April 10, 2009
 
Dear Shareowner of Harleysville National Corporation:
 
 
SUPPORT PROPOSAL #5 TO PROVIDE FOR MAJORITY VOTE IN DIRECTOR ELECTIONS
 
We are writing to urge you to VOTE FOR PROPOSAL #5 at Harleysville National Corporation’s (Harleysville) April 28, 2009 shareowner meeting. CalPERS is the nation’s largest public pension fund with assets totaling $175 billion and owns approximately 101,000 shares of Harleysville common stock. Proposal #5 is a shareowner proposal asking the Board of Directors to amend the Company’s articles of incorporation and/or bylaws to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders, with a plurality vote standard retained for contested director elections. CalPERS urges Harleysville shareowners to vote “FOR” Proposal #5.
 
 
HARLEYSVILLE STOCK UNDERPERFORMANCE & GOVERNANCE COCERNS
 
Time period
ending
3/31/2009
Harleysville
Natl Corp/Pa
(HNBC)
Russell 1000
Index
Relative Return
Russell 1000
Index
Banks: Outside New York
City Russell 1000 GICS
Industry Peer Index
Relative Return
Russell 1000 GICS
Industry Peer
Index
5 years
-68.8%
-20.7%
-48.1%
-37.7%
-31.1%
3 years
-67.6%
-34.7%
-32.9%
-48.8%
-18.8%
1 year
-55.5%
-38.3%
-17.3%
-47.7%
-7.8%
 
  Source: FactSet
 
 
·
Harleysville stock has underperformed relative to the Russell 1000 Index and its Industry Peer Index over the last 1, 3 and 5 years for the period ending March 31, 2009.
     
·
CalPERS believes the Board has failed to adopt current best practices for good corporate governance and has further shown a lack of accountability through the existence of a classified board structure.
     
·
Shareowners lack the ability to hold Board members truly accountable for poor performance because of the ease of director re-elections under the current outdated plurality voting structure.
 
 
 
CalPERS Public Employees’ Retirement System Shareowner Alert
 
 
 
BOARD ACCOUNTABILITY STANDARDS SHOULD APPLY TO COMPANIES OF ALL SIZES
 
A majority voting standard holds corporate directors accountable for company performance and empowers shareowners to have a say over what is in the best interest of Harleysville. Plurality voting is rapidly being replaced with majority voting in director elections. Approximately 66% of the S&P 500 has adopted some form of majority voting – an indication of the current direction of good corporate governance – and this trend does not apply to large companies alone. Currently, there are a growing number of mid-sized and small companies that are adopting a majority vote standard.
 
 
YOU CAN HELP – VOTE FOR PROPOSAL #5
 
·
Send a message by voting FOR proposal # 5 on Harleysville proxy card.
     
·
Ensure every account, no matter how many or how few shares, supports this proposal.
     
·
Furthermore, we ask our fellow investors – to publicize their vote when cast. We believe this will further unite and encourage investors to both support – and benefit from – this campaign.
     
·
Do not be misled. If you are a large holder and find yourself under pressure from Harleysville management to vote against our proposal, ask yourself why defeating this initiative – which is intended to improve board accountability, shareowner rights, and shareowner value – is so important to them.
 
Please refer to the company’s proxy statement for more information. If you have any questions or need assistance with voting your shares, call InvestorCom, Inc., who is assisting us with this effort, at 203-972-9300.
 
 
Sincerely,
 
 
Eric Baggesen
Senior Investment Officer – CalPERS Global Equity
 
PLEASE NOTE: The cost of this solicitation is being borne entirely by CalPERS and is being done through the use of one or more of the following forms of communication: mail, e-mail, and/or telephone communication. CalPERS is not asking for your proxy card. Please do not send us your proxy card but return it to the proxy-voting agent in the envelope that was provided to you.
 
 
 
CalPERS Public Employees’ Retirement System Shareowner Alert
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