<PAGE> 1
As filed with the Securities and Exchange Commission
on August 2, 1999
Registration Nos. 33-12608 and 811-5059
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 26 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT [X]
COMPANY ACT OF 1940
Amendment No. 27 [X]
HIGHMARK FUNDS
(Exact Name of Registrant as Specified in Charter)
Oaks, Pennsylvania 19456
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(Address of principal executive offices)
(800) 433-6884
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(Registrant's telephone number, including area code)
Name and address of agent for service:
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Martin E. Lybecker, Esq.
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b), or
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] on October 1, 1999 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on [date] pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
post-effective amendment No. __ filed on [date].
Pursuant to Rule 24f-2(a) under the Investment Company Act of 1940,
the Registrant has registered an indefinite number or amount of its shares of
beneficial interest under the Securities Act of 1933. The Registrant filed a
Rule 24f-2 Notice with respect to the Registrant's fiscal year ended July 31,
1998 on October 26, 1998.
<PAGE> 2
CROSS REFERENCE SHEET
HIGHMARK VALUE MOMENTUM FUND
CLASS I SHARES
<TABLE>
<CAPTION>
FORM N-1A PART A ITEM PROSPECTUS CAPTION
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<S> <C>
1. Cover Page Cover Page
2. Synopsis Fee Table
3. Condensed Financial Information Financial Highlights; Performance Information
4. General Description of Registrant Fund Description; Investment Objectives; Investment
Policies; General Information--Description of
HighMark Funds & Its Shares
5. Management of the Fund Service Arrangements
5A. Management's Discussion of Fund
Performance Inapplicable
6. Capital Stock and Other Securities Purchase and Redemption of Shares; Exchange
Privileges; Dividends; Federal Taxation; Service
Arrangements-- Administrator; Distributor; General
Information--Description of HighMark Funds & Its
Shares; General Information-- Miscellaneous
7. Purchase of Securities Being Offered Purchase and Redemption of Shares; Exchange
Privileges; Service Arrangements-- Administrator;
Distributor
8. Redemption or Repurchase Purchase and Redemption of Shares
9. Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE> 3
HIGHMARK FUNDS
VALUE MOMENTUM FUND
HighMark Funds 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
HighMark Funds':
Value Momentum Fund
CLASS I SHARES
HighMark Funds' Class I Shares are offered to retirement and other
benefit plans sponsored by governmental entities with a minimum investment of
$70,000,000.
This Prospectus sets forth concisely the information about HighMark
Funds and the Fund 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 Class I Shares
of the Fund. Interested persons who wish to obtain a prospectus for other Funds
and classes of HighMark Funds may contact the Distributor at the above address
and telephone number.
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 FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING UNION BANK OF CALIFORNIA, N.A., THE BANK OF
TOKYO-MITSUBISHI, LTD. OR ANY OF THEIR AFFILIATES OR CORRESPONDENTS. HIGHMARK
FUNDS' SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN HIGHMARK FUNDS
INVOLVES RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
October 1, 1999
Class I Shares
<PAGE> 4
SUMMARY
HIGHMARK FUNDS 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 I Shares of the Value Momentum Fund. 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 FUND'S INVESTMENT OBJECTIVES? THE FUND seeks long-term
capital growth with a secondary objective of income. (See "INVESTMENT
OBJECTIVES.")
WHAT ARE THE FUND'S PERMITTED INVESTMENTS? The Fund primarily invests,
consistent with its investment objective, in equity securities including common
stocks and securities convertible into common stocks. The Fund may also invest
in a manner 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 FUND? The
investment policies of the Fund entail certain risks and considerations of which
an investor should be aware. Common stocks and other equity securities in which
the Fund invests are volatile and may fluctuate in value more than other types
of investments. (See "Risk Factors.")
ARE MY INVESTMENTS INSURED? HighMark Funds' 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? HighMark Capital Management, Inc. serves as the
Advisor to HighMark Funds. (See "The Advisor.")
WHO IS THE ADMINISTRATOR? SEI Investments Mutual Funds Services serves
as the Administrator of HighMark Funds. (See "The Administrator.")
WHO IS THE CUSTODIAN? Union Bank of California, N.A. (the "Bank")
serves as the custodian of HighMark Funds' assets. (See "The Custodian.")
WHO IS THE DISTRIBUTOR? SEI Investments Distribution Co. acts as
distributor of HighMark Funds' 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
$70,000,000. A purchase
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<PAGE> 5
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 net 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 Fund 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.")
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<PAGE> 6
TABLE OF CONTENTS
PAGE
----
Summary..................................................................
Fee Table................................................................
Financial Highlights.....................................................
Fund Description.........................................................
Investment Objectives....................................................
Investment Policies......................................................
General..................................................................
Money Market Instruments...............................................
Illiquid and Restricted Securities.....................................
Lending of Portfolio Securities........................................
Other Investments......................................................
Risk Factors...........................................................
Year 2000..............................................................
Portfolio Turnover.......................................................
Purchase and Redemption of Shares........................................
Exchange Privileges......................................................
Dividends................................................................
Taxes....................................................................
Federal Taxation.......................................................
Service Arrangements.....................................................
The Advisor............................................................
Administrator..........................................................
The Transfer Agent.....................................................
Shareholder Servicing Agreement........................................
Distributor............................................................
Banking Laws...........................................................
Custodian..............................................................
General Information......................................................
Description of HighMark Funds & Its Shares.............................
Performance Information................................................
Miscellaneous..........................................................
Description of Permitted Investments.....................................
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FEE TABLE
<TABLE>
<CAPTION>
Value
Momentum
Fund
---------
Class I
Shares
<S> <C>
SHAREHOLDER
TRANSACTION
EXPENSES(a)
Maximum Sales Load
Imposed on Purchases (as a
percentage of offering price) . 0%
Maximum Sales Load
Imposed on Reinvested
Dividends (as a percentage
of offering price) ............ 0%
Deferred Sales
Load (as a percentage of
original purchase price or
redemption proceeds, as
applicable) .................... 0%
Redemption Fees (as
a percentage of
amount redeemed,
if applicable)(b) .............. 0%
Exchange Fee(a) .................. $0
ANNUAL OPERATING
EXPENSES(as a
percentage of net assets)
Management Fees................... 0.60%
12b-1 Fees ....................... 0%
Other Expenses
(after voluntary
reduction)(c)................... 0.22%
-----
Total Fund
Operating
Expenses (after
voluntary reduction)(d)......... 0.82%
=====
</TABLE>
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- ---------------
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
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<S> <C> <C> <C> <C>
Class I Shares ..................................... $ 8 $26 $46 $101
</TABLE>
The purpose of the tables above is to assist an investor in the Fund in
understanding the various costs and expenses that a Shareholder will bear
directly or indirectly. For a more complete discussion of the 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, N.A. and its
affiliates) making investments in the Fund 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) OTHER EXPENSES are based on estimated amounts for the current fiscal
year. Absent voluntary fee waivers, OTHER EXPENSES would be 0.24% for
the Class I Shares of the Fund.
(d) Absent voluntary fee waivers, TOTAL FUND OPERATING EXPENSES would be
0.84% for the Class I Shares of the Fund.
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<PAGE> 9
FINANCIAL HIGHLIGHTS
Financial information with respect to the Class I Shares of the Value
Momentum Fund is not presented because Class I Shares were not offered prior to
the date of this prospectus. Please see "Financial Statements" in the Statement
of Additional Information for financial information regarding other Share
classes of the Value Momentum Fund.
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<PAGE> 10
FUND DESCRIPTION
HighMark Funds is an open-end, diversified, registered investment
company that currently offers units of beneficial interest ("Shares") in
seventeen investment portfolios ("Funds"). All of the Funds are advised by
HighMark Capital Management, Inc. (the "Advisor"), a subsidiary of UnionBanCal
Corporation. Shareholders may purchase Shares of selected Funds through four
separate classes (Class A and Class B (collectively, the "Retail Shares"),
Fiduciary Shares, and Class I Shares). Only Class I Shares of the Value Momentum
Fund are offered in this Prospectus. These classes may have different sales
charges and other expenses, which may affect performance. Information regarding
HighMark Funds' other Funds and other classes is contained in separate
prospectuses that may be obtained from HighMark Funds' Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456, or by calling
1-800-433-6884.
For information concerning those investors who qualify to purchase
Class I Shares, see PURCHASE AND REDEMPTION OF SHARES below. (Class I Shares may
be hereinafter referred to as "Shares.")
INVESTMENT OBJECTIVES
The investment objective of the Fund is to the seek long-term capital
growth with a secondary objective of income.
The investment objective and certain of the investment limitations of
the Fund may not be changed without a vote of the holders of a majority of the
outstanding Shares of the Fund (as defined under GENERAL
INFORMATION--Miscellaneous below). There can be no assurance that the Fund will
achieve its investment objective.
INVESTMENT POLICIES
Under normal market conditions, the 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 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 Fund invests will be dividend paying.
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<PAGE> 11
GENERAL
Money Market Instruments
Under normal market conditions, money market instruments may comprise
up to 35% of the total assets of the Fund. When market conditions indicate a
temporary "defensive" investment strategy as determined by the Advisor, the Fund
may invest more than the above stated amount of its total assets in money market
instruments. The Fund will not be pursuing its investment objective to the
extent that a substantial portion of its assets are invested in money market
instruments.
Illiquid and Restricted Securities
The 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 the illiquid
securities. The 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.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend its portfolio
securities to broker-dealers, banks or other institutions. The Fund may lend
portfolio securities in an amount representing up to 33 1/3% of the value of its
total assets.
Other Investments
The Fund may enter into repurchase agreements and reverse repurchase
agreements.
The Fund may enter into forward commitments or purchase securities on a
"when-issued" basis. The Fund expects that commitments by the 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 Fund
does 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 Fund may also invest in money market instruments, money market
funds, and cash.
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<PAGE> 12
The Fund may invest in other registered investment companies with
similar investment objectives. The 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 Funds by the
Securities and Exchange Commission, such other registered investment company
securities may include shares of a money market fund of HighMark Funds, and may
include registered investment companies for which the Advisor or Sub-Advisor to
a Fund of HighMark Funds, 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 Funds, 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. The Fund may be
subject to additional restrictions on investments in other investment companies.
See "INVESTMENT RESTRICTIONS" in the Statement of Additional Information.
The Fund may write covered calls on its equity securities and enter
into closing transactions with respect to covered call options. The 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 the Fund's net assets at the time
such options are purchased by the Fund. The 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. The Fund 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 common stocks
in which the Fund invests (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.
For further information, see "DESCRIPTION OF PERMITTED INVESTMENTS."
Risk Factors
To the extent the 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.
Equity Securities include common stocks, preferred stocks, convertible
securities and warrants. Common stocks, which represent an ownership interest in
a company, are probably the most recognized type of equity security. Equity
securities have historically outperformed
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<PAGE> 13
most other securities, although their prices can be volatile in the short term.
Market conditions, political, economic and even company-specific news can cause
significant changes in the price of a stock. Smaller companies (as measured by
market capitalization), sometimes called small-cap companies or small-cap
stocks, may be especially sensitive to these factors.
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 may be exercised but only the right to buy such
securities at a particular price. The 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.
Year 2000
HighMark Funds depends on the smooth functioning of computer systems in
almost every aspect of its business. Like other mutual funds, businesses and
individuals around the world, HighMark Funds could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. HighMark Funds has made inquiry of its service providers to determine
whether they expect to have their computer systems adjusted for the year 2000
transition, and is seeking assurances from each service provider that it expects
its system to accommodate the year 2000 transition without material adverse
consequences to HighMark Funds. While it is likely that such assurances will be
obtained, HighMark Funds and its shareholders may experience losses if these
assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or custodians,
banks, broker-dealers or others with which HighMark Funds does business.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will not be a factor preventing a
sale or purchase when the Advisor believes investment considerations warrant.
The Fund's 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
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<PAGE> 14
costs to the Fund and could involve the realization of capital gains that would
be taxable when distributed to Shareholders of the Fund. See FEDERAL TAXATION.
PURCHASE AND REDEMPTION OF SHARES
The Fund is divided into four classes of Shares, Class A, Class B,
Fiduciary, and Class I. Class I Shares are only available to retirement and
other benefit plans sponsored by governmental entities with a minimum investment
of $70,000,000.
Purchases and redemptions of Shares of the Fund may be made on days on
which the New York Stock Exchange is open for business ("Business Days"). The
minimum initial investment is $70,000,000 and the minimum subsequent investment
is generally only $100. 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 the Fund is the net asset value next determined
after a purchase order is received and accepted by HighMark Funds. The net asset
value per Share of the 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
Funds calculated to three decimal places. HighMark Funds reserves the right to
reject a purchase order when the Distributor or Advisor determines that it is
not in the best interest of HighMark Funds and/or its Shareholders to accept
such order.
Shares of the Fund are offered only to residents of states in which the
Shares are eligible for purchase.
Shareholders who desire to redeem shares of HighMark Funds 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 Funds' transfer agent nor HighMark Funds 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 Funds and its transfer agent
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<PAGE> 15
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
As indicated under GENERAL INFORMATION--Description of HighMark Funds &
Its Shares, certain Funds of HighMark Funds issue four classes of Shares (Class
A and Class B Shares (collectively, "Retail Shares"), Fiduciary Shares, and
Class I 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.
The Fund's Shares may be exchanged for Shares of the class of the
various other Funds of HighMark Funds 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. Class I Shares are only offered by the Value Momentum
Fund. Shareholders may exchange Class I 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.
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 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.
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
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<PAGE> 16
only in those states where Shares of such other Funds of HighMark Funds may
legally be sold. HighMark Funds may materially amend or terminate the exchange
privileges described herein upon sixty days' notice.
DIVIDENDS
The net investment income of the Fund is declared and paid monthly. 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 the 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.
TAXES
Federal Taxation
The 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 and realized net
capital gains in a timely manner so that the Fund is not required to pay federal
taxes on these amounts.
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. 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 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.
The sale, exchange or redemption of Fund Shares may give rise to a gain
or loss. In general, any gain realized upon the taxable disposition of Shares
will be treated as 20% gains
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<PAGE> 17
if the Shares have been held for more than 12 months. Otherwise the gain on the
sale, exchange or redemption of Fund Shares will be treated as short-term
capital gain. In general, any loss realized upon a taxable disposition of shares
will be treated as long-term loss if the Shares have been held for more than 12
months, and otherwise as short-term capital loss. However, if a Shareholder
disposes of Shares in the 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. All or a portion of any loss realized upon a taxable disposition of Fund
Shares will be disallowed if other Shares of the Fund are purchased within 30
days before or after the disposition. In such a case, the basis of the newly
purchased Shares will be adjusted to reflect the disallowed loss.
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.
Prior to purchasing Shares of the Fund, 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 the Fund.
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 the 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.
SERVICE ARRANGEMENTS
The Advisor
Prior to September 1, 1998, Pacific Alliance, a division of Union Bank
of California, N.A. served as the Funds' investment advisor. Effective September
1, 1998, Pacific
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Alliance was reorganized into a subsidiary of UnionBanCal Corporation, the
holding company of Union Bank of California. The new entity, which is called
HighMark Capital Management, Inc. (the "Advisor"), is a California corporation
registered under the Investment Adviser's Act of 1940.
HighMark Capital Management, Inc. now serves as the Fund's investment
advisor. Subject to the general supervision of HighMark Funds' Board of
Trustees, the Advisor manages the Fund in accordance with its investment
objective and policies, makes decisions with respect to and places orders for
all purchases and sales and maintains the Fund's records relating to such
purchases and sales.
For the expenses assumed and services provided by the Advisor as the
Fund's investment advisor, the Advisor receives a fee from the Fund, computed
daily and paid monthly, at the annual rate of sixty one-hundredths of one
percent (0.60%) 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. The Advisor 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 the Advisor will
choose to make such an agreement, any voluntary reductions in the Advisor'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.
During HighMark Funds' fiscal year ended July 31, 1998, Union Bank of
California received investment advisory fees from the Fund aggregating 0.60% of
the Fund's average daily net assets.
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, 1998, UnionBanCal Corporation and its
subsidiaries had approximately $31.4 billion in consolidated assets. HighMark
Capital Management, Inc., as of September 30, 1998, had approximately $16
billion of assets under management. The Advisor (and its predecessors), 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 Fund are made by a team of investment
professionals, all of whom take an active part in the decision making process.
Administrator
SEI Investments Mutual Funds Services (the "Administrator") and
HighMark Funds are parties to an administration agreement (the "Administration
Agreement"). Under the
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terms of the Administration Agreement, the Administrator provides HighMark Funds
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 0.20% of the average daily net assets of the
Fund. The Administrator may waive its fee or reimburse various expenses to the
extent necessary to limit the total operating expenses of a Fund's Class I
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 Fund.
Pursuant to a separate agreement with the Administrator, HighMark
Capital Management performs sub-administration services on behalf of the 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 Fund. A description of the
services performed by HighMark Capital Management 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 Class I
Shares of HighMark Funds for which services it receives a fee.
Shareholder Servicing Agreement
To support the provision of Shareholder services to the Class I Shares,
the Advisor, HighMark Funds and the California Department of Personnel
Administration have entered into a Shareholder Servicing Agreement. A
description of the services performed by the California Department of Personnel
Administration pursuant to the Shareholder Servicing Agreement is contained in
the Statement of Additional Information. In consideration of services provided
by the California Department of Personnel Administration, the Advisor will pay a
fee equal to 0.10% of the Fund's average daily net assets held in the State of
California Savings Plus Program to the California Department of Personnel
Administration.
Distributor
SEI Investments Distribution Co. (the "Distributor") and HighMark Funds
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 Funds
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<PAGE> 20
upon not more than 60 days written notice by either party, or upon assignment by
the Distributor. Class I Shares are not subject to HighMark Funds' Distribution
Plan or a distribution fee.
Banking Laws
HighMark Capital Management, Inc. believes that it may perform the
services for the Fund contemplated by its investment advisory agreement with
HighMark Funds without a violation of applicable banking laws and regulations.
HighMark Capital Management also believes that it may perform sub-administration
services on behalf of the Fund, for which it receives compensation from the
Administrator 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 the Advisor could continue to perform services for the Fund. For
a further discussion of applicable banking laws and regulations, see the
Statement of Additional Information.
Custodian
Union Bank of California, N.A. serves as the custodian and as a
shareholder servicing agent for the Fund. The Custodian holds cash securities
and other assets of HighMark Funds as required by the 1940 Act.
Services performed by Union Bank of California, N.A., as the Fund's
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 Funds & Its Shares
HighMark Funds was organized as a Massachusetts business trust on March
10, 1987, and consists of fourteen series of Shares open for investment
representing units of beneficial interest in HighMark Funds' Growth Fund, Income
Equity Fund, Balanced Fund, Value Momentum Fund, Emerging Growth Fund,
International Equity Fund, Small Cap Value Fund, Bond Fund, Intermediate-Term
Bond 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 Funds
were liquidated, would receive a pro rata share of the net assets attributable
to that Fund. Shares are without par value.
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<PAGE> 21
Performance Information
From time to time, HighMark Funds may advertise the aggregate total
return, average annual total return, yield and distribution rate with respect to
the Class I Shares of the Fund. Performance information is computed separately
for a Fund's Retail, Class I and Fiduciary Shares in accordance with the
formulas described below.
The aggregate total return and average annual total return of the Fund
may be quoted for the life of the Fund and for ten-year, five-year, three-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 the 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 the 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 the Fund would have experienced
on an annual basis from changes in Share price and reinvestment of dividends and
capital gain distributions.
The yield of the 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 the 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.
The 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. The Fund 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 the Fund is based on past
performance and does not predict future performance.
Miscellaneous
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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 the 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 Funds will vote in the aggregate and not by
series or class except (i) as otherwise expressly required by law or when
HighMark Funds' 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 Funds is not required to hold regular annual meetings of Shareholders,
but may hold special meetings from time to time.
HighMark Funds' 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 Value Momentum Fund:
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
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<PAGE> 23
security or to pass through to the holders of the receipts voting rights with
respect to the deposited securities.
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.
COMMON STOCK--Units of ownership of a public corporation. Owners
typically are entitled to vote on the selection of directors and other important
matters as well as to receive dividends on their holdings. In the event that a
corporation is liquidated, the claims of secured and unsecured creditors and
owners of bonds and preferred stock take precedence over the claims of those who
own common stock. For the most part, common stock has more potential for
appreciation.
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.
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"
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<PAGE> 24
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 the 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 the
Fund's return.
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.
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 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.
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
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<PAGE> 25
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 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 the 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.
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--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, the Fund 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, the 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, the
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
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<PAGE> 26
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 the Fund and
the price of options; (3) there may not be a liquid secondary market for
options; and (4) while the 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.
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 the 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 the 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 the Fund under the Investment Company
Act of 1940 (the "1940 Act").
REVERSE REPURCHASE AGREEMENTS--The 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, the Fund intends to limit
such investments to no more than 10% of the value of its total assets. Pursuant
to a reverse repurchase agreement, the 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. The Fund
intends
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<PAGE> 27
to enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
the 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 the Fund may decline below the
price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by the 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 Funds 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 the Fund agrees to purchase when-issued securities or
enter into forward commitments, HighMark Funds' custodian will be instructed to
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a segregated account. The 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 the Fund's net asset value.
SECURITIES LENDING--During the time portfolio securities are on loan
from the 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 the 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 the 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, the 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.
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<PAGE> 28
SECURITIES SUBJECT TO A PUT FEATURE--A "put" feature permits the 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.
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.
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.
UNIT INVESTMENT TRUST--Investment vehicle, registered with the
Securities and Exchange Commission under the Investment Company Act of 1940,
that purchases a fixed Portfolio of income-producing securities, such as
corporate, municipal, or government bonds, mortgage-backed securities, or
preferred stock. Units in the trust, which usually cost at least $1,000, are
sold to investors by brokers, for a Load charge of about 4%. Unit holders
receive an undivided interest in both the principal and the income portion of
the portfolio in proportion to the amount of capital they invest. The portfolio
of securities remains fixed until all the securities mature and unit holders
have recovered their principal. Most brokerage firms maintain a Secondary Market
in the trusts they sell, so that units can be resold if necessary.
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).
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.
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<PAGE> 29
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 the 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 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.
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.
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<PAGE> 30
HIGHMARK EQUITY AND
FIXED INCOME FUNDS
INVESTMENT PORTFOLIOS OF
HIGHMARK FUNDS
For further information (including current
yield, purchase and redemption information),
call 1-800-433-6884
INVESTMENT ADVISOR
HighMark Capital Management, Inc.
475 Sansome Street
San Francisco, CA 94104
CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
San Francisco, CA 94104
ADMINISTRATOR & DISTRIBUTOR
SEI Investments Mutual Funds Services
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Ropes & Gray
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
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<PAGE> 31
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
FUNDS OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
HIGHMARK FUNDS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
NOT FDIC INSURED
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<PAGE> 32
CROSS REFERENCE SHEET
HIGHMARK VALUE MOMENTUM FUND
CLASS I SHARES
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
FORM N-1A PART B ITEM INFORMATION CAPTION
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Additional Information -- Description of Shares
13. Investment Objectives and Policies Investment Objectives and Policies; Additional
Information on Portfolio Instruments
14. Management of HighMark Funds Management of HighMark Funds
15. Control Persons and Principal Additional Information -- Miscellaneous
Holders of Securities
16. Investment Advisory and Other Management of HighMark Funds
Services
17. Brokerage Allocation Management of HighMark Funds -- Portfolio
Transactions
18. Capital Stock and Other Securities Valuation; Additional Purchase and Redemption
Information; Management of HighMark Funds --
Distributor; Additional Information
19. Purchase, Redemption and Valuation; Additional Purchase and Redemption
Pricing of Securities Being Information; Management of HighMark Funds
Offered
20. Tax Status Additional Purchase and Redemption Information
-- Additional Federal Tax Information;
</TABLE>
<PAGE> 33
<TABLE>
<S> <C> <C>
21. Underwriters Management of HighMark Funds -- Distributor
22. Calculation of Performance Data Additional Information -- Calculation of
Performance Data
23. Financial Statements Financial Statements
</TABLE>
-2-
<PAGE> 34
HIGHMARK FUNDS
HIGHMARK VALUE MOMENTUM FUND
CLASS I SHARES
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1999
This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Prospectus of the HighMark Value
Momentum Fund -- Class I Shares, which is dated October 1, 1999, (collectively,
the "Prospectus") and any supplements thereto. This Statement of Additional
Information is incorporated in its entirety into the Prospectus. Copies of the
Prospectus 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 Prospectus.
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
HIGHMARK FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bank Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Commercial Paper and Variable Amount Master Demand Notes . . . . . . . . . . . . . . . . . 2
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Adjustable Rate Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Shares of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
When-Issued Securities and Forward Commitments . . . . . . . . . . . . . . . . . . . . . . 5
Options (Puts and Calls) on Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Covered Call Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Purchasing Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Purchasing Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Options in Stock Indices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Risk Factors in Options Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Futures Contracts on Securities and Related Options . . . . . . . . . . . . . . . . . . . 10
Futures Contracts on Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Options on Securities' Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 12
Risk of Transactions in Securities' Futures Contracts and Related Options . . . . . . . . 12
Index Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Options on Index Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S. Dollar Denominated Obligations of Securities of Foreign Issuers . . . . . . . . . . . 14
Standard & Poor's Depository Receipts ("SPDRs") . . . . . . . . . . . . . . . . . . . . . 15
Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Voting Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ADDITIONAL FEDERAL TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
FOREIGN TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
MANAGEMENT OF HIGHMARK FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<PAGE> 36
<TABLE>
<S> <C>
INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
GLASS-STEAGALL ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ADMINISTRATOR AND SUB-ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SHAREHOLDER SERVICING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
The Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
TRANSFER AGENT AND CUSTODIAN SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . 36
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SHAREHOLDER AND TRUSTEE LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
CALCULATION OF PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
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<PAGE> 37
STATEMENT OF ADDITIONAL INFORMATION
HIGHMARK FUNDS
HighMark Funds is a diversified, open-end management investment
company. HighMark Funds presently consists of fourteen 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 Emerging Growth Fund, the HighMark International
Equity Fund, the HighMark Small Cap Value Fund, the HighMark Bond Fund, the
HighMark Intermediate-Term Bond 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 commenced operations in HighMark Funds on April 28, 1997.
As described in the Prospectuses, selected Funds of HighMark Funds
have been divided into four classes of Shares (designated Class A and Class B
Shares (collectively "Retail Shares"), Fiduciary Shares and Class I Shares) for
purposes of HighMark Funds' Distribution and Shareholder Services Plans (the
"Distribution Plans"), which Distribution Plans apply only to such Funds'
Retail Shares.
The Value Momentum Fund (the "Fund") is sometimes referred to herein
as an Equity Fund.
Much of the information contained herein expands upon subjects
discussed in the Prospectus for the Fund. No investment in Shares of the Fund
should be made without first reading that Fund's Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment objective and
policies of the Fund as set forth in the Prospectus.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
1. Bank Instruments. Consistent with its investment objective,
policies, and restrictions, the Fund may invest in bankers' acceptances,
certificates of deposit, and time deposits.
<PAGE> 38
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 $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.
2. Commercial Paper and Variable Amount Master Demand Notes.
Consistent with its investment objective, policies, and restrictions, the 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 the Fund and the issuer,
they are not normally traded. Although there is no secondary market in the
notes, the 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
-2-
<PAGE> 39
rate or the period of time remaining until the principal amount can be
recovered from the issuer through demand.
3. Lending of Portfolio Securities. In order to generate additional
income, the Fund may lend its portfolio securities to broker-dealers, banks or
other institutions. During the time portfolio securities are on loan from the
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 the 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, the 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 HighMark Capital Management, Inc. (the
"Advisor"), and, should the market value of the loaned securities increase, the
borrower will be required to furnish additional collateral to the Fund. The
Fund may lend portfolio securities in an amount representing up to 33 1/3% of
the value of the Fund's total assets.
4. Repurchase Agreements. Securities held by the Fund may be subject
to repurchase agreements.
Under the terms of a repurchase agreement, the 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 Funds' 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.
Additionally, although there is no controlling legal precedent confirming that
the Fund would be entitled, as against a claim by the seller or its receiver or
trustee in bankruptcy, to retain the underlying securities, HighMark Funds'
Board of Trustees believes that, under the regular procedures normally in
effect for custody of the Fund's securities subject to repurchase
-3-
<PAGE> 40
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 Funds' 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.
5. Reverse Repurchase Agreements. The 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, the 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, the 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. The Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time the 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 the Fund may decline below the
price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by the Fund under the
1940 Act.
6. U.S. Government Obligations. The 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.
For information concerning mortgage-related securities issued by
certain agencies or instrumentalities of the U.S. Government, see
"Mortgage-Related Securities" below.
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<PAGE> 41
7. Adjustable Rate Notes. Consistent with its investment objective,
policies, and restrictions, the Fund may invest in "adjustable rate notes,"
which include variable rate notes and floating rate notes. 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 the 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 the
Fund's non fundamental 15% 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.
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.
8. Shares of Mutual Funds. The Fund 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 Funds by the Securities
and Exchange Commission, such other registered investment companies securities
may include shares of a money market fund of HighMark Funds, and may include
registered investment companies for which the Advisor or Sub-Advisor to a Fund
of HighMark Funds, 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 the 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 Funds, 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.
9. When-Issued Securities and Forward Commitments. The Fund may
enter into forward commitments or purchase securities on a "when-issued" basis,
which means that the
-5-
<PAGE> 42
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. The 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 the Fund agrees to purchase securities on a "when-issued" basis
or enter into forward commitments, HighMark Funds' 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 Fund expects 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 the Fund
exceeded this 25% threshold, the Fund's liquidity and the Advisor's ability to
manage it might be adversely affected. In addition, the Fund does 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.
10. Options (Puts and Calls) on Securities. The Fund may buy and
sell options (puts and calls), and write call options on a covered basis.
11. Covered Call Writing. The 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. The
Fund will not engage in option 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 the 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
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<PAGE> 43
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.
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.
12. Purchasing Call Options. The Fund may purchase call options to
hedge against an increase in the price of securities that the Fund wants
ultimately to buy. Such hedge protection
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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 Fund may sell, exercise or close out positions as the Advisor
deems appropriate.
13. Purchasing Put Options. The 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, the 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.
14. Options in Stock Indices. The Fund 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 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 the 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, the 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.
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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.
The 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 the Fund's portfolio will
not duplicate the components of an index, the correlation will not be exact.
Consequently, the 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.
The Fund will enter into an option position only if there appears to
be a liquid secondary market for such options.
The 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 the Fund's total assets.
15. Risk Factors in Options Transactions. The successful use of
options strategies depends on the ability of the Advisor to forecast interest
rate and market movements correctly.
When it purchases an option, the 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 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, the Fund will lose part or all of its investment in the option. This
contrasts with an investment by the 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 the Fund's ability to
terminate option positions at times when the Advisor deems it desirable to do
so. Although the Fund will take
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an option position only if its Advisor believes there is liquid secondary
market for the option, there is no assurance that the 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,
the 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 the Fund's ability to realize
its profits or limit its losses.
Disruptions in the markets for securities underlying options purchased
or sold by the 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, the 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, the 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 the Fund has expired, the Fund could lose the entire
value of its option.
16. Futures Contracts on Securities and Related Options. The 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 the Fund.
17. Futures Contracts on Securities. The Fund will enter into
futures contracts on securities 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 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
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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 the 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."
The 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 position then currently held by the Fund. The
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.
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18. Options on Securities' Futures Contracts. The 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. The 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. The 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.
The 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 the Fund's total assets.
19. Risk of Transactions in Securities' Futures Contracts and Related
Options. Successful use of securities' futures contracts by the Fund is
subject to the ability of the 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 the 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 the 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 result in the institution by exchanges of
special procedures which may interfere with the timely execution of customer
orders.
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To reduce or eliminate a hedge position held by the 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.
20. Index Futures Contracts. The 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. The 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 the 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.
The 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 index
futures contracts could exist in the secondary market, resulting in the Fund's
inability to
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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 the 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 the 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 Fund's
intention to qualify as such.
21. 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.
22. U.S. Dollar Denominated Obligations of Securities of Foreign
Issuers. The Fund may invest in U.S. dollar denominated obligations 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 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 custodial
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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.
23. Standard & Poor's Depository 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.
24. Illiquid Securities. The Fund has adopted a non-fundamental
policy (which may be changed without shareholder approval) prohibiting the Fund
from investing more than 15% 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 Fund may purchase Rule 144A
Securities only in accordance with
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liquidity guidelines established by the Board of Trustees of HighMark Funds and
only if the investment would be permitted under applicable state securities
laws.
25. Restricted Securities. The Fund has adopted a nonfundamental
policy (which may be changed without Shareholder approval) permitting the Fund
to invest in restricted securities provided the Fund complies with the illiquid
securities policy described above. Restricted securities are securities that
may not be sold to the public without registration under the Securities Act of
1933 ("1933 Act") and may be either liquid or illiquid. The Advisor will
determine the liquidity of restricted securities in accordance with guidelines
established by HighMark Funds' 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).
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 the Fund (as defined
below). Except with respect to the 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.
THE VALUE MOMENTUM 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, 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).
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;
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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 the Fund may purchase or hold debt
instruments, lend portfolio securities, and enter into repurchase
agreements in accordance with its investment objective and policies.
THE VALUE MOMENTUM 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, 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.
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The fundamental limitations of the Value Momentum Fund have been
adopted to avoid 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 Fund also has adopted nonfundamental
limitations, set forth below, which in some instances may be more restrictive
than their fundamental limitations. Any changes in the 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 ARE
NONFUNDAMENTAL POLICIES. THE 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 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. 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 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
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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 may invest
in futures contracts and options on futures contracts, as disclosed in
the prospectus and interest in a pool of securities that are secured
by interests in real estate. However, subject to their permitted
investments, the 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 Funds 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 the 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 Funds, an officer, trustee, partner or director
of HighMark Funds or the Advisor of HighMark Funds 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.
Voting Information. As used in this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of HighMark Funds
means the affirmative vote of the lesser of (a) more than 50% of the
outstanding Shares of HighMark Funds or such Fund or such Class, or (b) 67% or
more of the Shares of HighMark Funds or such Fund or such Class
-19-
<PAGE> 56
present at a meeting at which the holders of more than 50% of the outstanding
Shares of HighMark Funds or such Fund or such Class are represented in person
or by proxy.
PORTFOLIO TURNOVER
The Fund's turnover rate is calculated by dividing the lesser of the
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.
For the Fund, the portfolio turnover rate for the fiscal year ended July 31,
1998, the six-month period ended July 31, 1997 and the prior year ended January
31, 1997 was: 7%, 1% and 9%. 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.
VALUATION
As disclosed in the Prospectus, the 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) on days
on which the New York Stock Exchange is open for business (also "Business
Days").
Except as noted below, investments by the Fund 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
the 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 Funds' 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 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 Fund may be made on days on
which the New York Stock Exchange is open for business.
It is currently HighMark Funds' policy to pay redemptions in cash.
HighMark Funds 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 Fund in lieu of cash. Shareholders may incur
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<PAGE> 57
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 the Fund of HighMark Funds during any 90-day period of up
to the lesser of $250,000 or 1% of HighMark Funds' net assets.
HighMark Funds 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 Funds also
reserves the right to suspend sales of Shares of the Fund for any period.
If the 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
The 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, the
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) 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.
If the 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
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<PAGE> 58
in the form of dividends (including capital gain dividends). If the 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 the Fund fails to distribute in a calendar year substantially all
of its ordinary income for the year and substantially all its net capital gain
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 the 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 the 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.
Certain of the 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 the 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 the 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.
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<PAGE> 59
The 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, the Fund
may be required to sell securities in its portfolio that it otherwise would
have continued to hold.
The Fund 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.
FOREIGN TAXES
Dividends and interest received by the 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 the 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. If the Fund makes the 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 FUNDS
TRUSTEES AND OFFICERS
Overall responsibility for management of the Fund rests with the
Trustees of HighMark Funds, who are elected by HighMark Funds' Shareholders.
There are currently six Trustees, all of whom are not "interested persons" of
HighMark Funds within the meaning of that term under the 1940 Act.
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<PAGE> 60
The Trustees, in turn, elect the officers of HighMark Funds to
supervise actively its day-to-day operations.
The Trustees and officers of HighMark Funds, 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 FUNDS DURING PAST 5 YEARS
- ---------------- ------------------- -------------------
<S> <C> <C>
Thomas L. Braje Trustee Prior to retirement in October 1996,
1323 Encina Drive Vice President and Chief Financial
Milbrae, CA 94030 Officer of Bio Rad Laboratories, Inc.
Date of Birth: 6/7/43
David A. Goldfarb Trustee Partner, Goldfarb & Simens, Certified
111 Pine Street Public Accountants.
18th Floor
San Francisco, CA 94111
Date of Birth: 8/2/42
Joseph C. Jaeger Trustee Prior to retirement in June 1998, Senior
19 Crest Road Vice President and Chief Financial
Lafayette, CA 94549 Officer, Delta Dental Plan of
Date of Birth: 8/21/35 California.
Frederick J. Long Trustee President and Chief Executive Officer,
520 Pike Street Acordia West and Acordia Northwest Inc.
20th Floor (each an insurance brokerage firm).
Seattle, WA 98101
Date of Birth: 9/17/35
Paul L. Smith Trustee Member of the Board of Trustees of
422 Gordon Terrace Stepstone Funds from 1991 to 1997.
Pasadena, CA 91105
Date of Birth: 4/25/18
William R. Howell Trustee Director, Current Income Shares, Inc.
73-350 Calliandra Avenue from 1973 until retirement in 1998.
Palm Desert, CA 92260 Chairman of the Board of Trustees of
Date of Birth: 2/28/22 Stepstone Funds from 1991 to 1997.
</TABLE>
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<PAGE> 61
<TABLE>
<S> <C> <C>
Michael L. Noel Member Advisory Board President, Noel Consulting Company since
1107 Pine Country Court 1998. From 1991 to 1997, Member of the
Prescott, AZ 86303-6405 Board of Trustees of Stepstone Funds.
Date of Birth: 4/5/41 Prior to retirement in December 1994,
Senior Vice President and Chief
Financial Officer, Southern California
Edison Company; Director of Amerwest
Company, Current Income Shares, Inc. and
SCAN Health Plan.
Robert M. Whitler Member Advisory Board Director, Current Income Shares, Inc.
336 Running Spring Drive Prior to retirement in 1996, Executive
Palm Desert, CA 92211-3240 Vice President and head of Union Bank's
Date of Birth: 9/11/38 Financial Management and Trust Services
Group and a member of the bank-wide
Executive Policy Committee.
Mark E. Nagle President and Chief Executive Vice President and Controller, Funds
530 East Swedesford Road Officer Account, Vice President of the
Wayne, PA 19087 Administrator and Distributor, employee
since November 1996. From 1995 to 1996,
Vice President of Fund Accounting of
BISYS Fund Services. Prior to 1995,
Senior Vice President for Fidelity
Investments since 1981.
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 associate with Morgan Lewis & Bockius
Oaks, PA 19456 since 1988.
</TABLE>
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<PAGE> 62
<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.
Joseph M. O'Donnell Vice President and Assistant Employee since 1998. From March, 1993
1 Freedom Valley Drive Secretary to December, 1997, Vice President and
Oaks, PA 19456 General Counsel with FPS Services, Inc.
Lydia A. Gavalis Vice President and Assistant Vice President and Assistant Secretary
1 Freedom Valley Drive Secretary of SEI Investments Company, employee
Oaks, PA 19456 since 1998. Prior to 1998, Assistant
General Counsel and Director of
Arbitration, Philadelphia Stock
Exchange.
Lynda J. Striegel Vice President and Assistant Vice President and Assistant Secretary
1 Freedom Valley Drive Secretary of SEI Investments Company, employee
Oaks, PA 19456 since 1998. From 1997 to 1998, Senior
Assets Management Counsel, Barnett
Banks, Inc. From 1996 to 1997, Partner,
Groom and Nordberg, Chartered. Prior to
1995, Associate General Counsel, Riggs
Bank, N.A.
Kathy Heilig Vice President and Assistant Treasurer of SEI Investments Company,
1 Freedom Valley Drive Secretary employee since 1987.
Oaks, PA 19456
</TABLE>
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<PAGE> 63
<TABLE>
<S> <C> <C>
James R. Foggo Vice President and Assistant Vice President and Assistant Secretary
1 Freedom Valley Drive Secretary of the Administrator and the
Oaks, PA 19456 Distributor, employee since 1998. In
1998, associate Paul Weiss, Rifkind,
Wharton & Garrison. From 1995 to 1998,
associate, Baker & McKenzie. Prior to
1995, associate, Battle Fowler, L.L.P.
</TABLE>
The Trustees of HighMark Funds receive quarterly retainer fees and
fees and expenses for each meeting of the Board of Trustees attended. No
employee, officer or stockholder of SEI Investments Mutual Funds Services
and/or SEI Investments Distribution Co. receives any compensation directly from
HighMark Funds for serving as a Trustee and/or officer. SEI Investments Mutual
Funds Services and/or SEI Investments Distribution Co. receive administration,
fund accounting servicing and distribution fees from each of the Funds. See
"Manager and Administrator" and "Distributor" below. Messrs. Nagle, Robins,
Cipperman, DellaCroce, O'Donnell and Foggo, and Ms. Orlow, Ms. Striegel, Ms.
Gavalis and Ms. Heilig are employees and officers of SEI Investments Company.
While SEI Investments Mutual Funds Services is a distinct legal entity from SEI
Investments Distribution Co., SEI Investments Mutual Funds Services 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 Investments Mutual Funds Services are both controlled
by the same ultimate parent company, SEI Investments Company.
During the fiscal year ended July 31, 1998, fees paid to the
disinterested Trustees for their services as Trustees aggregated $102,000. For
the disinterested Trustees, the following table sets forth information
concerning fees paid and retirement benefits accrued during the fiscal year
ended July 31, 1998:
<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> <C> <C>
Thomas L. Braje $17,000 None None $17,000
David A. Goldfarb $17,000 None None $17,000
William R. Howell $17,000 None None $17,000
Joseph C. Jaeger $17,000 None None $17,000
Frederick J. Long $17,000 None None $17,000
</TABLE>
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<PAGE> 64
<TABLE>
<S> <C> <C> <C> <C>
Paul L. Smith $17,000 None None $17,000
Michael L. Noel* $17,000 None None $17,000
Robert M. Whitler* $17,000 None None $17,000
</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 advisory and management services are provided to the Fund
by HighMark Capital Management, Inc. (the "Advisor"), (formerly Pacific
Alliance Capital Management, a division of Union Bank of California), pursuant
to an investment advisory agreement between the Advisor and HighMark Funds
dated as of September 1, 1998 (the "Investment Advisory Agreement"). Union
Bank of California serves as custodian for each of the Fund. See "Transfer
Agent, Custodian and Fund Accounting Services" below. Union Bank of California
also serves as sub-administrator to the Fund pursuant to an agreement with SEI
Investments Mutual Funds Services. See "Manager and Administrator" below.
Unless sooner terminated, the Investment Advisory Agreement will
continue in effect as to the Fund from year to year if such continuance is
approved at least annually by HighMark Funds' Board of Trustees or by vote of a
majority of the outstanding Shares of such Fund (as defined under GENERAL
INFORMATION - Miscellaneous in the Prospectus), 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 the Fund at any time on 60 days' written
notice without penalty by the Trustees, by vote of a majority of the
outstanding Shares of the Fund, or by the Advisor. The Investment Advisory
Agreement terminates automatically in the event of any assignment, as defined
in the 1940 Act.
The Investment Advisory Agreement provides that the Advisor will not be
liable for any error of judgment or mistake of law or for any loss suffered by
HighMark Funds 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.
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<PAGE> 65
On September 1, 1998, the investment management unit at Union Bank of
California, N.A., Pacific Alliance Capital Management was reorganized into a
subsidiary of UnionBanCal Corporation. The new entity, HighMark Capital
Management, Inc., is a California corporation registered under the 1940 Act.
On April 1, 1996, the Bank of California, N.A., HighMark Funds'
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 The Bank of Tokyo -
Mitsubishi, Ltd.
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 the Fund as described in the Prospectus. For the fiscal
years ended July 31, 1998, July 31, 1997, January 31, 1997, and January 31,
1996, Union Bank of California received investment advisory fees of:
$3,952,110, $1,158,537, $1,599,000 and $1,169,765, respectively, from the Fund.
For the fiscal year ended January 31, 1997,(1) Union Bank of
California, N.A. received the following investment advisory fees: $1,599,000
from the Value Momentum Fund.
For the fiscal year ended January 31, 1996, the Adviser's predecessor
received the following investment advisory fees: $1,169,765 from the Value
Momentum Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Advisor determines,
subject to the general supervision of the Board of Trustees of HighMark Funds
and in accordance with the 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 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 Value
Momentum Fund will generally involve the payment of a brokerage fee. While the
Advisor generally seeks competitive spreads or commissions on behalf of the
Fund, HighMark Funds may not necessarily pay the lowest spread or commission
available on each transaction, for reasons discussed below.
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<PAGE> 66
Allocation of transactions, including their frequency, to various
dealers is determined by the Advisor 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 may receive orders for transactions by HighMark Funds.
Information so received is in addition to and not in lieu of services required
to be performed by the Advisor and does not reduce the advisory fees payable to
the Advisor by HighMark Funds. Such information may be useful to the Advisor
in serving both HighMark Funds and other clients and, 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 Funds.
Upon adoption by the Board of Trustees of certain procedures pursuant
to Rule 17e-1 under the 1940 Act, HighMark Funds may execute portfolio
transactions involving the payment of a brokerage fee through the Advisor, SEI
Investments Distribution Co., and their affiliates in accordance with such
procedures. HighMark Funds 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 the Fund of HighMark Funds are made
independently from those for the Fund or any other investment company or
account managed by the Advisor. However, any such other investment company or
account may invest in the same securities as HighMark Funds. When a purchase
or sale of the same security is made at substantially the same time on behalf
of the 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 believes 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 the Fund or the
size of the position obtained by the Fund. To the extent permitted by law, the
Advisor may aggregate the securities to be sold or purchased for the Fund with
those to be sold or purchased for the other Fund or for other investment
companies or accounts in order to obtain best execution. As provided in the
Investment Advisory Agreement in making investment recommendations for HighMark
Funds, the Advisor will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by HighMark Funds is a
customer of the Advisor, its parent or its subsidiaries or affiliates and, in
dealing with its commercial customers, the Advisor and its parent,
subsidiaries, and affiliates will not inquire or take into consideration
whether securities of such customers are held by HighMark Funds.
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<PAGE> 67
During the fiscal year ended July 31, 1998, no brokerage was directed
for the Fund. For the period ended July 31, 1997 and the fiscal year ended
January 31, 1997, the Fund paid brokerage commissions of $118,620 and $122,239,
respectively.
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.
The Advisor believes that it possesses the legal authority to perform
the services for the Fund contemplated by the Investment Advisory Agreement and
described in the Prospectus and this Statement of Additional Information and
has so represented in the Investment Advisory Agreement. 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 Funds. Depending upon the nature of any changes in the services
that could be provided by the Advisor the Board of Trustees of HighMark Funds
would review HighMark Funds' relationship with the Advisor 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, the Advisor, its
affiliates, and its correspondent banks
-31-
<PAGE> 68
in connection with Customer purchases of Shares of HighMark Funds, 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
Funds' method of operations would affect its net asset value per Share or
result in financial losses to any Customer.
ADMINISTRATOR AND SUB-ADMINISTRATOR
SEI Investments Mutual Funds Services (the "Administrator") serves as
administrator to the Fund pursuant to the administration agreement dated as of
February 15, 1997 between HighMark Funds and the Administrator (the
"Administration Agreement").
SEI Investments Mutual Funds Services is a Delaware business trust
whose sole beneficiary is SEI Investments Management Corporation. SEI
Investments 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 Institutional International Trust, SEI
Institutional Managed Trust, Boston 1784(R) Funds, The Advisors' Inner Circle
Fund, The Pillar Funds, CUFund, STI Classic Funds, First American Funds, Inc.,
First American Investment Funds, Inc., The Arbor Fund, Morgan Grenfell
Investment Trust, The PBHG Funds, Inc., The Achievement Funds Trust, Bishop
Street Funds, CrestFunds, Inc., STI Classic Variable Trust, Monitor Funds, TIP
Funds, ARK Funds, SEI Asset Allocation Trust, SEI Institutional Investments
Trust, TIP Institutional Funds, ARMADA Funds, The Expedition Funds and Oak
Associates Funds.
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, 1998 for its services as
administrator and expenses assumed pursuant to the Administration Agreement,
the Administrator received fees of $1,185,633 from the Fund (an additional
$131,737 in fees were voluntarily reduced).
For the fiscal year ended July 31, 1997, the Administrator received
fees of $298,886 from the Fund (an additional $22,063 in fees were voluntarily
reduced).
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<PAGE> 69
For the fiscal year ended January 31, 1997, the Administrator received
fees of $336,000 from the Fund.
For the fiscal year ended January 31, 1996, the Administrator received
fees of $261,423 from the 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, 2000. The Administration Agreement thereafter shall be
renewed automatically for successive annual terms. The Administration
Agreement is terminable at any time with respect to the Fund or HighMark Funds
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 Funds 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 Funds for
all acts of the subcontractor as if such acts were its own, except for losses
suffered by the 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 the Fund's average daily net assets.
SHAREHOLDER SERVICING AGREEMENT
HighMark Capital Management, Inc., HighMark Funds and the California
Department of Personnel have entered into a shareholder servicing agreement
pursuant to which HighMark Capital Management is to pay compensation to the
California Department of Personnel for providing certain shareholder support
services to plan participants in the State of California Savings Plus Program
("Plan Participants") who are the beneficial or record owners of Shares of the
Fund. In consideration for such services, the California Department of
Personnel is
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<PAGE> 70
compensated by the Advisor at an annual rate of 0.10% on net assets of the
Value Momentum Fund held in the Thrift Plan and Deferred Compensation Plan in
the State of California Savings Plus Program.
The servicing agreement adopted requires the California Department of
Personnel to perform certain shareholder support services as set forth in the
Servicing Agreement with respect to the beneficial or record owners of Class I
Shares of the Value Momentum Fund.
California Department of Personnel has agreed to provide certain
shareholder support services in connection with the Class I Shares of the Value
Momentum Fund. Such shareholder support services may include, but are not
limited to, (i) maintaining separate records for each Plan Participant with
respect to the Value Momentum Fund, which records shall reflect shares
purchased and redeemed and share balances, (ii) transmitting to the Value
Momentum Fund purchase and redemption orders on behalf of Plan Participants,
(iii) preparing and transmitting to Plan Participants periodic account
statements showing the total number of shares owned by them as of the statement
closing date, purchases and redemptions of Fund shares by the plan participant
during the period covered by the statement and the dividends and other
distributions paid to the plan participant during the statement period (whether
paid in cash or reinvested in Fund shares), (iv) transmitting to plan
participants proxy materials, reports and other information required to be sent
to shareholders under the federal securities laws received by the California
Department of Personnel from the Value Momentum Fund, and (v) providing to
HighMark Funds such periodic reports as shall reasonably be concluded to be
necessary to enable HighMark Funds and its distributor to comply with State
Blue Sky requirements.
EXPENSES
HighMark Funds' service providers bear all expenses in connection with
the performance of their respective services, except that the 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 HighMark Capital
Management, Inc., Union Bank of California, SEI Investments Mutual Funds
Services 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 Funds, 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.
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<PAGE> 71
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned
subsidiary of SEI, serves as distributor to the Funds pursuant to a
distribution agreement dated February 15, 1997 between HighMark Funds and the
Distributor for the Fiduciary Class and Class A Shares, pursuant to a
distribution agreement dated June 18, 1997 between HighMark Funds and the
Distributor for Class B Shares and pursuant to a distribution agreement dated
__________ between HighMark Funds and the Distributor for Class I Shares
(collectively, the "Distribution Agreements").
Unless terminated, the Distribution Agreements will continue in effect
until July 31, 2000 and from year to year thereafter if approved at least
annually (i) by HighMark Funds' Board of Trustees or by the vote of a majority
of the outstanding Shares of HighMark Funds, and (ii) by the vote of a majority
of the Trustees of HighMark Funds 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 Funds' Board of
Trustees, by vote of a majority of the outstanding voting securities of
HighMark Funds or by the Distributor. The Distribution Agreements terminate in
the event of their assignment, as defined in the 1940 Act.
TRANSFER AGENT AND CUSTODIAN SERVICES
State Street Bank and Trust Company performs transfer agency services
for the Fund pursuant to a transfer agency and shareholder service agreement
with HighMark Funds dated as of February 15, 1997 (the "Transfer Agency
Agreement"). As the Fund's transfer agent, State Street Bank and Trust Company
processes purchases and redemptions of the Fund's Shares and maintains the
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, the Distributor has agreed to pay
State Street Bank and Trust Company annual fees at the rate of $______ per
Class I/per Fund. In addition, there will be an annual account maintenance fee
of $25.00 per account and IRA Custodial fees totaling $15.00 per account, as
well as out-of-pocket expenses as defined in the Transfer Agency Agreement.
HighMark Funds 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 the Fund to
increase the Fund's net income available for distribution as dividends.
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<PAGE> 72
Union Bank of California, N.A. serves as custodian to the Fund
pursuant to a custodian agreement with HighMark Funds 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 the Fund's cash and securities, handling the receipt and delivery
of securities, and collecting interest and dividends on the Fund's investments.
Under the Custodian Agreement, HighMark Funds has agreed to pay Union
Bank of California a domestic custodian fee with respect to the 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 Funds for 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 the Fund to
increase the Fund's net income available for distribution as dividends.
AUDITORS
The financial statements of HighMark Funds for the period ended July
31, 1998, 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 Funds and will pass upon
the legality of the Shares offered hereby.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
HighMark Funds is a Massachusetts business trust. HighMark Funds'
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
Funds' Declaration of Trust, as amended, further authorizes the Board of
Trustees to establish one or more series of Shares of HighMark Funds, and to
classify or
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<PAGE> 73
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 Funds.
HighMark Funds presently consists of fourteen series of Shares, representing
units of beneficial interest in the Growth Fund, the Income Equity Fund, the
Balanced Fund, the Value Momentum Fund, the Emerging Growth Fund, the
International Equity Fund, the Small Cap Value Fund, the Bond Fund, the
Intermediate-Term Bond 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 have been divided into
four classes of Shares, designated Class A and Class B Shares (collectively,
"Retail Shares"), Fiduciary Shares and Class I 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 Funds' Shares will be fully paid
and non-assessable. In the event of a liquidation or dissolution of HighMark
Funds, Shareholders of the Fund are entitled to receive the assets available
for distribution belonging to the Fund, and a proportionate distribution, based
upon the relative asset values of the respective Fund, of any general assets
not belonging to any particular Fund that are available for distribution.
As used in the Prospectus and in this Statement of Additional
Information, "assets belonging to the Fund" means the consideration received by
HighMark Funds upon the issuance or sale of Shares in the 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 Funds not readily identified as
belonging to the Fund that are allocated to the Fund by HighMark Funds' 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 Fund at the time of allocation.
Assets belonging to the Fund are charged with the direct liabilities and
expenses of that Fund, and with a share of the general liabilities and expenses
of HighMark Funds not readily identified as belonging to the Fund that are
allocated to that Fund in proportion to the relative net asset values of the
Fund at the time of allocation. The timing of allocations of general assets
and general liabilities and expenses of HighMark Funds to the Fund 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
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<PAGE> 74
the allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to the 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 Funds shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
Shares of the Fund affected by the matter. For purposes of determining whether
the approval of a majority of the outstanding Shares of the Fund will be
required in connection with a matter, the Fund will be deemed to be affected by
a matter unless it is clear that the interests of the 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 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 Funds voting without regard to series.
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 Funds' Declaration of
Trust, as amended, provides that Shareholders shall not be subject to any
personal liability for the obligations of HighMark Funds, and that every
written agreement, obligation, instrument, or undertaking made by HighMark
Funds 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
Funds shall, upon request, assume the defense of any claim made against any
Shareholder for any act or obligation of HighMark Funds, 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
Funds itself would be unable to meet its obligations.
The Declaration of Trust, as amended, states further that no Trustee,
officer, or agent of HighMark Funds shall be personally liable in connection
with the administration or preservation of the assets of the trust or the
conduct of HighMark Funds' 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
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<PAGE> 75
duties. The Declaration of Trust, as amended, also provides that all persons
having any claim against the Trustees or HighMark Funds shall look solely to
the assets of the trust for payment.
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 the Fund 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
the Fund and the Advisor. Various mutual fund or market indices may also serve
as a basis for comparison of the performance of the 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 Funds' 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 the Funds.
From time to time, the Fund 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 Fund within HighMark Funds; (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 Fund; (7) comparisons of investment products (including the Fund) with
relevant market or industry indices or other appropriate benchmarks; (8)
discussions of fund rankings or ratings by recognized rating organizations; and
(9) testimonials describing the experience of persons that have invested in the
Fund. The Fund may also include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results in such
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<PAGE> 76
communications. Such performance examples will be based on an express set of
assumptions and are not indicative of the performance of the Fund.
For the Class I Shares of the Fund, the average annual total returns
for the one-year and five-year periods ended July 31, 1998 were 9.22% and
19.73%, respectively.
For the period since commencement of operations of the Fund (February
1, 1991) through July 31, 1998, the average annual total return was 18.12%.
Class I Shares commenced operations October 1, 1999. Performance
figures for the periods prior to that date reflect the performance of the
Fiduciary Shares.
The 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 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, 1998, the yield for the Class
I Shares of the Fund was 1.19%. 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:
Standardized Yield = 2 [(a-b + 1)(6) - 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.
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<PAGE> 77
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.
All performance information presented is based on past performance and
does not predict future performance.
MISCELLANEOUS
Prior to April 28, 1997, the HighMark Value Momentum 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. The Fund is the accounting
survivor of a reorganization of two mutual funds. All fees paid by the Fund
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 the 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 the Fund for each prior fiscal year, the financial and investment
information is provided for the period February 1 through January 31.
HighMark Funds is not required to hold meetings of Shareholders for
the purpose of electing Trustees except that (i) HighMark Funds 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 Funds at a meeting duly called for the purpose, which meeting shall be
held upon the written request of the holders of Shares representing not less
than 10% of the outstanding Shares of HighMark Funds. Upon written request by
the holders of Shares representing 1% of the outstanding Shares of HighMark
Funds 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 Funds will provide a list of
Shareholders or disseminate appropriate
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<PAGE> 78
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 Funds 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 Funds.
The Prospectus 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 1998 Annual Report to Shareholders of HighMark Funds is
incorporated herein by reference. This Report includes audited financial
statements for the fiscal year ended July 31, 1998. 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
Prospectus and this Statement of Additional Information.
As of July 28, 1999, HighMark Funds believes that the trustees and
officers of HighMark Funds, as a group, owned less than one percent of the
Shares of the Fund. As of July 28, 1999, HighMark Funds believes that Union
Bank of California was the shareholder of record of 100% of the Class I Shares
of the Fund. As of July 28, 1999, HighMark Funds believes that Union Bank of
California had voting power with respect to 100% of the Fund's Class I Shares.
The table below indicates each additional person known by HighMark
Funds to own of record or beneficially 5% or more of the Shares of the
following Funds of HighMark Funds as of July 28, 1999.
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<PAGE> 79
5% OR MORE OWNERS
INCOME EQUITY FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
The Jackson Family Foundation 5.92%
Attn: Claire Grabowski
421 Aviation Blvd.
Santa Rosa, CA 95403-1069
</TABLE>
INCOME EQUITY FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Lane & Company 86.12%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
</TABLE>
VALUE MOMENTUM FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Mellon Bank NA Trustee for Dept. 9.93%
of Personnel Admin. of State of California
Attn: Wally Adebayo
One Cabot Road, Mail Zone 028-003I
Medford, MA 02155-5141
Lane & Company 86.55%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
</TABLE>
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<PAGE> 80
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Union Bank of California Retirement Plan 7.75%
350 California Street
San Francisco, CA 94104
Union Bank of California 401(k) Plan 8.64%
350 California Street
San Francisco, CA 94104
</TABLE>
GROWTH FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Lane & Company 82.06%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
Dott Pension
c/o Union Bank of Tokyo Trust Company 10.17%
Attn: Dennis Demetropoulos
1251 Avenue of the Americas FL 10
New York, NY 10020-1104
</TABLE>
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Union Bank of California Retirement Plan 13.57%
350 California Street
San Francisco, CA 94104
Union Bank of California 401(k) Plan 10.87%
350 California Street
San Francisco, CA 94104
</TABLE>
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<PAGE> 81
BALANCED FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Ty & Wei Chen Yeh TTEE 7.79%
Yeh Family Trust
U/A 9/11/91
2048 Studebaker Rd.
Long Beach, CA 90815-3539
</TABLE>
BALANCED FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
American Express Trust Company 9.51%
As Agent for NBC Savings and Retirement Plan
Attn: Nancy Jendro Trust Operations
P.O. Box 534
Minneapolis, MN 55440-0534
PFTC. Trustee Nissan Empl. Sav. Pln. 5.39%
Putnam Investments DCPA
Nissan Motor Corporation
Location 31
P.O. Box 9740
Providence, RI 02940-9740
Lane & Company 79.24%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
</TABLE>
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Nissan 401k Plan 5.39%
Attn: Virginia King
P.O. Box 191
Gardena, CA 90248-0191
</TABLE>
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<PAGE> 82
<TABLE>
<S> <C>
Nummi Harly Retirement Plan 9.94%
Attn: Paige Kanisberg
45500 Fremont Blvd.
Fremont, CA 94538
NEC Savings Plan 9.51%
8 Old Sod Farm Road
Melville, NY 11747
Union Bank of California 401(k) Plan 9.16%
350 California Street
San Francisco, CA 94104
Union Bank of California Retirement Plan 11.41%
Controllers Division
P.O. Box 45000
San Francisco, CA 94145
</TABLE>
SMALL CAP VALUE FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Elizabeth Pearce 5.75%
135 Driftwood
Marina Del Ray, CA 90292-5734
Small Business Plan P.S. 6.68%
Union Bank of California TTBE.
Thomas J. Gram, Prof. Corp. P/Adm.
5800 Shellmound St., Suite 210
Emeryville, CA 94608-1931
State Street Bank & Trust 21.21%
Cust for the IRA of
Harold A. Hunter
480 Oak Grove Drive, Apt. 4
Santa Clara, CA 95054-3531
</TABLE>
-46-
<PAGE> 83
<TABLE>
<S> <C>
NFSC FEBO # OBP-373230 6.54%
Frank L. Coan
9468 Danbury Street
Cypress, CA 90630-2849
</TABLE>
SMALL CAP VALUE FUND - CLASS B SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Donaldson Lufkin Jenrette 18.19%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
State Street Bank & Trust Co. 7.03%
Cust for the Rollover IRA of
Regina L. Tilley
12698 Eagle Court
Groveland, CA 95321-9529
State Street Bank & Trust Co. 5.56%
Cust for the IRA R/O
FBO Marie L. Guerrero
1688 Yosemite Drive
Milpitas, CA 95035-6550
Donaldson Lufkin Jenrette 5.35%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
</TABLE>
SMALL CAP VALUE FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Lane & Company 96.51%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
</TABLE>
-47-
<PAGE> 84
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Union Bank of California Retirement Plan 95.18%
350 California Street
San Francisco, CA 94104
</TABLE>
EMERGING GROWTH FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
BOTT Pension 44.88%
c/o Bank of Tokyo Trust Company
Attn: Dennis Demetropoulos
1251 Avenue of the Americas, Fl. 10
New York, NY 10020-1104
Lane & Company 54.75%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
Bank of Tokyo Mitsubishi 16.723%
INternational Securities and Investments
Attn: Takoshi Chino, Manager
7-1 Marunouchi 2-Chome
Tokyo 100 Japan
BTM U.S. Agency Retirement Plan 6.591%
1251 Avenue of the Americas
New York, NY 11020
</TABLE>
BOND FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Northwestern Trst. & Advisory Co. TTBE 6.79%
1201 3rd Ave., Suite 2010
Seattle, WA 98101-3026
Alice A. Swenning Trust 6.33%
The Swenning Fam. TTBE
U/A 9/23/91
1447 21st Ave.
</TABLE>
-48-
<PAGE> 85
Kingsburg, CA 93631-2027
BOND FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Lane & Company 61.88%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
Bott Pension 31.85%
c/o Bank of Tokyo Trust Company
Attn: Dennis Demetropoulos
1251 Avenue of the Americas FL 10
New York, NY 10020-1104
Union Bank of California 401(k) Plan 5.22%
350 California Street
San Francisco, CA 94104
</TABLE>
INTERMEDIATE-TERM BOND FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
National Financial Services Corp. 94.01%
for Exclusive Benefit of Our Cust.
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
</TABLE>
INTERMEDIATE-TERM BOND FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Lane & Company 94.82%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
</TABLE>
-49-
<PAGE> 86
CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
NFSC FEBO #OBP-436976 5.57%
Linda C. Ragland
Ronald E. Ragland
P.O. Box 224
Rancho Santa Fe, CA 92067-0324
NFSC FEGO # PCI-081639 11.19%
Marcelino EStrada Munzttee
Marcelino Estrada Muniz Living
TR of 1998 U/A 11/23/98
2840 D Street
Selma, CA 93662-2903
NFSC FEGO # OBP-435538 5.56%
The Warne Family Trust
Thomas W. Warne
U/A 06/18/91
10200 Bolsa Avenue Space 130
Westminster, CA 92683-6748
Bill S. Tsutagawa
Yuriko Tsutagawa
2242 Valley Rd.
Oceanside, CA 92056-3107
Peter Johnson 16.79%
10350 N. Torrey Pines Rd., #100
La Jolla, CA 92037-1018
Larry Strasbaugh 5.62%
2555 W. Poza Road
Santa Margarita, CA 93453-9621
The Featherston Trust 5.40%
Lawrence H. Featherston
U/A 10/19/95
1300 S. Montezuma Way
West Covina, CA 91791-3738
</TABLE>
-50-
<PAGE> 87
<TABLE>
<S> <C>
Aaron Belokamen 5.85%
Lilian Belokamen
11610 Bellagio Rd.
Los Angeles, CA 90049-2113
</TABLE>
CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Lane & Company 100%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
</TABLE>
INTERNATIONAL EQUITY FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Lane & Company 79.94%
c/o Union Bank of California
Attn: Katherine Hillman
P.O. Box 85484
San Diego, CA 92186-5484
AXA Banque 7.57%
972 Rus Saint Honore
75040 Paris Cedex 01 France
The Equitable Life Assurance 5.61%
Society of the United States
1290 Avenue of the Americas
12th Floor
Attn: Rosemarie Shomstein
New York, NY 10104-0101
</TABLE>
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Nummi Hourly Retirement Plan 7.92%
45500 Fremont Blvd
Fremont, CA 94538
</TABLE>
-51-
<PAGE> 88
<TABLE>
<S> <C>
Union Bank of California Retirement Plan 61.13%
350 California Street
San Francisco, CA 94104
</TABLE>
DIVERSIFIED MONEY MARKET FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
National Financial Services Corp 99.16%
For the Benefit of our Customers
Church Street Station
PO Box 3908
New York, NY 10008-3908
</TABLE>
DIVERSIFIED MONEY MARKET FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Union Bank 80.07%
Lane & Co Cash
Attn: Fund Accounting
PO Box 85602
San Diego, CA 92186-5602
Lane & Company 18.30%
c/o Union Bank
Attn: Kathleen Heilman
PO Box 120109
San Diego, CA 92112-0109
</TABLE>
U.S. GOVERNMENT MONEY MARKET FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
National Financial Services Corp 98.89%
For the Benefit of our Customers
Church Street Station
PO Box 3908
New York, NY 10008-3908
</TABLE>
-52-
<PAGE> 89
U.S GOVERNMENT MONEY MARKET FUND - CLASS B SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Lakeside Business Center 35.69%
Sole Propietorship
Ronald E. Soderling
1400 N Bristol Street Suite #150
Newport Beach, CA 97660-2957
Laguna Ridge Business Center 24.07%
Sole Propietorship
Roanld E. Soderling
1400 N. Bristol St. Suite 150
Newport Beach, CA 92650-2957
Park Laguna Hills 23.79%
Sole Propietorship
Ronald B. Soderling
1400 N. Bristol St. Suite 150
Newport Beach, CA 92660-2957
</TABLE>
U.S GOVERNMENT MONEY MARKET FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Union Bank 96.17%
Lane & Co Cash
Attn: Fund Accounting
PO Box 85602
San Diego, CA 92186-5602
</TABLE>
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
RCM Capital Management 13.81%
7200 Wisconsin Avenue # 1001
Bethesda, MD 20814-4813
ELIC 98 Part CU 8.16%
</TABLE>
100% U.S TREASURY MONEY MARKET FUND - CLASS A SHARES
-53-
<PAGE> 90
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
National Financial Services Corp 99.74%
For the Benefit of our Customers
Church Street Station
PO Box 3908
New York, NY 10008-3908
</TABLE>
100% U.S TREASURY MONEY MARKET FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Union Bank 94.54%
Lane & Co Cash
Attn: Fund Accounting
PO Box 85602
San Diego, CA 92186-5602
</TABLE>
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Lane & Company 5.09%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 85484
San Diego, CA 92186-5464
Muni of Achorage 11.96%
City of Anchorage
Attn: Ellen Braden, Treasurer
632 W. Sixth Avenue
Anchorage, AK 99501
</TABLE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - CLASS A SHARES
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
National Financial Services Corp 99.95%
For the Benefit of our Customers
Church Street Station
PO Box 3908
New York, NY 10008-3908
</TABLE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - FIDUCIARY SHARES
-54-
<PAGE> 91
<TABLE>
<CAPTION>
Name and Address Percentage of Ownership of Record
---------------- ---------------------------------
<S> <C>
Union Bank 99.86%
Lane & Co Cash
Attn: Fund Accounting
PO Box 85602
San Diego, CA 92186-5602
</TABLE>
<TABLE>
<CAPTION>
Name and Address Percentage of Beneficial Ownership
---------------- ----------------------------------
<S> <C>
Van Daele Development Corp. 6.70%
Attn: Jeff Hack
2900 Adams Street
Riverside, CA 92504
</TABLE>
-55-
<PAGE> 92
APPENDIX
The nationally recognized statistical rating organizations
(individually, an "NRSRO") that may be utilized by the Funds 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 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 Funds 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 five 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.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded
-56-
<PAGE> 93
during both good and bad times in the future. Uncertainty of
position characterizes bonds in this class.
Description of the five 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 An obligation rated AAA has the highest rating assigned by
S&P. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated
obligations only in small degree. The obligor's capacity to
meet its financial commitment on the obligation is very
strong.
A An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher-rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the
least degree of speculation and C the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the
obligation.
Description of the three 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
AA- time because of economic conditions.
-57-
<PAGE> 94
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress.
Description of the three highest long-term debt ratings by Fitch IBCA (plus or
minus signs are used with a rating symbol to indicate the relative position of
the credit within the rating category):
AAA Obligations which have the highest rating assigned by Fitch
IBCA. Capacity for timely repayment principal and interest is
extremely strong relative to other obligors in the same
country.
AA Obligations for which capacity for timely repayment of
principal and interest is very strong relative to other
obligors in the same country. The risk attached to these
obligations differs only slightly from the country's highest
rated debt.
A Obligations for which capacity for timely repayment of
principal and interest is strong relative to other obligors in
the same country. However, adverse changes in business,
economic or financial conditions are more likely to affect the
capacity for timely repayment than for obligations in higher
rated categories.
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 ability for repayment of senior
short-term debt obligations. Prime-1 repayment
ability will often 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 ability for repayment of senior
short-term debt obligations. This will normally be
-58-
<PAGE> 95
evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more 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 A short-term obligation rated A-1 is rated in the highest
category by S&P. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category,
certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its
financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.
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):
D-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.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
-59-
<PAGE> 96
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
D-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.
D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
Fitch IBCA's description of its three highest short-term debt ratings:
Fl Obligations assigned this rating have the highest capacity for
timely repayment under Fitch IBCA's national rating scale for
that country, relative to other obligations in the same
country. Where issues possess a particularly strong credit
feature, a "+" is added to the assigned rating.
F2 Obligations supported by a strong capacity for timely
repayment relative to other obligors in the same country.
However, the relative degree of risk is slightly higher than
for issues classified as 'Al' and capacity for timely
repayment may be susceptible to adverse changes in business,
economic, or financial conditions.
F3 Obligations supported by an adequate capacity for timely
repayment relative to other obligors in the same country.
Such capacity is more susceptible to adverse changes in
business, economic, or financial conditions than for
obligations in higher categories.
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.
Short-Term Debt Ratings
-60-
<PAGE> 97
Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
BankWatch(TM) Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.
The TBW Short-Term Ratings apply to commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has
been assigned.
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal or interest.
TBW-1 The highest category; indicates a very high
likelihood that principal and interest will be paid
on a timely basis.
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 the obligation is more susceptible to adverse
developments (both internal and external) than those
with higher ratings, capacity to service principal
and interest in a timely fashion is considered
adequate.
TBW-4 The lowest rating category; this rating is regarded
as non-investment grade and therefore speculative.
-61-
<PAGE> 98
FINANCIAL STATEMENTS
The Independent Auditors' Report for HighMark Funds for the fiscal
year ended July 31, 1998, audited Financial Statements for HighMark Funds for
the fiscal year ended July 31, 1998, and unaudited Financial Statements for the
HighMark Value Momentum Fund for the period ended January 31, 1999 are all
incorporated by reference to the Annual and Semi-Annual Reports of HighMark
Funds, 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.
-62-
<PAGE> 99
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
-- Certain Financial Information.
Included in Part B:
The following financial statements have been incorporated into
the Statement of Additional Information by reference to
HighMark Funds' Annual Report to Shareholders, dated July 31,
1998 and HighMark Funds' Semi-Annual Report to Shareholders,
dated January 31, 1999:
-- Report of Independent Certified Public Accountants
for HighMark Funds at July 31, 1998 and for the
HighMark Value Momentum Fund at January 31, 1999.
-- Statements of Assets and Liabilities for
HighMark Funds at July 31, 1998 and for the
HighMark Value Momentum Fund at January 31,
1999.
-- Statements of Operations for HighMark Funds
for the year ended July 31, 1998 and for the
HighMark Value Momentum Fund for the 6-month
period ended January 31, 1999.
-- Statements of Changes in Net Assets for
HighMark Funds for the year ended July 31,
1998 and for the HighMark Value Momentum
Fund for the 6-month period ended January
31, 1999.
-- Schedules of Portfolio Investments for
HighMark Funds at July 31, 1998 and for the
HighMark Value Momentum Fund at January 31,
1999.
-- Notes to Financial Statements for HighMark
Funds dated July 31, 1998 and for the
HighMark Value Momentum Fund for the 6-month
period ended January 31, 1999.
<PAGE> 100
-- Financial Highlights for HighMark Funds for
the year ended July 31, 1998 and for the
HighMark Value Momentum Fund for the 6-month
period ended January 31, 1999. All required
financial statements are included in Part B
hereof. All other financial statements and
schedules are inapplicable.
(b) Exhibits:
(1) (a) Declaration of Trust, dated March 10, 1987,
is incorporated by reference to Exhibit
(1)(a) of Pre-Effective Amendment No. 1
(filed May 15, 1987) to Registrant's
Registration Statement on Form N-1A.
(b) Amendment to Declaration of Trust, dated
April 13, 1987, is incorporated by reference
to Exhibit (1)(b) of Pre-Effective Amendment
No. 1 (filed May 15, 1987) to Registrant's
Registration Statement on Form N-1A.
(c) Amendment to Declaration of Trust, dated
July 13, 1987, is incorporated by reference
to Exhibit (1)(c) of Pre-Effective
Amendment No. 2 (filed July 24, 1987) to
Registrant's Registration Statement on Form
N-1A.
(d) Amendment to Declaration of Trust, dated
July 30, 1987, is incorporated by reference
to Exhibit (1)(d) of Pre-Effective
Amendment No. 3 (filed July 31, 1987) to
Registrant's Registration Statement on Form
N-1A.
(e) Amendment to Declaration of Trust, dated
October 18, 1996, is incorporated by
reference to Exhibit (1)(e) of
Post-Effective Amendment No. 18 (filed
November 8, 1996) to Registrant's
Registration Statement on Form N-1A.
(f) Amendment to Declaration of Trust, dated
December 4, 1996, is incorporated by
reference to Exhibit (1)(f) of
Post-Effective Amendment No. 19 (filed
December 13, 1996) to Registrant's
Registration Statement on Form N-1A.
(2) (a) Amended and Restated Code of Regulations,
dated June 5, 1991, is incorporated by
reference to Exhibit 2 of
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<PAGE> 101
Post-Effective Amendment No. 7 (filed
September 30, 1991) to Registrant's
Registration Statement on Form N-1A.
(b) Amendment to Amended and Restated Code of
Regulations, dated December 4, 1991, is
incorporated by reference to Exhibit 2(b) of
Post-Effective Amendment No. 8 (filed
September 30, 1992) to Registrant's
Registration Statement on Form N-1A.
(3) None.
(4) None.
(5) (a) Investment Advisory Agreement between
Registrant and HighMark Capital Management,
Inc., dated as of September 1, 1998 (the
"Investment Advisory Agreement"), is
incorporated by reference to Exhibit 5(a) of
Post-Effective Amendment No. 25 (filed
November 30, 1998) to Registrant's
Registration Statement on Form N-1A.
(b) Investment Sub-Advisory Agreement between
HighMark Capital Management, Inc. and Bank
of Tokyo-Mitsubishi Trust Company, dated as
of September 1, 1998 (the "BOTM Sub-Advisory
Agreement") is incorporated by reference to
Exhibit 5(b) of Post-Effective Amendment No.
25 (filed November 30, 1998) to Registrant's
Registration Statement on Form N-1A.
(c) Investment Sub-Advisory Agreement between
HighMark Capital Management, Inc. and AXA
Asset Management Partenaires dated as of
September 1, 1998 (the "AXA Sub-Advisory
Agreement") is incorporated by reference to
Exhibit 5(c) of Post-Effective Amendment No.
25 (filed November 30, 1998) to Registrant's
Registration Statement on Form N-1A.
(d) Investment Sub-Advisory Agreement between
HighMark Capital Management, Inc. and
Brandes Investment Partners, L.P. (the
"Brandes Sub-Advisory Agreement") dated as
of September 1, 1998 is incorporated by
reference to Exhibit 5(d) of Post-Effective
Amendment
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<PAGE> 102
No. 25 (filed November 30, 1998) to
Registrant's Registration Statement on Form
N-1A.
(6) (a) Distribution Agreement between the
Registrant and SEI Financial Services
Company is incorporated by reference to
Exhibit 6 of Post-Effective Amendment No. 20
(filed February 25, 1997) to Registrant's
Registration Statement on Form N-1A.
(b) Form of Distribution and Service Agreement
for Class B Shares between Registrant and
SEI Investments Distribution Co.
incorporated by reference to Exhibit (6)(b)
of Post-Effective Amendment No. 22 (filed
June 18, 1997) to Registrant's Registration
Statement on Form N-1A.
(7) None.
(8) (a) Custodian Agreement between Registrant
and The Bank of California, N.A., dated as
of December 23, 1991, as amended as of
September 15, 1992 (the "Custodian
Agreement"), is incorporated by reference to
Exhibit 8 of Post-Effective Amendment No. 8
(filed September 30, 1992) to Registrant's
Registration Statement on Form N-1A.
(b) Amended and Restated Schedule A to the
Custodian Agreement is incorporated by
reference to Exhibit (8)(b) of
Post-Effective Amendment No. 22 (filed June
18, 1997) to Registrant's Registration
Statement on Form N-1A.
(c) Form of Amended and Restated Schedule B to
the Custodian Agreement is incorporated by
reference to Exhibit (8)(c) of
Post-Effective Amendment No. 22 (filed June
18, 1997) to Registrant's Registration
Statement on Form N-1A.
(d) Form of Securities Lending and Reverse
Repurchase Agreement Services Client
Addendum to Custodian Agreement is
incorporated by reference to Exhibit (8)(d)
of Post-Effective Amendment No. 22 (filed
June 18,
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<PAGE> 103
1997) to Registrant's Registration Statement
on Form N-1A.
(9) (a) Administration Agreement between Registrant
and SEI Fund Resources incorporated by
reference to Exhibit 9(a) of Post-Effective
Amendment No. 20 (filed February 25, 1997)
to Registrant's Registration Statement on
Form N-1A.
(b) Form of Sub-Administration Agreement between
SEI Fund Resources and Union Bank of
California, N.A. is incorporated by
reference to Exhibit 9(e) of Post-Effective
Amendment No. 19 (filed December 13, 1996)
to Registrant's Registration Statement on
Form N-1A.
(c) Transfer Agency and Service Agreement
between the Registrant and State Street Bank
and Trust Company is incorporated by
reference to Exhibit 9(c) of Post-Effective
Amendment No. 20 (filed February 25, 1997)
to Registrant's Registration Statement on
Form N-1A.
(d) Form of Shareholder Service Provider
Agreement for the Registrant is incorporated
by reference to Exhibit 9(n) of
Post-Effective Amendment No. 19 (filed
December 13, 1996) to Registrant's
Registration Statement on Form N-1A.
(e) Form of Shareholder Service Plan for the
Registrant is incorporated by reference to
Exhibit 9(q) of Post-Effective Amendment No.
19 (filed December 13, 1996) to Registrant's
Registration Statement on Form N-1A.
(f) Form of Shareholder Service Plan for Class B
for the Registrant is incorporated by
reference to Exhibit (9)(f) of
Post-Effective Amendment No. 22 (filed June
18, 1997) to Registrant's Registration
Statement on Form N-1A.
(10) Opinion and Consent of Counsel as to
legality of shares being registered is filed
herewith.
(11)(a) Consent of Deloitte & Touche LLP is filed
herewith.
(11)(b) Consent of Ropes & Gray, is filed herewith.
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<PAGE> 104
(12) None.
(13) None.
(14) None.
(15) (a) Restated Shareholder Services Plan with
respect to the Fiduciary Shares is
incorporated by reference to Exhibit 15(a)
of Post-Effective Amendment No. 25 (filed
November 30, 1998) to Registrant's
Registration Statement on Form N-1A.
(b) Restated Distribution and Shareholder
Services Plan with respect to the Class A
Shares is incorporated by reference to
Exhibit 15(b) of Post-Effective Amendment
No. 25 (filed November 30, 1998) to
Registrant's Registration Statement on Form
N-1A.
(c) Form of Distribution and Shareholder
Services Plan relating to the Class B Shares
of the Income Funds and the Equity Funds is
incorporated by reference to Exhibit (15)(f)
of Post-Effective Amendment No. 22 (filed
June 18, 1997) to Registrant's Registration
Statement on Form N-1A.
(16) (a) Performance Calculation Schedules
concerning: the seven-day yield and
effective yield of the Class A and Class B
Shares of the U.S. Government Obligations
Fund, the Diversified Obligations Fund, the
100% U.S. Treasury Obligations Fund, the
Tax-Free Fund, and the California Tax-Free
Fund; the seven-day tax-equivalent yield and
tax-equivalent effective yield of the Class
A and Class B Shares of the Tax-Free Fund
and the California Tax-Free Fund; and the
average annual total return of the Income
Equity Fund and Bond Fund for the one-year,
five-year, and inception-to-date periods are
incorporated by reference to Exhibit 16 of
Post-Effective Amendment No. 6 (filed
September 27, 1990) to Registrant's
Registration Statement on Form N-1A.
(b) Yield Calculation Schedules concerning the
seven-day tax-equivalent yield and
tax-equivalent effective yield (for
California and Oregon income tax purposes)
of the Class
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<PAGE> 105
A and Class B Shares of the 100% U.S.
Treasury Obligations Fund are incorporated
by reference to Exhibit 16(b) of Post-
Effective Amendment No. 7 (filed September
30, 1991) to Registrant's Registration
Statement on Form N-1A.
(c) Performance Calculation Schedules
concerning: (i) the seven-day and thirty-
day yield and effective yield of the Class A
and Class B Shares of the U.S. Government
Money Market Fund, the Diversified Money
Market Fund, the 100% U.S. Treasury Money
Market Fund, and the California Tax-Free
Money Market Fund; (ii) the seven-day and
thirty-day tax-equivalent yield (using a
Federal income tax rate of 31%) and tax-
equivalent effective yield (using a Federal
income tax rate of 31%) of the Class A and
Class B Shares of the California Tax-Free
Fund; (iii) the seven-day and thirty-day
tax-equivalent yield (using a Federal income
tax rate of 31% and a California income tax
rate of 9.3%) and tax-equivalent effective
yield (using a Federal income tax rate of
31% and a California income tax rate of
9.3%) of the Class A and Class B Shares of
the California Tax-Free Fund; (iv) the
average annual total return of the Class A
and Class B Shares of the U.S. Government
Money Market Fund, the Diversified Money
Market Fund, the 100% U.S. Treasury Money
Market Fund, and the California Tax-Free
Money Market Fund for the one-year,
three-year and inception-to-date periods and
the aggregate total return of the Class A
and Class B Shares of each such Fund for the
year-to-date, quarterly and monthly periods;
(v) the thirty-day yield of the Bond Fund;
(vi) the average annual total return of the
Bond Fund and the Income Equity Fund for the
one-year, three-year, five-year and
inception-to-date periods and the aggregate
total return of each such Fund for the
year-to-date, quarterly and monthly periods;
and (vii) the distribution rate (excluding
and including capital gains) over a
twelve-month period for the Bond Fund and
Income Equity Fund, are incorporated by
reference to Exhibit 16(c) of Post-
Effective Amendment No. 8 (filed September
30, 1992) to Registrant's Registration
Statement on Form N-1A.
(17) Not Applicable
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<PAGE> 106
(18) (a) Amended Multiple Class Plan for HighMark
Funds adopted by the Board of Trustees on
June 18, 1997 is incorporated by reference
to Exhibit (18) of Post-Effective Amendment
No. 22 (filed June 18, 1997) to Registrant's
Registration Statement on Form N-1A.
(b) Form of Amended Multiple Class Plan for
HighMark Funds is filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
As of the effective date of this Registration Statement, there are no
persons controlled by or under common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Omitted per instruction of letter from Barry D. Miller, Associate
Director, United States Securities and Exchange Commission, to Craig S.
Tyle, General Counsel, Investment Company Institute (October 2, 1998).
ITEM 27. INDEMNIFICATION
Article IX, Section 9.2 of the Registrant's Declaration of Trust, filed
or incorporated by reference as Exhibit (1) hereto, provides for the
indemnification of Registrant's trustees and officers. Indemnification
of the Registrant's principal underwriter, custodian, investment
adviser, administrator, transfer agent, and fund accountant is provided
for, respectively, in Section 6 of the Distribution Agreement, filed or
incorporated by reference as Exhibit 6(a) hereto, Section 16 of the
Custodian Agreement, filed or incorporated by reference as Exhibit 8
hereto, Section 8 of the Investment Advisory Agreement, filed or
incorporated by reference as Exhibit 5 hereto, Section 5 of the
Administration Agreement, filed or incorporated by reference as Exhibit
9(a) hereto, Section 6 of the Transfer Agency and Service Agreement,
filed or incorporated by reference as Exhibit 9 (c) hereto, and Section
7 of the Fund Accounting Agreement, filed or incorporated by reference
as Exhibit 9(e) hereto. Registrant has obtained from a major insurance
carrier a trustees and officers' liability policy covering certain
types of errors and omissions. In no event will Registrant indemnify
any of its trustees, officers, employees or agents against any
liability to which such person would otherwise be subject by reason of
his willful misfeasance, bad faith, or gross negligence in the
performance of his duties, or by reason of his reckless disregard of
the duties involved in the conduct of his office or under his agreement
with Registrant. Registrant will
-8-
<PAGE> 107
comply with Rule 484 under the Securities Act of 1933 and Release 11330
under the Investment Company Act of 1940 in connection with any
indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling
persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
trustee, officer, or controlling person of Registrant in the successful
defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
HighMark Capital Management, Inc. (the "Advisor") performs investment
advisory services for Registrant. The Advisor offers a wide range of
investment management services to its clients in California, Oregon,
and Washington and around the world. The Advisor is a subsidiary of
UnionBanCal Corporation, a publicly traded corporation, a majority of
the shares of which are owned by the Bank of Tokyo-Mitsubishi, Limited.
To the knowledge of Registrant, none of the directors or officers of
the Advisor, except those set forth below, is or has been at any time
during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that
certain directors and officers of the Advisor also hold positions with
UnionBanCal Corporation, the Bank of Tokyo-Mitsubishi and/or the Bank
of Tokyo-Mitsubishi's other subsidiaries.
Listed below are the directors and certain principal executive officers
of the Advisor, their principal occupations and, for the prior two
fiscal years, any other business, profession, vocation, or employment
of a substantial nature engaged in by such directors and officers:
-9-
<PAGE> 108
<TABLE>
<CAPTION>
Position with Type of
the Advisor Name Principal Occupation Business
- ------------- ---- -------------------- --------
<S> <C> <C> <C>
Director, Chairman of the Susumu Hanada Deputy Group Head Banking
Board, and Chief Executive Trust & Private Financial Services Group
Officer Union Bank of California
475 Sansome Street
San Francisco, CA 94104
Director, President, and Clark R. Gates President and COO Investment
Chief Operating Officer HighMark Capital Management Management
475 Sansome Street
San Francisco, CA 94104
Director Yoshihiko Someya Deputy Chairman, Credit and Banking
Administration
Head of Trust & Private Financial
Services Group
Union Bank of California
Director, UnionBanCal Corp.
400 California Street
San Francisco, CA 94104
Director Tsutomu Nakagawa Executive Vice President and Manager, Banking
Office of the President
Union Bank of California
400 California Street
San Francisco, CA 94104
Director and Chief Patrick G. Dodson Senior Vice President Banking
Financial Officer Trust & Private Financial Services Group
Systems and Operations
Union Bank of California
475 Sansome Street
San Francisco, CA 94104
Secretary Olga J. Sanchez Vice President and Senior Counsel Banking
Union Bank of California
400 California Street
San Francisco, CA 94104
Managing Director, Chief Luke C. Mazur c/o HighMark Capital Management Investment
Investment Officer 475 Sansome Street Management
San Francisco, CA 94104
</TABLE>
-10-
<PAGE> 109
<TABLE>
<CAPTION>
Position with Type of
the Advisor Name Principal Occupation Business
- ------------- ---- -------------------- --------
<S> <C> <C> <C>
Managing Director, Mutual R. Gregory Knopf c/o HighMark Capital Management Investment
Funds 445 S. Figueroa Street Management
Los Angeles, CA 90071
Managing Director, Sales and Terry L. Chambless c/o HighMark Capital Management Investment
Marketing 445 S. Figueroa Street Management
Los Angeles, CA 90071
Managing Director, Support Milton M. Fukuda c/o HighMark Capital Management Investment
Services 475 Sansome Street Management
San Francisco, CA 94104
Managing Director, Portfolio Kevin A. Rogers c/o HighMark Capital Management Investment
Management Group 18300 Von Karman Avenue Management
Irvine, CA 92715
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing securities
of the Registrant also acts as a principal underwriter, distributor or
investment advisor.
Registrant's distributor, SEI Investments Distribution Co. acts as
distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 10, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds (R) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
-11-
<PAGE> 110
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
ARMADA Funds March 8, 1997
TIP Institutional Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Funds, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution,
clearing and settlement of securities transactions ("MarketLink").
Furnish the information required by the following table with respect to
each director, officer or partner of each principal underwriter named
in the answer to Item 21 of Part B. Unless otherwise noted, the
principal business address of each director or officer is 1 Freedom
Valley Drive, Oaks, PA 19456.
-12-
<PAGE> 111
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name With Underwriter With Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board --
of Directors
Henry W. Greer Director --
Carmen V. Romeo Director --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President, Vice President,
General Counsel & Secretary
Secretary
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President and Assistant Vice President,
Secretary Assistant Secretary
Robert Crudup Vice President and Managing --
Director
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President and Managing --
Director
Lydia A. Gavalis Vice President & Assistant Vice President,
Secretary Assistant Secretary
Greg Gettinger Vice President & Assistant --
Secretary
Kathy Heilig Vice President --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing
Director --
John Krzeminski Vice President & Managing --
Director
Carolyn McLaurin Vice President & Managing --
Director
W. Kelso Morrill Vice President --
Mark Nagle Vice President President
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President & Assistant Vice President,
Secretary Assistant Secretary
</TABLE>
-13-
<PAGE> 112
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name With Underwriter With Registrant
---- ------------------- ---------------------
<S> <C> <C>
Sandra K. Orlow Vice President & Secretary Vice President,
Assistant Secretary
Cynthia M. Parrish Vice President & Assistant
Secretary --
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant --
Secretary
Lynda J. Striegel Vice President & Assistant Vice President,
Secretary Assistant Secretary
Lori L. White Vice President & Assistant --
Secretary
Wayne M. Withrow Vice President & Managing Director --
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) HighMark Capital Management, Inc., 475 Sansome Street, San
Francisco, CA 94104 (records relating to its function as
investment advisor).
(2) Union Bank of California, N.A., 400 California Street, San
Francisco, CA 94104 (records relating to its functions as
custodian, sub-administrator and sub-transfer agent).
(3) SEI Investments Mutual Funds Services, Oaks, Pennsylvania
19456 (records relating to its functions as administrator).
(4) SEI Investments Distribution Co. (formerly SEI Financial
Services Company), Oaks, Pennsylvania 19456 (records relating
to its function as distributor).
(5) State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 (records relating to its functions
as transfer agent).
(6) Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite
800 East, Washington, DC 20005 (the Registrant's Declaration
of Trust, Code of Regulations and Minute Books).
-14-
<PAGE> 113
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to call a meeting of the shareholders for
the purpose of voting upon the question of removal of one or more
trustees when requested to do so by the holders of at least 10% of the
outstanding shares of Registrant and to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communication.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
-15-
<PAGE> 114
NOTICE
A copy of the Amended and Restated Agreement and Declaration of Trust
of HighMark Funds is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is executed on
behalf of the Registrant by an officer of the Registrant as an officer and not
individually and that the obligations of or arising out of this instrument are
not binding upon any of the trustees or shareholders individually but are
binding only upon the assets and property of the Registrant.
-16-
<PAGE> 115
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 26 to this Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of
Washington, D.C., on the 2nd day of August, 1999.
HighMark Funds
By: */s/ Mark E. Nagle
------------------
Mark E. Nagle
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 26 has been signed below by the following persons
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
*/s/ Mark E. Nagle President and August 2, 1999
----------------- Chief Executive Officer
Mark E. Nagle
*/s/ Robert DellaCroce Comptroller and Chief August 2, 1999
--------------------- Financial Officer
Robert DellaCroce
*/s/ Thomas L. Braje Trustee August 2, 1999
----------------------
Thomas L. Braje
*/s/ David A. Goldfarb Trustee August 2, 1999
---------------------
David A. Goldfarb
*/s/ Joseph C. Jaeger Trustee August 2, 1999
-----------------------
Joseph C. Jaeger
*/s/ Frederick J. Long Trustee August 2, 1999
----------------------
Frederick J. Long
</TABLE>
*By: /s/ Alan G. Priest
----------------------
Alan G. Priest
Attorney-In-Fact, pursuant to powers
of attorney filed herewith.
-17-
<PAGE> 116
POWER OF ATTORNEY
The undersigned, being an officer of the HighMark Funds, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest and Alyssa Albertelli
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments that said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable HighMark Funds to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, and in connection
with the filing and effectiveness of any registration statement or statement of
HighMark Funds pursuant to said Acts and any and all amendments thereto
(including post-effective amendments), including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as an officer of HighMark Funds any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, any Notification of Registration under the Investment Company Act of 1940
and any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert J. DellaCroce
- ------------------------------ Treasurer and October 10, 1998
Robert J. DellaCroce Chief Financial Officer
</TABLE>
<PAGE> 117
POWER OF ATTORNEY
The undersigned, being an officer of the HighMark Funds, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest and Alyssa Albertelli
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments that said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable HighMark Funds to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, and in connection
with the filing and effectiveness of any registration statement or statement of
HighMark Funds pursuant to said Acts and any and all amendments thereto
(including post-effective amendments), including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as an officer of HighMark Funds any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, any Notification of Registration under the Investment Company Act of 1940
and any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Mark E. Nagle
- ------------------------------ President October 10, 1998
Mark E. Nagle
</TABLE>
<PAGE> 118
POWER OF ATTORNEY
The undersigned, being an officer of the HighMark Funds, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest and Alyssa Albertelli
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments that said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable HighMark Funds to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, and in connection
with the filing and effectiveness of any registration statement or statement of
HighMark Funds pursuant to said Acts and any and all amendments thereto
(including post-effective amendments), including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as an officer of HighMark Funds any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, any Notification of Registration under the Investment Company Act of 1940
and any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Paul L. Smith
- ------------------------------ Trustee October 10, 1998
Paul L. Smith
</TABLE>
<PAGE> 119
POWER OF ATTORNEY
The undersigned, being an officer of the HighMark Funds, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest and Alyssa Albertelli
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments that said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable HighMark Funds to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, and in connection
with the filing and effectiveness of any registration statement or statement of
HighMark Funds pursuant to said Acts and any and all amendments thereto
(including post-effective amendments), including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as an officer of HighMark Funds any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, any Notification of Registration under the Investment Company Act of 1940
and any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ William R. Howell
- ------------------------------ Trustee October 10, 1998
William R. Howell
</TABLE>
<PAGE> 120
POWER OF ATTORNEY
The undersigned, being an officer of the HighMark Funds, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest and Alyssa Albertelli
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments that said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable HighMark Funds to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, and in connection
with the filing and effectiveness of any registration statement or statement of
HighMark Funds pursuant to said Acts and any and all amendments thereto
(including post-effective amendments), including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as an officer of HighMark Funds any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, any Notification of Registration under the Investment Company Act of 1940
and any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------- -------- ----
<S> <C> <C>
/s/ Thomas L. Braje
- ------------------------------ Trustee
Thomas L. Braje
/s/ David A. Goldfarb
- ------------------------------ Trustee
David A. Goldfarb
/s/ William R. Howell
- ------------------------------ Trustee
William R. Howell
/s/ Joseph C. Jaeger
- ------------------------------ Trustee
Joseph C. Jaeger
/s/ Frederick J. Long
- ------------------------------ Trustee
Frederick J. Long
/s/ Paul L. Smith
- ------------------------------ Trustee
Paul L. Smith
</TABLE>
<PAGE> 121
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
9(g) Form of Shareholder Servicing Agreement with respect to the
Class I Shares.
10 Opinion and Consent of Counsel as to legality of shares being
registered.
11(a) Consent of Deloitte & Touche LLP.
11(b) Consent of Ropes & Gray.
18(b) Form of Amended Multiple Class Plan for HighMark Funds.
</TABLE>
<PAGE> 1
SHAREHOLDER SERVICING AGREEMENT
AGREEMENT made as of August __, 1999 by and between HighMark Capital
Management, Inc. ("Advisor") and ____________________ ("Service Provider") and
HighMark Funds ("Trust").
WITNESSETH:
WHEREAS, each of the funds listed on Schedule A hereto as such Schedule
may be amended from time to time (collectively, the "Funds," and each a "Fund")
is a series of the Trust, an investment company registered under the Investment
Company Act of 1940, as amended; and
WHEREAS, Service Provider, has entered into an agreement with Advisor
pursuant to which it makes available shares of the Funds to its plan
participants; and
WHEREAS, for the convenience of its plan participants, Service Provider
is the record owner of such shares and maintains an omnibus account with each of
the Funds which represents the aggregate number of shares held by such plan
participants at any given time; and
WHEREAS, Service Provider tracks the beneficial ownership of such
shares and distributes dividends, and shareholder information and performs other
services for its plan participants' benefit as set forth on Exhibit 1;
WHEREAS, the Funds and Advisor receive a direct benefit from Service
Provider performing the Services that they would otherwise perform, or have
performed, on behalf of such plan participants and the Advisor receives a
financial benefit from the sale of shares to plan participants through increased
advisory fees;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto agrees, as follows:
1. Service Provider agrees to perform the services specified in Exhibit
1 hereto (the "Services") for the benefit of the shareholders of the Funds
maintaining shares of any of such Funds in plan accounts with Service Provider
and whose shares are included in the omnibus account referred to above (each a
"Plan Participant" and collectively, the "Plan Participants").
2. Service Provider agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Services, and will otherwise comply with all laws, rules, and
regulations applicable to the Services.
<PAGE> 2
3. Upon request of the Advisor, Service Provider will provide access to
our facilities and records related to the Services to the Fund and its legal and
audit representatives to review the quality of the Services, and to respond to
requests of the board of trustees of the Trust, a governmental body,
self-regulatory organization or a shareholder. Notwithstanding this provision,
it is understood and agreed that the names and addresses of Service Provider
plan participants (including the Plan Participants) are the exclusive property
of Service Provider and that such plan participant information will not be
provided to the Funds and their representatives pursuant to this Agreement
provided, however, that such plan participants information will be provided by
Service Provider directly to any court or governmental agency if required by
applicable law or governmental or court order. All costs and expenses incurred
by Service Provider in providing access to the Fund and its representatives
shall be paid by the Advisor.
4. Advisor agrees that it and its representatives given access to our
facilities and/or records in accordance with Paragraph 3 hereto shall treat all
records and any information obtained in connection with access to our facilities
as confidential and shall not disclose information contained therein except as
permitted under Paragraph 3. All such records and information maintained by
Service Provider and its affiliates in connection with this Agreement are the
exclusive property of Service Provider and shall remain so notwithstanding any
release thereof in accordance with the terms of this Agreement. No person having
access to such records or information may use such records or information to
solicit, directly or indirectly, any plan participants of Service Provider for
any purpose. The provisions of Paragraphs 3 and 4 shall survive the termination
of this Agreement.
5. In consideration of the Services provided hereunder, Advisor shall
pay to Service Provider the amounts set forth in Schedule B hereto.
6. Service Provider shall indemnify and hold harmless the Funds and
Advisor from and against any and all losses that it may incur (including,
without limitation, reasonable attorneys' fees and expenses) arising out of or
related to the non-performance of Service Provider of its responsibilities under
this Agreement except to the extent any such losses are caused, or contributed
to, by Advisor.
7. The Advisor shall indemnify and hold harmless Service Provider from
any and all losses that it may incur (including, without limitation, reasonable
attorneys' fees and expenses) that are related to the non-performance of Advisor
of its responsibilities under this Agreement, except to the extent of any such
losses are caused, or contributed to by Service Provider. The provisions of
Paragraphs 6 and 7 shall survive the termination of this Agreement.
8. This Agreement may be terminated, without penalty, at any time by
Service Provider, Advisor, or the Trust in whole, or in part with respect to one
or more of the Funds, upon 60-days written notice to the other party.
-2-
<PAGE> 3
9. The Trust is organized as a Massachusetts business trust. Service
Provider understands and agrees that the obligations of under this Agreement are
not binding upon any shareholder of the Funds personally, but bind only each
Fund and each Fund's property. Service Provider represents that it has notice of
the provisions of the Declaration of Trust of the Trust disclaiming shareholder
liability for acts or obligations of the Funds.
10. This Agreement, including its exhibits and Schedules, constitutes
the entire agreement between the parties with respect to the matters dealt with
herein, and supersedes any previous agreements and documents with respect to
such matters.
11. All communications under this Agreement shall be written and sent
to Service Provider and to Advisor at the addresses each has provided at the end
of this Agreement. Notice shall be deemed to have been given on the date it was
delivered personally to the other party or any officer or was either received by
express delivery or telecopy (with receipt) by the other party at its address
specified in this Agreement. Either party may change the address to which
communications to it shall be sent by giving notice thereof in accordance with
this provision.
12. This Agreement may be amended only by mutual agreement of the
parties in writing; provided however, that any amendment to Schedule A of this
Agreement to add additional Fund(s) shall be deemed effective and part of this
Agreement upon the day of the first sale by Service Provider of any shares of
such Fund(s).
13. The rights and obligations of the parties hereunder may not be
assigned without the prior written consent of the non-assigning party.
14. This Agreement shall be governed by the laws of the State of
California without giving affect to provisions relating to conflict of laws.
This Agreement may be signed in counterparts, all of which shall constitute one
and the same agreement.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first below written.
SERVICE PROVIDER Address for Notice:
By:
--------------------------------- -------------------------------
Print Name: ------------------------- -------------------------------
Title:
-------------------------------- -------------------------------
-3-
<PAGE> 4
HIGHMARK CAPITAL MANAGEMENT Address for Notice:
INC.
By:
--------------------------------- -------------------------------
Print Name:
------------------------- -------------------------------
Title:
------------------------------- -------------------------------
HIGHMARK FUNDS
By:
--------------------------------- -------------------------------
Print Name:
------------------------- -------------------------------
Title:
------------------------------- -------------------------------
-4-
<PAGE> 5
EXHIBIT 1
Pursuant to the Agreement by and among the parties hereto, Service
Provider shall perform the following Services:
1. Maintain separate records for each Plan Participant with respect to
each of the Funds held by such Plan Participant, which records shall reflect
shares purchased and redeemed and share balances. Service Provider shall
maintain an omnibus account for each Fund with the transfer agent of the Trust
representing the position of such Plan Participants and such account shall be in
the name of Service Provider or its nominee as the record owner of the shares
owned by such Plan Participants.
2. Transmit to the Funds purchase and redemption orders on behalf of
Plan Participants. Disburse or credit to Plan Participants all proceeds of
redemptions of shares of each of the Funds and all dividends and other
distributions not invested in shares of each of the Funds.
3. Prepare and transmit to Plan Participants periodic account
statements showing the total number of shares owned by them as of the statement
closing date, purchases and redemptions of Fund shares by the plan participant
during the period covered by the statement and the dividends and other
distributions paid to the plan participant during the statement period (whether
paid in cash or reinvested in Fund shares).
4. Transmit to Service Provider plan participants proxy materials,
reports and other information required to be sent to shareholders under the
federal securities laws received by Service Provider from any of the Funds. Upon
request of the Trust, Service Provider will transmit to Plan Participants fund
communications deemed by the Trust, through its Board of Trustees, to be
material to the shareholders of a Fund. In the event Service Provider were to
mail any Fund materials, reports, prospectuses and other information to Plan
Participants/shareholders of any Fund who are Service Provider plan
participants pursuant to this paragraph, Advisor agrees to reimburse Service
Provider or cause the Fund to reimburse Service Provider for all out-of-pocket
expenses, including, without limitation, reasonable clerical expenses incurred
in connection with the distribution of such materials using rates and guidelines
set forth in Rule 451.90 of the New York Stock Exchange Inc.
5. Provide to the Trust such periodic reports as shall reasonably be
concluded to be necessary to enable the Trust and its distributor to comply with
State Blue Sky requirements.
6. Provide to the Trust standard monthly CDSC reports.
-5-
<PAGE> 6
SCHEDULE A
Funds
HighMark Value Momentum Fund - Class I Shares
-6-
<PAGE> 7
SCHEDULE B
Advisor agrees to pay Service Provider an annual fee equal to 10 basis points on
net assets of Funds held in the Thrift Plan and Deferred Compensation Plan in
the State of California Savings Plus Program.
In addition to fees set forth above, Advisor shall pay, or cause to be paid, to
Service Provider amounts due pursuant to Paragraph 3 of the Agreement and
Paragraph 4 of Exhibit 1 of this Agreement.
All payments referred to in this schedule shall be made by Advisor to Service
Provider immediately upon a receipt of the bill therefore by Federal funds wire
to the account specified by Service Provider.
-7-
<PAGE> 1
[ROPES & GRAY LETTERHEAD]
WRITER'S DIRECT DIAL NUMBER: (202) 626-3915
July 30, 1999
HighMark Funds
Oaks, Pennsylvania 19456
Ladies and Gentlemen:
You have registered under the Securities Act of 1933, as amended (the
"1933 Act") an indefinite number of shares of beneficial interest ("Shares") of
the HighMark Funds ("Trust"), as permitted by Rule 24f-2 under the Investment
Company Act of 1940, as amended (the "1940 Act"). You propose to file a
post-effective amendment on Form N-1A (the "Post-Effective Amendment") to your
Registration Statement in order to add Class I Shares to the HighMark Value
Momentum Fund.
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Bylaws and such other
documents, receipts and records as we have deemed necessary for the purpose of
this opinion.
Based upon the foregoing, we are of the opinion that the issue and sale
of the authorized but unissued Class I Shares of the Value Momentum Fund have
been duly authorized under Massachusetts law. Upon the original issue and sale
of your authorized but unissued Class I Shares and upon receipt of the
authorized consideration therefor in an amount not less than the net asset value
of the Class I Shares established and in force at the time of their sale, the
Class I Shares issued will be validly issued, fully paid and non-assessable.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust provides for indemnification out
of the property of a particular series of Shares for all loss and expenses of
any shareholder of that series held personally liable solely by reason of his
being
<PAGE> 2
HighMark Funds
July 30, 1999
Page 2
or having been a shareholder. Thus, the risk of shareholder liability is limited
to circumstances in which that series of Shares itself would be unable to meet
its obligations.
We understand that this opinion is to be used in connection with the
filing of the Post-Effective Amendment. We consent to the filing of this opinion
with and as part of your Post-Effective Amendment.
Sincerely,
/s/ Ropes & Gray
Ropes & Gray
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 26 to
Registration Statement under the Securities Act of 1933, filed under
Registration Statement No. 033-12608 of our report dated September 14, 1998,
relating to The HighMark Funds, including Diversified Money Market Fund, U.S.
Government Money Market Fund, 100% U.S. Treasury Money Market Fund, California
Tax-Free Money Market Fund, Bond Fund, Income Equity Fund, Intermediate-Term
Bond Fund, California Intermediate Tax-Free Bond Fund, Value Momentum Fund,
Emerging Growth Fund, International Equity Fund, Balanced Fund, and Growth Fund,
incorporated by reference in such Registration Statement and to the reference
to us under the heading "Auditors" in such Registration Statement.
DELOITTE & TOUCHE LLP
San Francisco, California
July 30, 1999
<PAGE> 1
CONSENT OF COUNSEL
We hereby consent to the use of our name and the references to our firm
under the caption "Legal Counsel" included in or made a part of Post-Effective
Amendment No. 26 to the Registration Statement (Nos. 33-12608 and 811-5059) of
HighMark Funds on Form N-1A under the Securities Act of 1933, as amended.
/s/ Ropes & Gray
Ropes & Gray
Washington, D.C.
July 30, 1999
<PAGE> 1
HIGHMARK FUNDS
AMENDED MULTIPLE CLASS PLAN
This constitutes a MULTIPLE CLASS PLAN (the "Plan") of HighMark Funds,
a Massachusetts business trust (the "Trust"), adopted pursuant to Rule 18f-3(d)
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Plan
is applicable to the Trust's investment portfolio(s) identified on Schedule A
hereto, as such Schedule may be amended from time to time (each a "Fund",
collectively the "Funds").
WHEREAS, it is desirable to enable the Trust to have flexibility in
meeting the investment and shareholder servicing needs of its current and future
investors; and
WHEREAS, the Board of Trustees of the Trust (the "Board of Trustees"),
including a majority of the Trustees who are not "interested persons" of the
Trust, as such term is defined by the 1940 Act, mindful of the requirements
imposed by Rule 18f-3(d) under the 1940 Act, has determined to adopt this Plan
to enable the Fund to provide appropriate services to certain designated classes
of shareholders of the Fund;
NOW, THEREFORE, the Trust designates the Plan as follows:
1. Designation of Classes. The Fund shall offer its units of beneficial
interest ("Shares") in six classes: Retail Class A Shares, Retail Class B
Shares, Retail Class C Shares (collectively "Retail Shares"), Class I Shares,
Class S Shares and Fiduciary Shares.
2. Purchases. Retail Shares and Class S Shares are distributed to the
general public pursuant to procedures outlined in the Trust's Registration
Statement. Fiduciary Shares and Class I Shares may only be purchased by certain
investors listed in the Registration Statement. Procedures for purchasing
Fiduciary Shares and Class I Shares are outlined in the Registration Statement.
3. Shareholder Services. Retail Shares, Class I Shares, Class S Shares
and Fiduciary Shares may be purchased by check or money order, by Federal Funds
wire, by telephone or through the Automatic Investment Plan, pursuant to
procedures outlined in the Trust's Registration Statement. Holders of Retail
Shares, Class I Shares, Class S Shares and Fiduciary Shares may also make
regular exchanges and redemptions of their Shares as described in the
Registration Statement.
4. Sales Charges.
Fiduciary Shares, Class I Shares and Class S Shares.
<PAGE> 2
Fiduciary Shares, Class I Shares, Class S Shares are not subject to
a sales charge at the time of purchase or upon redemption.
Retail Shares.
Retail Class A Shares and Retail Class C Shares, except Retail Class
A Shares of any money market funds, are subject to a sales charge at the time of
purchase. The sales charge is based on a percentage of the offering price and,
for Class A Shares, may vary based on the amount of purchase. Retail Class B
Shares are subject to a contingent deferred sales charge if they are redeemed
within six years after purchase. Sales charges applicable to Retail Class A
Shares, Retail Class B Shares and Retail Class C Shares may be waived in
accordance with the current Registration Statement.
5. Distribution and Shareholder Services Fee.
Fiduciary Shares.
Fiduciary Shares are subject to a shareholder service fee assessed
in accordance with the shareholder service plan adopted by the Trust.
Retail Shares.
Retail Shares are subject to a shareholder service fee assessed in
accordance with the shareholder service plan adopted by the Trust and Retail
Class A Shares, Retail Class B Shares and Retail Class C Shares are each subject
to a distribution fee in accordance with the respective distribution plans
adopted by the Trust for Retail Class A Shares, for Retail Class B Shares and
for Retail Class C Shares.
Class S Shares.
Class S Shares are subject to a distribution fee in accordance with the
distribution plan adopted by the Trust for the Class S Shares.
Class I Shares.
Class I Shares are not subject to either a shareholder service fee or
distribution fee.
6. Minimum Transaction Requirements. The minimum initial investment and
subsequent investment requirements applicable to Retail Shares, Class S Shares
and Fiduciary Shares shall be the same, as outlined in the Trust's Registration
Statement.
7. Exchange Privilege. Retail Shares, Class I Shares, Class S Shares
and Fiduciary Shares shall be exchangeable for Shares of the class of the
various other Funds of the Trust
-2-
<PAGE> 3
which the Shareholder qualifies to purchase directly, provided that the minimum
investment and any other requirements of the Fund for which the shares are
exchanged are satisfied.
8. Expense Allocation. Each class shall pay the expenses associated
with its different distribution and shareholder services arrangement. Each class
may, at the Board's discretion, also pay a different share of other expenses,
not including advisory or custodial fees or other expenses related to the
management of the Trust's assets, if these expenses are actually incurred in a
different amount by that class, or if the class receives services of a different
kind or to a different degree than other classes. All other expenses will be
allocated to each class on the basis of the relative net asset value of that
class in relation to the net asset value of the Fund.
9. Voting Rights. Each Share held entitles the Shareholder of record to
one vote. Each Fund will vote separately on matters relating solely to that
Fund. Each class of a Fund shall have exclusive voting rights on any matter
submitted to Shareholders that relates solely to that class, and shall have
separate voting rights on any matter submitted to Shareholders in which the
interests of one class differ from the interests of any other class. However,
all Fund Shareholders will have equal voting rights on matters that affect all
Fund Shareholders equally.
10. Dividends. The amount of dividends payable on Class I Shares may be
more than the dividends payable on Fiduciary Shares because of the shareholder
services fee charged to Fiduciary Shares pursuant to the Plan. The amount of
dividends payable on Fiduciary Shares may be more than the dividends payable on
Retail Class A Shares because of the distribution and shareholder services fee
charged to Retail Class A Shares pursuant to the Plan. Dividends on Retail Class
B Shares will be lower than the dividends paid on Retail Class A Shares due to
higher distribution fees. The dividends paid on Retail Class C Shares will be
lower than the dividends paid on Retail Class B Shares due to higher
distribution fees. The dividends paid on Class S Shares will be lower than the
dividends paid on Retail Class A Shares due to higher distribution fees.
Dividends will be declared and paid monthly.
11. Termination and Amendment. This Plan may be terminated or amended
pursuant to the requirements of Rule 18f-3(d) under the 1940 Act.
The names "HighMark Funds" and "Board of Trustees" refer respectively
to the Trust created and the Trustees, as Trustees but not individually or
personally, acting from time to time under a Declaration of Trust dated March
10, 1987, as amended July 30, 1987, to which reference is hereby made and a copy
of which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of the HighMark Funds
entered into in the name or on behalf thereof by any of the Trust,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series and/or class of Shares of the Trust must look solely to
-3-
<PAGE> 4
the assets of the Trust belonging to such series and/or class for the
enforcement of any claims against the Trust.
HIGHMARK FUNDS
Signature: _________________________________
Name: _________________________________
Title: _________________________________
Date: March 20, 1996
As amended: ________, 1999
-4-
<PAGE> 5
SCHEDULE A
MULTIPLE CLASS PLAN OF
HIGHMARK FUNDS
Name of Fund
HighMark Growth Fund (Fiduciary and Retail Class A, Class B and Class C Shares)
HighMark Income Equity Fund (Fiduciary and Retail Class A, Class B and Class C
Shares)
HighMark Balanced Fund (Fiduciary and Retail Class A and Class B Shares)
HighMark Bond Fund (Fiduciary and Retail Class A Shares)
HighMark Diversified Money Market Fund (Fiduciary and Retail Class A and
Class S Shares)
HighMark U.S. Government Money Market Fund (Fiduciary and Retail Class A and
Class B and Class S Shares)
HighMark 100% U.S. Treasury Money Market Fund (Fiduciary and Retail Class A and
Class S Shares)
HighMark California Tax-Free Money Market Fund (Fiduciary and Retail Class A
and Class S Shares)
HighMark California Intermediate Tax-Free Bond Fund (Fiduciary and Retail
Class A Shares)
HighMark Intermediate - Term Bond Fund (Fiduciary and Retail Class A Shares)
HighMark Value Momentum Fund (Fiduciary and Retail Class A, Class B and Class C
and Class I Shares)
HighMark Emerging Growth Fund (Fiduciary and Retail Class A Shares)
HighMark International Equity Fund (Fiduciary and Retail Class A, Class B and
Class C Shares)
HIGHMARK FUNDS
Signature: ______________________________
Name: ______________________________
Title: ______________________________
Date: March 20, 1996
As amended: ___________, 1999
-5-
