<PAGE>
As Filed With the Securities and Exchange
Commission On March 27, 2000
File No. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___ Pre-Effective Amendment No. ___
___ Post-Effective Amendment No. ___
(Check appropriate box or boxes)
------------------------
HIGHMARK FUNDS
(Exact Name of Registrant as specified in Charter)
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
(Address of Principal Executive Offices)
(800)-433-6884
(Area Code and Telephone Number)
Martin E. Lybecker, Esq.
Ropes & Gray
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
It is proposed that this filing will become effective on April 24, 2000 pursuant
to Rule 488.
Title of securities being offered: Units of beneficial interest.
An indefinite amount of the Registrant's securities has been registered under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. In reliance upon such Rule, no filing fee is being paid at this
time.
<PAGE>
IMPORTANT SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
HighMark Funds
The document you hold in your hands contains your combined registration
statement/proxy statement and proxy card. A proxy card is, in essence, a ballot.
When you vote your proxy, it tells us how to vote on your behalf on important
issues relating to your Fund. The proxy card may be completed by checking the
appropriate box voting for or against the specific proposals relating to your
Fund. If you simply sign the proxy without specifying a vote, your shares will
be voted in accordance with the recommendations of the Board of Trustees of
HighMark Funds.
We urge you to take the time to read the proxy statement, fill out the proxy
card, and return it to us. Voting your proxy, and doing so promptly, ensures
that the Fund will not need to conduct additional mailings. When shareholders do
not return their proxies in sufficient numbers, we will incur the expense of
follow-up solicitations.
Please take a few moments to exercise your right to vote. Thank you.
- --------------------------------------------------------------------------------
(Front Cover of Combined Registration Statement/Proxy Package)
<PAGE>
HIGHMARK FUNDS
1 Freedom Valley Drive
Oaks, PA 19456
April 22, 2000
To the Shareholders of the HighMark Intermediate-Term Bond Fund:
Enclosed you will find several documents being furnished to you in
connection with a special meeting of the shareholders of HighMark Funds to be
held on May 26, 2000, at SEI Investments Mutual Fund Services, 1 Freedom Valley
Drive, Oaks, Pennsylvania. We hope this material will receive your immediate
attention and that, if you cannot attend the meeting in person, you will vote
your proxy promptly.
The Board of Trustees of HighMark Funds is recommending that
shareholders of the HighMark Intermediate-Term Bond Fund ("Intermediate-Term
Bond Fund" or the "Consolidating Fund") approve a reorganization in which the
Fund will transfer all of its assets to the HighMark Bond Fund ("Bond Fund" or
the "Consolidated Fund") in return for Class A or Fiduciary Shares
("collectively, "Shares") of the Bond Fund and the assumption by the Bond Fund
of all of the liabilities of the Intermediate-Term Bond Fund. After the
transfer, Shares of the Bond Fund will be distributed to the Intermediate-Term
Bond Fund's shareholders tax-free in liquidation of the Intermediate-Term Bond
Fund. As a result of these transactions, your Shares of the Intermediate-Term
Bond Fund would, in effect, be exchanged at net asset value and on a tax-free
basis for corresponding Shares of the Bond Fund.
HighMark Capital Management, Inc. has advised the Board of Trustees of
HighMark Funds that it believes that the above-described transactions regarding
the Intermediate-Term Bond Fund offer the shareholders of the Fund an
opportunity to pursue similar investment objectives more effectively and with
resulting economies of scale and potentially lower expense ratios over time.
THE BOARD OF TRUSTEES OF HIGHMARK FUNDS BELIEVES THAT THE PROPOSED
COMBINATION OF THE INTERMEDIATE-TERM BOND FUND WITH THE BOND FUND IS IN THE BEST
INTERESTS OF THE FUND AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE PROPOSAL.
The Notices of Special Meeting of Shareholders, the accompanying
Combined Prospectus/Proxy Statement, and proxy cards are enclosed. Please read
them carefully. If you are unable to attend the meeting in person, we urge you
to sign, date, and return the proxy card so that your shares may be voted in
accordance with your instructions.
SINCE THE MEETING IS LESS THAN FIVE WEEKS AWAY, WE URGE YOU TO GIVE THE
ENCLOSED MATERIAL YOUR PROMPT ATTENTION SO THAT HIGHMARK FUNDS WILL NOT HAVE TO
INCUR THE EXPENSE OF ADDITIONAL MAILINGS.
Your vote is important to us. Thank you for taking the time to consider
this important proposal.
Sincerely yours,
Mark E. Nagle
PRESIDENT
HighMark Funds
-2-
<PAGE>
HIGHMARK FUNDS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE
HIGHMARK INTERMEDIATE-TERM BOND FUND
To the Shareholders of the HighMark Intermediate-Term Bond Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
("Meeting") of the HighMark Intermediate-Term Bond Fund ("Intermediate-Term Bond
Fund"), a separate series of HighMark Funds, will be held at SEI Investments
Mutual Funds Services, 1 Freedom Valley Drive, Oaks, Pennsylvania on Friday, May
26, 2000 at 10:00 a.m., Eastern time, for the following purposes:
1. To consider and act upon a Plan of Reorganization ("Plan")
adopted by HighMark Funds providing for the transfer of all of
the assets of the Intermediate-Term Bond Fund (the
"Intermediate-Term Bond Fund" or "Consolidating Fund") to the
HighMark Bond Fund (the "Bond Fund" or "Consolidated Fund") in
exchange for Class A or Fiduciary Shares (collectively,
"Shares") of the Bond Fund and the assumption by the Bond Fund
of all of the liabilities of the Intermediate-Term Bond Fund,
followed by the dissolution and liquidation of the
Intermediate-Term Bond Fund, and the distribution of Shares of
the Bond Fund to the shareholders of the Intermediate-Term
Bond Fund.
2. To transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
The proposed transaction is described in the attached Combined
Prospectus/Proxy Statement. A copy of the Plan is appended as Exhibit A thereto.
Pursuant to instructions of the Board of Trustees of HighMark Funds,
the close of business on March 16, 2000, has been designated as the record date
for determination of shareholders entitled to notice of, and to vote at, the
Meeting.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE
BOARD OF TRUSTEES OF HIGHMARK FUNDS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO HIGHMARK FUNDS A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
By Order of the Trustees
Lynda J. Striegel
SECRETARY
HIGHMARK FUNDS
1 Freedom Valley Drive
Oaks, Pennsylvania
April 22, 2000
-3-
<PAGE>
QUESTION & ANSWER SECTION
Q. WHY IS THE BOARD OF TRUSTEES OF HIGHMARK FUNDS PROPOSING TO MERGE THE
HIGHMARK INTERMEDIATE-TERM BOND FUND INTO THE HIGHMARK BOND FUND?
A. As part of a wide ranging effort to maximize efficiencies in HighMark
Funds, serious consideration was given to the future of the
Intermediate-Term Bond Fund. After considering a variety of options,
the Board of Trustees of HighMark Funds approved the consolidation of
the Intermediate-Term Bond Fund into the Bond Fund. The Board of
Trustees of HighMark Funds based its decision on a number of
considerations, including the tax-free nature of the consolidation, the
potential that the consolidation will provide to shareholders to pursue
similar investment objectives more effectively, the opportunities for
increased economies of scale and the better long-term performance of
the Bond Fund.
After careful consideration, the Board of Trustees of HighMark Funds
determined that the proposed Plan of Reorganization is in the best
interest of shareholders. Through this proxy, the Board of Trustees of
HighMark Funds is submitting the proposal to you -- the shareholders --
for a vote.
Q. WHAT WILL HAPPEN TO MY INVESTMENT IN THE HIGHMARK INTERMEDIATE-TERM
BOND FUND IF THIS PROPOSAL IS APPROVED?
A. The assets of the HighMark Intermediate-Term Bond Fund (the
"Intermediate-Term Bond Fund" or "Consolidating Fund") will be
transferred to the HighMark Bond Fund (the "Bond Fund" or "Consolidated
Fund"), in return for Shares of the Bond Fund and the assumption by the
Bond Fund of all of the liabilities of the Intermediate-Term Bond Fund.
After the transfer, shares of the Bond Fund will be distributed to the
Intermediate-Term Bond Fund's shareholders tax-free in liquidation of
the Intermediate-Term Bond Fund. As a result of these transactions,
your shares of the Intermediate-Term Bond Fund would, in effect, be
exchanged at net asset value and on a tax-free basis for shares of the
Bond Fund.
Q. HOW CAN I GET MORE INFORMATION ABOUT THE BOND FUND?
A. Please see the combined prospectus and proxy statement for more
information about the Bond Fund. If you have any questions about the
Fund, please contact your account administrator, investment
representative, or HighMark Funds directly at 1-800-433-6884.
Q. WHAT IF I DO NOT RETURN MY PROXY VOTING BALLOT?
A. In order to conduct the Shareholder Meeting a quorum must be present,
in person or by proxy. A quorum is defined as representation of over
50% of the shares outstanding for each Fund as of March 16, 2000. In
the event that not enough shareholders return the enclosed proxy ballot
card to achieve quorum, we will be forced to incur additional expenses
associated with additional solicitations. In order to avoid additional
costs, please return the completed proxy ballot as soon as possible.
Q. HOW DOES THE BOARD OF TRUSTEES OF HIGHMARK FUNDS SUGGEST THAT I VOTE?
A. After careful consideration, the Board of Trustees, including the
independent members, recommends that you vote "FOR" all of the items on
the enclosed proxy ballot. The Board of Trustees also wishes to remind
you to vote and return ALL of the proxy ballot cards you receive.
-4-
<PAGE>
Q. WHO SHOULD I CALL WITH QUESTIONS ABOUT THIS PROXY?
A. If you have any questions regarding this proxy, please contact your
account administrator, investment representative, or HighMark Funds
directly at 1-800-433-6884.
THE INFORMATION PROVIDED IN THIS "Q&A" IS SUPPORTED BY DISCLOSURES
CONTAINED IN THE ACCOMPANYING PROXY STATEMENT.
-5-
<PAGE>
PROSPECTUS/PROXY STATEMENT
APRIL 22, 2000
HighMark Funds
1 Freedom Valley Drive
Oaks, PA 19456
Tel. No. 1-800-433-6884
COMBINED PROSPECTUS/PROXY STATEMENT
This Combined Prospectus/Proxy Statement is furnished in connection
with the solicitation of proxies from the holders of units of beneficial
interest ("Shareholders") of the HighMark Intermediate-Term Bond Fund for use at
a Special Meeting of Shareholders of the HighMark Intermediate-Term Bond Fund to
approve a Plan of Reorganization adopted by HighMark Funds dated as of _______,
2000 ("Plan"), a copy of which is attached hereto as Appendix A, and the
consummation of the transactions (collectively, the "Transaction") contemplated
therein. The Plan contemplates the transfer of all of the assets and liabilities
of the HighMark Intermediate-Term Bond Fund (the "Intermediate-Term Bond Fund")
to the HighMark Bond Fund (the "Bond Fund"), (the Intermediate-Term Bond Fund,
is also the "Consolidating Fund" and the Bond Fund is also the "Consolidated
Fund" and the Intermediate-Term Bond and Bond Funds are, collectively, the
"HighMark Funds") in exchange for Class A or Fiduciary Shares (collectively
"Shares") of the Bond Fund, followed by the dissolution and liquidation of the
Intermediate-Term Bond Fund and the distribution of Shares to the shareholders
of the Intermediate-Term Bond Fund. As a result of the proposed Transaction,
each shareholder of the Intermediate-Term Bond Fund will receive on a tax-free
basis, a number of full and fractional Shares of the Bond Fund equal in value at
the date of the exchange to the value of the net assets of the Intermediate-Term
Bond Fund transferred to the Bond Fund attributable to the shareholder (based on
the proportion of the outstanding shares of the Intermediate-Term Bond Fund
owned at that time by the shareholder).
This Combined Prospectus/Proxy Statement explains concisely what you
should know before investing in the Bond Fund. Please read it and keep it for
future reference. This Combined Prospectus/Proxy Statement is accompanied by the
prospectuses relating to the HighMark Equity Funds and Fixed Income Funds,
Fiduciary Shares and Retail Shares, each dated November 30, 1999 (the "HighMark
Funds Prospectuses"), which are incorporated into this Combined Prospectus/Proxy
Statement by reference. The current Statement of Additional Information for
HighMark Funds, dated November 30, 1999, has been filed with the Securities and
Exchange Commission and is incorporated into this Combined Prospectus/Proxy
Statement by reference. The Statement of Additional Information of HighMark
Funds may be obtained, without charge, by writing SEI Investments Distribution
Co., 1 Freedom Valley Drive, Oaks, PA 19456 or by calling 1-800-433-6884. In
addition, a Statement of Additional Information dated April 22, 2000 relating to
the Transaction described in this Combined Prospectus/Proxy Statement has been
filed with the Securities and Exchange Commission and is also incorporated into
this Combined Prospectus/Proxy Statement by reference. Such Statement of
Additional Information may be obtained, without charge, by writing SEI
Investments Distribution Co. at the above-listed address or by calling
1-800-433-6884.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-6-
<PAGE>
THE SHARES OF HIGHMARK FUNDS OFFERED HEREBY 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.
-7-
<PAGE>
[BACK COVER PAGE]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT IN
CONNECTION WITH THE OFFERING MADE BY THIS COMBINED PROSPECTUS/PROXY STATEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY HIGHMARK FUNDS. THIS COMBINED PROSPECTUS/PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFERING BY HIGHMARK FUNDS IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-8-
<PAGE>
TABLE OF CONTENTS
PAGE
PROPOSAL (1) APPROVAL OF
PLAN OF REORGANIZATION .............................................. 10
FEE TABLES ........................................................... 11
SYNOPSIS ............................................................. 14
RISK FACTORS ......................................................... 21
INTRODUCTION ......................................................... 22
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
PLAN OF REORGANIZATION .............................................. 22
BACKGROUND AND REASONS FOR THE PROPOSED
REORGANIZATION ....................................................... 23
INFORMATION ABOUT THE REORGANIZATION ................................ 24
HIGHMARK FUNDS ....................................................... 26
FINANCIAL STATEMENTS ................................................. 27
VOTING INFORMATION ................................................... 27
INFORMATION FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION .................................................. 30
FORM OF PLAN OF REORGANIZATION
APPENDIX A .......................................................... A1
-9-
<PAGE>
PROPOSAL (1) -- APPROVAL OF
PLAN OF REORGANIZATION AND TRANSACTION THEREUNDER
At a meeting held on March 22, 2000, the Board of Trustees of HighMark
Funds unanimously approved a Plan of Reorganization providing for the transfer
of all of the assets of the Intermediate-Term Bond Fund to the Bond Fund in
exchange for Shares of the Bond Fund and the assumption by the Bond Fund of all
of the liabilities of the Intermediate-Term Bond Fund.
Following the transfer, the Intermediate-Term Bond Fund will be
dissolved and the Shares received by the Intermediate-Term Bond Fund will be
distributed to the shareholders of the Intermediate-Term Bond Fund in
liquidation of the Intermediate-Term Bond Fund. As a result of the proposed
Transaction, shareholders of the Intermediate-Term Bond Fund will receive, on a
tax-free basis, a number of full and fractional Shares equal in value at the
date of the exchange to the value of the net assets of the Intermediate-Term
Bond Fund transferred to the Bond Fund attributable to the shareholder (based on
the proportion of the outstanding shares of the Intermediate-Term Bond Fund
owned at the time by the shareholder).
For the reasons set forth below under "Background and Reasons for the
Proposed Reorganization," the Board of Trustees of HighMark Funds, including the
Trustees who are not "interested persons" of HighMark Funds as defined in the
Investment Company Act of 1940 (the "1940 Act") (the "Independent Trustees"),
unanimously concluded that participation in the proposed Transaction is in the
best interests of HighMark Funds and their respective existing shareholders and
that the economic interests of their respective existing shareholders will not
be diluted as a result of effecting the proposed Transaction.
In reaching this conclusion, the Board of Trustees of HighMark Funds
considered, among other things, the qualifications and experience of HighMark
Capital Management, Inc. (the "Adviser"); the potential economies of scale which
could be realized over time by former Intermediate-Term Bond Fund shareholders
as the Bond Fund increases in size; the recommendation of the Adviser in favor
of the Transaction; the fact that the Transaction will be free from Federal
income taxes to HighMark Funds and their shareholders; and the assumption of the
cost of the Transaction by the Adviser and/or its affiliates.
FEE TABLES
The following tables show the current fees for the Intermediate-Term
Bond Fund followed by those currently charged by the Bond Fund. If the
reorganization is approved, you would pay the fees shown for the Bond Fund.
Because the fees for the Bond Fund following the Transaction will be identical
to the current fees for the Bond Fund as set forth in the following fee tables,
no pro forma fee tables are provided.
-10-
<PAGE>
FEE TABLES
<TABLE>
<CAPTION>
Intermediate-Term Combined Fund
Bond Fund Bond Fund Pro Forma
Class A Shares Class A Shares Class A Shares
-------------- -------------- --------------
<S> <C> <C> <C>
SHAREHOLDER FEES
Maximum Sales Charge (Load) Imposed
on Purchase (as a percentage
of offering price)* 4.25% 4.25% 4.25%
Maximum Deferred Sales Charge (Load)
(as a percentage of
net asset value)** 0% 0% 0%
Redemption Fee (as a percentage
of amount redeemed, if applicable)*** 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Investment Advisory Fees 0.50% 0.50% 0.50%
Distribution and/or Services (12b-1) Fees 0.25% 0.25% 0.25%
Other Expenses 0.49% 0.51% 0.51%
----- ----- -----
TOTAL ANNUAL FUND OPERATING EXPENSES 1.24% 1.26% 1.26%
Fee Waivers 0.47% 0.49% 0.49%
TOTAL ANNUAL FUND OPERATING EXPENSES+ 0.77% 0.77% 0.77%
</TABLE>
- ---------------------
*This sales charge varies depending upon how much you invest. See "How Sales
Charges Are Calculated" in the HighMark Funds Retail Prospectus.
**If you sell Class A Shares within one year of buying them and you purchased
those Shares without a sales charge because your initial investment was $1
million or greater, you must pay a Contingent Deferred Sales Charge of 1.00%.
See "How Sales Charges are Calculated" in the HighMark Funds Retail Prospectus.
***Does not include any wire transfer fees, if applicable.
+The Adviser for the Intermediate-Term Bond Fund and the Bond Fund has agreed to
contractually waive fees in order to keep total operating expenses for Class A
Shares of each Fund from exceeding 0.77% for the period beginning November 30,
1999 and ending on November 29, 2000. The total actual operating expenses for
each of the Funds for the most recent fiscal year were less than the amount
shown above because additional fees were waived or reimbursed in order to keep
total operating expenses at a specified level. These voluntary waivers or
reimbursements may be discontinued at any time. With these fee waivers, the
actual operating expenses for each of the Funds are expected to be as follows:
<TABLE>
<S> <C>
Intermediate-Term Bond Fund - Class A Shares: 0.75%
Bond Fund- Class A Shares: 0.75%
Combined Fund Pro Forma - Class A Shares: 0.75%
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Intermediate-Term Combined Fund
Bond Fund Bond Fund Pro Forma
Fiduciary Shares Fiduciary Shares Fiduciary Shares
----------------- ---------------- ----------------
<S> <C> <C> <C>
SHAREHOLDER FEES
Maximum Sales Charge (Load) Imposed
on Purchase (as a percentage
of offering price) 0% 0% 0%
Deferred Sales Charge (Load)
(as a percentage of
net asset value) 0% 0% 0%
Redemption Fees (as a percentage
of amount redeemed, if applicable) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Investment Advisory Fees 0.50% 0.50% 0.50%
Distribution and/or Service (12b-1) Fees 0.00% 0.00% 0.00%
Other Expenses 0.49% 0.51% 0.51%
----- ----- -----
TOTAL ANNUAL FUND OPERATING EXPENSES 0.99% 1.01% 1.01%
Fee Waivers 0.22% 0.24% 0.24%
TOTAL ANNUAL FUND OPERATING EXPENSES+ 0.77% 0.77% 0.77%
- ---------------------
</TABLE>
*Does not include any wire transfer fees, if applicable.
+The Adviser for the Intermediate-Term Bond Fund and the Bond Fund has agreed to
contractually waive fees in order to keep total operating expenses for Fiduciary
Shares of each Fund from exceeding 0.77% for the period beginning November 30,
1999 and ending on November 29, 2000. The total actual operating expenses for
each of the Funds for the most recent fiscal year were less than the amount
shown above because additional fees were waived or reimbursed in order to keep
total operating expenses at a specified level. These voluntary waivers or
reimbursements may be discontinued at any time. With these fee waivers, the
actual operating expenses for the Intermediate-Term Bond Fund and the Bond Fund
are expected to be as follows:
<TABLE>
<S> <C>
Intermediate-Term Bond Fund - Fiduciary Shares: 0.75%
Bond Fund - Fiduciary Shares: 0.75%
Combined Fund Pro Forma - Fiduciary Shares: 0.75%
</TABLE>
-12-
<PAGE>
EXAMPLE: You would pay the following expenses on a $10,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
CLASS A SHARES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Intermediate-Term Bond Fund $500 $757 $1,034 $1,822
Bond Fund $500 $761 $1,042 $1,842
Combined Fund Pro Forma $500 $761 $1,042 $1,842
</TABLE>
FIDUCIARY SHARES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Intermediate-Term Bond Fund $79 $293 $526 $1,193
Bond Fund $79 $298 $535 $1,214
Combined Fund Pro Forma $79 $298 $535 $1,214
</TABLE>
The purpose of the tables above is to assist an investor in the Funds
in understanding the various costs and expenses that a Shareholder will bear
directly or indirectly. For a more complete discussion of each Fund's annual
operating expenses, see SERVICE ARRANGEMENTS. THE FOREGOING EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.
-13-
<PAGE>
SYNOPSIS OF PROSPECTUS
INVESTMENT OBJECTIVES AND POLICIES. Below is a brief comparison of the
investment objectives and policies of the Intermediate-Term Bond Fund and the
Bond Fund. The following discussion is qualified in its entirety by the
disclosure on such subjects contained in the HighMark Funds Prospectuses
accompanying this Combined Prospectus/Proxy Statement. For a full and detailed
description of permitted investments, see the HighMark Funds Prospectuses.
The securities currently held by the Intermediate-Term Bond Fund are
substantially similar to those securities which the Bond Fund may hold.
Consequently, the proposed reorganization of the Intermediate-Term Bond Fund
should not result in higher than normal portfolio turnover due to the Bond
Fund's disposal of investment securities.
The Intermediate-Term Bond Fund and Bond Fund each have identical
investment objectives. The Intermediate-Term Bond Fund seeks total return
through investments in fixed-income securities. The Bond Fund also seeks total
return through investments in fixed-income securities.
The Intermediate-Term Bond Fund and Bond Fund each have, with one
exception discussed below, identical investment strategies. Each Fund pursues
its investment goal by investing at least 65% of its assets in bonds which
include:
- - Debt obligations issued or guaranteed by the U.S. government or its
agencies.
- - Corporate debt securities issued by U.S. or foreign companies that
nationally recognized rating agencies such as Moody's or Standard & Poor's
recognize as investment-grade.
- - Investment-grade bonds backed by the interest and principal payments of
various types of mortgages, known as mortgage-backed securities.
- - Investment-grade bonds backed by the interest and principal payments on
loans for other types of assets, such as automobiles, houses, or credit
cards, known as asset-backed securities.
Each Fund may also invest up to 10% of its assets in issues which are
rated below BBB but have a minimum rating of B by Moody's and/or S&P at the time
of investment.
In addition to the securities discussed above, each Fund may invest in
other types of debt securities and may, under adverse market conditions, invest
more than 35% of its assets in very short-term investments called money market
securities.
The Intermediate-Term Bond Fund tries to maintain an average duration
of between 2 and 5 years, which the managers expect to be within one year of the
duration of the Lehman Brothers Intermediate Government/Corporate Bond Index.
The Bond Fund, on the other hand, tries to maintain an average duration of
between 3 and 6 years, which the managers expect to be within one year of the
duration of the Lehman Brothers Aggregate Bond Index.
The portfolio managers of both the Intermediate-Term Bond Fund and Bond
Fund consider the same factors when selecting securities for a Fund's portfolio,
including:
- - An assessment of the future level of interest rates and inflation
- - Expectations for U.S. and global economic growth
-14-
<PAGE>
- - Relative yields among securities in various market sectors
- - The yield to maturity, quality, liquidity and capital appreciation
potential of individual securities
OTHER INVESTMENTS. Each HighMark Fund limits investments in illiquid
securities to 15% or less of its net assets, and may additionally 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 of HighMark Funds.
Each HighMark Fund may lend portfolio securities in an amount
representing up to 33 1/3% of the value of its total assets.
Each HighMark Fund may enter into repurchase agreements and reverse
repurchase agreements.
Each HighMark Fund may enter into forward commitments or purchase
securities on a "when-issued" basis. Each HighMark Fund expects that commitments
by it to enter into forward commitments or purchase when-issued securities will
not exceed 25% of the value of its total assets under normal market conditions.
Each HighMark Fund may purchase securities of money market funds of
other investment companies and may purchase securities of variable funds of
other investment companies, subject to the terms of the 1940 Act and HighMark
Funds' exemptive order.
INVESTMENT RESTRICTIONS. The following discussion is qualified by the
disclosure regarding investment restrictions contained in the Statement of
Additional Information of HighMark Funds which is incorporated by reference into
this Combined Prospectus/Proxy Statement.
HighMark Funds revised and simplified its fundamental investment
restrictions for the Fund, as well as for a number of other HighMark Funds not
involved in the proposed transaction. It is the intent of HighMark Funds to
conform the fundamental investment restrictions of the remaining HighMark Funds,
including the Bond Fund (which commenced operations prior to the adoption of the
new format) to the simplified format used by the Intermediate-Term Bond Fund by
means of a proxy vote within the next two years. The fundamental investment
restrictions for the Intermediate-Term Bond Fund provides that the Fund:
1. May purchase securities of any issuer only when consistent
with the maintenance of its status as a diversified company
under the 1940 Act, 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 1940 Act, 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
1940 Act, 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 1940
Act, 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 1940 Act, or the rules or regulations thereunder, as such
statute, rules or regulations may be amended from time to
time.
-15-
<PAGE>
6. May underwrite securities to the extent permitted by the 1940
Act, 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 1940 Act, or the rules or regulations
thereunder, as such statute, rules or regulations may be
amended from time to time.
The fundamental limitations of the Intermediate-Term Bond Fund have
been adopted to avoid wherever possible the necessity of shareholder meetings
otherwise required by the 1940 Act. However, the Intermediate-Term Bond Fund
also has adopted nonfundamental limitations as set forth below, which in some
instances may be more restrictive than its fundamental limitations. Any changes
in a HighMark Fund's nonfundamental limitations are communicated to HighMark
Fund's shareholders prior to effectiveness.
Under the 1940 Act, and the rules, regulations and interpretations
thereunder, a "diversified company," as to 75% of its total 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 Intermediate-Term Bond 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 a Fund may borrow from banks or enter into reverse repurchase
agreements for temporary emergency purposes in amounts up to 10% of the value of
its total assets at the time of such borrowing. To the extent that such
borrowing exceeds 5% of the value of the Fund's assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Fund shall, within three days thereafter or such longer
period as the Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowing shall be at least 300%. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate heavy redemption requests if they should occur and is
not for investment purposes. All borrowings will be repaid before making
additional investments and any interest paid on such borrowings will reduce
income.
4. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10% of
total assets taken at current value at the time of the incurrence of such loan,
except as permitted with respect to securities lending.
5. Purchase or sell real estate, real estate limited partnership
interest, commodities or commodities contracts (except that the Funds 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, any Fund may
invest in companies which invest in real estate, commodities or commodities
contracts.
-16-
<PAGE>
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 a Fund security.
8. Issue senior securities (as defined in the Investment Company Act of
1940) except in connection with permitted borrowings as described above or as
permitted by rule, regulation or order of the Securities and Exchange
Commission.
9. Purchase or retain securities of an issuer if, to the knowledge of
HighMark Funds, an officer, trustee, partner or director of HighMark Funds or
the Adviser or sub-advisers of HighMark Funds owns beneficially more than 1/2 of
1% of the shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 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.
The fundamental investment restrictions for the Bond Fund provide that
the 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 a 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 a Fund's total assets
may be invested without regard to these limitations);
2. Purchase any securities that would cause more than 25% of a Fund's
total assets at the time of purchase to be invested in securities of one or more
issuers conducting their principal business activities in the same industry,
provided that (a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. or foreign governments or their agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services (for example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry);
3. Make loans, except that a Fund may purchase or hold debt
instruments, lend portfolio securities, and enter into repurchase agreements in
accordance with its investment objective and policies;
4. Purchase securities on margin (except that the Fund may make margin
payments in connection with transactions in options and financial and currency
futures contracts), sell securities short, participate on a joint or joint and
several basis in any securities trading account, or underwrite the securities of
other issuers, except to the extent that a Fund may be deemed to be an
underwriter under certain securities laws in the disposition of "restricted
securities" acquired in accordance with the investment objectives and policies
of the Fund;
5. Purchase or sell commodities, commodity contracts (excluding options
and financial and currency futures contracts), oil, gas or mineral exploration
leases or development programs, or real estate (although investments by a Fund
in marketable securities of companies engaged in such activities and investments
by a Fund in securities secured by real estate or interests therein, are not
hereby precluded to the extent the investment is appropriate to each Fund's
investment objective and policies);
6. Invest in any issuer for purposes of exercising control or
management;
-17-
<PAGE>
7. Purchase or retain securities of any issuer if the officers or
Trustees of HighMark Funds or the officers or directors of its investment
adviser owning beneficially more than one-half of 1% of the securities of such
issuer together own beneficially more than 5% of such securities;
8. Borrow money or issue senior securities, except that a Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with permissible borrowings and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of a Fund's total
assets at the time of its borrowing. A Fund will not invest in additional
securities until all its borrowings (including reverse repurchase agreements)
have been repaid. For purposes of this restriction, the deposit of securities
and other collateral arrangements with respect to options and financial and
currency futures contracts, and payments of initial and variation margin in
connection therewith, are not considered a pledge of a Fund's assets; and
9. Purchase the securities of other investment companies, except as
permitted by the 1940 Act.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The following information was provided by the Annual Report to
Shareholders of HighMark Funds ("Annual Report") for the period ended July 31,
1999. The Management Discussion found in the Annual Report in its entirety, is
as follows:
HIGHMARK BOND & INTERMEDIATE-TERM BOND FUNDS
PERFORMANCE
For the fiscal year ended July 31, 1999, the HighMark Bond Fund
returned 1.60% (Fiduciary Shares).* In comparison, the Lipper Corporate A-Rated
Debt Funds Average produced a 0.66% return while the unmanaged Lehman Brothers
Aggregate Bond Index reflected a return of 2.48%.
The HighMark Intermediate-Term Bond Fund produced a total return of
2.60% (Fiduciary Shares).** In comparison, the Lipper Intermediate
Investment-Grade Debt Average reflected a 1.43% return, while the unmanaged
Lehman Brothers Intermediate Government/Corporate Bond Index rose 3.72%.
FACTORS AFFECTING PERFORMANCE
The two halves of the fiscal year were a mirror image of each other.
After Russia devalued its currency last August, a worldwide credit crunch ensued
and there was a flight to quality. U.S. Treasury bonds soared and yields fell as
low as 4.7%, while corporate bonds and mortgages performed poorly.
- ---------------------
* The HighMark Bond Fund (Retail Class A Shares) produced a total return of
1.52% for the period. Including the maximum sales charge of 3.00%, the
total return for the Fund's Retail Class A Shares was -1.51%.
** The HighMark Intermediate-Term Bond Fund (Retail Class A Shares)
produced a total return of 2.60% for the period. Including the maximum
sales charge of 3.00%, the total return for the Fund's Retail Class A
Shares was -0.49%.
-18-
<PAGE>
After the Federal Reserve Board lowered short-term interest rates last
fall, central banks around the world followed suit, and the global economic
crisis faded. In early 1999, investors aggressively sold U.S. Treasury bonds and
bonds yields climbed above 6%. Both Funds reduced their allocation to Treasury
securities while adding corporate exposure. Corporate bonds, particularly
lower-rated bonds, performed well until May, when a flood of supply depressed
prices. As interest rates steadily rose, mortgages performed very well in 1999.
CURRENT STRATEGY & OUTLOOK
Both Funds continue to emphasize high-quality corporate bonds, a
strategy that works particularly well when the economy is slowing. With recent
inflation data showing some upward movement in labor costs, the Federal Reserve
Board raised short-term interest rates on June 30 and August 24 to slow the
economy. As a result, recent additions to the Funds have not included cyclical
companies. Instead, bonds issued by AT&T, Disney, MCI Worldcom, Nevada Power,
Safeway, Staples and Time Warner were added. Rather than make a prediction on
the direction of interest rates, the Funds' duration strategy is neutral to the
market.
OPERATING PROCEDURES.
PURCHASE PROCEDURES. Purchases and redemptions of Shares of HighMark
Funds may be made on days on which The New York Stock Exchange is open for
business ("Business Days"). Shares are sold on a continuous basis by the
Distributor, either by mail or by wire. The minimum investment requirement is
generally $1,000 and the subsequent minimum investment requirement is generally
$100.
Purchase orders for Shares of HighMark Funds are executed at a per
Share price equal to the asset value next determined after the purchase order is
effective, plus any applicable sales charges. No sales charges will be imposed
on the Class A Shares and Fiduciary Shares of the Bond Fund distributed by
HighMark Funds in the Transaction.
EXCHANGE PRIVILEGES. Shareholders in the Intermediate-Term Bond Fund
and the Bond Fund enjoy identical exchange privileges. Each HighMark 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. HighMark
Funds' shareholders may exchange Class A Shares of one HighMark Fund for Class A
Shares of another Fund on the basis of relative net asset value of the Class A
Shares exchanged. If the Fund being exchanged into has a higher sales charge
then what you paid originally, you must pay the difference. HighMark Funds'
shareholders may exchange their Fiduciary Shares for Fiduciary Shares of another
Fund on the basis of the relative net asset value of the Fiduciary Shares
exchanged. HighMark Funds' shareholders may also exchange Fiduciary Shares of a
Fund for Class A, Class B or Class C Shares ("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 charge.
Exchanges are made on the basis of the relative net asset values of the
shares exchanged plus any applicable sales charge. HighMark Funds does not
impose a charge for processing exchanges of shares.
REDEMPTION PROCEDURES. Redemption procedures are identical for each
HighMark Fund. HighMark Funds redeems shares at their net asset value next
determined after receipt by the Distributor of the redemption request.
Redemptions will be made on any Business Day without charge although there is
presently a $15 charge for wiring redemption proceeds to a shareholder's
designated account. Shares may be redeemed by mail or by telephone. HighMark
Funds reserves the right to make payment on redemptions in securities rather
than cash.
-19-
<PAGE>
DISTRIBUTIONS. The net investment income for HighMark Funds is declared
and paid monthly to all shareholders of record at the close of business on the
day of declaration. Net realized capital gains, if any, are distributed at least
annually to shareholders of record. A shareholder 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
unless the shareholder elects to receive such dividends or distributions in
cash. Dividends paid in additional shares receive the same tax treatment as
dividends paid in cash.
The amount of dividends payable on Fiduciary Shares of HighMark Funds
generally will be more than dividends payable on Retail Shares of HighMark Funds
because of the distribution expenses charged to Retail Shares, but not charged
to Fiduciary Shares.
NET ASSET VALUE. The net asset value of shares of HighMark Funds is
determined daily as of 1:00 p.m., Pacific time (4:00 p.m., Eastern time) on any
Business Day.
Investments by HighMark Funds in securities traded on a national
exchange (or exchanges) are valued based upon their last sale price on the
principal exchange on which such securities are traded. Investments by HighMark
Funds in securities for which the principal market 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 the Board
of Trustees of HighMark Funds. With the exception of short-term securities, 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.
FEDERAL TAX CONSIDERATIONS. Consummation of the Transaction is subject
to the condition that HighMark Funds receives an opinion of Ropes & Gray to the
effect that, based upon certain representations and assumptions and subject to
certain qualifications, the Transaction will not result in the recognition of
gain or loss for Federal income tax purposes for the Intermediate-Term Bond
Fund, their shareholders or the Bond Fund.
INVESTMENT ADVISER
HighMark Capital Management, Inc., a subsidiary of UnionBanCal
Corporation, serves as the investment advisor to HighMark Funds. Subject to the
general supervision of the Board of Trustees of HighMark Funds, the Adviser
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
the Fund's investment securities, and maintains the Fund's records relating to
such purchases and sales.
For the expenses assumed and services provided by the Adviser as each
Fund's investment advisor, the Adviser receives an identical fee from the
Intermediate-Term Bond Fund and the Bond Fund, computed daily and paid monthly,
at the annual rate of fifty one-hundredths of one percent (0.50%) of the Fund's
average daily net assets. Following the reorganization, the advisory fees will
remain the same.
All investment decisions for the Bond Fund are made by a team of
investment professionals, all of whom take an active part in the decision making
process. The Intermediate-Term Bond Fund and Bond Fund have the same team
leader. The team leader is as follows:
E. Jack Montgomery, Vice President of the Adviser, has served as team
leader for the Bond Fund since 1994 and of the Intermediate-Term Bond
Fund since 1995. He has been with the Adviser and its predecessors,
Union Bank of California, N.A. and The Bank of California, N.A., since
1994. From 1990 to 1994, Mr. Montgomery was employed by the San
Francisco Employees' Retirement System.
-20-
<PAGE>
Mr. Montgomery has an M.B.A. from the University of Oregon and a B.A.
from the University of Oklahoma.
RISK FACTORS
This discussion is qualified in its entirety by the disclosure set
forth in the HighMark Funds Prospectuses accompanying this Combined
Prospectus/Proxy Statement and the HighMark Funds Statement of Additional
Information. Because each Fund's investment objectives and policies are
virtually identical with the exception of the average duration of each Fund's
portfolio, the Intermediate-Term Bond Fund and Bond Fund are subject to
substantially similar investment risks.
The Intermediate-Term Bond Fund and Bond Fund are each subject to
interest rate or market risk, which relates to changes in a security's value as
a result of interest rate changes generally. An increase in interest rates will
generally reduce the value of the fixed income investments and a decline in
interest rates will generally increase the value of those investments.
Accordingly, the net asset value of each of the Intermediate-Term Bond and Bond
Funds' shares will vary as a result of changes in the value of the securities in
the Funds' portfolios. Therefore, an investment in the Funds may decline in
value, resulting in a loss of principal. Because interest rates vary, it is
impossible to predict the income or yield of the Funds for any particular
period. Interest rate risk should be modest for shorter-term securities,
moderate for intermediate-term securities, and high for longer-term securities.
Generally, an increase in the average maturity of a Fund will make it more
sensitive to interest rate risk.
Both Funds are also subject to credit risk which is the possibility
that a bond issuer cannot make timely interest and principal payments on its
bonds. Generally speaking, the lower a security's credit rating, the higher its
credit risk. If a security's credit rating is downgraded, its price tends to
decline sharply, especially as it becomes more probable that the issuer will
default.
Each Fund is also subject to prepayment and call risk. While debt
securities normally fluctuate less in price than equity securities, there have
been extended periods of cyclical increases in interest rates that have caused
significant declines in debt securities prices. Certain fixed-income securities,
such as zero-coupon obligations, mortgage-backed and asset-backed securities and
collateralized mortgage obligations ("CMOs") will have greater price volatility
then other fixed-income obligations. Because declining interest rates may lead
to prepayment of underlying mortgages, automobile sales contracts or credit card
receivables, the prices of mortgage-related and asset-backed securities may not
rise with a decline in interest rates. Mortgage-backed and asset-backed
securities and CMOs are extremely sensitive to the rate of principal prepayment.
Changes by recognized rating agencies in the rating of any fixed income security
and in the ability of an issuer to make payments of interest and principal also
affect the value of these investments. Changes in the value of Fund securities
will not affect cash income derived from these securities, but will affect the
Fund's net asset value. Similarly, callable corporate bonds also present risk of
prepayment. During periods of falling interest rates, securities that can be
called or prepaid may decline in value relative to similar securities that are
not subject to call or prepayment.
Both the Intermediate-Term Bond Fund and the Bond Fund may invest in
securities rated BBB by S&P or Baa by Moody's, which are considered investment
grade, but are deemed by these rating services to have some speculative
characteristics. Both Funds may also invest in bonds rated below investment
grade by the primary rating agencies (e.g., BB or lower by Standard & Poor's and
Ba or lower by Moody's). These securities, commonly called "lower rated bonds,"
"noninvestment grade bonds" or "junk bonds," are also considered speculative and
involve greater risk of loss than investment grade bonds. Adverse economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher-grade
bonds.
-21-
<PAGE>
Each of the Funds may invest in foreign securities. There may be
certain risks connected with investing in foreign securities, including risks of
adverse political and economic developments (including possible governmental
seizure or nationalization of assets), the possible imposition of exchange
controls or other governmental restrictions, including less uniformity in
accounting and reporting requirements, the possibility that there will be less
information on such securities and their issuers available to the public, the
difficulty of obtaining or enforcing court judgments abroad, restrictions on
foreign investments in other jurisdictions, difficulties in effecting
repatriation of capital invested abroad, and difficulties in transaction
settlements and the effect of delay on shareholder equity. Foreign securities
may be subject to foreign taxes, which reduce yield, and may be less marketable
than comparable U.S. securities. The value of a Fund's investments denominated
in foreign currencies will depend on the relative strengths of those currencies
and the U.S. dollar, and the Fund may be affected favorably or unfavorably by
changes in the exchange rates or exchange control regulations between foreign
currencies and the U.S. dollar. Changes in foreign currency exchange rates may
also affect the value of dividends and interest earned, gains and losses
realized on the sale of securities, and net investment income and gains, if any,
to be distributed to shareholders by the Fund.
SPECIAL MEETING OF SHAREHOLDERS
Proxies will be solicited by and on behalf of the Board of Trustees of
HighMark Funds for use at a Special Meeting of Shareholders of the
Intermediate-Term Bond Fund (the "Meeting"). The Meeting is to be held on May
26, 2000 at 10:00 a.m., Eastern time, at SEI Investments Mutual Funds Services,
1 Freedom Valley Drive, Oaks, PA 19456. This Combined Prospectus/Proxy Statement
and the enclosed form of proxy are being mailed to shareholders on or about
April 22, 2000.
Any shareholder giving a proxy has the power to revoke it. The
shareholder revoking such proxy must either submit to HighMark Funds a
subsequently dated proxy, deliver to HighMark Funds a written notice of
revocation, or otherwise give notice of revocation in open meeting. All properly
executed proxies received in time for the meeting will be voted as specified in
the proxy, or, if no specification is made, FOR the proposal (set forth in item
(1) of the Notice of Special Meeting) to implement the reorganization of the
Intermediate-Term Bond Fund by the transfer of all of their assets to the Bond
Fund, in exchange for Class A and Fiduciary Shares of the Bond Fund
(collectively, "Shares") and the assumption by the Bond Fund of all of the
liabilities of the Intermediate-Term Bond Fund followed by the dissolution and
liquidation of the Intermediate-Term Bond Fund and the distribution of Shares to
the shareholders of the Intermediate-Term Bond Fund.
Only shareholders of record on March 16, 2000 will be entitled to
notice of and to vote at the meeting. Each share is entitled to one vote as of
the close of business on March 16, 2000.
The Board of Trustees of HighMark Funds knows of no matters other than
those set forth herein to be brought before the meeting. If, however, any other
matters properly come before the meeting, it is the Trustees' intention that
proxies will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF PLAN OF REORGANIZATION
The shareholders of the Intermediate-Term Bond Fund are being asked to
approve or disapprove the Plan of Reorganization adopted by HighMark dated as of
_____________, 2000 (the "Plan"), a copy of which is attached to this Combined
Prospectus/Proxy Statement as Appendix A. The Plan provides, among other things,
for the transfer of all of the assets of the Intermediate-Term Bond Fund to the
Bond Fund in exchange for the assumption by the Bond Fund of all of the
liabilities of the Intermediate-Term Bond Fund and for a number of Shares
calculated based on the value of the net assets of the Intermediate-Term Bond
Fund acquired by the Bond
-22-
<PAGE>
Fund and the net asset value per share of the Bond Fund, all as more fully
described below under "Information about the Reorganization." After receipt of
Shares the Intermediate-Term Bond Fund will dissolve, distributing the Shares to
its shareholders in complete liquidation, and the Intermediate-Term Bond Fund
will be terminated. Prior to the date of such transfer (the "Exchange Date"),
the Intermediate-Term Bond Fund will declare a distribution to its shareholders
which, together with all previous distributions, will have the effect of
distributing to its respective shareholders all of their investment company
taxable income (computed without regard to the deduction for dividends paid) and
net realized capital gains, if any, through the Exchange Date.
At a meeting held on March 22, 2000, the Trustees of HighMark Funds in
attendance voted unanimously to approve the Transaction and to recommend that
shareholders of the Intermediate-Term Bond Fund also approve the Transaction.
Approval of the reorganization of the Intermediate-Term Bond Fund requires the
affirmative vote of a majority of all votes attributable to the voting
securities of the Intermediate-Term Bond Fund voting separately as a fund,
defined as the lesser of (a) sixty seven percent (67%) or more of the votes
attributable to all voting securities of the Intermediate-Term Bond Fund present
at such meeting, if holders of more than 50% of the votes attributable to the
outstanding voting securities are present or represented by proxy, or (b) more
than 50% of the votes attributable to the outstanding voting securities of the
Intermediate-Term Bond Fund.
A shareholder of the Intermediate-Term Bond Fund objecting to the
proposed Transaction is not entitled under either Massachusetts law or HighMark
Funds' Declaration of Trust to demand payment for and an appraisal of his or her
particular HighMark Fund shares if the Transaction is consummated over his or
her objection. However, shares of HighMark Funds are redeemable for cash at
their net asset value on any Business Day.
In the event that this proposal is not approved by the shareholders of
the Intermediate-Term Bond Fund, the Intermediate-Term Bond Fund will continue
to be managed as a separate fund in accordance with its current investment
objectives and policies, and the Trustees of HighMark Funds may consider
alternatives in the best interests of the shareholders. However, the
reorganization of the Intermediate-Term Bond Fund for which approval of the Plan
is obtained will be consummated.
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
A meeting was held on March 22, 2000 for the Board of Trustees of
HighMark Funds, at which meeting all of the Trustees of HighMark Funds,
including the Independent Trustees, unanimously determined that the
reorganization would be in the best interests of HighMark Funds and existing
shareholders and that the economic interests of the existing shareholders would
not be diluted as a result of effecting the reorganization. The Trustees of
HighMark Funds, including the Independent Trustees, unanimously approved the
proposed reorganization and have unanimously recommended its approval by the
Intermediate-Term Bond Fund's shareholders.
In electing to approve the Plan and recommend it to shareholders of
the Intermediate-Term Bond Fund, the Board of Trustees of HighMark Funds acted
upon information provided to them, indicating that the proposed Transaction
would operate in the best interests of HighMark Funds' shareholders. In
particular, the Trustees determined that the proposed transaction offered the
following benefits:
- BETTER LONG-TERM INVESTMENT PERFORMANCE: The Trustees
considered favorably that the long-term performance of the
Bond Fund was better than that of the Intermediate-Term Bond
Fund. For the fiscal year ended July 31, 1999, the Bond Fund
had an annualized 5 year total return of 6.72% for Fiduciary
Shares and 6.73% for Class A Shares (without sales load). For
the same period, the Intermediate-Term Bond Fund had an
annualized 5 year total return of 6.16% for Fiduciary Shares
and 6.16% for Class A Shares (without sales load).
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<PAGE>
- OPPORTUNITIES FOR ECONOMIES OF SCALE: The Trustees considered
favorably the potential the consolidation held for increased
economies of scale for the Bond Fund that could result in
reduced expenses, and consequent increased performance. The
Trustees concluded that this could allow shareholders of the
Intermediate-Term Bond Fund to pursue similar investment
objectives more effectively through ownership of shares of the
Bond Fund.
- TAX-FREE NATURE OF TRANSACTION: The Trustees of HighMark Funds
were informed that the proposed Transaction would be
accomplished without the imposition of federal income taxes on
the Intermediate-Term Bond Fund or its shareholders.
- NO DILUTION OF SHAREHOLDER INTERESTS: The Trustees of HighMark
Funds were informed that the interests of the shareholders of
HighMark Funds would not be materially diluted as a result of
the proposed Transaction, and that the shareholders of the
Intermediate-Term Bond Fund in the aggregate would receive
shares of the Bond Fund equal in value to the market value of
the assets of the Intermediate-Term Bond Fund.
The total operating expenses of the Class A Shares and the Fiduciary
Shares of the Intermediate-Term Bond Fund and the Bond Fund are identical.
Absent fee waivers, the total expenses of the Intermediate-Term Bond Fund would
be 1.24% for Class A Shares and 0.99% for Fiduciary Shares, while those of the
Bond Fund would be 1.26% for Class A Shares and 1.01% for Fiduciary Shares.
Taking into consideration both contractual and voluntary fee waivers, the total
operating expenses of the Funds are compared below.
<TABLE>
<CAPTION>
CLASS A SHARES FIDUCIARY SHARES
-------------- ----------------
<S> <C> <C>
Intermediate-Term Bond Fund: 0.75% 0.75%
Bond Fund: 0.75% 0.75%
</TABLE>
INFORMATION ABOUT THE REORGANIZATION
PLAN OF REORGANIZATION. The proposed Plan provides that the Bond Fund
will acquire all of the assets of the Intermediate-Term Bond Fund in exchange
for the assumption by the Bond Fund of all of the liabilities of the
Intermediate-Term Bond Fund and for Shares all as of the Exchange Date (defined
in the Plan to be June 5, 2000, or such other dates as may be decided by
HighMark Funds). The following discussion of the Plan is qualified in its
entirety by the full text of the Plan, which is attached as Appendix A to this
Combined Prospectus/Proxy Statement.
As a result of the Transaction, each shareholder of the
Intermediate-Term Bond Fund will receive that number of full and fractional
Shares equal in value at the Exchange Date to the value of the portion of the
net assets of the Intermediate-Term Bond Fund transferred to the Bond Fund
attributable to the shareholder (based on the proportion of the outstanding
shares of the Intermediate-Term Bond Fund owned by the shareholder as of the
Valuation Time). The portfolio securities of the Intermediate-Term Bond Fund
will be valued in accordance with the generally employed valuation procedures of
HighMark Funds. Each reorganization is being accounted for as a tax-free
business combination.
Immediately following the Exchange Date, the Intermediate-Term Bond
Fund will distribute pro rata to its respective shareholders of record as of the
close of business on the Exchange Date the full and fractional Shares received
by it and the Intermediate-Term Bond Fund will be liquidated and dissolved. Such
liquidation and distribution will be accomplished by the establishment of
accounts on the share records of the Bond Fund in
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<PAGE>
the name of the Intermediate-Term Bond Fund's shareholders, each account
representing the respective number of full and fractional Shares due such
shareholder. All shareholders of the Intermediate-Term Bond Fund will receive
the class of shares (Class A or Fiduciary) of the Bond Fund that corresponds to
the class of shares of the Intermediate-Term Bond Fund that they hold.
Each Share will be fully paid and nonassessable when issued, will be
transferable without restriction, and will have no preemptive or conversion
rights. HighMark Funds' Declaration of Trust permits HighMark Funds to divide
its shares of any series, without shareholder approval, into one or more classes
of shares having such preferences and special or relative rights and privileges
as the Trustees of HighMark Funds may determine.
The consummation of the reorganization is subject to the conditions set
forth in the Plan. The Plan may be terminated and the reorganization abandoned
by HighMark Funds at any time, before or after approval by the shareholders,
prior to the Exchange Date by HighMark Funds.
Under Massachusetts law, HighMark Funds' shareholders, could, under
certain circumstances, be held personally liable for the obligations of HighMark
Funds. However, the Declaration of Trust disclaims shareholder liability for
acts or obligations of HighMark Funds. The Declaration of Trust provides for
indemnification out of HighMark Funds' property for all loss and expense of any
shareholder held personally liable for the obligations of HighMark Funds. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which HighMark Funds would be unable to
meet its obligations. The likelihood of such circumstances is remote.
FEES AND EXPENSES REORGANIZATION. All fees and expenses, including
accounting expenses, portfolio transfer taxes (if any) or other similar expenses
incurred directly in connection with the consummation of the Transaction
contemplated by the Agreement will be borne by the Adviser and/or its affiliates
including the costs of proxy materials, proxy solicitation, and legal expenses.
Fees and expenses not incurred directly in connection with the consummation of
the Transaction will be borne by the party incurring such fees and expenses.
FEDERAL INCOME TAX CONSEQUENCES. The federal income tax consequences of
the Transaction should be as follows: (i) under Section 361 of the Code, no gain
or loss will be recognized by the Intermediate-Term Bond Fund upon the transfer
of its assets to the Bond Fund in exchange for the Bond Fund's Shares and the
assumption by the Bond Fund of the liabilities of the Intermediate-Term Bond
Fund, or upon the distribution of the Bond Fund Shares by the Intermediate-Term
Bond Fund to its shareholders in liquidation; (ii) under Section 354 of the
Code, no gain or loss will be recognized by the Intermediate-Term Bond Fund
shareholders upon the exchange of their shares of the Intermediate-Term Bond
Fund for the Shares; (iii) under Section 358 of the Code, the aggregate basis of
Shares an Intermediate-Term Bond Fund shareholder receives in connection with
the reorganization will be the same as the aggregate basis of his or her
Intermediate-Term Bond Fund shares exchanged therefor; (iv) under Section
1223(1) of the Code, an Intermediate-Term Bond Fund's shareholder's holding
period for his or her Shares will be determined by including the period for
which he or she held the Intermediate-Term Bond Fund shares exchanged therefor
provided that he or she held the Intermediate-Term Bond Fund shares as capital
assets; (v) under Section 1032 of the Code, no gain or loss will be recognized
by the Bond Fund upon the receipt of the assets of the Intermediate-Term Bond
Fund in exchange for Shares and the assumption by the Bond Fund of the
liabilities of the Intermediate-Term Bond Fund, (vi) under Section 362 of the
Code, the basis in the hands of the Bond Fund of the assets of the
Intermediate-Term Bond Fund transferred to the Bond Fund in the reorganization
will be the same as the basis of such assets in the hands of the
Intermediate-Term Bond Fund immediately prior to the transfer; and (vii) under
Section 1223(2) of the Code, the holding period of the assets of the
Intermediate-Term Bond Fund in the hands of the Bond Fund will include the
periods during which such assets were held by the Intermediate-Term Bond Fund.
As a condition to HighMark Funds' obligation to consummate the reorganization,
HighMark Funds will receive an opinion from Ropes & Gray, counsel to HighMark
Funds, to the effect that, on the basis of the existing provisions of the Code,
current administrative rules, court decisions, and based upon certain
representations and assumptions and subject to
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certain qualifications, for federal income tax purposes the above stated tax
consequences will be applicable to the Transaction.
VOTING RIGHTS. Each shareholder of a HighMark Fund is entitled to one
vote per share and a proportionate fractional vote for any fractional share. The
former shareholders of the Intermediate-Term Bond Fund, as holders of Class A or
Fiduciary Shares of the Bond Fund, will vote separately as a fund or a class on
matters relating solely to that fund or class. On all other matters, they will
vote in the aggregate with shareholders of all of HighMark Funds. When the
former shareholders of the Intermediate-Term Bond Fund vote in the aggregate as
shareholders of the Bond Fund, the voting power they will have will be less than
the voting power they had when the Intermediate-Term Bond Fund voted in the
aggregate. For a more detailed discussion of HighMark Funds' voting procedures,
see the HighMark Funds' Prospectuses "GENERAL INFORMATION -- Miscellaneous."
CAPITALIZATION. The following tables set forth as of July 31, 1999, (i)
the capitalization of the Intermediate-Term Bond Fund, (ii) the capitalization
of the Bond Fund, and (iii) the pro forma capitalization of the
Intermediate-Term Bond Fund as adjusted giving effect to the proposed
acquisition of assets at net asset value:
Capitalization Tables as of 7/31/99
If the Reorganization is consummated, the actual adjustments to the number of
shares outstanding in each respective class of the HighMark Fund may vary from
the numbers above due to changes in the Net Asset Values between July 31, 1999
and the Reorganization date.
HIGHMARK BOND FUND AND HIGHMARK INTERMEDIATE-TERM BOND FUND (UNAUDITED)
<TABLE>
<CAPTION>
HIGHMARK INTERMEDIATE-
HIGHMARK BOND FUND TERM BOND FUND PRO FORMA COMBINED (1), (2)
------------------ ---------------------- ---------------------------
CLASS A FIDUCIARY CLASS A FIDUCIARY CLASS A FIDUCIARY
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS (000'S)............ $2,638 $334,900 $4,591 $257,775 $7,229 $592,675
SHARES (000'S)................ 256 32,225 459 25,783 702 57,029
NET ASSET VALUE PER SHARE..... $10.30 $10.39 $9.99 $10.00 $10.30 $10.39
</TABLE>
(1) The adjusted balances are presented as if the Reorganization were effective
as of July 31, 1999 for information purposes only. The actual Effective Time
of the Reorganization is expected to be June 5, 2000 at which time the
results would be reflective of the actual composition of the shareholders'
equity at that date.
(2) Assumes that the HighMark Intermediate-Term Bond Fund has executed a reverse
stock split on June 2, 2000 immediately preceding the Reorganization, to
allow the Net Asset Values of the HighMark Intermediate-Term Bond Fund Class
A and Fiduciary Shares to match the Net Asset Values of the HighMark Bond
Fund Class A and Fiduciary Shares. Accordingly, this resulted in an
adjustment to the number of shares outstanding in the HighMark
Intermediate-Term Bond Fund of 13 in Class A Shares and 979 in Fiduciary
Shares.
If the Reorganization is consummated, the actual adjustments to the number of
shares outstanding in each respective class of HighMark Fund may vary from the
numbers above due to changes in the Net Asset Values between July 31, 1999 and
the Reorganization date.
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<PAGE>
INTEREST OF CERTAIN PERSONS IN THE TRANSACTION
HighMark Capital Management, Inc. may be deemed to have an interest in
the Plan of Reorganization and the Transaction because it provides investment
advisory services to HighMark Funds pursuant to an advisory agreement. HighMark
Capital Management, Inc. receives compensation from HighMark Funds for services
it provides pursuant to that Agreement. The terms and provisions of these
arrangements are described in the HighMark Funds Prospectuses. Union Bank of
California, N.A. serves as custodian and sub-administrator to HighMark Funds for
which services it receives a fee as described in HighMark Funds Prospectuses.
Union Bank of California, N.A. may also act as a service provider pursuant to
the Shareholder Service Plan adopted by HighMark Funds for which services it
would also receive a fee as described in the HighMark Funds Prospectuses.
FINANCIAL STATEMENTS
The financial statements and financial highlights for HighMark Funds
for the periods indicated therein ended July 31, 1999, July 31, 1998 and July
31, 1997 and July 31, 1996 included in HighMark Funds Prospectuses and related
Statement of Additional Information have been incorporated by reference in this
Combined Prospectus/Proxy Statement in reliance on the report of Deloitte &
Touche LLP, independent auditors, given on the authority of that Firm as experts
in accounting and auditing. The financial highlights for the fiscal periods
ended July 31, 1995 and prior were audited by other auditors whose report, dated
September 22, 1995, expressed an unqualified opinion on those statements. The
financial highlights for the fiscal period ended January 31, 1997 and prior were
audited by other auditors, whose report, dated March 15, 1997, expressed an
unqualified opinion of those statements.
VOTING INFORMATION
Proxies are being solicited from shareholders of Intermediate-Term Bond
Fund by the Board of Trustees of HighMark Funds for the Special Meeting of
Shareholders ("Meeting") to be held on May 26, 2000 at 10:00 a.m., Eastern time,
at SEI Investments Mutual Fund Services, 1 Freedom Valley Drive, Oaks, PA 19456,
or at such later time made necessary by adjournment. A proxy may be revoked at
any time at or before the Meeting by submitting to HighMark Funds a subsequently
dated proxy, delivering a written notice of revocation to HighMark Funds at 1
Freedom Valley Drive, Oaks, PA 19456, or as otherwise described in the
"Introduction" above. Unless revoked, all valid proxies will be voted in
accordance with the instructions thereon or, in the absence of instructions,
will be voted FOR approval of the Plan. The Transaction contemplated by the Plan
will be consummated only if approved by the affirmative vote of a majority of
all votes attributable to the voting securities of the Intermediate-Term Bond
Fund voting separately as a Fund, as described above. In the event the
shareholders do not approve the reorganization, the Trustees of HighMark Funds
will consider possible alternative arrangements in the best interests of the
Fund and its shareholders.
Proxies are being solicited by mail. Shareholders of record of the
Intermediate-Term Bond Fund at the close of business on March 22, 2000, (the
"Record Date"), will be entitled to vote at the Meeting of or any adjournment
thereof. The holders of a majority of votes attributable to the outstanding
voting shares of the Fund represented in person or by proxy at the Meeting will
constitute a quorum for the Fund for the Meeting, and a majority of the shares
of the Intermediate-Term Bond Fund voted on the Transaction is necessary to
approve the Transaction. Shareholders are entitled to one vote per share and a
proportionate fractional vote for any fractional share.
Votes cast by proxy or in person at the meeting will be counted by the
inspector of election appointed by the Intermediate-Term Bond Fund. The
inspector of election will count the total number of votes cast "for" approval
of the proposal for purposes of determining whether sufficient affirmative votes
have been cast. The
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<PAGE>
inspector of election will count shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum; however, the inspector of
election will not count "broker non-votes" (I.E., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or nominee does not
have the discretionary voting power on a particular matter) as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum. For purposes of determining whether an issue has been
approved, abstentions have the effect of a negative vote on the proposal, and
broker non-votes are treated as "against" votes in those instances where
approval of an issue requires a certain percentage of all votes outstanding, but
are given no effect in those instances where approval of an issue requires a
certain percentage of the votes constituting the quorum for such issue.
As of March 16, 2000, there were issued and outstanding 465,158 Class A
Shares and 24,240,441 Fiduciary Shares of the Intermediate-Term Bond Fund; and
264,099 Class A Shares and 31,275,737 Fiduciary Shares of the Bond Fund.
The votes of the shareholders of the Bond Fund are not being solicited,
since their approval or consent is not necessary for approval of the Plan. As of
March 16, 2000, the officers and Trustees of HighMark Funds as a group
beneficially owned less than 1% of the outstanding Retail and Fiduciary shares
of HighMark Funds. At March 16, 2000, to the best of the knowledge of HighMark
Funds, the following owned 5% or more of the outstanding shares of:
INTERMEDIATE-TERM BOND - CLASS A SHARES
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF OWNERSHIP OF RECORD
---------------- ----------------------------------
<S> <C>
National Financial Services Corp. 68.99%
for Exclusive Benefit of our Cust
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
</TABLE>
INTERMEDIATE-TERM BOND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF OWNERSHIP OF RECORD
---------------- ----------------------------------
<S> <C>
Lane & Company 99.66%
c/o Union Bank of California
Attn: Kathleen Heilman
P. O. Box 85484
San Diego, CA 92186-5484
</TABLE>
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<PAGE>
BOND FUND - CLASS A SHARES
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF OWNERSHIP OF RECORD
<S> <C>
Northwestern Trst. & Advisory Co. TTBE 6.64%
1201 3rd Ave., Suite 2010
Seattle, WA 98101-3026
Jody A. Bertolini TTEE
The Bertolini Trust 7.39%
UA 11/30/1999
P.O. Box 9598
Santa Rosa, CA 95405-1598
</TABLE>
BOND FUND - FIDUCIARY SHARES
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF BENEFICIAL OWNERSHIP
<S> <C>
BTM U.S. Agency Retirement Plan 5.83%
1251 Avenue of the Americas
New York, NY 10020
</TABLE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF OWNERSHIP OF RECORD
<S> <C>
Lane & Company 60.77%
c/o Union Bank of California
Attn: Kathleen Heilman
P.O. Box 120109
San Diego, CA 92112-0109
BTMT Pension 33.29%
c/o Bank of Tokyo-Mitsubishi Trust Company
Attn: Dennis Demetropoulos
1251 Avenue of the Americas FL 10
New York, NY 10020-1104
</TABLE>
THE BOARD OF TRUSTEES OF HIGHMARK FUNDS, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN.
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<PAGE>
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Combined Prospectus/Proxy Statement and the related statement of
additional information do not contain all of the information set forth in the
registration statements and the exhibits relating thereto which HighMark Funds
has filed with the Securities and Exchange Commission under the Securities Act
of 1933 and the 1940 Act to which reference is hereby made. The SEC file numbers
for the HighMark Funds Prospectuses and related statement of additional
information which are incorporated by reference herein are Registration No.
33-12608 and 811-5059.
HighMark Funds is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith file reports and
other information with the SEC. Reports, proxy and information statements,
registration statements and other information filed by HighMark Funds can be
inspected and copied at the public reference facilities of the SEC at 450 Fifth
Street, N.W. Washington, D.C. 20549. Copies of such filings may also be
available at the following SEC regional offices: 90 Devonshire Street, Suite
700, Boston, MA 02109; 500 West Madison Street, Suite 1400, Chicago, IL
60611-2511; and 601 Walnut Street, Suite 1005E, Philadelphia, PA 19106. Copies
of such materials can also be obtained by mail from the Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549
at prescribed rates.
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<PAGE>
EXHIBIT A
HIGHMARK FUNDS
PLAN OF REORGANIZATION
This Plan of Reorganization having been approved by the Board of Trustees
of HighMark Funds is made as of ________________, 2000 by HighMark Funds (the
"Plan"). The capitalized terms used herein shall have the meaning ascribed to
them in this Plan.
OVERVIEW OF PLAN OF REORGANIZATION
(1) The HighMark Intermediate-Term Bond Fund ("Intermediate-Term Bond
Fund" or the "Consolidating Fund") will sell, assign, convey, transfer and
deliver to the HighMark Bond Fund (the "Bond Fund" or the "Consolidated Fund")
on the Exchange Date all of the properties and assets existing at the Valuation
Time in the Consolidating Fund. In consideration therefor, the Consolidated Fund
shall, on the Exchange Date, assume all of the liabilities of the Consolidating
Fund for a number of full and fractional shares of the Consolidating Fund having
an aggregate net asset value equal to the value of the assets of the
Consolidating Fund transferred to the Consolidated Fund on such date less the
value of the liabilities of the Consolidating Fund assumed by the Consolidated
Fund on that date. It is intended that the reorganization described in this Plan
shall be a tax-free reorganization under the Internal Revenue Code of 1986, as
amended (the "Code").
(2) Upon consummation of the transactions described in paragraph (1) of this
Plan, the Consolidating Fund shall distribute in complete liquidation to its
shareholders of record as of the Exchange Date the shares of the Consolidated
Fund received by it, each shareholder being entitled to receive the number of
such shares of the Consolidated Fund equal to the proportion which the number of
shares of beneficial interest of the Consolidating Fund held by such shareholder
bears to the number of such shares of the Consolidating Fund outstanding on such
date.
FACTUAL BASIS OF THE PLAN
1. (a) HighMark Funds is a business trust duly established and validly existing
under the laws of the Commonwealth of Massachusetts and has power to own all of
its properties and assets and to carry out the transactions involved under this
Plan. Each of the Intermediate-Term Bond Fund and the Bond Fund (each a
"HighMark Fund" and, collectively, the "HighMark Funds") has all necessary
federal, state and local authorizations to carry on its business as now being
conducted and to carry out this Plan.
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<PAGE>
(b) HighMark Funds is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company, and
such registration has not been revoked or rescinded and is in full force and
effect. Each HighMark Fund has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of the Code as of and
since its first taxable year and each HighMark Fund qualifies and intends to
continue to qualify as a regulated investment company for the taxable year
ending upon its liquidation. Each HighMark Fund has been regulated as an
investment company under such Sections of the Code at all times since its
inception.
(c) The statement of assets and liabilities, statement of operations, and
statements of changes in net assets, financial highlights and schedule of
investments (indicating their market values) for each HighMark Fund for the year
ended July 31, 1999, such statements and schedules having been audited by
Deloitte & Touche LLP, independent accountants to HighMark Funds, fairly present
the financial position of each HighMark Fund as of such date and said statements
of operations and changes in net assets and financial highlights fairly reflect
the results of operations, changes in net assets and financial highlights for
the periods covered thereby in conformity with generally accepted accounting
principles.
(d) The prospectuses of each HighMark Fund dated November 30, 1999, as
filed with the Securities and Exchange Commission (the "Commission") (the
Prospectuses") and the Statement of Additional Information for HighMark Funds,
dated November 30, 1999, as filed with the Commission did not as of their such
dates, and will not as of the Exchange Date contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of HighMark Funds, threatened against HighMark
Funds which assert liability on the part of HighMark Funds.
(f) The Consolidating Fund does not have any known liabilities of a
material nature, contingent or otherwise, other than those shown as belonging to
it on its respective statement of assets and liabilities as of July 31, 1999
referred to in Section 1(c) hereof and those incurred in the ordinary course of
HighMark Funds' business as an investment company since that date.
(g) As used in this Plan, the term "Investments" shall mean the
Consolidating Fund's investments shown on their respective schedule of portfolio
investments as of July 31, 1999 referred to in Section 1(c) hereof as
supplemented with such changes as HighMark Funds or the Consolidating Fund shall
make after that date.
(h) HighMark Funds and each HighMark Fund has filed or will file all
federal and state tax returns which, to the knowledge of HighMark Funds'
officers, are required to be filed by HighMark Funds and has paid or will pay
all federal and state taxes shown to be due on said
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<PAGE>
returns or on any assessments received by HighMark Funds or each HighMark Fund.
All tax liabilities of HighMark Funds and each HighMark Fund have been
adequately provided for on its books, and no tax deficiency or liability of
HighMark Funds or any HighMark Fund has been asserted, and no question with
respect thereto has been raised by the Internal Revenue Service or by any state
or local tax authority for taxes in excess of those already paid.
(i) At both the Valuation Time and the Exchange Date and except for
shareholder approval, HighMark Funds, on behalf of the Consolidating Fund, will
have full right, power and authority to sell, assign, transfer and deliver the
Investments and any other assets and liabilities transferred by it pursuant to
this Plan. At the Exchange Date, subject only to the delivery of the shares,
Investments and any such other assets and liabilities as contemplated by this
Plan, HighMark Funds, on behalf of the Consolidated Fund, will acquire the
Investments and any such other assets subject to no encumbrances, liens or
security interests whatsoever and without any restrictions upon the transfer
thereof.
(j) At both the Valuation Time and the Exchange Date, HighMark Funds and
the Consolidated Fund will have full right, power and authority to purchase the
Investments and any other assets and assume the liabilities of the Consolidating
Fund to be transferred to it pursuant to this Plan.
(k) Each HighMark Fund is qualified and will at all times through the
Exchange Date qualify for taxation as a "regulated investment company" under
Sections 851 and 852 of the Code.
(l) At the Exchange Date, the Consolidating Fund will have sold such of its
assets, if any, as necessary to assure that, after giving effect to the
acquisition of its assets pursuant to this Plan, the Consolidated Fund will
remain a "diversified company" within the meaning of Section 5(b)(1) of the 1940
Act and in compliance with such other mandatory investment restrictions as are
set forth in its Prospectus and Statement of Additional Information.
SPECIFICS OF PLAN
2. REORGANIZATION. (a) Subject to the requisite approval of the respective
shareholders of the Consolidating Fund and to the other terms and conditions
contained herein (including the Consolidating Fund's distribution to its
respective shareholders of all of its investment company taxable income and net
capital gain (as described in Section 7(k)), the Consolidating Fund will sell,
assign, convey, transfer and deliver to the Consolidated Fund and the
Consolidated Fund will acquire from the Consolidating Fund, on the Exchange Date
all of the Investments and all of the cash and other assets of the Consolidating
Fund in exchange for that number of shares of beneficial interest of the
Consolidated Fund provided for in Section 3 and the assumption by the
Consolidated Fund of all of the liabilities of the Consolidating Fund. Pursuant
to this Plan, the Consolidating Fund will, as soon as practicable after the
Exchange Date, distribute in liquidation all of the Consolidated Fund's shares
received by it to its
A3
<PAGE>
shareholders in exchange for their shares of beneficial interest of the
Consolidating Fund.
(b) HighMark Funds, on behalf of the Consolidating Fund, will pay or cause
to be paid to the Consolidated Fund any interest and cash dividends received by
it on or after the Exchange Date with respect to the Investments transferred to
the Consolidated Fund hereunder. HighMark Funds, on behalf of the Consolidating
Fund, will transfer to the Consolidated Fund any rights, stock dividends or
other securities received by it after the Exchange Date as stock dividends or
other distributions on or with respect to the Investments transferred, which
rights, stock dividends and other securities shall be deemed included in the
assets transferred to the Consolidated Fund at the Exchange Date and shall not
be separately valued, in which case any such distribution that remains unpaid as
of the Exchange Date shall be included in the determination of the value of the
assets of the Consolidating Fund.
3. EXCHANGE DATE; VALUATION TIME. On the Exchange Date, the Consolidated Fund
will deliver to the Consolidating Fund a number of shares of the Consolidated
Fund having an aggregate net asset value equal to the value of the assets of the
Consolidating Fund, less the value of the liabilities of the Consolidating Fund
assumed, determined as hereafter provided in this Section.
(a) The valuation time shall be 4:00 pm. (Eastern time) June 2, 2000 or
such earlier or later day as may be established by the proper officers of
HighMark Funds (the "Valuation Time").
(b) The net asset value of shares of the Consolidated Fund to be delivered
to the Consolidating Fund, the value of the assets of the Consolidating Fund,
and the value of the liabilities of the Consolidating Fund to be assumed by the
Consolidated Fund in each case shall be computed as of the Valuation Time
pursuant to the valuation procedures customarily used by HighMark Funds.
(c) No formula will be used to adjust the net asset value of each HighMark
Fund to take into account differences in realized and unrealized gains and
losses.
(d) HighMark Funds, on behalf of the Consolidated Fund, shall issue shares
of the Consolidated Fund to the Consolidating Fund on one share deposit receipt
registered in the name of the Consolidating Fund. The Consolidating Fund shall
distribute in liquidation shares of the Consolidated Fund received by it
hereunder pro rata to its respective shareholders by redelivering such share
deposit receipt to HighMark Funds' transfer agent, which will as soon as
practicable set up open accounts for each shareholder of the Consolidating Fund
in accordance with written instructions furnished by HighMark Funds.
(e) The Consolidated Fund shall assume all liabilities of the Consolidating
Fund, whether accrued or contingent, in connection with the acquisition of
assets and subsequent dissolution of the Consolidating Fund or otherwise, except
that recourse for assumed liabilities relating to
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<PAGE>
the Consolidating Fund will be limited to the Consolidated Fund.
4. EXPENSES AND FEES. All fees and expenses, including accounting expenses,
portfolio transfer taxes (if any) or other similar expenses incurred directly in
connection with the consummation of the transaction contemplated by this Plan
will be borne by HighMark Capital Management, Inc. and/or its affiliates
including the costs of proxy materials, proxy solicitation, and legal expenses.
Fees and expenses not incurred directly in connection with the consummation of
the Plan will be borne by the party incurring such fees and expenses.
(b) Notwithstanding any other provisions of this Plan, if for any reason
the transaction contemplated by this Plan is not consummated, no entity shall be
liable to the other entity for any damages resulting therefrom, including,
without limitation, consequential damages.
5. EXCHANGE DATE. Delivery of the assets of the Consolidating Fund to be
transferred, assumption of the liabilities of the Consolidating Fund to be
assumed, and the delivery of the Consolidated Fund's shares to be issued shall
be made at the offices of HighMark Funds, 1 Freedom Valley Road, Oaks,
Pennsylvania 19456, at 9:00 a.m. Eastern time on the next full business day
following the Valuation Time, or at such other time and date established by the
proper officers of HighMark Funds, the date and time upon which such delivery is
to take place being referred to herein as the "Exchange Date."
6. SPECIAL MEETING OF SHAREHOLDERS: Dissolution. (a) The Consolidating Fund
agrees to call a special meeting of its respective shareholders as soon as is
practicable after the effective date of the registration statement filed with
the Commission by HighMark Funds on Form N-14 relating to the shares of the
Intermediate-Term Bond Fund issuable hereunder (the "Registration Statement"),
and the proxy statement of the Intermediate-Term Bond Fund included therein (the
"Proxy Statement") for the purpose of considering the sale of all of the assets
of the Consolidating Fund to and the assumption of all of the liabilities of the
Consolidating Fund by the Consolidated Fund as herein provided, adopting this
Plan, and authorizing the liquidation and dissolution of the Consolidating Fund,
and it shall be a condition to the obligations of each of the parties hereto
that the holders of the shares of beneficial interest of the Consolidating Fund
shall have approved this Plan and the transactions contemplated herein in the
manner required by law and HighMark Funds' Declaration of Trust at such a
meeting on or before the Valuation Time.
(b) The Consolidating Fund will liquidate and dissolve in the manner
provided in HighMark Funds' Declaration of Trust and in accordance with
applicable law, provided that the Consolidating Fund will not make any
distributions of shares of the Consolidated Fund to its shareholders without
first paying or adequately providing for the payment of all of its debts,
obligations and liabilities.
7. CONDITIONS TO BE MET REGARDING THE TRANSACTION. The intention of HighMark
Funds to consummate each of the transactions described herein is subject to the
following conditions:
A5
<PAGE>
(a) This Plan shall have been adopted and the transactions contemplated
hereby, including the liquidation and dissolution of the Consolidating Fund,
shall have been approved by its shareholders in the manner required by law.
(b) The officers of HighMark Funds shall cause the preparation of a
statement of assets of the Consolidating Fund and liabilities, with values
determined as provided in Section 3, together with a list of Investments with
their respective tax costs, all as of the Valuation Time, certified on HighMark
Funds' behalf by its President (or any Vice President) and Treasurer, and a
certificate of both such officers, dated the Exchange Date, that there has been
no material adverse change in the financial position of the Consolidating Fund
since July 31, 1999, other than changes in the Investments since that date or
changes in the market value of the Investments, or changes due to net
redemptions of shares of the Consolidating Fund, dividends paid or losses from
operations.
(c) The officers of HighMark Funds shall cause the preparation of a
statement of the Consolidated Fund's net assets, together with a list of
portfolio holdings with values determined as provided in Section 3 hereof, all
as of the Valuation Time certified on HighMark Funds' behalf by its President
(or any Vice President) and Treasurer.
(d) The President (or any Vice President) and Treasurer of HighMark Funds
shall certify that as of the Valuation Time and as of the Exchange Date all the
elements in Section 1 of this Plan are true and correct in all material respects
as if made at and as of such dates and that each HighMark Fund has complied with
and satisfied all the conditions on its part under the Plan to be performed or
satisfied at or prior to such dates.
(e) There shall not be any material litigation pending with respect to the
matters contemplated by this Plan.
(f) HighMark Funds shall have received an opinion of Ropes & Gray dated the
Exchange Date to the effect that: (i) HighMark Funds is a business trust duly
established and validly existing under the laws of the Commonwealth of
Massachusetts, and neither HighMark Funds nor any HighMark Fund is, to the
knowledge of such counsel, required to qualify to do business as a foreign
association in any jurisdiction; (ii) HighMark Funds, on behalf of the
Consolidating Fund, has the power to sell, assign, convey, transfer and deliver
the Investments and other assets contemplated hereby and, upon consummation of
the transactions contemplated hereby in accordance with the terms of this Plan,
HighMark Funds, on behalf of the Consolidating Fund, will have duly sold,
assigned, conveyed, transferred and delivered such Investments and other assets
to the Consolidated Fund; (iii) the adoption of this Plan did not, and the
consummation of the transactions contemplated hereby will not, violate HighMark
Funds' Declaration of Trust or Code of Regulations, as amended, or any provision
of any agreement known to such counsel to which HighMark Funds is a party or by
which it is bound; (iv) no consent, approval, authorization or order of any
court or governmental authority is required for the consummation by HighMark
Funds of the transactions
A6
<PAGE>
contemplated hereby, except such as have been obtained under the Securities Act
of 1933 (the "1933 Act"), the Securities Exchange Act of 1934 ("the 1934 Act")
and the 1940 Act; (v) this Plan has been duly authorized, executed and delivered
by HighMark Funds and is a valid and binding obligation of HighMark Funds; and
(vi) the shares of the Consolidated Fund to be delivered to the Consolidating
Fund as provided for by this Plan are duly authorized and upon such delivery
will be validly issued and will be fully paid and nonassessable by HighMark
Funds and no shareholder of HighMark Funds has any preemptive right to
subscription or purchase in respect thereof.
(g) With respect to the transaction, HighMark Funds shall have received an
opinion of Ropes & Gray addressed to HighMark Funds and dated the Exchange Date
to the effect that for Federal income tax purposes: (i) no gain or loss will be
recognized by the Consolidating Fund upon the transfer of the assets and
Investments to the Consolidated Fund in exchange for shares of the Consolidated
Fund and the assumption by the Consolidated Fund of the liabilities of the
Consolidating Fund or upon the distribution of shares of the Consolidating Fund
by the Consolidating Fund to its shareholders in liquidation; (ii) no gain or
loss will be recognized by the shareholders of the Consolidating Fund upon the
exchange of its shares for the shares of the Consolidated Fund; (iii) the basis
of the shares of the Consolidated Fund's shares a shareholder of the
Consolidating Fund receives in connection with the exchange will be the same as
the basis of his or her Consolidating Fund's shares exchanged therefor; (iv) the
Consolidating Fund's shareholder's holding period for his or her Consolidated
Fund's shares will be determined by including the period for which he or she
held the shares of the Consolidating Fund exchanged therefor, provided that he
or she held such shares of the Consolidating Fund as capital assets; (v) no gain
or loss will be recognized by the Consolidated Fund upon the receipt of the
assets transferred to the Consolidated Fund pursuant to this Plan in exchange
for the shares of the Consolidated Fund and the assumption by the Consolidated
Fund of the liabilities of the Consolidating Fund; (vi) the basis in the hands
of the Consolidated Fund of the assets of the Consolidating Fund will be the
same as the basis of the assets in the hands of the Consolidating Fund
immediately prior to the transfer; and (vii) the Consolidated Fund's holding
periods of the assets of the Consolidating Fund will include the period for
which such assets were held by the Consolidating Fund.
(h) The assets of the Consolidating Fund to be acquired by the Consolidated
Fund will include no assets which the Consolidated Fund, by reason of
limitations contained in HighMark Funds' Declaration of Trust or of investment
restrictions disclosed in its Prospectus in effect on the Exchange Date, may not
properly acquire.
(i) The Registration Statement shall have become effective under the 1933
Act, and no stop order suspending such effectiveness shall have been instituted
or to the knowledge of HighMark Funds, contemplated by the Commission.
(j) HighMark Funds shall have received from the Commission such order or
orders as Ropes & Gray deems reasonably necessary or desirable under the 1933
Act, the 1934 Act, the
A7
<PAGE>
1940 Act in connection with the transactions contemplated hereby, and that all
such orders shall be in full force and effect.
(k) Prior to the Exchange Date, the Consolidating Fund shall have declared
a dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to its respective shareholders all of its
investment company taxable income for its taxable years ending on or after July
31, 1999 and on or prior to the Exchange Date (computed without regard to any
deduction for dividends paid), and all of its net capital gain realized in each
of its taxable years ending on or after July 31, 1999 and on or prior to the
Exchange Date (after reduction for any capital loss carryover).
(l) The custodian of HighMark Funds shall have delivered to HighMark Funds
a certificate identifying all of the assets of the Consolidating Funds held by
such custodian as of the Valuation Time.
(m) The transfer agent of HighMark Funds shall have provided to HighMark
Funds (i) a certificate setting forth the number of shares of the Consolidating
Fund outstanding as of the Valuation Time and (ii) the name and address of each
holder of record of any such shares of the Consolidating Fund and the number and
class of shares held of record by each such shareholder.
(n) HighMark Funds, on behalf of the Consolidating Fund, shall have
executed and delivered an Assumption of Liabilities dated as of the Exchange
Date pursuant to which the Consolidating Fund will assume all of the liabilities
of the Consolidating Fund existing at the Valuation Time in connection with the
transactions contemplated by this Plan.
(o) HighMark Funds, on behalf of the Consolidating Fund, shall have
executed and delivered an instrument of transfer ("Transfer Document") and any
other certificates or documents HighMark Funds may deem necessary or desirable
to transfer the Consolidating Fund's entire right, title and interest in and to
the Investments and all other assets.
8. NO BROKER. There is no person who has dealt with HighMark Funds or any
HighMark Fund who by reason of such dealings is entitled to any broker's or
finder's or other similar fee or commission arising out of the transactions
contemplated by this Plan.
9. TERMINATION. HighMark Funds may, by consent of its trustees, terminate this
Plan, and HighMark Funds, after consultation with counsel, may modify this Plan
in any manner deemed necessary or desirable.
10. RULE 145. Pursuant to Rule 145 under the 1933 Act, HighMark Funds will, in
connection with the issuance of any shares of the Consolidated Fund to any
person who at the time of the transaction contemplated hereby is deemed to be an
affiliate of a party to the transaction pursuant to Rule 145(c), cause to be
affixed upon the certificates issued to such
A8
<PAGE>
person (if any) a legend as follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO HIGHMARK FUNDS
OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (ii) IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO HIGHMARK FUNDS SUCH
REGISTRATION IS NOT REQUIRED.
and, further, HighMark Funds will issue stop transfer instructions to HighMark
Funds' transfer agent with respect to such shares.
11. AGREEMENT AND DECLARATION OF TRUST. Copies of the Agreement and Declaration
of Trust of HighMark Funds and any amendments thereto so filed is on file with
the Secretary of State of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the trustees of HighMark Funds, as trustees
and not individually, and that the obligations of this instrument are not
binding upon any of the trustees, officers or shareholders of HighMark Funds
individually but are binding only upon the assets and property of HighMark
Funds.
The names "HighMark Funds" and "Trustees of HighMark Funds" 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 filed on March
10, 1987, as amended, 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 HighMark Funds entered into in the name or
on behalf thereof by any of the Trustees, 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 of Shares of
the Trust must look solely to the assets of the Trust belonging to such series
for the enforcement of any claims against the Trust.
HighMark Funds
By: __________________________
A9
<PAGE>
HIGHMARK FUNDS
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information contains information which may
be of interest to investors, but which is not included in the Combined
Prospectus/Proxy Statement of HighMark Funds dated April 22, 2000 (the
"Prospectus") relating to the transfer of the assets and liabilities of the
HighMark Intermediate-Term Bond Fund to the HighMark Bond Fund. This Statement
of Additional Information is not a prospectus and is authorized for distribution
only when it accompanies or follows delivery of the Prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus. A
copy of the Prospectus may be obtained, without charge, by writing SEI
Investments Distribution Co., 1 Freedom Valley Drive, Oaks, PA 19456 or by
calling 1-800-734-2922.
The Statement of Additional Information for HighMark Funds, dated
November 30, 1999 has been filed with the Securities and Exchange Commission and
is incorporated herein by reference.
Audited financial statements for the Intermediate-Term Bond Fund and
the Bond Fund for the period ended July 31, 1999 are contained in the Annual
Report, which is incorporated herein by reference.
The date of this Statement of Additional Information is April 22, 2000.
B1
<PAGE>
TABLE OF CONTENTS
Financial Statements of the combined Funds
on a pro-forma basis for the year ended
July 31, 1999 (unaudited) ...................................................B-3
B2
<PAGE>
HIGHMARK BOND FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES (000)
FOR THE YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
COMBINED
BOND INTERMEDIATE- PROFORMA PROFORMA
FUND TERM BOND FUND ADJUSTMENTS BOND FUND
<S> <C> <C> <C> <C>
ASSETS:
Investments at market value $399,692 $278,027 $677,719
(cost of $406,331, $281,152 and $687,483, respectively)
Interest Receivable 4,782 4,275 9,057
Receivable for investment securities sold - - -
Receivable for capital shares sold 109 290 399
Other assets 1,658 5 1,663
Total Assets 406,241 282,597 - 688,838
LIABILITIES:
Payable for investment securities purchased - - -
Payable for capital shares repurchased 114 62 176
Payable upon return of securities loaned 68,215 19,987 88,202
Other Liabilities 374 182 556
Total Liabilities 68,703 20,231 - 88,934
NET ASSETS:
Fiduciary Shares - HighMark Bond Fund
(based on 32,224,970 outstanding shares) 342,359
Fiduciary Shares - Pro Forma HighMark Bond Fund
(based on 57,028,834 outstanding shares) 604,870
Fiduciary Shares - HighMark Intermediate-Term Bond Fund 262,511
(based on 25,783,110 outstanding shares)
Class A - HighMark Bond Fund (based on 256,052 outstanding shares) 2,743
Class A - Proforma HighMark Bond Fund
(based on 701,613 outstanding shares) 8,065
Class A - HighMark Intermediate-Term Bond Fund
(based on 459,324 outstanding shares) 5,322
Undistributed net investment income 444 232 676
Accumulated net realized gain (losses) on investments (1,369) (2,574) (3,943)
Net unrealized appreciation (depreciation) on investments (6,639) (3,125) (9,764)
TOTAL NET ASSETS 337,538 262,366 599,904
Net Asset Value, Offering Price and Redemption Price Per Share -- Fiduciary Class 10.39 10.00 10.39
Net Asset Value and Redemption Price Per Share -- Class A 10.30 9.99 10.30
Maximum Offering Price Per Share -- Class A 10.62 10.30 10.62
B3
<PAGE>
HIGHMARK BOND FUND
PRO FORMA COMBINING STATEMENTS OF OPERATIONS (000)
FOR THE YEAR ENDED JULY 31, 1999
<CAPTION>
BOND INTERMEDIATE- PROFORMA COMBINED
FUND TERM BOND FUND ADJUSTMENTS BOND FUND
<S> <C> <C> <C> <C>
Interest Income $18,323 $17,203 $35,526
Dividend Income - - -
Total Investment Income $18,323 $17,203 - $35,526
Expenses:
Administrative Fee 574 531 1,105
Administrative Fees Waived (57) (53) (110)
Investment Adviser Fee 1,435 1,328 2,763
Investment Adviser Fee Waiver - - -
Shareholder Servicing Fees Fiduciary 710 650 (433) 927
Shareholder Servicing Fees Class A 7 14 (9) 12
Shareholder Servicing Fees Waived (689) (584) (1,273)
Custodian Fees 29 27 56
Professional Fees 35 20 (14) 41
Registration Fees 40 16 (16) 40
Transfer Agent Fees 30 21 51
Distribution Fees Class A 7 13 20
Distribution Fees Waiver (7) (13) (20)
Insurance Fees 5 2 7
Trustees Fees 12 5 17
Printing Fees 30 16 - 46
Miscellaneous Fees 2 5 - 7
Total Expenses 2,163 1,998 (472) 3,689
Reduction of Expenses (6) (6) (12)
Total Net Expenses 2,157 1,992 3,677
Net Investment Income 16,166 15,211 472 31,849
Net Realized Gain (Loss) on Investments 2,681 693 3,374
Change in Unrealized Appreciation
(Depreciation) on Investments (14,801) (9,244) (24,045)
Net Realized and Unrealized Gain on Investments (12,120) (8,551) (20,671)
Increase in Net Assets Resulting from Operations 4,046 6,660 11,178
</TABLE>
B4
<PAGE>
HIGHMARK BOND FUND
Notes to Pro Forma Financial Statements
1. BASIS OF COMBINATION
The unaudited Pro Forma Combining Statements of Assets and Liabilities,
Pro Forma Combining Statements of Operations and Pro Forma Combining Schedule of
Investments give effect to the proposed acquisition of the HighMark
Intermediate-Term Bond Fund by the HighMark Bond Fund. The proposed acquisition
will be accounted for by the method of accounting for tax free mergers of
investment companies (sometimes referred to as the pooling without restatement
method). The acquisition will be accomplished by an exchange of all outstanding
Fiduciary Shares and Class A Shares of the HighMark Intermediate-Term Bond Fund
in exchange for Fiduciary Shares and Class A Shares, respectively, of the
HighMark Bond Fund.
The Pro Forma combining statements should be read in conjunction with
the historical financial statements of the constituent funds and the notes
thereto incorporated by reference in the Statement of Additional Information.
The HighMark Bond Fund is a portfolio offered by HighMark Funds, an
open-end, management investment company registered under the Investment Company
Act of 1940, as amended. The HighMark Intermediate-Term Bond Fund is a portfolio
offered by HighMark Funds, an open-end, management investment company also
registered under the Investment Company Act of 1940, as amended.
PRO FORMA ADJUSTMENTS:
a) The Pro Forma combining statements of assets and liabilities
assumes the issuance of additional shares of the HighMark Bond Fund
as if the reorganization were to take place on July 31, 1999 and is
based on the net asset value of the acquiring fund. In addition,
because the HighMark Bond Fund is the surviving fund for accounting
purposes, the pro forma adjustments also reflect a reverse stock
split of the HighMark Intermediate-Term Bond Fund shares that will
take place simultaneous to the merger so as to ensure that the NAV
per share that carries forward for historical reporting purposes is
the NAV per share of the HighMark Bond Fund at the time of the
merger.
b) The Pro Forma adjustments to professional, registration and
shareholder servicing fees reflect the expected savings due to the
combination of the funds.
B5
<PAGE>
HIGHMARK INTERMEDIATE-TERM BOND FUND
PROXY FOR A SPECIAL MEETING OF
SHAREHOLDERS, MAY 26, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF HIGHMARK FUNDS.
The undersigned hereby appoints Donna Rafa and Lynda J. Striegel and
each of them with full power of substitution as proxies of the undersigned, to
vote, as designated below, at the Special Meeting of Shareholders of the
Intermediate-Term Bond Fund on Friday, May 26, 2000 at 10:00 a.m., Eastern time,
and at any adjournments thereof, all of the units of beneficial interest in the
Intermediate-Term Bond Fund which the undersigned would be entitled to vote upon
the following matter if personally present.
1. Approval of a Plan of Reorganization pursuant to which all of the assets and
liabilities of the Intermediate-Term Bond Fund will be transferred to the Bond
Fund in return for Fiduciary Class shares of the Bond Fund, followed by the
dissolution and liquidation of the Intermediate-Term Bond Fund, and the
distribution of shares of the Bond Fund to the shareholders of the
Intermediate-Term Bond Fund.
FOR AGAINST ABSTAIN
( ) ( ) ( )
2. To transact any other business as properly comes before the Meeting.
FOR AGAINST ABSTAIN
( ) ( ) ( )
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (1) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR ITEMS (1) AND (2).
NOTE: Please sign exactly as the name appears on this card. EACH Joint
owner must sign the proxy. When signing as executor, administrator, attorney,
trustee or guardian, or as custodian for a minor, please give the FULL title of
such. If a corporation, please give the FULL corporate name and indicate the
signer's office. If a partner, please sign in the partnership name.
------------------------------------------
Signature of Shareholder(s)
------------------------------------------
Signature of Shareholder(s)
Dated: ________________________________ , 2000.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
PART C. OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The information required by this item is incorporated by reference
to the Item 25 of Post-Effective Amendment No. 29 (filed January 28, 2000) to
Registrant's Registration Statement on Form N-1A (File No. 33-12608) under
the Securities Act of 1933 and the Investment Company Act of 1940 (File No.
811-5059).
ITEM 16. 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.
<PAGE>
(2) (a) Amended and Restated Code of
Regulations, dated June 5, 1991, is
incorporated by reference to Exhibit
2 of 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) Form of Plan of Reorganization is
filed herewith.
(5) (a) Article IV, Article V, Sections 5.1,
5.5, 5.6, 5.7 and 5.8, Article IX,
Sections 9.4 and 9.5, and Article X,
Sections 10.3, 10.4 and 10.8 of the
Declaration of Trust, dated March
10, 1987, are 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 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.
(c) Article I, Article III, Article V,
and Article VI, Sections 6.1 and 6.4
of the Amended and Restated Code of
Regulations, dated June 5, 1991, are
incorporated by reference to
Post-Effective Amendment No. 7
(filed September 30, 1991) to
Registrant's Registration
Statement on Form N-1A.
(6) (a) Investment Advisory Agreement
between Registrant and HighMark
Capital Management, Inc., dated as
of September 1, 1998, 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.
-2-
<PAGE>
(7) (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.
(8) None.
(9) (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, 1997) to
Registrant's Registration Statement
on Form N-1A.
-3-
<PAGE>
(10) (a) Restated Shareholder Services
Plan relating to the Fiduciary
Shares is incorporated by reference
to Exhibit 15(a) of Post-Effective
Amendment No. 28 (filed November 30,
1998) to Registrant's Registration
Statement on Form N-1A.
(b) Restated Distribution and
Shareholder Services Plan relating
to the Class A Shares is
incorporated by reference to Exhibit
15(b) of Post-Effective Amendment
No. 25 (filed November 30, 1998) to
the 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.
(d) Distribution relating to the Class C
Shares is incorporated by reference
to Exhibit (m)(4) of Post-Effective
Amendment No. 28 (filed September
20, 1999) to Registrant's
Registration Statement on Form N-1A.
(e) Distribution Plan relating to the
Class S Shares, is incorporated by
reference to Exhibit (m)(5) of Post-
Effective Amendment No. 28 (filed
September 20, 1999) to Registrant's
Registration Statement on Form N-1A.
(f) Amended Multiple Class Plan for
HighMark Funds adopted by the Board
of Trustees on September 17, 1999 is
incorporated by reference to Exhibit
(7) of Post-Effective Amendment No.
28 (filed September 20, 1999) to
Registrant's Registration Statement
on Form N-1A.
(11) Opinion of Ropes & Gray as to
legality of shares being
registered is filed herewith.
(12) Form of Opinion of Ropes & Gray,
including consent as to Tax Matters
is filed herewith.
(13) (a) Administration Agreement between
Registrant and SEI Fund Resources
incorporated by reference to Exhibit
9(a)
-4-
<PAGE>
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.
(14) (a) Consent of Deloitte & Touche LLP is
filed herewith.
(b) Consent of Ropes & Gray, is filed
herewith.
(15) None.
(16) Executed Powers of Attorney are
filed herewith.
-5-
<PAGE>
ITEM 17. UNDERTAKINGS
(1) The registrant agrees that prior to any public
reoffering of the securities registered through the
use of a prospectus which is a part of this
registration statement by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by
the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition
to the information called for by the other items of
the applicable form.
(2) The registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a
part of an amendment to the registration statement
and will not be used until the amendment is
effective, and that, in determining any liability
under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement
for the securities offered therein, and the offering
of the securities at that time shall be deemed to be
the initial bona fide offering of them.
-6-
<PAGE>
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.
-7-
<PAGE>
SIGNATURES
As requested by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant in the City of Washington, D.C., on
the 24th day of March, 2000.
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
Registration Statement 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 March 24, 2000
- ------------------ Chief Executive Officer
Mark E. Nagle
/s/ Robert J. DellaCroce Controller and Chief March 24, 2000
- ------------------------ Financial Officer
Robert J. DellaCroce
*/s/ Thomas L. Braje Trustee March 24, 2000
- -----------------------
Thomas L. Braje
*/s/ David A. Goldfarb Trustee March 24, 2000
- ----------------------
David A. Goldfarb
*/s/ Joseph C. Jaeger Trustee March 24, 2000
- ------------------------
Joseph C. Jaeger
*/s/ Frederick J. Long Trustee March 24, 2000
- ------------------------
Frederick J. Long
*/s/ Michael L. Noel Trustee March 24, 2000
- ------------------------
Michael L. Noel
*/s/ Robert M. Whitler Trustee March 24, 2000
- -----------------------
Robert M. Whitler
</TABLE>
*By: /s/ Alan G. Priest
-------------------------------------
Alan G. Priest, Attorney-In-Fact,
pursuant to powers of attorney filed herewith
-8-
<PAGE>
Exhibit Index
EXHIBIT NO. DESCRIPTION PAGE
(4) Form of Agreement and Plan of Reorganization.
(11) Opinion of Ropes & Gray.
(12) Form of Opinion of Ropes & Gray, including consent as to Tax
Matters.
(14) (a) Consent of Deloitte & Touche LLP.
(14) (b) Consent of Ropes & Gray.
(16) Executed Powers of Attorney.
<PAGE>
EXHIBIT (4)
Form of Plan of Reorganization
<PAGE>
HIGHMARK FUNDS
PLAN OF REORGANIZATION
This Plan of Reorganization having been approved by the Board of Trustees
of HighMark Funds is made as of ________________, 2000 by HighMark Funds (the
"Plan"). The capitalized terms used herein shall have the meaning ascribed to
them in this Plan.
OVERVIEW OF PLAN OF REORGANIZATION
(1) The HighMark Intermediate-Term Bond Fund ("Intermediate-Term Bond
Fund" or the "Consolidating Fund") will sell, assign, convey, transfer and
deliver to the HighMark Bond Fund (the "Bond Fund" or the "Consolidated Fund")
on the Exchange Date all of the properties and assets existing at the Valuation
Time in the Consolidating Fund. In consideration therefor, the Consolidated Fund
shall, on the Exchange Date, assume all of the liabilities of the Consolidating
Fund for a number of full and fractional shares of the Consolidating Fund having
an aggregate net asset value equal to the value of the assets of the
Consolidating Fund transferred to the Consolidated Fund on such date less the
value of the liabilities of the Consolidating Fund assumed by the Consolidated
Fund on that date. It is intended that the reorganization described in this Plan
shall be a tax-free reorganization under the Internal Revenue Code of 1986, as
amended (the "Code").
(2) Upon consummation of the transactions described in paragraph (1) of this
Plan, the Consolidating Fund shall distribute in complete liquidation to its
shareholders of record as of the Exchange Date the shares of the Consolidated
Fund received by it, each shareholder being entitled to receive the number of
such shares of the Consolidated Fund equal to the proportion which the number of
shares of beneficial interest of the Consolidating Fund held by such shareholder
bears to the number of such shares of the Consolidating Fund outstanding on such
date.
FACTUAL BASIS OF THE PLAN
1. (a) HighMark Funds is a business trust duly established and validly existing
under the laws of the Commonwealth of Massachusetts and has power to own all of
its properties and assets and to carry out the transactions involved under this
Plan. Each of the Intermediate-Term Bond Fund and the Bond Fund (each a
"HighMark Fund" and, collectively, the "HighMark Funds") has all necessary
federal, state and local authorizations to carry on its business as now being
conducted and to carry out this Plan.
(b) HighMark Funds is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company, and
such registration has not been revoked or rescinded and is in full force and
effect. Each HighMark
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<PAGE>
Fund has elected to qualify and has qualified as a regulated investment company
under Part I of Subchapter M of the Code as of and since its first taxable year
and each HighMark Fund qualifies and intends to continue to qualify as a
regulated investment company for the taxable year ending upon its liquidation.
Each HighMark Fund has been regulated as an investment company under such
Sections of the Code at all times since its inception.
(c) The statement of assets and liabilities, statement of operations, and
statements of changes in net assets, financial highlights and schedule of
investments (indicating their market values) for each HighMark Fund for the year
ended July 31, 1999, such statements and schedules having been audited by
Deloitte & Touche LLP, independent accountants to HighMark Funds, fairly present
the financial position of each HighMark Fund as of such date and said statements
of operations and changes in net assets and financial highlights fairly reflect
the results of operations, changes in net assets and financial highlights for
the periods covered thereby in conformity with generally accepted accounting
principles.
(d) The prospectuses of each HighMark Fund dated November 30, 1999, as
filed with the Securities and Exchange Commission (the "Commission") (the
Prospectuses") and the Statement of Additional Information for HighMark Funds,
dated November 30, 1999, as filed with the Commission did not as of their such
dates, and will not as of the Exchange Date contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of HighMark Funds, threatened against HighMark
Funds which assert liability on the part of HighMark Funds.
(f) The Consolidating Fund does not have any known liabilities of a
material nature, contingent or otherwise, other than those shown as belonging to
it on its respective statement of assets and liabilities as of July 31, 1999
referred to in Section 1(c) hereof and those incurred in the ordinary course of
HighMark Funds' business as an investment company since that date.
(g) As used in this Plan, the term "Investments" shall mean the
Consolidating Fund's investments shown on their respective schedule of portfolio
investments as of July 31, 1999 referred to in Section 1(c) hereof as
supplemented with such changes as HighMark Funds or the Consolidating Fund shall
make after that date.
(h) HighMark Funds and each HighMark Fund has filed or will file all
federal and state tax returns which, to the knowledge of HighMark Funds'
officers, are required to be filed by HighMark Funds and has paid or will pay
all federal and state taxes shown to be due on said returns or on any
assessments received by HighMark Funds or each HighMark Fund. All tax
liabilities of HighMark Funds and each HighMark Fund have been adequately
provided for on its books, and no tax deficiency or liability of HighMark Funds
or any HighMark Fund has
A2
<PAGE>
been asserted, and no question with respect thereto has been raised by the
Internal Revenue Service or by any state or local tax authority for taxes in
excess of those already paid.
(i) At both the Valuation Time and the Exchange Date and except for
shareholder approval, HighMark Funds, on behalf of the Consolidating Fund, will
have full right, power and authority to sell, assign, transfer and deliver the
Investments and any other assets and liabilities transferred by it pursuant to
this Plan. At the Exchange Date, subject only to the delivery of the shares,
Investments and any such other assets and liabilities as contemplated by this
Plan, HighMark Funds, on behalf of the Consolidated Fund, will acquire the
Investments and any such other assets subject to no encumbrances, liens or
security interests whatsoever and without any restrictions upon the transfer
thereof.
(j) At both the Valuation Time and the Exchange Date, HighMark Funds and
the Consolidated Fund will have full right, power and authority to purchase the
Investments and any other assets and assume the liabilities of the Consolidating
Fund to be transferred to it pursuant to this Plan.
(k) Each HighMark Fund is qualified and will at all times through the
Exchange Date qualify for taxation as a "regulated investment company" under
Sections 851 and 852 of the Code.
(l) At the Exchange Date, the Consolidating Fund will have sold such of its
assets, if any, as necessary to assure that, after giving effect to the
acquisition of its assets pursuant to this Plan, the Consolidated Fund will
remain a "diversified company" within the meaning of Section 5(b)(1) of the 1940
Act and in compliance with such other mandatory investment restrictions as are
set forth in its Prospectus and Statement of Additional Information.
SPECIFICS OF PLAN
2. REORGANIZATION. (a) Subject to the requisite approval of the respective
shareholders of the Consolidating Fund and to the other terms and conditions
contained herein (including the Consolidating Fund's distribution to its
respective shareholders of all of its investment company taxable income and net
capital gain (as described in Section 7(k)), the Consolidating Fund will sell,
assign, convey, transfer and deliver to the Consolidated Fund and the
Consolidated Fund will acquire from the Consolidating Fund, on the Exchange Date
all of the Investments and all of the cash and other assets of the Consolidating
Fund in exchange for that number of shares of beneficial interest of the
Consolidated Fund provided for in Section 3 and the assumption by the
Consolidated Fund of all of the liabilities of the Consolidating Fund. Pursuant
to this Plan, the Consolidating Fund will, as soon as practicable after the
Exchange Date, distribute in liquidation all of the Consolidated Fund's shares
received by it to its shareholders in exchange for their shares of beneficial
interest of the Consolidating Fund.
A3
<PAGE>
(b) HighMark Funds, on behalf of the Consolidating Fund, will pay or cause
to be paid to the Consolidated Fund any interest and cash dividends received by
it on or after the Exchange Date with respect to the Investments transferred to
the Consolidated Fund hereunder. HighMark Funds, on behalf of the Consolidating
Fund, will transfer to the Consolidated Fund any rights, stock dividends or
other securities received by it after the Exchange Date as stock dividends or
other distributions on or with respect to the Investments transferred, which
rights, stock dividends and other securities shall be deemed included in the
assets transferred to the Consolidated Fund at the Exchange Date and shall not
be separately valued, in which case any such distribution that remains unpaid as
of the Exchange Date shall be included in the determination of the value of the
assets of the Consolidating Fund.
3. EXCHANGE DATE; VALUATION TIME. On the Exchange Date, the Consolidated Fund
will deliver to the Consolidating Fund a number of shares of the Consolidated
Fund having an aggregate net asset value equal to the value of the assets of the
Consolidating Fund, less the value of the liabilities of the Consolidating Fund
assumed, determined as hereafter provided in this Section.
(a) The valuation time shall be 4:00 pm. (Eastern time) June 2, 2000 or
such earlier or later day as may be established by the proper officers of
HighMark Funds (the "Valuation Time").
(b) The net asset value of shares of the Consolidated Fund to be delivered
to the Consolidating Fund, the value of the assets of the Consolidating Fund,
and the value of the liabilities of the Consolidating Fund to be assumed by the
Consolidated Fund in each case shall be computed as of the Valuation Time
pursuant to the valuation procedures customarily used by HighMark Funds.
(c) No formula will be used to adjust the net asset value of each HighMark
Fund to take into account differences in realized and unrealized gains and
losses.
(d) HighMark Funds, on behalf of the Consolidated Fund, shall issue shares
of the Consolidated Fund to the Consolidating Fund on one share deposit receipt
registered in the name of the Consolidating Fund. The Consolidating Fund shall
distribute in liquidation shares of the Consolidated Fund received by it
hereunder pro rata to its respective shareholders by redelivering such share
deposit receipt to HighMark Funds' transfer agent, which will as soon as
practicable set up open accounts for each shareholder of the Consolidating Fund
in accordance with written instructions furnished by HighMark Funds.
(e) The Consolidated Fund shall assume all liabilities of the Consolidating
Fund, whether accrued or contingent, in connection with the acquisition of
assets and subsequent dissolution of the Consolidating Fund or otherwise, except
that recourse for assumed liabilities relating to the Consolidating Fund will be
limited to the Consolidated Fund.
A4
<PAGE>
4. EXPENSES AND FEES. All fees and expenses, including accounting expenses,
portfolio transfer taxes (if any) or other similar expenses incurred directly in
connection with the consummation of the transaction contemplated by this Plan
will be borne by HighMark Capital Management, Inc. and/or its affiliates
including the costs of proxy materials, proxy solicitation, and legal expenses.
Fees and expenses not incurred directly in connection with the consummation of
the Plan will be borne by the party incurring such fees and expenses.
(b) Notwithstanding any other provisions of this Plan, if for any reason
the transaction contemplated by this Plan is not consummated, no entity shall be
liable to the other entity for any damages resulting therefrom, including,
without limitation, consequential damages.
5. EXCHANGE DATE. Delivery of the assets of the Consolidating Fund to be
transferred, assumption of the liabilities of the Consolidating Fund to be
assumed, and the delivery of the Consolidated Fund's shares to be issued shall
be made at the offices of HighMark Funds, 1 Freedom Valley Road, Oaks,
Pennsylvania 19456, at 9:00 a.m. Eastern time on the next full business day
following the Valuation Time, or at such other time and date established by the
proper officers of HighMark Funds, the date and time upon which such delivery is
to take place being referred to herein as the "Exchange Date."
6. SPECIAL MEETING OF SHAREHOLDERS: Dissolution. (a) The Consolidating Fund
agrees to call a special meeting of its respective shareholders as soon as is
practicable after the effective date of the registration statement filed with
the Commission by HighMark Funds on Form N-14 relating to the shares of the
Intermediate-Term Bond Fund issuable hereunder (the "Registration Statement"),
and the proxy statement of the Intermediate-Term Bond Fund included therein (the
"Proxy Statement") for the purpose of considering the sale of all of the assets
of the Consolidating Fund to and the assumption of all of the liabilities of the
Consolidating Fund by the Consolidated Fund as herein provided, adopting this
Plan, and authorizing the liquidation and dissolution of the Consolidating Fund,
and it shall be a condition to the obligations of each of the parties hereto
that the holders of the shares of beneficial interest of the Consolidating Fund
shall have approved this Plan and the transactions contemplated herein in the
manner required by law and HighMark Funds' Declaration of Trust at such a
meeting on or before the Valuation Time.
(b) The Consolidating Fund will liquidate and dissolve in the manner
provided in HighMark Funds' Declaration of Trust and in accordance with
applicable law, provided that the Consolidating Fund will not make any
distributions of shares of the Consolidated Fund to its shareholders without
first paying or adequately providing for the payment of all of its debts,
obligations and liabilities.
7. CONDITIONS TO BE MET REGARDING THE TRANSACTION. The intention of HighMark
Funds to consummate each of the transactions described herein is subject to the
following conditions:
A5
<PAGE>
(a) This Plan shall have been adopted and the transactions contemplated
hereby, including the liquidation and dissolution of the Consolidating Fund,
shall have been approved by its shareholders in the manner required by law.
(b) The officers of HighMark Funds shall cause the preparation of a
statement of assets of the Consolidating Fund and liabilities, with values
determined as provided in Section 3, together with a list of Investments with
their respective tax costs, all as of the Valuation Time, certified on HighMark
Funds' behalf by its President (or any Vice President) and Treasurer, and a
certificate of both such officers, dated the Exchange Date, that there has been
no material adverse change in the financial position of the Consolidating Fund
since July 31, 1999, other than changes in the Investments since that date or
changes in the market value of the Investments, or changes due to net
redemptions of shares of the Consolidating Fund, dividends paid or losses from
operations.
(c) The officers of HighMark Funds shall cause the preparation of a
statement of the Consolidated Fund's net assets, together with a list of
portfolio holdings with values determined as provided in Section 3 hereof, all
as of the Valuation Time certified on HighMark Funds' behalf by its President
(or any Vice President) and Treasurer.
(d) The President (or any Vice President) and Treasurer of HighMark Funds
shall certify that as of the Valuation Time and as of the Exchange Date all the
elements in Section 1 of this Plan are true and correct in all material respects
as if made at and as of such dates and that each HighMark Fund has complied with
and satisfied all the conditions on its part under the Plan to be performed or
satisfied at or prior to such dates.
(e) There shall not be any material litigation pending with respect to the
matters contemplated by this Plan.
(f) HighMark Funds shall have received an opinion of Ropes & Gray dated the
Exchange Date to the effect that: (i) HighMark Funds is a business trust duly
established and validly existing under the laws of the Commonwealth of
Massachusetts, and neither HighMark Funds nor any HighMark Fund is, to the
knowledge of such counsel, required to qualify to do business as a foreign
association in any jurisdiction; (ii) HighMark Funds, on behalf of the
Consolidating Fund, has the power to sell, assign, convey, transfer and deliver
the Investments and other assets contemplated hereby and, upon consummation of
the transactions contemplated hereby in accordance with the terms of this Plan,
HighMark Funds, on behalf of the Consolidating Fund, will have duly sold,
assigned, conveyed, transferred and delivered such Investments and other assets
to the Consolidated Fund; (iii) the adoption of this Plan did not, and the
consummation of the transactions contemplated hereby will not, violate HighMark
Funds' Declaration of Trust or Code of Regulations, as amended, or any provision
of any agreement known to such counsel to which HighMark Funds is a party or by
which it is bound; (iv) no consent, approval, authorization or order of any
court or governmental authority is required for the consummation by HighMark
Funds of the transactions contemplated hereby,
A6
<PAGE>
except such as have been obtained under the Securities Act of 1933 (the "1933
Act"), the Securities Exchange Act of 1934 ("the 1934 Act") and the 1940 Act;
(v) this Plan has been duly authorized, executed and delivered by HighMark Funds
and is a valid and binding obligation of HighMark Funds; and (vi) the shares of
the Consolidated Fund to be delivered to the Consolidating Fund as provided for
by this Plan are duly authorized and upon such delivery will be validly issued
and will be fully paid and nonassessable by HighMark Funds and no shareholder of
HighMark Funds has any preemptive right to subscription or purchase in respect
thereof.
(g) With respect to the transaction, HighMark Funds shall have received an
opinion of Ropes & Gray addressed to HighMark Funds and dated the Exchange Date
to the effect that for Federal income tax purposes: (i) no gain or loss will be
recognized by the Consolidating Fund upon the transfer of the assets and
Investments to the Consolidated Fund in exchange for shares of the Consolidated
Fund and the assumption by the Consolidated Fund of the liabilities of the
Consolidating Fund or upon the distribution of shares of the Consolidating Fund
by the Consolidating Fund to its shareholders in liquidation; (ii) no gain or
loss will be recognized by the shareholders of the Consolidating Fund upon the
exchange of its shares for the shares of the Consolidated Fund; (iii) the basis
of the shares of the Consolidated Fund's shares a shareholder of the
Consolidating Fund receives in connection with the exchange will be the same as
the basis of his or her Consolidating Fund's shares exchanged therefor; (iv) the
Consolidating Fund's shareholder's holding period for his or her Consolidated
Fund's shares will be determined by including the period for which he or she
held the shares of the Consolidating Fund exchanged therefor, provided that he
or she held such shares of the Consolidating Fund as capital assets; (v) no gain
or loss will be recognized by the Consolidated Fund upon the receipt of the
assets transferred to the Consolidated Fund pursuant to this Plan in exchange
for the shares of the Consolidated Fund and the assumption by the Consolidated
Fund of the liabilities of the Consolidating Fund; (vi) the basis in the hands
of the Consolidated Fund of the assets of the Consolidating Fund will be the
same as the basis of the assets in the hands of the Consolidating Fund
immediately prior to the transfer; and (vii) the Consolidated Fund's holding
periods of the assets of the Consolidating Fund will include the period for
which such assets were held by the Consolidating Fund.
(h) The assets of the Consolidating Fund to be acquired by the Consolidated
Fund will include no assets which the Consolidated Fund, by reason of
limitations contained in HighMark Funds' Declaration of Trust or of investment
restrictions disclosed in its Prospectus in effect on the Exchange Date, may not
properly acquire.
(i) The Registration Statement shall have become effective under the 1933
Act, and no stop order suspending such effectiveness shall have been instituted
or to the knowledge of HighMark Funds, contemplated by the Commission.
(j) HighMark Funds shall have received from the Commission such order or
orders as Ropes & Gray deems reasonably necessary or desirable under the 1933
Act, the 1934 Act, the
A7
<PAGE>
1940 Act in connection with the transactions contemplated hereby, and that all
such orders shall be in full force and effect.
(k) Prior to the Exchange Date, the Consolidating Fund shall have declared
a dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to its respective shareholders all of its
investment company taxable income for its taxable years ending on or after July
31, 1999 and on or prior to the Exchange Date (computed without regard to any
deduction for dividends paid), and all of its net capital gain realized in each
of its taxable years ending on or after July 31, 1999 and on or prior to the
Exchange Date (after reduction for any capital loss carryover).
(l) The custodian of HighMark Funds shall have delivered to HighMark Funds
a certificate identifying all of the assets of the Consolidating Funds held by
such custodian as of the Valuation Time.
(m) The transfer agent of HighMark Funds shall have provided to HighMark
Funds (i) a certificate setting forth the number of shares of the Consolidating
Fund outstanding as of the Valuation Time and (ii) the name and address of each
holder of record of any such shares of the Consolidating Fund and the number and
class of shares held of record by each such shareholder.
(n) HighMark Funds, on behalf of the Consolidating Fund, shall have
executed and delivered an Assumption of Liabilities dated as of the Exchange
Date pursuant to which the Consolidating Fund will assume all of the liabilities
of the Consolidating Fund existing at the Valuation Time in connection with the
transactions contemplated by this Plan.
(o) HighMark Funds, on behalf of the Consolidating Fund, shall have
executed and delivered an instrument of transfer ("Transfer Document") and any
other certificates or documents HighMark Funds may deem necessary or desirable
to transfer the Consolidating Fund's entire right, title and interest in and to
the Investments and all other assets.
8. NO BROKER. There is no person who has dealt with HighMark Funds or any
HighMark Fund who by reason of such dealings is entitled to any broker's or
finder's or other similar fee or commission arising out of the transactions
contemplated by this Plan.
9. TERMINATION. HighMark Funds may, by consent of its trustees, terminate this
Plan, and HighMark Funds, after consultation with counsel, may modify this Plan
in any manner deemed necessary or desirable.
10. RULE 145. Pursuant to Rule 145 under the 1933 Act, HighMark Funds will, in
connection with the issuance of any shares of the Consolidated Fund to any
person who at the time of the transaction contemplated hereby is deemed to be an
affiliate of a party to the
A8
<PAGE>
transaction pursuant to Rule 145(c), cause to be affixed upon the certificates
issued to such person (if any) a legend as follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO HIGHMARK FUNDS
OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (ii) IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO HIGHMARK FUNDS SUCH
REGISTRATION IS NOT REQUIRED.
and, further, HighMark Funds will issue stop transfer instructions to HighMark
Funds' transfer agent with respect to such shares.
11. AGREEMENT AND DECLARATION OF TRUST. Copies of the Agreement and Declaration
of Trust of HighMark Funds and any amendments thereto so filed is on file with
the Secretary of State of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the trustees of HighMark Funds, as trustees
and not individually, and that the obligations of this instrument are not
binding upon any of the trustees, officers or shareholders of HighMark Funds
individually but are binding only upon the assets and property of HighMark
Funds.
The names "HighMark Funds" and "Trustees of HighMark Funds" 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 filed on March
10, 1987, as amended, 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 HighMark Funds entered into in the name or
on behalf thereof by any of the Trustees, 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 of Shares of
the Trust must look solely to the assets of the Trust belonging to such series
for the enforcement of any claims against the Trust.
HighMark Funds
By: __________________________
A9
<PAGE>
ROPES & GRAY
ONE FRANKLIN SQUARE
1301 K STREET, N.W., SUITE 800 EAST
WASHINGTON, DC 20005
WRITER'S DIRECT DIAL NUMBER: (202) 626-3915
March 24, 2000
HighMark Funds
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
Gentlemen:
You have registered under the Securities Act of 1933, as amended (the
"1933 Act") an indefinite number of shares of beneficial interest of 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 combined
proxy/registration statement on Form N-14 with respect to certain units of
beneficial interest of the Trust ("Shares").
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 Shares have been duly authorized under Massachusetts law. Upon the original
issue and sale of the Shares and upon receipt of the authorized consideration
therefor in an amount not less than the net asset value of the Shares
established and in force at the time of their sale, the Shares will be validly
issued, fully paid and non-assessable.
HighMark Funds 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 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.
<PAGE>
HighMark Funds
March 24, 2000
Page 2
We understand that this opinion is to be used in connection with the
filing of the N-14. We consent to the filing of this opinion with and as part of
your N-14.
Sincerely,
/s/ Ropes & Gray
ROPES & GRAY
<PAGE>
EXHIBIT (12)
Form of Opinion of Ropes & Gray as to Tax Matters
<PAGE>
DRAFT OPINION
June __, 2000
Highmark Bond Fund
Highmark Intermediate-Term Bond Fund
-- Highmark Funds
1 Freedom Valley Drive
Oaks, PA 19456
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization
made as of _______, 2000 (the "Plan"), between Highmark Funds (the "Trust"), a
Massachusetts business trust, on behalf of two of its series, Highmark Bond Fund
(the "Acquiring Fund") and Highmark Intermediate-Term Bond Fund (the "Target
Fund"). The Plan describes a proposed transaction (the "Transaction") to occur
on June __, 2000, or such other date as may be decided by the parties (the
"Exchange Date"), pursuant to which Acquiring Fund will acquire substantially
all of the assets of Target Fund in exchange for shares of beneficial interest
in Acquiring Fund (the "Acquiring Fund Shares") and the assumption by Acquiring
Fund of all of the liabilities of Target Fund following which the Acquiring Fund
Shares received by Target Fund will be distributed by Target Fund to its
shareholders in liquidation and termination of Target Fund. This opinion as to
certain federal income tax consequences of the Transaction is furnished to you
pursuant to Section____ of the Plan. Capitalized terms not defined herein are
defined in the Plan.
Target Fund is a series of the Trust which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. Shares of Target Fund are redeemable at net asset
value at each shareholder's option. Target Fund has elected to be a regulated
investment company for federal income tax purposes under Section 851 of the
Internal Revenue Code of 1986, as amended (the "Code").
Acquiring Fund is a series of the Trust which is registered under the
1940 Act as an open-end management investment company. Shares of Acquiring Fund
are redeemable at net asset value at each shareholder's option.
<PAGE>
HighMark Bond Fund -2- June __, 2000
HighMark Intermediate-Term Bond Fund
For purposes of this opinion, we have considered the Plan, the Proxy
Statement, the Registration Statement (including the items incorporated by
reference therein), and such other items as we have deemed necessary to render
this opinion. In addition, you provided us with a letter dated as of the date
hereof, representing as to certain facts, occurrences and information upon which
you have indicated that we may rely in rendering this opinion (whether or not
contained or reflected in the documents and items referred to above).
Based on the foregoing representations and our review of the documents
and items referred to above, we are of the opinion that for federal income tax
purposes:
(i) The Transaction will constitute a reorganization within the meaning
of Section 368(a) of the Code. Acquiring Fund and Target Fund will
each be a "party to a reorganization" within the meaning of Section
368(b) of the Code;
(ii) No gain or loss will be recognized by Target Fund upon the transfer
of Target Fund's assets to Acquiring Fund in exchange for Acquiring
Fund Shares and the assumption by Acquiring Fund of the liabilities
of Target Fund, or upon the distribution of Acquiring Fund Shares
by Target Fund to its shareholders in liquidation;
(iii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iv) The aggregate basis of Acquiring Fund Shares a Target Fund
shareholder receives in connection with the Transaction will be the
same as the aggregate basis of his or her Target Fund Shares
exchanged therefor;
(v) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he
or she held the Target Fund Shares exchanged therefor, provided
that he or she held such Target Fund Shares as capital assets;
(vi) No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Target Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund;
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HighMark Bond Fund -3- June __, 2000
HighMark Intermediate-Term Bond Fund
(vii) The basis in the hands of Acquiring Fund of the assets of Target
Fund transferred to Acquiring Fund in the Transaction will be the
same as the basis of such assets in the hands of Target Fund
immediately prior to the transfer; and
(viii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets
were held by Target Fund.
Very truly yours,
Ropes & Gray
<PAGE>
EXHIBIT (14)(a)
Consent of Deloitte & Touche LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement filed on Form N-14 under
the Securities Act of 1933, filed under Registration Statement No. 033-12608
of our report dated September 10, 1999, relating to HighMark Funds, including
Growth Fund, Value Momentum Fund, Income Equity Fund, Balanced Fund, Emerging
Growth Fund, Small Cap Value Fund, International Equity Fund, California
Intermediate Tax-Free Bond Fund, Bond Fund, Intermediate-Term Bond Fund, 100%
U.S. Treasury Money Market Fund, U.S. Government Money Market Fund,
Diversified Money Market Fund, and California Tax-Free Money Market Fund,
incorporated by reference in the Registration Statement and to the reference
to us under the caption "Financial Statements" in such Registration Statement.
DELOITTE & TOUCHE LLP
San Francisco, California
March 23, 2000
<PAGE>
EXHIBIT (14)(b)
Consent of Ropes & Gray
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our name and the reference to our firm
included in or made a part of the Registration Statement of HighMark Funds on
Form N-14 under the Securities Act of 1933, as amended.
/s/ Ropes & Gray
Ropes & Gray
Washington, D.C.
March 24, 2000
<PAGE>
EXHIBIT (16)
Executed Powers of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Trustee 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 a Trustee 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.
SIGNATURE TITLE DATE
/s/ Mark E. Nagle President October 10, 1998
- -------------------------------
Mark E. Nagle
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Trustee 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 a Trustee 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.
SIGNATURE TITLE DATE
/s/ Robert J. DellaCroce Treasurer and October 10, 1998
- ------------------------------ Chief Financial Officer
Robert J. DellaCroce
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Trustee 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 a Trustee 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.
SIGNATURE TITLE DATE
/s/ Thomas L. Braje Trustee
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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
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Trustee 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 a Trustee 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.
SIGNATURE TITLE DATE
/s/ Michael L. Noel Trustee September 9, 1999
- ---------------------------
Michael L. Noel
<PAGE>
POWER OF ATTORNEY
The undersigned, being a Trustee 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 a Trustee 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.
SIGNATURE TITLE DATE
/s/ Robert M. Whitler Trustee September 9, 1999
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Robert M. Whitler
