July 31, 2013

Dear Friends, Last weekend, the Lerner Group supported the Judd Goldman Adaptive Sailing Foundations annual fundraiser gala. The evening was a powerful reminder of the impact of a clear vision and determination. Peter Goldman and his family have built an organization that has grown at a stunning rate, facilitating sailing for over 1,000 disabled participants each year. We are proud to support their efforts and encourage you to learn more about their foundation. In a similar growth trajectory, the S&P stock price index recently experienced recordbreaking rates of return. The index increased 5 percent in July, 18 percent since January, and 150 percent since March of 2009. I believe two driving forces behind these gains, which now characterize our economy and could continue in the near future, are the unprecedented low interest rates and the high level of corporate profits. While low interest rates and high profits had an impact on the entire market, not all stocks increased at the same rate. Rather, many stocks that headquarter in China, India, and Brazil actually fell in price since the beginning of the year. On the other hand, the stocks of many companies which pay dividends, sell at a modest price to earnings (P/E) ratio, and enjoy a positive sales growth rate, increased at a faster rate than the broad market indices. These stunning growth rates beg the question - how long can the two macro-economic forces of low interest rates and high profits persist? And if they do continue, which stocks are most likely to benefit? The low short term interest rates that now prevail are the result of the Federal Reserves policy of buying $85 billion a month of government securities. These purchases have enabled our nations total money supply to expand at a double-digit rate. As end users spend some of this increase, they drive up both producer and consumer prices. Yet, while end product prices rose, high levels of unemployment and increased productivity held down the cost of producing goods. As a result, corporate profits increased. These same factors unemployment and productivity along with other related factors could keep costs lagging behind end prices, benefiting corporate profitability.

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

That said, not all of the increased money supply was spent on items that enter the consumer price index. Some funds went into the stock market, driving up stock prices; other funds went into the housing market, leading to a rise in home prices; and still other funds went to pay down existing debt and to increase the liquid balances that individuals and firms put aside and hold for a rainy day. If this analysis is correct and the low interest rate policy and high profits could continue for some time, the question every investor faces is, Which securities are likely to rise over the next several months and years? I believe that in the near future, as in the recent past, investors are likely to prefer owning companies that provide them with some current income. They could therefore continue to seek out companies that pay dividends, sell at a reasonable P/E ratio, and have the potential for future price appreciation. Different premiums may be paid for large cap, mid cap, and small cap companies, but this logic applies to all. Therefore, our preference is to look for opportunities in all three market cap sizes, and we will do so with the funds you entrust with us. We wish you well in this final summer month, and as always, we thank you for your trust and loyalty. Sincerely,

Eugene Lerner Managing Director, Partner

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