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July 1, 2015

Dear Client: Returns for the major stock indices for the first half of 2015 are as follows:   Index YTD 2015 Dow Jones Industrial Average -1.14% S&P 500 +0.20% NASDAQ Composite +5.30%     Year-to-date, the driving market forces for stocks and bonds have included both temporary and ongoing issues.  The temporary issues hit largely in the first quarter of 2015, including an unusually cold and snowy winter for major portions of the country and a West Coast port strike delaying the normal flow of many goods.  Like 2014, when harsh weather temporarily held the economy back, we expect forthcoming economic reports will show growth lost in the first quarter will be recovered in the second and third quarters of this year.  The West Coast port strike ended in mid-March and we expect its limiting effects are also being recovered. Ongoing market driving forces include: Anticipation of Federal Reserve rate increases: Like many economists, we are expecting the Federal Reserve will raise interest rates later in 2015. This will be the first Fed rate increase in nine years. The timing of this increase is uncertain, but it is likely to happen this fall. While the media and many market followers continue to sensationalize the timing and importance of this Fed change, we believe the move is more symbolic. With the Fed currently targeting near-zero short term interest rates and saying the timing of rate increases will be determined by economic strength, our view is any rate increase in 2015 is cause for optimism.  We feel a rate increase will be signaling the Fed believes the economy is finally strong...