Cambiar Investors LLC – Cambiar International Equity
4th Quarter 2007 Market Commentary

The ripple effects of the U.S. financial crisis extended overseas, bringing to an end a sequence of positive quarters for many developed countries. Negative sentiment was driven by continued sub-prime concerns, deteriorating credit markets and Japan’s loss of economic momentum. Although economic growth continues to be healthy in much of Europe, rising oil prices coupled with U.S. concerns resulted in risk aversion by investors, pushing markets downwards towards year end. While the MSCI EAFE generated stronger performance results for the quarter as compared to the broader domestic indices, much of this was attributable to currency translation.

During the quarter, Cambiar’s International Equity portfolio outpaced the MSCI EAFE, which posted a loss of -1.8%. Strong stock selection was generated in nearly all sectors within the portfolio, the greatest contribution being realized in the Industrials, Materials and Energy sectors. Technology was the single sector realizing negative stock selection for the period. The strong 4Q translates into outperformance for full year 2007.

Contributing the strongest to performance for the quarter was the Industrial sector, a trend that has been in place since the end of 1Q. Specifically, issues within Hong Kong and Germany keyed outperformance as our holdings in these countries finished up double digits on average. One of the largest holdings, a global supply chain manager, continues to execute exceedingly well as they invest deeper into the supply chain, leading to stronger profitability.

The Materials and Energy sectors delivered strong stock selection results for the quarter as certain issues finished up 20% or greater. From an asset allocation perspective, the continued chaos within the credit markets benefitted the portfolio’s significant underweight to Financials as various companies continue to be battered by write-downs and subsequent profit erosion. At some point the opportunity will present itself to take a position in attractive risk/reward situations within this sector, but we are not there yet.

Cambiar’s over-allocation to Technology resulted in the largest performance detraction as the sector experienced a rapid sell-off globally. Cambiar continues to believe that the Technology sector is capable of generating earnings growth ahead of the broader market moving forward, thus maintain the sector’s weighting. Coupled with attractive valuation levels, we feel the risk/reward profile is rather compelling in light of the anticipated slowdown in global economic growth.

Utilities was the next largest detractor from performance, due to our absence within this defensive sector. We fully expect periodic bouts of uncertainty will result in investors seeking shelter within these companies that provide a stable earnings stream. Driven by our valuation discipline and high hurdle rate requirements, Cambiar sees little opportunity within this sector.

As we enter 2008, global markets will likely remain volatile, resulting in attractive investment opportunities around the world. Today, we feel the portfolio represents a compilation of holdings that, at the aggregate level, provides forward earnings growth potential ahead of the overall market, but with an asymmetric risk profile. We believe our time-tested discipline and rigorous research will help us turn uncertainty and short-term volatility into long-term opportunity. Cambiar Investors will remain committed to buying quality companies at compelling valuations, regardless of the season or sentiment, a philosophy that has served our clients well over time.