Cambiar Investors LLC—Cambiar Conquistador Fund
Q1 2008 Market Commentary

In what has been a dismal start to 2008, the equity markets incurred one of their worst quarterly declines since 2002. Marked by a continued deleveraging of the credit bubble that began to unravel in the second half of 2007, equities experienced a broad and indiscriminate decline that was felt across all market capitalizations and investment styles. Given their more volatile profile, small cap stocks declined more than their larger-cap counterparts, as investors perceived there to be a higher margin of safety in larger companies that have more diversified revenue streams.

The Cambiar Conquistador Fund was not immune to the market sell-off; for the quarter, Cambiar posted a return of -9.5%, vs. -9.9% for the Russell 2000 Index. With 9 of 10 sectors posting a negative return for the quarter (Energy was the exception, with a 1.0% return), performance for small cap managers was generally a matter of magnitude to the downside.

At the sector level, performance was mixed. Cambiar’s Healthcare holdings comprised the most meaningful value-add for the quarter, as the portfolio’s holdings produced an aggregate return of -4.3%, vs. -15.7% for the Russell 2000 Index. The portfolio experienced similar strong stock selection in the Industrials sector, where Cambiar’s positions bucked the downward trend and posted a positive gain for the quarter. One individual standout was Diebold, which appreciated by over 50% on a proposed $40 buyout from United Technologies.
The two sectors that provided the majority of performance detraction in the quarter were Consumer Discretionary and Technology. Given the heightened concerns with regards to spending at both the consumer and corporate level, these sectors lagged for the quarter. For many companies in the Cambiar portfolio, valuations are at trough levels and appear to be pricing in a prolonged recession. While current positioning has resulted in portfolio losses over the short-term, we believe that many of our holdings have the potential to generate significant upside over the next 1-2 years.

Consistent with our 4Q07 comments, the Cambiar portfolio continues to maintain a material underweight allocation to Financials. Although small cap financials fared better in the quarter relative to other sectors of the market, we anticipate there to be more downward revisions to earnings for many companies in this space. And despite a sharp contraction in price levels, current valuations based on metrics such as Price/Book still have not come down enough to make additional investments in this sector a profitable endeavor.

Although only a slight positive in terms of performance contribution for the quarter, Cambiar continues to remain bullish on the long-term prospects for many of the Fund’s Energy holdings. The fact that oil prices are hitting record levels in the face of a downturn within the U.S. economy illustrates that there is a more global phenomenon occurring within this sector. Cambiar’s Energy positions are diversified across businesses whose earnings outlook is largely detached from the current U.S. macro environment.

Cambiar remains of the opinion that the U.S. markets have entered a shallow recession that will likely be followed by a sluggish growth trajectory for the economy over the next 12-24 months. Despite this tepid outlook, current market conditions have presented the Cambiar investment team with a number of attractive investment opportunities whose long-term prospects are not reflected in current valuations. As always, Cambiar’s interests remain closely aligned with those of our clients, as has been the case for the past 35 years.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice.

As of 3/31/08, the annualized performance of the Fund was: 1 year: -16.16%, 3 year: 7.07%, and since inception (8/31/04): 10.69%. Expense ratios are: 1.58% (gross); 1.50% (net). The performance quoted represents past performance and the investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost, and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end, please call 1-866-777-8227 or visit our website at www.cambiar.com. Holdings are subject to change. Weighting as of 3/31/2008 for Diebold is 3.02%.

Russell 2000™ Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

Russell 2000™ Value Index measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.