Mid Cap Recovery Growth Commentary

December 31, 2007

The Driehaus Mid Cap Recovery Growth Composite outperformed its benchmark, the Russell Midcap Growth Index, by 527 basis points for the quarter.  As a group, domestic mid cap growth stocks outperformed small and micro cap growth stocks for the year.

The performance of the Driehaus Mid Cap Recovery Growth Strategy (the “Strategy”) was largely aided by commitments to the Industrials, Materials, and Health Care sectors.  Specifically, within the Industrials sector, the Strategy had success with select holdings in the aerospace and defense area.  Once again, holdings in the concentrated phosphate fertilizer segment within the Materials sector contributed to quarterly performance.

The Strategy reduced its weighting during the quarter in the Consumer Discretionary sector due to more attractive growth investment opportunities in other sectors.  Also, the Strategy reduced its exposure to the agricultural segment of the Materials sector.  As the quarter ended, the Strategy reflected an increase in commitment to holdings in the Health Care, Financials, and Energy sectors relative to the previous quarter. 

The Strategy continues its emphasis on recovering growth opportunities as we enter fourth quarter earnings reporting season. 

NOTES

Sources: Driehaus Capital Management LLC, FactSet, Morgan Stanley Capital International and Standard & Poor’s Global Industry Classification Standard, Russell Indices, and the Wall Street Journal.

The performance numbers represent a composite of mid cap recovery 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 Midcap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values.  The performance data includes reinvested dividends. The performance data includes reinvested dividends. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 30% of the total market capitalization of the Russell 1000 Index.