Under normal market conditions, at least 65% of the Intermediate-Term Bond
Fund's assets will be invested in bonds. For purposes of this policy "bonds"
include (i) corporate bonds and debentures rated at the time of purchase as
"investment grade" (one of the four highest bond rating categories by a
nationally recognized statistical rating organization ("NRSRO")) or determined
by the Advisor to be of comparable quality; (ii) Yankee Bonds and Eurodollar
instruments; (iii) notes or bonds issued by the U.S. Government and its agencies
and instrumentalities (such as Government National Mortgage Association ("GNMA")
securities); (iv) mortgage-backed securities, including privately issued
mortgage-backed securities and readily-marketable asset-backed securities, which
must be rated at the time of purchase as investment grade, or be determined by
the Advisor to be of comparable quality; (v) securities issued or guaranteed by
foreign governments, their political subdivisions, agencies or
instrumentalities; (vi) obligations of supranational entities such as the World
Bank and the Asian Development Bank; and (vii) zero coupon obligations. In the
event that a security owned by the Fund is downgraded below the stated rating
categories, the Advisor will take appropriate action with regard to that
security. The remainder of the Fund's assets may be invested in money market
instruments.

20
<PAGE> 103

The dollar-weighted average portfolio maturity of the Intermediate-Term Bond
Fund will be from three to ten years.

Bond Fund

The Bond Fund invests in fixed-income securities with maturities in excess of
one year, except for amounts held in money market instruments. Fixed-income
securities can have maturities of up to thirty years or more. Under normal
market conditions, the Bond Fund will invest at least 65% of the value of its
total assets in bonds and may invest up to 35% of its total assets in money
market instruments.

For purposes of this policy "bonds" include (i) corporate bonds and debentures
rated at the time of purchase as investment grade or determined by the Advisor
to be of comparable quality; (ii) Yankee Bonds and Eurodollar instruments; (iii)
notes or bonds issued by the U.S. Government and its agencies and
instrumentalities (such as GNMA securities); (iv) mortgage-backed securities,
including privately issued mortgage-backed securities and readily-marketable
asset-backed securities, which must be rated at the time of purchase as
investment grade, or be determined by the Advisor to be of comparable quality;
(v) securities issued or guaranteed by foreign governments, their political
subdivisions, agencies or instrumentalities; (vi) obligations of supranational
entities such as the World Bank and the Asian Development Bank; and (vii) zero
coupon obligations. In the event that a security owned by the Fund is downgraded
below the stated rating categories, the Advisor will take appropriate action
with regard to that security. The remainder of the Fund's assets may be invested
in money market instruments.

The dollar-weighted average portfolio maturity of the Bond Fund will be from
five to twenty years.

Balanced Fund

The Balanced Fund may invest in any type or class of security. Under normal
market conditions, the Balanced Fund will invest between 50% and 70% of its
total assets in equity securities. Senior fixed-income securities will normally
constitute at least 25% of the Balanced Fund's net assets.

Equity securities include common stocks, warrants to purchase common stocks,
ADRs, preferred stocks, securities (including debt securities) convertible into
or exercisable for common stocks and Standard & Poor's Depositary Receipts
("SPDRs"). The Balanced Fund's fixed-income investments consist of bonds,
debentures, notes, zero-coupon securities, all forms of mortgage-related
securities (including collateralized mortgage obligations), and obligations
issued or guaranteed by the U.S. or foreign Governments or their agencies or
instrumentalities. Privately issued mortgage-backed securities must be rated in
one of the top two categories by at least one NRSRO as defined below. In
addition to mortgage-backed securities, the Balanced Fund may invest in other
asset-backed securities including, but not limited to, those backed by company
receivables, truck and auto loans, leases, and credit card or other receivables.

The Balanced Fund may invest in bonds, notes and debentures of any maturity
issued by U.S. and foreign corporate and governmental issuers. The Balanced Fund
will invest only in corporate fixed-income securities that are rated at the time
of purchase as investment grade or, if unrated, which the Advisor deems to be
attractive opportunities and of comparable quality.

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<PAGE> 104

In the event that a security owned by the Fund is downgraded below the stated
rating categories, the Advisor will take appropriate action with regard to that
security.

The portions of the Balanced Fund's assets invested in equity securities and
fixed-income securities will vary from time to time within the stated ranges,
depending upon the Advisor's assessment of business, economic and market
conditions. The Advisor considers a combination of risk, capital appreciation,
income, and protection of capital value.

California Intermediate Tax-Free Bond Fund

Under normal market conditions, the Fund will invest primarily in bonds and
notes issued by the State of California, its agencies, instrumentalities, and
political sub-divisions, the income on which is exempt from regular federal and
State of California personal income taxes ("California Municipal Securities").
The Fund may also invest in bonds and notes of other states, territories, and
possessions of the U.S. and their agencies, authorities, instrumentalities and
political sub-divisions which are exempt from federal income taxes, and in
shares of other investment companies, specifically money market funds, which
have similar investment objectives.

Under normal market conditions, at least 80% of the Fund's assets will be
invested in bonds and notes rated investment grade by a nationally recognized
rating agency or deemed by the Advisor to be of comparable quality at the time
of purchase and which pay interest that is not treated as a preference item for
purposes of the federal alternative minimum tax. In the event that a security
owned by the Fund is downgraded below the stated ratings categories, the Advisor
will take appropriate action with regard to the security.

Under California law, a mutual fund must have at least 50% of its total assets
invested in California Municipal Securities at the end of each quarter of its
taxable year in order to be eligible to pay California residents dividends that
are wholly or partially exempt from California personal income taxes.
Accordingly, the Fund intends to maintain at least 65% of its assets in
California Municipal Securities and may invest up to 100% of its assets in such
securities.

The Fund has no restrictions on the maturity of municipal securities in which
it may invest. Under normal market conditions, the dollar-weighted average
portfolio maturity of the Fund is expected to be from three to ten years.
Accordingly, the Fund seeks to invest in municipal securities of such maturities
which, in the judgment of the Advisor, will provide a high level of current
income consistent with prudent investment, with consideration given to market
conditions.

GENERAL

Money Market Instruments

Under normal market conditions, each Equity Fund and Fixed Income Fund may
invest up to 35% of its total assets in money market instruments and the
Balanced Fund may invest up to 25% of its total assets in money market
instruments. When market conditions indicate a temporary "defensive" investment
strategy as determined by the Advisor, an Equity Fund or Fixed Income Fund may
invest more than 35% of its total

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<PAGE> 105

assets in money market instruments, the Balanced Fund may invest more than 25%
of its total assets in money market instruments, and the California Intermediate
Tax-Free Bond Fund may invest more than 20% of its total assets in municipal
obligations of other states or taxable money market instruments including
repurchase agreements. A Fund will not be pursuing its investment objective to
the extent that a substantial portion of its assets are invested in money market
instruments (or taxable money market instruments for the California Intermediate
Tax-Free Bond Fund).

Illiquid and Restricted Securities

Each Fund shall limit investment in illiquid securities to 15% or less of its
net assets. Generally, an "illiquid security" is any security that cannot be
disposed of promptly and in the ordinary course of business at approximately the
amount at which the Fund has valued the instrument. The absence of a trading
market can make it difficult to ascertain the market value of illiquid
securities. Each Fund may purchase restricted securities which have not been
registered under the Securities Act of 1933 (e.g., Rule 144A Securities and
Section 4(2) commercial paper) subject to policies approved by the Board of
Trustees. See INVESTMENT RESTRICTIONS in the Statement of Additional
Information.

California Municipal Securities

The two principal classifications of California Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit, and taxing power for the
payment of principal and interest. Revenue bonds are payable primarily from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source. Private activity bonds (formerly known as industrial revenue bonds) are
generally revenue bonds.

Certain California Municipal Securities are municipal lease revenue
obligations (or certificates of participation or "COPs"), which typically
provide that the municipality has no obligation to make lease or installment
payments in future years unless money is appropriated for such purpose. While
the risk of non-appropriation is inherent to COP financing, this risk is
mitigated by the Fund's policy to invest in COPs that are rated in one of the
four highest rating categories used by Moody's, S&P, or Fitch.

California Municipal Securities also include so-called Mello-Roos and
assessment district bonds, which are usually unrated instruments issued to
finance the building of roads and other public works and projects that are
primarily secured by real estate taxes levied on property located in the local
community. Most of these bonds do not seek agency ratings because the issues are
too small, and in most cases, the purchase of these bonds is based upon the
Advisor's determination that it is suitable for the Fund.

Certain of the obligations in which the Fund may invest may be variable or
floating rate instruments and may involve a conditional or unconditional demand
feature.

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<PAGE> 106

Lending of Portfolio Securities

In order to generate additional income, a Fund may lend its portfolio
securities to broker-dealers, banks or other institutions. A Fund may lend
portfolio securities in an amount representing up to 33 1/3% of the value of the
Fund's total assets.

Other Investments

The Funds may enter into repurchase agreements and reverse repurchase
agreements.

The Funds may enter into forward commitments or purchase securities on a
"when-issued" basis. Each Fund expects that commitments by a Fund to enter into
forward commitments or purchase when-issued securities will not exceed 25% of
the value of the Fund's total assets under normal market conditions. The Funds
do not intend to purchase when-issued securities or forward commitments for
speculative or leveraging purposes but only for the purpose of acquiring
portfolio securities.

The Funds, other than the California Intermediate Tax-Free Bond Fund, may also
invest in money market instruments, money market funds, and cash.

Because other registered investment companies employ an investment advisor,
such investment by a Fund may cause Shareholders to bear duplicative fees. The
Advisor will waive its fees attributable to the assets of the investing Fund
invested in a money market fund of HighMark, and, to the extent required by
applicable law, the Advisor will waive its fees attributable to the assets of
the Fund invested in any investment company. Some Funds are subject to
additional restrictions on investment in other investment companies. See
"INVESTMENT RESTRICTIONS" in the Statement of Additional Information.

Each Equity Fund may write covered calls on its equity securities and enter
into closing transactions with respect to covered call options. The Balanced
Fund may also buy and sell options, futures contracts and options on futures. An
Equity Fund's assets may be invested in options, futures contracts and options
on futures, SPDRs, and investment grade bonds. The aggregate value of options on
securities (long puts and calls) will not exceed 10% of an Equity Fund's net
assets at the time such options are purchased by the Fund. An Equity Fund may
enter into futures and options on futures only to the extent that obligations
under such contracts or transactions, together with options on securities,
represent not more than 25% of the Fund's assets. Each of these Funds may
purchase options in stock indices to invest cash on an interim basis. The
aggregate premium paid on all options on stock indices cannot exceed 20% of the
Fund's total assets. All of the

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<PAGE> 107

common stocks in which these Funds invest (including foreign securities in the
form of ADRs but not including Rule 144A Securities) are traded on registered
exchanges or in the over-the-counter market.

The Fixed Income Funds may invest in futures and options on futures for the
purpose of achieving the Fund's objectives and for adjusting portfolio duration.
These Funds may invest in futures and related options based on any type of
security or index traded on U.S. or foreign exchanges or over the counter, as
long as the underlying security, or securities represented by an index, are
permitted investments of the Fund. These Funds may enter into futures contracts
and related options only to the extent that obligations under such contracts or
transactions represent not more than 10% of the Fund's assets.

Certain of the obligations in which the Fixed Income Funds, except the
California Intermediate Tax-Free Bond Fund, may invest may be variable or
floating rate instruments, may involve a conditional or unconditional demand
feature, and may include variable amount master demand notes.

For further information, see "DESCRIPTION OF PERMITTED INVESTMENTS."

Risk Factors

To the extent a Fund invests in equity securities, that Fund's Shares will
fluctuate in value, and thus may be more suitable for long-term investors who
can bear the risk of short-term fluctuations.

In addition to credit risk which relates to the ability of an issuer to make
payments of principal and interest, all types of bonds are also subject to
market risk. Market risk relates to changes in a security's value as a result of
interest rate changes generally. An increase in interest rates will generally
reduce the value of the fixed income investments in the Funds and a decline in
interest rates will generally increase the value of those investments.
Accordingly, the net asset value of the Fund's shares will vary as a result of
changes in the value of the securities in a Fund's portfolio. Therefore, an
investment in the Funds may decline in value, resulting in a loss of principal.
Because interest rates vary, it is impossible to predict the income or yield of
the Fund for any particular period. Changes in the value of a Fund's
fixed-income securities will not affect cash income received from ownership of
such securities, but will affect a Fund's net asset value.

As described above, the Funds may invest in debt securities within the four
highest rating categories assigned by a NRSRO and comparable unrated securities.
Securities rated BBB by S&P or Baa by Moody's are considered investment grade,
but are deemed by these rating services to have some speculative
characteristics, and adverse economic conditions or other circumstances are more
likely to lead to a weakened capacity to make principal and interest payments
than is the case with higher-grade bonds. Should subsequent events cause the
rating of a debt security purchased by a Fund to fall below the fourth highest
rating category, the Advisor will consider such an event in determining whether
the Balanced Fund should continue to hold that security. In no event, however,
would a Fund be required to liquidate any such portfolio security where the Fund
would suffer a loss on the sale of such security.

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<PAGE> 108

greater price volatility then other fixed-income obligations. Because declining
interest rates may lead to prepayment of underlying mortgages, automobile sales
contracts or credit card receivables, the prices of mortgage-related and
asset-backed securities may not rise with a decline in interest rates.
Mortgage-backed and asset-backed securities and CMOs are extremely sensitive to
the rate of principal prepayment. Similarly, callable corporate bonds also
present risk of prepayment. During periods of falling interest rates, securities
that can be called or prepaid may decline in value relative to similar
securities that are not subject to call or prepayment.

Depending upon prevailing market conditions, a Fund may purchase debt
securities at a discount from face value, which produces a yield greater than
the coupon rate. Conversely, if debt securities are purchased at premium over
face value, the yield will be lower than the coupon rate. In making investment
decisions, the Advisor will consider many factors other than current yield,
including the preservation of capital, the potential for realizing capital
appreciation, maturity, and yield to maturity.

From time to time, the equity and debt markets may fluctuate independently of
one another. In other words, a decline in equity markets may in certain
instances be offset by a rise in debt markets, or vice versa. As a result, the
Balanced Fund, with its balance of equity and debt investments, may entail less
investment risk (and a potentially smaller investment return) than a mutual fund
investing primarily in equity securities.

Each of the Fixed Income Funds, except the California Intermediate Tax-Free
Bond Fund, and the Balanced Fund may invest in securities issued or guaranteed
by foreign corporations or foreign governments, their political subdivisions,
agencies or instrumentalities and obligations of supranational entities such as
the World Bank and the Asian Development Bank. Any investments in these
securities will be in accordance with a Fund's investment objective and
policies, and are subject to special risks, such as adverse political and
economic developments, possible seizure, nationalization or expropriation of
foreign investments, less stringent disclosure requirements, changes in foreign
currency exchange rates, increased costs associated with the conversion of
foreign currency into U.S. dollars, the possible establishment of exchange
controls or taxation at the source or the adoption of other foreign governmental
restrictions. To the extent that a Fund may invest in securities of foreign
issuers that are not traded on any exchange, there is a further risk that these
securities may not be readily marketable. The Fixed Income Funds, except the
California Intermediate Tax-Free Bond Fund, and the Balanced Fund will not hold
foreign currency for investment purposes.

Convertible securities include corporate bonds, notes or preferred stocks that
can be converted into common stocks or other equity securities. Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation. Because convertible securities can be
converted into common stock, their values will normally vary in some proportion
with those of the underlying common stock. Convertible securities usually
provide a higher yield than the underlying common stock, however, so that the
price decline of a convertible security may sometimes be less substantial than
that of the underlying common stock. The value of convertible securities that
pay dividends or interest, like the value of all fixed-income securities,
generally fluctuates inversely with changes in interest rates. Warrants have no
voting rights, pay no dividends and have no rights with respect to the assets of
the corporation issuing them. They do not represent ownership of the securities
for which they are exercisable, but only the right to buy such securities at a
particular price. The Funds will not purchase any convertible debt security or
convertible preferred stock

26
<PAGE> 109

unless it has been rated as investment grade at the time of acquisition by a
NRSRO or that is not rated but is determined to be of comparable quality by the
Advisor.

Given the uncertainty of the future value of emerging growth companies and
companies in special equity situations, the risk of possible decline in value of
the Emerging Growth Fund's net assets are significant. Companies in which the
Emerging Growth Fund invests may offer greater opportunities for capital
appreciation than larger more established companies, but investment in such
companies may involve certain special risks. These risks may be due to the
greater business risks of small size, limited markets and financial resources,
narrow product lines and frequent lack of depth in management. The securities of
such companies are often traded in the over-the-counter market and may not be
traded in volumes typical on a national securities exchange. Thus, the
securities of emerging growth companies may be less liquid, and subject to more
abrupt or erratic market movements than securities of larger, more established
growth companies. Since a "special equity situation" may involve a significant
change from a company's past experiences, the uncertainties in the appraisal of
the future value of the company's equity securities and the risk of a possible
decline in the value of the Fund's investments are significant.

The ability of the State of California and its political sub-divisions to
generate revenue through real property and other taxes and to increase spending
has been significantly restricted by various constitutional and statutory
amendments and voter-passed initiatives. Such limitations could affect the
ability of California state and municipal issuers to pay interest or repay
principal on their obligations. In addition, during the first half of the
decade, California faced severe economic and fiscal conditions and experienced
recurring budget deficits that caused it to deplete its available cash resources
and to become increasingly dependent upon external borrowings to meet its cash
needs.

The financial difficulties experienced by the State of California and
municipal issuers during the recession resulted in the credit ratings of certain
of their obligations being downgraded significantly by the major rating
agencies.

PORTFOLIO TURNOVER

A Fund's portfolio turnover rate will not be a factor preventing a sale or
purchase when the Advisor believes investment considerations warrant. The Fixed
Income Funds will not purchase securities solely for the purpose of short-term
trading. Each of the Funds' portfolio turnover rate may vary greatly from year
to year as well as within a particular year. High portfolio turnover rates
generally will result in correspondingly higher brokerage and other transactions
costs to the Funds and could involve the realization of capital gains that would
be taxable when distributed to Shareholders of the relevant Fund. See FEDERAL
TAXATION.

HOW TO PURCHASE SHARES

27
<PAGE> 110

net asset value without an initial sales charge, but are subject to a contingent
deferred sales charge if they are redeemed within six years after purchase. For
a description of investors who qualify to purchase Fiduciary Shares, see the
Fiduciary Shares prospectus of the Funds. HighMark's Retail Shares are offered
to investors who are not fiduciary clients of Union Bank of California, N.A.,
and who are not otherwise eligible for HighMark's Fiduciary Shares.

Retail Shares are sold on a continuous basis by HighMark's Distributor, SEI
Investments Distribution Co. The principal office of the Distributor is Oaks,
Pennsylvania 19456. If you wish to purchase Shares, you may contact your
investment professional or telephone HighMark at 1-800-433-6884. Investors may
be charged a fee if they effect transactions in fund shares through a broker or
agent.

The minimum initial investment is generally $1,000 per Fund and the minimum
subsequent investment is generally only $100 per Fund. For present and retired
directors, officers, and employees (and their spouses and children under the age
of 21) of Union Bank of California, SEI Investments Distribution Co. and their
affiliates, the minimum initial investment is $250 per Fund and the minimum
subsequent investment is $50 per Fund. A Fund's initial and subsequent minimum
purchase amounts may be waived if purchases are made in connection with
Individual Retirement Accounts, Keoghs, payroll deduction plans, or 401(k) or
similar plans. Purchases and redemption of Shares of the Funds may be made on
days on which the New York Stock Exchange is open for business ("Business
Days").

Purchase orders for Class A Shares will be executed at a per Share price equal
to the net asset value next determined after the receipt of the purchase order
by the Distributor (plus any applicable sales charge). Purchase orders for Class
B Shares will be executed at a per Share price equal to the net asset value next
determined after the receipt of a purchase order by the Distributor, without an
initial sales charge, but B Shares will be subject to a contingent deferred
sales charge if they are redeemed within six years after purchase. The net asset
value per Share of a Fund is determined by dividing the total market value of
the Fund's investments and other assets, less any liabilities, by the total
number of outstanding Shares of the Fund. Net asset value per Share is
determined daily as of 1:00 p.m., Pacific time (4:00 p.m. Eastern time), on any
Business Day. Purchases will be made in full and fractional Shares of HighMark
calculated to three decimal places. HighMark reserves the right to reject a
purchase order when the Distributor or the Advisor determines that it is not in
the best interest of HighMark and/or its Shareholders to accept such order.

The securities in each Fund will be valued at market value. If market
quotations are not available, the securities will be valued by a method that
HighMark's Board of Trustees believes accurately reflects fair value. Although
the methodology and procedures for determining net asset value are identical for
Class A and Class B Shares, the net asset value per share of such classes may
differ because of the higher distribution expenses charged to B Class Shares.
For further information about valuation of investments in the Funds, see the
Statement of Additional Information.

Shares of the Funds are offered only to residents of states in which the
Shares are eligible for purchase.

How to Purchase By Mail

You may purchase Shares of the Funds by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "HighMark

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<PAGE> 111

Funds," to the transfer agent at P.O. Box 8416, Boston, Massachusetts
02266-8416. All purchases made by check should be in U.S. dollars and made
payable to "HighMark Funds." Third party checks, credit card checks or cash will
not be accepted. You may purchase more Shares at any time by mailing payment
also to the transfer agent at the above address. Orders placed by mail will be
executed on receipt of your payment. If your check does not clear, your purchase
will be canceled and you could be liable for any losses or fees incurred.

You may obtain Account Application Forms for the Funds by calling the
Distributor at 1-800-433-6884.

How to Purchase By Wire

You may purchase Shares of the Funds by wiring Federal funds, provided that
your Account Application has been previously received. You must wire funds to
the transfer agent and the wire instructions must include your account number.
You must call the transfer agent at 1-800-433-6884 before wiring any funds. An
order to purchase Shares by Federal funds wire will be deemed to have been
received by a Fund on the Business Day of the wire; provided that the
Shareholder wires funds to the transfer agent prior to 1:00 p.m., Pacific time
(4:00 p.m., Eastern time). If the transfer agent does not receive the wire by
1:00 p.m., Pacific time (4:00 p.m., Eastern time), the order will be executed on
the next Business Day.

How to Purchase Through an Automatic Investment Plan ("AIP")

You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") from a checking account
by completing this section in the Account Application form. The minimum
pre-authorized investment amount is $100 per month per Fund. For present and
retired directors, officers, and employees (and their spouses and children under
the age of 21) of Union Bank of California, SEI Investments Distribution Co.,
and their affiliates, the minimum pre-authorized investment amount is $50 per
month per Fund. The AIP is available only for additional investments to an
existing account.

How to Purchase Through Financial Institutions

Shares of the Funds may be purchased through financial institutions, including
the Advisor, that provide distribution assistance or Shareholder services.
Shares purchased by persons ("Customers") through financial institutions may be
held of record by the financial institution. Financial institutions may impose
an earlier cut-off time for receipt of purchase orders directed through them to
allow for processing and transmittal of these orders to the transfer agent for
effectiveness the same day. Customers should contact their financial institution
for information as to that institution's procedures for transmitting purchase,
exchange or redemption orders to HighMark.

Customers who desire to transfer the registration of Shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.

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<PAGE> 112

ALTERNATIVE SALES CHARGE OPTIONS

Overview

You may purchase shares of the Funds at a price equal to their net asset value
per share plus a sales charge which, at your election, may be imposed either (i)
at the time of the purchase (Class A "initial sales charge alternative"), or
(ii) on a contingent deferred basis (the Class B "deferred sales charge
alternative"). Each class represents a Fund's interest in a portfolio of
investments. The classes have the same rights and are identical in all respects
except that (i) Class B shares bear the expenses of the deferred sales charge
arrangement and distribution and service fees resulting from such sales
arrangement, (ii) each class has exclusive voting rights with respect to
approvals of any Rule 12b-1 distribution plan related to that specific class
(although Class B shareholders may vote on any distribution fees imposed on
Class A shares so long as Class B shares convert into Class A shares), (iii)
only Class B shares carry a conversion feature and (iv) each class has different
exchange privileges. See "Exchange Privileges." Sales personnel of
broker-dealers distributing the Funds' shares, and other persons entitled to
receive compensation for selling such shares, may receive differing compensation
for selling Class A or Class B shares.

The alternative purchase arrangement permits you to choose the method of
purchasing shares that is more beneficial to you. The amount of your purchase,
the length of time you expect to hold the shares, and whether you wish to
receive dividends in cash or in additional shares will all be factors in
determining which sales charge option is best for you. You should consider
whether, over the time you expect to maintain your investment, the accumulated
distribution and service fees and contingent deferred sales charges on Class B
shares prior to conversion would be less than the initial sales charge on Class
A shares, and to what extent such differential would be offset by the expected
higher yield of Class A shares. Class A shares will normally be more beneficial
to you if you qualify for reduced sales charges as described below.

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<PAGE> 113

Class A Shares: Front-End Sales Charge

The following table shows the regular sales charge on Class A Shares to a
"single purchaser" (defined below) together with the dealer discount paid to
dealers and the agency commission paid to brokers (collectively the
"commission"):

EQUITY FUNDS

<TABLE>
<CAPTION>
SALES CHARGE AS COMMISSION AS
SALES CHARGE AS A APPROPRIATE PERCENTAGE OF
PERCENTAGE OF PERCENTAGE OF NET OFFERING
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED PRICE
- --------------------- ----------------- ----------------- -------------
<S> <C> <C> <C>
0-$49,999 4.50% 4.71% 4.05%
$50,000-$99,999 4.00% 4.17% 3.60%
$100,000-$249,999 3.50% 3.63% 3.15%
$250,000-$499,999 2.50% 2.56% 2.25%
$500,000-$999,999 1.50% 1.52% 1.35%
$1,000,000 and Over* 0.00% 0.00% 0.00%
</TABLE>

- ------------

* A contingent deferred sales charge of 1.00% will be assessed against any
proceeds of any redemption of such Class A Shares prior to one year from date
of purchase.

FIXED INCOME FUNDS

<TABLE>
<CAPTION>
SALES CHARGE AS COMMISSION AS
SALES CHARGE AS A APPROPRIATE PERCENTAGE OF
PERCENTAGE OF PERCENTAGE OF NET OFFERING
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED PRICE
- --------------------- ----------------- ----------------- -------------
<S> <C> <C> <C>
0-$24,999 3.00% 3.09% 2.70%
$25,000-$49,999 2.50% 2.56% 2.25%
$50,000-$99,999 2.00% 2.04% 1.80%
$100,000-$249,999 1.50% 1.52% 1.35%
$250,000-$999,999 1.00% 1.01% 0.90%
$1,000,000 and Over 0.00%* 0.00% 0.00%
</TABLE>

- ------------

* A contingent deferred sales charge of 1.00% will be assessed against any
proceeds of any redemption of such Retail Shares prior to one year from date
of purchase.

The commissions shown in the table apply to sales through authorized dealers
and brokers. Under certain circumstances, the Distributor may use its own funds
to compensate financial institutions and intermediaries in amounts that are
additional to the commissions shown above. In addition, the Distributor may,
from time to time and at its own expense, provide promotional incentives in the
form of cash or other compensation to certain financial institutions and
intermediaries whose registered representatives have sold or are expected to
sell significant amounts of the Class A Shares of a Fund. Such other
compensation may take the form of payments for travel expenses, including
lodging, incurred in connection with trips taken by qualifying

31
<PAGE> 114

registered representatives to places within or without the United States. Under
certain circumstances, commissions up to the amount of the entire sales charge
may be reallowed to dealers or brokers, who might then be deemed to be
"underwriters" under the Securities Act of 1933. Commission rates may vary among
the Funds.

In calculating the sales charge rates applicable to current purchases of a
Fund's Class A Shares, a "single purchaser" is entitled to cumulate current
purchases with the net purchase of previously purchased Class A Shares of a Fund
and other of HighMark's funds (the "Eligible Funds") which are sold subject to a
comparable sales charge.

The term "single purchaser" refers to (i) an individual, (ii) an individual
and spouse purchasing Shares of a Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account including employee benefit plans
created under Sections 401, 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code"), including related plans of the same employer. To be
entitled to a reduced sales charge based upon Class A Shares already owned, the
investor must ask the Distributor for such entitlement at the time of purchase
and provide the account number(s) of the investor, the investor and spouse, and
their minor children, and give the age of such children. A Fund may amend or
terminate this right of accumulation at any time as to subsequent purchases.

Letter of Intent

By initially investing at least $1,000 and submitting a Letter of Intent (the
"Letter") to the Distributor, a "single purchaser" may purchase Class A Shares
of a Fund and the other Eligible Funds during a 13-month period at the reduced
sales charge rates applicable to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. To receive credit for such prior purchases and
later purchases benefitting from the Letter, the Shareholder must notify the
transfer agent at the time the Letter is submitted that there are prior
purchases that may apply, and, at the time of later purchases, notify the
transfer agent that such purchases are applicable under the Letter.

Rights of Accumulation

In calculating the sales charge rates applicable to current purchases of Class
A Shares, a "single purchaser" is entitled to cumulate current purchases with
the current market value of previously purchased Class A Shares of the Funds
sold subject to a comparable sales charge.

To exercise your right of accumulation based upon Shares you already own, you
must ask the Distributor for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.

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<PAGE> 115

Front-End Sales Charge Waivers

The following categories of investors may purchase Class A Shares of the Funds
with no sales charge in the manner described below (which may be changed or
eliminated at any time by the Distributor):

(1) Existing holders of Class A Shares of a Fund upon the reinvestment of
dividend and capital gain distributions on those Shares;

(2) Investment companies advised by the Adviser or distributed by SEI
Investments Distribution Co. or its affiliates placing orders on each
entity's behalf;

(3) State and local governments;

(4) Individuals who have received distributions from employee benefit trust
accounts administered by Union Bank of California who are rolling over such
distributions into an individual retirement account for which the Bank
serves as trustee or custodian;

(5) Individuals who purchase Class A Shares with proceeds from a required
minimum distribution at age 70 1/2 from their employee benefit qualified
plan or an individual retirement account administered by Union Bank of
California;

(6) Individuals who purchase Class A Shares with proceeds received in
connection with a distribution paid from a Union Bank of California trust
or agency account;

(7) Investment advisors or financial planners regulated by a federal or state
governmental authority who are purchasing Class A Shares for their own
account or for an account for which they are authorized to make investment
decisions (i.e., a discretionary account) and who charge a management,
consulting or other fee for their services; and clients of such investment
advisors or financial planners who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor or
financial planner on the books and records of a broker or agent;

(8) Investors purchasing Class A Shares with proceeds from a redemption of
Shares of another open-end investment company (other than HighMark Funds)
on which a sales charge was paid if such redemption occurred within thirty
(30) days prior to the date of the purchase order. Satisfactory evidence of
the purchaser's eligibility must be provided at the time of purchase (e.g.,
a confirmation of the redemption);

(9) Brokers, dealers and agents who are purchasing for their own account and
who have a sales agreement with the Distributor, and their employees (and
their spouses and children under the age of 21);

(10) Investors purchasing Class A Shares on behalf of a qualified prototype
retirement plan (other than an IRA, SEP-IRA or Keogh) sponsored by Union
Bank of California or any other parties;

(11) Purchasers of Class A Shares of the Growth Fund that are sponsors of other
investment companies that are unit investment trusts for deposit by such
sponsors into such unit investment trusts, and to purchasers of Class A
Shares of the Growth Fund that are holders of such unit investment trusts
that invest distributions from such investment trusts in Class A Shares of
the Growth Fund;

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(12) Present and retired directors, officers, and employees (and their spouses
and children under the age of 21) of Union Bank of California, SEI
Investments Distribution Co. or their affiliated companies; and

(13) Investors receiving Class A Shares issued in plans of reorganization, such
as mergers, asset acquisitions, and exchange offers, to which HighMark is a
party.

With regard to categories 2 through 12 above, the Distributor must be notified
that the purchase qualifies for a sales charge waiver at the time of purchase.

Reductions for Qualified Groups

Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar amount of
Class A Shares purchased by all members of the qualified group. For purposes of
this paragraph, a qualified group consists of a "company," as defined in the
1940 Act, which has been in existence for more than six months and which has a
primary purpose other than acquiring Shares of a Fund at a reduced sales charge,
and the "related parties" of such company. For purposes of this paragraph, a
"related party" of a company is (i) any individual or other company who directly
or indirectly owns, controls or has the power to vote five percent or more of
the outstanding voting securities of such company; (ii) any other company of
which such company directly or indirectly owns, controls or has the power to
vote five percent or more of its outstanding voting securities; (iii) any other
company under common control with such company; (iv) any executive officer,
director or partner of such company or of a related party; and (v) any
partnership of which such company is a partner. Investors seeking to rely on
their membership in a qualified group to purchase Shares at a reduced sales load
must provide evidence satisfactory to the transfer agent of the existence of a
bona fide qualified group and their membership therein.

All orders from a qualified group will have to be placed through a single
source and identified at the time of purchase as originating from the same
qualified group, although such orders may be placed into more than one discrete
account that identifies HighMark.

Class B Shares: Contingent Deferred Sales Charge

If you redeem your Class B shares within six years of purchase and are not
eligible for a waiver, you will pay a contingent deferred sales charge at the
rates set forth below. You will not be required to pay the contingent deferred
sales charge on exchange of your Class B shares of any Fund for Class B shares
of any other Fund. See "Exchange Privileges." The charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in

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net asset value above the initial purchase price. In addition, no charge is
assessed on shares derived from reinvestment of dividends or capital gain
distributions.

In determining whether a particular redemption is subject to a contingent
deferred sales charge, it is assumed that the redemption is first of any Class A
shares in the shareholder's Fund account, second of Class B shares held for over
six years or Class B shares acquired pursuant to reinvestment of dividends or
other distributions and third of Class B shares held longest during the six year
period. This method should result in the lowest possible sales charge.

CONVERSION FEATURE. At the end of the period ending eight years after the
beginning of the month in which the shares were issued, Class B shares will
automatically convert to Class A shares and will no longer be subject to the
Class B distribution and service fees. Such conversion will be on the basis of
the relative net asset value of the two classes.

EXCHANGE PRIVILEGES

As indicated under GENERAL INFORMATION--Description of HighMark & Its
Shares, certain of HighMark's Funds issue three classes of Shares (Class A and
Class B Shares (collectively, "Retail Shares") and Fiduciary Shares); as of the
date of this Prospectus, the Distribution Plans and distribution fee payable
thereunder are applicable only to such Fund's Retail Shares. A Shareholder's
eligibility to exchange into a particular class of Shares will be determined at
the time of the exchange. The Shareholder must supply, at the time of the
exchange, the necessary information to permit confirmation of qualification.

Each Fund's Class A or Class B Shares may be exchanged for Class A or Class B
Shares, respectively, of the various other Funds of HighMark which the
Shareholder qualifies to purchase directly so long as the Shareholder maintains
the applicable minimum account balance in each Fund in which he or she owns
Class A or Class B Shares and satisfies the minimum initial and subsequent
purchase amounts of the Fund

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into which the Shares are exchanged. Shareholders may exchange their Class A
Shares for Class A Shares of a Fund with the same or lower sales charge on the
basis of the relative net asset value of the Class A Shares exchanged.
Shareholders may exchange their Class A Shares for Class A Shares of a Fund with
a higher sales charge by paying the difference between the two sales charges.
Shareholders may also exchange Class A Shares of a Money Market Fund for which
no sales load was paid for Class A Shares of a non-money market HighMark Fund.
Under such circumstances, the cost of the acquired Class A Shares will be the
net asset value per share plus the appropriate sales load. If Class A Shares of
the Money Market Fund were acquired in a previous exchange involving Class A
Shares of a non-money market HighMark Fund, then such Class A Shares of the
Money Market Fund may be exchanged for Class A Shares of a non-money market
HighMark Fund without payment of any additional sales load within a twelve month
period. In order to receive a reduced sales charge when exchanging into a Fund,
the Shareholder must notify HighMark that a sales charge was originally paid and
provide sufficient information to permit confirmation of qualification.

Certain entities (including Participating Organizations and Union Bank of
California and its affiliates), however, may charge customers a fee with respect
to exchanges made on the customer's behalf. Information about these charges, if
any, can be obtained by the entity effecting the exchange and this Prospectus
should be read in conjunction with that information.

REDEMPTION OF SHARES

You may redeem your Shares of the Funds without charge on any Business Day.
There is presently a $15 charge for wiring redemption proceeds to a
Shareholder's designated account. Shares may be redeemed by mail, by telephone
or through a pre-arranged systematic withdrawal plan. Investors who own Shares
held by a financial institution should contact that institution for information
on how to redeem Shares.

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By Mail

A written request for redemption of Shares of the Funds must be received by
the transfer agent, P.O. Box 8416, Boston, Massachusetts 02266-8416 in order to
constitute a valid redemption request.

If the redemption request exceeds $5,000, or if the request directs the
proceeds to be sent or wired to an address different from that of record, the
transfer agent may require that the signature on the written redemption request
be guaranteed. You should be able to obtain a signature guarantee from a bank,
broker dealer, credit union, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
Shares, (2) the redemption check is payable to the Shareholder(s) of record, and
(3) the redemption check is mailed to the Shareholder(s) at his or her address
of record.

Telephone Transactions

You may redeem your Shares of the Funds by calling the transfer agent at
1-800-433-6884. Under most circumstances, payments will be transmitted on the
next Business Day following receipt of a valid request for redemption. You may
have the proceeds mailed to your address or wired to a commercial bank account
previously designated on your Account Application. There is no charge for having
redemption proceeds mailed to you, but there is a $15 charge for wiring
redemption proceeds.

You may request a wire redemption for redemptions of Shares of the Funds in
excess of $500 by calling the transfer agent at 1-800-433-6884 who will deduct a
wire charge of $15 from the amount of the wire redemption. Shares cannot be
redeemed by Federal Reserve wire on Federal holidays restricting wire transfers.

Neither the transfer agent nor HighMark will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. HighMark and transfer agent will each
employ reasonable procedures to confirm that instructions, communicated by
telephone are genuine. Such procedures may include taping of telephone
conversations.

Systematic Withdrawal Plan ("SWP")

The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current net asset value of $5,000 or more. You may
elect to receive automatic payments via check or ACH of $100 per Fund or more on
a monthly, quarterly, semi-annual or annual basis. You may arrange to receive
regular distributions from your account via check or ACH by completing this
section in the Account Application form.

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It is generally not in your best interest to be participating in the SWP at
the same time that you are purchasing additional Shares if you have to pay a
sales load in connection with such purchases. The aggregate withdrawals of Class
B Shares in any year pursuant to the SWP will not be subject to the contingent
deferred sale charge in an amount up to 10% of the value of the account at the
time of the establishment of the SWP. Because automatic withdrawals of Class B
Shares in amounts greater than 10% of the initial value of the account will be
subject to the contingent deferred sales charge, it may not be in the best
interest of Class B Shareholders to participate in the SWP for such amounts.

Other Information Regarding Redemptions

Shareholders who desire to redeem Shares of HighMark must place their
redemption orders prior to 1:00 p.m., Pacific time (4:00 p.m., Eastern time), on
any Business Day for the order to be accepted on that Business Day. The
redemption price is the net asset value of the Fund next determined after
receipt by the Distributor of the redemption order, reduced by any applicable
contingent deferred sales charge for Class B Shares. Payment on redemption will
be made as promptly as possible and, in any event, within seven calendar days
after the redemption order is received. The Funds reserve the right to make
payment on redemptions in securities rather than cash.

Payment to the Shareholders for Shares redeemed will be made within seven days
after the transfer agent receives the valid redemption request. At various
times, however, a Fund may be requested to redeem Shares for which it has not
yet received good payment; collection of payment may take ten or more days. In
such circumstances, the redemption request will be rejected by the Fund. Once a
Fund has received good payment for the Shares a Shareholder may submit another
request for redemption.

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DIVIDENDS

The net income of each Fund is declared and paid monthly as a dividend to
Shareholders of record at the close of business on the day of declaration. Net
realized capital gains are distributed at least annually to Shareholders of
record.

Shareholders will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of a Fund at net asset
value as of the date of declaration (which is also the ex-dividend date), unless
the Shareholder elects to receive such dividends or distributions in cash.
Shareholders wishing to receive their dividends in cash (or wishing to revoke a
previously made election) must notify the transfer agent at P.O. Box 8416,
Boston, MA 02266-8416, and such election (or revocation thereof) will become
effective with respect to dividends and distributions having record dates after
notice has been received. Dividends paid in additional Shares receive the same
tax treatment as dividends paid in cash. The amount of dividends payable on
Class A Shares will be more than the dividends payable on the Class B Shares
because of the higher distribution fees paid by Class B Shares.

TAXES

Federal Taxation

For each Fund, other than the California Intermediate Tax-Free Bond Fund,
distributions of ordinary income and/or an excess of net short-term capital gain
over net long-term capital loss are treated for federal income tax purposes as
ordinary income to Shareholders. With respect to the Equity Funds and the
Balanced Fund, the 70 percent dividends received deduction for corporations
generally will apply to these distributions to the extent the distribution
represents amounts that would qualify for the dividends received deduction when
received by a Fund if a Fund were a regular corporation, and to the extent
designated by a Fund as so qualifying. A corporate Shareholder will only be
eligible to claim a dividends received deduction with respect to a dividend from
a Fund if the corporate Shareholder held its Shares on the ex-dividend date and
for at least 45 other days during the 90-day period surrounding the ex-dividend
date. Distributions by the Fund of net gains on capital assets held for more
than one year but not more than 18 months and of net gains on capital assets
held for more than 18 months are taxable to Shareholders as such, regardless of
how long the Shareholder has held Shares of the Fund. Such distributions are not
eligible for the dividends received deduction. If a Shareholder disposes of
Shares in a Fund at a loss before holding such Shares for longer than six
months, such loss will be treated as a long-term capital loss to the extent the
Shareholder has received long-term capital gain distributions on the Shares.

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received deduction for corporations. The Fund is not managed to generate any
long-term capital gains and, therefore, does not foresee paying any significant
"capital gains dividends" as described in the Code.

Exempt-interest dividends from the California Intermediate Tax-Free Bond Fund
are excludable from Shareholders' gross income for federal income tax purposes.
Such dividends may be taxable to Shareholders under state or local law as
ordinary income even though all or a portion of the amounts may be derived from
interest on tax-exempt obligations which, if realized directly, would be exempt
from such taxes. Shareholders are advised to consult a tax advisor with respect
to whether exempt-interest dividends retain the exclusion if such Shareholder
would be treated as a "substantial user" of a facility financed through certain
private activity bonds or a "related person" to such a user under the Code.

Under the Code, interest on indebtedness incurred or continued by a
Shareholder to purchase or carry Shares of the California Intermediate Tax-Free
Bond Fund is not deductible for federal income tax purposes to the extent the
Fund distributes exempt-interest dividends during the Shareholder's taxable
year.

Under the Code, if a Shareholder sells a Share of the California Intermediate
Tax-Free Bond Fund after holding it for six months or less, any loss on the sale
or exchange of such Share will be disallowed to the extent of the amount of any
exempt-interest dividends that the Shareholder has received with respect to the
Share that is sold.

In addition, any loss (not already disallowed as provided in the preceding
sentence) realized upon a taxable disposition of shares of the California
Intermediate Tax-Free Bond Fund held for six months or less will be treated as
long-term, rather than short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the shares.

The California Intermediate Tax-Free Bond Fund may at times purchase
California Municipal Securities at a discount from the price at which they were
originally issued. For federal income tax purposes, some or all of this market
discount will be included in the California Tax-Free Money Market Fund's
ordinary income and will be taxable to Shareholders as such when it is
distributed to them.

Under the Code, dividends attributable to interest on certain private activity
bonds issued after August 7, 1986 must be included in alternative minimum
taxable income for the purpose of determining liability (if any) for the federal
alternative minimum tax. In addition, exempt-interest dividends will be included
in a corporation's "adjusted current earnings" for purposes of the alternative
minimum tax (except to the extent derived from interest on certain private
activity bonds issued after August 7, 1986, which interest would already be
included in alternative minimum taxable income as a specific item of tax
preference). Shareholders of the California Intermediate Tax-Free Bond Fund
receiving social security or railroad retirement benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income (including
exempt-interest dividends distributed by the Fund).

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Prior to purchasing Shares of the Funds, the impact of dividends or capital
gain distributions that are expected to be declared or have been declared, but
not paid, should be carefully considered. Dividends or capital gain
distributions received after a purchase of Shares are subject to federal income
taxes, although in some circumstances, the dividends or distributions may be, as
an economic matter, a return of capital to the Shareholder. A Shareholder should
consult his or her advisor for specific advice about the tax consequences to the
Shareholder of investing in a Fund.

Fund investments in foreign securities may be subject to withholding taxes at
the source on dividend or interest payments. In that case, the Fund's yield on
those securities would be decreased. No Fund expects to be eligible to elect to
permit shareholders to claim a credit or deduction on their income tax return
for their pro rata share of such foreign taxes.

Fund transactions in foreign currencies and hedging activities may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in value of the foreign currency concerned. In addition, such
activities will likely produce a difference between book income and taxable
income. This difference may cause a portion of the Fund's income distributions
to constitute a return of capital for tax purposes or require the Fund to make
distributions exceeding book income to qualify as a regulated investment company
for tax purposes.

Investment in an entity that qualifies as a "passive foreign investment
company" under the Code could subject the Fund to a U.S. federal income tax or
other charge on certain "excess distributions" received with respect to the
investment, and on the proceeds from disposition of the investment.

Additional information regarding federal taxes is contained in the Statement
of Additional Information. However, the foregoing and the material in the
Statement of Additional Information are only brief summaries of some of the
important tax considerations generally affecting each Fund and its Shareholders.
In addition, the foregoing discussion and the federal tax information in the
Statement of Additional Information are based on tax laws and regulations which
are in effect as of the date of this Prospectus; these laws and regulations may
subsequently change, and such changes could be retroactive.

Shareholders will be advised at least annually as to the federal income tax
status of distributions made during the year.

California Taxes

The California Intermediate Tax-Free Bond Fund intends to qualify to pay
dividends to Shareholders that are exempt from California personal income tax
("California exempt-interest dividends"). The California Intermediate Tax-Free
Bond Fund will qualify to pay California exempt-interest dividends if (1) at the
close of each quarter of the Fund's taxable year, at least 50 percent of the
value of the Fund's total assets consists of obligations the interest on which
would be exempt from California personal income tax if the obligations were held
by an individual ("California Tax Exempt Obligations") and (2) the Fund
continues to qualify as a regulated investment company.

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designated as exempt-interest dividends by the Fund in a written notice to
Shareholders mailed within 60 days of the close of the Fund's taxable year and
(2) to the extent that they are derived from the interest received by the Fund
during the year on California Tax Exempt Obligations (less related expenses). If
the aggregate dividends so designated exceed the amount that may be treated as
California exempt-interest dividends, only that percentage of each dividend
distribution equal to the ratio of aggregate California exempt-interest
dividends to aggregate dividends so designated will be treated as a California
exempt-interest dividend. The Fund will notify Shareholders of the amount of
California exempt-interest dividends each year.

Corporations subject to California franchise tax that invest in the California
Intermediate Tax-Free Bond Fund generally will not be entitled to exclude
California exempt-interest dividends from income.

Dividend distributions that do not qualify for treatment as California
exempt-interest dividends will be taxable to Shareholders at ordinary income tax
rates for California personal income tax purposes to the extent of the
California Intermediate Tax-Free Bond Fund's earnings and profits.

Interest on indebtedness incurred or continued by a Shareholder in connection
with the purchase of Shares of the California Intermediate Tax-Free Bond Fund
will not be deductible for California personal income tax purposes if the Fund
distributes California exempt-interest dividends.

Additional information regarding California taxes is contained in the
Statement of Additional Information. However, the foregoing and the California
tax information in the Statement of Additional Information is a general,
abbreviated summary of certain of the provisions of the California Revenue and
Taxation Code presently in effect as they directly govern the taxation of
Shareholders subject to California personal income tax. These provisions are
subject to change by legislative or administrative action, and any such change
may be retroactive with respect to Fund transactions. Shareholders are advised
to consult with their own tax advisors for more detailed information concerning
California tax matters.

SERVICE ARRANGEMENTS

The Advisor

Pacific Alliance, a division of Union Bank of California, N.A. serves as the
Funds' investment advisor. Subject to the general supervision of HighMark's
Board of Trustees, the Advisor manages each Fund in accordance with its
investment objective and policies, makes decisions with respect to and places
orders for all purchases and sales of the Fund's investment securities, and
maintains the Fund's records relating to such purchases and sales.

For the expenses assumed and services provided by the Advisor as each Fund's
investment advisor, Union Bank of California receives a fee from the
Intermediate-Term Bond Fund, the Bond Fund and the California Intermediate
Tax-Free Bond Fund, computed daily and paid monthly, at the annual rate of fifty
one-hundredths of one percent (.50%) of the Fund's average daily net assets,
from the Growth Fund, Value Momentum Fund, Income Equity Fund and Balanced Fund,
computed daily and paid monthly, at the annual rate of sixty one-hundredths of
one percent (.60%) of the Fund's average daily net assets and from the Emerging
Growth Fund, at the annual rate of eighty one-hundredths of one percent (.80%)
of the Fund's

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average daily net assets. Depending on the size of the Fund, this fee may be
higher than the advisory fee paid by most mutual funds, although the Board of
Trustees believes it will be comparable to advisory fees paid by many funds
having similar objectives and policies.

Union Bank of California may from time to time agree to voluntarily reduce its
advisory fee, however, it is not currently doing so for each Fund. While there
can be no assurance that Union Bank of California will choose to make such an
agreement, any voluntary reductions in Union Bank of California's advisory fee
will lower the Fund's expenses, and thus increase the Fund's yield and total
return, during the period such voluntary reductions are in effect. Prior to
April 28, 1997, the Value Momentum Fund, the Emerging Growth Fund, the
Intermediate-Term Bond Fund, the Balanced Fund, and the California Intermediate
Tax-Free Bond Fund did not yet operate as HighMark Funds. Fee and other
information presented regarding these Funds after that time only represents
their operation as HighMark Funds. Prior to operating as HighMark Funds, these
Funds had a fiscal year end of January 31.

During HighMark's fiscal year ended July 31, 1997, Union Bank of California
received investment advisory fees from the Income Equity Fund aggregating 0.60%
of the Fund's average daily net assets, from the Value Momentum Fund (February
1, 1997 through July 31, 1997) aggregating 0.60% of the Fund's average daily net
assets, from the Growth Fund aggregating 0.59% of the Fund's average daily net
assets, from the Intermediate-Term Bond Fund (February 1, 1997 through July 31,
1997) aggregating 0.50% of the Fund's average daily net assets, from the Bond
Fund aggregating 0.46% of the Fund's average daily net assets, from the Balanced
Fund (February 1, 1997 through July 31, 1997) aggregating 0.60% of the Fund's
average daily net assets, and from the California Intermediate Tax-Free Bond
Fund (February 1, 1997 through July 31, 1997) aggregating 0.00% of the Fund's
average daily net assets. For the period February 1, 1996 through January 31,
1997, Union Bank of California received investment advisory fees from the Value
Momentum Fund aggregating 0.60% of the Fund's average daily net assets, from the
Intermediate-Term Bond Fund aggregating 0.50% of the Fund's average daily net
assets, from the Balanced Fund aggregating 0.60% of the Fund's average daily net
assets, and from the California Intermediate Tax-Free Bond Fund aggregating
0.00% of the Fund's average daily net assets.

On April 1, 1996, the Bank of California, N.A., HighMark's then investment
advisor, combined with Union Bank and the resulting bank changed its name to
Union Bank of California, N.A. At the same time, the banks' investment
management divisions were combined. Each of Union Bank and The Bank of
California, N.A. (or their predecessor banks) has been in banking since the
early 1900's and, historically, each has had significant investment functions
within its trust and investment division. UnionBanCal Corporation, the parent of
Union Bank of California, N.A., is a publicly held corporation, but is
principally held by The Bank of Tokyo-Mitsubishi, Ltd. As of September 30, 1997,
UnionBanCal Corporation and its subsidiaries had approximately $31 billion in
consolidated assets. Pacific Alliance, a division of Union Bank of California's
Trust and Investment Management Group, as of September 30, 1997, had
approximately $14.6 billion of assets under management. The Advisor, with a team
of approximately 43 stock and bond research analysts, portfolio managers and
traders, has been providing investment management services to individuals,
institutions and large corporations since 1917.

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All investment decisions for the Funds are made by a team of investment
professionals, all of whom take an active part in the decision making process.
The team leaders for each Fund are as follows:

Growth Fund--Scott Chapman. Mr. Chapman, Vice President of the Advisor, has
served as team leader since 1993. He has been with Union Bank of California,
N.A., and its predecessor, The Bank of California, N.A., since 1991.

Value Momentum Fund--Richard Earnest. Mr. Earnest, Senior Vice President of
the Advisor, has served as team leader of the Fund since its inception on
February 1, 1991. He has been with Union Bank of California, N.A., and its
predecessor, Union Bank, since 1964.

Income Equity Fund--Thomas Arrington. Mr. Arrington, Vice President of the
Advisor, has served as team leader since 1994. He has been with Union Bank of
California, N.A., and its predecessor, The Bank of California, N.A., since 1990.

Bond Fund and Intermediate-Term Bond Fund--E. Jack Montgomery. Mr. Montgomery,
Vice President of the Advisor, has served as team leader for the Bond Fund since
1994. He has served as the team leader for the Intermediate-Term Bond Fund since
1996. He has been with Union Bank of California, N.A., and The Bank of
California, N.A., since 1994. From 1990 to 1994, Mr. Montgomery was employed by
the San Francisco Employee's Retirement System.

Balanced Fund--Carl J. Colombo. Mr. Colombo, Vice President of the Advisor,
has served as team leader of the Fund since its inception on February 1, 1991.
He has been with Union Bank of California, N.A., and its predecessor, Union
Bank, since 1985.

California Intermediate Tax-Free Bond Fund--Robert Bigelow. Mr. Bigelow, Vice
President of the Advisor, has served as team leader since 1994. He has been with
Union Bank of California, N.A., and its predecessor, Union Bank since 1994. From
1986 to 1994, Mr. Bigelow served as a portfolio manager at City National Bank.

The Sub-Advisor

The Advisor and Bank of Tokyo-Mitsubishi Trust Company ("BTMT") have entered
into an investment subadvisory agreement relating to the Emerging Growth Fund
(the "Investment Sub-Advisory Agreement"). Under the Investment Sub-Advisory
Agreement, BTMT will make the day-to-day investment decisions for the assets of
the Emerging Growth Fund, subject to the supervision of, and policies
established by, the Advisor and the Trustees of HighMark.

Bank of Tokyo-Mitsubishi Trust Company, headquartered at 1251 Avenue of the
Americas, New York, New York 10116, operates as a wholly-owned subsidiary of The
Bank of Tokyo-Mitsubishi, Ltd. BTMT was formed by the combination on April 1,
1996, of Bank of Tokyo Trust Company, a wholly-owned subsidiary of The Bank of
Tokyo, Ltd., and Mitsubishi Bank Trust Company of New York, a wholly-owned
subsidiary of The Mitsubishi Bank, Limited. Bank of Tokyo Trust Company was the
surviving entity, and changed its name to Bank of Tokyo-Mitsubishi Trust
Company. Prior to the combination, subadvisory services were provided by Bank of
Tokyo Trust Company. Bank of Tokyo Trust Company was established in 1955, and
has provided trust services since that time and management services since 1965.

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BTMT serves as portfolio manger to bank common funds, employee benefit funds
and personal trust accounts, managing assets in money market, equity and fixed
income portfolios. As of September 30, 1997, BTMT managed $750 million in
individual portfolios and collective funds. In addition, BTMT will also serve as
sub-advisor to HighMark's Government Securities, Convertible Securities and Blue
Chip Growth Funds.

BTMT is entitled to a fee, which is calculated daily and paid monthly out of
the Advisor's fee, at an annual rate of .50% of the average daily net assets of
the Emerging Growth Fund.

Seth E. Shalov serves as portfolio manager of the Emerging Growth Fund. Mr.
Shalov has been a Senior Portfolio Manager with the Sub-Advisor and its
predecessor, Bank of Tokyo Trust Company, since October 1987.

Administrator

SEI Investments Fund Resources (the "Administrator"), and HighMark are parties
to an administration agreement (the "Administration Agreement"). Under the terms
of the Administration Agreement, the Administrator provides HighMark with
certain management services, including all necessary office space, equipment,
personnel, and facilities.

Pursuant to a separate agreement with the Administrator, Union Bank of
California, N.A. performs sub-administration services on behalf of each Fund,
for which it receives a fee paid by the Administrator at the annual rate of up
to 0.05% of the average daily net assets of the Funds. A description of the
services performed by Union Bank of California, N.A., pursuant to this Agreement
is contained in the Statement of Additional Information.

The Transfer Agent

Shareholder Service Plan

To support the provision of Shareholder services to all classes of Shares,
HighMark has adopted a Shareholder Service Plan for Fiduciary Class and Class A
Shares and a Shareholder Service Plan for Class B Shares. A description of the
services performed by service providers pursuant to each Shareholder Service
Plan is contained in the Statement of Additional Information. Under these plans,
in consideration of services provided by any service provider, which may include
Union Bank of California, N.A., Bank of Tokyo-Mitsubishi, Ltd., or their
respective affiliates, each Fund may pay a fee at the rate of up to 0.25% of its
average daily net assets to such service provider. The service provider may
waive such fees at any time. Any such waiver is voluntary and may be terminated
at any time. Currently, such fees are being waived to the rate of 0.10% of
average daily net assets for the Class A Shares of the Income Equity Fund,
Growth Fund, and

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Balanced Fund, 0.03% for the Class A Shares of the Intermediate-Term Bond Fund,
0.01% for the Class A Shares of the Bond Fund, and 0.00% for the Class A Shares
of the California Intermediate Tax-Free Bond Fund.

Distributor

SEI Investments Distribution Co. (the "Distributor") and HighMark are parties
to two distribution agreements, one for Fiduciary Class and Class A Shares, and
one for Class B Shares (collectively, the "Distribution Agreements"). Each
Distribution Agreement is renewable annually and may be terminated by the
Distributor, by a majority vote of the Disinterested Trustees or by a majority
vote of the outstanding securities of HighMark upon not more than 60 days
written notice by either party, or upon assignment by the Distributor.

The Distribution Plans

Pursuant to HighMark's Distribution Plans, each Equity Fund pays the
Distributor as compensation for its services in connection with the Distribution
Plans a distribution fee, computed daily and paid monthly, equal to twenty-five
one-hundredths of one percent (0.25%) of the average daily net assets
attributable to that Fund's Class A Shares, pursuant to the Class A Distribution
Plan, and seventy-five one-hundredths of one percent (0.75%) of the average
daily net assets attributable to that Fund's Class B Shares, pursuant to the
Class B Distribution Plan. The Distributor has agreed to waive its fees to 0.00%
of the average daily net assets of the Intermediate Term Bond Fund, the Bond
Fund and the California Intermediate Tax-Free Bond Fund.

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<PAGE> 129

tions are required to provide their customers with a schedule of fees charged
directly to such customers in connection with investments in a Fund. Customers
of Participating Organizations should read this Prospectus in light of the terms
governing their accounts with the Participating Organization.

Banking Laws

Union Bank of California believes that it may perform the services for the
Funds contemplated by its investment advisory agreement with HighMark without a
violation of applicable banking laws and regulations. Union Bank of California
also believes that it may perform sub-administration and sub-accounting services
on behalf of each Fund, without a violation of applicable banking laws and
regulations. Future changes in federal or state statutes and regulations
relating to permissible activities of banks or bank holding companies and their
subsidiaries and affiliates, as well as further judicial or administrative
decisions or interpretations of present and future statutes and regulations,
could change the manner in which Union Bank of California or the Advisor could
continue to perform such services for the Funds. For a further discussion of
applicable banking laws and regulations, see the Statement of Additional
Information.

Custodian

Union Bank of California also serves as the custodian and as a shareholder
servicing agent for the Funds. The Custodian holds cash securities and other
assets of HighMark as required by the 1940 Act.

Services performed by Union Bank of California, as the Funds' shareholder
servicing agent and custodian, as well as the basis of remuneration for such
services, are described in the Statement of Additional Information.

GENERAL INFORMATION

Description of HighMark & Its Shares

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<PAGE> 130

U.S. Government Obligations Money Market Fund, 100% U.S. Treasury Obligations
Money Market Fund, and California Tax-Free Money Market Fund. Shares of each
Fund are freely transferable, are entitled to distributions from the assets of
the Fund as declared by the Board of Trustees, and, if HighMark were liquidated,
would receive a pro rata share of the net assets attributable to that Fund.
Shares are without par value.

As noted above, pursuant to a Multiple Class Plan on file with the Securities
and Exchange Commission permitting the issuance and sale of three classes of
Shares in selected Funds, Shares of such Funds have been divided into three
classes, designated Class A and Class B Shares (collectively, "Retail Shares")
and Fiduciary Shares. For information regarding the Fiduciary Shares of the
Funds, interested persons may contact the Distributor for a prospectus at
1-800-433-6884.

HighMark believes that as of November 17, 1997, there was no person who owned
of record or beneficially more than 25% of the Class A or Class B Shares of any
Fund.

Performance Information

From time to time, HighMark may advertise the aggregate total return, average
annual total return, yield and distribution rate with respect to the Class A and
Class B Shares of each Equity Fund. Performance information is computed
separately for a Fund's Class A, Class B and Fiduciary Shares in accordance with
the formulas described below.

The aggregate total return and average annual total return of the Equity Funds
may be quoted for the life of each Fund and for ten-year, five-year, three-year,
and one-year periods, in each case through the most recent calendar quarter (in
the case of the Income Equity Fund, utilizing, when appropriate, the aggregate
total return and average annual total return of the IRA Fund Income Equity
Portfolio prior to June 23, 1988). Aggregate total return is determined by
calculating the change in the value of a hypothetical $1,000 investment in a
Fund over the applicable period that would equate the initial amount invested to
the ending redeemable value of the investment. The ending redeemable value
includes dividends and capital gain distributions reinvested at net asset value.
Average annual total return is calculated by annualizing a Fund's aggregate
total return over the relevant number of years. The resulting percentage
indicates the average positive or negative investment results that an investor
in a Fund would have experienced on an annual basis from changes in Share price
and reinvestment of dividends and capital gain distributions. Average annual
total return will reflect deduction of all charges and expenses, including, as
applicable, the maximum sales charge imposed on Class A Shares or the contingent
deferred sales charge imposed on Cass B Shares redeemed at the end of the
specified period covered by the total return figure.

The yield of a Fund is determined by annualizing the net investment income per
Share of the Fund during a specified thirty-day period and dividing that amount
by the per Share public offering price of the Fund on the last day of the
period.

The distribution rate of a Fund is determined by dividing the income and
capital gains distributions, or where indicated the income distributions alone,
on a Share of the Fund over a twelve-month period by the per Share public
offering price of the Fund on the last day of the period.

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<PAGE> 131

Each Fund may periodically compare its performance to the performance of other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; broad groups of comparable
mutual funds; unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs; or
other investment alternatives. Certain Funds may advertise performance that
includes results from periods in which the Fund's assets were managed in a
non-registered predecessor vehicle.

All performance information presented for a Fund is based on past performance
and does not predict future performance.

Because the Class A and Class B Shares of a Fund have different sales charge
structures and differing distribution and shareholder servicing fees, the
performance of each class will differ.

Miscellaneous

Shareholders will be sent unaudited semi-annual reports and annual reports
audited by independent public accountants.

HighMark's Trustees are elected by Shareholders, except that vacancies may be
filled by vote of the Board of Trustees. Trustees may be removed by the Board of
Trustees, or by Shareholders at a meeting called for such purpose. For
information about how Shareholders may call such a meeting and communicate with
other Shareholders for that purpose, see ADDITIONAL INFORMATION -- Miscellaneous
in the Statement of Additional Information.

Inquiries may be directed in writing to SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling toll free 1-800-433-6884.

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of permitted investments for the HighMark
Funds.

AMERICAN DEPOSITARY RECEIPTS (ADRs)--ADRs are receipts typically issued by a
U.S. financial institution that evidence ownership of underlying securities
issued by a foreign issuer.

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<PAGE> 132

securities also may be debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of owning such assets and
issuing such debt. The purchase of non-mortgage asset-backed securities raises
risk considerations peculiar to the financing of the instruments underlying such
securities. Asset-backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than the prepayment risk
associated with mortgage-backed securities.

Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to substantial prepayment
risk, which may reduce the overall return to certificate holders. Nevertheless,
principal prepayment rates tend not to vary as much in response to changes in
interest rates and the short-term nature of the underlying car loans or other
receivables tend to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying sales contracts or receivables are not
realized by the trust because of unanticipated legal or administrative costs of
enforcing the contracts or because of depreciation or damage to the collateral
(usually automobiles) securing certain contracts, or other factors. If
consistent with their investment objectives and policies, the Funds may invest
in other asset-backed securities that may be developed in the future.

CONVERTIBLE BONDS AND CONVERTIBLE PREFERRED STOCK--Convertible Bonds are bonds
convertible into a set number of shares of another form of security (usually
common stock) at a prestated price. Convertible bonds have characteristics
similar to both fixed-income and equity securities. Convertible preferred stock
is a class of capital stock that pays dividends at a specified rate and that has
preference over common stock in the payment of dividends and the liquidation of
assets. Convertible preferred stock is preferred stock exchangeable for a given
number of common stock shares, and has characteristics similar to both
fixed-income and equity securities. Because of the conversion feature, the
market value of convertible bonds and convertible preferred stock tend to move
together with the market value of the underlying stock. As a result, a Fund's
selection of convertible bonds and convertible preferred stock is based, to a
great extent, on the potential for capital appreciation that may exist in the
underlying stock. The value of convertible bonds and convertible preferred stock
is also affected by prevailing interest rates, the credit quality of the issuer
and any call provisions.

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<PAGE> 133

some mortgage-backed securities (CMOs, REMICs, IOs and POs). See elsewhere in
this "DESCRIPTION OF PERMITTED INVESTMENTS" for discussions of these various
instruments, and see "INVESTMENT OBJECTIVES" and "INVESTMENT POLICIES" for more
information about any policies and limitations applicable to their use.

FUTURES AND OPTIONS ON FUTURES--Some futures strategies, including selling
futures, buying puts and writing calls, reduce a Fund's exposure to price
fluctuations. Other strategies, including buying futures, writing puts and
buying calls, tend to increase market exposure. Futures and options may be
combined with each other in order to adjust the risk and return characteristics
of the overall portfolio.

Options and futures can be volatile instruments, and involve certain risks
that, if applied at an inappropriate time, could negatively impact a Fund's
return.

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investment; (iii) short-term corporate obligations rated within the three
highest rating categories by a NRSRO (e.g., at least A by S&P or A by Moody's)
at the time of investment, or, if not rated, determined by the Advisor to be of
comparable quality; (iv) general obligations issued by the U.S. Government and
backed by its full faith and credit, and obligations issued or guaranteed as to
principal and interest by agencies or instrumentalities of the U.S. Government
(e.g., obligations issued by Farmers Home Administration, Government National
Mortgage Association, Federal Farm Credit Bank and Federal Housing
Administration); (v) receipts, including TRs, TIGRs and CATS; (vi) repurchase
agreements involving such obligations; (vii) loan participations issued by a
bank in the United States with assets exceeding $1 billion and for which the
underlying loan is issued by borrowers in whose obligations the Fund may invest;
(viii) money market funds and (ix) foreign commercial paper.

Certain of the obligations in which a Fund may invest may be variable or
floating rate instruments, may involve conditional or unconditional demand
features and may include variable amount master demand notes.

MORTGAGE-BACKED SECURITIES--Securities generally issued or guaranteed by U.S.
government agencies such as GNMA, FNMA, or FHLMC. GNMA mortgage-backed
certificates are mortgage-backed securities of the modified pass-through type,
which means that both interest and principal payments (including prepayments)
are passed through monthly to the holder of the certificate. Each GNMA
certificate evidences an interest in a specific pool of mortgage loans insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. FNMA, a federally-chartered and
stockholder-owned corporation, issues pass-through certificates which are
guaranteed as to payment of principal and interest by FNMA. FHLMC, a corporate
instrumentality of the United States, issues participation certificates which
represent an interest in mortgages held in FHLMC's portfolio. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal.
Securities issued or guaranteed by FNMA and FHLMC are not backed by the full
faith and credit of the United States. There can be no assurance that the U.S.
government would provide financial support to FNMA or FHLMC if necessary in the
future.

Although payments on certain mortgage-related securities may be guaranteed by
a third party or otherwise similarly secured, the market value of such
securities is not secured and may fluctuate significantly because of changes in
interest rates and changes in prepayment levels. Thus, for example, if a Fund
purchases a mortgage-related security at a premium, that portion may be lost if
there is a decline in the market value of the security whether due to changes in
interest rates or prepayments of the underlying mortgage collateral. As with
other interest-bearing securities, the prices of mortgage-related securities are
inversely affected by changes in interest rates. However, although the value of
a mortgage-related security may decline when interest rates rise, the converse
is not necessarily true because in periods of declining interest rates the
mortgages underlying the securities are prone to prepayment which results in
amounts being available for reinvestment which are likely to be invested at a
lower interest rate. For this and other reasons, the stated maturity of a
mortgage-related security may be shortened by unscheduled prepayments on the
underlying mortgages and, accordingly, it is not possible to predict accurately
the security's return to a Fund. In addition, regular payments received on
mortgage-related securities include both interest and principal. No assurance
can be given as to the return a Fund will receive when these amounts are
reinvested. As a consequence, mortgage-related securities may be a less
effective means of "locking in" interest rates than other types of debt

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<PAGE> 135

securities having the same stated maturity, may have less potential for capital
appreciation and may be considered riskier investments as a result.

Adjustable rate mortgage securities ("ARMS") are pass-through certificates
representing ownership interests in a pool of adjustable rate mortgages and the
resulting cash flow from those mortgages. Unlike conventional debt securities,
which provide for periodic (usually semi-annual) payments of interest and
payments of principal at maturity or on specified call dates, ARMs provide for
monthly payments based on a pro rata share of both periodic interest and
principal payments and prepayments of principal on the underlying mortgage pool
(less GNMA's, FNMA's, or FHLMC's fees and any applicable loan servicing fees).

Collateralized mortgage obligations ("CMOs") are bonds generally issued by
single purpose, stand-alone finance subsidiaries or trusts established by
financial institutions, government agencies, investment banks, or other similar
institutions, and collateralized by pools of mortgage loans. Payments of
principal and interest on the collateral mortgages are used to pay debt service
on the CMO. In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date. The
principal and interest payment on the underlying mortgages may be allocated
among the classes of CMOs in several ways. Typically, payments of principal,
including any prepayments, on the underlying mortgages would be applied to the
classes in the order of their respective stated maturities or final distribution
dates, so that no payment of principal will be made on CMOs of a class until all
CMOs of other classes having earlier stated maturities or final distribution
dates have been paid in full.

One or more classes of CMOs may have coupon rates that reset periodically
based on an index, such as the London Interbank Offered Rate ("LIBOR"). Each
Fund may purchase fixed, adjustable, or "floating" rate CMOs that are
collateralized by fixed rate or adjustable rate mortgages that are guaranteed as
to payment of principal and interest by an agency or instrumentality of the U.S.
government or are directly guaranteed as to payment of principal and interest by
the issuer, which guarantee is collateralized by U.S. government securities or
is collateralized by privately issued fixed rate or adjustable rate mortgages.

Securities such as zero-coupon obligations, mortgage-backed and asset-backed
securities, and collateralized mortgage obligations ("CMOs") will have greater
price volatility then other fixed-income obligations. Because declining interest
rates may lead to prepayment of underlying mortgages, automobile sales contracts
or credit card receivables, the prices of mortgage-related and asset-backed
securities may not rise with a decline in interest rates. Mortgage-backed and
asset-backed securities and CMOs are extremely sensitive to the rate of
principal prepayment. Similarly, callable corporate bonds also present risk of
prepayment. During periods of falling interest rates, securities that can be
called or prepaid may decline in value relative to similar securities that are
not subject to call or prepayment.

Real Estate Mortgage Investment Conduits ("REMICs") are private entities
formed for the purpose of holding a fixed pool of mortgages secured by an
interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.

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<PAGE> 136

refunding mechanism for bonds that may only be redeemed on a designated future
date. As with forward commitments and when-issued securities, municipal forwards
are subject to market fluctuations due to changes, real or anticipated, in
market interest rates between the commitment date and the settlement date and
will have the effect of leveraging the Fund's assets. Municipal forwards may be
considered to be illiquid investments. The Fund will maintain liquid, high-grade
securities in a segregated account in an amount at least equal to the purchase
price of the municipal forward.

OPTIONS--Under a call option, the purchaser of the option has the right to
purchase, and the writer (the Fund) the obligation to sell, the underlying
security at the exercise price during the option period. A put option gives the
purchaser the right to sell, and the writer the obligation to purchase, the
underlying security at the exercise price during the option period.

In addition, certain Funds may buy options on stock indices to invest cash on
an interim basis. Such options will be listed on a national securities exchange.
In order to close out an option position, a Fund may enter into a "closing
purchase transaction"--the purchase of an option on the same security with the
same exercise price and expiration date as the option contract previously
written on any particular security. When the security is sold, a Fund effects a
closing purchase transaction so as to close out any existing option on that
security.

There are risks associated with such investments including the following: (1)
the success of a hedging strategy may depend on the ability of the Advisor or
Sub-Advisor to predict movements in the prices of individual securities,
fluctuations in markets and movements in interest rates; (2) there may be an
imperfect correlation between the movement in prices of securities held by a
Fund and the price of options; (3) there may not be a liquid secondary market
for options; and (4) while a Fund will receive a premium when it writes covered
call options, it may not participate fully in a rise in the market value of the
underlying security.

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<PAGE> 137

55
<PAGE> 138

RULE 144A SECURITIES--Rule 144A Securities are securities that have not been
registered under the Securities Act of 1933, but which may be traded between
certain qualified institutional investors, including investment companies. The
absence of a secondary market may affect the value of the Rule 144A Securities.
The Board of Trustees of HighMark has established guidelines and procedures to
be utilized to determine the liquidity of such securities.

SECURITIES ISSUED ON A FORWARD COMMITMENT BASIS OR WHEN-ISSUED
SECURITIES--Securities purchased for delivery beyond the normal settlement date
at a stated price and yield and which thereby involve a risk that the yield
obtained in the transaction will be less than that available in the market when
delivery takes place. When a Fund agrees to purchase when-issued securities or
enter into forward commitments, HighMark's custodian will be instructed to set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a segregated account. A Fund will generally not pay for such securities and
no income will accrue on the securities until they are received. These
securities are recorded as an asset and are subject to changes in value based
upon changes in the general level of interest rates. Therefore, the purchase of
securities on a "when-issued" basis or forward commitments may increase the risk
of fluctuations in a Fund's net asset value.

STANDARD & POOR'S DEPOSITARY RECEIPTS (SPDRs)--SPDRs are interests in a unit
investment trust holding a portfolio of securities linked to the S&P 500 Index.
SPDRs closely track the underlying portfolio of securities, trade like a share
of common stock and pay periodic dividends proportionate to those paid by the
portfolio of stocks that constitutes the S&P 500 Index. For further information
regarding SPDRs, see the Statement of Additional Information.

TAX-EXEMPT COMMERCIAL PAPER--Commercial paper, which is commercial paper
issued by governments and political subdivisions.

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<PAGE> 139

WARRANTS--Securities that entitle the holder to buy a proportionate amount of
common stock at a specified price for a limited or unlimited period of time.
Warrants are often freely transferable and are traded on major stock exchanges.

YANKEE BONDS--Dollar denominated securities issued by foreign-domiciled
issuers that obligate the issuer to pay the bondholder a specified sum of money,
usually semiannually, and to repay the principal amount of the loan at maturity.
Sovereign bonds are bonds issued by the governments of foreign countries.
Supranational bonds are those issued by supranational entities, such as the
World Bank and European Investment Bank. Canadian bonds are bonds issued by
Canadian provinces.

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<PAGE> 140

For federal income tax purposes, the difference between the par value and the
original issue price (original issue discount) is included in the income of a
holder of a zero-coupon obligation over the term of the obligation even though
the interest is not paid until maturity. The amount included in income is
determined under a constant interest rate method. In addition, if an obligation
is purchased subsequent to its original issue, a holder such as the Fixed Income
Funds may elect to include market discount in income currently on a ratable
accrual method or a constant interest rate method. Market discount is the
difference between the obligation's "adjusted issue price" (the original issue
price plus original issue discount accrued to date) and the holder's purchase
price. If no such election is made, gain on the disposition of a market discount
obligation is treated as ordinary income (rather than capital gain) to the
extent it does not exceed the accrued market discount.

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<PAGE> 141

HIGHMARK FUNDS

For further information

call 1-(800) 433-6884

or visit our Web site at

www.highmark-funds.com

INVESTMENT ADVISOR

Pacific Alliance,

a division of Union Bank of California, N.A.

475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

ADMINISTRATOR & DISTRIBUTOR
SEI Investments Fund Resources and
SEI Investments Distribution Co.
Oaks, PA 19456

LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005

AUDITORS
Deloitte & Touche LLP

50 Fremont Street

San Francisco, CA 94105

NOT FDIC INSURED
<PAGE> 142

HighMark Funds Prospectus

INVESTMENT ADVISOR
Pacific Alliance
a division of Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

ADMINISTRATOR & DISTRIBUTOR
SEI Investment Fund Resources and
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005

AUDITORS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, CA 94105-2230

For further information call
1-800-433-6884
or visit our web site at
www.highmark-funds.com

[HIGHMARK FUNDS LOGO]
<PAGE> 143

- Equity Funds

- Fixed Income Funds

Fiduciary Shares
November 30, 1997
<PAGE> 144

HIGHMARK FUNDS

EQUITY FUNDS
FIXED INCOME FUNDS

<TABLE>
<S> <C> <C> <C>
- - Income Equity Fund - Convertible Securities Fund
- - Value Momentum Fund - Intermediate-Term Fund
- - Blue Chip Growth Fund - Bond Fund
- - Growth Fund - Government Securities Fund
- - Emerging Growth Fund - Balanced Fund
- - International Equity Fund - California Intermediate Tax-Free Bond Fund
</TABLE>

FIDUCIARY SHARES

This Prospectus sets forth concisely the information about HighMark and the
Funds that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated the same date as this Prospectus has been filed
with the Securities and Exchange Commission and is available without charge by
writing the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania
19456, or by calling 1-800-433-6884. The SEC maintains a World Wide Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information. The Statement of
Additional Information is incorporated into this Prospectus by reference. This
Prospectus relates only to the Fiduciary Shares of the Funds. Interested persons
who wish to obtain a prospectus for other Funds and classes of HighMark may
contact the Distributor at the above address and telephone number.

HIGHMARK'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, INCLUDING UNION BANK OF CALIFORNIA, N.A., BANK OF TOKYO-
MITSUBISHI, LIMITED OR ANY OF THEIR AFFILIATES OR CORRESPONDENTS. HIGHMARK
SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN HIGHMARK INVOLVES RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

November 30, 1997
Fiduciary Shares
<PAGE> 145

SUMMARY

HIGHMARK FUNDS ("HighMark") is an open-end, diversified, registered investment
company providing a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
Fiduciary Shares of the Income Equity, Value Momentum, Blue Chip Growth, Growth,
Emerging Growth, International Equity, Convertible Securities, Intermediate-Term
Bond, Bond, Government Securities, Balanced, and California Intermediate
Tax-Free Bond Funds (each a "Fund" and together the "Funds"). This summary is
qualified in its entirety by reference to the more detailed information provided
elsewhere in the Prospectus and in the Statement of Additional Information.

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES? THE INCOME EQUITY FUND seeks
investments in equity securities that provide current income through the regular
payment of dividends, with the goal that the Fund will have a high current yield
and a low level of price volatility; opportunity for long-term growth of asset
value is a secondary consideration. THE VALUE MOMENTUM FUND seeks long-term
capital growth with a secondary objective of income. THE BLUE CHIP GROWTH FUND
seeks long-term capital growth by investing in a diversified portfolio of common
stocks and other equity securities of seasoned, large capitalization companies.
THE BALANCED FUND seeks capital appreciation and income, with a secondary
investment objective of conservation of capital. THE GROWTH FUND seeks long-term
capital appreciation through investments in equity securities; the production of
current income is an incidental objective. THE INTERNATIONAL EQUITY FUND seeks
to provide long-term capital appreciation by investing primarily in a
diversified portfolio of equity securities of non-U.S. issuers. THE EMERGING
GROWTH FUND seeks long-term growth of capital by investing in a diversified
portfolio of equity securities of small capitalization, emerging growth
companies (collectively these seven Funds are sometimes referred to in this
Prospectus as the "Equity Funds"). THE CONVERTIBLE SECURITIES FUND seeks a high
level of current income and capital appreciation by investing in convertible
securities. THE INTERMEDIATE-TERM BOND FUND seeks total return through
investments in fixed-income securities. THE BOND FUND seeks current income
through investments in long-term, fixed-income securities. THE CALIFORNIA
INTERMEDIATE TAX-FREE BOND FUND seeks to provide high current income that is
exempt from federal and State of California income taxes. THE GOVERNMENT
SECURITIES FUND seeks to achieve total return consistent with the preservation
of capital by investing in a diversified portfolio of obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities
(collectively, these five Funds are sometimes referred to in this Prospectus as
"Fixed Income Funds"). (See "INVESTMENT OBJECTIVES")

WHAT ARE THE FUNDS' PERMITTED INVESTMENTS? Each of the Equity Funds primarily
invests, consistent with its investment objective, in equity securities
including common stocks and securities convertible into common stocks. The
International Equity Fund primarily invests, consistent with its investment
objective, in equity securities including common stocks and securities
convertible into common stocks of non-U.S. issuers. The Convertible Securities
Fund invests primarily in convertible securities, including bonds, debentures,
notes and preferred stocks convertible into common stock. The Intermediate-Term
Bond Fund primarily invests in bonds. The Bond Fund primarily invests in
long-term bonds. The Government Securities Fund invests primarily in debt
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, including mortgage-backed securities issued or guaranteed by
U.S. government agencies. Bonds include debt obligations such as bonds, notes,
debentures and securities convertible into or exercisable for debt obligations
that are issued by U.S. corporations or issued or guaranteed by the U.S.
Government, its agencies, or

2
<PAGE> 146

instrumentalities; investments may also include zero-coupon obligations,
mortgage-related securities and asset-backed securities. The Balanced Fund
primarily invests, consistent with its investment objective, in equity
securities including common stocks and securities convertible into common stocks
and may also invest in fixed income securities. The California Intermediate
Tax-Free Bond Fund invests primarily in investment grade or better bonds and
notes issued by the State of California, its agencies, instrumentalities and
political sub-divisions, the income on which is exempt from regular federal and
State of California personal income taxes ("California Municipal Securities").
Each Fund may also invest consistent with its investment objective and
investment policies in certain other instruments. (See "INVESTMENT POLICIES")

WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? The investment
policies of each Fund entail certain risks and considerations of which an
investor should be aware. Common stocks and other equity securities that the
Funds invest in are volatile and may fluctuate in value more than other types of
investments. Values of fixed income securities and, correspondingly, share
prices of Funds invested in such securities, tend to vary inversely with
interest rates, and may be affected by other market and economic factors as
well. During periods of falling interest rates, the value of outstanding fixed
income securities generally rises. Conversely, during periods of rising interest
rates, the value of such securities generally declines. Values of fixed income
securities in which the California Intermediate Tax-Free Bond Fund invests may
be affected by other market and economic factors affecting the State of
California as well. The International Equity Fund will invest in securities of
foreign companies that involve special risks and considerations not typically
associated with investing in U.S. companies. In addition, the securities of the
emerging growth companies in which the Emerging Growth Fund may invest may be
less liquid, and subject to more abrupt or erratic market movements, than
securities of larger, more established growth companies. The Convertible
Securities Fund may invest up to 35% of its assets in convertible bonds rated
lower than Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard
& Poor's Corporation ("S&P") and as low as Caa by Moody's or CCC by S&P, which
are lower-quality, higher-yielding, high-risk debt securities. (See "Risk
Factors")

ARE MY INVESTMENTS INSURED? HighMark's Shares are not federally insured by the
FDIC or any other government agency. Any guarantee by the U.S. Government, its
agencies or any instrumentalities of the securities in which any Fund invests
guarantees only the payment of principal and interest on the guaranteed
security, and does not guarantee the total return or value of the security or
total return or value of Shares of that Fund.

WHO IS THE ADVISOR? Pacific Alliance, a division of Union Bank of California,
N.A., serves as the Advisor to HighMark. (See "The Advisor")

WHO ARE THE SUB-ADVISORS? Bank of Tokyo-Mitsubishi Trust Company serves as the
Sub-Advisor to the Emerging Growth, Blue Chip Growth, Convertible Securities and
Government Securities Funds. Tokyo-Mitsubishi Asset Management (U.K.), Ltd.
serves as the Sub-Advisor to the International Equity Fund. (See "The
Sub-Advisors")

WHO IS THE ADMINISTRATOR? SEI Investments Fund Resources serves as the
Administrator of HighMark. (See "The Administrator")

WHO IS THE CUSTODIAN? Union Bank of California, N.A. (the "Bank") serves as the
custodian of HighMark's assets. (See "The Custodian")

3
<PAGE> 147

WHO IS THE DISTRIBUTOR? SEI Investments Distribution Co. acts as distributor of
HighMark's Shares. (See "The Distributor")

HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on days on which the New York Stock Exchange is open for
business ("Business Days"). The minimum initial investment is generally $1,000
per Fund. A purchase order will be effective if the Distributor receives an
order prior to 1:00 p.m., Pacific time (4:00 p.m., Eastern time) and the
Custodian receives Federal Funds before the close of business on the next
Business Day. Purchase orders for Shares will be executed at a per Share price
equal to the asset value next determined after the purchase order is effective.
Redemption orders must be placed prior to 1:00 p.m., Pacific time (4:00 p.m.,
Eastern time) on any Business Day for the order to be effective that day. (See
"PURCHASE AND REDEMPTION OF SHARES")

HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Funds is distributed in the form of monthly
dividends (periodic dividends with respect to the International Equity Fund) to
Shareholders of record. Any capital gain is distributed at least annually.
Distributions are paid in additional Shares unless the Shareholder elects to
take the payment in cash. (See "DIVIDENDS")

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................................... 2
Fee Table............................................................................. 6
Financial Highlights.................................................................. 8
Fund Description...................................................................... 21
Investment Objectives................................................................. 21
Investment Policies................................................................... 22
Income Equity Fund.................................................................. 22
Value Momentum Fund................................................................. 22
Blue Chip Growth Fund............................................................... 23
Growth Fund......................................................................... 23
Emerging Growth Fund................................................................ 23
International Equity Fund........................................................... 24
Convertible Securities Fund......................................................... 25
Intermediate-Term Bond Fund......................................................... 25
Bond Fund........................................................................... 26
Government Securities Fund.......................................................... 26
Balanced Fund....................................................................... 27
California Intermediate Tax-Free Bond Fund.......................................... 27
</TABLE>

4
<PAGE> 148

<TABLE>
<CAPTION>
PAGE
--
<S> <C>
General............................................................................... 28
Money Market Instruments............................................................ 28
Illiquid and Restricted Securities.................................................. 28
California Municipal Securities..................................................... 29
Lending of Portfolio Securities..................................................... 29
Other Investments................................................................... 29
Risk Factors........................................................................ 30
Risks Associated with Convertible Securities........................................ 33
Portfolio Turnover.................................................................... 34
Purchase and Redemption of Shares..................................................... 34
Exchange Privileges................................................................... 35
Dividends............................................................................. 36
Taxes................................................................................. 36
Federal Taxation.................................................................... 36
California Taxes.................................................................... 39
Service Arrangements.................................................................. 40
The Advisor......................................................................... 40
The Sub-Advisors.................................................................... 42
Administrator....................................................................... 44
The Transfer Agent.................................................................. 44
Shareholder Service Plan............................................................ 44
Distributor......................................................................... 45
Banking Laws........................................................................ 45
Custodian........................................................................... 45
General Information................................................................... 45
Description of HighMark & Its Shares................................................ 45
Performance Information............................................................. 46
Miscellaneous....................................................................... 47
Description of Permitted Investments.................................................. 47
</TABLE>

5
<PAGE> 149

FEE TABLE
<TABLE>
<CAPTION>
VALUE CONVERTIBLE INTERMEDIATE-
INCOME MOMENTUM BLUE CHIP GROWTH EMERGING INTERNATIONAL SECURITIES TERM BOND
EQUITY FUND FUND GROWTH FUND FUND GROWTH FUND EQUITY FUND FUND FUND
FIDUCIARY FIDUCIARY FIDUCIARY FIDUCIARY FIDUCIARY FIDUCIARY FIDUCIARY FIDUCIARY
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES(a)
Maximum Sales Load
Imposed on
Purchases (as a
percentage of
offering
price)........... 0% 0% 0% 0% 0% 0% 0% 0%
Maximum Sales Load
Imposed on
Reinvested
Dividends (as a
percentage of
offering
price)........... 0% 0% 0% 0% 0% 0% 0% 0%
Deferred Sales Load
(as a percentage
of original
purchase price or
redemption
proceeds, as
applicable)...... 0% 0% 0% 0% 0% 0% 0% 0%
Redemption Fees (as
a percentage of
amount redeemed,
if
applicable)(b)... 0% 0% 0% 0% 0% 0% 0% 0%
Exchange Fee(a).... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
ANNUAL OPERATING
EXPENSES (as a
percentage of net
assets)
Management Fees
(after voluntary
reduction)(c).... 0.50% 0.60% 0.60% 0.60% 0.80% 0.95% 0.60% 0.50%
12b-1 Fees......... 0% 0% 0% 0% 0% 0% 0% 0%
Other Expenses
(after voluntary
reduction)(d).... 0.31% 0.21% 0.22% 0.30% 0.23% 0.41% 0.25% 0.25%
---- ---- ---- ---- ---- ---- ---- ----
Total Fund
Operating
Expenses (after
voluntary
reduction)(e).... 0.91% 0.81% 0.82% 0.90% 1.03% 1.36% 0.85% 0.75%
==== ==== ==== ==== ==== ==== ==== ====

<CAPTION>
CALIFORNIA
GOVERNMENT INTERMEDIATE
SECURITIES BALANCED TAX-FREE
BOND FUND FUND FUND BOND FUND
FIDUCIARY FIDUCIARY FIDUCIARY FIDUCIARY
SHARES SHARES SHARES SHARES
--------- ---------- --------- ------------
<S> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES(a)
Maximum Sales Load
Imposed on
Purchases (as a
percentage of
offering
price)........... 0% 0% 0% 0%
Maximum Sales Load
Imposed on
Reinvested
Dividends (as a
percentage of
offering
price)........... 0% 0% 0% 0%
Deferred Sales Load
(as a percentage
of original
purchase price or
redemption
proceeds, as
applicable)...... 0% 0% 0% 0%
Redemption Fees (as
a percentage of
amount redeemed,
if
applicable)(b)... 0% 0% 0% 0%
Exchange Fee(a).... $ 0 $ 0 $ 0 $ 0
ANNUAL OPERATING
EXPENSES (as a
percentage of net
assets)
Management Fees
(after voluntary
reduction)(c).... 0.50% 0.50% 0.60% 0%
12b-1 Fees......... 0% 0% 0% 0%
Other Expenses
(after voluntary
reduction)(d).... 0.25% 0.25% 0.30% 0.27%
---- ---- ---- ----
Total Fund
Operating
Expenses (after
voluntary
reduction)(e).... 0.75% 0.75% 0.90% 0.27%
==== ==== ==== ====
</TABLE>

6
<PAGE> 150

EXAMPLE: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Income Equity Fund Fiduciary Shares............................ $ 9 $29 $50 $112
Value Momentum Fund Fiduciary Shares........................... $ 8 $26 $45 $100
Blue Chip Growth Fund Fiduciary Shares......................... $ 8 $26 $46 $101
Growth Fund Fiduciary Shares................................... $ 9 $29 $50 $111
Emerging Growth Fund Fiduciary Shares.......................... $ 11 $33 $57 $126
International Equity Fund Fiduciary Shares..................... $ 14 $43 $74 $164
Convertible Securities Fund Fiduciary Shares................... $ 9 $27 $47 $105
Intermediate-Term Bond Fund Fiduciary Shares................... $ 8 $24 $42 $ 93
Bond Fund Fiduciary Shares..................................... $ 8 $24 $42 $ 93
Government Securities Fund Fiduciary Shares.................... $ 8 $24 $42 $ 93
Balanced Fund Fiduciary Shares................................. $ 9 $29 $50 $111
California Intermediate Tax-Free Bond Fund Fiduciary Shares.... $ 3 $ 9 $15 $ 34
</TABLE>

The purpose of the tables above is to assist an investor in the Funds in
understanding the various costs and expenses that a Shareholder will bear
directly or indirectly. For a more complete discussion of each Fund's annual
operating expenses, see SERVICE ARRANGEMENTS below. THE FOREGOING EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ---------------
(a) Certain entities (including Union Bank of California and its affiliates)
making investments in the Funds on behalf of their customers may charge
customers fees for services provided in connection with the investment in,
redemption of, and exchange of Shares. (See PURCHASE AND REDEMPTION OF
SHARES, EXCHANGE PRIVILEGES, and SERVICE ARRANGEMENTS below.)

(b) A wire redemption charge of $15 is deducted from the amount of a wire
redemption payment made at the request of a Shareholder. (See REDEMPTION OF
SHARES below.)

(c) Absent voluntary fee waivers, MANAGEMENT FEES would be, 0.50% for the
Fiduciary Shares of the California Intermediate Tax-Free Bond Fund.

(d) Absent voluntary fee waivers, OTHER EXPENSES would be 0.47% for the
Fiduciary Shares of the Growth and Balanced Funds, 0.48% for the Fiduciary
Shares of the Income Equity and Value Momentum Funds, 0.49% for the
Fiduciary Shares of the Blue Chip Growth and Intermediate-Term Bond Funds,
0.50% for the Fiduciary Shares of the Emerging Growth Fund, 0.68% for the
Fiduciary Shares of the International Equity Fund, 0.52% for the Fiduciary
Shares of the Convertible Securities Fund, 0.51% for the Fiduciary Shares of
the Bond Fund, 0.52% for the Fiduciary Shares of the Government Securities
Fund and 0.72% for the Fiduciary Shares of the California Intermediate
Tax-Free Bond Fund.

(e) Absent voluntary fee waivers, TOTAL FUND OPERATING EXPENSES would be: 1.07%
for the Fiduciary Shares of the Growth and Balanced Funds, 1.08% for the
Fiduciary Shares of the Income Equity and Value Momentum Funds, 1.09% for
the Fiduciary Shares of the Blue Chip Growth Fund, 1.30% for the Fiduciary
Shares of the Emerging Growth Fund, 1.63% for the Fiduciary Shares of the
International Equity Fund, 1.12% for the Fiduciary Shares of the Convertible
Securities Fund, 0.99% for the Fiduciary Shares of the Intermediate-Term
Bond Fund, 1.01% for the Fiduciary Shares of the Bond Fund, 1.02% for the
Fiduciary Shares of the Government Securities Fund and 1.22% for the
Fiduciary Shares of the California Intermediate Tax-Free Bond Fund.

7
<PAGE> 151

FINANCIAL HIGHLIGHTS

The tables below set forth certain financial information with respect to the
Fiduciary Shares of the Bond Fund, Growth Fund, and Income Equity Fund.
Financial highlights for the Funds for the period ended July 31, 1997 have been
derived from financial statements audited by Deloitte & Touche LLP, independent
auditors for HighMark, whose report thereon is included in the 1997 Annual
Report for the HighMark Funds, which is incorporated by reference into the
Statement of Additional Information. Financial highlights for the Funds prior to
the fiscal year ended July 31, 1996 have been derived from financial statements
examined by other auditors whose report thereon is on file with the Securities
and Exchange Commission.

The tables below set forth certain financial information with respect to the
Fiduciary Shares of the Intermediate-Term Bond Fund, the California Intermediate
Tax-Free Bond Fund, the Convertible Securities Fund, the Government Securities
Bond Fund, the Balanced Fund, the Value Momentum Fund, the Blue Chip Growth
Fund, the Emerging Growth Fund and the International Equity Fund. Upon
reorganizing as funds of HighMark Funds on April 28, 1997, Stepstone
Intermediate-Term Bond Fund became HighMark Intermediate-Term Bond Fund,
Stepstone California Intermediate Tax-Free Bond Fund became HighMark California
Intermediate Tax-Free Bond Fund, Stepstone Convertible Securities Fund became
HighMark Convertible Securities Fund, Stepstone Government Securities Fund
became HighMark Government Securities Fund, Stepstone Balanced Fund became
HighMark Balanced Fund, Stepstone Value Momentum Fund became HighMark Value
Momentum Fund, Stepstone Blue Chip Growth Fund became HighMark Blue Chip Growth
Fund, Stepstone Emerging Growth Fund became HighMark Emerging Growth Fund, and
Stepstone International Equity Fund became HighMark International Equity.
Financial highlights through January 31, 1997 represent the Institutional Class
Shares (now Fiduciary Shares) of Stepstone Intermediate-Term Bond, Stepstone
California Intermediate Tax-Free Bond, Stepstone Convertible Securities,
Stepstone Government Securities, Stepstone Balanced, Stepstone Value Momentum,
Stepstone Blue Chip Growth, Stepstone Emerging Growth, and Stepstone
International Equity Funds, and have been derived from financial statements
audited by Arthur Andersen LLP, independent auditors for the Stepstone Funds,

8
<PAGE> 152

INTERMEDIATE-TERM BOND FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, ------------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value,
Beginning of
Period............... $ 10.16 $ 10.62 $ 9.67 $ 10.72 $ 10.57 $ 10.49
------------ -------- -------- -------- -------- --------
Investment Activities
Net investment
income............ 0.309 0.599 0.609 0.589 0.598 0.650
Net realized and
unrealized gain
(loss) on
investments....... 0.138 (0.460) 0.951 (1.034) 0.352 0.409
------------ -------- -------- -------- -------- --------
Distributions
Net investment
income............ (0.310) (0.595) (0.609) (0.590) (0.595) (0.636)
Capital gains........ -- -- -- (0.015) (0.205) (0.343)
------------ -------- -------- -------- -------- --------
Net Asset Value, End of
Period............... $ 10.30 $ 10.16 $ 10.62 $ 9.67 $ 10.72 $ 10.57
========== ======== ======== ======== ======== ========
Total Return........... 4.54% 1.43% 16.58% (4.11)% 9.22% 10.47%
Net assets, end of
period (000)...... $152,676 $150,411 $132,942 $109,848 $130,308 $112,806
Ratio of expenses to
average net
assets............ 0.69%* 0.67% 0.68% 0.71% 0.69% 0.67%
Ratio of expenses to
average net assets
excluding fee
waivers........... 0.82%* 0.68% 0.68% 0.71% 0.69% 0.67%
Ratio of net
investment income
to average net
assets............ 6.17%* 5.93% 5.97% 5.89% 5.56% 6.16%
Ratio of net
investment income
to average net
assets excluding
fee waivers....... 6.04%* 5.92% 5.97% 5.89% 5.56% 6.16%
Portfolio turnover
rate................. 58% 106% 147% 95% 72% 88%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized.

9
<PAGE> 153

CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -----------------------------------------
1997 1997 1996 1995 1994(2)
------------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period.... $ 9.76 $ 9.85 $ 8.95 $ 10.04 $ 10.00
------------ ------ ------ ------- -------
Investment Activities
Net investment income................. 0.206 0.430 0.518 0.460 0.117
Net realized and unrealized gain
(loss) on investments.............. 0.256 (0.078) 0.873 (1.098) 0.028
------------ ------ ------ ------- -------
Distributions
Net investment income................. (0.215) (0.442) (0.487) (0.452) (0.105)
Capital Gains......................... -- -- -- -- --
------------ ------ ------ ------- -------
Net Asset Value, End of Period.......... $ 10.01 $ 9.76 $ 9.85 $ 8.95 $ 10.04
========== ====== ====== ======= =======
Total Return............................ 4.84% 3.72% 15.83% (6.33)% 5.01%*
Net assets, end of period (000)....... $ 11,292 $7,435 $4,196 $12,793 $22,197
Ratio of expenses to average net
assets............................. 0.21%* 0.20% 0.24% 0.50% 0.50%*
Ratio of expenses to average net
assets excluding fee waivers....... 0.91%* 0.85% 0.71% 0.72% 0.73%*
Ratio of net investment income to
average net assets................. 4.56%* 4.69% 4.97% 4.84% 4.31%*
Ratio of net investment income to
average net assets excluding fee
waivers............................ 3.85%* 4.04% 4.50% 4.62% 4.08%
Portfolio turnover rate................. 5% 6% 30% 22% 19%
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized
(2) Commenced operations on October 15, 1993.

10
<PAGE> 154

BOND FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period..... $ 10.23 $ 10.38 $ 10.11 $ 11.13 $ 11.02
------- ------- ------- ------- -------
Investment Activities
Net investment income.................. 0.628 0.660 0.640 0.630 0.700
Net realized and unrealized gain
(loss) on investments............... 0.421 (0.160) 0.270 (0.970) 0.350
------- ------- ------- ------- -------
Distributions
Net investment income.................. (0.609) (0.650) (0.640) (0.630) (0.700)
Capital gains.......................... -- -- -- -- --
------- ------- ------- ------- -------
Net Asset Value, End of Period........... $ 10.67 $ 10.23 $ 10.38 $ 10.11 $ 11.13
======= ======= ======= ======= =======
Total Return............................. 10.59% 4.81% 9.43% (3.14)% 10.07%
Net assets, end of period (000)........ $71,571 $60,374 $59,758 $64,185 $33,279
Ratio of expenses to average net
assets.............................. 0.85% 0.89% 0.92% 0.86% 0.93%
Ratio of expenses to average net assets
excluding fee waivers............... 1.42% 1.61% 1.64% 1.37% 1.55%
Ratio of net investment income to
average net assets.................. 6.11% 6.10% 6.35% 6.11% 6.41%
Ratio of net investment income to
average net assets excluding fee
waivers............................. 5.54% 5.38% 5.62% 5.60% 5.79%
Portfolio turnover rate.................. 14% 21% 36% 44% 59%
Average commission rate(A)............... n/a n/a n/a n/a n/a
</TABLE>

- ---------------
Amounts designated as "--" are either $0 or have been rounded to $0.
(A) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1995.

11
<PAGE> 155

CONVERTIBLE SECURITIES FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -------------------------------
1997 1997 1996 1995(3)
------------ ------- ------- -------
<S> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period............. $ 11.58 $ 10.43 $ 9.08 $ 10.00
------------ ------- ------- -------
Investment Activities
Net investment income.......................... 0.183 0.376 0.407 0.354
Net realized and unrealized gain (loss) on
investments................................. 0.833 1.423 1.350 (0.930)
------------ ------- ------- -------
Distributions
Net investment income.......................... (0.186) (0.378) (0.404) (0.343)
Capital gains.................................. -- (0.270) -- --
------------ ------- ------- -------
Net Asset Value, End of Period................... $ 12.41 $ 11.58 $ 10.43 $ 9.08
========== ======= ======= =======
Total Return..................................... 8.92% 17.72% 19.67% (5.83)%
Net assets, end of period (000)................ $ 25,338 $21,129 $16,668 $10,297
Ratio of expenses to average net assets........ 0.85%* 0.85% 0.85% 0.85%
Ratio of expenses to average net assets
excluding fee waivers....................... 1.00%* 0.85% 0.85% 0.85%
Ratio of net investment income to average net
assets...................................... 3.25%* 3.47% 4.14% 3.87%
Ratio of net investment income to average net
assets excluding fee waivers................ 3.10%* 3.47% 4.14% 3.87%
Portfolio turnover rate.......................... 33% 89% 46% 36%
Average commission rate(A)....................... 0.0647 0.0640 n/a n/a
</TABLE>

12
<PAGE> 156

GOVERNMENT SECURITIES FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -------------------------------
1997 1997 1996 1995(3)
------------ ------- ------- -------
<S> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period............. $ 9.44 $ 9.94 $ 9.07 $ 10.00
------------ ------- ------- -------
Investment Activities
Net investment income.......................... 0.268 0.524 0.556 0.491
Net realized and unrealized gain (loss) on
investments................................. 0.203 (0.505) 0.870 (0.950)
------------ ------- ------- -------
Distributions
Net investment income.......................... (0.269) (0.520) (0.556) (0.475)
Capital gains.................................. -- -- -- --
------------ ------- ------- -------
Net Asset Value, End of Period................... $ 9.64 $ 9.44 $ 9.94 $ 9.07
========== ======= ======= =======
Total Return..................................... 5.08% 0.34% 16.16% (4.49)%
Net assets, end of period (000)................ $ 57,256 $51,382 $46,725 $32,178
Ratio of expenses to average net assets........ 0.73%* 0.74% 0.75% 0.75%
Ratio of expenses to average net assets
excluding fee waivers....................... 0.88%* 0.74% 0.75% 0.75%
Ratio of net investment income to average net
assets...................................... 5.79%* 5.59% 5.89% 5.46%
Ratio of net investment income to average net
assets excluding fee waivers................ 5.64%* 5.59% 5.89% 5.46%
Portfolio turnover rate.......................... 40% 186% 239% 184%
Average commission rate(A)....................... n/a n/a n/a n/a
</TABLE>

13
<PAGE> 157

BALANCED FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, ------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of
Period....................... $ 15.04 $ 13.92 $ 11.45 $ 12.21 $ 11.50 $ 11.15
------------ -------- -------- -------- -------- --------
Investment Activities
Net investment income........ 0.228 0.422 0.415 0.390 0.394 0.413
Net realized and unrealized
gain (loss) on
investments............... 1.712 1.699 2.831 (0.756) 0.928 0.543
------------ -------- -------- -------- -------- --------
Distributions
Net investment income........ (0.228) (0.409) (0.417) (0.391) (0.391) (0.408)
Capital gains................ (0.290) (0.595) (0.362) (0.003) (0.221) (0.198)
------------ -------- -------- -------- -------- --------
Net Asset Value, End of
Period....................... $ 16.46 $ 15.04 $ 13.92 $ 11.45 $ 12.21 $ 11.50
========== ======== ======== ======== ======== ========
Total Return................... 13.35% 16.30% 28.93% (2.95)% 11.79% 8.86%
Net assets, end of period
(000)..................... $400,442 $307,531 $233,878 $167,434 $152,189 $100,474
Ratio of expenses to average
net assets................ 0.83%* 0.79% 0.80% 0.80% 0.69% 0.69%
Ratio of expenses to average
net assets excluding fee
waivers................... 0.98%* 0.79% 0.80% 0.80% 0.79% 0.79%
Ratio of net investment
income to average net
assets.................... 2.99%* 3.48% 3.20% 3.41% 3.35% 3.72%
Ratio of net investment
income to average net
assets excluding fee
waivers................... 2.85%* 3.48% 3.20% 3.41% 3.25% 3.62%
Portfolio turnover rate........ 10% 27% 26% 48% 49% 68%
Average commission rate(A)..... 0.0581 0.0604 n/a n/a n/a n/a
</TABLE>

14
<PAGE> 158

GROWTH FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-------------------------------------------------
1997 1996 1995 1994
------------- ------- ------- -------
<S> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period............. $ 12.58 $ 11.87 $ 9.76 $ 10.00
------------- ------- ------- -------
Investment Activities
Net investment income.......................... 0.057 0.120 0.150 0.050
Net realized and unrealized gain (loss) on
investments................................. 5.773 1.350 2.260 (0.240)
------------- ------- ------- -------
Distributions
Net investment income.......................... (0.053) (0.120) (0.150) (0.050)
Capital gains.................................. (0.996) (0.640) (0.150) --
------------- ------- ------- -------
Net Asset Value, end of period................... $ 17.36 $ 12.58 $ 11.87 $ 9.76
========== ======= ======= =======
Total Return..................................... 48.54% 12.72% 25.23% (1.87)%
Net assets, end of period (000)................ $ 297,879 $41,495 $25,096 $15,254
Ratio of expenses to average net assets........ 0.92% 0.93% 0.79% 0.77%
Ratio of expenses to average net assets
excluding fee waivers....................... 1.24% 1.67% 1.92% 2.61%
Ratio of net investment income to average net
assets...................................... 0.39% 0.98% 1.40% 0.86%
Ratio of net investment income to average net
assets excluding fee waivers................ 0.07% 0.23% 0.26% (0.98)%
Portfolio turnover rate.......................... 118% 79% 68% 123%
Average commission rate(A)....................... 0.0598 n/a n/a n/a
</TABLE>

15
<PAGE> 159

VALUE MOMENTUM FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of
Period..................... $ 21.57 $ 18.05 $ 13.40 $ 11.27 $ 12.76 $ 11.68
------------ -------- -------- -------- -------- -------
Investment Activities
Net investment income...... 0.132 0.436 0.331 0.318 0.292 0.310
Net realized and unrealized
gain (loss) on
investments............. 3.955 4.371 5.063 (0.817) 1.538 1.103
------------ -------- -------- -------- -------- -------
Distributions
Net investment income...... (0.176) (0.438) (0.337) (0.317) (0.290) (0.311)
Capital gains.............. -- (0.848) (0.408) (0.054) (0.030) (0.022)
------------ -------- -------- -------- -------- -------
Net Asset Value, End of
Period..................... $ 25.48 $ 21.57 $ 18.05 $ 13.40 $ 14.27 $ 12.76
========== ======== ======== ======== ======== =======
Total Return................. 19.06% 27.33% 40.88% (3.48)% 14.56% 12.33%
Net assets, end of period
(000)................... $463,433 $317,482 $222,065 $150,138 $140,609 $92,636
Ratio of expenses to
average net assets...... 0.78%* 0.79% 0.80% 0.81% 0.77% 0.68%
Ratio of expenses to
average net assets
excluding fee waivers... 0.94%* 0.79% 0.80% 0.81% 0.79% 0.78%
Ratio of net investment
income to average net
assets.................. 1.65%* 2.26% 2.07% 2.36% 2.19% 2.59%
Ratio of net investment
income to average net
assets excluding fee
waivers................. 1.49%* 2.26% 2.07% 2.36% 2.17% 2.49%
Portfolio turnover rate...... 1% 9% 20% 6% 5% 3%
Average commission rate(A)... 0.0600 0.0590 n/a n/a n/a n/a
</TABLE>

16
<PAGE> 160

INCOME EQUITY FUND

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of
Period............................ $ 14.27 $ 13.00 $ 11.92 $ 12.13 $ 11.42
---------- -------- -------- -------- --------
Investment Activities
Net investment income............. 0.372 0.420 0.440 0.390 0.380
Net realized and unrealized gain
(loss) on investments.......... 5.019 1.930 1.500 0.120 0.710
---------- -------- -------- -------- --------
Distributions
Net investment income............. (0.368) (0.420) (0.440) (0.390) (0.380)
Capital gains..................... (1.083) (0.660) (0.420) (0.330) --
---------- -------- -------- -------- --------
Net Asset Value, End of Period...... $ 18.21 $ 14.27 $ 13.00 $ 11.92 $ 12.13
======== ======== ======== ======== ========
Total Return........................ 40.13% 18.25% 17.26% 4.23% 9.75%
Net assets, end of period (000)... $352,725 $262,660 $221,325 $213,328 $104,840
Ratio of expenses to average net
assets......................... 0.99% 1.03% 1.06% 1.06% 1.15%
Ratio of expenses to average net
assets excluding fee waivers... 1.21% 1.27% 1.30% 1.10% 1.21%
Ratio of net investment income to
average net assets............. 2.39% 2.95% 3.59% 3.29% 3.27%
Ratio of net investment income to
average net assets excluding
fee waivers.................... 2.17% 2.71% 3.34% 3.24% 3.22%
Portfolio turnover rate............. 46% 42% 37% 34% 30%
Average commission rate(A).......... 0.0583 n/a n/a n/a n/a
</TABLE>

17
<PAGE> 161

BLUE CHIP GROWTH FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -------------------------------
1997 1997 1996 1995(7)
------------ ------- ------- -------
<S> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period............. $ 14.50 $ 12.63 $ 9.53 $ 10.00
------------ ------- ------- -------
Investment Activities
Net investment income.......................... 0.081 0.160 0.174 0.167
Net realized and unrealized gain (loss) on
investments................................. 2.818 2.449 3.311 (0.479)
------------ ------- ------- -------
Distributions
Net investment income.......................... (0.078) (0.162) (0.180) (0.158)
Capital gains.................................. -- (0.574) (0.203) --
------------ ------- ------- -------
Net Asset Value, End of Period................... $ 17.32 $ 14.50 $ 12.63 $ 9.53
========== ======= ======= =======
Total Return..................................... 20.08% 21.11% 36.95% (3.10)%
Net assets, end of period (000)................ $ 96,883 $80,682 $63,410 $39,319
Ratio of expenses to average net assets........ 0.80%* 0.84% 0.83% 0.85%
Ratio of expenses to average net assets
excluding fee waivers....................... 0.95%* 0.84% 0.83% 0.85%
Ratio of net investment income to average net
assets...................................... 1.09%* 1.21% 1.54% 1.84%
Ratio of net investment income to average net
assets excluding fee waivers................ 0.94%* 1.21% 1.54% 1.84%
Portfolio turnover rate.......................... 54% 80% 69% 89%
Average commission rate(A)....................... 0.0520 0.0598 n/a n/a
</TABLE>

18
<PAGE> 162

EMERGING GROWTH FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED FOR THE YEARS ENDED JANUARY 31,
JULY 31, -------------------------------
1997 1997 1996 1995(7)
------------ ------- ------- -------
<S> <C> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period............. $ 13.50 $ 11.94 $ 9.42 $ 10.00
------------ ------- ------- -------
Investment Activities
Net investment income.......................... 0.014 0.008 0.026 0.086
Net realized and unrealized gain (loss) on
investments................................. 0.888 2.556 2.807 (0.535)
------------ ------- ------- -------
Distributions
Net investment income.......................... (0.012) (0.009) (0.033) (0.080)
Capital gains.................................. -- (0.991) (0.277) (0.051)
------------ ------- ------- -------
Net Asset Value, End of Period................... $ 14.39 $ 13.50 $ 11.94 $ 9.42
========== ======= ======= =======
Total Return..................................... 6.70% 21.79% 30.24% (4.48)%
Net assets, end of period (000)................ $ 66,336 $57,156 $41,770 $23,928
Ratio of expenses to average net assets........ 1.01%* 1.04% 1.05% 1.05%
Ratio of expenses to average net assets
excluding fee waivers....................... 1.16%* 1.04% 1.05% 1.05%
Ratio of net investment income to average net
assets...................................... 0.26%* 0.06% 0.22% 1.01%
Ratio of net investment income to average net
assets excluding fee waivers................ 0.10%* 0.06% 0.22% 1.01%
Portfolio turnover rate.......................... 116% 134% 131% 123%
Average commission rate(A)....................... 0.0583 0.0583 n/a n/a
</TABLE>

19
<PAGE> 163

INTERNATIONAL EQUITY FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH FOR THE YEARS ENDED
PERIOD ENDED JANUARY 31,
JULY 31, -------------------
1997 1997 1996(8)
------------ ------- -------
<S> <C> <C> <C>
FIDUCIARY SHARES
Net Asset Value, Beginning of Period....................... $ 34.52 $ 37.49 $ 33.51
------------ ------- -------
Investment Activities
Net investment income.................................... 0.212 0.220 0.447
Net realized and unrealized gain (loss) on investments... 3.958 (0.965) 4.084
------------ ------- -------
Distributions
Net investment income.................................... -- (0.812) (0.446)
Capital gains............................................ -- (1.416) (0.105)
------------ ------- -------
Net Asset Value, End of Period............................. $ 38.69 $ 34.52 $ 37.49
========== ======= =======
Total Return............................................... 12.08% (2.14)% 13.56%
Net Assets, end of period (000).......................... $ 52,467 $46,373 $44,188
Ratio of expenses to average net assets.................. 1.22%* 1.18% 1.16%
Ratio of expenses to average net assets excluding fee
waivers............................................... 1.41%* 1.28% 1.36%
Ratio of net investment income to average net assets..... 1.16%* 0.60% 1.31%
Ratio of net investment income to average net assets
excluding fee waivers................................. 0.97%* 0.50% 1.11%
Portfolio turnover rate.................................... 18% 29% 21%
Average commission rate(A)................................. 0.0250 0.0235 n/a
</TABLE>

20
<PAGE> 164

FUND DESCRIPTION

HighMark is an open-end, diversified, registered investment company that
currently offers units of beneficial interest ("Shares") in sixteen separate
investment portfolios ("Funds"). All of the Funds are advised by Pacific
Alliance, a division of Union Bank of California, N.A. (the "Adviser").
Shareholders may purchase Shares of selected Funds through three separate
classes (Class A and Class B Shares (collectively, the "Retail Shares") and
Fiduciary Shares). These classes may have different sales charges and other
expenses, which may affect performance. Information regarding HighMark's other
Funds and other classes is contained in separate prospectuses that may be
obtained from HighMark's Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-433-6884.

For information concerning those investors who qualify to purchase Fiduciary
Shares, see PURCHASE AND REDEMPTION OF SHARES below. (Fiduciary Shares may be
hereinafter referred to as "Shares.")

INVESTMENT OBJECTIVES

The investment objectives of the Funds are as follows:

The VALUE MOMENTUM FUND seeks long-term capital growth with a secondary
objective of income.

The BLUE CHIP GROWTH FUND seeks long-term capital growth by investing in a
diversified portfolio of common stocks and other equity securities of seasoned,
large capitalization companies.

The GROWTH FUND seeks long-term capital appreciation through investments in
equity securities. The production of current income is an incidental objective.

The EMERGING GROWTH FUND seeks long-term growth of capital by investing in a
diversified portfolio of equity securities of small capitalization, emerging
growth companies.

The INTERNATIONAL EQUITY FUND seeks to provide long-term capital appreciation
by investing primarily in a diversified portfolio of equity securities of
non-U.S. issuers.

The CONVERTIBLE SECURITIES FUND seeks a high level of current income and
capital appreciation by investing in convertible securities.

The INTERMEDIATE-TERM BOND FUND seeks total return through investments in
fixed-income securities.

The BOND FUND seeks current income through investments in long-term,
fixed-income securities.

The GOVERNMENT SECURITIES FUND seeks to achieve total return consistent with
the preservation of capital by investing in a diversified portfolio of
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities.

21
<PAGE> 165

The BALANCED FUND seeks capital appreciation and income. Conservation of
capital is a secondary consideration.

The CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND seeks to provide high current
income that is exempt from federal and State of California income taxes.

INVESTMENT POLICIES

Income Equity Fund

The Income Equity Fund generally invests in stocks with favorable, long-term
fundamental characteristics when their current relative yields are at the upper
end of their historical yield ranges. Frequently, these stocks are out of favor
in the financial community and investors see little opportunity for price
appreciation. The Fund may also invest in major U.S. corporations in a mature
stage of development or operating in slower areas of the economy. While it is
anticipated that a significant part of the total growth in asset value
experienced by the Income Equity Fund will result from companies' improving
prospects (although there can be no assurance that this will in fact occur),
dividends will provide a substantial portion of the Fund's total return. When
yields on stocks held by the Income Equity Fund drop to the lower end of their
historical ranges, the Fund may begin to reduce its holdings. Similarly, if
there is a significant fundamental change that impairs a company's ability to
pay dividends, or if the yield on a stock dips below the yield of the general
market, the Income Equity Fund may eliminate its holdings in these stocks.

Value Momentum Fund

22
<PAGE> 166

momentum. Securities purchased will generally have a medium to high market
capitalization. A majority of the securities in which the Value Momentum Fund
invests will be dividend paying.

Blue Chip Growth Fund

Under normal market conditions, the Blue Chip Growth Fund will invest at least
65% of its total assets in equity securities, including common stocks, warrants
to purchase common stocks, ADRs, preferred stocks and securities (including debt
securities) convertible into or exercisable for common stocks. The Fund
primarily invests in equity securities of seasoned, large capitalization
companies. A seasoned company is generally a company with an operating history
of 3 years or more. A large capitalization company is generally a company with
capitalization in excess of $1.0 billion. A majority of the Fund's equity
investments ordinarily will consist of dividend-paying securities.

Growth Fund

Under normal market conditions, the Growth Fund will invest at least 65% of
its total assets in equity securities, including common stocks, warrants to
purchase common stocks, ADRs, preferred stocks and securities (including debt
securities) convertible into or exercisable for common stocks, of
growth-oriented companies. The Growth Fund emphasizes a well-diversified
portfolio of medium to large capitalization growth companies (capitalization in
excess of $500 million) with a record of above average growth in earnings. The
Fund focuses on companies that the Advisor believes to have enduring quality and
above average earnings growth. Among the criteria the Fund uses to screen for
stock selection are earnings growth, return on capital, brand identity,
recurring revenues, price and quality of management team.

Emerging Growth Fund

23
<PAGE> 167

special equity situation may involve a significant change from a company's past
experiences, the uncertainties in the appraisal of the future value of the
company's equity securities and the risk of a possible decline in the value of
the Emerging Growth Fund's investments are significant.

International Equity Fund

Under normal market conditions, at least 65% of the International Equity
Fund's assets will be invested in the following equity securities of non-U.S.
issuers: common stocks, securities convertible into common stocks, preferred
stocks, warrants and rights to purchase common stock. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
securities of issuers organized under the laws of at least five countries other
than the United States that are included in the Morgan Stanley Capital
International Europe, Australia and Far East Index (the "EAFE Index").(1)
Countries may be over- or under-weighted in comparison to the EAFE Index based
upon the Advisor's and Sub-Advisors's view of forecasted rates of returns.
Regional and individual country weightings, therefore, may vary from the EAFE
Index benchmark. The Advisor and Sub-Advisor will select individual securities
for the Fund on the basis of their growth opportunities or undervaluation in
relation to other securities. The Fund expects its investments to emphasize
companies with market capitalizations in excess of $100,000,000.

The Fund will typically invest in equity securities listed on recognized
foreign exchanges, but may also invest up to 15% of its total assets in
securities traded in over-the-counter markets. Equity securities of non-U.S.
issuers may also be purchased in the form of sponsored or unsponsored ADRs and
sponsored or unsponsored European Depositary Receipts ("EDRs").

The Fund may enter into forward foreign currency contracts as a hedge against
possible variations in foreign exchange rates. A forward foreign currency
contract is a commitment to purchase or sell a specified currency at a specified
date, at a specified price. The Fund may enter into forward foreign currency
contracts to hedge a specific security transaction or to hedge a portfolio
position. These contracts may be bought and sold to protect the Fund, to some
degree, against a possible loss resulting from an adverse change in the
relationship between foreign currencies. The Fund may also invest in options on
currencies.

The premium paid on options on securities positions will not exceed 10% of the
Fund's net assets at the time such options are entered into by the Fund. The
aggregate premium paid on all options on stock indices will not exceed 20% of
the Fund's total assets.

The Fund's remaining assets may be invested in investment grade bonds and
debentures issued by non-U.S. or U.S. companies, obligations of supranational
entities, securities issued or guaranteed by foreign and U.S. governments, and
foreign and U.S. commercial paper. Certain of these instruments may have
floating or variable interest rate provisions. In addition, the Fund may invest
in securities of issuers whose principal activities are in countries with
emerging markets. The Fund defines an emerging market country as any country
whose economy and market the World Bank or the United Nations considers to be
emerging or developing. The Fund may also purchase shares of closed-end
investment companies that invest in the

- ---------------

1 "MSCI-EAFE Index" is a registered service mark of Morgan Stanley Capital
International which does not sponsor and is in no way affiliated with the
International Equity Fund.

24
<PAGE> 168

securities of issuers in a single country or region and shares of U.S.
registered or foreign registered open-end management investment companies.

Convertible Securities Fund

Under normal market conditions, at least 65% of the Convertible Securities
Fund's assets will be invested in convertible securities consisting of bonds,
debentures, notes and preferred stocks each of which are convertible into common
stock. In general, a convertible security is a fixed-income security such as a
bond (which typically pays a fixed annual rate of interest) or preferred stock
(which typically pays a fixed dividend), that may be converted at a stated price
within a specified period of time into a specified number of shares of common
stock of the issuing company, or of a different company. A convertible security
may be subject to redemption by the issuer, but only after a particular date and
under certain circumstances (including a specified price) established upon
issue. If a convertible security held by the Fund is called for redemption, the
Fund could be required to tender it for redemption, convert it into the
underlying common stock, or sell it to a third party. Common stock received upon
conversion will be sold when, in the opinion of the Sub-Advisor, it is advisable
to do so.

Because of its conversion feature, the market value of convertible preferred
stock tends to move together with the market value of the underlying common
stock. As a result, the Fund's selection of convertible securities is based, to
a great extent, on the potential for capital appreciation that may exist in the
underlying common stocks. The value of convertible securities is also affected
by prevailing interest rates, the credit quality of the issuer and any call
provisions. Investments in convertible securities generally entail less
volatility than investments in the common stocks of the same issuers.
Nevertheless, it is the fixed income component of these securities that is often
deemed by the ratings agencies to be high risk or speculative. The Fund may
invest up to 35% of its assets in convertible bonds rated lower than Baa by
Moody's or BBB by S&P and as low as Caa by Moody's or CCC by S&P, which are
lower-quality, higher-yielding, high-risk debt securities (commonly known as
"junk bonds"). The Fund may also invest in unrated convertible securities which,
in the Sub-Advisor's opinion, are of comparable quality to such rated
securities. See "Risk Factors."

In the event that a security owned by the Fund is downgraded below the stated
ratings categories, the Advisor or Sub-Advisor will take appropriate action with
regard to the security.

The Fund may invest any remaining assets in common stocks; securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities;
corporate bonds rated Baa or better by Moody's or BBB or better by S&P
(investment grade bonds); shares of other investment companies with similar
investment objectives; high grade commercial paper; money market funds; money
market instruments and cash; floating and variable rate notes; repurchase
agreements; dollar-denominated securities of foreign issuers; and Standard and
Poor's Depositary Receipts ("SPDRs").

Intermediate-Term Bond Fund

25
<PAGE> 169

recognized statistical rating organization ("NRSRO") or determined by the
Advisor to be of comparable quality; (ii) Yankee Bonds and Eurodollar
instruments; (iii) notes or bonds issued by the U.S. Government and its agencies
and instrumentalities (such as Government National Mortgage Association ("GNMA")
securities); (iv) mortgage-backed securities, including privately issued
mortgage-backed securities and readily-marketable asset-backed securities, which
must be rated at the time of purchase as investment grade, or be determined by
the Advisor to be of comparable quality; (v) securities issued or guaranteed by
foreign governments, their political subdivisions, agencies or
instrumentalities; (vi) obligations of supranational entities such as the World
Bank and the Asian Development Bank; and (vii) zero coupon obligations. In the
event that a security owned by the Fund is downgraded below the stated rating
categories, the Advisor will take appropriate action with regard to that
security. The remainder of the Fund's assets may be invested in money market
instruments.

The dollar-weighted average portfolio maturity of the Intermediate-Term Bond
Fund will be from three to ten years.

Bond Fund

The dollar-weighted average portfolio maturity of the Bond Fund will be from
five to twenty years.

Government Securities Fund

Under normal market conditions, the Government Securities Fund will invest at
least 80% of its assets in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, including mortgage-backed
securities issued or guaranteed by U.S. government agencies such as GNMA, the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC") and repurchase agreements backed by such securities. The
Fund may invest any remaining assets in corporate bonds that are rated at the
time of purchase as investment grade or determined by the Sub-Advisor to be of

26
<PAGE> 170

comparable quality; Yankee Bonds, including sovereign, supranational and
Canadian bonds; shares of other investment companies with similar investment
objectives; commercial paper; money market funds; privately issued
mortgage-backed and other readily-marketable asset-backed securities; and money
market instruments and cash.

The Sub-Advisor will seek to enhance the yield of the Fund by taking advantage
of yield disparities or other factors that occur in the government securities
and money markets. The Fund may dispose of any security prior to its maturity if
such disposition and reinvestment of the proceeds are expected to enhance its
yield consistent with the Sub-Advisor's judgment as to a desirable maturity
structure or if such disposition is believed to be advisable due to other
circumstances or considerations. The Fund will seek to achieve capital gains by
taking advantage of price appreciation caused by interest rate and credit
quality changes.

Balanced Fund

Equity securities include common stocks, warrants to purchase common stocks,
ADRs, preferred stocks, securities (including debt securities) convertible into
or exercisable for common stocks and SPDRs. The Balanced Fund's fixed-income
investments consist of bonds, debentures, notes, zero-coupon securities, all
forms of mortgage-related securities (including collateralized mortgage
obligations), and obligations issued or guaranteed by the U.S. or foreign
Governments or their agencies or instrumentalities. Privately issued
mortgage-backed securities must be rated in one of the top two categories by at
least one NRSRO as defined below. In addition to mortgage-backed securities, the
Balanced Fund may invest in other asset-backed securities including, but not
limited to, those backed by company receivables, truck and auto loans, leases,
and credit card or other receivables.

In the event that a security owned by the Fund is downgraded below the stated
rating categories, the Advisor will take appropriate action with regard to that
security.

California Intermediate Tax-Free Bond Fund

27
<PAGE> 171

regular federal and State of California personal income taxes ("California
Municipal Securities"). The Fund may also invest in bonds and notes of other
states, territories, and possessions of the U.S. and their agencies,
authorities, instrumentalities and political sub-divisions which are exempt from
federal income taxes, and in shares of other investment companies, specifically
money market funds, which have similar investment objectives.

GENERAL

Money Market Instruments

Under normal market conditions, money market instruments may comprise up to
35% of the total assets of each Equity Fund, and the International Equity,
Convertible Securities, Intermediate-Term Bond and Bond Funds, up to 25% of the
Balanced Fund's total assets and up to 20% of the Government Securities Fund's
total assets. When market conditions indicate a temporary "defensive" investment
strategy as determined by the Advisor, a Fund may invest more than the above
stated amount of its total assets in money market instruments, and the
California Intermediate Tax-Free Bond Fund may invest more than 20% of its total
assets in municipal obligations of other states or taxable money market
instruments including repurchase agreements. A Fund will not be pursuing its
investment objective to the extent that a substantial portion of its assets are
invested in money market instruments (or taxable money market instruments for
the California Intermediate Tax-Free Bond Fund).

Illiquid and Restricted Securities

28
<PAGE> 172

make it difficult to ascertain the market value of the illiquid securities. Each
Fund may purchase restricted securities which have not been registered under the
Securities Act of 1933 (e.g., Rule 144A Securities and Section 4(2) commercial
paper) subject to policies approved by the Board of Trustees. See INVESTMENT
RESTRICTIONS in the Statement of Additional Information.

California Municipal Securities

Certain of the obligations in which the Fund may invest may be variable or
floating rate instruments and may involve a conditional or unconditional demand
feature.

Lending of Portfolio Securities

Other Investments

The Funds may enter into repurchase agreements and reverse repurchase
agreements.

The Funds may enter into forward commitments or purchase securities on a
"when-issued" basis. Each Fund expects that commitments by a Fund to enter into
forward commitments or purchase when-issued securities will not exceed 25% of
the value of the Fund's total assets under normal market conditions. The Funds
do not intend to purchase when-issued securities or forward commitments for
speculative or leveraging purposes but only for the purpose of acquiring
portfolio securities.

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The Funds, other than the California Intermediate Tax-Free Bond Fund, may also
invest in money market instruments, money market funds, and cash.

Each Fund may invest in other registered investment companies with similar
investment objectives. A Fund may invest up to 5% of its total assets in the
shares of any one registered investment company, but may not own more than 3% of
the securities of any one registered investment company or invest more than 10%
of its assets in the securities of other registered investment companies. In
accordance with an exemptive order issued to HighMark by the Securities and
Exchange Commission, such other registered investment company securities may
include shares of a money market fund of HighMark, and may include registered
investment companies for which the Advisor or Sub-Advisor to a Fund of HighMark,
or an affiliate of such Advisor or Sub-Advisor, serves as investment advisor,
administrator or distributor. Because other registered investment companies
employ an investment advisor, such investment by a Fund may cause Shareholders
to bear duplicative fees. The Advisor will waive its fees attributable to the
assets of the investing Fund invested in a money market fund of HighMark, and,
to the extent required by applicable law, the Advisor will waive its fees
attributable to the assets of the Fund invested in any investment company. Some
Funds are subject to additional restrictions on investments in other investment
companies. See INVESTMENT RESTRICTIONS in the Statement of Additional
Information.

The International Equity Fund and the Fixed Income Funds may invest in futures
and options on futures for the purpose of achieving the Fund's objectives and
for adjusting portfolio duration. These Funds may invest in futures and related
options based on any type of security or index traded on U.S. or foreign
exchanges or over the counter, as long as the underlying security, or securities
represented by an index, are permitted investments of the Fund. The
International Equity Fund may enter into index contracts and contracts for
foreign currencies. These Funds may enter into futures contracts and related
options only to the extent that obligations under such contracts or transactions
represent not more than 10% of the Fund's assets.

For further information, see DESCRIPTION OF PERMITTED INVESTMENTS.

Risk Factors

To the extent a Fund invests in equity securities, that Fund's Shares will
fluctuate in value, and thus may be more suitable for long-term investors who
can bear the risk of short-term fluctuations.

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While debt securities normally fluctuate less in price than equity securities,
there have been extended periods of cyclical increases in interest rates that
have caused significant declines in debt securities prices. Certain fixed-income
securities which may be purchased by a Fund such as zero-coupon obligations,
mortgage-backed and asset-backed securities, and collateralized mortgage
obligations ("CMOs") will have greater price volatility then other fixed-income
obligations. Because declining interest rates may lead to prepayment of
underlying mortgages, automobile sales contracts or credit card receivables, the
prices of mortgage-related and asset-backed securities may not rise with a
decline in interest rates. Mortgage-backed and asset-backed securities and CMOs
are extremely sensitive to the rate of principal prepayment. Similarly, callable
corporate bonds also present risk of prepayment.

During periods of falling interest rates, securities that can be called or
prepaid may decline in value relative to similar securities that are not subject
to call or prepayment.

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Each of the International Equity Fund, the Fixed Income Funds and the Balanced
Fund may invest in securities issued or guaranteed by foreign corporations or
foreign governments, their political subdivisions, agencies or instrumentalities
and obligations of supranational entities such as the World Bank and the Asian
Development Bank. There may be certain risks connected with investing in foreign
securities, including risks of adverse political and economic developments
(including possible governmental seizure or nationalization of assets), the
possible imposition of exchange controls or other governmental restrictions,
including less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad, and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, which reduce yield,
and may be less marketable than comparable U.S. securities. The value of the
Fund's investments denominated in foreign currencies will depend on the relative
strengths of those currencies and the U.S. dollar, and the Fund may be affected
favorably or unfavorably by changes in the exchange rates or exchange control
regulations between foreign currencies and the U.S. dollar. Changes in foreign
currency exchange rates may also affect the value of dividends and interest
earned, gains and losses realized on the sale of securities, and net investment
income and gains, if any, to be distributed to Shareholders by the Fund. To the
extent that a Fund may invest in securities of foreign issuers that are not
traded on any exchange, there is a further risk that these securities may not be
readily marketable. The Convertible Securities Fund, the Fixed Income Funds and
the Balanced Fund will not hold foreign currency for investment purposes.

Forward foreign currency contracts do not eliminate fluctuations in the
underlying prices of securities. Rather, they simply establish a rate of
exchange which one can achieve at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency at the same time, they tend to limit any
potential gain which might result, should the value of such currency increase.

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and municipal issuers to pay interest or repay principal on their obligations.
In addition, during the first half of the decade, California faced severe
economic and fiscal conditions and experienced recurring budget deficits that
caused it to deplete its available cash resources and to become increasingly
dependent upon external borrowings to meet its cash needs.

Risks Associated with Convertible Securities

Convertible securities include corporate bonds, notes or preferred stocks that
can be converted into common stocks or other equity securities. Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation. Because convertible securities can be
converted into common stock, their values will normally vary in some proportion
with those of the underlying common stock. Convertible securities usually
provide a higher yield than the underlying common stock, however, so that the
price decline of a convertible security may sometimes be less substantial than
that of the underlying common stock. The value of convertible securities that
pay dividends or interest, like the value of all fixed-income securities,
generally fluctuates inversely with changes in interest rates. Warrants have no
voting rights, pay no dividends and have no rights with respect to the assets of
the corporation issuing them. They do not represent ownership of the securities
for which they are exercisable, but only the right to buy such securities at a
particular price. The Funds, other than the Convertible Securities Fund, will
not purchase any convertible debt security or convertible preferred stock unless
it has been rated as investment grade at the time of acquisition by a NRSRO or
that is not rated but is determined to be of comparable quality by the Advisor.

Investments in lower-rated debt securities (i.e., securities rated lower than
BBB by S&P or Baa by Moody's), in which the Fund may invest, bear certain risks,
including the risk that such securities may be thinly traded, which can
adversely affect the price at which these securities can be sold and can result
in high transaction costs. Market quotations may not be available, and
therefore, judgment plays a greater role in valuing lower-rated debt securities
than securities for which more extensive quotations and last sale information
are available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-rated debt securities,
and the Fund's ability to dispose of these securities.

The market price of lower-rated debt securities may decline significantly in
periods of general economic difficulty which may follow periods of rising
interest rates. During an economic downturn or a prolonged period of rising
interest rates, the ability of issuers of lower-rated debt to meet their payment
obligation on these securities may be impaired.

The Convertible Securities Fund may invest in securities which are rated as
low as 'Caa' by Moody's or 'CCC' by S&P. Securities rated 'Caa' by Moody's are
of poor standing and may be in default or may present elements of danger with
respect to principal or interest. Debt rated 'CCC' by S&P is regarded as having
speculative characteristics with respect to capacity to pay interest and repay
principal. In the event of adverse business, financial, and economic conditions,
debt rated 'CCC' is not likely to have the capacity to repay principal.

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PORTFOLIO TURNOVER

A Fund's portfolio turnover rate will not be a factor preventing a sale or
purchase when the Advisor believes investment considerations warrant. Each of
the Funds' portfolio turnover rate may vary greatly from year to year as well as
within a particular year. High portfolio turnover rates generally will result in
correspondingly higher brokerage and other transactions costs to the Funds and
could involve the realization of capital gains that would be taxable when
distributed to Shareholders of the relevant Fund. See FEDERAL TAXATION.

PURCHASE AND REDEMPTION OF SHARES

The Income Equity, Value Momentum, Growth and Balanced Funds are divided into
three classes of Shares, Class A, Class B and Fiduciary. The Emerging Growth,
Intermediate-Term Bond, Bond and California Intermediate Tax-Free Bond Funds are
divided into two classes of Shares, Class A and Fiduciary, and the Blue Chip
Growth, International Equity, Convertible Securities and Government Securities
Funds are only offered in a single class of Shares, Fiduciary. Only the
following investors qualify to purchase a Fund's Fiduciary Shares: (i)
fiduciary, advisory, agency, custodial and other similar accounts maintained
with Union Bank of California, N.A. or its affiliates; (ii) SelectIRA accounts
established with The Bank of California, N.A. and invested in any of HighMark's
Equity or Income Funds prior to June 20, 1994, which have remained continuously
open thereafter and which are not considered to be fiduciary accounts; (iii)
Shareholders who currently own Shares of HighMark's Equity or Income Funds that
were purchased prior to June 20, 1994 within an account registered in their name
with the Funds; and (iv) present and retired directors, officers and employees
(and their spouses and children under the age of 21) of Union Bank of
California, N.A., HighMark's current or former distributors or their respective
affiliated companies who currently own Shares of HighMark Funds which were
purchased before April 30, 1997. For a description of investors who qualify to
purchase Retail Shares, see the Retail Shares prospectus of the Funds.

Purchases and redemptions of Shares of the Funds may be made on days on which
the New York Stock Exchange is open for business ("Business Days"). The minimum
initial investment is generally $1,000 per Fund and the minimum subsequent
investment is generally only $100 per Fund. For present and retired directors,
officers, and employees (and their spouses and children under the age of 21) of
Union Bank of California, SEI Investments Distribution Co. and their affiliates,
the minimum initial investment is $250 per Fund and the minimum subsequent
investment is $50 per Fund. A Fund's initial and subsequent minimum purchase
amounts may be waived if purchases are made in connection with Individual
Retirement Accounts, Keoghs, payroll deduction plans, or 401(k) or similar
plans. However, the minimum investment may be waived in the Distributor's
discretion. Shareholders may place orders by telephone.

Purchase orders will be effective if the Distributor receives an order before
1:00 p.m., Pacific time (4:00 p.m., Eastern time) and the custodian receives
Federal funds before the close of business on the next Business Day. The
purchase price of Shares of a Fund is the net asset value next determined after
a purchase order is received and accepted by HighMark. The net asset value per
Share of a Fund is determined by dividing the total market value of a Fund's
investments and other assets, less any liabilities, by the total number of
outstanding Shares of a Fund. Net asset value per share is determined daily as
of 1:00 p.m., Pacific time (4:00 p.m., Eastern time) on any Business Day.
Purchases will be made in full and fractional Shares of

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<PAGE> 178

HighMark calculated to three decimal places. HighMark reserves the right to
reject a purchase order when the Distributor or Advisor determines that it is
not in the best interest of HighMark and/or its Shareholders to accept such
order.

Shares of the Funds are offered only to residents of states in which the
Shares are eligible for purchase.

Shareholders who desire to redeem shares of HighMark must place their
redemption orders prior to 1:00 p.m., Pacific time (4:00 p.m., Eastern time), on
any Business Day for the order to be accepted on that Business Day. The
redemption price is the net asset value of the Fund next determined after
receipt by the Distributor of the redemption order. Payment on redemption will
be made as promptly as possible and, in any event, within seven calendar days
after the redemption order is received. The Funds reserve the right to make
payment for redemptions in securities rather than cash.

Neither HighMark's transfer agent nor HighMark will be responsible for any
loss, liability, cost or expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes to be genuine. HighMark and
its transfer agent will each employ reasonable procedures to confirm that
telephone instructions are genuine. Such procedures may include taping of
telephone conversations. If market conditions are extraordinarily active or
other extraordinary circumstances exist, and you experience difficulties placing
redemption orders by telephone, you may wish to consider placing your order by
other means.

EXCHANGE PRIVILEGES

Each Fund's Shares may be exchanged for Shares of the class of the various
other Funds of HighMark which the Shareholder qualifies to purchase directly so
long as the Shareholder maintains the applicable minimum account balance in each
Fund in which he or she owns Shares and satisfies the minimum initial and
subsequent purchase amounts of the Fund into which the Shares are exchanged.
Shareholders may exchange their Fiduciary Shares for Fiduciary Shares of another
Fund on the basis of the relative net asset value of the Fiduciary Shares
exchanged. Shareholders may also exchange Fiduciary Shares of a Fund for Retail
Shares of another Fund. Under such circumstances, the cost of the acquired
Retail Shares will be the net asset value per share plus the appropriate sales
load.

Certain entities (including participating organizations and Union Bank of
California and its affiliates), however, may charge customers a fee with respect
to exchanges made on the customer's behalf. Information

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about these charges, if any, can be obtained by the entity effecting the
exchange and this Prospectus should be read in conjunction with that
information.

DIVIDENDS

The net investment income of each of the Funds is declared and paid monthly,
with the exception of the International Equity Fund which is declared and paid
periodically, as a dividend to Shareholders of record at the close of business
on the day of declaration. Net realized capital gains are distributed at least
annually to Shareholders of record.

Shareholders will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of a Fund at net asset
value as of the date of declaration (which is also the ex-dividend date), unless
the Shareholder elects to receive such dividends or distributions in cash.
Shareholders wishing to receive their dividends in cash (or wishing to revoke a
previously made election) must notify the transfer agent in writing at P.O. Box
8416, Boston, MA 02266-8416, and such election (or revocation thereof) will
become effective with respect to dividends and distributions having record dates
after notice has been received. Dividends paid in additional Shares receive the
same tax treatment as dividends paid in cash.

TAXES

Federal Taxation

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to a dividend from a Fund if the corporate Shareholder held its Shares on the
ex-dividend date and for at least 45 other days during the 90-day period
surrounding the ex-dividend date. Distributions by the Fund of net gains on
capital assets held for more than one year but not more than 18 months and of
net gains on capital assets held for more than 18 months are taxable to
Shareholders as such, regardless of how long the Shareholder has held Shares of
the Fund. Such distributions are not eligible for the dividends received
deduction. If a Shareholder disposes of Shares in a Fund at a loss before
holding such Shares for longer than six months, such loss will be treated as a
long-term capital loss to the extent the Shareholder has received long-term
capital gain distributions on the Shares.

Because all of the California Intermediate Tax-Free Bond Fund's net investment
income is expected to be derived from interest, it is anticipated that no part
of any distribution will be eligible for the federal dividends received
deduction for corporations. The Fund is not managed to generate any long-term
capital gains and, therefore, does not foresee paying any significant "capital
gains dividends" as described in the Code.

The California Intermediate Tax-Free Bond Fund may at times purchase
California Municipal Securities at a discount from the price at which they were
originally issued. For federal income tax purposes, some or all of this market
discount will be included in the California Intermediate Tax-Free Bond Fund's
ordinary income and will be taxable to Shareholders as such when it is
distributed to them.

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Under the Code, dividends attributable to interest on certain private activity
bonds issued after August 7, 1986 must be included in alternative minimum
taxable income for the purpose of determining liability (if any) for the federal
alternative minimum tax. In addition, exempt-interest dividends will be included
in a corporation's "adjusted current earnings" for purposes of the alternative
minimum tax (except to the extent derived from interest on certain private
activity bonds issued after August 7, 1986, which interest would already be
included in alternative minimum taxable income as a specific item of tax
preference). Shareholders of the California Intermediate Tax-Free Bond Fund
receiving social security or railroad retirement benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income (including
exempt-interest dividends distributed by the Fund).

Fund investments in foreign securities may be subject to withholding taxes at
the source on dividend or interest payments. In that case, the Fund's yield on
those securities would be decreased. If at the end of a Fund's fiscal year more
than 50% of the value of its total assets represents securities of foreign
corporations, the Fund intends to make an election permitted by the Internal
Revenue Code to treat any foreign taxes paid by it in respect of foreign
securities the Fund has held for at least the minimum period specified in the
Code as paid by its Shareholders. In this case, Shareholders who are U.S.
citizens, U.S. corporations and, in some cases, U.S. residents generally will be
required to include in U.S. taxable income their pro rata share of such taxes,
but may then generally be entitled to deduct their share of such taxes.
Alternatively, such Shareholders who hold Shares (without protection from risk
of loss) on the ex-dividend date and for at least 15 other days during the
30-day period surrounding the ex-dividend date will be entitled to claim a
foreign tax credit for their share of these taxes. The Funds, other than the
International Equity Fund, do not expect to be eligible to elect to permit
shareholders to claim a credit or deduction on their income tax return for their
pro rata share of such foreign taxes.

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of some of the important tax considerations generally affecting each Fund and
its Shareholders. In addition, the foregoing discussion and the federal tax
information in the Statement of Additional Information are based on tax laws and
regulations which are in effect as of the date of this Prospectus; these laws
and regulations may subsequently change, and such changes could be retroactive.

Shareholders will be advised at least annually as to the federal income tax
status of distributions made during the year.

California Taxes

If the California Intermediate Tax-Free Bond Fund qualifies to pay California
exempt-interest dividends, dividends distributed to Shareholders will be
considered California exempt-interest dividends (1) if they are designated as
exempt-interest dividends by the Fund in a written notice to Shareholders mailed
within 60 days of the close of the Fund's taxable year and (2) to the extent
that they are derived from the interest received by the Fund during the year on
California Tax Exempt Obligations (less related expenses). If the aggregate
dividends so designated exceed the amount that may be treated as California
exempt-interest dividends, only that percentage of each dividend distribution
equal to the ratio of aggregate California exempt-interest dividends to
aggregate dividends so designated will be treated as a California
exempt-interest dividend. The Fund will notify Shareholders of the amount of
California exempt-interest dividends each year.

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retroactive with respect to Fund transactions. Shareholders are advised to
consult with their own tax advisors for more detailed information concerning
California tax matters.

SERVICE ARRANGEMENTS

The Advisor

For the expenses assumed and services provided by the Advisor as each Fund's
investment advisor, Union Bank of California receives a fee from the Fixed
Income Funds and the California Intermediate Tax-Free Bond Fund, computed daily
and paid monthly, at the annual rate of fifty one-hundredths of one percent
(.50%) of the Fund's average daily net assets, from the Growth Fund, Value
Momentum Fund, Income Equity Fund, Convertible Securities Fund and Balanced
Fund, computed daily and paid monthly, at the annual rate of sixty
one-hundredths of one percent (.60%) of the Fund's average daily net assets,
from the Emerging Growth Fund, computed daily and paid monthly, at the annual
rate of eighty one-hundredths of one percent (.80%) of the Fund's average daily
net assets, and from the International Equity Fund, computed daily and paid
monthly, at the annual rate of ninety-five one-hundredths of one percent (.95%)
of the Fund's average daily net assets. Depending on the size of the Fund, this
fee may be higher than the advisory fee paid by most mutual funds, although the
Board of Trustees believes it will be comparable to advisory fees paid by many
funds having similar objectives and policies. Union Bank of California may from
time to time agree to voluntarily reduce its advisory fee, however, it is not
currently doing so. While there can be no assurance that Union Bank of
California will choose to make such an agreement, any voluntary reductions in
Union Bank of California's advisory fee will lower the Fund's expenses, and thus
increase the Fund's yield and total return, during the period such voluntary
reductions are in effect. Prior to April 28, 1997, the Value Momentum Fund, the
Blue Chip Growth Fund, the Emerging Growth Fund, the International Equity Fund,
the Convertible Securities Fund, the Intermediate-Term Bond Fund, the Government
Securities Fund, the Balanced Fund, and the California Intermediate Tax-Free
Bond Fund did not yet operate as HighMark Funds. Fee and other information
presented regarding these Funds after that time only represents their operation
as HighMark Funds. Prior to operating as HighMark Funds, these Funds had a
fiscal year end of January 31.

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the Fund's average daily net assets, from the Convertible Securities Fund
(February 1, 1997 through July 31, 1997) aggregating 0.60% of the Fund's average
daily net assets, from the Intermediate-Term Bond Fund (February 1, 1997 through
July 31, 1997) aggregating 0.50% of the Fund's average daily net assets, from
the Bond Fund aggregating 0.50% of the Fund's average daily net assets, from the
Government Securities Fund (February 1, 1997 through July 31, 1997) aggregating
0.50% of the Fund's average daily net assets, from the Balanced Fund (February
1, 1997 through July 31, 1997) aggregating 0.60% of the Fund's average daily net
assets, and from the California Intermediate Tax-Free Bond Fund (February 1,
1997 through July 31, 1997) aggregating 0.00% of the Fund's average daily net
assets. For the period February 1, 1996 through January 31, 1997, Union Bank of
California received investment advisory fees from the Value Momentum Fund
aggregating 0.60% of the Fund's average daily net assets, from the Blue Chip
Growth Fund aggregating 0.60% of the Fund's average daily net assets, from the
Emerging Growth Fund aggregating 0.80% of the Fund's average daily net assets,
from the International Equity Fund aggregating 0.95% of the Fund's average daily
net assets, from the Convertible Securities Fund aggregating 0.60% of the Fund's
average daily net assets, from the Intermediate-Term Bond Fund aggregating 0.50%
of the Fund's average daily net assets, from the Government Securities Fund
aggregating 0.50% of the Fund's average daily net assets, from the Balanced Fund
aggregating 0.60% of the Fund's average daily net assets, and from the
California Intermediate Tax-Free Bond Fund aggregating 0.00% of the Fund's
average daily net assets.

On April 1, 1996, the Bank of California, N.A., HighMark's then investment
advisor, combined with Union Bank and the resulting bank changed its name to
Union Bank of California, N.A. At the same time, the banks' investment
management divisions were combined. Each of Union Bank and The Bank of
California, N.A. (or their predecessor banks) has been in banking since the
early 1900's and, historically, each has had significant investment functions
within its trust and investment division. UnionBanCal Corporation, the parent of
Union Bank of California, N.A., is a publicly held corporation, but is
principally held by The Bank of Tokyo-Mitsubishi, Ltd. As of September 30, 1997,
Union BanCal Corporation and its subsidiaries had approximately $31 billion in
consolidated assets. Pacific Alliance, a division of Union Bank of California's
Trust and Investment Management Group, as of September 30, 1997, had
approximately $14.6 billion of assets under management. The Advisor, with a team
of approximately 43 stock and bond research analysts, portfolio managers and
traders, has been providing investment management services to individuals,
institutions and large corporations since 1917.

All investment decisions for the Funds are made by a team of investment
professionals, all of whom take an active part in the decision making process.
Team leaders for each Fund are as follows:

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Bond Fund and Intermediate-Term Bond Fund--E. Jack Montgomery. Mr. Montgomery,
Vice President of the Advisor, has served as team leader for the Bond Fund since
1994. He has served as the team leader for the Intermediate-Term Bond Fund since
1996. He has been with Union Bank of California, N.A. and The Bank of
California, N.A. since 1994. From 1990 to 1994, Mr. Montgomery was employed by
the San Francisco Employees' Retirement System.

California Intermediate Tax-Free Bond Fund--Robert Bigelow. Mr. Bigelow, Vice
President of the Advisor, has served as team leader since 1994. He has been with
Union Bank of California, N.A. and its predecessor, Union Bank since 1994. From
1986 to 1994, Mr. Bigelow served as a portfolio manager at City National Bank.

The Sub-Advisors

The Advisor and Bank of Tokyo-Mitsubishi Trust Company ("BTMT") have entered
into an investment subadvisory agreement relating to the Emerging Growth, Blue
Chip Growth, Convertible Securities and Government Securities Funds (the
"Investment Sub-Advisory Agreement"). Under the Investment Sub-Advisory
Agreement, BTMT will make the day-to-day investment decisions for the assets of
the Emerging Growth and Blue Chip Growth Funds, subject to the supervision of,
and policies established by, the Advisor and the Trustees of HighMark.

BTMT is entitled to a fee, which is calculated daily and paid monthly out of
the Advisor's fee, at an annual rate of .50% of the average daily net assets of
the Emerging Growth Fund, .30% of the average daily net assets of the Blue Chip
Growth and Convertible Securities Fund and .20% of the average daily net assets
of the Government Securities Fund. For the fiscal year ended July 31, 1997
(beginning February 1, 1997), BTMT received sub-investment advisory fees from
the Advisor for the Emerging Growth Fund aggregating 0.50% of the Fund's average
daily net assets, for the Blue Chip Growth Fund aggregating 0.30% of the Fund's
average

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daily net assets, for the Convertible Securities Fund aggregating 0.30% of the
Fund's average daily net assets, and for the Government Securities Fund
aggregating 0.20% of the Fund's average daily net assets. For the period
February 1, 1996 through January 31, 1997, BTMT received sub-investment advisory
fees for the Emerging Growth Fund aggregating 0.50% of the Fund's average daily
net assets, for the Blue Chip Growth Fund aggregating 0.30% of the Fund's
average daily net assets, for the Convertible Growth Fund aggregating 0.30% of
the Fund's average daily net assets, and for the Government Securities Fund
aggregating 0.20% of the Fund's average daily net assets.

Seth E. Shalov serves as portfolio manager of the Emerging Growth Fund. Mr.
Shalov has been a Senior Portfolio Manager with BTMT and its predecessor, Bank
of Tokyo Trust Company, since 1987.

Robert Freund serves as portfolio manager for the Convertible Securities Fund.
Mr. Freund has been an analyst and portfolio manager with BTMT and its
predecessor, Bank of Tokyo Trust Company, since 1992.

Edmond Y. Chin serves as portfolio manager of the Blue Chip Growth Fund. Mr.
Chin has been a portfolio manager with the Sub-Advisor and its predecessor, Bank
of Tokyo Trust Company, since 1997. From 1985 to 1997, Mr. Chin served as an
equity analyst and portfolio manager at Continental Asset Management.

Stephen W. Blocklin serves as portfolio manager of the Government Securities
Fund. Mr. Blocklin has been with BTMT and its predecessor, Bank of Tokyo Trust
Company, since 1993. From September 1988 to December 1993, he served as a senior
fixed income fund manager in the institutional investment management group at
First Fidelity Bancorporation.

The Advisor and Tokyo-Mitsubishi Asset Management (U.K.), Ltd. ("TMAM"), have
entered into an investment sub-advisory agreement relating to the International
Equity Fund (the "Investment Sub-Advisory Agreement"). Under the Investment
SubAdvisory Agreement, TMAM makes the day-to-day investment decisions for the
assets of the Fund, subject to the supervision of, and policies established by,
the Advisor and the Trustees of HighMark. HighMark's Shares are not sponsored,
endorsed or guaranteed by and do not constitute obligations or deposits of the
Sub-Advisor and are not guaranteed by the FDIC or any other governmental agency.

Tokyo-Mitsubishi Asset Management (U.K.), Ltd., 12-15 Finsbury Circus, London
EC2 M7BT operates as a subsidiary of The Bank of Tokyo-Mitsubishi, Ltd.
Established in 1989, TMAM provides active global investment services for
segregated funds and specialist fund management.

TMAM is entitled to a fee, which is calculated daily and paid monthly out of
the Advisor's fee, at an annual rate of .30% of the average daily net assets of
the International Equity Fund. For the fiscal year ended July 31, 1997
(beginning February 1, 1997), TMAM received sub-investment advisory fees from
the Advisor for the International Equity Fund aggregating 0.30% of the Fund's
average daily net assets. For the period February 1, 1996 through January 31,
1997, TMAM received sub-investment advisory fees for the Fund aggregating 0.30%
of the Fund's average daily net assets.

In March 1997, Andrew Jenner assumed the responsibilities of portfolio manager
for the International Equity Fund. Mr. Jenner has been with TMAM since September
1996. From 1987 to 1996, Mr. Jenner was employed by NatWest Investment
Management, most recently as Director of International Equities.

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<PAGE> 187

Administrator

SEI Investment Fund Resources (the "Administrator") and HighMark are parties
to an administration agreement (the "Administration Agreement"). Under the terms
of the Administration Agreement, the Administrator provides HighMark with
certain management services, including all necessary office space, equipment,
personnel, and facilities.

The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of the Funds.
The Administrator may waive its fee or reimburse various expenses to the extent
necessary to limit the total operating expenses of a Fund's Fiduciary Shares.
Any such waiver is voluntary and may be terminated at any time in the
Administrator's sole discretion. Currently, the Administrator has agreed to
waive its fee to the rate of .18% of the average daily net assets of the Funds.

Pursuant to a separate agreement with the Administrator, Union Bank of
California, N.A. performs sub-administration services on behalf of each Fund,
for which it receives a fee paid by the Administrator at the annual rate of up
to 0.05% of the average daily net assets of the Funds. A description of the
services performed by Union Bank of California, N.A., pursuant to this Agreement
is contained in the Statement of Additional Information.

The Transfer Agent

State Street Bank and Trust Company serves as the transfer agent, dividend
disbursing agent, and as a shareholder servicing agent for the Fiduciary Shares
of HighMark for which services it receives a fee.

Shareholder Service Plan

To support the provision of Shareholder services to each class of Shares,
HighMark has adopted a Shareholder Service Plan. A description of the services
performed by service providers pursuant to the Shareholder Service Plan is
contained in the Statement of Additional Information. In consideration of
services provided by any service provider, which may include Union Bank of
California, N.A., Bank of Tokyo-Mitsubishi, Ltd., or their respective
affiliates, each Fund may pay a fee at the rate of up to 0.25% of its average
daily net assets to such service provider. The service provider may waive such
fees at any time. Any such waiver is voluntary and may be terminated at any
time. Currently, such fees are being waived to the rate of 0.01% of the average
daily net assets for the Bond Fund, 0.03% of the average daily net assets of the
Intermediate-Term Bond Fund, 0.10% of the average daily net assets of the
Balanced Fund, Income Equity Fund, and Growth Fund, and 0.00% of the average
daily net assets of each of the other Funds.

Distributor

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Banking Laws

Union Bank of California believes that it may perform the services for the
Funds contemplated by its investment advisory agreement with HighMark without a
violation of applicable banking laws and regulations. Union Bank of California
also believes that it may perform sub-administration and sub-accounting services
on behalf of each Fund, for which it receives compensation from SEI Investment
Fund Resources without a violation of applicable banking laws and regulations.
Future changes in federal or state statutes and regulations relating to
permissible activities of banks or bank holding companies and their subsidiaries
and affiliates, as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations, could change the
manner in which Union Bank of California or the Advisor could continue to
perform such services for the Funds. For a further discussion of applicable
banking laws and regulations, see the Statement of Additional Information.

Custodian

Union Bank of California also serves as the custodian and as a shareholder
servicing agent for the Funds. The Custodian holds cash securities and other
assets of HighMark as required by the 1940 Act.

GENERAL INFORMATION

Description of HighMark & Its Shares

HighMark was organized as a Massachusetts business trust on March 10, 1987,
and consists of sixteen series of Shares open for investment representing units
of beneficial interest in HighMark's Growth Fund, Income Equity Fund, Balanced
Fund, Value Momentum Fund, Blue Chip Growth Fund, Emerging Growth Fund,
International Equity Fund, Bond Fund, Intermediate-Term Bond Fund, Government
Securities Fund, Convertible Securities Fund, California Intermediate Tax-Free
Bond Fund, Diversified Money Market Fund, U.S. Government Obligations Money
Market Fund, 100% U.S. Treasury Obligations Money Market Fund, and California
Tax-Free Money Market Fund. Shares of each Fund are freely transferable, are
entitled to distributions from the assets of the Fund as declared by the Board
of Trustees, and, if HighMark were liquidated, would receive a pro rata share of
the net assets attributable to that Fund. Shares are without par value.

As noted above, pursuant to a Multiple Class Plan on file with the Securities
and Exchange Commission permitting the issuance and sale of three classes of
Shares in selected Funds, Shares of such Funds have been divided into three
classes, designated Class A and Class B Shares (collectively, "Retail Shares")
and Fiduciary Shares. For information regarding the Retail Shares of the Funds,
interested persons may contact the Distributor for a prospectus at
1-800-433-6884.

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<PAGE> 189

As of November 17, 1997, HighMark believes that Union Bank of California, N.A.
was the Shareholder of record of 94.45% of the Fiduciary Shares of the Growth
Fund, 75.17% of the Fiduciary Shares of the Income Equity Fund, 81.50% of the
Fiduciary Shares of the Balanced Fund, 92.15% of the Fiduciary Shares of the
Bond Fund, 76.42% of the Fiduciary Shares of the Intermediate-Term Bond Fund,
substantially all of the Fiduciary Shares of the California Intermediate
Tax-Free Bond Fund, 78.51% of the Fiduciary Shares of the Value Momentum Fund,
34.66% of the Fiduciary Shares of the Blue Chip Growth Fund, 50.63% of the
Fiduciary Shares of the Emerging Growth Fund, 99.36% of the Fiduciary Shares of
the International Equity Fund. As of November 17, 1997, HighMark believes that
Bank of Tokyo Trust Company was the shareholder of record of 81.34% of the
Fiduciary Shares of the Government Securities Fund, 64.85% of the Fiduciary
Shares of the Blue Chip Growth Fund, and 48.57% of the Fiduciary Shares of the
Emerging Growth Fund.

Performance Information

From time to time, HighMark may advertise the aggregate total return, average
annual total return, yield and distribution rate with respect to the Fiduciary
Shares of each Fund. Performance information is computed separately for a Fund's
Retail and Fiduciary Shares in accordance with the formulas described below.

The aggregate total return and average annual total return of the Funds may be
quoted for the life of each Fund and for ten-year, five-year, three-year, and
one-year periods, in each case through the most recent calendar quarter (in the
case of the Income Equity Fund, utilizing, when appropriate, the aggregate total
return and average annual total return of the IRA Fund Income Equity Portfolio
prior to June 23, 1988). Aggregate total return is determined by calculating the
change in the value of a hypothetical $1,000 investment in a Fund over the
applicable period that would equate the initial amount invested to the ending
redeemable value of the investment. The ending redeemable value includes
dividends and capital gain distributions reinvested at net asset value. Average
annual total return is calculated by annualizing a Fund's aggregate total return
over the relevant number of years. The resulting percentage indicates the
average positive or negative investment results that an investor in a Fund would
have experienced on an annual basis from changes in Share price and reinvestment
of dividends and capital gain distributions.

Each Fund may periodically compare its performance to the performance of other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical);
financial and business publications and periodicals; broad groups of comparable
mutual funds; unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs; or
other investment alternatives. Certain Funds may advertise performance that
includes results from periods in which the Fund's assets were managed in a
non-registered predecessor vehicle.

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<PAGE> 190

All performance information presented for a Fund is based on past performance
and does not predict future performance.

Miscellaneous

Shareholders will be sent unaudited semi-annual reports and annual reports
audited by independent public accountants.

Inquiries may be directed in writing to SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456, or by calling toll free 1-800-433-6884.

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of permitted investments for the HighMark
Funds.

AMERICAN DEPOSITARY RECEIPTS (ADRs) and EUROPEAN DEPOSITARY RECEIPTS
(EDRs)--Receipts, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares. EDRs, which are
sometimes referred to as Continental Depositary Receipts ("CDRs"), are receipts,
typically issued by a non-U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by either a U.S. or
foreign issuer. ADRs, EDRs and CDRs may be available for investment through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the security underlying the receipt and a depositary,
whereas an unsponsored facility may be established by a depositary without
participation by the issuer of the receipt's underlying security. Holders of an
unsponsored depositary receipt generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through to the holders of the receipts voting
rights with respect to the deposited securities.

47
<PAGE> 191

ASSET-BACKED SECURITIES (NON-MORTGAGE)--Instruments secured by company
receivables, truck and auto loans, leases, and credit card receivables. Such
securities are generally issued as pass-through certificates, which represent
undivided fractional ownership interests in the underlying pools of assets. Such
securities also may be debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of owning such assets and
issuing such debt. The purchase of non-mortgage asset-backed securities raises
risk considerations peculiar to the financing of the instruments underlying such
securities. Asset-backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than the prepayment risk
associated with mortgage-backed securities.

Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to substantial prepayment
risk, which may reduce the overall return to certificate holders. Nevertheless,
principal prepayment rates tend not to vary as much in response to changes in
interest rates and the short-term nature of the underlying car loans or other
receivables tend to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying sales contracts or receivables are not
realized by the trust because of unanticipated legal or administrative costs of
enforcing the contracts or because of depreciation or damage to the collateral
(usually automobiles) securing certain contracts, or other factors. If
consistent with their investment objectives and policies, the Equity Funds may
invest in other asset-backed securities that may be developed in the future.

48
<PAGE> 192

and convertible preferred stock is also affected by prevailing interest rates,
the credit quality of the issuer and any call provisions.

FORWARD FOREIGN CURRENCY CONTRACTS--The International Equity Fund may conduct
its foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through entering
into forward currency contracts to protect against uncertainty in the level of
future exchange rates between particular currencies or between foreign
currencies in which the Fund's securities are or may be denominated. A forward
contract involves an obligation to purchase or sell a specific currency amount
at a future date, which may be any fixed number of days from the date of the
contract, agreed upon by the parties, at a price set at the time of the
contract. Under normal circumstances, consideration of the prospect for changes
in currency exchanges rates will be incorporated into the Fund's long-term
investment strategies. However, the Advisor and Sub-Advisor believe that it is
important to have the flexibility to enter into forward currency contracts when
it determines that the best interests of the Fund will be served.

When the Advisor and Sub-Advisor believe that the currency of a particular
country may suffer a significant decline against another currency, the Fund may
enter into a currency contract to sell, for the appropriate currency, the amount
of foreign currency approximating the value of some or all of the Fund's
securities denominated in such foreign currency.

At the maturity of a forward contract, the Fund may either sell a fund
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligations to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader,
obligating it to purchase on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.

Options and futures can be volatile instruments, and involve certain risks
that, if applied at an inappropriate time, could negatively impact a Fund's
return.

49
<PAGE> 193

Baa or better by Moody's or similarly rated by other NRSROs, or, if not rated,
determined to be of comparable quality by the Advisor.

LOWER-RATED, HIGHER-YIELDING, HIGH-RISK DEBT SECURITIES--High-yield, high-risk
securities consist of securities rated Ba or lower by Moody's or BB or lower by
S&P. Lower-rated debt securities are considered speculative and involve greater
risk of loss than investment grade debt securities, and are more sensitive to
changes in the issuer's capacity to pay. For a description of the debt
securities ratings, see the "Appendix."

MONEY MARKET INSTRUMENTS--Short-term, debt instruments or deposits and may
include, for example, (i) commercial paper rated within the highest rating
category by a NRSRO at the time of investment, or, if not rated, determined by
the Advisor to be of comparable quality; (ii) obligations (certificates of
deposit, time deposits, bank master notes, and bankers' acceptances) of thrift
institutions, savings and loans, U.S. commercial banks (including foreign
branches of such banks), and U.S. and foreign branches of foreign banks,
provided that such institutions (or, in the case of a branch, the parent
institution) have total assets of $1 billion or more as shown on their last
published financial statements at the time of investment; (iii) short-term
corporate obligations rated within the three highest rating categories by a
NRSRO (e.g., at least A by S&P or A by Moody's) at the time of investment, or,
if not rated, determined by the Advisor to be of comparable quality; (iv)
general obligations issued by the U.S. Government and backed by its full faith
and credit, and obligations issued or guaranteed as to principal and interest by
agencies or instrumentalities of the U.S. Government (e.g., obligations issued
by Farmers Home Administration, Government National Mortgage Association,
Federal Farm Credit Bank and Federal Housing Administration); (v) receipts,
including TRs, TIGRs and CATS; (vi) repurchase agreements involving such
obligations; (vii) loan participations issued by a bank in the United States
with assets exceeding $1 billion and for which

50
<PAGE> 194

the underlying loan is issued by borrowers in whose obligations the Fund may
invest; (viii) money market funds and (ix) foreign commercial paper.

51
<PAGE> 195

During periods of falling interest rates, securities that can be called or
prepaid may decline in value relative to similar securities that are not subject
to call or prepayment.

52
<PAGE> 196

for general operating expenses and for lending such funds to other public
institutions and facilities, and (ii) certain private activity and industrial
development bonds issued by or on behalf of public authorities to obtain funds
to provide for the construction, equipment, repair or improvement of privately
operated facilities. Municipal notes include general obligation notes, tax
anticipation notes, revenue anticipation notes, bond anticipation notes,
certificates of indebtedness, demand notes and construction loan notes.
Municipal bonds include general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds. General obligation
bonds are backed by the taxing power of the issuing municipality. Revenue bonds
are backed by the revenues of a project or facility, tolls from a toll bridge,
for example. The payment of principal and interest on private activity and
industrial development bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property so financed as security for such payment.

OBLIGATIONS OF SUPRANATIONAL ENTITIES--Obligations of supranational entities
are established through the joint participation of several governments, and
include the Asian Development Bank, the Inter-American Development Bank,
International Bank for Reconstruction and Development (World Bank), African
Development Bank, European Economic Community, European Investment Bank and the
Nordic Investment Bank.

OPTIONS ON CURRENCIES--The International Equity Fund may purchase options and
write covered call options on foreign currencies (traded on U.S. and foreign
exchanges or over-the-counter markets) to manage the Fund's exposure to changes
in dollar exchange rates. Call options on foreign currency written by the Fund
will be "covered" which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by the Fund, the Fund will establish a segregated account with its
Custodian consisting of cash, U.S. government securities or other liquid high
grade debt securities in an amount of equal to the amount the Fund would be
required to pay upon exercise of the put.

53
<PAGE> 197

54
<PAGE> 198

maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which a Fund is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.

RULE 144A SECURITIES--Rule 144A Securities are securities that have not been
registered under the Securities Act of 1933, but which may be traded between
certain qualified institutional investors, including investment companies. The
absence of a secondary market may affect the value of the Rule 144A Securities.
The Board of Trustees of HighMark has established guidelines and procedures to
be utilized to determine the liquidity of such securities.

SECURITIES ISSUED ON A FORWARD COMMITMENT BASIS OR WHEN-ISSUED
SECURITIES--Securities purchased for delivery beyond the normal settlement date
at a stated price and yield and which thereby involve a risk that the yield
obtained in the transaction will be less than that available in the market when
delivery takes place. When a Fund agrees to purchase when-issued securities or
enter into forward commitments, HighMark's custodian will be instructed to set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a segregated account. A Fund will generally not pay for such securities and
no income will accrue on the securities until they are received. These
securities are recorded as an asset and are subject to changes in value based
upon changes in the general level of interest rates. Therefore, the purchase of
securities on a "when-issued" basis or forward commitments may increase the risk
of fluctuations in a Fund's net asset value.

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<PAGE> 199

TAX-EXEMPT COMMERCIAL PAPER--Commercial paper, which is commercial paper
issued by governments and political sub-divisions.

56
<PAGE> 200

Supranational bonds are those issued by supranational entities, such as the
World Bank and European Investment Bank. Canadian bonds are bonds issued by
Canadian provinces.

57
<PAGE> 201

HIGHMARK FUNDS

For further information

call 1-(800) 433-6884

or visit our Web site at

www.highmark-funds.com

INVESTMENT ADVISOR

Pacific Alliance,

a division of Union Bank of California, N.A.

475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

ADMINISTRATOR & DISTRIBUTOR
SEI Investments Fund Resources and
SEI Investments Distribution Co.
Oaks, PA 19456

LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005

AUDITORS
Deloitte & Touche LLP

50 Fremont Street

San Francisco, CA 94105

NOT FDIC INSURED
<PAGE> 202

HighMark Funds Prospectus

INVESTMENT ADVISOR
Pacific Alliance
a division of Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

SUB-ADVISOR
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
New York, NY 10116

SUB-ADVISOR
Tokyo-Mitsubishi Asset Management (U.K.) Ltd.
12-15 Finsbury Circus
London EC2M7BT

CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
Post Office Box 45000
San Francisco, CA 94104

ADMINISTRATOR & DISTRIBUTOR
SEI Investments Fund Resources and
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456

LEGAL COUNSEL
Ropes & Gray
For further information call One Franklin Square
1-800-433-6884 1301 K Street, N.W., Suite 800 East
or visit our web site at Washington, D.C. 20005
www.highmark-funds.com
AUDITORS
Deloitte & Touche LLP
[HIGHMARK FUNDS logo] 50 Fremont Street
San Francisco, CA 94105-2230

84823-A (11/97)

<PAGE> 203
HIGHMARK FUNDS

STATEMENT OF ADDITIONAL INFORMATION

NOVEMBER 28, 1997

This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectuses of the HighMark Funds and the
HighMark Money Market Funds, each of which is dated November 28, 1997,
(collectively, the "Prospectuses") and any supplements thereto. This Statement
of Additional Information is incorporated in its entirety into the
Prospectuses. Copies of the Prospectuses may be obtained by writing the
Distributor, SEI Investments Distribution Co., at 1 Freedom Valley Drive, Oaks,
Pennsylvania, 19456, or by telephoning toll free 1-800-433-6884. Capitalized
terms used but not defined herein have the same meanings as set forth in the
Prospectuses.

<PAGE> 204
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHMARK FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bank Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commercial Paper and Variable Amount Master Demand Notes . . . . . . . . . . . . . . . . . . . . . . . . . 3
Loan Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Mortgage-Related Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Adjustable Rate Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Municipal Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Investments in California Municipal Securities by the California Tax-Free Money Market Fund and the
California Intermediate Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Puts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Shares of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
When-Issued Securities and Forward Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Zero-Coupon Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
High Quality Investments with Regard to the Money Market Funds . . . . . . . . . . . . . . . . . . . . . 29
Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Voting Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Valuation of the Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Valuation of the Equity Funds and the Fixed Income Funds . . . . . . . . . . . . . . . . . . . . . . . . 40

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Additional Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Additional Tax Information Concerning The California Tax-Free Money
Market Fund and The California Intermediate Tax-Free Bond Fund . . . . . . . . . . . . . . . . . 44
Federal Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
California Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>

-i-
<PAGE> 205
<TABLE>
<S> <C>
Foreign Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

MANAGEMENT OF HIGHMARK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
The Sub-Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Glass-Steagall Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Administrator and Sub-Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Shareholder Services Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
The Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Transfer Agent and Custodian Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Shareholder and Trustee Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
The Reorganization of the IRA Fund and HighMark . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Calculation of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>

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STATEMENT OF ADDITIONAL INFORMATION

HIGHMARK FUNDS

HighMark Funds ("HighMark") is a diversified, open-end management
investment company. HighMark presently consists of sixteen series of Shares,
representing units of beneficial interest in the HighMark Growth Fund, the
HighMark Income Equity Fund, the HighMark Balanced Fund, the HighMark Value
Momentum Fund, the HighMark Blue Chip Growth Fund, the HighMark Emerging Growth
Fund, the HighMark International Equity Fund, the HighMark Bond Fund, the
HighMark Intermediate-Term Bond Fund, the HighMark Government Securities Fund,
the HighMark Convertible Securities Fund, the HighMark California Intermediate
Tax-Free Bond Fund, the HighMark Diversified Money Market Fund, the HighMark
U.S. Government Money Market Fund, the HighMark 100% U.S. Treasury Money Market
Fund, and the HighMark California Tax-Free Money Market Fund. The HighMark
Value Momentum Fund, the HighMark Blue Chip Growth Fund, the HighMark Emerging
Growth Fund, the HighMark International Equity Fund, the HighMark
Intermediate-Term Bond Fund, the HighMark Government Securities Fund, and the
HighMark California Intermediate Tax-Free Bond Fund commenced operations in
HighMark on April 28, 1997, and the HighMark Convertible Securities Fund
commenced operations in HighMark on May 1, 1997. The HighMark Balanced Fund
commenced operations on November 14, 1993 and the HighMark Growth Fund
commenced operations on November 18, 1993. The HighMark Income Equity Fund and
the HighMark Bond Fund commenced operations on June 23, 1988 as a result of the
reorganization of the Income Equity Portfolio and the Bond Portfolio,
respectively, of the IRA Collective Investment Fund (the "IRA Fund") described
under "ADDITIONAL INFORMATION - The Reorganization of the IRA Fund and
HighMark" below. The HighMark Diversified Money Market Fund, the HighMark U.S.
Government Money Market Fund and the HighMark 100% U.S. Treasury Money Market
Fund commenced operations on August 10, 1987. The HighMark California Tax-Free
Money Market Fund commenced operations on August 11, 1987.

As described in the Prospectuses, selected Funds of HighMark have been
divided into three classes of Shares (designated Class A and Class B Shares
(collectively "Retail Shares") and Fiduciary Shares) for purposes of HighMark's
Distribution and Shareholder Services Plans (the "Distribution Plans"), which
Distribution Plans apply only to such Funds' Retail Shares. Retail Shares and
Fiduciary Shares are sometimes herein referred to collectively as "Shares".

The Diversified Money Market Fund, the U.S. Government Money Market
Fund, the 100% U.S. Treasury Money Market Fund, and the California Tax-Free
Money Market Fund are sometimes herein referred to as the "Money Market Funds."
The Growth, Income Equity, Balanced, Value Momentum, Blue Chip Growth, Emerging
Growth, and International Equity Funds are sometimes referred to herein as the
"Equity Funds." The Bond, Intermediate-Term Bond, Government Securities,
Convertible Securities, and California Intermediate Tax-Free Bond Funds are
sometimes referred to herein as the "Fixed Income Funds." The Income

<PAGE> 207
Equity Portfolio and the Bond Portfolio of the IRA Fund (which were reorganized
into HighMark's Funds as described above) are sometimes referred to herein as
the "IRA Fund Portfolios."

Much of the information contained herein expands upon subjects
discussed in the Prospectuses for the respective Funds. No investment in Shares
of a Fund should be made without first reading that Fund's Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment objectives and
policies of each Fund of HighMark as set forth in the respective Prospectus for
that Fund.

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

1. Bank Instruments. Consistent with its investment objective,
policies, and restrictions, each Fund (other than the U.S. Government Money
Market Fund, the 100% U.S. Treasury Money Market Fund, and the California
Tax-Free Money Market Fund) may invest in bankers' acceptances, certificates of
deposit, and time deposits.

Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise that
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity. Investments in
bankers' acceptances will be limited to those guaranteed by domestic and foreign
banks having, at the time of investment, total assets of $1 billion or more (as
of the date of the institution's most recently published financial statements).

Certificates of deposit and time deposits represent funds deposited in
a commercial bank or a savings and loan association for a definite period of
time and earning a specified return.

Investments in certificates of deposit and time deposits may include
Eurodollar Certificates of Deposit, which are U.S. dollar denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States, Yankee Certificates of Deposit, which are
certificates of deposit issued by a U.S. branch of a foreign bank denominated
in U.S. dollars and held in the United States, Eurodollar Time Deposits
("ETDs"), which are U.S. dollar denominated deposits in a foreign branch of a
U.S. bank or a foreign bank, and Canadian Time Deposits ("CTDs"), which are
U.S. dollar denominated certificates of deposit issued by Canadian offices of
major Canadian banks. All investments in certificates of deposit and time
deposits will be limited to those (a) of domestic and foreign banks and savings
and loan associations which, at the time of investment, have total assets of

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$1 billion or more (as of the date of the institution's most recently published
financial statements) or (b) the principal amount of which is insured by the
Federal Deposit Insurance Corporation.

There is no limitation on the Diversified Money Market Fund's ability
to invest in domestic certificates of deposit, bankers' acceptances or other
bank instruments in connection with the Fund's fundamental investment
restriction governing concentration in the securities of one or more issuers
conducting their principal business activities in the same industry. For
purposes of this exception to the Fund's fundamental investment restriction,
domestic certificates of deposit and bankers' acceptances include those issued
by domestic branches of foreign banks to the extent permitted by the rules and
regulations of the Securities and Exchange Commission staff. These rules and
regulations currently permit U.S. branches of foreign banks to be considered
domestic banks if it can be demonstrated that they are subject to the same
regulation as U.S. banks.

2. Commercial Paper and Variable Amount Master Demand Notes.
Consistent with its investment objective, policies, and restrictions, each Fund
(other than the U.S. Government Money Market Fund and the 100% U.S. Treasury
Money Market Fund) may invest in commercial paper (including Section 4(2)
commercial paper) and variable amount master demand notes. Commercial paper
consists of unsecured promissory notes issued by corporations normally having
maturities of 270 days or less. These investments may include Canadian
Commercial Paper, which is U.S. dollar denominated commercial paper issued by a
Canadian corporation or a Canadian counterpart of a U.S. corporation, and
Europaper, which is U.S. dollar denominated commercial paper of a foreign
issuer.

Variable amount master demand notes are unsecured demand notes that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate according to the terms of the instrument. Because master
demand notes are direct lending arrangements between a Fund and the issuer,
they are not normally traded. Although there is no secondary market in the
notes, a Fund may demand payment of principal and accrued interest at any time.
A variable amount master demand note will be deemed to have a maturity equal to
the longer of the period of time remaining until the next readjustment of its
interest rate or the period of time remaining until the principal amount can be
recovered from the issuer through demand.

3. Loan Participations. As indicated in the Money Market Funds'
Prospectus, the Diversified Money Market Fund may invest in loan participations
pursuant to which the Fund acquires a portion of a bank or other lending
institution's interest in a secured or unsecured loan to a corporate borrower.
Although the Fund's ability to receive payments of principal and interest in
connection with a particular loan participation is primarily dependent on the
financial condition of the underlying borrower, the lending institution or bank
may provide assistance in collecting interest and principal from the borrower
and in enforcing its rights against the borrower in the event of a default.
Loans in which the Fund may purchase loan

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participations may be made to finance a variety of corporate purposes, but will
not be made to finance highly leveraged activities such as "leveraged
buy-outs." Loan participations will be subject to the Fund's non fundamental
limitation governing investments in "illiquid" securities. See "Investment
Restrictions" below.

4. Lending of Portfolio Securities. In order to generate additional
income, each Fund (other than the California Tax-Free Money Market Fund) may
lend its portfolio securities to broker-dealers, banks or other institutions.
During the time portfolio securities are on loan from a Fund, the borrower will
pay the Fund any dividends or interest paid on the securities. In addition,
loans will be subject to termination by the Fund or the borrower at any time.
While the lending of securities may subject a Fund to certain risks, such as
delays or an inability to regain the securities in the event the borrower were
to default on its lending agreement or enter into bankruptcy, a Fund will
receive at least 100% collateral in the form of cash or U.S. Government
securities. This collateral will be valued daily by the lending agent, with
oversight by Pacific Alliance Capital Management (the "Advisor"), and, should
the market value of the loaned securities increase, the borrower will be
required to furnish additional collateral to the Fund. A Fund (other than the
California Tax-Free Money Market Fund) may lend portfolio securities in an
amount representing up to 33 1/3% of the value of the Fund's total assets.

5. Repurchase Agreements. Securities held by each Fund (other than
the 100% U.S. Treasury Money Market Fund) may be subject to repurchase
agreements. As a matter of non fundamental policy, the California Tax-Free
Money Market Fund intends to limit investments in repurchase agreements to no
more than 5% of the value of its total assets.

Under the terms of a repurchase agreement, a Fund will deal with
financial institutions such as member banks of the Federal Deposit Insurance
Corporation having, at the time of investment, total assets of $100 million or
more and from registered broker-dealers that the Advisor deems creditworthy
under guidelines approved by HighMark's Board of Trustees. Under a repurchase
agreement, the seller agrees to repurchase the securities at a mutually
agreed-upon date and price, and the repurchase price will generally equal the
price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. The seller under a repurchase agreement will be required
to maintain the value of collateral held pursuant to the agreement at not less
than 102% of the repurchase price (including accrued interest) and the
Custodian, with oversight by the Advisor, will monitor the collateral's value
daily and initiate calls to request that collateral be restored to appropriate
levels. In addition, securities subject to repurchase agreements will be held
in a segregated custodial account.

If the seller were to default on its repurchase obligation or become
insolvent, the Fund holding such obligation would suffer a loss to the extent
that either the proceeds from a sale of the underlying portfolio securities
were less than the repurchase price under the agreement or the Fund's
disposition of the underlying securities was delayed pending court action.

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Additionally, although there is no controlling legal precedent confirming that
a Fund would be entitled, as against a claim by the seller or its receiver or
trustee in bankruptcy, to retain the underlying securities, HighMark's Board of
Trustees believes that, under the regular procedures normally in effect for
custody of a Fund's securities subject to repurchase agreements and under
federal laws, a court of competent jurisdiction would rule in favor of the Fund
if presented with the question. Securities subject to repurchase agreements
will be held by HighMark's custodian or another qualified custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.

6. Reverse Repurchase Agreements. Each Fund (other than the 100%
U.S. Treasury Money Market Fund) may borrow funds for temporary purposes by
entering into reverse repurchase agreements, provided such action is consistent
with the Fund's investment objective and fundamental investment restrictions;
as a matter of non fundamental policy, each Fund intends to limit total
borrowings under reverse repurchase agreements to no more than 10% of the value
of its total assets. Pursuant to a reverse repurchase agreement, a Fund will
sell portfolio securities to financial institutions such as banks or to
broker-dealers, and agree to repurchase the securities at a mutually
agreed-upon date and price. A Fund intends to enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time a Fund enters into a reverse
repurchase agreement, it will place in a segregated custodial account assets
such as U.S. Government securities or other liquid, high-quality debt
securities consistent with the Fund's investment objective having a value equal
to 102% of the repurchase price (including accrued interest), and will
subsequently monitor the account to ensure that an equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Fund may decline below the price at which a
Fund is obligated to repurchase the securities. Reverse repurchase agreements
are considered to be borrowings by a Fund under the 1940 Act.

7. U.S. Government Obligations. With the exception of the 100% U.S.
Treasury Money Market Fund, which may invest only in direct U.S. Treasury
obligations, each Fund may, consistent with its investment objective, policies,
and restrictions, invest in obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities. Obligations of certain agencies
and instrumentalities of the U.S. Government, such as those of the Government
National Mortgage Association and the Export-Import Bank of the United States,
are supported by the full faith and credit of the U.S. Treasury; others, such
as those of the Federal National Mortgage Association, are supported by the
right of the issuer to borrow from the Treasury; others, such as those of the
Student Loan Marketing Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and
still others, such as those of the Federal Farm Credit Banks or the Federal
Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.

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For information concerning mortgage-related securities issued by
certain agencies or instrumentalities of the U.S. Government, see
"Mortgage-Related Securities" below.

8. Mortgage-Related Securities. As indicated in the Money Market
Funds' Prospectus, the Diversified Money Market Fund and the U.S. Government
Money Market Fund may each invest in mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") representing GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes"). The Fixed Income Funds
and the Balanced Fund may also, consistent with each such Fund's investment
objective and policies, invest in Ginnie Maes and in mortgage-related
securities issued or guaranteed by the U.S. Government, its agencies, or its
instrumentalities or, those issued by nongovernmental entities. In addition,
the Fixed Income Funds and the Balanced Fund may invest in collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").

Mortgage-related securities represent interests in pools of mortgage
loans assembled for sale to investors. Mortgage-related securities may be
assembled and sold by certain governmental agencies and may also be assembled
and sold by nongovernmental entities such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a Fund purchases a mortgage-related security
at a premium, that portion may be lost if there is a decline in the market
value of the security, whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of mortgage-related securities are
inversely affected by changes in interest rates. However, although the value of
a mortgage-related security may decline when interest rates rise, the converse
is not necessarily true because in periods of declining interest rates the
mortgages underlying the security are prone to prepayment. For this and other
reasons, a mortgage-related security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages and, therefore, it is not
possible to predict accurately the security's return to the Fund. In addition,
regular payments received in respect of mortgage-related securities include
both interest and principal. No assurance can be given as to the return a Fund
will receive when these amounts are reinvested.

There are a number of important differences both among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities themselves. As noted above, Ginnie Maes are
issued by GNMA, which is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. Ginnie Maes are guaranteed as to
the timely payment of principal and interest by GNMA and GNMA's guarantee is
backed by the full faith and credit of the U.S. Treasury. In addition, Ginnie
Maes are supported by the authority of GNMA to borrow funds from the U.S.
Treasury to make payments under GNMA's guarantee. Mortgage-related securities
issued by the Federal National Mortgage Association ("FNMA") include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes"),
which are solely the

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obligations of the FNMA and are not backed by or entitled to the full faith and
credit of the U.S. Treasury. The FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA. Mortgage-related securities issued
by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). The FHLMC
is a corporate instrumentality of the U.S. Government, created pursuant to an
Act of Congress, which is owned entirely by the Federal Home Loan Banks.
Freddie Macs are not guaranteed by the U.S. Treasury or by any Federal Home
Loan Banks and do not constitute a debt or obligation of the U.S. Government
or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by the FHLMC. The FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When the FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.

CMOs in which the Fixed Income Funds and the Balanced Fund may invest
represent securities issued by a private corporation or a U.S. Government
instrumentality that are backed by a portfolio of mortgages or mortgage-backed
securities held under an indenture. The issuer's obligation to make interest
and principal payments is secured by the underlying portfolio of mortgages or
mortgage-backed securities. CMOs are issued with a number of classes or series
that have different maturities and that may represent interests in some or all
of the interest or principal on the underlying collateral or a combination
thereof. CMOs of different classes are generally retired in sequence as the
underlying mortgage loans in the mortgage pool are repaid. In the event of
sufficient early prepayments on such mortgages, the class or series of a CMO
first to mature generally will be retired prior to its maturity. Thus, the
early retirement of a particular class or series of a CMO held by a Fund would
have the same effect as the prepayment of mortgages underlying a
mortgage-backed pass-through security.

REMICs in which the Fixed Income Funds and the Balanced Fund may
invest are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs
in that they issue multiple classes of securities.

9. Adjustable Rate Notes. Consistent with its investment objective,
policies, and restrictions, each Fund (other than the 100% U.S. Treasury Money
Market Fund) may invest in "adjustable rate notes," which include variable rate
notes and floating rate notes. For Money Market Fund purposes, a variable rate
note is one whose terms provide for the readjustment of its interest rate on
set dates and that, upon such readjustment, can reasonably be expected to have
a market value that approximates its amortized cost; the degree to which a
variable rate note's market value approximates its amortized cost subsequent to
readjustment will depend on the frequency of the readjustment of the note's
interest rate and the length of

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time that must elapse before the next readjustment. A floating rate note is one
whose terms provide for the readjustment of its interest rate whenever a
specified interest rate changes and that, at any time, can reasonably be
expected to have a market value that approximates its amortized cost. Although
there may be no active secondary market with respect to a particular variable
or floating rate note purchased by a Fund, the Fund may seek to resell the note
at any time to a third party. The absence of an active secondary market,
however, could make it difficult for the Fund to dispose of a variable or
floating rate note in the event the issuer of the note defaulted on its payment
obligations and the Fund could, as a result or for other reasons, suffer a loss
to the extent of the default. Variable or floating rate notes may be secured by
bank letters of credit. A demand instrument with a demand notice period
exceeding seven days may be considered illiquid if there is no secondary market
for such security. Such security will be subject to a Fund's non fundamental
15% (10% in the case of the Money Market Funds) limitation governing
investments in "illiquid" securities, unless such notes are subject to a demand
feature that will permit the Fund to receive payment of the principal within
seven days of the Fund's demand. See "INVESTMENT RESTRICTIONS" below.

Maturities for variable and adjustable rate notes held in the Money
Market Funds will be calculated in compliance with the provisions of Rule 2a-7,
as it may be amended from time to time.

As used above, a note is "subject to a demand feature" where the Fund
is entitled to receive the principal amount of the note either at any time on
not more than thirty days' notice or at specified intervals, not exceeding 397
days and upon not more than thirty days' notice.

10. Municipal Securities. As defined in the Prospectuses, under
normal market conditions, at least 80% of the total assets of the California
Tax-Free Money Market Fund and 80% of the total assets of the California
Intermediate Tax-Free Bond Fund will be invested in Municipal Securities, the
interest on which is both excluded from gross income for federal income tax and
California personal income tax purposes and not treated as a preference item
for individuals for purposes of the federal alternative minimum tax. The
California Intermediate Tax-Free Bond Fund invests in Municipal Securities of
varying maturities, which are rated in one of the four highest rating
categories by at least one nationally recognized statistical rating
organization ("NRSRO") or are determined by the Advisor to be of comparable
quality. The California Tax-Free Money Market Fund invests only in Municipal
Securities with remaining maturities of 397 days or less, and which, at the
time of purchase, possess the highest short-term rating from at least one NRSRO
or are determined by the Advisor to be of comparable quality.

Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and public entities. Private activity bonds that are issued
by or on behalf of public authorities to finance various privately operated
facilities are

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included within the term Municipal Securities if the interest paid thereon is
(i) excluded from gross income for federal income tax purposes and (ii) not
treated as a preference item for individuals for purposes of the federal
alternative minimum tax.

As described in the Prospectuses, the two principal classifications of
Municipal Securities consist of "general obligation" and "revenue" issues. In
general, only general obligation bonds are backed by the full faith and credit
and general taxing power of the issuer. There are, of course, variations in the
quality of Municipal Securities, both within a particular classification and
between classifications, and the yields on Municipal Securities depend upon a
variety of factors, including general market conditions, the financial
condition of the issuer (or other entity whose financial resources are
supporting the Municipal Securities), general conditions of the municipal bond
market, the size of a particular offering, the maturity of the obligation and
the rating(s) of the issue. In this regard, it should be emphasized that the
ratings of any NRSRO are general and are not absolute standards of quality;
Municipal Securities with the same maturity, interest rate and rating(s) may
have different yields while Municipal Securities of the same maturity and
interest rate with a different rating(s) may have the same yield.

An issuer's obligations with respect to its Municipal Securities are
subject to the provisions of bankruptcy, insolvency, and other laws affecting
the rights and remedies of creditors, such as the Federal Bankruptcy Code, and
laws, if any, that may be enacted by Congress or state legislatures extending
the time for payment of principal or interest, or both, or imposing other
constraints upon the enforcement of such obligations or upon the ability of
municipalities to levy taxes or otherwise raise revenues. Certain of the
Municipal Securities may be revenue securities and dependent on the flow of
revenue, generally in the form of fees and charges. The power or ability of an
issuer to meet its obligations for the payment of interest on and principal of
its Municipal Securities may be materially adversely affected by litigation or
other conditions, including a decline in property value or a destruction of
uninsured property due to natural disasters.

In addition, in accordance with its investment objective, each Fund
may invest in private activity bonds, which may constitute Municipal Securities
depending upon the federal income tax treatment of such bonds. Such bonds are
usually revenue bonds because the source of payment and security for such bonds
is the financial resources of the private entity involved; the full faith and
credit and the taxing power of the issuer in normal circumstances will not be
pledged. The payment obligations of the private entity also will be subject to
bankruptcy and similar debtor's rights, as well as other exceptions similar to
those described above. Moreover, the Funds may invest in obligations secured
in whole or in part by a mortgage or deed of trust on real property located in
California that are subject to the "anti-deficiency" legislation discussed
below.

The Funds may also invest indirectly in Municipal Securities by
purchasing the shares of tax-exempt money market mutual funds. Such investments
will be made solely for the

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purpose of investing short-term cash on a temporary tax-exempt basis and only
in those funds with respect to which the Advisor believes with a high degree of
certainty that redemption can be effected within seven days of demand.
Additional limitations on investments by the Funds in the shares of other
tax-exempt money market mutual funds are set forth under "Investment
Restrictions" below.

Certain Municipal Securities in the Funds may be obligations that are
payable solely from the revenues of health care institutions, although the
obligations may be secured by real or personal property of such institutions.
Certain provisions under federal and California law may adversely affect such
revenues and, consequently, payment on those Municipal Securities.

Certain Municipal Securities in which the Funds may invest may be
obligations that are secured in whole or in part by a mortgage or deed of trust
on real property. California has certain statutory provisions that limit the
remedies of a creditor secured by a mortgage or deed of trust. Two of the
provisions limit a creditor's right to obtain a deficiency judgment, one
limitation being based on the method of foreclosure and the other on the type
of debt secured. A third statutory provision, commonly known as the "single
action" rule, has two aspects, an "affirmative defense aspect" and a "sanction
aspect." The "affirmative defense" aspect limits creditors secured by real
property to a single legal action for recovery of their debt, and that single
action must be a judicial foreclosure action against their real property
security. Under the "sanction" aspect, if the real estate-secured creditor
proceeds by legal action other than judicial foreclosure, the creditor loses
its lien on the real property security and, in some instances, the right to
recover its debt. Another statutory provision gives the debtor the right to
redeem the real property from any judicial foreclosure sale.

Upon the default under a mortgage or deed of trust with respect to
California real property, a creditor's nonjudicial foreclosure rights under the
power of sale contained in the mortgage or deed of trust are subject to certain
procedural requirements whereby the effective minimum period for foreclosing on
a mortgage or deed of trust is generally four to five months after the initial
default and such foreclosure could be further delayed by bankruptcy proceedings
initiated by the debtor. Such time delays in collections could disrupt the flow
of revenues available to an issuer for the payment of debt service on the
outstanding obligations if such defaults occur with respect to a substantial
number of mortgages or deeds of trust securing an issuer's obligations.
Following a creditor's non-judicial foreclosure under a power of sale, no
deficiency judgment is available. This limitation, however, does not apply to
bonds authorized or permitted to be issued by the Commissioner of Corporations,
or which are made by a public utility subject to the Public Utilities Act.

Certain Municipal Securities in the Funds may be obligations that
finance the acquisition of mortgages for low and moderate income mortgagors.
These obligations may be payable solely from revenues derived from home
mortgages and are subject to California's statutory limitations applicable to
obligations secured by real property, as described above. Under California
anti-deficiency legislation, there is no personal recourse against a mortgagor

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of a dwelling of no more than four units, at least one of which is occupied by
such a mortgagor, where the dwelling has been purchased with the loan that is
secured by the mortgage, regardless of whether the creditor chooses judicial or
nonjudicial foreclosure. In the event that this purchase money anti-deficiency
rule applies to a loan secured by a mortgage or deed of trust, and the value of
the property subject to that mortgage or deed of trust has been substantially
reduced because of market forces or by an earthquake or other event for which
the mortgagor or trustor carried no insurance, upon default, the issuer holding
that loan nevertheless would be entitled to collect no more on its loan than it
could obtain from the foreclosure sale of the property.

Legislation has been introduced from time to time regarding the
California state personal income tax status of interest paid on Municipal
Securities issued by the State of California and its local governments and held
by investment companies such as the California Tax-Free Money Market Fund and
the California Intermediate Tax-Free Bond Fund. The Funds can not predict what
legislation relating to Municipal Securities, if any, may be proposed in the
future or which proposals, if any, might be enacted. Such proposals, while
pending or if enacted, might materially adversely affect the availability of
Municipal Securities generally, as well as the availability of Municipal
Securities issued by the State of California and its local governments
specifically, for investment by the Funds and the liquidity and value of their
portfolios. In such an event, each Fund would re-evaluate its investment
objective and policies and consider changes in its structure or possible
dissolution. See "Investments in California Municipal Securities by the
California Tax-Free Money Market Fund and the California Intermediate Tax-Free
Bond Fund" below.

11. Investments in California Municipal Securities by the California
Tax-Free Money Market Fund and the California Intermediate Tax-Free Bond Fund.
The following information is a general summary intended to give a recent
historical description, and is not a discussion of any specific factors that
may affect any particular issuer of California Municipal Securities. The
information is not intended to indicate continuing or future trends in the
condition, financial or otherwise, of California.

Because each Fund expects to invest substantially all of its assets in
California Municipal Securities, it will be susceptible to a number of complex
factors affecting the issuers of California Municipal Securities, including
national and local political, economic, social, environmental, and regulatory
policies and conditions. The Funds cannot predict whether or to what extent
such factors or other factors may affect the issuers of California Municipal
Securities, the market value or marketability of such securities or the ability
of the respective issuers of such securities to pay interest on, or principal
of, such securities. The creditworthiness of obligations issued by a local
California issuer may be unrelated to the creditworthiness of obligations
issued by the State of California, and there is no responsibility on the part
of the State of California to make payments on such local obligations.

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From mid-1990 to late 1993, California suffered the most severe
recession in the State since the 1930's, with significant job losses
(particularly in the aerospace, other manufacturing, services and construction
sectors). The greatest effects of the recession were felt in Southern
California. While a steady recovery has been underway since 1994, as of the date
of this Statement of Additional Information, rating agencies, underwriters and
investors appear to have lingering concerns about California's creditworthiness.
Major credit rating agencies have cited, among other things, concerns about
California's ability to withstand another economic downturn, fiscal problems at
the county level, and concern about California's ability to pass a true balanced
budget in light of federal funding cuts, political influences and structural
impediments under the California constitution (such as strict property tax
limits and mandated school funding levels).

The recession severely affected State revenues while the State's
health, welfare and education costs were increasing. As a result, throughout
the first half of the decade, California had a period of budget imbalance and
multibillion dollar year-end deficits. However, in recent years, California
appears to have ended its fiscal years with a surplus in the general fund. The
State's ability to raise revenues and reduce expenditures to the extent
necessary to balance the budget for any year depends upon numerous factors,
including economic conditions in the State and the nation, the accuracy of the
State's revenue predictions, as well as the impact of budgetary restrictions
imposed by voter-passed initiatives.

During the recession that began in 1990, the State depleted its
available cash resources and became increasingly dependent on external
borrowings to meet its cash needs. For well over a decade, California has
issued revenue anticipation notes (which must be issued and repaid during the
same fiscal year) to fund its operating budget during the fiscal year.
Beginning in 1992, the State expanded its external borrowing to include revenue
anticipation warrants (which can be issued and redeemed in different fiscal
years). The State was severely criticized by the major credit rating agencies
for the State's reliance upon such external borrowings during the recession. In
1996, the State fully repaid $4 billion of revenue anticipation warrants issued
in 1994. The State did not need to use such "cross-year" borrowing during the
1996-97 fiscal year and does not anticipate that it will need to use such
borrowing during the 1997-98 fiscal year. It is not presently possible,
however, to determine the extent to which California will issue additional
revenue anticipation warrants, short-term interest-bearing notes or other
instruments in future fiscal years.

Certain of the securities in the California Tax-Free Money Market Fund
and the California Intermediate Tax-Free Bond Fund may be obligations of
issuers that rely in whole or in part, directly or indirectly, on ad valorem
real property taxes as a source of revenue. Article XIII A of the California
Constitution, adopted by the voters in 1978, limits ad valorem taxes on real
property, and restricts the ability of taxing entities to increase real
property and other taxes. Constitutional challenges to Article XIII A to date
have been unsuccessful.

Article XIII B of the California Constitution, originally adopted in
1979, limits significantly spending by state government and by "local
governments". Article XIII B generally limits the amount of the appropriations
of the State and of local governments to the amount of appropriations of the
entity for the prior year, adjusted for changes in the cost of living,
population, and the services that the government entity is financially
responsible for providing. To the extent that the "proceeds of taxes" of the
State or a local government exceed its "appropriations limit," the excess
revenues must be rebated. One of the exclusions from these limitations for any
entity of government is the debt service costs of bonds existing or legally
authorized as of January 1, 1979 or on bonded indebtedness thereafter approved
by the voters. Although Article XIII B states that it shall not "be construed to
impair the ability of the state or of any local government to meet its
obligations with respect to existing or future bonded indebtedness,"

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concern has been expressed with respect to the combined effect of such
constitutionally imposed spending limits on the ability of California state and
local governments to utilize bond financing.

Article XIII B was modified substantially by Propositions 98 and 111
of 1988 and 1990, respectively. These initiatives changed the State's Article
XIII B appropriations limit to require that the State set aside a prudent
reserve fund for public education, and guarantee a minimum level of State
funding for public elementary and secondary schools as well as community
colleges. Such guaranteed spending is often cited as one of the causes of the
State's recurring budget problems.

The effect of Article XIII A, Article XIII B and other constitutional
and statutory changes and of budget developments on the ability of California
issuers to pay interest and principal on their obligations remains unclear, and
may depend on whether a particular bond is a general obligation or limited
obligation bond (limited obligation bonds being generally less affected).

There is no assurance that any California issuer will make full or
timely payments of principal or interest or remain solvent. For example, in
December 1994, Orange County filed for bankruptcy. In June 1995, Orange County
negotiated a rollover of its short-term debt originally due at that time; the
major rating agencies considered the rollover a default. In June 1996, the
investors in such overdue notes were paid and the Orange County bankruptcy
ended. However, the Orange County bankruptcy and such default have had a serious
effect upon the market for California municipal obligations.

Numerous factors may adversely affect the State and municipal
economies. For example, limits on federal funding (such as those contemplated by
welfare reform enacted in 1996) could result in the loss of billions of dollars
in federal assistance otherwise available to the State.

In addition, it is impossible to predict the time, magnitude, or
location of a natural catastrophe, such as a major earthquake, or its effect on
the California economy. In January 1994, a major earthquake struck the Los
Angeles area, causing significant damage in a four-county area. The possibility
exists that another natural disaster such as an earthquake could create a major
dislocation of the California economy.

The Funds' concentration in California Municipal Securities provides a
greater level of risk than funds that are diversified across numerous states
and municipal entities.

12. Puts. The California Tax-Free Money Market Fund and the
California Intermediate Tax-Free Bond Fund may acquire "puts" with respect to
the Municipal Securities held in their respective portfolios. A put is a right
to sell a specified security (or securities) within a specified period of time
at a specified exercise price. These Funds may sell, transfer,

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or assign a put only in conjunction with the sale, transfer, or assignment of
the underlying security or securities.

The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities (excluding any accrued
interest that the Fund paid on the acquisition), less any amortized market
premium or plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.

Puts may be acquired by a Fund to facilitate the liquidity of the
Fund's portfolio assets. Puts may also be used to facilitate the reinvestment
of a Fund's assets at a rate of return more favorable than that of the
underlying security. Under certain circumstances, puts may be used to shorten
the maturity of underlying adjustable rate notes for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of the California Tax-Free Money Market Fund's assets
pursuant to Rule 2a-7 under the 1940 Act.

The California Tax-Free Money Market Fund and the California
Intermediate Tax-Free Bond Fund will generally acquire puts only where the puts
are available without the payment of any direct or indirect consideration.
However, if necessary or advisable, a Fund may pay for puts either separately
in cash or by paying a higher price for portfolio securities that are acquired
subject to the puts (thus reducing the yield to maturity otherwise available
for the same securities).

13. Shares of Mutual Funds. Each of the California Tax-Free Money
Market Fund, the Fixed Income Funds and the Equity Funds may invest up to 5% of
its total assets in the shares of any one investment company, but may not own
more than 3% of the securities of any one registered investment company or
invest more than 10% of its assets in the securities of other investment
companies. In accordance with an exemptive order issued to HighMark by the
Securities and Exchange Commission, such other registered investment companies
securities may include shares of a money market fund of HighMark, and may
include registered investment companies for which the Advisor or Sub-Advisor to
a Fund of HighMark, or an affiliate of such Advisor or Sub-Advisor, serves as
investment advisor, administrator or distributor or provides other services.
Because other investment companies employ an investment advisor, such
investment by a Fund may cause Shareholders to bear duplicative fees. The
Advisor will waive its advisory fees attributable to the assets of the
investing Fund invested in a money market fund of HighMark, and, to the extent
required by applicable law, the Advisor will waive its fees attributable to the
assets of the Fund invested in any investment company. Additional restrictions
on the Fund's investments in the securities of a money market mutual fund are
set forth under "Investment Restrictions" below.

Investments by the California Tax-Free Money Market Fund in the shares
of other tax-exempt money market mutual funds are described under "Municipal
Securities" above.

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14. When-Issued Securities and Forward Commitments. Each Fund may
enter into forward commitments or purchase securities on a "when-issued" basis,
which means that the securities will be purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve the risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. A Fund will generally not pay for such
securities and no interest accrues on the securities until they are received by
the Fund. These securities are recorded as an asset and are subject to changes
in value based upon changes in the general level of interest rates. Therefore,
the purchase of securities on a "when-issued" basis may increase the risk of
fluctuations in a Fund's net asset value.

When a Fund agrees to purchase securities on a "when-issued" basis or
enter into forward commitments, HighMark's custodian will be instructed to set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a separate account. The Fund may be required subsequently to place
additional assets in the separate account in order to assure that the value of
the account remains equal to the amount of the Fund's commitment.

The Funds expect that commitments to enter into forward commitments or
purchase "when-issued" securities will not exceed 25% of the value of their
respective total assets under normal market conditions; in the event any Fund
exceeded this 25% threshold, the Fund's liquidity and the Advisor's ability to
manage it might be adversely affected. In addition, the Funds do not intend to
purchase "when-issued" securities or enter into forward commitments for
speculative or leveraging purposes but only in furtherance of such Fund's
investment objective.

15. Zero-Coupon Securities. Consistent with its objectives, a Fund
may invest in zero-coupon securities, which are debt securities that do not pay
interest, but instead are issued at a deep discount from par. The value of the
security increases over time to reflect the interest accreted. The value of
these securities may fluctuate more than similar securities that are issued at
par and pay interest periodically. Although these securities pay no interest to
holders prior to maturity, interest on these securities is reported as income
to the Fund and distributed to its shareholders. These distributions must be
made from the Fund's cash assets or, if necessary, from the proceeds of sales
of portfolio securities. The Fund will not be able to purchase additional
income producing securities with cash used to make such distributions and its
current income ultimately may be reduced as a result.

16. Options (Puts and Calls) on Securities. Each Equity Fund may buy
and sell options (puts and calls), and write call options on a covered basis.

17. Covered Call Writing. Each Equity Fund may write covered call
options from time to time on such portion of its assets, without limit, as the
Advisor determines is appropriate in seeking to obtain its investment
objective. A Fund will not engage in option

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writing strategies for speculative purposes. A call option gives the purchaser
of such option the right to buy, and the writer, in this case the Fund, has the
obligation to sell the underlying security at the exercise price during the
option period. The advantage to the Fund of writing covered calls is that the
Fund receives a premium which is additional income. However, if the value of
the security rises, the Fund may not fully participate in the market
appreciation.

During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold,
which requires the writer to deliver the underlying security against payment of
the exercise price. This obligation is terminated upon the expiration of the
option period or at such earlier time in which the writer effects a closing
purchase transaction. A closing purchase transaction is one in which a Fund,
when obligated as a writer of an option, terminates its obligation by
purchasing an option of the same series as the option previously written. A
closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.

Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security, or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a
net gain or loss from a closing purchase transaction, depending upon whether
the net amount of the original premium received on the call option is more or
less than the cost of effecting the closing purchase transaction. Any loss
incurred in a closing purchase transaction may be partially or entirely offset
by the premium received from a sale of a different call option on the same
underlying security. Such a loss may also be wholly or partially offset by
unrealized appreciation in the market value of the underlying security.
Conversely, a gain resulting from a closing purchase transaction could be
offset in whole or in part by a decline in the market value of the underlying
security.

If a call option expires unexercised, the Fund will realize a short
term capital gain in the amount of the premium on the option, less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security, and the proceeds of the sale of the security plus the amount of the
premium on the option, less the commission paid.

The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.

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The Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period or will own the right to acquire the underlying
security at a price equal to or below the option's strike price. Unless a
closing purchase transaction is effected the Fund would be required to continue
to hold a security which it might otherwise wish to sell, or deliver a security
it would want to hold. Options written by the Fund will normally have
expiration dates between one and nine months from the date written. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.

18. Purchasing Call Options. The Equity Funds may purchase call
options to hedge against an increase in the price of securities that the Fund
wants ultimately to buy. Such hedge protection is provided during the life of
the call option since the Fund, as holder of the call option, is able to buy
the underlying security at the exercise price regardless of any increase in the
underlying security's market price. In order for a call option to be
profitable, the market price of the underlying security must rise sufficiently
above the exercise price to cover the premium and transaction costs. These
costs will reduce any profit the Fund might have realized had it bought the
underlying security at the time it purchased the call option. The Funds may
sell, exercise or close out positions as the Advisor deems appropriate.

19. Purchasing Put Options. Each Equity Fund may purchase put
options to protect its portfolio holdings in an underlying security against a
decline in market value. Such hedge protection is provided during the life of
the put option since the Fund, as holder of the put option, is able to sell the
underlying security at the put exercise price regardless of any decline in the
underlying security's market price. For a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put
options in this manner, a Fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the premium paid for
the put option and by transaction costs.

20. Options in Stock Indices. The Equity Funds may engage in options
on stock indices. A stock index assigns relative values to the common stock
included in the index with the index fluctuating with changes in the market
values of the underlying common stock.

Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or
make delivery of the underlying stock at a specified price. A stock index
option gives the holder the right to receive a cash "exercise settlement
amount" equal to (i) the amount by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." Receipt of this cash amount will depend upon
the closing level of the stock index upon which the option is based being
greater than (in the case of a call) or less than (in the case of a put) the
exercise price of the option. The amount of cash received will be equal to
such difference

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between the closing price of the index and exercise price of the option
expressed in dollars times a specified multiple. The writer of the option is
obligated, in return of the premium received, to make delivery of this amount.
Gain or loss to a Fund on transactions in stock index options will depend on
price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities.

As with stock options, a Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.

A stock index fluctuates with changes in the market values of the
stock so included. Some stock index options are based on a broad market index,
such as the Standard & Poor's 500 or the New York Stock Exchange Composite
Index, or a narrower market index such as the Standard & Poor's 100. Indices
are also based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on stock indices
are currently traded on the following exchanges among others: The Chicago Board
Options Exchange, New York Stock Exchange, American Stock Exchange and London
Stock Exchange.

A Fund's ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the Fund's portfolio securities. Since a Fund's portfolio will
not duplicate the components of an index, the correlation will not be exact.
Consequently, a Fund bears the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument. It is also
possible that there may be a negative correlation between the index or other
securities underlying the hedging instrument and the hedged securities which
would result in a loss on both such securities and the hedging instrument.

A Fund will enter into an option position only if there appears to be
a liquid secondary market for such options.

A Fund will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets. The aggregate premium paid on all options on stock indices will not
exceed 20% of a Fund's total assets.

21. Risk Factors in Options Transactions. The successful use of
options strategies depends on the ability of the Advisor or, where applicable,
the Sub-Advisor to forecast interest rate and market movements correctly.

When it purchases an option, a Fund runs the risk that it will lose
its entire investment in the option in a relatively short period of time,
unless the Fund exercises the option or enters

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into a closing sale transaction with respect to the option during the life of
the option. If the price of the underlying security does not rise (in the case
of a call) or fall (in the case of a put) to an extent sufficient to cover the
option premium and transaction costs, a Fund will lose part or all of its
investment in the option. This contrasts with an investment by a Fund in the
underlying securities, since the Fund may continue to hold its investment in
those securities notwithstanding the lack of a change in price of those
securities.

The effective use of options also depends on a Fund's ability to
terminate option positions at times when the Advisor or, where applicable, the
Sub-Advisor deems it desirable to do so. Although a Fund will take an option
position only if its Advisor or, where applicable, the Sub-Advisor believes
there is liquid secondary market for the option, there is no assurance that a
Fund will be able to effect closing transactions at any particular time or at
an acceptable price.

If a secondary trading market in options were to become unavailable, a
Fund could no longer engage in closing transactions. Lack of investor interest
might adversely affect the liquidity of the market for particular options or
series of options. A marketplace may discontinue trading of a particular
option or options generally. In addition, a market could become temporarily
unavailable if unusual events such as volume in excess of trading or clearing
capability, were to interrupt normal market operations. A marketplace may at
times find it necessary to impose restrictions on particular types of options
transactions, which may limit a Fund's ability to realize its profits or limit
its losses.

Disruptions in the markets for securities underlying options purchased
or sold by a Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, a Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
(OCC) or other options markets, such as the London Options Clearing House, may
impose exercise restrictions. If a prohibition on exercise is imposed at the
time when trading in the option has also been halted, a Fund as purchaser or
writer of an option will be locked into its position until one of the two
restrictions has been lifted. If a prohibition on exercise remains in effect
until an option owned by a Fund has expired, the Fund could lose the entire
value of its option.

22. Futures Contracts on Securities and Related Options. A Fund may
invest in futures and related options based on any type of security or index
traded on U.S. or foreign exchanges, or over the counter as long as the
underlying security or the securities represented by the future or index are
permitted investments of the Fund. Futures and options can be combined with
each other in order to adjust the risk and return parameters of a Fund.

23. Futures Contracts on Securities. A Fund will enter into futures
contracts on securities only when, in compliance with the SEC's requirements,
cash or equivalents equal in

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value to the securities' value (less any applicable margin deposits) have been
deposited in a segregated account of the Fund's custodian.

A futures contract sale creates an obligation by the seller to deliver
the type of instrument called for in the contract in a specified delivery month
for a stated price. A futures contract purchase creates an obligation by the
purchaser to take delivery of the type of instrument called for in the contract
in a specified delivery month at a stated price. The specific instruments
delivered or taken at settlement date are not determined until on or near that
date. The determination is made in accordance with the rules of the exchanges
on which the futures contract was made. Futures contracts are traded in the
United States only on the commodity exchange or boards of trade, known as
"contract markets," approved for such trading by the Commodity Futures Trading
Commission (CFTC), and must be executed through a futures commission merchant
or brokerage firm which is a member of the relevant contract market.

Although futures contracts by their terms call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Closing out a
futures contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument with the same
delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the difference
and realizes a gain. Similarly, the closing out of a futures contract purchase
is effected by the purchaser's entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the purchaser realizes a
gain, and if the purchase price exceeds the offsetting sale price, the
purchaser realizes a loss.

Unlike when a Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract, although
the Fund is required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of cash and/or U.S. Government
securities. This amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the Fund to finance the transactions. Rather, initial margin is in
the nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts also involve
brokerage costs.

Subsequent payments, called "variation margin," to and from the broker
(or the custodian) are made on a daily basis as the price of the underlying
security fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."

A Fund may elect to close some or all of its futures positions at any
time prior to their expiration. The purpose of making such a move would be to
reduce or eliminate the hedge

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position then currently held by the Fund. A Fund may close its positions by
taking opposite positions which will operate to terminate the Fund's position
in the futures contracts. Final determinations of variation margin are then
made, additional cash is required to be paid by or released to the Fund, and
the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.

24. Options on Securities' Futures Contracts. A Fund will enter into
written options on securities' futures contracts only when in compliance with
the SEC's requirements, cash or equivalents equal in value to the securities'
value (less any applicable margin deposits) have been deposited in a segregated
account of the Fund's custodian. A Fund may purchase and write call and put
options on the futures contracts it may buy or sell and enter into closing
transactions with respect to such options to terminate existing positions. A
Fund may use such options on futures contracts in lieu of writing options
directly on the underlying securities or purchasing and selling the underlying
futures contracts. Such options generally operate in the same manner as
options purchased or written directly on the underlying investments.

As with options on securities, the holder or writer of an option may
terminate his or her position by selling or purchasing an offsetting option.
There is no guarantee that such closing transactions can be effected.

A Fund will be required to deposit initial margin and maintenance
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above.

Aggregate initial margin deposits for futures contracts (including
futures contracts on securities, indices and currency) and premiums paid for
related options may not exceed 5% of a Fund's total assets.

25. Risk of Transactions in Securities' Futures Contracts and Related
Options. Successful use of securities' futures contracts by a Fund is subject
to the ability of the Advisor or, where applicable, the Sub-Advisor to predict
correctly movements in the direction of interest rates and other factors
affecting securities markets.

Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less risk to a Fund because
the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to a Fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the price of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.

There is no assurance that higher than anticipated trading activity or
other unforeseen events will not, at times, render certain market clearing
facilities inadequate, and thereby

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result in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.

To reduce or eliminate a hedge position held by a Fund, the Fund may
seek to close out a position. The ability to establish and close out positions
will be subject to the development and maintenance of a liquid secondary
market. It is not certain that this market will develop or continue to exist
for a particular futures contract. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain contracts or options; (ii)
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of contracts or
options, or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange
or a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of contracts or options (or a particular class or series of contracts or
options), in which event the secondary market on that exchange (or in the class
or series of contracts or options) would cease to exist, although outstanding
contracts or options on the exchange that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

26. Index Futures Contracts. A Fund may enter into stock index
futures contracts, debt index futures contracts, or other index futures
contracts appropriate to its objective, and may purchase and sell options on
such index futures contracts. A Fund will not enter into any index futures
contract for the purpose of speculation, and will only enter into contracts
traded on securities exchanges with standardized maturity dates.

An index futures contract is a bilateral agreement pursuant to which
two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the index value at the
close of trading of the contracts and the price at which the futures contract
is originally struck. No physical delivery of the securities comprising the
index is made; generally contracts are closed out prior to the expiration date
of the contract. No price is paid upon entering into index futures contracts.
When a Fund purchases or sells an index futures contract, it is required to
make an initial margin deposit in the name of the futures broker and to make
variation margin deposits as the value of the contract fluctuates, similar to
the deposits made with respect to futures contracts on securities. Positions
in index futures contracts may be closed only on an exchange or board of trade
providing a secondary market for such index futures contracts. The value of
the contract usually will vary in direct proportion to the total face value.

A Fund's ability to effectively utilize index futures contracts
depends on several factors. First, it is possible that there will not be a
perfect price correlation between the index futures contracts and their
underlying index. Second, it is possible that a lack of liquidity for

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index futures contracts could exist in the secondary market, resulting in the
Fund's inability to close a futures position prior to its maturity date.
Third, the purchase of an index futures contract involves the risk that the
Fund could lose more than the original margin deposit required to initiate a
futures transaction. In order to avoid leveraging and related risks, when a
Fund purchases an index futures contract, it will collateralize its position by
depositing an amount of cash or cash equivalents, equal to the market value of
the index futures positions held, less margin deposits, in a segregated account
with the Fund's custodian. Collateral equal to the current market value of the
index futures position will be maintained only a daily basis.

The extent to which a Fund may enter into transactions involving index
futures contracts may be limited by the Internal Revenue Code's requirements
for qualification as a regulated investment company and the Funds' intention to
qualify as such.

27. Options on Index Futures Contracts. Options on index futures
contracts are similar to options on securities except that options on index
futures contracts gives the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long position if the
option is a call and a short position if the option is a put), at a specified
exercise price at any time during the period of the option. Upon exercise of
the option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account which represents the amount by
which the market price of the index futures contract, at exercise, exceeds (in
the case of a call) or is less than (in the case of a put) the exercise price
of the option on the index futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise
price of the option and the closing level of the index on which the future is
based on the expiration date. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium paid.

28. U.S. Dollar Denominated Obligations of Securities of Foreign
Issuers. Certain of the Funds may invest in U.S. dollar denominated
obligations of securities of foreign issuers. Permissible investments may
consist of obligations of foreign branches of U.S. banks and foreign or
domestic branches of foreign banks, including European Certificates of Deposit,
European Time Deposits, Canadian Time Deposits and Yankee Certificates of
Deposits, and investments in Canadian Commercial Paper, foreign securities and
Europaper. In addition, the Equity Funds, the Government Securities Fund and
Convertible Securities Fund may invest in American Depositary Receipts. These
instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic
developments, the possible imposition of withholding taxes on interest or other
income, possible seizure, nationalization, or expropriation of foreign
deposits, the possible establishment of exchange controls or taxation at the
source, greater fluctuations in value due to changes in exchange rates, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. Such
investments may also entail higher

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custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements than
those applicable to domestic branches of U.S. banks.

29. Foreign Currency Transactions. Under normal market conditions,
the International Equity Fund may engage in foreign currency exchange
transactions to project against uncertainty in the level of future exchange
rates. The International Equity Fund expects to engage in foreign currency
exchange transactions in connection with the purchase and sale of portfolio
securities ("transaction hedging"), and to protect the value of specific
portfolio positions ("position hedging"). The Fund may purchase or sell a
foreign currency on a spot (or cash) basis at the prevailing spot rate in
connection with the settlement of transactions in portfolio securities
denominated in that foreign currency, and may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward contracts") and
purchase or sell foreign currency futures contracts ("futures contracts"). The
Fund may also purchase domestic and foreign exchange-listed and
over-the-counter call and put options on foreign currencies and futures
contracts. Hedging transactions involve costs and may result in losses, and
the Fund's ability to engage in hedging and related options transactions may be
limited by tax considerations.

30. Transaction Hedging. When it engages in transaction hedging, the
International Equity Fund enters into foreign currency transactions with
respect to specific receivables or payables of the International Equity Fund
generally arising in connection with the purchase or sale of its portfolio
securities. The International Equity Fund will engage in transaction hedging
when it desires to "lock in" the U.S. dollar price of a security it has agreed
to purchase or sell, or the U.S. dollar equivalent of a dividend or interest
payment in a foreign currency. By transaction hedging, the Fund will attempt
to protect itself against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the applicable foreign currency
during the period between the date on which the security is purchased or sold,
or on which the dividend or interest payment is declared, and the date on which
such payments are made or received.

Although there is no current intention to do so, the International
Equity Fund reserves the right to purchase and sell foreign currency futures
contracts which are traded in the United States and are subject to regulation
by the CFTC.

For transaction hedging purposes the International Equity Fund may
also purchase exchange-listed call and put options on foreign currency futures
contracts and on foreign currencies. A put option on a futures contract gives
the International Equity Fund the right to assume a short position in the
futures contract until expiration of the option. A put option on currency
gives the International Equity Fund the right to sell a currency at an exercise
price until the expiration of the option. A call option on a futures contract
gives the Fund the right

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to assume a long position in the futures contract until the expiration of the
option. A call option on currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.

31. Position Hedging. When it engages in position hedging, the
International Equity Fund enters into foreign currency exchange transactions to
protect against a decline in the values of the foreign currencies in which its
portfolio securities are denominated (or an increase in the value of currency
for securities which the Sub-Advisor expects to purchase, when the Fund holds
cash or short-term investments). In connection with the position hedging, the
Fund may purchase or sell foreign currency forward contracts or foreign
currency on a spot basis.

The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the value of such securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the dates the currency exchange transactions are entered
into and the dates they mature.

It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward contract or
futures contract. Accordingly, it may be necessary for the International
Equity Fund to purchase additional foreign currency on the spot market (and
bear the expense of such purchase) if the market value of the security or
securities being hedged is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security or
securities and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security or securities if the market value of such
security or securities exceeds the amount of foreign currency the International
Equity Fund is obligated to deliver.

Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the International Equity Fund owns or
expects to purchase or sell. They simply establish a rate of exchange which
one can achieve at some future point in time. Additionally, although these
techniques tend to minimize the risk of loss due to a decline in the value of
the hedged currency, they tend to limit any potential gain which might result
from the increase in the value of such currency.

32. Currency Forward and Futures Contracts. A forward contract
involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract as
agreed by the parties, at a price set at the time of the contract. In the case
of a cancelable forward contract, the holder has the unilateral right to cancel
the contract at maturity by paying a specified fee. Forward contracts are
trades in the interbank markets conducted directly between currency traders
(usually large commercial

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banks) and their customers. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades.

A futures contract is a standardized contract for the future delivery
of a specified amount of a foreign currency at a future date at a price set at
the time of the contract. Futures contracts are designed by and traded on
exchanges. The Fund would enter into futures contracts solely for hedging or
other appropriate risk management purposes as defined in the controlling
regulations.

Forward contracts differ from futures contracts in certain respects.
For example, the maturity date of a forward contract may be any fixed number of
days from the date of the contract agreed upon by the parties, rather than a
predetermined date in a given month. Forward contracts may be in any amounts
agreed upon by the parties rather than predetermined amounts. Also, forward
contracts are traded directly between currency traders so that no intermediary
is required. A forward contract generally requires no margin or other deposit.

At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.

Positions in the futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market in such contracts.
Although the Fund intends to purchase or sell futures contracts only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a secondary market on an exchange or board
of trade will exist for any particular contract or at any particular time. In
such event, it may not be possible to close a futures position and, in the
event of adverse price movements, the Fund would continue to be required to
make daily cash payments of variation margin, as described below.

33. General Characteristics of Currency Futures Contracts. When the
Fund purchases or sells a futures contract, it is required to deposit with its
custodian an amount of cash or U.S. Treasury bills up to 5% of the amount of
the futures contract. This amount is known as "initial margin." The nature of
initial margin is different from that of margin in security transactions in
that it does not involve borrowing money to finance transactions. Rather,
initial margin is similar to a performance bond or good faith deposit that is
returned to the International Equity Fund upon termination of the contract,
assuming the Fund satisfies its contractual obligation.

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Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market." These payments are called "variation
margin," and are made as the value of the underlying futures contract
fluctuates. For example, when the Fund sells a futures contract and the price
of the underlying currency rises above the delivery price, the International
Equity Fund's position declines in value. The Fund then pays a broker a
variation margin payment equal to the difference between the delivery price of
the futures contract and the market price of the currency underlying the
futures contract. Conversely, if the price of the underlying currency falls
below the delivery price of the contract, the Fund's futures position increases
in value. The broker then must make a variation margin payment equal to the
difference between the delivery price of the futures contract and the market
price of the currency underlying the futures contract.

When the International Equity Fund terminates a position in a futures
contract, a final determination of variation margin is made, additional cash is
paid by or to the International Equity Fund, and the International Equity Fund
realizes a loss or gain. Such closing transactions involve additional
commission costs.

34. Foreign Currency Options. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written
only when the Fund's Sub-Advisor believes that a liquid secondary market exists
for such options. There can be no assurance that a liquid secondary market
will exist for a particular option at any specific time. Options on foreign
currencies are affected by all of those factors which influence foreign
exchange rates and investments generally.

The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors
may be disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies, and there is no regulatory requirement that quotations available
through dealer or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market, and thus may not reflect relatively
smaller transactions (less than $1 million), where rates may be less favorable.
The interbank market in foreign currencies is a global, around-the-clock
market.

35. Foreign Currency Conversion. Although foreign exchange dealers
do not charge a fee for currency conversion, the do realize a profit based on
the difference (the "spread") between prices at which they are buying and
selling various currencies. Thus, a dealer may

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offer to sell a foreign currency to an International Equity Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.

36. Standard & Poor's Depositary Receipts ("SPDRs"). SPDRs are
interests in a unit investment trust ("UIT") that may be obtained from the UIT
or purchased in the secondary market as SPDRs are listed on the American Stock
Exchange.

The UIT will issue SPDRs in aggregations of 50,000 known as "Creation
Units" in exchange for a "Portfolio Deposit" consisting of (a) a portfolio of
securities substantially similar to the component securities ("Index
Securities") of the Standard & Poor's 500 Composite Stock Price Index (the "S&P
Index"), (b) a cash payment equal to a pro rata portion of the dividends
accrued on the UIT's portfolio securities since the last dividend payment by
the UIT, net of expenses and liabilities, and (c) a cash payment or credit
("Balancing Amount") designed to equalize the net asset value of the S&P Index
and the net asset value of a Portfolio Deposit.

SPDRs are not individually redeemable, except upon termination of the
UIT. To redeem, the portfolio must accumulate enough SPDRs to reconstitute a
Creation Unit. The liquidity of small holdings of SPDRs, therefore, will
depend upon the existence of a secondary market. Upon redemption of a Creation
Unit, the portfolio will receive Index Securities and cash identical to the
Portfolio Deposit required of an investor wishing to purchase a Creation Unit
that day.

The price of SPDRs is derived and based upon the securities held by
the UIT. Accordingly, the level of risk involved in the purchase or sale of a
SPDR is similar to the risk involved in the purchase or sale of traditional
common stock, with the exception that the pricing mechanism for SPDRs is based
on a basket of stocks. Disruptions in the markets for the securities
underlying SPDRs purchased or sold by the Portfolio could result in losses on
SPDRs. Trading in SPDRs involves risks similar to those risks, described above
under "Options," involved in the writing of options on securities.

37. High Yield Securities

The Convertible Securities Fund may invest in lower rated securities.
Fixed income securities are subject to the risk of an issuer's ability to meet
principal and interest payments on the obligation (credit risk), and may also
be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and
general market liquidity (market risk). Lower rated or unrated (i.e., high
yield) securities are more likely to react to developments affecting market and
credit risk than are more highly rated securities, which primarily react to
movements in the general level of interest rates. The market values of
fixed-income securities tend to vary inversely with the level of interest
rates. Yields and market values of high yield securities will fluctuate over
time, reflecting not only changing interest rates but the market's perception
of credit quality and the outlook for

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economic growth. When economic conditions appear to be deteriorating, medium
to lower rated securities may decline in value due to heightened concern over
credit quality, regardless of the prevailing interest rates. Investors should
carefully consider the relative risks of investing in high yield securities and
understand that such securities are not generally meant for short-term
investing.

The high yield market is relatively new and its growth has paralleled
a long period of economic expansion and an increase in merger, acquisition and
leveraged buyout activity. Adverse economic developments can disrupt the
market for high yield securities, and severely affect the ability of issuers,
especially highly leveraged issuers, to service their debt obligations or to
repay their obligations upon maturity which may lead to a higher incidence of
default on such securities. In addition, the secondary market for high yield
securities, which is concentrated in relatively few market makers, may not be
as liquid as the secondary market for more highly rated securities. As a
result, the Convertible Securities Fund could find it more difficult to sell
these securities or may be able to sell the securities only at prices lower
than if such securities were widely traded. Furthermore, the Trust may
experience difficulty in valuing certain securities at certain times. Prices
realized upon the sale of such lower rated or unrated securities, under these
circumstances, may be less than the prices used in calculating the Convertible
Securities Fund's net asset value.

Lower rated or unrated debt obligations also present risks based on
payment expectations. If an issuer calls an obligation for redemption, the
Convertible Securities Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. If the
Convertible Securities Fund experiences unexpected net redemptions, it may be
forced to sell its higher rated securities, resulting in a decline in the
overall credit quality of the Convertible Securities Fund's investment
portfolio and increasing the exposure of the Convertible Securities Fund to the
risks of high yield securities.

The Convertible Securities Fund may choose, at its expense or in
conjunction with others, to pursue litigation or otherwise exercise its rights
as a security holder to seek to protect the interest of security holders if it
determines this to be in the interest of the Convertible Securities Fund's
Shareholders.

38. High Quality Investments with Regard to the Money Market Funds.
As noted in the Prospectuses for the Money Market Funds, each such Fund may
invest only in obligations determined by the Advisor to present minimal credit
risks under guidelines adopted by HighMark's Board of Trustees.

With regard to the Diversified Money Market Fund and the California
Tax-Free Money Market Fund, investments will be limited to "Eligible
Securities" that (i) in the case of the Diversified Money Market Fund, include
those obligations that, at the time of purchase, possess the highest short-term
rating from at least one NRSRO (the Diversified Money Market Fund may also
invest up to 5% of its net assets in obligations that, at the time of purchase,

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possess one of the two highest short-term ratings from at least one NRSRO, and
in obligations that do not possess a short-term rating (i.e., are unrated) but
are determined by the Advisor to be of comparable quality to the rated
instruments eligible for purchase by the Fund under guidelines adopted by the
Board of Trustees) and (ii) in the case of the California Tax-Free Money Market
Fund, include those obligations that, at the time of purchase, possess one of
the two highest short-term ratings by at least one NRSRO or do not possess a
short-term rating (i.e., are unrated) but are determined by the Advisor to be
of comparable quality to the rated obligations eligible for purchase by the
Fund under guidelines adopted by the Board of Trustees.

A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, are
determined by the Advisor to be of comparable quality; provided, however, that
where the demand feature would be readily exercisable in the event of a default
in payment of principal or interest on the underlying security, the obligation
may be acquired based on the rating possessed by the demand feature or, if the
demand feature does not possess a rating, a determination of comparable quality
by the Advisor. In applying the above-described investment policies, a security
that has not received a short-term rating will be deemed to possess the rating
assigned to an outstanding class of the issuer's short-term debt obligations if
determined by the Advisor to be comparable in priority and security to the
obligation selected for purchase by the Fund, or, if not available, the
issuer's long-term obligations, but only in accordance with the requirements of
Rule 2a-7. A security that at the time of issuance had a maturity exceeding
397 days but, at the time of purchase, has a remaining maturity of 397 days or
less, is considered an Eligible Security if it possesses a long-term rating,
within the two highest rating categories.

Eligible Securities include First Tier Securities and Second Tier
Securities. First Tier Securities include those that possess at least one
rating in the highest category and, if the securities do not possess a rating,
those that are determined to be of comparable quality by the Advisor pursuant
to guidelines adopted by the Board of Trustees. Second Tier Securities are all
other Eligible Securities.

The Diversified Money Market Fund will not invest more than 5% of its
total assets in the First Tier Securities of any one issuer, except that the
Fund may invest up to 25% of its total assets in First Tier Securities of a
single issuer for a period of up to three business days. (This three day "safe
harbor" provision will not be applicable to the California Tax-Free Money
Market Fund, because single state funds are specifically excluded from this
Rule 2a-7 provision.) In addition, the Diversified Money Market Fund may not
invest more than 5% of its total assets in Second Tier Securities, with
investments in the Second Tier Securities of any one issuer further limited to
the greater of 1% of the Fund's total assets or $1.0 million. If a percentage
limitation is satisfied at the time of purchase, a later increase in such
percentage resulting from a change in the Diversified Money Market Fund's net
asset value or a subsequent change in a security's qualification as a First
Tier or Second Tier Security will not

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constitute a violation of the limitation. In addition, there is no limit on the
percentage of the Diversified Money Market Fund's assets that may be invested
in obligations issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities and repurchase agreements fully collateralized by such
obligations.

Under the guidelines adopted by HighMark's Board of Trustees, in
accordance with Rule 2a-7 under the Investment Company Act of 1940 (the "1940
Act"), when in the best interests of the Shareholders, the Advisor may be
required to promptly take appropriate action with respect to an obligation held
in a Fund's portfolio in the event of certain developments that indicate a
diminishment of the instrument's credit quality, such as where an NRSRO
downgrades an obligation below the second highest rating category, or in the
event of a default relating to the financial condition of the issuer.

The Appendix to this Statement of Additional Information identifies
each NRSRO that may be utilized by the Advisor with regard to portfolio
investments for the Funds and provides a description of relevant ratings
assigned by each such NRSRO. A rating by a NRSRO may be utilized only where the
NRSRO is neither controlling, controlled by, or under common control with the
issuer of, or any issuer, guarantor, or provider of credit support for, the
instrument.

Illiquid Securities. Each Fund has adopted a non-fundamental policy
(which may be changed without shareholder approval) prohibiting the Fund from
investing more than 15% (in the case of each of the Money Market Funds, not
more than 10%) of its total assets in "illiquid" securities, which include
securities with legal or contractual restrictions on resale or for which no
readily available market exists but exclude such securities if resalable
pursuant to Rule 144A under the Securities Act ("Rule 144A Securities").
Pursuant to this policy, the Funds may purchase Rule 144A Securities only in
accordance with liquidity guidelines established by the Board of Trustees of
HighMark and only if the investment would be permitted under applicable state
securities laws.

Restricted Securities. Each Fund has adopted a nonfundamental policy
(which may be changed without Shareholder approval) prohibiting the Fund from
investing more than 25% of its total assets in restricted securities.
Restricted securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 ("1933 Act"). Restricted
Securities may be liquid or illiquid. The Advisor will determine the liquidity
of restricted securities in accordance with guidelines established by
HighMark's Board of Trustees. Restricted securities purchased by the Funds may
include Rule 144A securities and commercial paper issued in reliance upon the
"private placement" exemption from registration under Section 4(2) of the 1933
Act (whether or not such paper is a Rule 144A security).

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INVESTMENT RESTRICTIONS

Unless otherwise indicated, the following investment restrictions are
fundamental and, as such, may be changed with respect to a particular Fund only
by a vote of a majority of the outstanding Shares of that Fund (as defined
below). Except with respect to a Fund's restriction governing the borrowing of
money, if a percentage restriction is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in asset
value will not constitute a violation of the restriction.

100% U.S. TREASURY MONEY MARKET FUND

The 100% U.S. Treasury Money Market Fund may not purchase
securities other than short-term obligations issued or guaranteed as
to payment of principal and interest by the full faith and credit of
the U.S. Treasury.

EACH OF THE GROWTH FUND, THE INCOME EQUITY FUND, THE BALANCED FUND, THE BOND
FUND, THE DIVERSIFIED MONEY MARKET FUND, THE U.S. GOVERNMENT MONEY MARKET
FUND, AND THE 100% U.S. TREASURY MONEY MARKET FUND MAY NOT:

1. Purchase securities on margin (except that, with respect
to the Growth Fund, the Income Equity Fund, the Balanced Fund and the
Bond Fund only, such Funds may make margin payments in connection with
transactions in options and financial and currency futures contracts),
sell securities short, participate on a joint or joint and several
basis in any securities trading account, or underwrite the securities
of other issuers, except to the extent that a Fund may be deemed to be
an underwriter under certain securities laws in the disposition of
"restricted securities" acquired in accordance with the investment
objectives and policies of such Fund;

2. Purchase or sell commodities, commodity contracts
(excluding, with respect to the Growth Fund, the Income Equity Fund,
the Balanced Fund, and the Bond Fund, options and financial and
currency futures contracts), oil, gas or mineral exploration leases or
development programs, or real estate (although investments by the
Growth Fund, the Income Equity Fund, the Balanced Fund, the Bond Fund,
and the Diversified Money Market Fund in marketable securities of
companies engaged in such activities and investments by the Growth
Fund, the Income Equity Fund, the Balanced Fund, and the Bond Fund in
securities secured by real estate or interests therein, are not hereby
precluded to the extent the investment is appropriate to such Fund's
investment objective and policies);

3. Invest in any issuer for purposes of exercising control or
management;

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4. Purchase or retain securities of any issuer if the
officers or Trustees of HighMark or the officers or directors of its
investment advisor owning beneficially more than one-half of 1% of the
securities of such issuer together own beneficially more than 5% of
such securities;

5. Borrow money or issue senior securities, except that a
Fund may borrow from banks or enter into reverse repurchase agreements
for temporary emergency purposes in amounts up to 10% of the value of
its total assets at the time of such borrowing; or mortgage, pledge,
or hypothecate any assets, except in connection with permissible
borrowings and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Fund's total assets at the
time of its borrowing. A Fund will not invest in additional
securities until all its borrowings (including reverse repurchase
agreements) have been repaid. For purposes of this restriction, the
deposit of securities and other collateral arrangements with respect
to options and financial and currency futures contracts, and payments
of initial and variation margin in connection therewith, are not
considered a pledge of a Fund's assets; and

THE DIVERSIFIED MONEY MARKET FUND, THE U.S. GOVERNMENT MONEY MARKET FUND AND
THE 100% U.S. TREASURY MONEY MARKET FUND MAY NOT:

1. Buy common stocks or voting securities, or state,
municipal or private activity bonds;

2. Invest in securities of other investment companies, except
as they may be acquired as part of a merger, consolidation,
reorganization, or acquisition of assets;

3. Write or purchase put or call options; or

4. Invest more than 10% of total assets in the securities of
issuers that together with any predecessors have a record of less than
three years' continuous operation.

5. Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government, its agencies,
or instrumentalities, if, immediately after the purchase, more than 5%
of the value of the Fund's total assets would be invested in such
issuer (except that up to 25% of the value of the Fund's total assets
may be invested without regard to the 5% limitation). (As indicated
below, the Funds have adopted a non-fundamental investment policy that
is more restrictive than this fundamental investment limitation);

6. Purchase any securities that would cause more than 25% of
the value of the Fund's total assets at the time of purchase to be
invested in the securities of one or more issuers conducting their
principal business activities in the same industry, provided that (a)
there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government, its agencies, or instrumentalities,
domestic bank certificates of deposit or bankers' acceptances, and
repurchase agreements secured by bank instruments or obligations of
the U.S. Government, its agencies, or instrumentalities; (b) wholly
owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing
the activities of their parents; and (c) utilities will be divided
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered a
separate industry).

7. Make loans, except that a Fund may purchase or hold debt
instruments, lend portfolio securities, and enter into repurchase
agreements as permitted by its individual investment objective and
policies.

The Diversified Money Market Fund, the Government Obligations
Money Market Fund, and the 100% U.S. Treasury Money Market Fund have
each adopted, in accordance with Rule 2a-7, a non-fundamental policy
providing that the 5% limit noted in limitation 5. above shall apply
to 100% of each Fund's assets. Notwithstanding, each such Fund may
invest up to 25% of its assets in First Tier qualified securities of a
single issuer for up to three business days.

THE GROWTH FUND, THE INCOME EQUITY FUND, THE BALANCED FUND, AND THE BOND FUND
MAY NOT:

1. Invest in securities of other investment companies except
as they may be acquired as part of a merger, consolidation,
reorganization, or acquisition of assets, provided, however, that each
of the Funds may purchase securities of a money market fund, if,
immediately after such purchase, the acquiring Fund does not own in
the aggregate (i) more than 3% of the acquired company's outstanding
voting securities, (ii) securities issued by the acquired company

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having an aggregate value in excess of 5% of the value of the
total assets of the acquiring Fund, or (iii) securities issued by the
acquired company and all other investment companies (other than
treasury stock of the acquiring Fund) having an aggregate value in
excess of 10% of the value of the acquiring Fund's total assets; and

EACH OF THE EQUITY AND FIXED INCOME FUNDS, OTHER THAN THE CONVERTIBLE SECURITIES
FUND AND THE CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND, MAY NOT:

1. Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government, its agencies,
or instrumentalities, (and, with respect to the International Equity
Fund only, repurchase agreements involving such securities) if,
immediately after the purchase, more than 5% of the value of such
Fund's total assets would be invested in the issuer or the Fund would
hold more than 10% of any class of securities of the issuer or more
than 10% of the issuer's outstanding voting securities (except that up
to 25% of the value of the Fund's total assets may be invested without
regard to these limitations). With respect to the International Equity
Fund, for purposes of this investment limitation, each foreign
governmental issuer is deemed a separate issuer;

2. Purchase any securities that would cause more than 25% of
such Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
or foreign governments or their agencies or instrumentalities and
repurchase agreements secured by obligations of the U.S. Government or
its agencies or instrumentalities; (b) wholly owned finance companies
will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services
(for example, gas, gas transmission, electric and gas, electric, and
telephone will each be considered a separate industry); and

3. Make loans, except that a Fund may purchase or hold debt
instruments, lend portfolio securities, and enter into repurchase
agreements in accordance with its investment objective and policies.

THE CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND MAY NOT:

1. Purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements involving such securities)
if as a result more than 5% of the total assets of the Fund would be
invested in the securities of such issuer provided, however, that the
Fund may invest up to 25% of its total assets without regard to this
restriction as permitted by applicable law;

2. Purchase any securities which would cause more than 25% of
the total assets of the Fund to be invested in the securities of one
or more issuers conducting their principal business activities in the
same industry, provided that this limitation does not apply to
investments in the obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and repurchase
agreements involving such securities, and provided further, that
utilities as a group will not be considered to be one industry, and
wholly-owned subsidiaries organized to finance the operations of their
parent companies will be considered to be in the same industries as
their parent companies; and

3. Make loans, except that the Fund may (a) purchase or hold
debt instruments in accordance with its investment objective and
policies; (b) enter into repurchase agreements; and (c) lend
securities.

THE CONVERTIBLE SECURITIES FUND MAY NOT:

1. Purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements involving such securities)
if as a result more than 5% of the total assets of the Fund would be
invested in the securities of such issuer. This restriction applies to
75% of the Fund's assets.

3. Make loans, except that the Fund may (a) purchase or hold
debt instruments in accordance with its investment objective and
policies, (b) enter into repurchase agreements, and (c) engage in
securities lending as described in this Prospectus and in the
Statement of Additional Information.

THE CALIFORNIA TAX-FREE MONEY MARKET FUND MAY NOT:

1. Purchase or sell real estate; provided, however, that the
Fund may, to the extent appropriate to its investment objective,
purchase Municipal Securities secured by real estate or interests
therein or securities issued by companies investing in real estate or
interests therein;

2. Purchase securities on margin, make short sales of
securities or maintain a short position;

3. Underwrite the securities of other issuers;

4. Purchase securities of companies for the purpose of
exercising control or management;

5. Invest in private activity bonds where the payment of
principal and interest are the responsibility of a company (including
its predecessors) with less than three years of continuous operation;

6. Purchase or sell commodities or commodity contracts, or
invest in oil, gas or mineral exploration leases or development
programs; provided, however, the Fund may, to the extent appropriate
to the Fund's investment objective, purchase publicly traded
obligations of companies engaging in whole or in part in such
activities;

7. Acquire any other investment company or investment company
security except in connection with a merger, consolidation,
reorganization or acquisition of assets;

8. Borrow money or issue senior securities, except that the
Fund may borrow from banks or enter into reverse repurchase agreements
for temporary emergency purposes in amounts up to 10% of the value of
its total assets at the time of such borrowing; or mortgage, pledge,
or hypothecate any assets, except in connection with permissible
borrowings and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Fund's total assets at the
time of its borrowing. The Fund will not invest in additional

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<PAGE> 240
securities until all its borrowings (including reverse repurchase
agreements) have been repaid;

9. Write or sell puts, calls, straddles, spreads, or
combinations thereof, except that the Fund may acquire puts with
respect to Municipal Securities in its portfolio and sell the puts in
conjunction with a sale of the underlying Municipal Securities;

10. Acquire a put, if, immediately after the acquisition,
more than 5% of the total amortized cost value of the Fund's assets
would be subject to puts from the same institution (except that (i) up
to 25% of the value of the Fund's total assets may be subject to puts
without regard to the 5% limitation and (ii) the 5% limitation is
inapplicable to puts that, by their terms, would be readily
exercisable in the event of a default in payment of principal or
interest on the underlying securities). In applying the
above-described limitation, the Fund will aggregate securities subject
to puts from any one institution with the Fund's investments, if any,
in securities issued or guaranteed by that institution. In addition,
for the purpose of this investment restriction and investment
restriction No. 11 below, a put will be considered to be from the
party to whom the Fund will look for payment of the exercise price;

11. Acquire a put that, by its terms, would be readily
exercisable in the event of a default in payment of principal and
interest on the underlying security or securities if, immediately
after the acquisition, the amortized cost value of the security or
securities underlying the put, when aggregated with the amortized cost
value of any other securities issued or guaranteed by the issuer of
the put, would exceed 10% of the total amortized cost value of the
Fund's assets; and

12. Invest in securities of other investment companies except
as they may be acquired as part of a merger, consolidation,
reorganization, or acquisition of assets, provided, however, that the
Fund may purchase securities of a tax-exempt money market fund if,
immediately after such purchase, the acquiring Fund does not own in
the aggregate (i) more than 3% of the acquired company's outstanding
voting securities, (ii) securities issued by the acquired company
having an aggregate value in excess of 5% of the value of the total
assets of the acquiring Fund, or (iii) securities issued by the
acquired company and all other investment companies (other than
treasury stock of the acquiring Fund) having an aggregate value in
excess of 10% of the value of the acquiring Fund's total assets.

13. Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government, its agencies,
or instrumentalities, if, immediately after the purchase, more than 5%
of the value of its total assets would be invested in such issuer
(except that up to 25% of the value of the Fund's total assets may be
invested without regard to the 5% limitation). For purposes of this
investment restriction, a security is considered to be issued by the
government entity (or entities) whose assets and revenues back the
security or, with respect to a private activity bond that is backed
only by the assets and revenues of a non-governmental user, by the
non-governmental user;

14. Purchase any securities that would cause 25% or more of
such Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided that this limitation shall
not apply to securities of the U.S. Government, its agencies or
instrumentalities or Municipal Securities or governmental guarantees of
Municipal Securities; and provided, further, that for the purpose of
this limitation, private activity bonds that are backed only by the
assets and revenues of a non-governmental user shall not be deemed to
be Municipal Securities.

15. Make loans; except that the Fund may purchase or hold
debt instruments, lend portfolio securities and enter into repurchase
agreements as permitted by its investment objective and policies.

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<PAGE> 241
EACH OF THE VALUE MOMENTUM FUND, THE BLUE CHIP GROWTH FUND, THE EMERGING GROWTH
FUND, THE INTERNATIONAL EQUITY FUND, THE INTERMEDIATE-TERM BOND FUND, THE
GOVERNMENT SECURITIES FUND, THE CONVERTIBLE SECURITIES FUND, AND THE CALIFORNIA
INTERMEDIATE TAX-FREE BOND FUND:

1. May purchase securities of any issuer only when consistent
with the maintenance of its status as a diversified company
under the Investment Company Act of 1940, or the rules or
regulations thereunder, as such statute, rules or regulations
may be amended from time to time.

2. May not concentrate investments in a particular industry or
group of industries, or within any one state (except that the
limitation as to investments in any one state or its political
subdivision shall not apply to the California Intermediate
Tax-Free Bond Fund), as concentration is defined under the
Investment Company Act of 1940, or the rules or regulations
thereunder, as such statute, rules or regulations may be
amended from time to time.

3. May issue senior securities to the extent permitted by the
Investment Company Act of 1940, or the rules or regulations
thereunder, as such statute, rules or regulations may be
amended from time to time.

4. May lend or borrow money to the extent permitted by the
Investment Company Act of 1940, or the rules or regulations
thereunder, as such statute, rules or regulations may be
amended from time to time.

5. May purchase or sell commodities, commodities contracts,
futures contracts, or real estate to the extent permitted by
the Investment Company Act of 1940, or the rules or
regulations thereunder, as such statute, rules or regulations
may be amended from time to time.

6. May underwrite securities to the extent permitted by the
Investment Company Act of 1940, or the rules or regulations
thereunder, as such statute, rules or regulations may be
amended from time to time.

7. May pledge, mortgage or hypothecate any of its assets to the
extent permitted by the Investment Company Act of 1940, or the
rules or regulations thereunder, as such statute, rules or
regulations may be amended from time to time.

The fundamental limitations of the Value Momentum Fund, the
Blue Chip Growth Fund, the Emerging Growth Fund, the International
Equity Fund, the International Equity Fund, the Intermediate-Term Bond
Fund, the Government Securities Fund, the Convertible Securities Fund,
and the California Intermediate Tax-Free Bond Fund have been adopted
to avoid

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<PAGE> 242
wherever possible the necessity of shareholder meetings otherwise
required by the 1940 Act. This recognizes the need to react quickly
to changes in the law or new investment opportunities in the
securities markets and the cost and time involved in obtaining
shareholder approvals for diversely held investment companies.
However, the Funds also have adopted nonfundamental limitations, set
forth below, which in some instances may be more restrictive than
their fundamental limitations. Any changes in a Fund's nonfundamental
limitations will be communicated to the Fund's shareholders prior to
effectiveness.

1940 ACT RESTRICTIONS. Under the 1940 Act, and the rules,
regulations and interpretations thereunder, a "diversified company,"
as to 75% of its totals assets, may not purchase securities of any
issuer (other than obligations of, or guaranteed by, the U.S.
Government, its agencies or its instrumentalities) if, as a result,
more than 5% of the value of its total assets would be invested in the
securities of such issuer or more than 10% of the issuer's voting
securities would be held by the fund. "Concentration" is generally
interpreted under the 1940 Act to be investing more than 25% of net
assets in an industry or group of industries. The 1940 Act limits the
ability of investment companies to borrow and lend money and to
underwrite securities. The 1940 Act currently prohibits an open-end
fund from issuing senior securities, as defined in the 1940 Act,
except under very limited circumstances.

THE FOLLOWING INVESTMENT LIMITATIONS OF THE VALUE MOMENTUM FUND, THE BLUE CHIP
GROWTH FUND, THE EMERGING GROWTH FUND, THE INTERNATIONAL EQUITY FUND, THE
INTERMEDIATE-TERM BOND FUND, THE GOVERNMENT SECURITIES FUND, THE CONVERTIBLE
SECURITIES FUND, AND THE CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND ARE
NONFUNDAMENTAL POLICIES. EACH FUND MAY NOT:

1. Acquire more than 10% of the voting securities of any one
issuer. This limitation applies to only 75% of a Fund's
assets.

2. Invest in companies for the purpose of exercising control.

3. Borrow money, except for temporary or emergency purposes and
then only in an amount not exceeding one-third of the value of
total assets and except that a Fund may borrow from banks or
enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its
total assets at the time of such borrowing. To the extent
that such borrowing exceeds 5% of the value of the Fund's
assets, asset coverage of at least 300% is required. In the
event that such asset coverage shall at any time fall below
300%, the Fund shall, within three days thereafter or such
longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of

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such borrowing shall be at least 300%. This borrowing
provision is included solely to facilitate the orderly sale
of portfolio securities to accommodate heavy redemption
requests if they should occur and is not for investment
purposes. All borrowings will be repaid before making
additional investments and any interest paid on such borrowings
will reduce income.

4. Pledge, mortgage or hypothecate assets except to secure
temporary borrowings permitted by (3) above in aggregate
amounts not to exceed 10% of total assets taken at current
value at the time of the incurrence of such loan, except as
permitted with respect to securities lending.

5. Purchase or sell real estate, real estate limited partnership
interest, commodities or commodities contracts (except that
the Government Securities Fund, the Blue Chip Growth Fund, the
Emerging Growth Fund, the International Equity Fund, the Value
Momentum Fund, the Intermediate-Term Bond Fund and the
California Intermediate Tax-Free Bond Fund may invest in
futures contracts and options on futures contracts, as
disclosed in the prospectuses) and interest in a pool of
securities that are secured by interests in real estate.
However, subject to their permitted investments, any Fund may
invest in companies which invest in real estate, commodities
or commodities contracts.

6. Make short sales of securities, maintain a short position or
purchase securities on margin, except that HighMark may obtain
short-term credits as necessary for the clearance of security
transactions.

7. Act as an underwriter of securities of other issuers except as
it may be deemed an underwriter in selling a Fund security.

8. Issue senior securities (as defined in the Investment Company
Act of 1940) except in connection with permitted borrowings as
described above or as permitted by rule, regulation or order
of the Securities and Exchange Commission.

9. Purchase or retain securities of an issuer if, to the
knowledge of HighMark, an officer, trustee, partner or
director of HighMark or the Advisor or Sub-Advisors of
HighMark owns beneficially more than 1/2 or 1% of the shares
or securities or such issuer and all such officers, trustees,
partners and directors owning more than 1/2 or 1% of such
shares or securities together own more than 5% of such shares
or securities.

10. Invest in interest in oil, gas, or other mineral exploration
or development programs and oil, gas or mineral leases.

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<PAGE> 244
Voting Information. As used in this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of HighMark or a
particular Fund or a particular Class of Shares of HighMark or a Fund means the
affirmative vote of the lesser of (a) more than 50% of the outstanding Shares
of HighMark or such Fund or such Class, or (b) 67% or more of the Shares of
HighMark or such Fund or such Class present at a meeting at which the holders
of more than 50% of the outstanding Shares of HighMark or such Fund or such
Class are represented in person or by proxy.

PORTFOLIO TURNOVER

A Fund's turnover rate is calculated by dividing the lesser of a
Fund's purchases or sales of portfolio securities for the year by the monthly
average value of the portfolio securities. The calculation excludes all
securities whose maturities at the time of acquisition were one year or less.
Thus, for regulatory purposes, the portfolio turnover rate with respect to each
of the Money Market Funds was zero percent for each of the last two fiscal
years, and is expected to remain zero percent. For HighMark's fiscal years
ended July 31, 1997 and July 31, 1996, each Funds' portfolio turnover rate was:
118% and 79% for the HighMark Growth Fund; 46% and 42% for the HighMark Income
Equity Fund; and 14% and 21% for the HighMark Bond Fund. For each of the
following Funds, the portfolio turnover rate for the six-month period ended
July 31, 1997 and the prior two years ended January 31, 1997 and January 31,
1996 was: __%, __% and __% for the HighMark Balanced Fund (fixed income
portion); __%, __% and __% for the HighMark Balanced Fund (equity portion); 1%,
9% and 20% for the HighMark Value Momentum Fund; 54%, 80% and 69% for the
HighMark Blue Chip Growth Fund; 116%, 134% and 131% for the HighMark Emerging
Growth Fund; 18%, 29% and 21% for the HighMark International Equity Fund; 58%,
106% and 147% for the HighMark Intermediate-Term Bond Fund; 40%, 186% and 239%
for the HighMark Government Securities Fund; 33%, 89% and 46% for the HighMark
Convertible Securities Fund; and 5%, 6% and 30% for the HighMark California
Intermediate Tax-Free Bond Fund. The portfolio turnover rate may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemption of Shares and, in the case of the
California Tax-Free Money Market Fund, by requirements that enable them to
receive certain favorable tax treatment.

VALUATION

As disclosed in the Prospectuses, each Money Market Fund's net asset
value per share for purposes of pricing purchase and redemption orders is
determined by the administrator as of 1:00 p.m., Pacific Time (4:00 p.m.
Eastern Time) and 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time) on days on
which both the New York Stock Exchange and the Federal Reserve wire system are
open for business ("Business Days"). As disclosed in the Prospectuses, each
Equity Fund's and Fixed Income Fund's net asset value per share for

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<PAGE> 245

purposes of pricing purchase and redemption orders is determined by the
administrator as of 1:00 p.m., Pacific Time (4:00 p.m. Eastern Time) on days
on which the New York Stock Exchange is open for business (also "Business
Days").

VALUATION OF THE MONEY MARKET FUNDS

The Money Market Funds have elected to use the amortized cost method
of valuation pursuant to Rule 2a-7 under the 1940 Act. The amortized cost
method involves valuing an instrument at its cost initially and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. This method may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument. The value of securities in a Fund can be
expected to vary inversely with changes in prevailing interest rates.

HighMark's Board of Trustees has undertaken to establish procedures
reasonably designed, taking into account current market conditions and a Fund's
investment objective, to stabilize the net asset value per Share of each Money
Market Fund for purposes of sales and redemptions at $l.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per Share of each
Fund calculated by using available market quotations deviates from $1.00 per
Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7
requires that the Board promptly consider what action, if any, should be
initiated. If the Trustees believe that the extent of any deviation from a
Fund's $1.00 amortized cost price per Share may result in material dilution or
other unfair results to new or existing investors, the Trustees will take such
steps as they consider appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the average
portfolio maturity of a Fund, withholding or reducing dividends, reducing the
number of a Fund's outstanding Shares without monetary consideration, or
utilizing a net asset value per Share based on available market quotations.

VALUATION OF THE EQUITY FUNDS AND THE FIXED INCOME FUNDS

Except as noted below, investments by the Equity Funds and the Fixed
Income Funds in securities traded on a national exchange (or exchanges) are
valued based upon their last sale price on the principal exchange on which such
securities are traded. With regard to each such Fund, securities the principal
market for which is not a securities exchange are valued based upon the latest
bid price in such principal market. Securities and other assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of HighMark's Board of Trustees. With the
exception of short-term securities as described below, the value of each Fund's
investments may be based on valuations provided by a pricing

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<PAGE> 246
service. Short-term securities (i.e., securities with remaining maturities of
60 days or less) may be valued at amortized cost, which approximates current
value.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Purchases and redemptions of shares of the Money Market Funds may be
made on days on which both the New York Stock Exchange and the Federal Reserve
wire systems are open for business. Purchases and redemptions of shares of the
Equity Funds and Fixed Income Funds may be made on days on which the New York
Stock Exchange is open for business.

It is currently HighMark's policy to pay redemptions in cash.
HighMark retains the right, however, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of securities held by
the Funds other than the Money Market Funds in lieu of cash. Shareholders may
incur brokerage charges on the sale of any such securities so received in
payment of redemptions. However, a Shareholder will at all times be entitled
to aggregate cash redemptions from all Funds of HighMark during any 90-day
period of up to the lesser of $250,000 or 1% of HighMark's net assets.

HighMark reserves the right to suspend the right of redemption and/or
to postpone the date of payment upon redemption for any period on which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation) as a result of which disposal or valuation of the Fund's securities
is not reasonably practicable, or for such other periods as the Securities and
Exchange Commission has by order permitted. HighMark also reserves the right
to suspend sales of Shares of the Funds for any period.

If a Fund holds portfolio securities listed on foreign exchanges which
trade on Saturdays or other customary United States national business holidays,
the portfolio will trade and the net assets of the Fund's redeemable securities
may be significantly affected on days when the investor has no access to the
Fund.

ADDITIONAL FEDERAL TAX INFORMATION

Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). In order so to qualify and to qualify for the special tax
treatment accorded regulated investment companies and their Shareholders, a
Fund must, among other things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities, and foreign currencies, or other
income (including but not limited to gains from options, futures, or forward
contracts) derived with respect to its business of investing in such stock,
securities, or currencies; (b)

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<PAGE> 247

each year distribute at least 90% of its dividends, interest (including
tax-exempt interest), certain other income and the excess, if any, of its net
short-term capital gains over its net long-term capital losses; and (c)
diversify its holdings so that, at the end of each fiscal quarter (i) at least
50% of the market value of the Fund's assets is represented by cash, cash items,
U.S. Government securities, securities of other regulated investment companies,
and other securities, limited in respect of any one issuer to a value not
greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one issuer or of two
or more issuers that the Fund controls and that are engaged in the same,
similar, or related trades or businesses.

In addition, until the start of a Fund's first tax year beginning after
August 5, 1997, each Fund must derive less than 30% of its gross income from the
sale or other disposition of certain assets (including stocks and securities)
held for less than three months. This 30% of gross income test described above
may restrict a Fund's ability to sell certain assets held (or considered under
Code rules to have been held) for less than three months.

If a Fund qualifies as a regulated investment company that is accorded
special tax treatment, the Fund will not be subject to federal income tax on
income paid to its shareholders in the form of dividends (including capital
gain dividends). If a Fund failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the Fund would be subject
to tax on its taxable income at corporate rates, and all distributions from
earnings and profits, including any distributions of net tax-exempt income and
net long-term capital gains, would be taxable to shareholders as ordinary
income.

If a Fund fails to distribute in a calendar year substantially all of
its ordinary income for the year and substantially all its capital gain net
income for the one-year period ending October 31 of the year (and any retained
amount from the prior calendar year), the Fund will be subject to a
non-deductible 4% excise tax on the undistributed amounts.

Any dividend declared by a Fund to Shareholders of record on a date in
October, November or December generally is deemed to have been received by its
Shareholders on December 31 of such year (and paid by the Fund on or before
such time) provided that the dividend actually is paid during January of the
following year.

If a Fund engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sales, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders.

Under the 30% of gross income test described above, a Fund will be
restricted in selling assets held or considered to have been held for less than
three months, and in engaging

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in certain hedging transactions (including hedging transactions in options and
futures) that in some circumstances could cause certain Fund assets to be
treated as held for less than three months.

Certain of a Fund's hedging activities (including its transactions, if
any, in foreign currencies or foreign currency-denominated instruments) are
likely to produce a difference between its book income and its taxable income.
If a Fund's book income exceeds its taxable income, the distribution (if any)
of such excess will be treated as (i) a dividend to the extent of the Fund's
remaining earnings and profits (including earnings and profits arising from
tax-exempt income), (ii) thereafter as a return of capital to the extent of the
recipient's basis in the shares, and (iii) thereafter as gain from the sale or
exchange of a capital asset. If the Fund's book income is less than its
taxable income, the Fund could be required to make distributions exceeding book
income to qualify as a regulated investment company that is accorded special
tax treatment.

If a Fund makes a distribution in excess of its current and
accumulated "earnings and profits" in any taxable year, the excess distribution
will be treated as a return of capital to the extent of a Shareholder's tax
basis in Fund shares, and thereafter as capital gain. A return of capital is
not taxable, but it reduces the Shareholder's tax basis in the shares, thus
reducing any loss or increasing any gain on a subsequent taxable disposition of
those shares.

A Fund's investment in securities issued at a discount and certain
other obligations will (and investments in securities purchased at a discount
may) require the Fund to accrue and distribute income not yet received. In
order to generate sufficient cash to make the requisite distributions, a Fund
may be required to sell securities in its portfolio that it otherwise would
have continued to hold.

The Funds will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends and other distributions
paid to any Shareholder who has provided either an incorrect tax identification
number or no number at all, or who is subject to withholding by the Internal
Revenue Service for failure to properly include on his or her tax return
payments of interest or dividends.

The foregoing discussion and the one below regarding the California
Tax-Free Money Market Fund and the California Intermediate Tax-Free Bond Fund
under "Federal Taxation" is only a summary of some of the important Federal tax
considerations generally affecting purchasers of the Funds' Shares. No attempt
has been made to present a detailed explanation of the Federal income tax
treatment of the Funds, and this discussion is not intended as a substitute for
careful tax planning. Accordingly, potential purchasers of the Funds' Shares
are urged to consult their tax advisors with specific reference to their own
tax situation. Foreign Shareholders should consult their tax advisors
regarding the U.S. and foreign tax consequences of an investment in the Funds.
In addition, this discussion is based on tax laws and regulations that are in
effect on the date of this Statement of Additional Information; such laws

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<PAGE> 249
and regulations may be changed by legislative, judicial or administrative
action, and such changes may be retroactive.

ADDITIONAL TAX INFORMATION CONCERNING THE CALIFORNIA TAX-FREE MONEY MARKET FUND
AND THE CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND

Federal Taxation. As indicated in their respective Prospectuses, the
California Tax-Free Money Market Fund and the California Intermediate Tax-Free
Bond Fund are designed to provide individual Shareholders with current
tax-exempt interest income. Neither of these Funds is intended to constitute a
balanced investment program or is designed for investors seeking capital
appreciation. Nor are the California Tax-Free Money Market Fund or the
California Intermediate Tax-Free Bond Fund designed for investors seeking
maximum tax-exempt income irrespective of fluctuations in principal. Shares of
the Funds may not be suitable for tax-exempt institutions and may not be
suitable for retirement plans qualified under Section 401 of the Code, H.R. 10
plans, and individual retirement accounts because such plans and accounts are
generally tax-exempt and, therefore, would not gain any additional benefit from
the Funds' dividends being tax-exempt, and such dividends would ultimately be
taxable to the beneficiaries when distributed to them.

The Code permits a regulated investment company that invests at least
50% of its total assets in tax-free Municipal Securities (at the close of each
quarter of the Fund's taxable year) to pass through to its investors, tax-free,
net Municipal Securities interest income to the extent such interest would be
exempt if earned directly. Because the California Tax-Free Money Market Fund
and the California Intermediate Tax-Free Bond Fund intend to be qualified to pay
such exempt-interest dividends, these Funds will be limited in their ability to
enter into taxable transactions, such as forward commitments, repurchase
agreements, securities lending transactions, financial futures and options
contracts on financial futures, tax-exempt bond indices and other assets. The
policy of the California Tax-Free Money Market Fund and the California
Intermediate Tax-Free Bond Fund is to pay each year as dividends substantially
all of such Fund's Municipal Securities interest income net of certain
deductions. An exempt-interest dividend is any dividend or part thereof derived
from interest excludable from gross income and designated as an exempt-interest
dividend in a written notice mailed to Shareholders after the close of such
Fund's taxable year, but the aggregate of such dividends may not exceed the net
Municipal Securities interest received by the Fund during the taxable year. In
the case of each of the California Tax-Free Money Market Fund and the California
Intermediate Tax-Free Bond Fund the percentage of the dividends paid for any
taxable year that qualifies as federal exempt-interest dividends will be the
same for all Shareholders receiving dividends during such year, regardless of
the period for which the Shares were held.

Exempt-interest dividends may be treated by Shareholders of the
California Tax-Free Money Market Fund and the California Intermediate Tax-Free
Bond Fund as items of interest excludable from their gross income. However, each
such Shareholder is advised to consult his or her tax advisor with respect to
whether exempt-interest

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<PAGE> 250
dividends would remain excludable if such Shareholder were treated as a
"substantial user" or a "related person" to such user with respect to facilities
financed through any of the tax-exempt obligations held by the California
Tax-Free Money Market Fund and the California Intermediate Tax-Free Bond Fund.
In addition, exempt-interest dividends may be taxable for federal alternative
minimum tax purposes and for state and local purposes.

The California Tax-Free Money Market Fund and the California
Intermediate Tax-Free Bond Fund will distribute substantially all of any
investment company taxable income for each taxable year. In general, a Fund's
investment company taxable income will be its taxable income subject to certain
adjustments and excluding the excess of any net long-term capital gains for the
taxable year over the net short-term capital loss, if any, for such year.
Distributions of such income will be taxable to Shareholders as ordinary
income. The dividends-received deduction for corporations is not expected to
apply to such distributions.

Distributions designated by the California Tax-Free Money Market Fund
and the California Intermediate Tax-Free Bond Fund as deriving from net gains on
securities held for more than one year but not more than 18 months and from net
gains on securities held for more than 18 months will be taxable to a Fund
Shareholder as such, regardless of how long a time the Shareholder held the
Fund's Shares. Such distributions will not be eligible for the
dividends-received deduction. If a Shareholder disposes of Shares in a Fund at
a loss before holding such Shares for longer than six months, such loss will be
disallowed to the extent of any exempt-interest dividends paid thereon, and any
remaining loss will be treated as a long-term capital loss to the extent the
Shareholder has received a capital gain dividend on the Shares.

Shareholders receiving social security or railroad retirement benefits
may be taxed on a portion of those benefits as a result of receiving tax-exempt
income (including exempt-interest dividends distributed by a Fund).

Like the other Funds, if for any taxable year the California Tax-Free
Money Market Fund or the California Intermediate Tax-Free Bond Fund does not
qualify for the special tax treatment afforded regulated investment companies,
all of such Fund's taxable income will be subject to tax at regular corporate
rates (without any deduction for distributions to Shareholders), and Municipal
Securities interest income, although not taxable to the California Tax-Free
Money Market Fund or the California Intermediate Tax-Free Bond Fund, would be
taxable to Shareholders as ordinary income when distributed as dividends.

Depending upon the extent of its activities in states and localities
in which its offices are maintained, in which its agents or independent
contractors are located or in which it is otherwise deemed to be conducting
business, the California Tax-Free Money Market Fund and the California
Intermediate Tax-Free Bond Fund may be subject to the tax laws of such states
or localities. For a summary of certain California tax considerations
affecting the California Tax-Free Money Market Fund and the California
Intermediate Tax-Free Bond Fund, see "California Taxation" below.

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<PAGE> 251
As indicated in their Prospectuses, the California Tax-Free Money
Market Fund and the California Intermediate Tax-Free Bond Fund may acquire
rights regarding specified portfolio securities under puts. See "INVESTMENT
OBJECTIVES AND POLICIES - Additional Information on Portfolio Instruments -
Puts" in this Statement of Additional Information. The policy of each Fund is
to limit its acquisition of puts to those under which the Fund will be treated
for Federal income tax purposes as the owner of the Municipal Securities
acquired subject to the put and the interest on such Municipal Securities will
be tax-exempt to the Fund. There is currently no guidance available from the
Internal Revenue Service that definitively establishes the tax consequences
that may result from the acquisition of many of the types of puts that the
California Tax-Free Money Market Fund or the California Intermediate Tax-Free
Bond Fund could acquire under the 1940 Act. Therefore, although they will only
acquire a put after concluding that it will have the tax consequences described
above, the Internal Revenue Service could reach a different conclusion from
that of the relevant Fund.

California Taxation. Under existing California law, if the California
Tax-Free Money Market Fund and the California Intermediate Tax-Free Bond Fund
continue to qualify for the special federal income tax treatment afforded
regulated investment companies and if at the end of each quarter of each such
Fund's taxable year at least 50% of the value of that Fund's assets consists of
obligations that, if held by an individual, would pay interest exempt from
California taxation ("California Exempt-Interest Securities"), Shareholders of
that Fund will be able to exclude from income, for California personal income
tax purposes, "California exempt-interest dividends" received from that Fund
during that taxable year. A "California exempt-interest dividend" is any
dividend or portion thereof of the California Tax-Free Money Market Fund or the
California Intermediate Tax-Free Bond Fund not exceeding the interest received
by the Fund during the taxable year on obligations that, if held by an
individual, would pay interest exempt from California taxation (less direct and
allocated expenses, which includes amortization of acquisition premium) and so
designated by written notice to Shareholders within 60 days after the close of
that taxable year.

Distributions, other than of "California exempt-interest dividends,"
by the California Tax-Free Money Market Fund and the California Intermediate
Tax-Free Bond Fund to California residents will be subject to California
personal income taxation. Gains realized by California residents from a
redemption or sale of Shares of the California Tax-Free Money Market Fund and
the California Intermediate Tax-Free Bond Fund will also be subject to
California personal income taxation. In general, California nonresidents, other
than certain dealers, will not be subject to California personal income
taxation on distributions by, or on gains from the redemption or sale of,
Shares of the California Tax-Free Money Market Fund and the California
Intermediate Tax-Free Bond Fund unless those Shares have acquired a California
"business situs." (Such California nonresidents may, however, be subject to
other state or local income taxes on such distributions or gains, depending on
their residence.) Short-term capital losses realized by shareholders from a
redemption of shares of the California Tax-Free Money Market Fund and the
California Intermediate Tax-Free Bond Fund within six months from the date of
their purchase will not be allowed for California personal

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<PAGE> 252
income tax purposes to the extent of any tax-exempt dividends received with
respect to such Shares during such period. No deduction will be allowed for
California personal income tax purposes for interest on indebtedness incurred
or continued in order to purchase or carry Shares of the California Tax-Free
Money Market Fund and the California Intermediate Tax-Free Bond Fund for any
taxable year of a Shareholder during which the Fund distributes "California
exempt-interest dividends."

A statement setting forth the amount of "California exempt-interest
dividends" distributed during each calendar year will be sent to Shareholders
annually.

The foregoing is only a summary of some of the important California
personal income tax considerations generally affecting the Shareholders of the
California Tax-Free Money Market Fund and the California Intermediate Tax-Free
Bond Fund. This summary does not describe the California tax treatment of the
California Tax-Free Money Market Fund and the California Intermediate Tax-Free
Bond Fund, in addition, no attempt has been made to present a detailed
explanation of the California personal income tax treatment of the Fund's
Shareholders. Accordingly, this discussion is not intended as a substitute for
careful planning. Further, "California exempt-interest dividends" are
excludable from income for California personal income tax purposes only. Any
dividends paid to Shareholders subject to California corporate franchise tax
will be taxed as ordinary dividends to such Shareholders, notwithstanding that
all or a portion of such dividends is exempt from California personal income
tax. Accordingly, potential investors in the California Tax-Free Money Market
Fund and the California Intermediate Tax-Free Bond Fund including, in
particular, corporate investors which may be subject to either California
franchise tax or California corporate income tax, should consult their tax
advisors with respect to the application of such taxes to the receipt of Fund
dividends and as to their own California tax situation, in general.

FOREIGN TAXES

Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on the Fund's securities. Tax conventions between
certain countries and the United States may reduce or eliminate these taxes.
Foreign countries generally do not impose taxes on capital gains with respect to
investments by foreign investors. If at the end of a Fund's fiscal year more
than 50% of the value of its total assets represents securities of foreign
corporations, the Fund will be eligible to make an election permitted by the
Code to treat any foreign taxes paid by it on securities it has held for at
least the minimum period specified in the Code as having been paid directly by
the Fund's Shareholders in connection with the Fund's dividends received by
them. In this case, Shareholders generally will be required to include in U.S.
taxable income their pro rata share of such taxes, and those Shareholders who
are U.S. citizens, U.S. corporations and, in some cases, U.S. residents will be
entitled to deduct their share of such taxes. Alternatively, such Shareholders
who hold Fund Shares (without protection from risk of loss) on the ex-dividend
date and for at least 15 other days during the 30-day period surrounding the
ex-dividend date will be entitled to claim a foreign tax credit for their share
of these taxes.

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<PAGE> 253

If a Fund makes this election, it will report annually to its Shareholders the
respective amounts per share of the Fund's income from sources within, and taxes
paid to, foreign countries and U.S. possessions.

MANAGEMENT OF HIGHMARK

TRUSTEES AND OFFICERS

Overall responsibility for management of each Fund rests with the
Trustees of HighMark, who are elected by HighMark's Shareholders. There are
currently six Trustees, all of whom are not "interested persons" of HighMark
within the meaning of that term under the 1940 Act.

The Trustees, in turn, elect the officers of HighMark to supervise
actively its day-to-day operations.

The Trustees and officers of HighMark, their addresses and principal
occupations during the past five years are set forth below.

<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH HIGHMARK DURING PAST 5 YEARS
- ---------------- ------------- -------------------
<S> <C> <C>
Thomas L. Braje Trustee Retired October, 1996. Prior to October
1323 Encina Drive 1996, Vice President and Chief Financial
Milbrae, CA 94030 Officer of Bio Rad Laboratories, Inc.

David A. Goldfarb Trustee Partner, Goldfarb & Simens, Certified
111 Pine Street Public Accountants.
18th Floor
San Francisco, CA 94111

Joseph C. Jaeger Trustee Senior Vice President and Chief
100 First Street Financial Officer, Delta Dental Plan of
San Francisco, CA 94105 California.

Frederick J. Long Trustee President and Chief Executive Officer,
520 Pike Street Pettit-Morry Co. and Acordia Northwest
20th Floor Inc. (each an insurance brokerage firm).
Seattle, WA 98101
</TABLE>

-48-
<PAGE> 254

<TABLE>
<S> <C> <C>
Paul L. Smith Trustee Member of the Board of Trustees
422 Gordon Terrace of Stepstone Funds 2/1991 - 4/1997;
Pasadena, CA 91105 Retired. Prior to retirement Director of Union
Bank; Vice Chairman and member of the Office
of the Chief Executive of Security
Pacific Corporation; and Former Director
and officer of numerous subsidiaries of
Security Pacific Corporation and
Security Pacific National Bank.

William R. Howell Trustee Chairman of the Board of Trustees
73-350 Calliandra Avenue of Stepstone Funds 1991 - 4/1997;
Palm Desert, CA 92260 Director, Current Income Shares, Inc.

</TABLE>

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<PAGE> 255

<TABLE>
<S> <C> <C>
Michael L. Noel Member Advisory Board Member of the Board of Trustees
1107 Pine Country Court of Stepstone Funds 1990-4/1997.
Prescott, AZ 86303-6405

</TABLE>

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<PAGE> 256

<TABLE>
<S> <C> <C>
Robert M. Whitler Member Advisory Board Retired. Prior to retirement Executive Vice
336 Running Spring Drive President and head of Union Bank's Financial
Palm Desert, CA 92211-3240 Management and Trust Services Group.

David G. Lee President and Chief Executive Senior Vice President of the
530 East Swedesford Road Officer Administrator and Distributor, employee
Wayne, PA 19087 since 1993. Prior to 1993, President
for GW Sierra Trust Funds before 1991.

Robert DellaCroce Controller and Chief CPA, Director of Fund Resources,
530 East Swedesford Road Financial Officer employee since 1994. Prior to 1994,
Wayne, PA 19087 senior manager for Arthur Andersen.

Kevin P. Robins Vice President and Secretary Employee since 1992. Prior to 1992,
1 Freedom Valley Drive of the Administrator and associate with Morgan Lewis & Bockius
Oaks, PA 19456 Distributor since 1988.

Kathryn L. Stanton Vice President and Assistant Employee since 1994. Prior to 1992,
1 Freedom Valley Drive Secretary; Secretary associate with Morgan Lewis & Bockius
Oaks, PA 19456 since 1988.
</TABLE>

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<PAGE> 257
<TABLE>
<S> <C> <C>
Sandra K. Orlow Vice President and Assistant Employee since 1983.
1 Freedom Valley Drive Secretary
Oaks, PA 19456

Todd Cipperman Vice President and Assistant Employee since 1995. From 1994 to May
1 Freedom Valley Drive Secretary. 1995, associate with Dewey Ballantine.
Oaks, PA 19456 Prior to 1994, associate with Winston &
Strawn.

Barbara A. Nugent Vice President and Assistant Employee since 1996. Prior to April
1 Freedom Valley Drive Secretary. 1996, associate with Drinker, Biddle &
Oaks, PA 19456 Reath from 1994 to 1996. Prior to 1996,
Assistant Vice President/Administration
for Delaware Service Company, Inc. from
1992 to 1993 and Assistant
Vice-Operations of Delaware Service
Company, Inc. from 1988 to 1992.
</TABLE>

The Trustees of HighMark receive quarterly retainer fees and fees and
expenses for each meeting of the Board of Trustees attended. No employee,
officer or stockholder of SEI Fund Resources and/or SEI Investments
Distribution Co. receives any compensation directly from HighMark for serving
as a Trustee and/or officer. SEI Fund Resources and/or SEI Investments
Distribution Co. receive administration, fund accounting servicing and
distribution fees from each of HighMark's Funds. See "Manager and
Administrator" and "Distributor" below. Messrs. Robins, Cipperman, Cahn,
DellaCroce, and Lee, and Ms. Stanton, Ms. Orlow, and Ms. Nugent are employees
and officers of SEI Investments Company. While SEI Fund Resources is a
distinct legal entity from SEI Investments Distribution Co., SEI Fund Resources
is considered to be an affiliated person of SEI Investments Distribution Co.
under the 1940 Act due to, among other things, the fact that SEI Investments
Distribution Co. and SEI Fund Resources are both controlled by the same
ultimate parent company, SEI Investments Company.

During the fiscal year ended July 31, 1997, fees paid to the
disinterested Trustees for their services as Trustees aggregated $___________.
For the disinterested Trustees, the

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<PAGE> 258

following table sets forth information concerning fees paid and retirement
benefits accrued during the fiscal year ended July 31, 1997:

<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Annual Total Compensation
Trustee Compensation Retirement Benefits Upon from Fund
from Group Benefits Accrued Retirement Complex Paid to
as Trustees
Part of Fund
Expenses
---------- ----------- -------- ---------- ----------
<S> <C> <C>
Thomas L. Braje None None
David A. Goldfarb None None
William R. Howell None None
Joseph C. Jaeger None None
Frederick J. Long None None
Paul L. Smith None None
Michael L. Noel* None None
Robert M. Whitler* None None
</TABLE>

*Members of Advisory Board.

The Advisory Board to the Board of Trustees is responsible for
providing monitoring services and evaluating issues affecting the HighMark
Funds pursuant to the direction of the Board of Trustees, and consulting and
providing advice to the Board of Trustees regarding those issues.

INVESTMENT ADVISOR

Investment the advisory and management services are provided to each of
HighMark's Funds by Pacific Alliance division, formerly MERUS-UCA Capital
Management (the "Advisor"), pursuant to an investment advisory agreement between
Union Bank of California and HighMark dated as of April 1, 1996 (the "Investment
Advisory Agreement"). Union Bank of California serves as custodian for each of
HighMark's Funds. See "Transfer Agent, Custodian and Fund Accounting Services"
below. Union Bank of California also serves as sub-administrator to each of
HighMark's Funds pursuant to an agreement with SEI Fund Resources. See "Manager
and Administrator" below.

Unless sooner terminated, the Investment Advisory Agreement will
continue in effect as to each particular Fund from year to year if such
continuance is approved at least annually by HighMark's Board of Trustees or by
vote of a majority of the outstanding Shares of such Fund (as defined under
GENERAL INFORMATION - Miscellaneous in the Prospectuses), and a majority of the
Trustees who are not parties to the Investment Advisory Agreement or interested
persons (as defined in the 1940 Act) of any party to the Investment Advisory
Agreement by votes cast in person at a meeting called for such purpose. The
Investment Advisory Agreement is terminable as to a particular Fund at any time
on 60 days' written

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<PAGE> 259

notice without penalty by the Trustees, by vote of a majority of the
outstanding Shares of that Fund, or by Union Bank of California. The Investment
Advisory Agreement terminates automatically in the event of any assignment, as
defined in the 1940 Act.

The Investment Advisory Agreement provides that Union Bank of
California will not be liable for any error of judgment or mistake of law or
for any loss suffered by HighMark in connection with the Advisor's services
under the Investment Advisory Agreement, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties, or from reckless
disregard by the Advisor of its duties and obligations thereunder.

On April 1, 1996, the Bank of California, N.A., HighMark's
then-investment advisor, combined with Union Bank and the resulting bank
changed its name to Union Bank of California, N.A. At the same time, the
banks' investment management divisions were combined. Each of the Bank of
California and Union Bank (or its predecessor bank) has been in banking since
the early 1900's, and historically, each has had significant investment
functions within its trust and investment division. Union Bank of California,
N.A. is a subsidiary of UnionBanCal Corporation, a publicly traded corporation,
a majority of the shares of which are owned by Bank of Tokyo - Mitsubishi,
Limited.

For the services provided and expenses assumed by the Advisor pursuant
to the Investment Advisory Agreement, Union Bank of California is entitled to
receive fees from each Fund as described in that Fund's Prospectus. For the
fiscal year ended July 31, 1997, Union Bank of California received the
following investment advisory fees: $666,964 from the Growth Fund (an
additional $121,712 in fees were voluntarily reduced); $1,986,575 from the
Income Equity Fund (an additional $658 in fees were voluntarily reduced);
$1,025,689 from the Balanced Fund; $1,158,537 from the Value Momentum Fund;
$254,574 from the Blue Chip Growth Fund; $229,671 from the Emerging Growth
Fund; $218,664 from the International Equity Fund (an additional $9,751 in fees
were voluntarily reduced); $294,637 from the Bond Fund (an additional $188,247
in fees were voluntarily reduced); $388,609 from the Intermediate-Term Bond
Fund; $137,014 from the Government Securities Fund; $67,657 from the
Convertible Securities Fund; $506 from the California Intermediate Tax-Free
Bond Fund (an additional $41,978 in fees were voluntarily reduced); $2,181,976
from the Diversified Money Market Fund; $838,857 from the U.S. Government Money
Market Fund; $1,377,080 from the 100% U.S. Treasury Money Market Fund (an
additional $129,101 in fees were voluntarily reduced); and $124,611 from the
California Tax-Free Money Market Fund (an additional $266,840 in fees were
voluntarily reduced).

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<PAGE> 260

For the fiscal year ended January 31, 1997,(1) Union Bank of
California, N.A. received the following investment advisory fees: $1,630,000
from the Balanced Fund; $1,599,000 from the Value Momentum Fund; $437,000 from
the Blue Chip Growth Fund; $428,000 from the Emerging Growth Fund; $413,000
from the International Equity Fund (an additional $49,000 in fees were
voluntarily waived); $711,000 from the Intermediate-Term Bond Fund; $243,000
from the Government Securities Fund; $116,000 from the Convertible Securities
Fund; $1,000 from the California Intermediate Tax-Free Bond Fund (an additional
$49,000 in fees were voluntarily waived); $2,773,000 from the HighMark
Diversified Money Market Fund; and $126,000 from the California Tax-Free Money
Market Fund (an additional $265,000 in fees were voluntarily waived).(2)

For the fiscal year ended July 31, 1996, Union Bank of California
received the following investment advisory fees: $180,047 from the Growth Fund
(an additional $182,161 in fees were voluntarily reduced); $1,722,014 from the
Income Equity Fund (an additional $33,207 in fees were voluntarily reduced);
$277,708 from the Bond Fund (an additional $256,561 in fees were voluntarily
reduced); $944,226 from the U.S. Government Money Market Fund; and $1,203,300
from the 100% U.S. Treasury Money Market Obligations Fund.

For the fiscal year ended January 31, 1996, the Adviser's predecessor
received the following investment advisory fees: $1,238,970 from the Balanced
Fund; $1,169,765 from the Value Momentum Fund; $288,983 from the Blue Chip
Growth Fund; $255,357 from the Emerging Growth Fund; $300,582 from the
International Equity Fund (an additional $76,243 in fees were voluntarily
waived); $648,012 from the Intermediate-Term Bond Fund; $185,894 from the
Government Securities Fund; $77,050 from the Convertible Securities Fund;
$3,065 from the California Intermediate Tax-Free Bond Fund (an additional
$61,451 in fees were voluntarily waived); $2,002,595 from the HighMark
Diversified Money Market Fund; and $113,705 from the California Tax-Free Money
Market Fund (an additional $237,331 in fees were voluntarily waived).

For the fiscal year ended July 31, 1995, the Bank of California
received the following investment advisory fees: $37,349 from the Growth Fund
(an additional $158,716 in fees were voluntarily reduced); $1,419,062 from the
Income Equity Fund (an additional $11,439 in fees were voluntarily reduced);
$271,150 from the Bond Fund (an additional $250,310 in fees were voluntarily
reduced); $729,094 from the U.S. Government Money Market Fund; and $920,611
from the 100% U.S. Treasury Money Market Fund.

- -------------------

(1) See "ADDITIONAL INFORMATION - Miscellaneous" for an explanation of the
different fiscal year ends for each Fund.

(2) Each of these Funds is the accounting survivor of a reorganization of
two mutual funds. All fees paid by these Funds (or sub-advisory fees paid with
respect to these Funds) for a fiscal year end of January 31 represent the fees
paid by the accounting survivor prior to the reorganization.

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<PAGE> 261

For the fiscal year ended January 31, 1995, the Adviser's predecessor
received the following investment advisory fees: $1,015,559 from the Balanced
Fund; $923,288 from the Value Momentum Fund; $183,178 from the Blue Chip Growth
Fund; $130,134 from the Emerging Growth Fund; $617,704 from the
Intermediate-Term Bond Fund; $145,821 from the Government Securities Fund;
$44,430 from the Convertible Securities Fund; $60,306 from the California
Intermediate Tax-Free Bond Fund (an additional $48,888 in fees were voluntarily
waived); $1,820,479 from the HighMark Diversified Money Market Fund; and
$99,901 from the California Tax-Free Money Market Fund (an additional $264,000
in fees were voluntarily waived).

THE SUB-ADVISORS

The Advisor and Bank of Tokyo-Mitsubishi Trust Company have entered
into a sub-advisory agreement which relates to the Emerging Growth, Blue Chip
Growth, Convertible Securities and Government Securities Funds. The Advisor
and Tokyo-Mitsubishi Asset Management (UK) Ltd. have entered into a
sub-advisory agreement which relates to the International Equity Fund (the Bank
of Tokyo-Mitsubishi Trust Company, together with Tokyo-Mitsubishi Asset
Management (UK) Ltd., are hereafter collectively, the "Sub-Advisors").

Under its sub-advisory agreement, Bank of Tokyo-Mitsubishi Trust
Company is entitled to a fee which is calculated daily and paid monthly at an
annual rate of .20% of the average daily net assets of the Government
Securities Fund, .30% of the average daily net assets of the Blue Chip Growth
Fund and Convertible Securities Fund and .50% of the average daily net assets
of the Emerging Growth Fund. Such fee is paid by the Advisor, and Bank of
Tokyo-Mitsubishi Trust Company receives no fees directly from a Fund. For the
fiscal year ended July 31, 1997, Bank of Tokyo-Mitsubishi Trust Company
received sub-advisory fees of $127,287 with respect to the Blue Chip Growth
Fund; $143,545 with respect to the Emerging Growth Fund; $54,805 with respect
to the Government Securities Fund; and $33,828 with respect to the Convertible
Securities Fund. For the fiscal years ended January 31, 1997 and 1996, Bank of
Tokyo-Mitsubishi Trust Company, or its predecesor, Bank of Tokyo Trust Company
received sub-advisory fees of: $ and $144,472, respectively, with respect
to the Blue Chip Growth Fund; $ and $159,198, respectively, with respect to
the Emerging Growth Fund; $ and $74,358, respectively, with respect to the
Government Securities Fund; and $ and $37,745, respectively, with respect to
the Convertible Securities Fund.

Bank of Tokyo-Mitsubishi Trust Company operates as a subsidiary of The
Bank of Tokyo-Mitsubishi, Ltd. Bank of Tokyo-Mitsubishi Trust Company was
established in 1955 and has been providing asset management services since
1965.

Under its sub-advisory agreement, Tokyo-Mitsubishi Asset Management
(UK), Ltd. is entitled to a fee which is calculated daily and paid monthly at
an annual rate of .30% of the

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average daily net assets of the International Equity Fund. Such a fee is paid
by the Advisor, and Tokyo-Mitsubishi Asset Management (UK), Ltd. receives no
fees directly from the International Equity Fund. For the fiscal year ended
July 31, 1997 and the fiscal year ended January 31, 1997, Tokyo-Mitsubishi
Asset Management (UK) Ltd. received sub-advisory fees of $72,131 and
$_________, respectively, with respect to the International Equity Fund.

Tokyo-Mitsubishi Asset Management (UK), Ltd. operates as a subsidiary
of The Bank of Tokyo-Mitsubishi, Ltd. Tokyo-Mitsubishi Asset Management (UK),
Ltd was established in 1989.

PORTFOLIO TRANSACTIONS

Pursuant to the Investment Advisory Agreement, the Advisor determines,
subject to the general supervision of the Board of Trustees of HighMark and in
accordance with each Fund's investment objective and restrictions, which
securities are to be purchased and sold by a Fund, and which brokers are to be
eligible to execute its portfolio transactions. Purchases and sales of
portfolio securities for the Bond Fund, the Intermediate-Term Bond Fund, the
Government Securities Fund, the Convertible Securities Fund, the California
Intermediate Tax-Free Bond Fund, the Diversified Money Market Fund, the U.S.
Government Money Market Fund, the 100% U.S. Treasury Money Market Fund and the
California Tax-Free Money Market Fund usually are principal transactions in
which portfolio securities are normally purchased directly from the issuer or
from an underwriter or market maker for the securities. Purchases from
underwriters of portfolio securities include a commission or concession paid by
the issuer to the underwriter and purchases from dealers serving as market
makers may include the spread between the bid and asked price. Securities
purchased by the Growth Fund, the Income Equity Fund, the Value Momentum Fund,
the Blue Chip Growth Fund, the Emerging Growth Fund and the International
Equity Fund will generally involve the payment of a brokerage fee. Portfolio
transactions for the Balanced Fund may be principal transactions or involve the
payment of brokerage commissions. While the Advisor generally seeks competitive
spreads or commissions on behalf of each of the Funds, HighMark may not
necessarily pay the lowest spread or commission available on each transaction,
for reasons discussed below.

Allocation of transactions, including their frequency, to various
dealers is determined by the Advisor or the Sub-Advisors in their best judgment
and in a manner deemed fair and reasonable to Shareholders. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price. Subject to this consideration, dealers who provide
supplemental investment research to the Advisor or the Sub-Advisors may receive
orders for transactions by HighMark. Information so received is in addition to
and not in lieu of services required to be performed by the Advisor or the
Sub-Advisors and does not reduce the advisory fees payable to Union Bank of
California by HighMark. Such information may be useful to the Advisor or the
Sub-Advisors in serving both HighMark and other clients and,

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conversely, supplemental information obtained by the placement of business of
other clients may be useful to the Advisor in carrying out its obligations to
HighMark.

Upon adoption by the Board of Trustees of certain procedures pursuant
to Rule 17e-1 under the Investment Company Act, HighMark may execute portfolio
transactions involving the payment of a brokerage fee through Union Bank of
California, SEI Investments Distribution Co., and their affiliates in
accordance with such procedures. HighMark will not acquire portfolio securities
issued by, make savings deposits in, or enter repurchase or reverse repurchase
agreements with, Union Bank of California, or their affiliates, and will not
give preference to correspondents of Union Bank of California with respect to
such securities, savings deposits, repurchase agreements and reverse repurchase
agreements.

Investment decisions for each Fund of HighMark are made independently
from those for the other Funds or any other investment company or account
managed by the Advisor, the Sub-Advisors or Union Bank of California. However,
any such other investment company or account may invest in the same securities
as HighMark. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another Fund, investment
company or account, the transaction will be averaged as to price, and available
investments allocated as to amount, in a manner that the Advisor or the
Sub-Advisors and Union Bank of California believe to be equitable to the
Fund(s) and such other investment company or account. In some instances, this
investment procedure may adversely affect the price paid or received by a Fund
or the size of the position obtained by a Fund. To the extent permitted by law,
the Advisor, or the Sub-Advisors and Union Bank of California may aggregate the
securities to be sold or purchased for a Fund with those to be sold or
purchased for the other Funds or for other investment companies or accounts in
order to obtain best execution. As provided in the Investment Advisory
Agreement and the Sub-Advisory Agreements, in making investment recommendations
for HighMark, the Advisor or the Sub-Advisors will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
HighMark is a customer of the Advisor, the Sub-Advisors or Union Bank of
California, their parent or its subsidiaries or affiliates and, in dealing with
its commercial customers, the Advisor, the Sub-Advisors and Union Bank of
California, their parent, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of such customers are held by HighMark.

The following brokerage commissions were paid in the Fiscal Year ended
July 3, 1997: $___________________________________________________________ The
following brokerage commissions were paid in the fiscal year ended July 31,
1996: $104,127 by the Growth Fund, $318,261 by the Income Equity Fund, and
$13,043 by the Balanced Fund. The following brokerage commissions were paid in
the fiscal year ended July 31, 1995: $57,798 by the Growth Fund, $257,339 by
the Income Equity Fund, and $10,757 by the Balanced Fund.

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GLASS-STEAGALL ACT

In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation
and interpretation to the effect that the Glass-Steagall Act and such decision:
(a) forbid a bank holding company registered under the Federal Bank Holding
Company Act of 1956 (the "Holding Company Act") or any non-bank affiliate
thereof from sponsoring, organizing, or controlling a registered, open-end
investment company continuously engaged in the issuance of its shares, but (b)
do not prohibit such a holding company or affiliate from acting as investment
advisor, transfer agent, and custodian to such an investment company. In 1981,
the United States Supreme Court held in Board of Governors of the Federal
Reserve System v. Investment Company Institute that the Board did not exceed
its authority under the Holding Company Act when it adopted its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisors to registered closed-end investment companies. In
the Board of Governors case, the Supreme Court also stated that if a national
bank complies with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisors to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.

Union Bank of California believes that the Advisor and the
Sub-Advisors possess the legal authority to perform the services for the Funds
contemplated by the Investment Advisory Agreement and the Sub-Advisory
Agreements and described in the Prospectuses and this Statement of Additional
Information and has so represented in the Investment Advisory Agreement and the
Sub-Advisory Agreements. Future changes in either federal or state statutes and
regulations relating to the permissible activities of banks or bank holding
companies and the subsidiaries or affiliates of those entities, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations could prevent or restrict the Advisor from
continuing to perform such services for HighMark. Depending upon the nature of
any changes in the services that could be provided by the Advisor, or the
Sub-Advisors, the Board of Trustees of HighMark would review HighMark's
relationship with the Advisor and the Sub-Advisors and consider taking all
action necessary in the circumstances.

Should further legislative, judicial or administrative action prohibit
or restrict the activities of Union Bank of California, its affiliates, and its
correspondent banks in connection with Customer purchases of Shares of
HighMark, such Banks might be required to alter materially or discontinue the
services offered by them to Customers. It is not anticipated, however, that any
change in HighMark's method of operations would affect its net asset value per
Share or result in financial losses to any Customer.

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ADMINISTRATOR AND SUB-ADMINISTRATOR

SEI Fund Resources (the "Administrator") serves as administrator to
each of HighMark's Funds pursuant to the administration agreement dated as of
February 15, 1997 between HighMark and the Administrator (the "Administration
Agreement").

SEI Fund Resources is a Delaware business trust whose sole beneficiary
is SEI Financial Management Corporation. SEI Financial Management Corporation,
a wholly owned subsidiary of SEI Investment Company ("SEI"), was organized as a
Delaware corporation in 1969 and has its principal business offices at 1
Freedom Valley Drive, Oaks, Pennsylvania 19456. SEI and its subsidiaries are
leading providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors and money managers. The Administrator and its affiliates also serve
as administrator to the following other institutional mutual funds: SEI Daily
Income Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Index Funds,
SEI International Trust, SEI Institutional Managed Trust, Boston 1784(R) Funds,
The Advisors' Inner Circle Fund, The Pillar Funds, CUFund, STI Classic Funds,
CoreFunds, Inc., First American Funds, Inc., First American Investment Funds,
Inc., The Arbor Fund, Marquis Funds(R), Morgan Grenfell Investment Trust, The
PBHG Funds, Inc., The Achievement Funds Trust, Bishop Street Funds, CrestFunds,
Inc., STI Classic Variable Trust, Monitor Funds, FMB Funds, Inc., TIP Funds,
ARK Funds, SEI Asset Allocation Trust, and SEI Institutional Investments Trust.

Pursuant to the Administration Agreement, the Administrator provides
the Group with administrative services, regulatory reporting, fund accounting
and related portfolio accounting services, all necessary office space,
equipment, personnel, compensation and facilities for handling the affairs of
the Group. As described below, the Administrator has delegated part of its
responsibilities under the Administration Agreement to Union Bank of
California, N.A.

For the fiscal year ended July 31, 1997, for its services as
administrator and expenses assumed pursuant to the Administration Agreement,
the Administrator received the following fees: $204,315 from the Growth Fund
(an additional $22,032 in fees were voluntarily reduced); $605,282 from the
Income Equity Fund (an additional $17,907 in fees were voluntarily reduced);
$255,346 from the Balanced Fund (an additional $29,410 in fees were voluntarily
reduced); $298,886 from the Value Momentum Fund (an additional $22,063 in fees
were voluntarily reduced); $65,190 from the Blue Chip Growth Fund (an
additional $4,683 in fees were voluntarily reduced); $44,080 from the Emerging
Growth Fund (an additional $3,159 in fees were voluntarily reduced); $36,978
from the International Equity Fund (an additional $3,072 in fees were
voluntarily reduced); $101,712 from the Bond Fund (an additional $25,352 in
fees were voluntarily reduced); $118,137 from the Intermediate-Term Bond Fund
(an additional $8,143 in fees were voluntarily reduced); $41,994 from the
Government Securities Fund (an

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additional $2,987 in fees were voluntarily reduced); $17,347 from the
Convertible Securities Fund (an additional $1,252 in fees were voluntarily
reduced); $11,833 from the California Intermediate Tax-Free Bond Fund (an
additional $2,604 in fees were voluntarily reduced); $1,141,740 from the
Diversified Money Market Fund (an additional $88,254 in fees were voluntarily
reduced); $439,141 from the U.S. Government Money Market Fund (an additional
$14,294 in fees were voluntarily reduced); $815,457 from the 100% U.S. Treasury
Money Market Fund (an additional $45,215 in fees were voluntarily reduced); and
$207,633 from the California Tax-Free Money Market Fund (an additional $15,291
in fees were voluntarily reduced).

For the fiscal year ended January 31, 1997, the Administrator received
the following fees: $342,000 from the Balanced Fund; $336,000 from the Value
Momentum Fund; $92,000 from the Blue Chip Growth Fund; $67,000 from the
Emerging Growth Fund; $60,000 from the International Equity Fund; $179,000 from
the Intermediate-Term Bond Fund; $61,000 from the Government Securities Fund;
$24,000 from the Convertible Securities Fund; $13,000 from the California
Intermediate Tax-Free Bond Fund; $1,163,000 from the HighMark Diversified Money
Market Fund; and $164,00 from the California Tax-Free Money Market Fund.

Through the fiscal year ended July 31, 1996 BISYS Fund Services
Limited Partnership d/b/a BISYS Fund Services ("BISYS Fund Services") served as
HighMark's administrator. For its services as administrator and expenses
assumed pursuant to the administration agreement between BISYS Fund Services
and HighMark, BISYS Fund Services received a fee from each Fund as described in
that Fund's Prospectus. For the fiscal year ended July 31, 1996, BISYS Fund
Services earned the following administration fees: $72,337 from the Growth
Fund; $520,671 from the Income Equity Fund; $80,226 from the Bond Fund (an
additional $43,205 in fees were voluntarily reduced); $472,171 from the U.S.
Government Money Market Fund; and $601,680 from the 100% U.S. Treasury Money
Market Fund.

For the fiscal year ended January 31, 1996, the Administrator received
the following fees: $276,935 from the Balanced Fund; $261,423 from the Value
Momentum Fund; $288,983 from the Blue Chip Growth Fund; $42,746 from the
Emerging Growth Fund; $54,149 from the International Equity Fund; $173,915 from
the Intermediate-Term Bond Fund; $49,832 from the Government Securities Fund;
$17,197 from the Convertible Securities Fund; $17,405 from the California
Intermediate Tax-Free Bond Fund; $895,102 from the HighMark Diversified Money
Market Fund; and $157,204 from the California Tax-Free Money Market Fund.

For the fiscal year ended July 31, 1995, BISYS Fund Services earned
the following administration fees: $23,444 from the Growth Fund (an additional
$15,769 in fees were voluntarily reduced); $423,500 from the Income Equity
Fund; $78,332 from the Bond Fund (an additional $42,155 in fees were
voluntarily reduced); $364,547 from the U.S. Government Money Market Fund; and
$460,306 from the 100% U.S. Treasury Money Market Fund.

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For the fiscal year ended January 31, 1995, the Administrator received
the following fees: $233,783 from the Balanced Fund; $212,556 from the Value
Momentum Fund; $42,147 from the Blue Chip Growth Fund; $22,454 from the
Emerging Growth Fund; $170,689 from the Intermediate-Term Bond Fund; $40,273
from the Government Securities Fund; $10,223 from the Convertible Securities
Fund; $30,713 from the California Intermediate Tax-Free Bond Fund; $838,165
from the HighMark Diversified Money Market Fund; and $170,054 from the
California Tax-Free Money Market Fund.

The Administration Agreement became effective on February 15, 1997,
unless sooner terminated as provided in the Administration Agreement (and as
described below), the Administration Agreement, as amended, will continue in
effect until July 31, 1999. The Administration Agreement thereafter shall be
renewed automatically for successive annual terms. The Administration Agreement
is terminable at any time with respect to a particular Fund or HighMark as a
whole by either party without penalty for any reason upon 90 days' written
notice by the party effecting such termination to the other party.

The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
HighMark in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or from the reckless disregard by
the Administrator of its obligations and duties thereunder.

The Administration Agreement permits the Administrator to subcontract
its services thereunder, provided that the Administrator will not be relieved
of its obligations under the Administration Agreement by the appointment of a
subcontractor and the Administrator shall be responsible to HighMark for all
acts of the subcontractor as if such acts were its own, except for losses
suffered by any Fund resulting from willful misfeasance, bad faith or gross
negligence by the subcontractor in the performance of its duties or for
reckless disregard by it of its obligations and duties. Pursuant to a
sub-administration agreement between the Administrator and Union Bank of
California, N.A., Union Bank of California, N.A. will perform services which
may include clerical, bookkeeping, accounting, stenographic and administrative
services, for which it will receive a fee, paid by the Administrator, at the
annual rate of up to 0.05% of each Fund's average daily net assets.

SHAREHOLDER SERVICES PLANS

HighMark has adopted two Shareholder Services Plans, one for Fiduciary
Class and Class A Shares, and one for Class B Shares (collectively, the
"Services Plans") pursuant to which a Fund is authorized to pay compensation to
financial institutions (each a "Service Provider"), which may include Bank of
Tokyo-Mitsubishi, Ltd., Union Bank of California, N.A., or their respective
affiliates, that agree to provide certain shareholder support services for
their customers or account holders (collectively, "customers") who are the
beneficial or record owners of Shares of a Fund. In consideration for such
services, a Service Provider is

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compensated by a Fund at a maximum annual rate of up to 0.25% of the average
daily net asset value of Shares of a Fund, pursuant to each plan.

The servicing agreements adopted under the Services Plans (the
"Servicing Agreements") require the Service Provider receiving such
compensation to perform certain shareholder support services as set forth in
the Servicing Agreements with respect to the beneficial or record owners of
Shares of a Fund.

As authorized by the Services Plans, HighMark may enter into a
Servicing Agreement with a Service Provider pursuant to which the Service
Provider has agreed to provide certain shareholder support services in
connection with Shares of one or more of HighMark's Funds. Such shareholder
support services may include, but are not limited to, (i) maintaining
Shareholder accounts; (ii) providing information periodically to Shareholders
showing their positions in Shares; (iii) arranging for bank wires; (iv)
responding to Shareholder inquiries relating to the services performed by the
Service Provider; (v) responding to inquiries from Shareholders concerning
their investments in Shares; (vi) forwarding Shareholder communications from
HighMark (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to
Shareholders; (vii) processing purchase, exchange and redemption requests from
Shareholders and placing such orders with HighMark or its service providers;
(viii) assisting Shareholders in changing dividend options, account
designations, and addresses; (ix) providing subaccounting with respect to
Shares beneficially owned by Shareholders; (x) processing dividend payments
from HighMark on behalf of the Shareholders; and (xi) providing such other
similar services as HighMark may reasonably request to the extent that the
service provider is permitted to do so under applicable laws or regulations.

EXPENSES

HighMark's service providers bear all expenses in connection with the
performance of their respective services, except that each Fund will bear the
following expenses relating to its operations: taxes, interest, brokerage fees
and commissions, if any, fees and travel expenses of Trustees who are not
partners, officers, directors, shareholders or employees of Union Bank of
California, SEI Fund Resources or SEI Investments Distribution Co., Securities
and Exchange Commission fees and state fees and expenses, certain insurance
premiums, outside and, to the extent authorized by HighMark, inside auditing
and legal fees and expenses, fees charged by rating agencies in having the
Fund's Shares rated, advisory and administration fees, fees and reasonable
out-of-pocket expenses of the custodian and transfer agent, expenses incurred
for pricing securities owned by the Fund, costs of maintenance of corporate
existence, typesetting and printing prospectuses for regulatory purposes and
for distribution to current Shareholders, costs and expenses of Shareholders'
and Trustees' reports and meetings and any extraordinary expenses.

DISTRIBUTOR

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SEI Investments Distribution Co. (the "Distributor"), a wholly-owned
subsidiary of SEI, serves as distributor to HighMark's Funds pursuant to a
distribution agreement dated February 15, 1997 between HighMark and the
Distributor for the Fiduciary Class and Class A Shares, and pursuant to a
distribution agreement dated June 18, 1997 between HighMark and the Distributor
for Class B Shares (collectively, the "Distribution Agreements").

Unless terminated, the Distribution Agreements will continue in effect
until July 31, 1999 and from year to year thereafter if approved at least
annually (i) by HighMark's Board of Trustees or by the vote of a majority of
the outstanding Shares of HighMark, and (ii) by the vote of a majority of the
Trustees of HighMark who are not parties to the Distribution Agreements or
interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreements, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreements are terminable without
penalty, on not less than sixty days' notice by HighMark's Board of Trustees,
by vote of a majority of the outstanding voting securities of HighMark or by
the Distributor. The Distribution Agreements terminate in the event of their
assignment, as defined in the 1940 Act.

The Distribution Plans. The operation of the Distribution Plans, the
0.25% fee payable under HighMark's Distribution Plans to which the Class A
Shares of HighMark's Funds are presently subject and the 0.75% fee to which the
Class B Shares are presently subject are described in each such Fund's
Prospectus under "SERVICE ARRANGEMENTS -The Distribution Plans." For the
fiscal year ended July 31, 1997, the Distributor received in respect of the
sale of Retail Shares distribution fees of: $4,737 from the Growth Fund; $8,102
from the Income Equity Fund; $10,350 from the Balanced Fund; $21,773 from the
Value Momentum Fund; $803,701 from the Diversified Money Market Fund; $29,990
from the U.S. Government Money Market Fund; $358,799 from the 100% U.S.
Treasury Money Market Fund; and $229,497 from the California Tax-Free Money
Market Fund.

For the fiscal year ended January 31, 1997, the Distributor received
in respect of the sale of Retail Shares distribution fees of: $21,000 from the
Balanced Fund; $34,000 from the Value Momentum Fund; $962,000 from the
Diversified Money Market Fund; and $300,000 from the California Tax-Free Money
Market Fund.

In accordance with Rule 12b-1 under the 1940 Act, the Distribution
Plans may be terminated with respect to any Fund by a vote of a majority of the
Independent Trustees, or by a vote of a majority of the outstanding Class A or
Class B Shares of that Fund. The Distribution Plans may be amended by vote of
HighMark's Board of Trustees, including a majority of the Independent Trustees,
cast in person at a meeting called for such purpose, except that any change in
a Distribution Plan that would materially increase the distribution fee with
respect to a Fund requires the approval of that Fund's Retail Shareholders.
HighMark's Board of Trustees will review on a quarterly and annual basis
written reports of the amounts received and expended under the Distribution
Plans (including amounts expended by the

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Distributor to Participating Organizations pursuant to the Servicing Agreements
entered into under the Distribution Plans) indicating the purposes for which
such expenditures were made.

Each Distribution Plan provides that it will continue in effect with
respect to each Fund for successive one-year periods, provided that each such
continuance is specifically approved (i) by the vote of a majority of the
Independent Trustees and (ii) by the vote of the entire Board of Trustees, cast
in person at a meeting called for such purpose. For so long as each of the
Distribution Plans remains in effect, the selection and nomination of those
trustees who are not interested persons of HighMark (as defined in the 1940
Act) shall be committed to the discretion of such disinterested persons.

TRANSFER AGENT AND CUSTODIAN SERVICES

State Street Bank and Trust Company performs transfer agency services
for HighMark's Funds pursuant to a transfer agency and shareholder service
agreement with HighMark dated as of February 15, 1997 (the "Transfer Agency
Agreement"). As each Fund's transfer agent, State Street Bank and Trust Company
processes purchases and redemptions of each Fund's Shares and maintains each
Fund's Shareholder transfer and accounting records, such as the history of
purchases, redemptions, dividend distributions, and similar transactions in a
Shareholders's account.

Under the Transfer Agency Agreement, HighMark has agreed to pay State
Street Bank and Trust Company annual fees at the rate of $18,000 per Retail
class/per Fund. The Distributor has agreed to pay State Street Bank and Trust
Company annual fees at the rate of $15,000 per Fiduciary class/per Fund. In
addition, there will be an annual account maintenance fee of $25.00 per account
and IRA Custodial fees totalling $15.00 per account, as well as out-of-pocket
expenses as defined in the Transfer Agency Agreement. HighMark intends to
charge transfer agency fees across the HighMark Funds as a whole. State Street
Bank and Trust Company may periodically voluntarily reduce all or a portion of
its transfer agency fee with respect to a Fund to increase the Fund's net
income available for distribution as dividends.

Union Bank of California, N.A. serves as custodian to HighMark's Funds
pursuant to a custodian agreement with HighMark dated as of December 23, 1991,
as amended (the "Custodian Agreement"). Under the Custodian Agreement, Union
Bank of California's responsibilities include safeguarding and controlling each
Fund's cash and securities, handling the receipt and delivery of securities,
and collecting interest and dividends on each Fund's investments.

Under the Custodian Agreement, HighMark has agreed to pay Union Bank
of California a domestic custodian fee with respect to each Fund at an annual
rate of .01% of the Fund's average daily net assets, with an annual minimum fee
of $2,500 per Fund, plus certain transaction fees. Union Bank of California is
also entitled to be reimbursed by HighMark for

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its reasonable out-of-pocket expenses incurred in the performance of its duties
under the Custodian Agreement. Global custody fees shall be determined on a
transaction basis. Union Bank of California may periodically voluntarily
reduce all or a portion of its custodian fee with respect to a Fund to increase
the Fund's net income available for distribution as dividends.

AUDITORS

The financial statements of HighMark for the period ended July 31,
1997, incorporated by reference into this Statement of Additional Information
have been audited by Deloitte & Touche LLP, independent accountants, as set
forth in their report also incorporated by reference into this Statement of
Additional Information, and are included in reliance upon such report and on
the authority of such firm as experts in auditing and accounting.

LEGAL COUNSEL

Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800
East, Washington, D.C. 20005, are counsel to HighMark and will pass upon the
legality of the Shares offered hereby.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES

HighMark is a Massachusetts business trust. HighMark's Declaration of
Trust was originally filed with the Secretary of State of The Commonwealth of
Massachusetts on March 10, 1987. The Declaration of Trust, as amended,
authorizes the Board of Trustees to issue an unlimited number of Shares, which
are units of beneficial interest, without par value. HighMark's Declaration of
Trust, as amended, further authorizes the Board of Trustees to establish one or
more series of Shares of HighMark, and to classify or reclassify the Shares of
any series into one or more classes by setting or changing in any one or more
respects the preferences, designations, conversion or other rights,
restrictions, limitations as to dividends, conditions of redemption,
qualifications or other terms applicable to the Shares of such class, subject
to those matters expressly provided for in the Declaration of Trust, as
amended, with respect to the Shares of each series of HighMark. HighMark
presently consists of sixteen series of Shares, representing units of
beneficial interest in the Growth Fund, the Income Equity Fund, the Balanced
Fund, the Value Momentum Fund, the Blue Chip Growth Fund, the Emerging Growth
Fund, the International Equity Fund, the Bond Fund, the Intermediate-Term Bond
Fund, the Government Securities Fund, the Convertible Securities Fund, the
California Intermediate Tax-Free Bond Fund, the Diversified Money Market Fund,
the U.S. Government Money Market Fund, the 100% U.S. Treasury Money Market
Fund, and the California Tax-Free Money Market Fund. As described in the
Prospectuses, selected Funds

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have been divided into three classes of Shares, designated Class A and Class B
Shares (collectively, "Retail Shares") and Fiduciary Shares.

Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, HighMark's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of HighMark,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund that are available for distribution. Upon
liquidation or dissolution of HighMark, Retail and Fiduciary shareholders are
entitled to receive the net assets of the Fund attributable to each class.

As used in the Prospectuses and in this Statement of Additional
Information, "assets belonging to a Fund" means the consideration received by
HighMark upon the issuance or sale of Shares in that Fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or payments derived from any reinvestment of such
proceeds, and any general assets of HighMark not readily identified as
belonging to a particular Fund that are allocated to that Fund by HighMark's
Board of Trustees. Such allocations of general assets may be made in any manner
deemed fair and equitable, and it is anticipated that the Board of Trustees
will use the relative net asset values of the respective Funds at the time of
allocation. Assets belonging to a particular Fund are charged with the direct
liabilities and expenses of that Fund, and with a share of the general
liabilities and expenses of HighMark not readily identified as belonging to a
particular Fund that are allocated to that Fund in proportion to the relative
net asset values of the respective Funds at the time of allocation. The timing
of allocations of general assets and general liabilities and expenses of
HighMark to particular Funds will be determined by the Board of Trustees and
will be in accordance with generally accepted accounting principles.
Determinations by the Board of Trustees as to the timing of the allocation of
general liabilities and expenses and as to the timing and allocable portion of
any general assets with respect to a particular Fund are conclusive.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as HighMark shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding Shares of
each Fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding Shares of a Fund will be required in
connection with a matter, a Fund will be deemed to be affected by a matter
unless it is clear that the interests of each Fund in the matter are identical,
or that the matter does not affect any interest of the Fund.

Under Rule 18f-2, the approval of an investment advisory agreement or
any change in fundamental investment policy would be effectively acted upon
with respect to a Fund only if

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approved by a majority of the outstanding Shares of such Fund. However, Rule
18f-2 also provides that the ratification of independent public accountants,
the approval of principal underwriting contracts, and the election of Trustees
may be effectively acted upon by Shareholders of HighMark voting without regard
to series.

Although not governed by Rule 18f-2, Retail Shares of a Fund have
exclusive voting rights with respect to matters pertaining to the Fund's
Distribution Plan.

SHAREHOLDER AND TRUSTEE LIABILITY

Under Massachusetts law, holders of units of interest in a business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, HighMark's Declaration of Trust, as
amended, provides that Shareholders shall not be subject to any personal
liability for the obligations of HighMark, and that every written agreement,
obligation, instrument, or undertaking made by HighMark shall contain a
provision to the effect that the Shareholders are not personally liable
thereunder. The Declaration of Trust, as amended, provides for indemnification
out of the trust property of any Shareholder held personally liable solely by
reason of his or her being or having been a Shareholder. The Declaration of
Trust, as amended, also provides that HighMark shall, upon request, assume the
defense of any claim made against any Shareholder for any act or obligation of
HighMark, and shall satisfy any judgment thereon. Thus, the risk of a
Shareholder incurring financial loss on account of Shareholder liability is
limited to circumstances in which HighMark itself would be unable to meet its
obligations.

The Declaration of Trust, as amended, states further that no Trustee,
officer, or agent of HighMark shall be personally liable in connection with the
administration or preservation of the assets of the trust or the conduct of
HighMark's business, nor shall any Trustee, officer, or agent be personally
liable to any person for any action or failure to act except for his own bad
faith, willful misfeasance, gross negligence, or reckless disregard of his
duties. The Declaration of Trust, as amended, also provides that all persons
having any claim against the Trustees or HighMark shall look solely to the
assets of the trust for payment.

THE REORGANIZATION OF THE IRA FUND AND HIGHMARK

As of June 23, 1988, pursuant to an Agreement and Plan of
Reorganization between the IRA Fund, HighMark, and the Bank of California,
substantially all of the assets of the IRA Fund's Income Equity Portfolio, and
Bond Portfolio were transferred to HighMark's Income Equity Fund, and Bond
Fund, respectively, in exchange for such Fund's Shares, and substantially all
of the assets of the IRA Fund's Short Term Portfolio were transferred to one or
more of HighMark's Money Market Funds in exchange for Shares of such Money
Market Fund or Funds. Prior to June 23, 1988, the aggregate total return and
average annual total return of the Bond Fund and Income Equity Fund reflect the
aggregate total return and average annual total return of the IRA Fund Bond
Portfolio and the IRA Fund Income Equity

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Portfolio, respectively. The IRA Fund Bond Portfolio and the IRA Fund Income
Equity Portfolio both received investment advice from the same division of the
Bank of California now known as Pacific Alliance Capital Management and had
investment objectives, policies and restrictions substantially similar to those
of the Bond Fund and the Income Equity Fund, respectively. However, potential
investors should be aware that both the nature and amount of fees and expenses
of the IRA Fund Bond Portfolio and the Bond Fund and those of the IRA Fund
Income Equity Portfolio and the Income Equity Fund differ.

CALCULATION OF PERFORMANCE DATA

From time to time, articles relating to the performance, rankings, and
other investment characteristics of mutual funds and their investment advisors,
including HighMark's Funds and the Advisor, may appear in national, regional,
and local publications. In particular, some publications may publish their own
rankings or performance reviews of mutual funds and their investment advisors,
including HighMark's Funds and the Advisor. Various mutual fund or market
indices may also serve as a basis for comparison of the performance of
HighMark's Funds with other mutual funds or mutual fund portfolios with
comparable investment objectives and policies. In addition to the indices
prepared by Dow Jones & Co., Inc. and Standard & Poor's Corporation, references
to or reprints from the following publications may be used in HighMark's
promotional literature: IBC/Donoghue's Money Fund Report, Ibbotson Associates
of Chicago, MorningStar, Lipper Analytical Services, Inc., CDA/Wiesenberger
Investment Company Services, SEI Financial Services, Callan Associates,
Wilshire Associates, MONEY Magazine, Pension and Investment Age, Forbes
Magazine, Business Week, American Banker, Fortune Magazine, Institutional
Investor, Barron's National Business & Financial Weekly, The Wall Street
Journal, New York Times, San Francisco Chronicle and Examiner, Los Angeles
Times, U.S.A. Today, Sacramento Bee, Seattle Times, Seattle Daily Journal of
Commerce, Seattle Post/Intelligence, Seattle Business Journal, Tacoma New
Tribune, Bellevue Journal-American, The Oregonian, Puget Sound Business
Journal, Portland Chamber of Commerce and Portland Daily Journal of
Commerce/Portland Business Today. Shareholders may call toll free
1-800-433-6884 for current information concerning the performance of each of
HighMark's Funds.

From time to time, the Funds may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends; (3) presentations of statistical data
to supplement such discussions; (4) descriptions of past or anticipated
portfolio holdings for one or more of the Funds within HighMark; (5)
descriptions of investment strategies for one or more of the Funds; (6)
descriptions or comparisons of various savings and investment products
(including, but not limited to, insured bank products, annuities, qualified
retirement plans and individual stocks and bonds), which may or may not include
the Funds; (7) comparisons of investment products (including the Funds) with
relevant market or industry indices or other appropriate benchmarks; (8)
discussions of fund rankings or ratings by

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recognized rating organizations; and (9) testimonials describing the experience
of persons that have invested in one or more of the Funds. The Funds may also
include calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any of the Funds. In addition, the California Tax- Free
Fund may include charts comparing various tax-free yields versus taxable yield
equivalents at different income levels.

Based on the seven-day period ended July 31, 1997 (the "base period"
for the Diversified Money Market Fund, the U.S. Government Money Market Fund,
the 100% U.S. Treasury Money Market Fund, and the California Tax-Free Money
Market Fund), the yield of the Diversified Money Market Fund's Retail Shares and
Fiduciary Shares was 4.67% and 4.67%, respectively, and the effective yield of
the Fund's Retail Shares and Fiduciary Shares was 4.78% and 4.78%, respectively;
the yield of the U.S. Government Money Market Fund's Retail Shares and Fiduciary
Shares was 4.54% and 4.56%, respectively, and the effective yield of the Fund's
Retail Shares and Fiduciary Shares was 4.66% and 4.64%, respectively; the yield
of the 100% U.S. Treasury Money Market Fund's Retail Shares and Fiduciary Shares
was 4.45% and 4.45% respectively, and the effective yield of the Fund's Retail
Shares and Fiduciary Shares was 4.55% and 4.55% respectively; and the yield of
the California Tax-Free Money Market Fund's Retail Shares and Fiduciary Shares
was 2.83% and 2.83% respectively, and the effective yield of the Fund's Retail
Shares and Fiduciary Shares was 2.87% and 2.87%, respectively. The yield of
each Fund's Retail Shares and Fiduciary Shares, respectively, was computed by
determining the percentage net change, excluding capital changes, in the value
of an investment in one Share of the Class over the base period, and multiplying
the net change by 365/7 (or approximately 52 weeks). The effective yield of each
Fund's Retail Shares and Fiduciary Shares, respectively, represents a
compounding of the yield of the Class by adding 1 to the number representing the
percentage change in value of the investment during the base period, raising
that sum to a power equal to 365/7, and subtracting 1 from the result.

Based on the thirty-day period ended July 31, 1997, the yield of the
Diversified Money Market Fund's Retail Shares and Fiduciary Shares was 4.65% and
4.65% respectively, and the effective yield of the Fund's Retail Shares and
Fiduciary Shares was 4.75% and 4.75%, respectively; the yield of the U.S.
Government Money Market Fund's Retail Shares and Fiduciary Shares was 4.52% and
4.54%, respectively, and the effective yield of the Fund's Retail Shares and
Fiduciary Shares was 4.61% and 4.63%, respectively; the yield of the 100% U.S.
Treasury Money Market Fund's Retail Shares and Fiduciary Shares was 4.43% and
4.43%, respectively, and the effective yield of the Fund's Retail Shares and
Fiduciary Shares was 4.52% and 4.52%, respectively; and the yield of the
California Tax- Free Money Market Fund's Retail Shares and Fiduciary Shares was
2.70% and 2.70%, respectively, and the effective yield of the Fund's Retail
Shares and Fiduciary Shares was 2.73% and 2.73%, respectively. The yield of
each Fund's Retail Shares and Fiduciary Shares, respectively, was computed by
determining the percentage

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net change, excluding capital changes, in the value of an investment in one
Share of the Class over the thirty-day period, and multiplying the net change
by 365/30 (or approximately twelve months). The effective yield of each Fund's
Retail Shares and Fiduciary Shares, respectively, represents a compounding of
the yield of the Class by adding 1 to the number representing the percentage
change in value of the investment during the thirty-day period, raising that
sum to a power equal to 365/30, and subtracting 1 from the result.

Based on the seven-day period ended July 31, 1997, the tax-equivalent
yield of the California Tax-Free Money Market Fund's Retail Shares and Fiduciary
Shares was 4.69% and 4.69% respectively (using a federal income tax rate of
39.6%), and 5.73% and 5.73% respectively (using a federal income tax rate of
39.6% and a California personal income tax rate of 11%), and the tax-equivalent
effective yield of the Fund's Retail Shares and Fiduciary Shares was 4.75% and
4.75%, respectively (using a federal income tax rate of 39.6%), and 5.81% and
5.81%, respectively (using a federal income tax rate of 39.6% and a California
personal income tax rate of 11%).

Based on the thirty-day period ended July 31, 1997, the tax-equivalent
yield of the California Tax-Free Money Market Fund's Retail Shares and Fiduciary
Shares was 4.47% and 4.47%, respectively (using a federal income tax rate of
39.6%), and 5.47% and 5.47%, respectively (using a federal income tax rate of
39.6% and a California personal income tax rate of 11%), and the tax-equivalent
effective yield of the Fund's Retail Shares and Fiduciary Shares was 4.52% and
4.52%, respectively (using a federal income tax rate of 39.6%), and 5.53% and
5.53%, respectively (using a federal income tax rate of 39.6% and a California
personal income tax rate of 11%).

The tax-equivalent yield of the Retail Shares and Fiduciary Shares,
respectively, of the California Tax-Free Fund was computed by dividing that
portion of the yield of the Class that is tax-exempt by 1 minus the stated
income tax rate (or rates) and adding the product to that portion, if any, of
the yield of the Class that is not tax-exempt. The tax-equivalent effective
yield of the Fund's Retail Shares and Fiduciary Shares, respectively, was
computed by dividing that portion of the effective yield of the Class which is
tax-exempt by 1 minus the stated income tax rate (or rates) and adding to that
portion, if any, of the effective yield of the Class that is not tax-exempt.

For the year ended July 31, 1997, the one-year average annual total
return of the Diversified Money Market Fund Retail and Fiduciary shares was
4.80%, of the U.S. Government Money Market Fund Retail and Fiduciary shares was
4.65% and 4.67%, respectively, of the 100% U.S. Treasury Money Market Fund
Retail and Fiduciary shares was 4.55%, and of the California Tax-Free Money
Market Fund Retail and Fiduciary shares was 2.76%.

For the period ended July 31, 1997, the five-year average annual total
return of the Diversified Money Market Fund's Retail and

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Fiduciary shares was 3.98%; of the U.S. Government Money Market Fund's Retail
and Fiduciary shares was 3.86%; of the 100% U.S. Treasury Money Market Fund's
Retail and Fiduciary shares was 3.75%; and of the California Tax-Free Money
Market Fund's Retail and Fiduciary shares was 2.58%.

For the period from August 10, 1987 (the date on which the Diversified
Money Market Fund, the U.S. Government Money Market Fund and the 100% U.S.
Treasury Money Market Fund commenced operations) through July 31, 1997, the
average annual total return of the Diversified Money Market Fund Retail and
Fiduciary shares, the U.S. Government Money Market Fund Retail and Fiduciary
shares and the 100% U.S. Treasury Money Market Fund Retail and Fiduciary shares
was 4.35%, 4.17% and 4.08%, respectively. For the period from August 11, 1987
(the date on which the California Tax-Free Money Market Fund commenced
operations) through July 31, 1997, the average annual total return of the
California Tax-Free Money Market Fund Retail and Fiduciary shares was 3.65%.

Prior to June 23, 1988 (the date on which the Income Equity Fund and
the Bond Fund commenced operations as a result of the reorganization involving
the IRA Fund Income Equity Portfolio and the IRA Fund Bond Portfolio,
respectively, as described under "ADDITIONAL INFORMATION - The Reorganization
of the IRA Fund and HighMark" above), the total return and average annual total
return of the Income Equity Fund and the Bond Fund reflects the total return
and average annual total return of the IRA Fund Income Equity Portfolio, and
the IRA Fund Bond Portfolio, respectively. Each IRA Fund Portfolio received
investment advice from the same division of the Bank of California now known as
Pacific Alliance Capital Management and had substantially similar investment
objectives, policies, and restrictions of the Fund into which it was
reorganized. However, potential investors in the Income Equity Fund, and the
Bond Fund should be aware that both the nature and amount of fees and expenses
of the IRA Fund Income Equity Portfolio, and the IRA Fund Bond Portfolio differ
from the Fund into which the respective IRA Fund Portfolios were reorganized.
See "Management of HighMark Investment Advisor" and the Statements of
Operations in the Financial Statements with respect to the Income Equity Fund,
and the Bond Fund and the IRA Fund Income Equity Portfolio, and the IRA Fund
Bond Portfolio for the applicable period ended July 31, 1989 and June 22, 1988
contained in this Statement of Additional Information.

Each Equity Fund and Fixed Income Fund offered a single class of
shares throughout the periods shown below. The performance figures relating to
the Retail Shares have been adjusted, however, to give effect to the sales
charge and distribution fee to which the Retail Shares are subject. Because
only Retail Shares bear the expense of the fee, if any, under the Distribution
Plan and a sales charge, total return and yield relating to a Fund's Retail
Shares will be lower than that relating to the Funds' Fiduciary Shares.

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For the one year period ended July 31, 1997, the average annual total
return of the Retail and Fiduciary Shares of the Income Equity Fund was 11.77%
(12.01% without a load) and 17.04%, respectively, and of the Bond Fund was 1.00%
(2.05% without a load) and 2.03%, respectively. For the five-year period ended
July 31, 1997, the average annual total return of the Retail and Fiduciary
Shares of the Income Equity Fund was 14.07% (15.12% without a load) and 15.08%,
respectively, and of the Bond Fund was 5.69% (6.34% without a load) and 6.49%,
respectively. For the ten year period ended January 31, 1997, the average annual
total return of the Retail and Fiduciary Shares of the Income Equity Fund was
12.16% (12.67% without a load) and 12.66%, respectively. For the ten year period
ended July 31, 1997, the average annual total return of the Retail and Fiduciary
Shares of the Bond Fund was 6.58% (6.91% without a load) and 6.99%,
respectively.

For the one year period ended July 31, 1997, the average annual total
return of the Retail and Fiduciary Shares of the Growth Fund was 19.02% (24.62%
without a load) and 24.84%, respectively and of the Retail and Fiduciary Shares
of the Balanced Fund was 8.86% (14.00% without a load) and 13.89% respectively.

For the period beginning November 18, 1993 (commencement of operations)
and ending July 31, 1997, the average annual total return of the Retail Shares
and Fiduciary Shares of the Growth Fund was 16.58% (18.26% without a load) and
18.24%, respectively.

For the period beginning November 14, 1993 (commencement of operations)
and ending July 31, 1997, the aggregate total return of the Retail Shares and
Fiduciary Shares of the Balanced Fund was 10.55% (12.14% without a load) and
12.36%, respectively.

Each Fund's respective average annual total return and/or aggregate
total return was calculated by determining the change in the value of a
hypothetical $1,000 investment in the Fund over the applicable period
(utilizing, when appropriate, performance information from the applicable IRA
Fund Portfolio prior to June 23, 1988) that would equate the initial amount
invested to the ending redeemable value of the investment; in the case of the
average annual total return, this amount (representing the Fund's total return)
was then averaged over the relevant number of years. The ending redeemable
value includes dividends and capital gain distributions reinvested at net asset
value. The resulting percentages indicate the positive or negative investment
results that an investor would have experienced from changes in Share price and
reinvestment of dividends and capital gains distributions.

For the thirty-day period ended July 31, 1997, the yield for the Retail
and Fiduciary Shares of the Growth Fund was 0.34% (0.77%

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without a load) and 0.36%, respectively; for the Retail and Fiduciary Shares of
the Income Equity Fund was 2.24% (2.99% without a load) and 2.36%,
respectively; for the Retail and Fiduciary Shares of the Balanced Fund was
3.17% (3.57% without a load) and 3.32%, respectively; and for the Retail and
Fiduciary Shares of the Bond Fund was 5.75% (6.08% without a load) and 5.93%,
respectively. The Fund's "yield" (referred to as "standardized yield") for a
given 30-day period for a class of shares is calculated using the following
formula set forth in rules adopted by the Commission that apply to all funds
that quote yields:

(6)
Standardized Yield = 2 [( a-b + 1) - 1]
---
cd

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares of that class outstanding during
the 30-day period that were entitled to receive dividends.

d = the maximum offering price per share of the class on the last day of
the period, adjusted for undistributed net investment income.

The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The Commission formula assumes
that the standardized yield for a 30-day period occurs at a constant rate for a
six-month period and is annualized at the end of the six-month period. This
standardized yield is not based on actual distributions paid by the Fund to
shareholders in the 30-day period, but is a hypothetical yield based upon the
net investment income from the Fund's portfolio investments calculated for that
period. Because each class of shares is subject to different expenses, it is
likely that the standardized yields of the Fund classes of shares will differ.

For the period ended July 31, 1997, the annualized distribution rate
(including capital gains and excluding a sales charge) of the Income Equity Fund
was 16.30% for Retail Shares and 16.33% for Fiduciary Shares and of the Bond
Fund was 5.78% for Retail Shares and 5.73% for Fiduciary Shares. For the period
ended July 31, 1997, the distribution rate (excluding capital gains and a sales
charge) of the Income Equity Fund was 2.38% for the Retail and Fiduciary Shares,
and of the Bond Fund was 5.78 for the Retail Shares and 5.73% for the Fiduciary
Shares. For the period ended July 31, 1997, the distribution rate (including
capital gains and a sales charge) of the Income Equity Fund was 15.57% and of
the Bond Fund was 5.61%. For the period ended July 31, 1997 [all figures will
be updated in final SAI] the distribution rate (excluding capital gains and
including a sales charge) of the Income Equity Fund was 2.27% and of the Bond
Fund was 5.61%. The distribution rate for each Fund is determined by dividing
the income distributions and, where the distribution rate includes capital gains
distributions, capital gains

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distributions on a Share of the Fund over a six-month period by the per Share
net asset value of the Fund on the last day of the period and annualized.

All performance information presented is based on past performance and
does not predict future performance. No performance information is presented
for the Value Momentum, Blue Chip Growth, Emerging Growth, International
Equity, Intermediate-Term Bond, Government Securities, Convertible Securities
and California Intermediate Tax-Free Bond Funds because they had not commenced
operations as of the date of this Statement of Additional Information. Because
the Class B Shares had not commenced operations as of January 31, 1997, "Retail
Shares" in the preceding examples refer only to Class A Shares.

MISCELLANEOUS

Prior to April 28, 1997, the California Tax-Free Money Market Fund,
the HighMark Value Momentum Fund, the Blue Chip Growth Fund, the Emerging
Growth Fund, the International Equity Fund, the Intermediate-Term Bond Fund,
the Government Securities Fund, and the California Intermediate Tax-Free Bond
Fund and, prior to May 1, 1997, the Convertible Securities Fund did not yet
operate as HighMark Funds. Prior to operating as HighMark Funds, each Fund had
a fiscal year end of January 31 (rather than July 31). Most of the financial
and investment information (e.g., fees paid to service providers and portfolio
turnover) presented in this Statement of Additional Information and in the
Prospectuses is based on a Fund's fiscal year end. Each of these Funds is the
accounting survivor of a reorganization of two mutual funds. All fees paid by
these Funds (or sub-advisory fees paid with respect to these Funds) for a
fiscal year end of January 31 represent the fees paid by the accounting
survivor prior to the reorganization. As a result, for each of these Funds,
and for the Diversified Money Market Fund and the Balanced Fund, for the fiscal
year ended July 31, 1997, the financial and investment information is provided
for the period February 1, 1997 through July 31, 1997. Therefore, for these
Funds for each prior fiscal year, the financial and investment information is
provided for the period February 1 through January 31.

For all of the other Funds information for a fiscal year is provided
for the period August 1 through July 31 (or such other shorter period if the
Fund began operations after August 1).

HighMark is not required to hold meetings of Shareholders for the
purpose of electing Trustees except that (i) HighMark is required to hold a
Shareholders' meeting for the election of Trustees at such time as less than a
majority of the Trustees holding office have been elected by Shareholders and
(ii) if, as a result of a vacancy on the Board of Trustees, less than
two-thirds of the Trustees holding office have been elected by the
Shareholders, that vacancy may be filled only by a vote of the Shareholders. In
addition, Trustees may be removed from office by a written consent signed by
the holders of Shares representing two-thirds of the outstanding Shares of
HighMark at a meeting duly called for the purpose, which meeting shall

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be held upon the written request of the holders of Shares representing not less
than 10% of the outstanding Shares of HighMark. Upon written request by the
holders of Shares representing 1% of the outstanding Shares of HighMark stating
that such Shareholders wish to communicate with the other Shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a Trustee, HighMark will provide a list of Shareholders or
disseminate appropriate materials (at the expense of the requesting
Shareholders). Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.

HighMark is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Securities and Exchange Commission of the management or policies of
HighMark.

The Prospectuses and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Securities and Exchange Commission. Copies of such information may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.

The 1997 Annual Report to Shareholders of HighMark is incorporated
herein by reference. This Report includes audited financial statements for the
fiscal year ended July 31, 1997. Upon the incorporation by reference herein of
such Annual Report, the opinion in such Annual Report of independent
accountants is incorporated herein by reference and such Annual Report's
financial statements are incorporated by reference herein in reliance upon the
authority of such accountants as experts in auditing and accounting.

The Prospectuses and this Statement of Additional Information are not
an offering of the securities herein described in any state in which such
offering may not lawfully be made.

No salesperson, dealer, or other person is authorized to give any
information or make any representation other than those contained in the
Prospectuses and this Statement of Additional Information.

As of November 17, 1997, HighMark believes that the trustees and
officers of HighMark, as a group, owned less than one percent of the Shares of
any Fund of HighMark. As of November 17, 1997, HighMark believes that Union Bank
of California was the shareholder of record of 94.45% of the Fiduciary Shares of
the Growth Fund, 75.17% of the Fiduciary Shares of the Income Equity Fund,
81.50% of the Fiduciary Shares of the Balanced Fund, 92.15% of the Fiduciary
Shares of the Bond Fund, 76.42% of the Fiduciary Shares of the Intermediate-Term
Bond Fund, substantially all of the Fiduciary Shares of the California
Intermediate Tax-Free Bond Fund, 17.96% of the Fiduciary Shares of the
Government Securities Fund, 18.68% of the Fiduciary Shares of the Convertible
Securities Fund, 78.51% of the Fiduciary Shares of the Value Momentum Fund,
34.66% of the Fiduciary Shares of the Blue Chip Growth Fund, 50.63% of the
Fiduciary Shares of the

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Emerging Growth Fund, 99.36% of the Fiduciary Shares of the International
Equity Fund, 96.79% of the Fiduciary Shares of the U.S. Government Money
Market Fund, 97.20% of the Fiduciary Shares of the Diversified Money Market
Fund, 94.83% of the Fiduciary Shares of the 100% U.S. Treasury Money Market
Fund and 99.72% of the Fiduciary Shares of the California Tax-Free Money Market
Fund. As of November 17, 1997, HighMark believes that Bank of Tokyo Trust
Company was the shareholder of record of 81.34% of the Fiduciary Shares of the
Government Securities Fund, 81.13% of the Fiduciary Shares of the Convertible
Securities Fund, 64.85% of the Fiduciary Shares of the Blue Chip Growth Fund,
and 48.57% of the Fiduciary Shares of the Emerging Growth Fund.

As of November 17, 1997, HighMark believes that Union Bank of
California had voting power with respect to 43.89% of the Growth Fund Fiduciary
Shares, 23.96% of the Income Equity Fund Fiduciary Shares, 37.63% of the
Balanced Fund Fiduciary Shares, 54.48% of the Bond Fund Fiduciary Shares,
46.88% of the Value Momentum Fund Fiduciary Shares, 86.77% of the
Intermediate-Term Bond Fund Fiduciary Shares, 98.91% of the California
Intermediate Tax-Free Bond Fund Fiduciary Shares, 91.77% of the International
Equity Fund Fiduciary Shares, 13.98% of the Diversified Money Market Fund
Fiduciary Shares, 7.98% of the 100% U.S. Treasury Money Market Fund Fiduciary
Shares, 3.52% of the U.S. Government Money Market Fund Fiduciary Shares and
34.20% of the California Tax-Free Money Market Fund Fiduciary Shares.

The table below indicates each additional person known by HighMark to
own beneficially 5% or more of the Shares of the following Funds of HighMark as
of November 17, 1997. Because Class B Shares had not commenced operations as
of November 28, 1997, "Retail Shares" in this context refers to Class A Shares
only.

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<TABLE>
<CAPTION>
5% OR MORE BENEFICIAL OWNERS
----------------------------
PERCENT OF
BENEFICIAL
NAME AND ADDRESS OWNERSHIP
- ---------------- ---------
GROWTH FUND
-----------

RETAIL SHARES
-------------
<S> <C> <C>
Post & Co. 9.68%
c/o The Bank of New York
Attn: Bill Sauer - Mutual Funds
Reorganization Department
P.O. Box 1066
Wall Street Station
New York, New York 10268-1066

INCOME EQUITY FUND
------------------

RETAIL SHARES
-------------

NFSC FEBO #0C3-114383 12.19%
Richard W. Killion
c/o Killion Industries
2811 La Mirada Drive
Vista, CA 92083-8407

NFSC FEBO #PC1-039918
The Kendall Jackson FNDTN, Inc.
Wendy Petersen
421 Aviation Blvd.
Santa Rosa, CA 95403-1069

BALANCED FUND
-------------

RETAIL SHARES
-------------

NFSC FEBO #0BP-237345 8.07%
Ty Yeh
Yeh Family Trust
U/A 3/11/91
2048 Studebaker Rd
Long Beach, CA 90815-3539
</TABLE>

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<PAGE> 284

<TABLE>
<S> <C> <C>
FIDUCIARY SHARES
----------------

American Express Trust Company 10.27%
as Agent for NEC Savings and Retirement Plan
Attn: Nancy Jendro Trust Operations
P.O. Box 534
Minneapolis, MN 55440-0534

PFTC: Trustee Nissan Employee Savings Plan 5.61%
Putnam Investments DCPA
Nissan Motor Corporation
Location 31
P.O. Box 9740
Providence, Rhode Island 02940-9740

BOND FUND
---------

RETAIL SHARES
-------------

NFSC FEBO 0C3-032050 11.25%
Frederick V. Betts
800 Financial Center
1215 Fourth Avenue
Seattle, WA 98161

NFSC FEBO 0L5-328391 8.66%
Union Bank of Calif Cust
IRA of James Harris
1212 Christian Valley Road
Auburn, CA 95602

NFSC FEBO #PC1-038210 8.12%
Marla J. Arata
7108 Oakmont Drive
Modesto, CA 95356-9646
</TABLE>

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<PAGE> 285

<TABLE>
<S> <C> <C>
NFSC FEBO 0C3-090565 8.10%
Wallace Allred
Norma Allred
2250 N. Broadway No. 48
Escondido, CA 92026

NFSC FEBO #0C3-159069 6.46%
NFSC/FMTC IRA
FBO Domnic N. Lemos
666 4th Avenue
San Francisco, CA 94118-3911

NFSC FEBO #0L5-911925
Union Bank of Calif Cust
IRA of Bernard White
Rollover
10303 Fig Grove Rd.
Madera, CA 93638-8896

DIVERSIFIED MONEY MARKET FUND
-----------------------------

RETAIL SHARES
-------------

National Financial Services 99.45%
Corporation for the Benefit of Our Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908

U.S. GOVERNMENT MONEY MARKET FUND
---------------------------------

RETAIL SHARES
-------------

National Financial Services 93.71%
Corporation for the
Benefit of Our Customers
Church Street Station
P.O. Box 3752
New York, NY 10008-3752
</TABLE>

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<PAGE> 286

<TABLE>
<S> <C> <C>
100% U.S. TREASURY MONEY MARKET FUND
------------------------------------

RETAIL SHARES
-------------

National Financial Services 99.82%
Corporation for the
Benefit of Our Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908

CALIFORNIA TAX-FREE MONEY MARKET FUND
-------------------------------------

RETAIL SHARES
-------------

National Financial Services 99.41%
Corporation for the
Benefit of Our Customers
Church Street Station
P.O. Box 3752
New York, NY 10008-3752

CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND
------------------------------------------

RETAIL SHARES
-------------

NFSC FEBO #0BP-354317 42.26%
Tri Cities Broadcasting Inc.
6551 Corte Cisco
Carlsbad, CA 92009-4527

NFSC FEBO #PC1-046655 11.55%
Henry & Marcy Tenenblatt Trust
Henry Tenenblatt
U/A 08/03/87
16323 Shadow Mountain
Pacific Palisades, CA 90272-2353

</TABLE>

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<PAGE> 287

<TABLE>
<S> <C> <C>
NFSC FEBO #0BP-253499 8.42%
Aaron Belokamen
Lilian Belokamen
11610 Bellagio Road
Los Angeles, CA 90049-2113

VALUE MOMENTUM FUND
-------------------

FIDUCIARY CLASS
---------------

Mellon Bank NA 13.52%
Trustee for Department of
Personnel Admin. of State of CA
Attn: Wally Adebayo
One Cabot Road Mail Zone 028-0031
Medford, MA 02155-5141

INTERMEDIATE-TERM BOND FUND
---------------------------

RETAIL CLASS
------------

National Financial Services Corp. 100.00%
for Exclusive Benefits of our Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908

</TABLE>

No person other than Union Bank of California and the beneficial
owners listed above own as of record more than 5% of the Fiduciary or Retail
Shares of a Fund.

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<PAGE> 288
APPENDIX

The nationally recognized statistical rating organizations (individually, an
"NRSRO") that may be utilized by the Advisor with regard to portfolio
investments for the Funds include Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc. ("Duff"), Fitch
Investors Service, Inc. ("Fitch"), IBCA Limited and its affiliate, IBCA Inc.
(collectively, "IBCA"), and Thomson BankWatch, Inc. ("Thomson"). Set forth
below is a description of the relevant ratings of each such NRSRO. The NRSROs
that may be utilized by the Advisor and the description of each NRSRO's ratings
is as of the date of this Statement of Additional Information, and may
subsequently change.

Long-Term Debt Ratings (may be assigned, for example, to corporate and
municipal bonds)

Description of the four highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):

Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of
such issues.

Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat
larger than in Aaa securities.

A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the
future.

Baa Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.

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<PAGE> 289
- -Description of the four highest long-term debt ratings by S&P (S&P may apply a
plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):

AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.

AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.

A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.

BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

Description of the four highest long-term debt ratings by Duff:

AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality . Protection factors are strong. AA Risk
is modest but may vary slightly from time to time A- because
of economic conditions.

A+ Protection factors are average but adequate. However, A risk
factors are more variable and greater in periods A- of
economic stress.

BBB Below average protection factors. Still considered sufficient
for prudent investment.

Description of the four highest long-term debt ratings by Fitch (plus or minus
signs are used with a rating symbol to indicate the relative position of the
credit within the rating category):

AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not

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<PAGE> 290
quite as strong as bonds rated "AAA." Because bonds rated in
the "AAA" and "AA" categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these
issues is generally rated "F-1+."

A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more
likely to have an adverse impact on thee bonds and therefore,
impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than
for bonds with higher ratings.

IBCA's description of its four highest long-term debt ratings:

AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.

AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk
albeit not very significantly.

A Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.

BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal
and interest is adequate, although adverse changes in
business, economic or financial conditions are more likely to
lead to increased investment risk than for obligations in
higher categories.

Thomson's description of its four highest long-term debt ratings (Thomson may
include a plus (+) or minus (-) designation to indicate where within the
respective category the issue is placed):

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<PAGE> 291
AAA The highest category: indicates ability to repay principal and
interest on a timely basis is very high.

AA The second highest category: indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.

A The third highest category: indicates the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.

BBB Lowest investment grade category: indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB"
are, however, more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings.

Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)

Moody's description of its three highest short-term debt ratings:

Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by many of the following
characteristics:

- Leading market positions in
well-established industries.

- High rates of return on funds
employed.

- Conservative capitalization
structures with moderate reliance on
debt and ample asset protection.

- Broad margins in earnings coverage
of fixed financial charges and high
internal cash generation.

- Well-established access to a range
of financial markets and assured
sources of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more

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<PAGE> 292
subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is
maintained.

Prime-3 Issuers rated Prime-3 (or supporting institutions)
have an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and profitability
may result in changes in the level of debt protection
measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.

S&P's description of its three highest short-term debt ratings:

A-1 This designation indicates that the degree of safety
regarding timely payment is strong. Those issues
determined to have extremely strong safety
characteristics are denoted with a plus sign (+).

A-2 Capacity for timely payment on issues with this
designation is satisfactory. However, the relative
degree of safety is not as high as for issues
designated "A-1."

A-3 Issues carrying this designation have adequate
capacity for timely payment. They are, however, more
vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher
designations.

Duff's description of its three highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):

Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors
and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

Duff 1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good
fundamental protection factors. Risk factors are
minor.

Duff 1- High certainty of timely payment. Liquidity factors
are strong and supported by good fundamental
protection factors. Risk factors are very small.

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<PAGE> 293
Duff 2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing
requirements, access to capital markets is good. Risk
factors are small.

Duff 3 Satisfactory liquidity and other protection factors
qualify issue as to investment grade. Risk factors
are larger and subject to more variation.
Nevertheless, timely payment is expected.

Fitch's description of its three highest short-term debt ratings:

F-1+ Exceptionally Strong Credit Quality. Issues assigned
this rating are regarded as having the strongest
degree of assurance for timely payment.

F-1 Very Strong Credit Quality. Issues assigned this
rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

F-2 Good Credit Quality. Issues assigned this rating have
a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as
for issues assigned F-1+ or F-1 ratings.

F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of
assurance for timely payment is adequate, however,
near-term adverse changes could cause these
securities to be rated below investment grade.

IBCA's description of its three highest short-term debt ratings:

A+ Obligations supported by the highest capacity for
timely repayment.

A1 Obligations supported by a very strong capacity for
timely repayment.

A2 Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible
to adverse changes in business, economic or financial
conditions.

Thomson's description of its three highest short-term ratings:

TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid
on a timely basis.

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<PAGE> 294
TBW-2 The second highest category; while the degree of
safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".

TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest
in a timely fashion is considered adequate.

SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS

Moody's description of its two highest short-term loan/municipal note
ratings:

MIG-1/VMIG-1 This designation denotes best quality. There is
present strong protection by established cash flows,
superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG-2/VMIG-2 This designation denotes high quality. Margins of
protection are ample although not so large as in the
preceding group.

S&P's description of its two highest municipal note ratings:

SP-1 Very strong or strong capacity to pay principal and
interest. Those issues determined to possess
overwhelming safety characteristics will be given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest.

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<PAGE> 295
FINANCIAL STATEMENTS

The Independent Auditors' Report for HighMark Funds for the year ended July 31,
1996, Financial Statements for HighMark Funds for the period ended July 31,
1996, Financial Statements for HighMark Funds for the period ended January 31,
1997, and Financial Statements for Stepstone Funds for the period ended January
31, 1997 are all incorporated by reference to the Annual and Semi-Annual
Reports of HighMark and Stepstone, dated as of such dates, which have been
previously sent to shareholders of each Fund pursuant to the 1940 Act and
previously filed with the Securities and Exchange Commission. A copy of each
such report may be obtained without charge by contacting the Distributor, SEI
Investments Distribution Co. at 1 Freedom Valley Drive, Oaks, Pennsylvania,
19456 or by telephoning toll-free at 1-800-734-2922.

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