Manager Commentary as of 12/31/2011

• Interest rates were almost unchanged in the fourth quarter in spite of strong quarterly returns in U.S. equities and high-yield corporate bonds.  Investors appeared willing to accept more risk as they looked for income in a low yield world.  The interest rate markets were driven by two factors that roughly offset each other in the quarter.  Continuing problems in Europe at times pushed rates lower as global investors sought safety and liquidity in the U.S. Treasury market.  Emerging signs of a strengthening U.S. economy throughout the quarter pushed rates higher at times.

• The low rates in the U.S. were further supported by a lack of yield around the world.  Stronger countries, like Germany, Switzerland, Canada, Sweden, the United Kingdom, Norway, and Japan offered comparable or even lower yields than those in the U.S.  While the 10-year U.S. Treasury Note ended the year with a yield of 1.88%, the yield of the 10-year Swiss Note was only 0.74% and the 10-year Japanese Note yielded only 0.98%.  The global deleveraging process continued to play out slowly, keeping rates low as countries, corporations and households all reduced their dependence on the high debt levels used to support prior consumption.  Unchanged interest rates in the quarter also reflected an expectation by market participants that the Federal Reserve will indeed keep short term interest rates anchored near zero well into 2013.

• The U.S. investment grade bond market, as measured by the Barclays Capital Aggregate Bond Index, returned 1.12%.   Agency mortgage-backed securities and U.S. Treasuries, which together comprise roughly two-thirds of the market value of the Index, were the weakest performing sectors, returning only 0.88% and 0.89% respectively.  Of the large sectors in the Index, corporate bonds were the strongest performers, returning 1.93%, with lower-rated issuers outperforming more highly-rated issuers.  U.S. high-yield bonds, rated below “BBB” and not in the Index, posted even stronger returns. 

• In the fourth quarter of 2011, the Westcore Plus Bond Fund returned 1.62%, outperforming its benchmark, the Barclays Capital Aggregate Bond Index by 0.50%.  The Fund’s overweight to corporate bonds and its allocation to select high-yield issues contributed positively to performance.  In particular, holdings in the capital goods, consumer non-cyclical, and energy sectors added to performance.   The Fund’s performance was dampened by its exposure to U.S. Treasuries, government-related securities, and technology company bonds. 

• Our economic outlook reflects the difficulties around the world that we believe can only be partially offset by the extreme measures taken by the Federal Reserve and the fiscal stimulus that has been deployed.  While unemployment has declined and gross domestic product (“GDP”) has expanded in the U.S., we cannot, in our opinion, view ourselves as immune from an approaching recession in Europe nor a potential slowdown in the emerging markets of China, India and Brazil.  In this environment we see modest but positive GDP growth and contained inflation as global competitive forces keep a lid on price increases.

• We continue to overweight corporate bonds in an environment of positive, but slow economic growth, strong corporate profits, continued deleveraging, and contained inflation.  We expect to maintain holdings in certain below investment-grade bonds that we deem to be of higher quality than the overall high-yield bond market.  Interest rate risk in the portfolio as of year-end was similar to that of the Index as we anticipate rates remaining relatively low.  The Fund will likely maintain its allocation to agency mortgage-backed securities due to their very high credit quality and additional yield compared to Treasuries.

• As always, we appreciate your confidence and continued investment in the Fund.