January 31, 2014

Dear Friends, Last year broadly diversified portfolios of large, mid and small cap stocks generated serious double digit returns; in contrast, the returns of many corporate and government bonds were modest or negative. This year, the market is starting out on a different note: the returns of many corporate and municipal bonds increased in January while the returns of broad based equity portfolios fell. I believe a contributing force to the difference in price movements between last year and today was a perceived change in Federal Reserve policy. When the US economy entered a financial downturn in 2008, the Federal Reserve initiated a policy to help the economy recover. It first increased liquidity and aggressively lowered short term interest rates; and it then began to implement QE2 to directly influence long term rates. The underlying theory of this program was simple enough. If interest rates were low and liquid funds readily available, investors were likely to respond by borrowing low cost money and investing in higher yielding assets. Some would invest in common stocks, others would turn to real estate, while still others would take advantage of the low rates and greater liquidity by starting new businesses and hiring more people. The Feds low interest rate policy could also induce foreign investors to consider America as a place where they could borrow and spend their low cost funds. The Fed program worked as intended. Stock prices began to rise and almost doubled between 2009 and the end of 2013. Today many home prices and apartment rents are at peak values. Foreign borrowings increased, and the number of people employed continued rising. As the economy gained momentum, a discussion began to take place as to whether the low interest should come to an end and be replaced by a policy calling for more restraint. A former Fed Chairman, William McChesney Martin voiced a similar sentiment years ago when he said that It is the job of the Fed to take away the punch bowl just as the party gets going. Ben Bernanke indicated that a reasonable target date for ending the current easy money policy could be when the rate of unemployment fell to 6.5 percent. Until then, the Fed could taper or lower the dollar value of the bonds it buys by $10 billion a month. Two months ago, the Fed bought $85 billion of bonds; last month it bought $75 billion, and this month it announced that it would buy $65 billion. We expect the Fed to continue this tapering policy, and ask How should we change your portfolio in response to this new Fed policy? We currently think of your portfolio as consisting of three parts. We would like the first two, high dividend paying equities and fixed income securities to generate enough cash to satisfy your portfolios current income requirements. The third part, growth equities, should enable the total value of your portfolio to increase so it can make a significant contribution to your future wealth.

500 Lake Cook Road | Suite 210 | Deerfield, IL 60015 TEL 847.282.4225 FAX 312.962.3899 hightoweradvisors.com Securities offered through HighTower Securities, LLC | Member FINRA/SIPC/MSRB | HighTower Advisors, LLC is a SEC registered investment advisor

We recognize that as the Fed ends its easy money policy, widespread price changes are going to take place in both the stock and bond market. In the municipal bond market, for example, some tax equivalent rates now exceed corporate rates. Many foreign stocks now sell at depressed levels and could become attractive investments. Relative price changes are going to continue influencing the attractiveness of specific investment opportunities. However, they do not reduce your need for current income, or the desirability of bonds and equity income holdings. We want to continue to preserve and enhance your wealth and plan to monitor the asset price changes in these investment areas in the months that lie ahead to take advantage of opportunities as they might arise. Thank you for your continuing support during the challenging weeks and months that lie ahead. Please call if you have any questions. Sincerely,

Eugene Lerner Managing Director, Partner

The Lerner Group is a group of investment professionals registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The Lerner Group and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. This document was created for informational purposes only; the opinions expressed are solely those of The Lerner Group and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

500 Lake Cook Road | Suite 210 | Deerfield, IL 60015 TEL 847.282.4225 FAX 312.962.3899 hightoweradvisors.com Securities offered through HighTower Securities, LLC | Member FINRA/SIPC/MSRB | HighTower Advisors, LLC is a SEC registered investment advisor