Manager Commentary as of 12/31/2011

• Given tepid valuations, low expectations, and significant declines in equity markets in the third quarter of 2011, we were not surprised to see a rebound in the fourth quarter.  What we did find surprising was the persistence of gut-wrenching volatility despite improving equity prices.  Much of the day-to-day volatility appears to have been a by-product of increased market risk attributable to the European debt crisis, U.S. politicians’ inability to iron out their differences on budget issues and uncertainty surrounding China’s growth trajectory and monetary policies. 

• The Russell 1000^® Growth Index was up 10.61% for the quarter while the Westcore Growth Fund returned 8.16%.  Although U.S. markets were up in the fourth quarter, investors favored more defensive companies and avoided those that are more dependent on cyclical or global growth.  Many of the Fund’s global growth companies will need to play catch-up after underperforming in the fourth quarter and we believe a combination of improving fundamentals, long-term growth opportunities and reasonable valuations may provide positive catalysts in 2012.

• From a sector standpoint, the Fund’s holdings in health care, telecommunication services and industrials produced the strongest returns relative to the benchmark.  The Fund’s best performing individual holdings came from bellwether information technology companies Apple Inc. and Google Inc.  A sell-off of Apple’s shares followed the death of legendary CEO Steve Jobs in early October.  However, Apple’s stock price recovered as investors realized that its strong product lineup remained, its valuation was tepid and that Steve Jobs’ replacement Tim Cook has strong leadership capabilities.  Google also produced strong returns during the quarter as the company continued to make inroads into mobile search along with its dominant position in paid search.  Global diversified industrials company Ametek Inc. was the Fund’s top performer in the industrials sector. 

• At the sector level, energy, materials and information technology delivered the Fund’s weakest results relative to the benchmark during the quarter.  The fourth quarter, historically speaking, is a strong period for information technology companies.  However, a few high-profile technology companies preannounced expected earnings during the quarter that were lower than previous guidance. This created a temporary headwind for many companies in the sector including Fund holdings Oracle Corp. and Juniper Networks Inc.  Within the materials and energy sectors, the day-to-day uncertainty in Europe created enormous volatility in commodity prices, particularly iron ore and oil, and ultimately equity prices.  This negatively impacted materials sector holding Cliffs Natural Resources Inc.  Consumer discretionary holding Amazon.com Inc. was the Fund’s weakest performer in the period.  Amazon released its new tablet, the Kindle Fire, in November as a loss leader.  Selling each tablet at a price of $199 with a cost of approximately $220 produced a negative drag on margins and earnings in the quarter.  Longer term, we believe the company will be able to produce tremendous revenue and earnings leverage from the Kindle Fire as customers purchase electronic books and have a direct link to Amazon.com for purchases.  Think of the Kindle Fire as the razor and future Amazon purchases as the razor blades – all the profit eventually comes from the razor blades. 

• Memories of the 2008 financial meltdown are still vivid in many investors’ minds and these “ghosts of the past” seem to keep haunting us today with all of the uncertainty surrounding the debt problems in Europe.  We don’t, however, believe that we are entering into another situation like we saw in 2008.  Although there are numerous issues that warrant concern, the current sentiment towards equities is in our opinion too pessimistic.  We acknowledge that politics in the U.S. are a mess, but this seems always to be the case, and the structural debt/currency problems in Europe likely will take years to fix.  We believe, however, that there are many positive signs on the horizon.  In the last six months central banks have added tremendous liquidity to economies around the world.  Additionally, current valuations appear reasonable, leading economic indicators have been improving and inflation is starting to decline.  Given this, we believe the prospects for equities, especially large-cap growth equities, relative to other asset classes looks compelling for longer term investors.

• We are focused on identifying companies that have dominant franchises, exciting products, proprietary technology, unique distribution channels and defensible business models that we believe will survive and thrive over time.  Although market turbulence may continue, we will remain steadfast in our research.

• We wish you the best prospects in 2012 and as always, thank you for your continued investment in the Fund and confidence in our team.

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will vary, and shares, when redeemed, may be worth more or less than their original cost. To obtain current performance as of the most recent month-end, please call 800.392.CORE (2673) or visit the Performance tab.

Stock Performance (3 months ended 12/31/2011)