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

March 31, 2014


Dear Friends,

Most people expect equities to generate higher returns than bonds. However between the first of this year and
today, the S&P market index remained virtually unchanged while Barclays municipal bond index rose
approximately 3 percent.

I believe that three factors contributed to this new and unusual return pattern: (1) a growing awareness of
market uncertainty, (2) the widespread expectation of rising taxes, and (3) the likelihood that interest rates could
continue to remain low. Let us first discuss these three market forces and then turn to their implication for your
personal portfolio.

(1) The increase in market uncertainty. The current high level of uncertainty over equity returns arises
from many different sources. The wide range of possible outcomes arising from our foreign policy in
Syria, Iran and Russia make the returns of investment decisions in these areas virtually impossible to
calculate. Known unknowns are increasing. On the domestic front, the growth and spread of new
rules and regulations makes it almost as difficult for investors to compute expected returns from new
ventures. On the political front, Congress is deeply divided and the rising class antagonism between
the rich and the poor increases the uncertainty of the outcome of many investment outlays that should
be easier to calculate than they now are.

The net effect of these growing uncertainties is that investors are likely to develop an even stronger
preference, and pay a higher premium for, investments that offer steady and predictable returns.
Even though the average return to investors from companies that report more volatile earnings may
be more modest, some carefully selected companies from this set may represent attractive investment
opportunities.

(2) The widespread expectation of rising taxes. One of the first lessons that every new investor learns is
that municipal bond income is tax exempt. And one of the first messages that investors are likely to
hear when they listen to candidates running for public office is that the government needs more
money. When these two learning experiences are linked, they create a strong demand for municipal
securities.

Since investors are prepared to pay higher prices for tax exempt securities as their marginal income
taxes rise, the returns from a portfolio of muni bonds may be higher in the future than the returns
from a portfolio of common stocks. This pattern occurred earlier this year.

(3) The likelihood that interest rates are going to continue to be low. For the past several years, the
Federal Reserve pursued its Quantitative Easing policy of increasing liquidity and holding down
interest rates. The logic behind this policy was that it would stimulate corporate investment in plant
and equipment, lead to economic recovery, and reduce unemployment. While the speed at which
these developments took place has been disappointing, low interest rates were the major driving force
in our growing recovery. Home prices are now rising, construction activity is strong, and in some
areas of the equity market, speculative signs are beginning to appear.




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







The question then arises, When will the Federal Reserve reverse its low interest rate policy and start
to raise interest rates? Ben Bernanke said he would take action when the unemployment rate fell
below 6.5 percent; Janet Yellen is more cautious and alludes to several other indicators she would
watch before she takes decisive action to tighten money.

If rates do rise, two things will follow as a direct consequence. First, the US Treasury will be obliged
to pay higher interest rates on the national debt as existing bonds mature and new bonds are issued.
Second, the interest rate homeowners will be asked to pay on their mortgage loans will increase. Since
there may be strong opposition to both of these developments, we believe interest rates are likely to
remain low, and bond prices remain strong, until some future date.

(4) Implication of these developments for your portfolio. None of the observations made above have
an effect upon the goal we set when you gave us the privilege of managing your money. Our goal is,
and continues to be, to preserve and enhance your wealth.

However, the observations do have implications for the weights we assign to our three major
tools: Growth Equities, Equity Income Stocks, and Bonds. We believe a strong case has been
made for increasing your holdings of investment grade, short term corporate and muni bonds.
We would like to increase your allocation to this asset class.

We also believe that an increase in the Growth Equity portion of your total portfolio should
take place. Good quality well managed companies can and do experience sharp downward
price movements when uncertainty is high. Companies that meet these criteria should be
added to your Growth Equity portfolio when their market prices become attractive. At the
present time, roughly twenty percent of your the Growth Equity portfolio consists of companies
that meet such an opportunistically priced standard. We believe this portion of your Growth
Equity portfolio should be increased.

Funds to purchase additional Bonds and opportunistically priced Growth Equities could come from
new contributions or from a reallocation of your total assets, i.e., by moving funds from the Equity
Income portion your total portfolio into these two asset classes. We would like to discuss these
proposed allocation changes and their funding with you and welcome your call for an appointment.



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











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.