Cambiar Investors LLC—Cambiar Small Cap Value
Q4 2007 Market Commentary

Investor uncertainty remained prevalent within the financial markets as the books were closed on 2007. The tumultuous market activity that began in the third quarter continued into 4Q, as the collective headwinds of seized-up credit markets, increased inflation fears and a slowing economic environment combined to stifle any end-of-year rally we’ve come to expect. Within the small cap universe, 4Q capped off a reversal of fortunes, as small cap indices gave back all of their gains from the first six months of 2007, and then some.

The Cambiar Small Cap Value portfolio could not escape the selling pressure that impacted the small cap markets in the fourth quarter. Cambiar outperformed the Russell 2000 Value Index and slightly underperformed the Russell 2000 Index, respectively. The 4Q selloff was broad-based in nature, with 7 of 10 sectors posting a negative return. The only sectors that were able to buck the trend were those with more defensive characteristics – those sectors were Healthcare, Utilities and Energy. Specific to the Cambiar portfolio, the portfolio’s investments in the Technology and Consumer Discretionary sectors were the leading performance contributors (relatively speaking), which helped to offset the portfolio’s underperformance within the Industrial, Financial and Consumer Staples sectors.

At the sector level, the portfolio’s largest performance contribution was the result of strong stock selection within the Technology sector; Cambiar’s Tech holdings posted a positive aggregate return for the quarter, vs. a negative return for the index. Despite maintaining a valuation bias in the portfolio, the Fund has generally been successful in identifying attractive investment opportunities within the Tech sector.

Although relative in nature, Cambiar’s security selection within Consumer Discretionary, the poorest-performing sector for the quarter, was another positive contributor in the quarter. Cambiar’s Consumer holdings posted a modest decline, as compared to double digit losses within the benchmark. While cognizant of the potential for a slowdown in consumer spending, we continue to believe that our holdings possess the necessary demand drivers to execute - regardless of economic environment.

Cambiar’s holdings within Financials resulted in the leading detractor to performance; although the portfolio benefited from the decision to underweight Financials, this positive was more than offset from a number of our holdings in the sector. The portfolio continues to maintain an underweight to Financials, primarily due to the anticipation of additional write-downs and declining profits. At some point, the risk/reward profile for Financials will be too compelling to ignore, but we are not there yet.

In a reversal from prior quarters, the portfolio’s Healthcare positions detracted from performance in 4Q, largely due to underperformance with one holding. We believe the sell-off in this name was an over-exaggeration, given the company’s new business pipeline. As such, we continue to hold this position. Healthcare continues to represent one of the largest sector weights for the portfolio.

As we move into 2008, we anticipate that the market will remain volatile, marked by sharp sell-offs as well as strong up-moves. Such volatility can create attractive investment opportunities for active investment managers such as Cambiar. While difficult to place a timeframe on the existing macro issues, we are confident that the current market malaise will be resolved. Given the uncertainty for the U.S. economy, Cambiar remains focused on identifying businesses that can not only operate in a challenging market, but to eventually thrive once the existing headwinds subside. We believe we own the right companies at the right prices, and our tenured investment team remains focused in delivering strong long-term performance for our clients.