Welcome to the June issue of Condor Monthly!

In "From the Portfolio Manager" this month, we present the Rainier Growth Equity Portfolio, a recent addition to Condor's Mutual Fund Model. In this month's "Financial Planning Corner," we review the benefits of using required minimum IRA distributions for charitable purposes and discuss recent changes to federal tax legislation that increase the appeal of Sec. 529 savings plans relative to custodial accounts.

From the Portfolio Manager

Rainier Large Cap Growth Equity (RGROX)

One of Condor Capital Management's newest additions to client portfolios is the Rainier Large Cap Growth Equity Portfolio, managed by the highly regarded Rainier Investment Management Inc.

Objective & Strategy

Although past performance does not guarantee future results, it is worth comparing longer-term returns to get an idea of whether a strategy is working or not. Compared to the Russell 1000 Growth Index, the Rainier Large Cap Growth Equity Portfolio has outperformed its benchmark over the prior three- and five-year time frames. In addition to astute stock picking, the company's willingness to invest in non-traditional growth sectors, such as energy, have enabled it to outperform the Russell 1000 Growth Index over those time periods.

Outlook

Though equities can be a risky investment, Rainier believes that if the economy continues to weaken, the Federal Reserve will be forced to cut rates later in the year. This could then serve as a catalyst to stimulate economic growth. With 98% of Rainier's assets in equities (the other 2% being in cash), the company's overall outlook still remains positive for stocks because the managers feel that equities do not appear to be as expensive when compared to historical valuations.

Financial Planning Corner

Charitable IRA Distribution Opportunity Still Available

The Pension Protection Act of 2006 lets taxpayers who are age 70½ or older exclude up to $100,000 of otherwise taxable IRA distributions from income in both 2006 and 2007 if those distributions are paid directly to a qualifying charity. Distributions must be for outright gifts, including outstanding pledges. The IRA owner cannot receive any benefit, such as goods or services, as a result of the charitable contribution. Note that donor-advised funds and most foundations are not eligible charities. The distributions count toward the taxpayer's required minimum distributions. Since the distribution is not included as taxable income, a charitable deduction is not available.

IRA account owners most likely to benefit from this provision are those who:

• Do not need their required minimum distribution for living expenses
• Do not itemize deductions
• Lose tax deductions as their adjusted gross income increases
• Want to reduce the proportion of retirement assets in their estates
• Have already exceeded their charitable deduction limitations for the year
• Live in states that do not provide a state income tax deduction for charitable contributions (e.g., New Jersey)

Because the tax benefits of distributions under this provision will differ based on varying individual circumstances, we recommend that you consult your tax advisor to learn how distributions will affect your particular situation.

Distributions from SEP or Simple IRAs are allowed as long as there are no contributions into these IRAs in the year of the distribution to the charity, but distributions from qualified plans such as 401k or 403b plans will not qualify for this special treatment.

New Rule on "kiddie tax" makes Sec 529 Accounts More Attractive

Many people use custodial accounts to save for their children's education and to also shift income to the child's lower tax rate. However, the advantages of custodial accounts have been drastically diminished due to recent legislation, especially when compared to Sec. 529 College Savings Plan accounts.

Special rules (generally referred to as "kiddie tax" rules) can apply to the net unearned income of children. Generally, kiddie tax rules apply if a child under the age of 18 has unearned income exceeding $1,700 (2007 figure). In this case, the child's excess unearned income (that portion of the child's unearned income exceeding $1,700 for 2007) is taxed at the parents' marginal tax rate, assuming the parents' tax rate is greater than the child's.

The Small Business and Work Opportunity Tax Act of 2007 expands kiddie tax rules to apply to children who are 18 years old or who are full-time students over age 18 but under age 24. The expanded kiddie tax rules apply only to children whose earned income does not exceed one-half of the amounts of their support. This provision is effective for taxable years beginning after May 25, 2007 (the 2008 tax year for calendar year taxpayers).

The new law could give a boost to 529 college savings plans because investments in these accounts are not subject to the kiddie tax and investments grow tax-free when used for college expenses. Withdrawals from a custodial account can only be made for the child's benefit, but this can include moving the funds into a Sec. 529 account. For many parents, now would be an appropriate time to reevaluate the use of custodial accounts.