Dear Friends and Family,

We hope you are enjoying a fun-filled summer! We would like to thank all of our clients for your continued support and referrals. As a direct result, our firm was ranked #29 in growth among Registered Investment Advisory firms within our asset group (July 2007 issue of Financial Advisor Magazine). Without you, this would not be possible — we truly appreciate and enjoy our relationships with each of you.

During this August’s monthly calls, we’ll be discussing any recent changes in your fiscal health. Have your needs changed? Have there been any life-changing events — such as retirement, purchasing a new home, welcoming a new baby, or sending a child off to college? We’ll be checking in on these updates during our conversation with you, so please feel free to share any changes or questions.

The markets recently experienced a rough week, described by many as a reaction to fears of a credit crunch originating in the subprime mortgage sector. Poor-quality debt has seen a justified increase in interest rates. These higher rates are making some loans unaffordable and therefore unlikely to be issued. The concern is that economic activity may slow, and that the wave of mergers, acquisitions, and stock buybacks — which have contributed to recent market gains — could begin to decline.

But as Isaac Newton’s third law reminds us: for every action, there is an equal and opposite reaction. So what will lenders do with their cash? We’re already seeing a 0.5% drop in 10-year Treasury bond yields over the past six weeks — essentially functioning like a Federal Reserve rate cut. Quality companies may now be able to borrow at lower rates to repurchase their undervalued shares. Homebuyers with strong credit will find lower-rate loans easier to access. And while some speculative transactions may recede, 80% of merger and acquisition activity is driven by high-quality companies making strategic moves. These companies, too, will benefit from the lower-rate environment and more reasonable valuations. Ultimately, a lending landscape where good and bad creditors are financed at appropriate rates is likely to be healthier for the long-term economy.

We’re also pleased to announce a new seminar topic and guest speaker for our upcoming events in Issaquah and Bethesda. Phil Tobin of the American Endowment Foundation will lead a thoughtful and engaging session on Donor-Advised Funds. What are they? How do they work? Come learn how charitable giving through donor-advised funds can align with your philanthropic goals and offer meaningful tax advantages.

In Issaquah, we’ll host two sessions on September 11, 2007 — one at noon and one at 6:00 p.m., with lunch and/or dinner provided. Seminars in the Bethesda area are planned for mid-October. We’ll update you with exact dates and locations soon. In the meantime, please contact Vicki or Julie with any questions.

Warm regards,

Katz Family Financial