Westcore Funds - Fund Manager Q & A

Recently Asked Questions:
Q:	What causes the dividend to drop in these two bond funds?
A:	Bond funds calculate dividends based on all recorded taxable income received in a given period (usually monthly). Mutual funds are required to pass through to shareholders all taxable income and capital gains. The income can vary based on any number of factors, but the primary driver is usually the overall yield of the underlying portfolio. This can vary given the broad level of interest rates, levels of cash held by the portfolio, at what yield the manager is able to reinvest cash receipts and the number of days in the period. When dividends decline in a bond fund, this usually points to a declining overall yield on the underlying portfolio. Keep in mind the NAV may also go down, keeping your reinvestment rate up. This varying yield is also why it is difficult for advisors and fund companies to state exactly what the investment is yielding.

Q:	Can you please tell me if there are any advantages of closed end bond funds over open end bond funds. Also what is a comfortable amount of leverage for a bond fund? I am noticing that the higher yielding funds have an incredible amount of leverage.
A:	You are correct in noting the amount of leverage that many bond funds (especially some of the more recently issued closed-end funds) are using. This ability to use leverage is actually one of the biggest advantages for closed-end bond funds versus open-end funds. While this can significantly increase the yield, it does leave the principal value of the fund subject to much more potential volatility than in an open-ended fund. The other main advantage a closed-end fund has is that shares can't be redeemed forcing the manager to potentially have to sell assets at an inopportune time affecting the fund's performance for remaining shareholders. We do, however, believe in the motto that "leverage doesn't kill portfolios, people kill portfolios!" While leverage can increase the volatility, as long as the manager is using it appropriately and not taking on more risk than should be given the underlying fund assets, it can help increase the fund's income stream. We do not presently leverage any of our bond funds (which are all open-ended).

Commonly Asked Questions:
Q:	Is it too late to invest in high-yield bond funds?
A:	Over the short-term, we don't believe that investors should try to time asset allocations. In fact, many experts agree that a portfolio containing both stock and bond funds may, over time, enhance returns and reduce risks. We believe investors should be asking themselves: what segment of my portfolio should I be using to generate income? That would then lead to asking: where can I generate the best risk-adjusted income and total return? In our opinion, we feel that a long-term investment in corporate bonds, preferred stocks and income-generating equities makes the most sense to generate income (with potential for principal growth) over time.


Q:	Are high-yield bond funds too risky?
A:	This is not an easy question to answer because each individual has a different level of risk tolerance. While most high-yield funds have heavy allocations of the lowest rated sectors of the bond market, we tend to invest the majority of Westcore Flexible Income Fund in BB-rated (higher rated below investment grade) and BBB-rated (lower rated investment grade) assets. We believe that BB and BBB-rated bonds can provide better risk-adjusted returns over time with less volatility.

Q:	What if interest rates go back up?
A:	Corporate debt (including high-yield to a more limited extent) trades not only on the basis of price, but also in a percentage spread over Treasury rates. While overall Treasury rates are low now (and we feel they are likely to go higher over the next 2-4 years), the spread levels corporate bonds currently possess over Treasuries may provide a cushion against principal losses due to rising interest rates. We also favor having a small equity component (especially equities that produce income) to provide the overall portfolio with another cushion against interest-rate volatility. Interest rates should only continue to rise in the event of economic growth, which should also mean we are in an environment of rising corporate profitability. This may further benefit both corporate spreads and income-producing equities.

This information should not be construed as investment advice. Investors must consider their own situation before making an investment decision.

Westcore Flexible Income Fund is subject to the additional risk in that it may invest in high-yield/high-risk bonds and is subject to greater levels of liquidity risk.

An investor should consider investment objectives, risks, charges and expenses of the Fund(s) carefully before investing. Click here for a prospectus, which contains this and other important information. Please read the prospectus carefully before investing.