Recent events in the financial markets have been unprecedented. The federal takeover of Fannie Mae, Freddie Mac, and AIG, coupled with the bankruptcy filing for Lehman Brothers and the sudden sale of Merrill Lynch, underscore the disarray in the markets. In our opinion, the fundamental cause for this turmoil is the excessive leverage employed by these institutions.

As recent events have shown, absolute size is not an indication of financial strength. Instead, a better measure of strength is equity capital relative to size. The following financial ratios, as of June 30, 2008, illustrate Stifel�s financial strength:

� Stifel Financial, our holding company, has a Tier-one capital ratio of 49%, which is 12 times the required level. For comparison, Citigroup�s Tier-one capital ratio is approximately 9%.

� Stifel, our broker-dealer, hasa net capital ratio of 37%, 17 times the required level.

� Stifel Financial�s total capital* ratio is 3 to 1, which means we have $1 of capital for every $3 of assets. The major New York investment banks� capital ratio, on average, has been 30 to 1, meaning they have $1 of capital for every $30 of assets. In other words, the large firms are ten times more leveraged than Stifel.

� Finally, it is important to note that holding securities with Stifel is as safe as holding them with any custodian bank or trust company. Stifel�s clients have the same right as clients of banks/trust companies to reclaim securities free from any general creditor claims, because, in both cases, client securities are not considered assets of the financial institution.

Stifel is very well capitalized, and this strong capital position has allowed us to weather the storm. 2007 marked the 12th consecutive year of record net revenue for Stifel Financial Corp., and we are well on our way to a 13th consecutive year of record net revenue. Our business model, which emphasizes client service, does not rely on the leverage which has plagued many other financial institutions. As part of our efforts to be the Advisor of Choice for today�s investor, we have maintained our focus on our core capabilities, and the end result is a firm that is well positioned for years to come.

Thank you for your continued trust and for allowing us to assist you in reaching your financial goals.

Ronald J. Kruszewski

Chairman and Chief Executive Officer                                       *Total capital includes equity plus trust preferred securities.

As a Stifel client, you have access to a wide range of resources to help you reach your financial goals. In addition to a variety of separate account managers, Stifel clients can take advantage of the services of two investment advisory groups that are part of the Stifel family � EquityCompass Strategies and Washington Crossing Advisors. You may recognize the market strategists who lead these entities from their frequent national financial news media appearances.

Investors outperform market averages with superior market timing and/or superior stock selection. However, market timing is difficult, with a less than favorable long-term record of successful performance. The competitiveness of the marketplace also makes the search for undervalued stocks challenging, with inconsistent results. The third approach to outperforming the market is to exploit investor mistakes. There are periods when investors over- and underreact to information and mispriced stocks. The stock mispricing is a unique and temporary investor mistake that a competitive market will correct with favorable probability. Given the behavioral tendencies of investors, over-/underreaction is a persistent feature of the stock market.

The EquityCompass has developed proprietary research to identify stocks experiencing over-/underreaction and seeks to systematically exploit the condition with portfolios that meet a range of investor objectives.

Combining the insight of investor over-/underreaction with fundamental analysts� Buy opinions provides a complementary, independent, and top-to-bottom approach for stock selection. EquityCompass research suggests that these two factors produce better results than over-/underreaction or analysts� Buy recommendations on their own. With the research serving as the basis for developing a rules-based portfolio discipline, the Stifel Research Opportunity combines the buy recommendations of Stifel research analysts with the over-/underreaction insight from the EquityCompass and is available as a managed portfolio in the S|CORE program.

The CONQUEST program is designed to serve as the diversified core of a comprehensive strategy for investing. This strategy actively manages your portfolio through changing market environments by tilting your portfolio toward those markets that Washington Crossing Advisors believes will perform the best over the next 12-24 months. Washington Crossing Advisors

will invest in a variety of exchange traded funds (ETFs), which represent a variety of asset classes. While diversification does not ensure a profit or protect against loss, it is a tool that allows investors to mitigate some types of unnecessary risk while taking advantage of the potential benefits of global diversification and professional management.

The approach is intended to reduce overall risk in three ways: by using multi-asset and global diversification to help mitigate risk associated with owning individual securities, improving liquidity through the use of highly marketable exchange traded funds, and by investing in many asset classes that behave differently from one another as economic and market conditions change.

Washington Crossing Advisors has constructed over ten different portfolios to suit the needs of different investor types, based on risk tolerance. These portfolios range from a �conservative� portfolio with primary emphasis on stability of principal to an �aggressive growth� portfolio that places a greater emphasis on total return with commensurately more risk. Working together with your Stifel Financial Advisor, Washington Crossing Advisors can help guide you toward an ETF strategy that provides a growth potential level that fits with your tolerance for risk.