IN THIS ISSUE:
• A wonderful story
• The pain of taxes
• Spirit of America family of funds
• Protecting and preserving your assets
• Invest like a bank

We have a wonderful story to tell...
We are so proud to announce the results of our Apple Hospitality Two and Apple Hospitality Five programs. Although past performance is never a guarantee of future results, here are the facts:

Apple Hospitality Two:
The year was 2001, probably one of the most traumatic years in all of history. The stock market was imploding, causing investors to lose trillions of dollars, millions watched helplessly as their savings of a lifetime were substantially eroding. The events of 9/11 loomed in our future. (Perhaps, you remember our radio ad at the time which asked, “Has your 401K become a 201K?”)

With these horrific events as the backdrop, David Lerner Associates embarked on a new venture: Apple Hospitality Two. Our clients invested $425 million in 64 Marriott and Hilton extended-stay hotels throughout the country. Remember, this was at a time when many chose not to travel, causing the hotel industry to decline.

Exciting news for our investors
In May 2007, Apple Hospitality Two was purchased by an affiliate of ING Clarion Partners (ING) for a total of $890 million, which included the assumption of debt.

With the sale, our investors received $11.20 a share for their original $10 investment on April 24, 2001. For those who chose to receive their distributions, the average total annual return was 11.89%. If distributions were reinvested and positions were held for the entire period, the average annual total annual return was 16.84%.

While nothing could be assured, after this sale we believed our other Apple programs (Apples Five, Six and Seven) would be even more successful than Apple Two for the following reasons:

• These newer programs have little or no debt (Apple Two was 45% leveraged.)
• The hotels in these programs are considerably newer (The average age of the hotels in Apple Two was approximately 20 years.)
• The management contracts in Apples Five, Six and Seven make it easy to transfer ownership, unlike Apple Two which had restrictive management contracts.

Apple Hospitality Five:

On October 5, 2007 our belief was validated. Apple Hospitality Five (2003) with 28 hotels and 13,051 clients was acquired by Inland American Real Estate Trust for $14.05 a share.

This closed program began December 11, 2002 at an initial offering price of $10.50 a share. The offering price became $11.00 on January 10, 2003.

Although past performance is no guarantee of future results, clients who paid $11.00 a share January 10, 2003 and reinvested their dividends received an average annual return of 18.33% which was a result of reinvested dividends as well as share appreciation.

Let’s look back and examine what Apples Two and Five did for our investors:
• Before the sale, regardless of what happened in the stock market, the value of their shares did not fluctuate.
• For Apple Two, distributions were paid quarterly; for Apple Five, distributions were paid monthly.
• Investors received significant tax advantages.

At the conclusion of our offering of Apples Two and Five, we created additional two $1 billion programs. Apple REIT Six (2004) with 67 hotels has 21,826 clients. Apple REIT Seven (2006) with 42 hotels currently, has 21,239 clients.

We are grateful to all of those who shared our vision and invested in Apples Two, Five, Six and Seven.

The returns shown above may not be indicative of the results experienced by other investors who may have purchased shares at different times and/or at a different price.

The pain of taxes
Tax his land
Tax his bed
Tax the table
At which he’s fed

Tax all he has
Then let him know
That you won’t be done
’Til he has no dough

Do you recognize this person? What’s the answer? For the past 31 years, David Lerner has conducted investment seminars that thousands upon thousands of people have attended.
And without fail, he asks the audience, “Raise your hands if you own individual tax-free bonds.” Typically, a number of hands go up at each seminar. He then has the hubris to say to his audience, “Raise your hands again if you are not happy with the bonds.” Typically, not
one hand is raised.

What is behind this amazing poll?
Why have tax-free bonds been such a satisfying experience?
• They historically offer one of the highest degrees of credit safety.*
• The tax-free advantage can be very meaningful. A hypothetical municipal bond yielding 4.5% (in 43% tax bracket**) = 7.89% taxable.
• They are liquid any business day at the market.

Find out how millions have eased the pain of taxes. Call us at 1-800-367-5960 or click here to contact us.

Interest earned on certain municipal bonds is subject to the alternative minimum tax (AMT).
Investors should consult with their tax preparer or tax advisor to determine if they are subject to AMT.
*Bonds subject to market fluctuation.
**Tax advantage will vary depending on individual tax bracket.

What could an investment in Spirit of America do for you?
Spirit of America, David Lerner Associates’ family of mutual funds, is made up of a real estate income and growth fund and a large cap value fund.

Spirit of America Real Estate Growth and Income Fund
• Invests in the “bricks and mortar” of the country
• Liquidity – can be sold any day at the market
• Seeks to provide regular dividends

Spirit of America Large Cap Value Fund
• Seeks long-term capital appreciation
• Invests in large, high quality U.S. companies that the managers believe are undervalued
• 33 of 54 companies the Fund invests in are rated 4 and 5-star by Standard & Poor’s as of 9/30/07
• Liquidity – can be sold any day at the market

Investors should consider the objectives, risks, charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund and should be read carefully before investing.

Cut out the middleman: Invest like a bank
Years ago, only large institutions such as banks were able to purchase Collateralized Mortgage Obligations (CMOs) which were typically sold in blocks of $1 million or more. In the late 1980’s, David Lerner Associates became one of the first investment firms to make this investment available to the vast majority of investors.

CMOs are bonds backed by a pool of mortgages and guaranteed by such agencies as FHLMC (Freddie Mac), GNMA (Ginnie Mae) and FNMA (Fannie Mae) as well as many major banks.

• They are typically 100 to 150 basis points higher than a Treasury bond with a comparable anticipated maturity. For example, a CMO offered on October 15, 2007 had an anticipated yield of 5.91% which was 115 basis points higher than the Treasury bond was yielding on that day.
• Historically among the safest of investments — CMOs offered by David Lerner Associates are either AAA implied or AAA rated.
• Liquid at the market on any business day.
• Typically generates a monthly income.
• Anticipated maturity dates can be tailored to an individual’s needs.*

Click here to contact us or call 1-800-367-5960 for our free booklet, “An Investor’s Guide to CMOs.”

*Actual maturity may be longer or shorter than anticipated.
Government agency backing applies only to the face value of the CMO and not to any premium paid. Market value subject to change based on mortgage rates and changes in current interest rates. Yields and anticipated lives will fluctuate depending on the actual rate at which mortgage holders prepay the mortgages underlying the CMO and changes in current interest rates. Potential investors should be aware of tax considerations, minimum investments, average life, transaction costs and a list of questions an investor should ask before investing.

Even your grandfather’s clock could be taxed!
Failure to implement strategies to preserve assets could jeopardize a lifetime of planning.

In 2011, the maximum estate tax will be 55%, and this does not include state estate taxes. It is assessed against total worth – your home, your business, your pension, your investment accounts, your savings accounts, your grandfather’s clock, everything of value can be subject to this tax. It may be wise to contact your investment counselor and find out about the various ways to protect your estate.

Protect your family and help preserve your independence.

Another event that can unravel the best financial plan is the need for long term care. Many investors fail to protect their assets from the possible catastrophic impact of having to pay for this type of expense. Depending on the location, these expenses can range between $150 and $300 per day. At $200 per day, the annual cost for long term care is $72,000 per year, in three years that cost is $216,000. These costs will probably significantly escalate in the future. Will these expenses come from your retirement fund, your spouse’s retirement fund or perhaps the legacy you had hoped to provide for your grandchildren? Call your investment counselor to find out how you can protect your family.

Learn how to protect your income
The engine that drives nearly everything we achieve and acquire is the income we earn over our lifetime. A 35-year old earning an average of $100,000 per year will have earned by age 65 a total amount of $3 million. This is the income which buys the house, educates the children and provides for your retirement. While it is natural to insure your home, your car and your life, should your ability to earn an income stop — even for a short time — a lifetime of planning could be dramatically altered with devastating results.

Avoiding these financial uncertainties is a matter of planning. Without financial planning strategies, your goals may be unrealized. Utilizing trusts and wills, education and retirement strategies, insurance, estate and income tax avoidance techniques as well as investment planning are all critical components in protecting you and your family’s future.

What is the next step? Concerns about protecting your assets from estate taxes, long-term care costs, and disability need not destroy a lifetime of planning. Protect yourself and your family.

Make an appointment today to learn more. Call us at 1-800-367-5960.

We are proud to sponsor so many worthy causes
From the Arts to Education to Helping Those in Need

• This is the 16th year the David Lerner Associates Annual Police Appreciation Run has donated its entire proceeds to the special Police Crisis Fund. The fund was established to aid Long Island officers in times of emergency.

• “Love is learning, learning is love.” That’s the motto of the Trey Whitfield School. Located in East New York, this remarkable private school serves more than 500 inner city elementary students.

• David Lerner Associates has supported the Nassau County Museum of Art for the last several years. David Lerner was honored by the museum last year for his many contributions.

• We are happy to support the Long Island Philharmonic with two free concerts on Long Island every summer.

• “Stride for the Cure,” a walk to benefit cancer research, was held recently at Cold Spring Country Club. David Lerner Associates matched all contributions.

We’re growing...
Newest branch opens in Coral Springs

Our newest retail branch in Coral Springs, Florida recently opened at 3111 North University Drive. We are planning special events and educational seminars and look forward to seeing and serving our Florida clients. Stop by the office anytime and meet our new branch manager, Jonathan Jarow.

Syosset headquarters expanding

To help meet our continuing growth, we recently purchased the property next door to our corporate headquarters on Jericho Turnpike in Syosset. When the new building is completed, it will be an exact replica of corporate headquarters. We’ve even hired the same architect who designed our original building over 25 years ago.

The best way to find out about what we do is to make an appointment with one of our investment counselors.

Click here to make a reservation for an upcoming seminar in your area.