Manager Commentary as of 12/31/2011 

• The fourth quarter closed with a flurry with Westcore Blue Chip Fund slightly outperforming the S&P 500^® Index during the quarter, 12.15% versus 11.82% respectively. The fourth quarter rally was partly attributable to investor optimism tied to the strong beginning of the retail holiday shopping season and, after a brief lull, holiday sales finished strong. During the quarter there was also a mix of encouraging economic news, including a positive trend in unemployment claims and job creation.  Last, but not least, the potential unraveling of the Euro market got some relief as credit spreads narrowed slightly and Greece and Italy were able to successfully place debt offerings and obtain needed credit relief. 

• The three sectors that provided the greatest contribution to return relative to the Fund’s benchmark index during the fourth quarter were energy, consumer cyclicals and transportation. Within the energy sector National Oilwell Varco (oilfield supply) benefitted from an improving outlook for offshore drilling. This improvement encouraged customers to place more orders for higher specification equipment able to target harder-to-access oil and gas deposits, while doing it in a safer manner than in the past. Union Pacific, a holding in transportation, led performance in that sector. The company’s continued improvement in both traffic growth and operating efficiencies coupled with solid price increases drove fundamentals while a modestly improved economic outlook gave investors more confidence in the duration of these results.

• The greatest headwinds relative to the benchmark index came within the technology, staples and utilities sectors. Within the technology sector, Avago (analog semiconductor devices) had performed very strongly across the board for the past couple of years and its silicone chips were used in the iPhone 4s, providing a fresh revenue source. During the quarter, however, customers reduced inventories to guard against having too much product on hand if positive sales forecasts did not materialize. We believe Avago is well positioned and is selling at an extremely attractive valuation when compared to the cash its business generates.  While no specific utility holding was among the weaker performers during the period, the Fund’s holdings in the sector tend more to the unregulated utilities.  These types of utilities are less defensive with a greater ability to grow and benefit from an environment of increasing power prices.  We believe these companies should do well over the next 3-5 years due to their attractive cash flow profiles and valuations.  However, until there is an increase in natural gas prices, they may not attract as much attention from investors who have focused more on defensive, steady performers.   

• As we look toward 2012 many of the issues we believe face investors remain from 2011. First, a common issue that permeates both domestic and global economies is lack of credibility.  Questions of credibility surround our political structure (the debt ceiling, payroll tax extension, etc.); the Euro structure (Greece, Italy, etc.); Federal Reserve monetary policy (seemingly endless quantitative easing).  The lack of credible solutions and the confusion associated with erratic actions by the players in these dramas has been a very large contributor to the elevated market volatility seen in 2011 which may continue into 2012.  Europe has been in the headlines for quite some time, but the threats of a worse than expected slowdown in China and the high debt to gross domestic product situation in Japan also lurk in the background.  It appears likely that several European countries are on the verge of recession if they are not already there.  We do not believe the U.S. economy can continue to show positive economic growth if other areas of the world, particularly Europe, slip into recession. 

• There are, however, potential bright spots in 2012.  First, the U.S. economy appears to have weathered the turbulence of 2011 and is still growing at a moderate pace.  The trends in unemployment claims and job creation have also been more encouraging, which gives some support for consumer spending trends in the near-term.  The housing market has also shown signs of life, although this has largely been centered on multi-family housing.  The rise in rental rates, coupled with historically low borrowing costs, may ultimately breathe some life into the single family housing industry as well. 

• We remain excited by the holdings of the Fund and the new ideas that we are exploring.  While corporate profits have come under increased pressure, we continue to look for companies with good fundamentals to weather this environment.  We appreciate the opportunity to work on behalf of our shareholders and will work hard to make 2012 successful. We wish everyone a healthy, happy and prosperous New Year. 

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)