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Market Overview/Performance Discussion The Capital Growth Plan gained 5.32% and the Conservative Plan was up .65% net of fees for the quarter. Both plans slightly exceeded their respective benchmarks. From an allocation perspective, the plans were overweight both stocks and bonds and underweight cash. The overweight to stocks was a positive contributor. The overweight to bonds was neutral for Capital Growth and a slight detractor for the Conservative plan. Equities in total were higher by 7% for the quarter. REIT equity was the top performing asset class up about 15%. While the investment is a passive exchange traded fund, the performance was below the Wilshire REIT Index benchmark. The Vanguard REIT ETF fund in the portfolio has a different benchmark than the Wilshire REIT Index, and over shorter periods of time may experience out- or under-performance. Over longer periods of time, however, the ETF and Wilshire REIT Index should have similar returns. Large Cap was the next best asset class up about 11% followed by Mid Cap (+6.46%), Small Cap (+2.10%) and International (+1.65%). The growth uncertainty associated with the Covid variants and the expectation for the Fed raising interest rates led investors to favor the more stable and less risky Large Cap companies. The Capital Growth fixed income asset class was about flat for the quarter and nearly in-line with the benchmark. Both yields and the outlook were relatively unchanged during the quarter leading to effectively zero returns.. The Conservative Fixed Income asset class, however, was down .51%, but in-line with the benchmark. Hawkish comments by the Fed calling for an accelerated pace of interest rate increases led to sharply higher shorter-term yields. As the Conservative plan's objective is to invest in shorter-term fixed income securities, the plan was impacted by the sell-off in the shorter-end of the yield curve. The start of the year has brought volatility and lower equity prices given investor concern regarding the Fed's guidance for rate hikes. Higher interest rates typically coincide with heightened volatility and temporary declines in equities. As investors become comfortable with tighter monetary conditions, volatility typically subsides leading to a recovery in equity markets. We expect a similar dynamic to occur in the current environment and a recovery in equity markets throughout the year. However, we do expect continued volatility as investors contend with the changes in monetary policy and a moderation in economic growth. Given the outlook for equity markets, both plans continue to be overweight stocks. Because we believe inflation will normalize over the year along as well as continued positive economic conditions, the upward pressure on medium to longer-term yields will subside resulting in very modest but positive bond returns. Thus, fixed income is also modestly overweight. HIGHIVIARK® PARS: City of Pleasanton 4 CAPITAL MANAGEMENT