Despite the suspension of most active equity search activity over the last year, we were hired by a Chicago pension fund (Growth Equity), a state pension fund (US Small Cap) and two California counties (Small Cap) through their emerging manager programs as well as Credit Suisse (Growth Equity) through their preferred advisor program. The compelling and unprecedented valuations in convertibles attracted more investors in our convertible strategies: a state pension fund (Convertibles), a mutual fund (Convertible Arbitrage) opening in September and the opening of a commingled vehicle. We thank our clients for their vote of confidence and the opportunity to add value to their investment programs.

Compelled by the historic opportunities in the convertible market during Q4 2008, Nicholas Investment Partners launched a US Convertibles strategy utilizing John Wylie’s 17 years of convertibles experience, including overseeing $1B in convertibles mandates at a previous firm. In addition, this strategy also leverages our existing small to mid cap company research and insights since most convertible issuers are in this market capitalization segment.

Nicholas Investment Partners recently celebrated the 2nd anniversary of US Growth Equity and US Small Cap products. Both strategies apply a blend of bottom-up traditional and quantitative approach to finding attractive investment opportunities in their respective universes. Aided by a strong stock selection in the 2nd quarter, US Growth Equity strategy ranked 17th in the eVestment Mid Cap Growth Equity Universe YTD through June 30, 2009 and US Small Cap Growth ranked 27th (the cusp of top-quartile) YTD in the eVestment Small Cap Growth universe. Convertibles outperformed equities and most fixed income indexes as well as earned a 21st percentile ranking in eVestment’s convertibles universe YTD.

As the second quarter of 2009 showed evidence of sustainability within the financial markets and July reports confirmed the economic contraction is bottoming, we are optimistic about the opportunities in small- to mid-cap equities and convertibles.

You can find all our strategies in most leading consultant and third party databases. To learn more about our firm and investment capabilities, please visit our website www.nicpartners.com or call Laura DeMarco (858-381-8181) or Tammy Wiseman (858-381-8183). Catherine Nicholas, Managing Partner/CIO and lead portfolio manager for US Small Cap and US Growth Equity, or John Wylie, Portfolio Manager for Convertibles are available for conference calls to share their experienced perspective and outlook on the equity and convertibles markets.