Manager Commentary as of 12/31/2011 
 

• The fourth quarter closed with a flurry, with the Westcore Small-Cap Opportunity Fund underperforming the benchmark Russell 2000^® Index, 13.27% versus 15.47% 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 interest rate sensitive, technology, and energy sectors were key contributors to our performance relative to the index during the fourth quarter. Within the interest rate sensitive sector no stock was among the top performers during the quarter. Within the technology sector Manhattan Associates is a company that provides a platform-based approach to supply chain solutions. It continues to execute well with its warehouse management software offering that allows customers to more efficiently manage supply chain inventory. As demand picks up the product should also help reduce the need to increase headcount. GeoResources was not only the standout within the energy sector it was the best performing stock in the Fund during the quarter. Investors are beginning to give the company credit for the significant value in their Bakken and Eagleford Shale acreage. Our belief that these assets were significantly undervalued was a key element of our thesis at the time of purchase.

• The greatest headwinds to performance relative to the benchmark came from the consumer cyclicals, medical/healthcare, and commercial services sectors.  JAKKS Pacific Inc. was the holding that most negatively impacted performance within the consumer cyclical sector. JAKKS is a toy and consumer products company that designs, develops, produces, and markets toys, leisure products and writing instruments for children and adults around the world. It significantly reduced guidance during the quarter as sales during the holiday season came in below expectations.  We believed that its new products should improve sales and margins, however, given the magnitude of the sales shortfall during the quarter our thesis is under review. Medicis Pharmaceutical Corporation, a specialty pharmaceutical company focusing on dermatological and aesthetic products, was the main detractor from performance within the medical/healthcare sector. During the quarter it announced a strategic initiative to gain greater reimbursement from managed care providers for its largest dermatological product. Although this initiative is designed to increase prescription volumes, investors seem to be more concerned about the potential impact to pricing for the product going forward. We believe that the potential for greater volumes outweighs the potential for slightly lower prices. This should allow the company to continue to generate long-term free cash flow. While no single stock within the commercial services sector was in the bottom performers our underweight position in the sector added relative value. 

• 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.