ASTON/Cardinal Mid Cap Value Fund

1st Quarter 2012

Improving U.S. economic trends that began during the fourth quarter of 2011 continued into early 2012, sparking a rally in equities. Job creation accelerated, business executives were more confident, and consumer spending increased. Consumer confidence reached its highest point since 2007, in part because the housing market may have bottomed, although it will still take several years to return to normal. In addition, a European sovereign debt crisis was averted as authorities approved an additional Greek bailout. U.S. interest-rates edged higher during the first quarter as the market speculated on an earlier than anticipated tightening of interest-rate policy. Washington’s failure to extend tax cuts and unemployment benefits, however, could have a major negative impact on U.S economic growth. Although Congress will ultimately have to address this fiscal cliff, the dysfunction in Washington makes any meaningful progress unlikely until after the election.

Most major domestic equity indices posted double-digit gains during the quarter, with the Fund’s Russell Midcap Value Index benchmark gaining more than 11%. The value benchmark lagged its growth index counterpart due to its higher weighting in poorly performing utility stocks and a lower weighting in software and biotech stocks, which rose sharply. Last year’s laggards led the market higher as cyclical sectors, including Consumer Discretionary, Technology, and Materials led the rally. Consistent with an improving economy, low-quality stocks and those with smaller market-caps were the best performers during the period.

The Fund trailed its benchmark owing to many of the factors that led to its outperformance during the fourth quarter of 2011. Stock selection within Financials, Technology, Healthcare, and Consumer Discretionary were the key detractors from relative performance. Stock selection and a lower weighting in bank stocks hurt as all over-capitalized banks, including the portfolio’s holdings, lagged their less-capitalized peers. In addition, the performance of several Real Estate Investment Trust (REIT) investments was depressed as the companies took advantage of the strong equity market to fund future growth. Among Technology stocks, InterDigital lagged as the strategic process the company started earlier last year ended without a deal to sell the entire company. The firm continues to pursue the sale of its non-core patents, however. The absence of biotech stocks hurt relative returns within Healthcare. Lastly, shares of retailer American Eagle Outfitters lagged as the intense promotional environment in teen retail negatively affected results and guidance.

Notable contributors to relative performance included stock selection in the Industrials and Materials sectors, as well as the Fund’s underweight position in Utilities. Holdings in Atlas Air Worldwide, U.S. Antimony, and Kaman Corp all produced strong returns as these industrial firms tend to be leveraged to stronger economic growth. Materials company FMC moved higher on strong results, while Silgan Holdings’ cash rich balance sheet makes it a prime takeover candidate, leading the market to anticipate a deal announcement.

Portfolio Highlights

Two holdings that highlight our focus on finding companies with solid fundamentals at opportunistic valuations are ValueClick and Entertainment Properties. Global digital marketing firm ValueClick focuses on increasing brand awareness and acquiring new customers for the world’s largest advertisers. The company provides marketers with a comprehensive toolkit designed to increase client customer web browsing, shopping, and purchasing activity. Despite competition from Google, which has just half of ValueClick’s market leading share, affiliate marketing is the company’s crown jewel with high margins and multiyear contracts. We established the Fund’s position last year as the company languished preceding the return of its former CEO to re-focus the company. With an attractive business model, substantial free cash flow, and a sound management team, with think the stock’s valuation can rise to the level of its peers as they execute their business plan.

Entertainment Properties is a REIT which acts as a developer, owner, lessor, and financier focused on providing triple net lease financing to entertainment venues and charter schools. We first looked at the company after the 2008 credit crisis limited its access to the capital markets, effectively derailing several of its development projects and increasing vacancies in retail properties. The silver lining was that the credit crisis also significantly increased the number and attractiveness of investment opportunities in its theater financing business and greatly reduced competition. With a high single-digit yield at the time of investment, the dividend payout itself provided the Fund with almost half of our targeted return. Since then, the company has successfully worked out of many of its troubled assets and redeployed its capital into new investments. As the firm continues to clean up its portfolio and redeploy its capital at attractive rates of return, and as the market becomes more comfortable with its charter school investments, we think its valuation should rise and approach that of its triple net lease peers.

Outlook

We believe that U.S. economic growth will be moderate, short-term interest rates will stay low, and inflation will remain benign. Despite the recent strength in equity markets, our outlook is sanguine as investors start to move from bonds into stocks based on compelling relative valuations. Although merger and acquisition activity remains depressed, the strength shown in the economy and the high-yield bond and stock markets should stimulate activity for the balance of the year. Recently, company management teams for a number of the holdings in the portfolio have become much more active in redeploying their cash flow in accretive ways, including acquisitions and share repurchases. We believe these actions bode well for the future and can aid 2012 results.

The Cardinal Capital Team

As of March 31, 2012, InterDigital comprised 1.81% of the portfolio's assets, American Eagle Outfitters – 0.00%, Atlas Air Worldwide – 3.78%, U.S. Antimony – 0.00%, Kaman – 0.00%, FMC – 3.36%, Silgan Holdings – 4.30%, ValueClick – 2.15%, and Entertainment Properties – 1.56%.

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

Before investing, consider the Fund’s investment objectives, risks, charges, and expenses. Contact 800 992-8151 for a prospectus or summary prospectus containing this and other information. Please, read it carefully. Aston Funds are distributed by Foreside Funds Distributors LLC.