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INVESTMENT INSIGHTS July 18, 2011
Union Bank, N.A., (Union Bank) is the Investment Manager of the Fund. HighMark Capital Management, Inc. (Adviser), a registered
investment adviser and a wholly owned subsidiary of Union Bank, has been appointed as the Investment Adviser to manage the
assets of the Fund. Union Bank, N.A., is also the Fund’s Trustee and Custodian.
Raising the U.S. Debt Ceiling and Fiscal Budget Deficit Debate – Summary Thoughts
Once again, the U.S. President and Congress debate whether to raise the amount of debt the U.S. Department of
Treasury (the “Treasury”) is authorized to issue. The current limit is $14.294 trillion, which was increased by $2
trillion in February 2010. A decision to raise the debt limit, which would allow the Treasury to finance ongoing
operations of the federal government, has become linked to decisions about longer-term budget issues, such as
reducing government spending commitments and changes to tax policy. There is also debate about whether to
establish triggers for future debt increases. With a substantial increase to U.S. government debt since 2009,
compounded by fiscal deficits currently expected to continue to exceed $1 trillion through 2013, Congress is seeking
a grand compromise to extinguish the U.S. fiscal deficit as soon as possible. Critical differences exist in determining
how to extinguish the U.S. fiscal deficit, such as considering a mix of raising taxes and curtailing spending to rein in
growth of U.S. government debt.
The Treasury’s imposed August 2, 2011 deadline to raise the debt limit has increased public debate. Rating
agencies, such as Moody’s Investors Service and Standard & Poor’s Corporation, have warned that the AAA credit
rating of the United States is at risk of being downgraded. A downgrade would increase the cost of debt priced off
U.S. Treasuries for an extended period of time, as higher yield compensates for increased risk. Media coverage
ranges from expert analysis to objective reporting and a lot of opinionated views that tend to amplify capital market
volatility. However, we observe no risk premium in U.S. Treasuries that would suggest any more than a negligible
probability of U.S. government default or even downgrade. The markets provide certain measured discipline of
known outcomes that preclude certain scenarios when, unlike Greece and several other Eurozone countries, there is
a great deal of flexibility in how to resolve the current U.S. fiscal deficit situation. We view a U.S. government
downgrade or even technical default as a remote possibility given the consequences would be quite severe to the
U.S. economy and financial markets, resulting in significant public outcry and political backlash.
Should an agreement on raising the debt ceiling not be reached by early August, the U.S. would not necessarily
default, but Treasury would be forced to prioritize items to be paid. Much like what we observed in California in
recent years, government can respond in many ways to a cash flow crunch when expenses exceed revenues and
there is no ability to borrow more money. Non-essential services can be curtailed as well as furloughing workers or
shortening work hours, but servicing interest payments and refunding maturing bonds is the first priority, which is
easily covered by income tax revenues. Once an increase is approved, we expect significant supplies of U.S.
Treasuries to come to market given the various cash flow maneuvers needed to buy time in order to reach
agreement.
NIFCU$ is defensively positioned with respect to weighted average maturity and exposure to U.S. Treasuries. We
believe U.S. Treasuries up and down the yield curve are abundant relative to other available investment alternatives,
in part due to debt turmoil in the Eurozone.
Although we think the risk of non-payment of U.S. government debt is remote, we have considered the potential fall-
out and are closely monitoring the situation.

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Investment Insights is a publication of HighMark Capital Management, Inc. This publication is for general information only and is
not intended to provide specific advice to any individual. Some information provided herein was obtained from third party sources
deemed to be reliable. HighMark Capital Management, Inc. and its affiliates make no representations or warranties with respect to
the timeliness, accuracy, or completeness of this publication and bear no liability for any loss arising from its use. All forward looking
information and forecasts contained in this publication, unless otherwise noted, are the opinion of HighMark Capital Management,
Inc. and future market movements may differ significantly from our expectations. HighMark Capital Management, Inc., a registered
investment adviser and subsidiary of Union Bank, N.A., serves as the investment adviser for HighMark Funds. HighMark Funds are
distributed by HighMark Funds Distributors, Inc., a wholly owned subsidiary of BNY Mellon Distributors Inc. Union Bank, N.A.
provides certain services for the HighMark Funds for which it is compensated. Shares in the HighMark Funds and investments in
HighMark Capital Management, Inc. strategies are not deposits, obligations of or guaranteed by the adviser, its parent, or any
affiliates. Index performance or any index related data is given for illustrative purposes only and is not indicative of the performance
of any portfolio. Note that an investment cannot be made directly in an index. Any performance data shown herein represents
returns, and is no guarantee of future results. Investment return and principal value will fluctuate, so that investors' shares, when
sold, may be worth more or less than their original cost. Current performance may be higher or lower than the performance quoted.
Investments involve risk, including possible LOSS of PRINCIPAL, offer NO BANK GUARANTEE, and are NOT INSURED by the
FDIC or any other agency. Entire publication © HighMark Capital Management, Inc. 2011. All rights reserved.