ASTON/Cardinal Mid Cap Value Fund

4th Quarter 2011

Economic Momentum

U.S. equity markets posted strong double-digit gains during the fourth quarter, though they were mostly flat to down for the full year 2011. U.S. economic momentum picked up during the final months of the year—brightening the prospects for 2012 despite the challenges of falling state and local government budgets, weak European economies, and a slowdown in China. The improving trend was driven by increased confidence resulting from the lack of any economic fallout from the Congressional super committee failure to address the U.S. debt issues, the avoidance of a larger European sovereign debt crisis, and the Federal Reserve’s forecast that interest-rates would remain near zero until at least mid-2013.

Although the U.S. government’s debt situation will not be addressed until after the 2012 presidential election, an improving economy can only help matters. The European economies, however, are at the mercy of the capital markets until structural solutions for the European Union have been agreed upon and implemented. Domestic economic challenges also persist as the unemployment rate remains high and the residential real estate market still faces several million foreclosures. Despite these headwinds, the environment remains favorable for U.S. equities.

Mid-cap stocks (as represented by the Russell Midcap Index) performed well during the quarter to finish the year with only modest losses. The value component of the Russell Midcap outperformed growth during the quarter, largely due to better performing holdings within the Consumer Discretionary and Technology sectors, plus a smaller weighting in lagging Healthcare. These returns were consistent with a more optimistic view of the economy as cyclical stocks posted the strongest gains while more-defensive Utilities and Consumer Staples stocks lagged. Growth also lagged value for the full year, but contrary to the fourth quarter this owed much to the latter’s higher weighting in the defensively-oriented and better performing Utilities area.

Modest Quarter, Strong Year

The Fund trailed its Russell Midcap Value Index benchmark slightly in posting double-digit returns during the quarter. Stock selection in the Materials and Energy sectors and the drag from residual cash were the main detractors from relative performance. An investment in metal food can manufacturer Silgan Holdings within Materials did not perform as well as the sector’s more commodity-sensitive businesses or its strong performing metals and mining group. Within Energy, Chesapeake Energy lagged despite positive joint venture announcements as investors seemed more concerned about its funding gap.

Mitigating these performance headwinds was positive stock selection in the Industrials and Consumer Discretionary sectors. Industrials firm Stanley Black & Decker rose after reporting strong quarterly results. Other significant contributors that saw their stock prices rise sharply on better-than-expected results were Six Flags Entertainment, Nelnet, and Concho Resources. In addition, the avoidance of poorly performing Utilities stocks during the quarter was a positive.

For the year, the Fund outperformed in delivering a modest absolute gain compared with a slight loss by the benchmark. Strong stock selection in the Financials, Consumer Discretionary, Materials, and Energy sectors offset the absence of better performing Utilities stocks. Financials firms Cash America International, Nelnet, and CYS Investments contributed meaningfully to performance due to strong results and their attractive business models. The portfolio’s largest Consumer Discretionary holding, IAC/Interactive, also performed well on robust financial results and as management continued to repurchase substantial amounts of the company’s stock. Previously mentioned Silgan Holdings performed much better than its commodity based peers for the full year as its businesses are based on essentially fixed processing fees which are inherently more stable.

Highlights

Two stocks that highlight our focus on finding companies with solid fundamentals at opportunistic valuations are Teleflex and Global Payments. Teleflex develops, manufactures and markets medical devices designed to reduce infection and improve patient and provider safety. The vast majority of sales are single-use, disposable products. Having just completed its transition to a pure-play medical technology company, management is in the early stages of implementing a strategy that entails accelerating revenue growth, expanding gross margins, reinvesting in R&D, and improving operating margins. Although the firm’s valuation is now more comparable to its medical device peers following the sale of non-core assets, the company retained substantial capital with which to make acquisitions to leverage its core healthcare franchise. With significant growth opportunities ahead, we think Teleflex should perform well regardless of the regulatory uncertainty plaguing the Healthcare industry.

Global Payments is a processor of electronic transactions for merchants around the world. Even though the business is price competitive, Global offers a high level of service critical to the middle market and has important strategic relationships with banks such as HSBC. More importantly, electronic transactions are still growing steadily, particularly in Emerging Market countries where governments are trying to increase tax collections. With 30% of its revenues from higher margin international markets, we think the company can continue its solid organic revenue growth and profit margin expansion. With modest capital needs and significant free cash-flow, we believe Global Payments to be a prime acquisition target as the processing industry continues to consolidate.

Outlook

We think that economic growth will be moderate, short-term interest-rates will remain low, and inflation will remain benign in 2012. Our equity market outlook is cautiously optimistic as corporate earnings continue to grow, albeit unevenly, and valuations of smaller-sized companies appear reasonable in general. Merger and acquisition activity is likely to increase from depressed levels in the second half of 2011 due to an improved high-yield bond market and easier bank lending conditions. The cyclical high-beta (volatility) rally in stocks witnessed during the fourth quarter is apt to continue if economic data remains strong. The wild card remains Europe.

Recently, the management teams at a number of holdings within the portfolio have become much more active in redeploying their cash flow in accretive ways, including acquisitions and stock repurchases. Will think these actions bode well for the future and stand to enhance results in 2012.

The Cardinal Capital Team

As of December 31, 2011, Silgan Holdings comprised 4.19% of the portfolio's assets, Chesapeake Energy – 2.09%, Stanley Black & Decker – 3.66%, Six Flags Entertainment – 3.59%, Nelnet – 2.86%, Concho Resources – 2.39%, Cash America International – 2.12%, CYS Investments – 1.60%, IAC/Interactive – 4.00%, Teleflex – 1.99%, and Global Payments – 2.09%.

Note: Small- and mid-cap stocks are considered riskier than large-cap stocks due to greater potential volatility and less liquidity.

Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Contact 800 992-8151 for a prospectus containing this and other information. Read it carefully. Aston Funds are distributed by BNY Mellon Distributors Inc.