Large Cap Growth Commentary

June 30, 2010

Market News

The correction in the Euro impacted large cap names with exposure to Europe.  The second quarter was an inflection point for quality.  Perceived low quality stocks have outperformed since the 2009 market bottom, but in May there was a reversal and recognized high quality stocks began to outperform. Given the market environment, it ties in well to have increased confidence in quality and large cap names.  The U.S. job market trends of key leading indicators of productivity, average workweek, and temp hires remain intact.

Detractors & Contributors

The Driehaus Large Cap Growth Composite (the “Strategy”) outperformed its benchmark, the Russell 1000 Growth Index (the “Index”), by 49 basis points for the quarter.

At quarter end, the Strategy’s two largest underweights versus the Index were in the Consumer Staples and Industrials sectors.  The Strategy’s underweight allocation in both these sectors detracted from return; however, stock selection in the Consumer Staples sector contributed to performance.  As a result of accelerating sales and increased earnings growth rates, the Strategy’s two largest overweights versus the Index were in the Consumer Discretionary and Information Technology sectors. The overweight allocation to the Consumer Discretionary sector and underweight allocation to the Financials sector both contributed to return.

Holdings in the Information Technology sector represented the highest contribution to return over the quarter.  The largest detractors from return over the quarter were holdings in the Consumer Discretionary and Energy sectors.

Portfolio Positioning and Outlook

Given the market outlook, we reduced risk in the Strategy in mid-to-late April by decreasing our exposure to the Materials and Energy sectors. We may reduce our overweight Consumer Discretionary position or shift assets toward more stable names within the sector.  Consumer Discretionary names for “high ticket” items that require financing will need to be compelling from a bottom-up aspect in order for us to continue to own the security. That being said, we are still finding attractive Consumer Discretionary growth names. In general, the Strategy should maintain its weighting in blue chip technology holdings given their strong balance sheets and attractive valuations. In some cases, we did reduce our holdings in companies with large exposure to Europe in April and May.

Based on risk factors of individual stocks in the Strategy, we are purchasing stocks displaying high quality characteristics and avoiding stocks with leverage and volatility. In addition, in our opinion there are very early signs that large cap stocks (measured by the Russell 1000 Index) are beginning to outperform relative to small cap stocks (as measured by the Russell 2000 Index) after ten plus years of small cap outperformance.

NOTES

Sources: Driehaus Capital Management LLC, FactSet, Morgan Stanley Capital International and Standard & Poor’s Global Industry Classification Standard, Russell Investments

The performance numbers represent a composite of large cap growth accounts managed by Driehaus Capital Management LLC.  These numbers are estimated for the period as all underlying accounts have not yet been reconciled. All rates of return include reinvested dividends and other earnings and are net of fees and brokerage commissions. The performance data shown above represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted.

The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.