As filed with the Securities and Exchange Commission on December 28, 2012
1933 Act Registration File No. 033-68666
1940 Act File No. 811-8004
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
x
Pre-Effective Amendment No.
¨
Post-Effective Amendment No. 144
x
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940
Amendment No. 146
x
ASTON FUNDS
(Exact Name of Registrant as Specified in Charter)
120 North LaSalle Street
Chicago, Illinois 60602
(Address of Principal Executive Offices, including
Zip Code)
Registrants Telephone Number, including Area Code (312) 268-1400
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(Name and Address of Agent for Service)
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Copy to:
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Kenneth C. Anderson, President
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Deborah B. Eades
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Aston Funds
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Vedder Price P.C.
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120 North LaSalle Street
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222 North LaSalle Street
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Chicago, Illinois 60602
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Chicago, Illinois 60601
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It is proposed that this filing will become effective:
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¨
immediately upon filing pursuant to rule 485(b)
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¨
on (date) pursuant to rule 485(b)
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60 days after filing pursuant to rule 485(a)(1)
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x
on February 28, 2013 pursuant to rule 485(a)(1)
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75 days after filing pursuant to rule 485(a)(2)
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on (date) pursuant to rule 485(a)(2)
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If appropriate, check the following box:
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¨
this post-effective amendment designates a new effective date for a previously filed post-effective
amendment
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Aston Funds
ASTON Dynamic Allocation Fund (the Fund)
Supplement dated
February 28, 2013 to the Prospectus dated February 28, 2013
for the Aston Funds (the Prospectus)
IMPORTANT NOTICE
This supplement provides new and additional information beyond that contained in the Prospectus and should
be retained and read in conjunction with the Prospectus. Keep it for future reference.
The Board of Trustees of Aston Funds has determined that the termination and liquidation of the Fund is in the best interests of the Fund. Effective
immediately, the Fund is closed to new or additional investments, provided that the Fund may in its discretion permit investments by 401(k) plans and other similar accounts that require additional time to change investment options. The estimated
liquidation date of the Fund is on or about January 30, 2013.
For more information, please call Aston Funds: 800-992-8151 or visit our
website at
www.astonfunds.com
.
SUP DYN 0213
Aston Funds
ASTON/Veredus Select Growth Fund (the Fund)
Supplement dated
February 28, 2013 to the Prospectus dated February 28, 2013
for the Aston Funds (the Prospectus)
IMPORTANT NOTICE
This supplement provides new and additional information beyond that contained in the Prospectus and should
be retained and read in conjunction with the Prospectus. Keep it for future reference.
The Board of Trustees of Aston Funds has determined that the termination and liquidation of the Fund is in the best interests of the Fund. Effective
immediately, the Fund is closed to new or additional investments, provided that the Fund may in its discretion permit investments by 401(k) plans and other similar accounts that require additional time to change investment options. The estimated
liquidation date of the Fund is on or about January 30, 2013.
For more information, please call Aston Funds: 800-992-8151 or visit our
website at
www.astonfunds.com
.
SUP VSG 0213
Aston Funds
(the Trust)
ASTON/Veredus Small Cap Growth Fund (the
Fund)
Supplement dated February 28, 2013 to the Prospectus dated February 28, 2013
for the Aston Funds (the Prospectus)
IMPORTANT NOTICE
This supplement provides new and additional
information beyond that contained in the Prospectus and should
be retained and read in conjunction with the Prospectus.
Keep it for future reference.
CHANGE IN SUBADVISER AND PROPOSED MERGER OF THE FUND WITH AND INTO ASTON
SMALL CAP GROWTH FUND
CHANGE IN SUBADVISER AND FUND NAME
Effective as of January 31, 2013 (the Effective Date), Lee Munder Capital Group, LLC (LMCG) is appointed as subadviser to
the Fund, and the Fund will change its name to ASTON Small Cap Fund. All of the assets of the Fund will be allocated to LMCG as of the Effective Date. The existing subadvisory agreement with Todd-Veredus Asset Management LLC will be terminated.
There is no change in the Funds current investment objective, principal investment strategies or management fees.
As of the Effective Date, the following information replaces the information in the Prospectuses relating to the Funds subadviser and portfolio
manager:
Management
Lee Munder Capital Group, LLC (LMCG) serves as the subadviser to the Fund. Mr. Andrew Morey, CFA, lead portfolio manager of LMCGs
small and small/mid cap investment strategies, has served as the Funds portfolio manager since January 2013.
As of the Effective
Date, the following information replaces the information in the Prospectus relating to the Funds subadviser:
ASTON Small Cap
Fund
ASTON Small Cap Growth Fund
Lee Munder Capital Group, LLC, 200 Clarendon Street, 28
th
Floor, Boston, MA 02116, was founded in August 2000. LMCG is majority-owned by Convergent Capital Management, LLC. As of November 30, 2012, LMCG had assets of approximately $4.4 billion under
management.
As of the Effective Date, the following information replaces the information in the Prospectus on page 107 relating to the
Funds portfolio manager:
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Andrew Morey,
CFA
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Portfolio Manager since January 2013. Mr. Morey, portfolio manager for LMCGs Small and Small/Mid Cap Growth investment strategies, joined LMCG in February 2012. Mr. Morey has
20 years of investment management experience, and prior to joining LMCG, he served as portfolio manager at Crosswind Investments, LLC for Crosswinds Small and Small/Mid Cap investment strategies. Previously, Mr. Morey was the founder and
portfolio manager of Tartan Partners, LLC from 2005 to 2007. Prior to Tartan Partners, Mr. Morey worked at State Street Research & Management as a portfolio manager, and at Gabelli & Co. as a research analyst. Mr. Morey holds the Chartered
Financial Analyst designation.
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PROPOSED MERGER OF THE FUND WITH AND INTO ASTON SMALL CAP GROWTH FUND
At a meeting held on December 13, 2012, the Board of Trustees of the Trust approved the merger of the Fund with and into ASTON Small
Cap Growth Fund, each a series of the Trust, subject to the approval of shareholders of the Fund (the Merger). If approved by the shareholders of the Fund, the Merger will occur as soon as practicable after shareholder approval is
obtained, likely on or about March 31, 2013. Additional information about the Merger will be provided in the proxy solicitation materials for the Merger.
For more information, please call Aston Funds: 800-992-8151 or visit our website at
www.astonfunds.com
.
SUP ASCG 0213
2
Aston Funds
Class N, I and R Shares
Prospectus
- February 28, 2013
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Ticker Symbols
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EQUITY FUNDS
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Class N
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Class I
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Class R
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ASTON/Montag & Caldwell Growth Fund
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MCGFX
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MCGIX
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MCRGX
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ASTON/Herndon Large Cap Value Fund
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AALIX
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AHRNX
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ASTON/Cornerstone Large Cap Value Fund
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RVALX
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AAVIX
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ASTON/TAMRO Diversified Equity Fund
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ATLVX
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ATDEX
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ASTON/River Road Dividend All Cap Value Fund
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ARDEX
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ARIDX
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ASTON/River Road Dividend All Cap Value Fund II
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ADVTX
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ADIVX
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ASTON/Fairpointe Mid Cap Fund
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CHTTX
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ABMIX
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ASTON/Montag & Caldwell Mid Cap Growth Fund
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AMCMX
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ASTON/TAMRO Small Cap Fund
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ATASX
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ATSIX
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ASTON/River Road Select Value Fund
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ARSMX
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ARIMX
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ASTON/River Road Small Cap Value Fund
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ARSVX
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ARSIX
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ASTON/River Road Independent Value Fund
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ARIVX
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ARVIX
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ASTON/LMCG Small Cap Growth Fund
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ACWDX
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ACWIX
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ASTON/Veredus Select Growth Fund
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AVSGX
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AVISX
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ASTON Small Cap Fund
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VERDX
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AVEIX
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ASTON/Silvercrest Small Cap Fund
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ASCTX
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ACRTX
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FIXED INCOME FUNDS
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ASTON/DoubleLine Core Plus Fixed Income Fund
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ADBLX
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ADLIX
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ASTON/TCH Fixed Income Fund
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CHTBX
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CTBIX
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ALTERNATIVE FUNDS
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ASTON/Lake Partners LASSO Alternatives Fund
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ALSNX
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ALSOX
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ASTON Dynamic Allocation Fund
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ASENX
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ADNAX
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ASTON/Anchor Capital Enhanced Equity Fund
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AMBEX
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AMDSX
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ASTON/River Road Long-Short Fund
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ARLSX
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[]
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INTERNATIONAL FUND
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ASTON/Barings International Fund
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ABARX
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ABIIX
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SECTOR FUND
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ASTON/Harrison Street Real Estate Fund
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ARFCX
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AARIX
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BALANCED FUND
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ASTON/Montag & Caldwell Balanced Fund
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MOBAX
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MOBIX
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Not FDIC Insured. No Bank Guarantee. May Lose Value.
The Securities and Exchange Commission has not approved or disapproved these or any mutual funds shares or determined if this prospectus is
accurate or complete. Any representation to the contrary is a crime.
TABLE OF CONTENTS
ASTON/Montag & Caldwell Growth Fund
INVESTMENT OBJECTIVES
The Fund seeks long-term capital appreciation and, secondarily, current income, by investing primarily in common stocks and convertible securities.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
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Class I Shares
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Class R Shares
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Management Fees
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0.65
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%
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0.65
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%
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0.65
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%
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Distribution and Service (12b-1) Fees
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0.25
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%
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None
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0.50
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%
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Other Expenses
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Acquired Fund Fees and Expenses
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Total Annual Fund Operating Expenses
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5% and operating
expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Class N Shares
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$
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[ ]
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$
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[ ]
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$
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[ ]
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$
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[ ]
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Class I Shares
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[ ]
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[ ]
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[ ]
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[ ]
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Class R Shares
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[ ]
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[ ]
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[ ]
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[ ]
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in common stocks and convertible securities. The portfolio manager uses a bottom-up approach to stock selection and seeks high quality, well-established large-cap companies that
the portfolio manager believes are growing their near-term earnings at an above average rate. The Fund defines a large-cap company as one having a market capitalization of $5 billion or more at the time of acquisition. The portfolio manager
emphasizes valuation to find companies selling at a discount to their intrinsic value. These companies must pass an initial capitalization screen and:
n
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Have a strong history of earnings growth
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n
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Be attractively priced, relative to the companys potential for above average long-term earnings and revenue growth
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n
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Have strong balance sheets
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n
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Have a sustainable competitive advantage
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n
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Be currently, or have the potential to become, industry leaders
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n
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Have the potential to outperform during market downturns
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The Fund may invest in foreign securities (directly and through depositary receipts).
To manage risk,
the portfolio manager limits sector and individual security exposure, and adheres to a strong sell discipline.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The
following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject
to the risks of equity securities and fixed income securities. The lower the premium, the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the
behavior of bonds because the likelihood of conversion is lower. In that case, the price of convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
Prospectus
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3
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the
risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty
in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with
securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control
regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in
economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other
regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile
than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the
security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their
recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the
investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a particular
companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
FUND PERFORMANCE
The bar chart shows how the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N
shares, Class I shares, and Class R shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the classes have different expenses. The annual returns of the Class I shares would be
higher than the returns of Class N shares and Class R shares due to 12b-1 fees paid by Class N shares and Class R shares. This information may help illustrate the risks of investing in the Fund. The Fund makes updated performance information
available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
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]%
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Worst quarter:
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[
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]
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[
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]%
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Prospectus
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4
The following table indicates how the Funds average annual returns for different calendar periods compared to the returns of a broad-based securities
market index.
Average Annual Total Return
(For the periods ended December 31, 2012)
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ASTON/Montag & Caldwell Growth Fund
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1 Year
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5 Years
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10 Years
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Since Inception
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Class N Shares
(Inception 11/2/94):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions and Sale of Fund Shares
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Class I Shares
(Inception 6/28/96):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Class R Shares
(Inception 12/31/02):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Russell 1000 Growth Index
(Reflects no deduction for taxes, expenses or fees. Index
return since inception for Class N shares is computed from October 31, 1994. Index return for Class I shares, since inception, computed from June 30, 1996, is [ ]%. Index return for Class R shares, since inception,
computed from December 31, 2002, is [ ]%.)
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares and Class R shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Montag & Caldwell, LLC (Montag & Caldwell) serves as the subadviser to the Fund.
Mr. Ronald E. Canakaris, Chairman and Chief Investment Officer of Montag & Caldwell, has served as the Funds Portfolio Manager since
November 1994.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by
telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
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Minimum Initial Investment
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Subsequent Investments
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Class N
Regular Accounts
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$
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2,500
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$
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50
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Individual Retirement Accounts (IRAs)
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$
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500
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$
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50
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Education Savings Accounts (ESAs) (except R Class)
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$
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500
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$
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50
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Custodial Accounts for Minors (UGMA/UTMA)
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$
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500
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$
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50
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Class I
Institutional Accounts
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$
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1 Million
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$
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50
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Class R
Retirement Plans
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$
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2,500
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$
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50
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Class R shares are only intended for use within retirement plans offered through a financial representative or a plan
sponsor.
TAX INFORMATION
The
Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a tax-deferred account such as a 401(k) or individual retirement account. Distributions on
investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund
through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
Prospectus
|
5
ASTON/Herndon Large Cap Value Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
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Class I Shares
|
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Management Fees
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0.80
|
%
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|
0.80
|
%
|
Distribution and Service (12b-1) Fees
|
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0.25
|
%
|
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|
None
|
|
Other Expenses
|
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[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
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[ ]
|
%
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|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
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[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 1.30% of the Funds average daily net assets with respect to Class N shares and 1.05% of the Funds average daily net assets with respect to Class I shares (the Operating Expense
Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was
waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from commencement of operations through the completion of the first three full fiscal years to the extent that the Funds Total
Annual Operating Expenses for a class, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, remains at or below the Operating Expense Limit after such
reimbursement.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if
you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for
one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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|
Class N Shares
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$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
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[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its assets in securities of large-cap companies that the portfolio manager believes are undervalued compared to their perceived worth. Value
companies tend to have stock prices that are low relative to their earnings, dividends, assets or other financial measures. The Fund defines large-cap companies as companies with a market capitalization, at the time of acquisition, within the range
of market capitalizations of companies constituting the Russell 1000 Index. The market capitalization range of the Russell 1000 Index changes periodically, and the capitalization of companies in which the Fund invests also changes. As of December
31, 2012, the market capitalization range of the Russell 1000 Index was approximately $ million to
$ billion.
The portfolio manager combines a value-oriented approach
with fundamental analysis to seek to identify companies primarily from the Russell 1000 Index that he believes have strong fundamentals and are undervalued relative to other companies comprising the Russell 1000 Index. Companies that meet minimum
capitalization and quality screens are evaluated and ranked based on a number of fundamental metrics. The portfolio manager seeks to construct a portfolio that has the following characteristics relative to the Russell 1000 Index:
n
|
|
Higher dividend growth rates
|
Prospectus
|
6
n
|
|
Stronger earnings growth
|
To manage
risk, the portfolio manager seeks to limit sector and security exposure, maintain sector diversification, maintain a bias towards liquidity and adhere to a disciplined sell process.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that
the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Liquidity
Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can
adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and
volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and
the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a particular
companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Portfolio
Turnover Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital gains, including short-term gains, and will result in greater transaction costs to the Fund. High portfolio turnover
may increase the level of short-term capital gains. To the extent distributions to shareholders are made from net short-term capital gains (i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net
capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary income rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater
transaction costs and higher expenses as a result of portfolio turnover can negatively impact the Funds performance.
Value Style
Risk.
Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different
types of stocks go out of favor with investors depending on market and economic conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year for the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the
classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The
Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
|
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[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
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|
[
|
]
|
|
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[
|
]%
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|
|
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|
|
Prospectus
|
7
The following table indicates how the Funds average annual returns for different calendar periods compared to the returns of a broad-based securities
market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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ASTON/Herndon Large Cap Value Fund
|
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|
1 Year
|
|
|
Since Inception
|
|
Class N Shares
(Inception 3/31/10):
|
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|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 3/2/11):
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell 1000 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from [ ]. Index return for Class I shares, since inception, computed from
[ ], is [ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [ In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to
use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary
.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Herndon Capital Management, LLC (Herndon) serves as the subadviser to the Fund.
Randell A. Cain Jr., CFA, a principal of Herndon, serves as the Portfolio Manager of the Fund. Mr. Cain has served as the Portfolio Manager since the
Funds inception in March 2010.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by
telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
8
ASTON/Cornerstone Large Cap Value Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide total return through long-term capital appreciation and current income.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.80
|
%
|
|
|
0.80
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes,
extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.30% of the Funds average daily net assets with respect to Class N shares and 1.05% of the Funds
average daily net assets with respect to Class I shares. Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if
you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for
one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [__]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities of large-cap companies. The portfolio managers seek to identify companies they believe are undervalued
compared to their perceived worth (value companies). Value companies tend to have stock prices that are low relative to their earnings, dividends, assets, or other financial measures. The Fund defines a large-cap company as one having a market
capitalization of $5 billion or more at the time of acquisition.
The portfolio managers use a bottom-up investment approach in buying and
selling investments for the Fund. Investments are selected primarily based on fundamental analysis of issuers and their potential in light of their current financial condition and industry position, including market, economic, political, and
regulatory conditions. Factors considered may include analysis of:
Quantitative
analysis of these and other factors may also be considered.
The Fund may invest in foreign securities (directly and through depositary receipts).
To manage risk, the portfolio managers generally limit position sizes, diversify among sectors, and adhere to a strong sell discipline.
Prospectus
|
9
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of
foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little
public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the
U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other
political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally
different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the
security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their
recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the
investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a particular
companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Value Style
Risk.
Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different
types of stocks go out of favor with investors depending on market and economic conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prospectus
|
10
The following table indicates how the Funds average annual returns for different calendar periods compared to the returns of a broad-based securities
market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Cornerstone Large Cap Value Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
10 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 1/04/93):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 9/20/05):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
N/A
|
|
|
|
[ ]
|
%
|
Russell 1000 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from December 31, 1992. Index return for Class I shares, since inception, computed from September 30, 2005, is [__]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Cornerstone Investment Partners, LLC (Cornerstone) became the subadviser to the Fund on July 15, 2011.
Performance prior to that date reflects the performance of a previous subadviser. Performance prior to September 27, 2001 reflects the performance of a predecessor fund.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. [ In some instances, the Return After
Tax on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns
depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Cornerstone serves as the subadviser to the Fund.
Mr. John Campbell, CFA, Chief Investment Officer of Cornerstone, Mr. Rick van Nostrand, CFA, a Cornerstone portfolio manager, Mr. Cameron Clement, CFA, a Cornerstone portfolio manager and
Mr. Dean Morris, CFA, a Cornerstone portfolio manager, serve as Portfolio Managers of the Fund. Messrs. Campbell, van Nostrand, Clement and Morris have served as the Funds Portfolio Managers since July 2011.
PURCHASE AND SALE OF FUND SHARES
Shares of
the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
11
ASTON/TAMRO Diversified Equity Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
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Class I Shares
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Management Fees
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0.80
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%
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0.80
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%
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Distribution and Service (12b-1) Fees
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0.25
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%
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None
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Other Expenses
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[ ]
|
%
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|
|
[ ]
|
%
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Acquired Fund Fees and Expenses
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[ ]
|
%
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|
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[ ]
|
%
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Total Annual Fund Operating Expenses
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[ ]
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%
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[ ]
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%
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Fee Waiver and/or Expense Reimbursement
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[ ]
|
%
(a)
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|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
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[ ]
|
%
(a)
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|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage
commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.20% of the Funds average daily net assets with respect to Class N shares
and 0.95% of the Funds average daily net assets with respect to Class I shares. Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating
expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the
above assumptions, your costs would be:
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1 Year
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3 Years
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|
5 Years
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10 Years
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|
Class N Shares
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$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its assets in equity securities. The portfolio managers seek opportunities across the growth/value spectrum, resulting in what is generally
considered a diversified core portfolio.
The portfolio managers investment process focuses on bottom-up stock selection with
the goal of identifying companies that possess a sustainable competitive advantage combined with an attractive valuation. A sustainable competitive advantage may be derived from a unique product or service offering, a capable and proven management
team, and sound financials.
Through the use of both qualitative and quantitative evaluation, the portfolio managers seek securities that meet the
specific criteria of one of three investment categories: leaders (leading market share and above average profitability), laggards (companies undergoing a restructuring), and innovators (dedication to introducing new products or services).
The Fund may invest in real estate investment trusts (REITs), foreign securities (directly and through depositary receipts), below
investment grade securities, and convertible bonds. The Fund may invest in options on securities and securities indices for hedging purposes or to seek capital appreciation. For example, the portfolio managers may purchase call options on securities
they believe possess appreciation potential. Conversely, the portfolio managers may sell covered call options on securities held in the portfolio.
To manage risk, the portfolio managers limit position sizes, diversify across both market sectors and capitalization, and adhere to a strong sell discipline.
Prospectus
|
12
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Below Investment Grade (High Yield) Securities Risk.
Bonds and other fixed income securities are rated by national ratings agencies. These ratings generally assess the ability of the issuer to pay
principal and interest. Issuers of securities that are rated below investment grade (i.e., Ba1/BB+ or lower) and their unrated equivalents are typically in poor financial health, and their ability to pay interest and principal is uncertain. The
prices of such securities may be more vulnerable to bad economic news, or even the expectation of bad news, than higher rated or investment grade bonds and other fixed income securities. These securities are considered speculative and are commonly
known as junk bonds.
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and
fixed income securities. The lower the premium, the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of
conversion is lower. In that case, the price of convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the
risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time frame.
Derivatives Risk.
Risks associated with derivatives may include the risk that the derivative is not well correlated with the security, index or
currency to which it relates, the risk that derivatives may not have the intended effects and may result in losses or missed opportunities, the risk that the Fund will be unable to sell the derivative because of an illiquid secondary market, the
risk that a counterparty is unwilling or unable to meet its obligations, and the risk that the derivative transaction could expose the Fund to the effects of leverage, which could increase the Funds exposure to the market and magnify potential
losses. There is no guarantee that derivatives, to the extent employed, will have the intended effect, and their use could cause lower returns or even losses to the Fund. The use of derivatives by the Fund to hedge risk may reduce the opportunity
for gain by offsetting the positive effect of favorable price movements. The use of over-the-counter derivatives subjects the Fund to credit risk of the counterparty instrument. The use of certain derivatives provides exposure to the underlying
market or other reference asset in excess of the cash investment of the Fund. The use of derivatives can magnify gains and losses.
Foreign
Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more
widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little public information about the companies. Trades typically
take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S.
dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely
affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments
in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing involves
buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock
underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily
sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take
advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a
result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock
market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
REIT Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. Some REITs may have limited diversification and may be
subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic conditions. When growth is slowing, demand for property decreases
and prices may decline. Rising interest rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and may reduce the appeal of real estate investments. REITs depend generally on their ability to
generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs return may be adversely affected when interest rates are high or rising. Distributions from
REITs generally are taxed as ordinary income for federal income tax purposes.
Prospectus
|
13
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for
growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic conditions, the Funds return may be adversely affected during a
market downturn and when value stocks are out of favor.
FUND PERFORMANCE
The bar chart shows how the Funds performance of Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of
securities, so the annual returns would differ only to the extent that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares.
This information may help illustrate the risks of investing in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance
(before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
|
]%
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Worst quarter:
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[
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]
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[
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]%
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The table below indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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ASTON/TAMRO Diversified Equity Fund
(a)
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1 Year
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5 Years
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10 Years
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Since Inception
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Class N Shares
(Inception 11/30/00):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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|
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions
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[ ]
|
%
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[ ]
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%
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[ ]
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%
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|
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[ ]
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%
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Return After Taxes on Distributions and Sale of Fund Shares
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[ ]
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%
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|
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[ ]
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%
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[ ]
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%
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|
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[ ]
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%
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Russell 1000 Index
(Reflects no deduction for taxes, expenses or fees.)
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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(a)
|
Class I shares commenced operations on February 29, 2012, therefore no returns are shown for Class I shares.
|
As of June 30, 2009, the Fund changed its name from ASTON/TAMRO All Cap Fund to ASTON/TAMRO Diversified Equity Fund. As of January 1, 2008, the
Fund changed its name from ASTON/TAMRO Large Cap Value Fund to ASTON/TAMRO All Cap Fund. Performance prior to such times reflects the Funds former strategy and the performance may have differed if the current strategy was in place.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and
local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the capital loss of the sale of Fund
shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such
as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. TAMRO Capital Partners, LLC (TAMRO) serves as the subadviser to the Fund.
Mr. Philip D. Tasho, CFA, Chief Executive Officer and Chief Investment Officer of TAMRO, and Mr. Timothy A. Holland, CFA, a principal for
TAMRO, serve as Portfolio Managers of the Fund. Mr. Tasho has served as Portfolio Manager of the Fund since November 2000. Mr. Holland has served as Portfolio Manager of the Fund since March 2010.
Prospectus
|
14
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
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Minimum Initial Investment
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Subsequent Investments
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Class N
Regular Accounts
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$
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2,500
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$
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50
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Individual Retirement Accounts (IRAs)
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$
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500
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$
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50
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Education Savings Accounts (ESAs)
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$
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500
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$
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50
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Custodial Accounts for Minors (UGMA/UTMA)
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$
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500
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$
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50
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Class I
Institutional Accounts
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$
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1 Million
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$
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50
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TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
15
ASTON/River Road Dividend All Cap Value Fund
INVESTMENT OBJECTIVES
The Fund seeks to provide high current income and, secondarily, long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
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Class N Shares
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Class I Shares
|
|
Management Fees
|
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|
0.70
|
%
|
|
|
0.70
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5% and operating
expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
|
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Class N Shares
|
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$
|
[ ]
|
|
|
$
|
[ ]
|
|
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$
|
[ ]
|
|
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$
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[ ]
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Class I Shares
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[ ]
|
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[ ]
|
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[ ]
|
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[ ]
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Fund invests at least 80% of its assets in equity securities. The Fund invests in a diversified, all-cap portfolio of income-producing equity securities with yields that the
portfolio managers believe will exceed the Russell 3000 Value Index. The Fund invests primarily in dividend paying common stocks, publicly traded partnerships (PTPs), and real estate investment trusts (REITs). The Fund
may also invest in foreign securities (directly and through depositary receipts), closed-end funds or other investment companies, convertible preferred stocks and royalty income trusts. Using systematic and dynamic internal research through multiple
sources, the portfolio managers narrow the field of companies into a more refined working universe. The portfolio managers then employ a value-driven, bottom-up approach that seeks to identify companies that they believe have certain characteristics
including:
n
|
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High, growing dividend yield
|
n
|
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Priced at a discount to absolute value
|
n
|
|
Attractive business model
|
n
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Shareholder-oriented management
|
n
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Undiscovered, underfollowed, misunderstood companies
|
To manage risk, the portfolio managers employ a structured sell discipline and a strategy of balanced diversification.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that
the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the
premium, the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the
price of convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
Prospectus
|
16
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the
risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty
in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with
securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control
regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in
economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other
regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Investment Company Risk.
The Fund may invest in securities of other investment companies, including ETFs, open-end funds and closed-end funds. The
risks of investment in other investment companies typically reflect the risk of the types of securities in which the funds invest. Investments in ETFs and closed-end funds are subject to the additional risk that shares of the fund may trade at a
premium or discount to their net asset value per share. When the Fund invests in another investment company, shareholders of the Fund bear their proportionate share of the other investment companys fees and expenses as well as their share of
the Funds fees and expenses.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the
desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of
other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As
a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to
stock market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
PTP Risk.
Investing in publicly traded partnerships (including master limited partnerships) involves risks not typically associated with publicly
traded companies. PTPs are exposed to the risks of their underlying assets, which in many cases includes the same types of risks as energy and natural resources companies, such as commodity pricing risk, supply and demand risk and depletion and
exploration risk. PTPs are also subject to capital markets risk, which is the risk that they are unable to raise capital to execute their growth strategies. PTPs are also subject to tax risk, which is the risk that they lose their partnership status
for tax purposes.
REIT Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by
defaults by borrowers or tenants. Some REITs may have limited diversification and may be subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also
affected by general economic conditions. When growth is slowing, demand for property decreases and prices may decline. Rising interest rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and
may reduce the appeal of real estate investments. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs
return may be adversely affected when interest rates are high or rising. Distributions from REITs generally are taxed as ordinary income for federal income tax purposes.
Royalty Income Trust Risk.
Investing in royalty income trusts involve risks not typically associated with publicly traded companies. Royalty income trusts are exposed to many of the same risks as
energy and natural resources companies, such as commodity pricing risk, supply and demand risk and depletion and exploration risk. Royalty income trusts are also subject to capital markets risk, which is the risk that they are unable to raise
capital to execute their growth strategies.
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or
undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic
conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
Prospectus
|
17
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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|
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|
ASTON/River Road Dividend All Cap Value Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 6/28/05):
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 6/28/07):
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell 3000 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from June 30, 2005. Index return for Class I shares, since inception, computed from June 30, 2007, is
[ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Tax on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the
capital loss of the sale of Fund shares to offset other taxable gains]. After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. River Road Asset Management, LLC (River Road) serves as the subadviser to the Fund.
Mr. Henry W. Sanders, CFA, Executive Vice President of River Road, serves as lead Portfolio Manager of the Fund, Mr. Thomas S. Forsha, CFA, Vice
President of River Road, and Mr. James C. Shircliff, CFA, Chief Investment Officer of River Road, serve as Co-Portfolio Managers of the Fund. Mr. Shircliff and Mr. Sanders have served as the Funds Portfolio Managers since
June 2005. Mr. Forsha has served as the Funds Portfolio Manager since June 2007.
Prospectus
|
18
PURCHASE AND SALE OF FUND SHARES*
Shares of
the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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|
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|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
*
|
The Fund is currently accepting additional investments from existing investors only. The Fund will remain closed to new investors until further notice, with certain
limited exceptions as listed in the Shareholder Information Section of the statutory prospectus.
|
TAX
INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless
you are investing through a tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from
those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the
intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediarys website for more information.
Prospectus
|
19
ASTON/River Road Dividend All Cap Value Fund II
INVESTMENT OBJECTIVES
The Fund seeks to provide long term capital appreciation and high current income.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.70
|
%
|
|
|
0.70
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(
a)
|
|
|
[ ]
|
%
(
a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(
a)
|
|
|
[ ]
|
%
(
a)
|
(a)
|
The adviser is contractually obligated to waive
management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the
extent that operating expenses exceed 1.30% of the Funds average daily net assets with respect to Class N shares and 1.05% of the Funds average daily net assets with respect to Class I shares (the Operating Expense Limit).
Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was waived or
reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement of operations through the completion of the first three full fiscal years to the extent that the Funds Total Annual
Operating Expenses for a class, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, remains below the Operating Expense Limit after such reimbursement.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if
you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same and expenses were capped for one
year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. For the period from June 27, 2012, when the
Fund commenced investment operations, through the Funds fiscal year end on October 31, 2012, the Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions the Fund invests at least 80% of its assets in equity securities. The Fund invests in a diversified, all-cap portfolio of income-producing equity securities, typically of companies
with a market capitalization of at least $1 billion at the time of initial purchase. The portfolio managers seek to obtain a portfolio yield that exceeds the Russell 3000 Value Index. The Fund invests primarily in dividend-paying common stocks,
publicly traded partnerships (PTPs), and real estate investment trusts (REITs). The Fund may also invest in foreign securities (directly and through depositary receipts), closed-end funds or other investment companies,
convertible preferred stocks and royalty income trusts. Using a proprietary research process, the portfolio managers narrow the field of potential investments into a more refined working universe. The portfolio managers then employ a value-driven,
bottom-up approach that seeks to identify companies that they believe have certain characteristics including:
n
|
|
High, growing dividend yield
|
n
|
|
Priced at a discount to absolute value
|
n
|
|
Attractive business model
|
n
|
|
Shareholder-oriented management
|
n
|
|
Undiscovered, underfollowed, misunderstood companies
|
To manage risk, the portfolio managers employ a structured sell discipline and a strategy of balanced diversification.
Prospectus
|
20
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium, the more likely the price of the convertible
will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of convertible preferred shares normally will
fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
The value of convertible securities
is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the
holder of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities
Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely
than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little public information about the companies. Trades typically take more
time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S.
dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely
affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments
in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Investment Company Risk.
The Fund may invest
in securities of other investment companies, including ETFs, open-end funds and closed-end funds. The risks of investment in other investment companies typically reflect the risk of the types of securities in which the funds invest. Investments in
ETFs and closed-end funds are subject to the additional risk that shares of the fund may trade at a premium or discount to their net asset value per share. When the Fund invests in another investment company, shareholders of the Fund bear their
proportionate share of the other investment companys fees and expenses as well as their share of the Funds fees and expenses.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a
lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities
are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The
performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a
particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
PTP
Risk.
Investing in publicly traded partnerships (including master limited partnerships) involves risks not typically associated with publicly traded companies. PTPs are exposed to the risks of their underlying assets, which in many cases
include the same types of risks as energy and natural resources companies, such as commodity pricing risk, supply and demand risk and depletion and exploration risk. PTPs are also subject to capital markets risk, which is the risk that they are
unable to raise capital to execute their growth strategies. PTPs are also subject to tax risk, which is the risk that they lose their partnership status for tax purposes.
REIT Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. Some REITs may have limited diversification and may
be subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic conditions. When growth is slowing, demand for property
decreases and prices may decline. Rising interest rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and may reduce the appeal of real estate investments. REITs depend generally on their
ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs return may be adversely affected when interest rates are high or rising.
Distributions from REITs generally are taxed as ordinary income for federal income tax purposes.
Royalty Income Trust Risk.
Investing
in royalty income trusts involve risks not typically associated with publicly traded companies. Royalty income trusts are exposed to many of the same risks as energy and natural resources companies, such as commodity pricing risk, supply and demand
risk and depletion and exploration risk. Royalty income trusts are also subject to capital markets risk, which is the risk that they are unable to raise capital to execute their growth strategies.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may involve greater risks than investing in
securities of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the securities of
larger, more established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility and may
decline significantly in market downturns.
Prospectus
|
21
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for
growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic conditions, the Funds return may be adversely affected during a
market downturn and when value stocks are out of favor.
FUND PERFORMANCE
The Fund does not have a full calendar year of operations. Performance information will be included in the Funds shareholder reports.
MANAGEMENT
Aston Asset Management, LP serves as the investment adviser to the Fund. River Road Asset Management, LLC (River Road or the Subadviser) serves as the subadviser to the Fund.
Mr. Henry W. Sanders, CFA, Executive Vice President of River Road, serves as lead portfolio manager of the Fund.
Mr. Thomas S. Forsha, CFA, Vice President of River Road, and Mr. James C. Shircliff, CFA, Chief Investment Officer of River Road, serve as co-portfolio managers of the Fund. Mr. Sanders, Mr. Forsha, and
Mr. Shircliff have served as the Funds portfolio managers since the Funds inception in June 2012.
PURCHASE AND SALE OF FUND
SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765,
Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
100,000
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a tax-deferred account such as a 401(k) or individual
retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund
through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
Prospectus
|
22
ASTON/Fairpointe Mid Cap Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term total return through capital appreciation by investing primarily in common and preferred stocks and convertible securities.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.71
|
%
|
|
|
0.71
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5% and operating
expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Fund invests at least 80% of its assets in mid-cap stocks of companies with an improving revenue and earnings growth outlook. The Fund defines a mid-cap company as one having a
market capitalization of between $1 and $12 billion at the time of acquisition. The portfolio managers select approximately 40 50 stocks based on bottom-up fundamental analysis.
Important investment criteria include:
n
|
|
Focused business franchise with ability to grow market share
|
The
portfolio managers take a long-term approach with a focus on maximizing after-tax returns.
The Fund may invest in small-cap stocks, convertible
securities, and foreign securities (directly and through depositary receipts).
To manage risk, the portfolio managers employ a valuation
discipline to limit downside risk, limit position sizes and sector exposure, and adhere to a strong sell discipline.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The
following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject
to the risks of equity securities and fixed income securities. The lower the premium, the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the
behavior of bonds because the likelihood of conversion is lower. In that case, the price of convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
Prospectus
|
23
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the
risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty
in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with
securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control
regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in
economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other
regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile
than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a
lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities
are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The
performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes
in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may involve greater risks than investing in securities
of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the securities of larger, more
established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility and may decline
significantly in market downturns.
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or
undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic
conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
FUND
PERFORMANCE
The bar chart shows how the performance of the Class N shares of the Fund has varied from year to year over the periods
shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the classes have different expenses. The annual returns of the Class I shares would be
higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The Fund makes updated performance information available on the Funds
website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
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]%
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|
Worst quarter:
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[
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]
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[
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]%
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Prospectus
|
24
The following table indicates how the Funds average annual returns for different calendar periods compared to the returns of a broad-based securities
market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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ASTON/Fairpointe Mid Cap Fund
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1 Year
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5 Years
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10 Years
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Since Inception
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Class N Shares
(Inception 9/19/94):
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|
|
|
|
|
|
|
|
|
|
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|
Return Before Taxes
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|
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[ ]
|
%
|
|
|
[ ]
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%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
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[ ]
|
%
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|
|
[ ]
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%
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|
|
[ ]
|
%
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|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
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|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 7/06/04):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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N/A
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[ ]
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%
|
S&P MidCap 400 Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from September 30, 1994. Index return for Class I shares, since inception, computed from June 30, 2004, is [__]%.)
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[ ]
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%
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|
|
[ ]
|
%
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|
|
[ ]
|
%
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|
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[ ]
|
%
|
Fairpointe Capital LLC (Fairpointe) became the subadviser to the Fund on April 30, 2011.
Performance prior to that date reflects the performance of previous subadvisers. However, Ms. Zerhusen has served as a portfolio manager since May 1999.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. [In some instances, the Return After
Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns
depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Fairpointe serves as the subadviser to the Fund.
Ms. Thyra E. Zerhusen, founder, Chief Executive Officer and Chief Investment Officer of Fairpointe, Ms. Marie L. Lorden, partner and portfolio manager of Fairpointe, and
Ms. Mary L. Pierson, partner and portfolio manager of Fairpointe, serve as Portfolio Managers of the Fund. Ms. Zerhusen has served as the Funds Portfolio Manager since May 1999. Ms. Lorden and Ms. Pierson have served
as the Funds Co-Portfolio Managers of the Fund since March 2009.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire
transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
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$
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500
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$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
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$
|
500
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$
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50
|
|
Class I
Institutional Accounts
|
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$
|
1 Million
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$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
25
ASTON/Montag & Caldwell Mid Cap Growth Fund
INVESTMENT OBJECTIVES
The Fund seeks to provide long-term capital appreciation and, secondarily, current income, by investing primarily in common stocks and convertible securities.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
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|
Management Fees
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0.85
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%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
Other Expenses
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
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|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
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[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Reimbursement
|
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[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 1.25% of the Funds average daily net assets (Operating Expense Limit). Prior to February 28, 2014, the arrangement may be amended or terminated only by a vote of the Board of
Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement
of operations through the completion of the first three full fiscal years to the extent that the Funds Total Annual Operating Expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary
expenses and acquired fund fees and expenses, remains at or below the Operating Expense Limit after such reimbursement.
|
Example
This example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all
your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
|
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5 Years
|
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10 Years
|
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Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in common stocks and convertible securities. Under normal circumstances, the Fund invests at least 80% of its assets in securities of mid-cap companies. The Fund defines a mid-cap
company as one having a market capitalization, at the time of acquisition, within the range of market capitalizations of companies constituting the Russell Midcap Growth Index. The market capitalization range of the Russell Midcap Growth Index
changes periodically, and the capitalization of mid-cap companies in which the Fund invests also changes. As of December 31, 2012, the market capitalization range of the Russell Midcap Growth Index was approximately
$ million to $ billion.
The portfolio managers use a bottom-up approach to stock selection and seek high quality, well-established mid-cap companies that:
n
|
|
Offer a compelling combination of earnings growth and attractive value
|
n
|
|
Sell at a discount to intrinsic value
|
n
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|
Exhibit above-median near-term relative earnings strength
|
n
|
|
Are leading franchises and have proven management teams, strong finances and attractive long-term secular growth characteristics
|
The Fund may invest in convertible securities and foreign securities (directly and through depositary receipts).
To manage risk, the portfolio managers adhere to a strong sell discipline.
Prospectus
|
26
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium, the more likely the price of the convertible will
follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of convertible preferred shares normally will fall
as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
The value of convertible securities is
also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder
of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing
in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S.
markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear,
and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S.
dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely
affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments
in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing
involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock
underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be
readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to
take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As
a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to
stock market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Mid-Cap Company Risk.
Investments in mid-cap companies may entail greater risks than investments in larger, more established companies. Mid-cap
companies generally have narrower product lines, more limited financial resources and a more limited trading market for their stocks compared with larger companies. As a result, their stock prices may experience greater volatility and may decline
significantly in market downturns.
FUND PERFORMANCE
The bar chart shows how the performance of the Fund has varied from year to year over the periods shown. This information may help illustrate the risks of investing in the Fund. The Fund makes updated
performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Calendar Year Total Return
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prospectus
|
27
The following table indicates how the Funds average annual returns for different calendar periods compared to the returns of a broad-based securities
market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
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|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 11/02/07):
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell Midcap Growth Index
(Reflects no deduction for taxes, expenses or fees. Index
return is computed from October 31, 2007.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Tax on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the
capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Montag & Caldwell, LLC (Montag & Caldwell) serves as the subadviser to the Fund.
Mr. Andrew W. Jung, CFA, a security analyst and Vice President for Montag & Caldwell, and Mr. M. Scott Thompson, CFA, a security
analyst and Vice President for Montag & Caldwell, serve as Portfolio Managers to the Fund. Mr. Jung and Mr. Thompson have served as the Funds Portfolio Managers since November 2007.
PURCHASE AND SALE OF FUND SHARES
Shares of
the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
28
ASTON/TAMRO Small Cap Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.90
|
%
|
|
|
0.90
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5% and operating
expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance.
During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 80% of its assets in a blended portfolio of growth and value stocks of small-cap companies. The Fund defines companies with market capitalizations of
up to $2.75 billion, at the time of acquisition, to be small-cap companies. The portfolio managers seek opportunities across the growth/value spectrum, resulting in what is generally considered a core portfolio.
The portfolio managers investment process focuses on bottom-up stock selection with the goal of identifying companies that possess a sustainable
competitive advantage combined with an attractive valuation. A sustainable competitive advantage may be derived from a unique product or service offering, a capable and proven management team, and sound financials.
Through the use of both qualitative and quantitative evaluation, the portfolio managers seek securities that meet the specific criteria of one of three
investment categories:
n
|
|
Leaders
(leading market share and above average profitability)
|
n
|
|
Laggards
(companies undergoing a restructuring)
|
n
|
|
Innovators
(dedication to introducing new products or services)
|
The Fund may invest in real estate investment trusts (REITs), foreign securities (directly and through depositary receipts), convertible bonds, securities outside the small-cap range and
cash-equivalent securities.
To manage risk, the portfolio managers limit position sizes, diversify across market sectors and adhere to a strong
sell discipline.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a
summary of the principal risks of investing in the Fund.
Prospectus
|
29
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium,
the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of
convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the risk that the issuer of the security will not be able
to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of
foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little
public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the
U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other
political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally
different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile than other stocks because they are generally more
sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a
lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities
are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The
performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a
particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
REIT
Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. Some REITs may have limited diversification and may be subject to risks inherent in investments in a
limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic conditions. When growth is slowing, demand for property decreases and prices may decline. Rising interest
rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and may reduce the appeal of real estate investments. REITs depend generally on their ability to generate cash flow to make distributions
to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs return may be adversely affected when interest rates are high or rising. Distributions from REITs generally are taxed as ordinary income
for federal income tax purposes.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may
involve greater risks than investing in securities of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more
limited volume than the securities of larger, more established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may
experience greater volatility and may decline significantly in market downturns.
Value Style Risk.
Value investing involves buying
stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors
depending on market and economic conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
Prospectus
|
30
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
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|
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|
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|
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|
Best quarter:
|
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|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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|
ASTON/TAMRO Small Cap Fund
|
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|
1 Year
|
|
|
5 Years
|
|
|
10 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 11/30/00):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 1/04/05):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Return Before Taxes
|
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|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
N/A
|
|
|
|
[ ]
|
%
|
Russell 2000 Index
(Reflects no deduction for taxes, expenses or fees. Index return for
Class I shares, since inception, computed from December 31, 2004, is [ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary
.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. TAMRO Capital Partners, LLC (TAMRO) serves as the subadviser to the Fund.
Mr. Philip D. Tasho, CFA, Chief Executive Officer and Chief Investment Officer of TAMRO, and Mr. Tim Holland, CFA, a principal for TAMRO,
serve as Portfolio Managers of the Fund. Mr. Tasho has served as Portfolio Manager of the Fund since November 2000. Mr. Holland has served as Portfolio Manager of the Fund since February 2010.
Prospectus
|
31
PURCHASE AND SALE OF FUND SHARES*
Shares of
the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
*
|
The Fund is currently accepting additional investments from existing investors only. The Fund will remain closed to new investors until further notice, with certain
limited exceptions as listed in the Shareholder Information Section of the statutory prospectus.
|
TAX
INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless
you are investing through a tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from
those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the
intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediarys website for more information.
Prospectus
|
32
ASTON/River Road Select Value Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
1.00
|
%
|
|
|
1.00
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5% and operating
expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Fund invests at least 80% of its assets in common stocks and other equity securities of small-cap companies with market capitalizations of less than $6 billion at the time
of acquisition which the portfolio managers believe are undervalued. Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. The Fund may also invest in common stock
of companies with market capitalizations that exceed $6 billion, real estate investment trusts (REITs), convertible securities and foreign securities (directly and through depositary receipts).
Using systematic and dynamic internal research, the portfolio managers narrow the field of small- and mid-cap companies into a more refined working universe.
The portfolio managers then employ a value-driven, bottom-up fundamental approach that seeks to identify certain characteristics including:
n
|
|
Priced at a discount to absolute value
|
n
|
|
Attractive business model
|
n
|
|
Shareholder-oriented management
|
n
|
|
Undiscovered, underfollowed or misunderstood companies
|
To manage risk, the portfolio managers employ a strategy of balanced diversification, and adhere to a structured sell discipline.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that
the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium,
the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of
convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
Prospectus
|
33
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the
risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty
in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with
securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control
regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in
economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other
regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a
lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities
are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The
performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a
particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
REIT
Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. Some REITs may have limited diversification and may be subject to risks inherent in investments in a
limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic conditions. When growth is slowing, demand for property decreases and prices may decline. Rising interest
rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and may reduce the appeal of real estate investments. REITs depend generally on their ability to generate cash flow to make distributions
to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs return may be adversely affected when interest rates are high or rising. Distributions from REITs generally are taxed as ordinary income
for federal income tax purposes.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may
involve greater risks than investing in securities of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more
limited volume than the securities of larger, more established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may
experience greater volatility and may decline significantly in market downturns.
Value Style Risk.
Value investing involves buying
stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors
depending on market and economic conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
Prospectus
|
34
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the
classes have different expenses. The annual returns of the Class I shares would be higher than the returns of Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The Fund
makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of broad-based securities market indices.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/River Road Select Value Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 3/29/07):
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 6/28/07):
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell 2500 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return since inception for Class N shares is
computed from March 31, 2007. Index return for Class I shares, since inception, computed from June 30, 2007, is [ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell 2000 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from March 31, 2007. Index return for Class I shares, since inception, computed from June 30, 2007, is
[ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains
.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their
shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. River Road Asset Management, LLC (River Road) serves as the subadviser to the Fund.
Mr. James C. Shircliff, CFA, Chief Investment Officer of River Road, Mr. R. Andrew Beck, CEO and President of River Road, and Mr. J.
Justin Akin, a River Road portfolio manager, serve as Portfolio Managers for the Fund. Mr. Shircliff and Mr. Beck have served as Portfolio Managers since March 2007. Mr. Akin has served as Portfolio Manager since March 2012.
Prospectus
|
35
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
36
ASTON/River Road Small Cap Value Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.90
|
%
|
|
|
0.90
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5% and operating
expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Class N Shares
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$
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[ ]
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$
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[ ]
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$
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[ ]
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$
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[ ]
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Class I Shares
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[ ]
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[ ]
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[ ]
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[ ]
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance.
During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Fund invests at least 80% of its assets in common stocks and other equity securities of small-cap companies that the portfolio managers believe are undervalued. Value investing
involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. The Fund considers companies with market capitalizations below $3 billion at the time of acquisition to be small-cap.
The Fund may also invest in mid-cap stocks, real estate investment trusts (REITs), convertible securities, exchange-traded funds (ETFs), closed-end funds and foreign securities (directly and through depositary receipts). The
Fund considers companies with market capitalizations between $3 billion and $6 billion at the time of acquisition to be mid-cap companies. Using systematic and dynamic internal research, the portfolio managers narrow the field of small- and mid-cap
companies into a more refined working universe. The portfolio managers employ a value-driven, bottom-up fundamental approach that seeks to identify certain characteristics including:
n
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Priced at a discount to absolute value
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n
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Attractive business model
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n
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Shareholder-oriented management
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n
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Undiscovered, underfollowed or misunderstood companies
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To manage risk, the portfolio managers employ a strategy of balanced diversification, and adhere to a structured sell discipline.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that
the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Prospectus
|
37
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium,
the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of
convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the risk that the issuer of the security will not be able
to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of
foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little
public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the
U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other
political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally
different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Investment Company Risk.
The Fund may invest in securities of other investment companies, including ETFs, open-end funds and closed-end funds. The risks of investment in other investment companies
typically reflect the risk of the types of securities in which the funds invest. Investments in ETFs and closed-end funds are subject to the additional risk that shares of the fund may trade at a premium or discount to their net asset value per
share. When the Fund invests in another investment company, shareholders of the Fund bear their proportionate share of the other investment companys fees and expenses as well as their share of the Funds fees and expenses.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to
accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid
securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager
Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or
its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or
changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
REIT Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants.
Some REITs may have limited diversification and may be subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic
conditions. When growth is slowing, demand for property decreases and prices may decline. Rising interest rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and may reduce the appeal of
real estate investments. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs return may be adversely
affected when interest rates are high or rising. Distributions from REITs generally are taxed as ordinary income for federal income tax purposes.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may involve greater risks than investing in securities
of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the securities of larger, more
established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility and may decline
significantly in market downturns.
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or undervalued
in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic conditions, the
Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
Prospectus
|
38
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
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]%
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Worst quarter:
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[
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]
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[
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]%
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The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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ASTON/River Road Small Cap Value Fund
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1 Year
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5 Years
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Since Inception
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Class N Shares
(Inception 6/28/05):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions and Sale of Fund Shares
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Class I Shares
(Inception 12/13/06):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Russell 2000 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from June 30, 2005. Index return for Class I shares, since inception, computed from November 30, 2006, is
[ ]%.)
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[ ]
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%
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[ ]
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%
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[ ]
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%
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary
.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. River Road Asset Management, LLC (River Road) serves as the subadviser to the Fund.
Mr. James C. Shircliff, CFA, Chief Investment Officer of River Road, Mr. R. Andrew Beck, CEO and President of River Road, and
Mr.
J. Justin Akin, a River Road portfolio manager, serve as the Funds Portfolio Managers. Mr. Shircliff and Mr. Beck have served as Portfolio Managers since June 2005. Mr. Akin has served as Portfolio Manager since
March 2012.
Prospectus
|
39
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
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Minimum Initial Investment
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Subsequent Investments
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Class N
Regular Accounts
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$
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2,500
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$
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50
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Individual Retirement Accounts (IRAs)
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$
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500
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$
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50
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Education Savings Accounts (ESAs)
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$
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500
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$
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50
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Custodial Accounts for Minors (UGMA/UTMA)
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$
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500
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$
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50
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Class I
Institutional Accounts
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$
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1 Million
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$
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50
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TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
40
ASTON/River Road Independent Value Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term total return.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
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Class I Shares
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Management Fees
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1.00
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%
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1.00
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%
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Distribution and Service (12b-1) Fees
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0.25
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%
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None
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Other Expenses
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[ ]
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%
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[ ]
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%
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Acquired Fund Fees and Expenses
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[ ]
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%
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[ ]
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%
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Total Annual Fund Operating Expenses
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[ ]
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%
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[ ]
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%
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Fee Waiver and/or Expense Reimbursement
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[ ]
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%
(
a)
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[ ]
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%
(
a)
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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[ ]
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%
(
a)
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[ ]
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%
(
a)
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(a)
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The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions),interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 1.42% of the Funds average daily net assets with respect to Class N shares and 1.17% of the Funds average daily net assets with respect to Class I shares (the Operating Expense
Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was
waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement of operations through the completion of the first three full fiscal years to the extent that the Total Annual
Operating Expenses for the class, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, remains at or below the Operating Expense Limit after such
reimbursement.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if
you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for
one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Class N Shares
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$
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[ ]
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$
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[ ]
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$
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[ ]
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$
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[ ]
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Class I Shares
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[ ]
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[ ]
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[ ]
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[ ]
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in common stocks and other equity securities that the portfolio manager believes are undervalued. Under normal circumstances, the Fund typically invests in smaller cap companies with market
capitalizations between $100 million and $5 billion at the time of acquisition. The Funds equity investments consist primarily of common stock but may also include other types of equity such as preferred stock, convertible securities, foreign
securities and real estate investment trusts (REITs). Cash is a residual of the investment process. When the portfolio manager is unable to find investment opportunities that meet the Funds criteria, the Fund may have significant
(more than 25%) cash balances, at times, for a sustained period. The portfolio manager employs a value driven, bottom-up fundamental approach that seeks to identify companies with certain characteristics including:
n
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Priced at a discount to absolute value
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n
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Considered high quality by the portfolio manager
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n
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Consistent free cash flow
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The
portfolio manager generally emphasizes a high quality portfolio and seeks absolute return while minimizing downside portfolio risk. As a result, the Funds returns may vary significantly from its benchmark index. To manage risk, the portfolio
manager adheres to a structured sell discipline.
Prospectus
|
41
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium, the more likely the price of the convertible will
follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of convertible preferred shares normally will fall
as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
The value of convertible securities is
also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder
of the security may not take advantage of the convertible features in the appropriate time frame.
Foreign Securities Risk.
Investing
in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S.
markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear,
and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S.
dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely
affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments
in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Liquidity Risk.
When there is no willing
buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or
prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio
managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market
Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in
general is rising.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may involve greater
risks than investing in securities of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than
the securities of larger, more established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater
volatility and may decline significantly in market downturns.
Value Style Risk.
Value investing involves buying stocks that are out
of favor and/or undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and
economic conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of favor.
Prospectus
|
42
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year for the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that
the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in
the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
|
]%
|
|
Worst quarter:
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[
|
]
|
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[
|
]%
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The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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|
ASTON/River Road Independent Value Fund
|
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|
1 Year
|
|
|
Since Inception
|
|
Class N Shares
(Inception 12/31/10):
|
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|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 6/1/2011):
|
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|
|
|
|
|
|
|
Return Before Taxes
|
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|
[ ]
|
%
|
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[ ]
|
%
|
Russell 2000 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return
for Class I shares, since inception, computed from [ ], is [ ]%.)
|
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|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Tax on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the
capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary
.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. River Road Asset Management, LLC (River Road) serves as the subadviser to the Fund.
Mr. Eric Cinnamond, CFA, Vice President of River Road and portfolio manager of River Roads Independent Value Strategy, has served as the Portfolio
Manager since the Funds inception in December 2010.
Prospectus
|
43
PURCHASE AND SALE OF FUND SHARES
Shares
of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
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|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a tax-deferred account such as a 401(k) or individual
retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund
through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
Prospectus
|
44
ASTON/LMCG Small Cap Growth Fund
(formerly, ASTON Small Cap Growth Fund)
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
1.00
|
%
|
|
|
1.00
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 1.35% of the Funds average daily net assets with respect to Class N shares and 1.10% of the Funds average daily net assets with respect to Class I shares (the Operating Expense
Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was
waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from commencement of operations through the completion of the first three full fiscal years to the extent that the Funds Total
Annual Operating Expenses for a class, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, remains at or below the Operating Expense Limit after such
reimbursement.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if
you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for
one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[
|
]
|
|
$
|
[
|
]
|
|
$
|
[
|
]
|
|
$
|
[
|
]
|
Class I Shares
|
|
|
[
|
]
|
|
|
[
|
]
|
|
|
[
|
]
|
|
|
[
|
]
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its assets in common stocks and other equity securities of small-cap companies. The Fund defines a small-cap company as one with a market
capitalization below $3 billion at the time of acquisition. The portfolio manager seeks to achieve above average risk-adjusted returns by identifying unrecognized growth potential. The portfolio manager utilizes a fundamental bottom-up security
selection process to identify characteristics such as: revenue growth, margin expansion, surprise potential, and strong balance sheets. The focus of the fundamental research process is to confirm that the growth is durable and sustainable, as well
as to conduct due diligence on the key drivers of each security. The final step in the process applies a valuation framework to each security that meets the criteria of the fundamental research process.
The Fund may also invest in mid-cap stocks, including companies with a market capitalization up to $10 billion at the time of acquisition.
To manage risk, the portfolio manager limits position sizes, employs a strategy of diversification, and adheres to a structured sell discipline based on
fundamental drivers and company valuations.
Prospectus
|
45
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile than other stocks because they are generally more
sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a
lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities
are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The
performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a
particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Portfolio Turnover Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital gains,
including short-term gains, and will result in greater transaction costs to the Fund. High portfolio turnover may increase the level of short-term capital gains. To the extent distributions to shareholders are made from net short-term capital gains
(i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary income
rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater transaction costs and higher expenses as a result of portfolio turnover can negatively impact the Funds performance.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may involve greater risks than investing in securities
of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the securities of larger, more
established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility and may decline
significantly in market downturns.
FUND PERFORMANCE
The bar chart shows how the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of
securities, so the annual returns would differ only to the extent that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares.
This information may help illustrate the risks of investing in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance
(before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prospectus
|
46
The following table indicates how the Funds average annual returns for different calendar periods compared to the returns of a broad-based securities
market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
|
|
ASTON/LMCG Small Cap Growth Fund
|
|
|
|
1 Year
|
|
|
Since Inception
|
|
Class N Shares
(Inception 11/03/10):
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 6/1/11):
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell 2000 Growth Index
(Reflects no deduction for taxes, expenses or fees. Index
return since inception for Class N shares is computed from October 31, 2010. Index return for Class I shares, since inception, computed from [ ], is [ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
As of March 1, 2013, the Fund changed its name form ASTON Small Cap Growth Fund to ASTON/LMCG Small Cap Growth Fund.
As of February 17, 2012, the Fund changed its name from ASTON/Crosswind Small Cap Growth Fund to ASTON Small Cap Growth Fund and Lee Munder Capital Group, LLC (LMCG) became the subadviser. Performance prior to that date reflects the
performance of a previous subadviser. However, Mr. Morey has served as the Funds portfolio manager since its inception.
After-tax
returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares
may be greater than Return Before Taxes because the investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may
differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares.
After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. LMCG serves as the subadviser to the Fund.
Mr. Andrew Morey, CFA, lead portfolio manager for LMCGs small and small/mid cap investment strategies, has served as the Funds Portfolio Manager since the Funds inception in November
2010.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by
telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
47
ASTON/Veredus Select Growth Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.80
|
%
|
|
|
0.80
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses , not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 1.30% of the Funds average daily net assets with respect to Class N shares and 1.05% of the Funds average daily net assets with respect to Class I shares. Prior to February 28,
2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds.
|
Example
This example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all
your shares at the end of those periods. The example assumes that the average annual return was 5% and operating expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in growth stocks of mid-cap and large-cap companies whose earnings are growing, or expected to grow, at an accelerating rate. The Fund defines a mid-cap company as one having a
market capitalization of between approximately $2.5 and $9 billion at the time of acquisition. The Fund defines a large-cap company as one having a market capitalization of approximately $9 billion or more at the time of acquisition. The portfolio
managers look for inefficiencies in the market caused by inaccurate expectations (e.g., positive earnings surprises, estimate revisions). The focus is on companies that have:
n
|
|
Expanding unit volume growth
|
n
|
|
Expanding profit margin potential
|
n
|
|
High or improving cash flow return on investment
|
n
|
|
Large markets with high barriers to entry
|
The Fund may invest in exchange-traded funds (ETFs), publicly traded partnerships (PTPs) and foreign securities (directly and through depositary receipts).
To manage risk, the portfolio managers adhere to a strong sell discipline. The Funds investment strategies may result in high portfolio turnover.
PRINCIPAL RISKS
You could lose
money by investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Prospectus
|
48
ETF Risk.
An ETF seeks to track the performance of an index by holding in its portfolio shares of all the companies, or a representative sample of the
companies, that are components of a particular index. The risks of investment in ETFs typically reflect the risk of the types of securities in which the ETFs invest. Shares of an ETF may trade at a premium or discount to their net asset value per
share. In addition, when the Fund invests in an ETF, shareholders of the Fund bear their proportionate share of the ETFs fees and expenses as well as their share of the Funds fees and expenses.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty
in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with
securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control
regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in
economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other
regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile than
other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at
all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values
and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment
advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may
decline in value even when the value of stocks in general is rising.
Mid-Cap Company Risk.
Investments in mid-cap companies may entail
greater risks than investments in larger, more established companies. Mid-cap companies generally have narrower product lines, more limited financial resources and a more limited trading market for their stocks compared with larger companies. As a
result, their stock prices may experience greater volatility and may decline significantly in market downturns.
Portfolio Turnover
Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital gains, including short-term gains, and will result in greater transaction costs to the Fund. High portfolio turnover may
increase the level of short-term capital gains. To the extent distributions to shareholders are made from net short-term capital gains (i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net
capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary income rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater
transaction costs and higher expenses as a result of portfolio turnover can negatively impact the Funds performance.
PTP Risk.
Investing in publicly traded partnerships (including master limited partnerships) involves risks not typically associated with publicly traded companies. PTPs are exposed to the risks of their underlying assets, which in many cases includes the same
types of risks as energy and natural resources companies, such as commodity pricing risk, supply and demand risk and depletion and exploration risk. PTPs are also subject to capital markets risk, which is the risk that they are unable to raise
capital to execute their growth strategies. PTPs are also subject to tax risk, which is the risk that they lose their partnership status for tax purposes.
Prospectus
|
49
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Return
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Veredus Select Growth Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
10 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 12/31/01):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 9/11/06):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
N/A
|
|
|
|
[ ]
|
%
|
Russell 1000 Growth Index
(Reflects no deduction for taxes, expenses or fees. Index
return for Class I shares since inception, computed from August 31, 2006, is [ ] %.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary
.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Todd-Veredus Asset Management LLC (Todd-Veredus) serves as the subadviser to the Fund.
Mr. B. Anthony Weber, Co-President and Chief Investment Officer of the growth investment strategy at Todd-Veredus, serves as Lead Portfolio Manager of
the Fund. Mr. Charles F. Mercer, Jr., CFA, a portfolio manager of Todd-Veredus, Mr. Michael E. Johnson, CFA, a portfolio manager of Todd-Veredus, Mr. John R. Prys, CFA, a portfolio manager of Todd-Veredus, and
Mrs. Katherine A. Kuntz, CFA, a portfolio manager of Todd-Veredus, serve as Co-Portfolio Managers of the Fund. Mr. Weber has served as the Funds Portfolio Manager since September 2002. Mr. Mercer has served as a Portfolio
Manager for the Fund since December 2001. Mr. Johnson has served as a Co-Portfolio Manager of the Fund since January 2009. Mr. Prys and Mrs. Kuntz have served as Co-Portfolio Managers of the Fund since February 2012.
Prospectus
|
50
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
51
ASTON Small Cap Fund
(formerly, ASTON/Veredus Small Cap Growth Fund)
INVESTMENT OBJECTIVE
The Fund seeks to provide capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
1.00
|
%
|
|
|
1.00
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage
commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.49% of the Funds average daily net assets with respect to Class N shares
and 1.24% of the Funds average daily net assets with respect to Class I shares. Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating
expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the
above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [__]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its assets in common stocks and other equity securities of small-cap companies. The Fund seeks to invest in growth stocks of small-cap companies
whose earnings are growing, or are expected to grow, at an accelerating rate. The Fund defines a small-cap company as one having a market capitalization of less than $2.5 billion at the time of acquisition. The portfolio managers look for
inefficiencies in the market caused by inaccurate expectations (e.g., positive earnings surprises, estimate revisions). The focus is on companies that have:
n
|
|
Expanding unit volume growth
|
n
|
|
Expanding profit margin potential
|
n
|
|
High or improving cash flow return on investment
|
n
|
|
Large markets with high barriers to entry
|
The Fund may also invest in equity securities outside the small cap range. Sector exposure is a residual of the investment process and the Fund may, from time to time, have exposure to a single sector or
group of related sectors that react similarly to market, economic or other events.
The Fund may invest in exchange-traded funds
(ETFs), publicly traded partnerships (PTPs) and foreign securities (directly and through depositary receipts).
To
manage risk, the portfolio managers adhere to a strong sell discipline. The Funds investment strategies may result in high portfolio turnover.
Prospectus
|
52
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. The securities of
foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little
public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the
U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other
political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally
different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be more volatile than other stocks because they are generally more
sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Investment Company Risk.
The Fund may invest in securities of other investment companies, including ETFs, open-end funds and closed-end funds. The
risks of investment in other investment companies typically reflect the risk of the types of securities in which the funds invest. Investments in ETFs and closed-end funds are subject to the additional risk that shares of the fund may trade at a
premium or discount to their net asset value per share. When the Fund invests in another investment company, shareholders of the Fund bear their proportionate share of the other investment companys fees and expenses as well as their share of
the Funds fees and expenses.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the
desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of
other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As
a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to
stock market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Portfolio Turnover Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital gains,
including short-term gains, and will result in greater transaction costs to the Fund. High portfolio turnover may increase the level of short-term capital gains. To the extent distributions to shareholders are made from net short-term capital gains
(i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary income
rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater transaction costs and higher expenses as a result of portfolio turnover can negatively impact the Funds performance.
PTP Risk.
Investing in publicly traded partnerships (including master limited partnerships) involves risks not typically associated with publicly
traded companies. PTPs are exposed to the risks of their underlying assets, which in many cases includes the same types of risks as energy and natural resources companies, such as commodity pricing risk, supply and demand risk and depletion and
exploration risk. PTPs are also subject to capital markets risk, which is the risk that they are unable to raise capital to execute their growth strategies. PTPs are also subject to tax risk, which is the risk that they lose their partnership status
for tax purposes.
Sector Concentration Risk.
The Fund may entail greater risks than investing in funds diversified across sectors.
Because the Fund may at times have a significant portion of its assets in one or more related sectors, the Fund may be subject to a greater level of market risk and its performance may be more volatile than a fund that does not concentrate its
investments in a specific sector.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may
involve greater risks than investing in securities of larger, more established issuers. Small-cap and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more
limited volume than the securities of larger, more established companies. Also, small-cap and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may
experience greater volatility and may decline significantly in market downturns.
Prospectus
|
53
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON Small Cap Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
10 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 6/30/98):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 10/05/01):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell 2000 Growth Index
(Reflects no deduction for taxes, expenses or fees. Index
return for Class I shares, since inception, computed from September 30, 2001, is [ ] %.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
As of January 31, 2013, the Fund changed its name from ASTON/Veredus Small Cap Growth Fund to ASTON Small Cap Fund
and Lee Munder Capital Group, LLC (LMCG) became the subadviser. Performance prior to that date reflects the performance of a previous subadviser.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. [In some instances, the Return After
Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns
depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. [Todd-Veredus Asset Management LLC (Todd-Veredus) serves as the subadviser to the Fund.]
[Mr. B. Anthony Weber, Co-President and Chief Investment Officer of the growth investment strategy at Todd-Veredus, serves as Lead Portfolio Manager of
the Fund. Mr. Charles F. Mercer, Jr., CFA, co-portfolio manager of Todd-Veredus, Mr. Michael E. Johnson, CFA, co-portfolio manager of Todd-Veredus, Mr. John R. Prys, CFA, Co-Portfolio Manager of Todd-Veredus and
Mrs. Katherine A. Kuntz, CFA, co-portfolio manager of Todd-Veredus, serve as Co-Portfolio Managers of the Fund. Mr. Weber has served as the Funds Portfolio Manager since June 1998. Mr. Mercer and Mr. Johnson have
served as Co-Portfolio Managers of the Fund since January 2009. Mr. Prys and Mrs. Kuntz have served as Co-Portfolio Managers of the Fund since February 2012.]
Prospectus
|
54
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
55
ASTON/Silvercrest Small Cap Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
1.00
|
%
|
|
|
1.00
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage
commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.40% of the Funds average daily net assets with respect to Class N shares
and 1.15% of the Funds average daily net assets with respect to Class I shares (the Operating Expense Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of
Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement
of operations through the completion of the first three full fiscal years to the extent that the Total Annual Operating Expenses for a class, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary
expenses and acquired fund fees and expenses, remains at or below the Operating Expense Limit after such reimbursement.
|
Example
This example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all
your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. For the period from the Funds commencement
of operations on December 21, 2011, when the Fund commenced operations, through the Funds fiscal year end on October 31, 2012, the Funds portfolio turnover rate was [ ] %.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its assets in common stocks and other equity securities of small-cap companies. The Fund considers companies with market capitalizations below $3
billion at the time of acquisition to be small-cap. The portfolio manager invests in companies that it believes to be undervalued at the time of purchase. These companies typically possess, in the opinion of the portfolio manager, one or more of the
following attributes:
n
|
|
Business that results in relatively consistent longer-term earning and cash flow growth
|
n
|
|
Franchise/asset value that may make the company attractive to potential acquirers
|
n
|
|
Cyclically depressed earnings and/or cash flow that has potential for improvement
|
n
|
|
A catalyst that will promote recognition of the companys undervalued status
|
The Fund may also invest in securities of companies outside the small-cap range, preferred stock, convertible securities and real estate investment trusts
(REITs). The portfolio manager employs a strategy of diversification, and adheres to a structured sell discipline.
Prospectus
|
56
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Convertible Risk.
Convertible preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium, the more likely the price of the convertible will
follow the price of the underlying common stock. Higher premium convertibles are more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of convertible preferred shares normally will fall
as interest rates rise. Conversely, as rates fall, the price of convertible preferred shares will rise.
The value of convertible securities is
also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. There is the risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder
of the security may not take advantage of the convertible features in the appropriate time frame.
Liquidity Risk.
When there is no willing
buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or
prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers
skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds
share price can move down in response to stock market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
REIT Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. Some
REITs may have limited diversification and may be subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic conditions.
When growth is slowing, demand for property decreases and prices may decline. Rising interest rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and may reduce the appeal of real estate
investments. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs return may be adversely affected when
interest rates are high or rising. Distributions from REITs generally are taxed as ordinary income for federal income tax purposes.
Small-Cap
and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may involve greater risks than investing in securities of larger, more established issuers. Small-cap and mid-cap companies generally have limited product
lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the securities of larger, more established companies. Also, small-cap and mid-cap companies are typically subject to greater changes
in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility and may decline significantly in market downturns.
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less
than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of
favor.
FUND PERFORMANCE
The bar
chart shows the performance of the Class N shares of the Fund for the period shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the classes have
different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The Fund makes
updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
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]%
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|
Worst quarter:
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[
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]
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[
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]%
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Prospectus
|
57
The following table indicates how the Funds average annual returns for different calendar periods compared to the returns of a broad-based securities
market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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ASTON/Silvercrest Small Cap
Fund
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1 Year
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Since Inception
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Class N Shares
(Inception 12/27/11):
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Return Before Taxes
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|
|
[ ]
|
%
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|
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[ ]
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%
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Return After Taxes on Distributions
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|
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions and Sale of Fund Shares
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[ ]
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%
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[ ]
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%
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Class I Shares
(Inception 12/27/11):
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|
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Return Before Taxes
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[ ]
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%
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[ ]
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%
|
Russell 2000 Value Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from [ ]. Index return for Class I shares, since inception, computed from
[ ], is [ ]%.
|
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[ ]
|
%
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|
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[ ]
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%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary
.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Silvercrest Asset Management Group LLC (Silvercrest) serves as the subadviser to the Fund.
Mr. Roger W. Vogel, CFA, a Managing Director of Silvercrest and lead portfolio manager of Silvercrests small cap investment strategy, has
served as the Portfolio Manager since the Funds inception in December 2011.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire
transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
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Minimum Initial Investment
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Subsequent Investments
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Class N
Regular Accounts
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$
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2,500
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$
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50
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Individual Retirement Accounts (IRAs)
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$
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500
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$
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50
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Education Savings Accounts (ESAs)
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$
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500
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$
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50
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Custodial Accounts for Minors (UGMA/UTMA)
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$
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500
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$
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50
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Class I
Institutional Accounts
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$
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1 Million
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$
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50
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TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a tax-deferred account such as a 401(k) or individual
retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund
through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
Prospectus
|
58
ASTON/DoubleLine Core Plus Fixed Income Fund
INVESTMENT OBJECTIVE
The Fund seeks to maximize total return.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
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Class I Shares
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Management Fees
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0.55
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%
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0.55
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%
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Distribution and Service (12b-1) Fees
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0.25
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%
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None
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Other Expenses
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[ ]
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%
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[ ]
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%
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Acquired Fund Fees and Expenses
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[ ]
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%
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[ ]
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%
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Total Annual Fund Operating Expenses
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[ ]
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%
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[ ]
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%
|
Fee Waiver and Expense Reimbursement
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[ ]
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%
(a)
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[ ]
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%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and Reimbursement
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[ ]
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%
(a)
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[ ]
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%
(a)
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(a)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 0.94% of the Funds average daily net assets with respect to Class N shares and 0.69% of the Funds average daily net assets with respect to Class I shares (the Operating Expense
Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was
waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement of operations through the completion of the first three full fiscal years to the extent that the Total Annual
Operating Expenses for a class, not including investment-related cost (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, remains at or below the Operating Expense Limit after such
reimbursement.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if
you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for
one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
|
|
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5 Years
|
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10 Years
|
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Class N Shares
|
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$
|
[ ]
|
|
|
$
|
[ ]
|
|
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$
|
[ ]
|
|
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$
|
[ ]
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|
Class I Shares
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|
[ ]
|
|
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|
[ ]
|
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|
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[ ]
|
|
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|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its net assets (plus the amount of borrowings for investment purposes) in fixed income securities. Fixed income securities include, but are not
limited to, securities issued or guaranteed by the U.S. government or its agencies, instrumentalities or sponsored corporations; agency mortgage-backed securities; non-agency mortgage-backed securities; commercial mortgage-backed securities;
asset-backed securities; foreign and domestic corporate bonds; fixed income securities issued by corporations and governments in foreign countries including emerging markets; securities issued by municipalities; and other securities bearing fixed
interest rates of any maturity.
The Fund may invest without limit in below investment grade securities (commonly known as junk
bonds). The subadviser allocates below investment grade securities broadly by industry and issuer in an attempt to reduce the impact of negative events on an industry or issuer. Below investment grade securities are instruments that are rated
BB+ or lower by S&P, rated Ba1 or lower by Moodys, or the equivalent by any other nationally recognized statistical rating organization ("NRSRO"), or if unrated, of comparable quality in the opinion of the subadviser.
The Fund may also invest in inverse floaters, interest-only and principal-only securities, and in senior bank loans and assignments indirectly through
investment companies advised by DoubleLine.
Prospectus
|
59
The subadviser actively manages the portfolios asset class exposure using a top-down approach based on analysis of sector fundamentals. Primary sectors
include government/municipals, high yield, global developed credit, international sovereign debt, emerging markets, and mortgage- and asset-backed. The subadviser will rotate portfolio assets among sectors in various markets to attempt to maximize
return. Individual securities within asset classes are selected using a bottom up approach.
The subadviser uses a controlled risk approach which
includes consideration of:
n
|
|
Security selection within a given asset class
|
n
|
|
Relative performance of the various market sectors and asset classes
|
n
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|
The shape of the yield curve
|
n
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|
Fluctuations in the overall level of interest rates
|
The subadviser also monitors the duration of the securities held by the Fund to seek to mitigate exposure to interest rate risk. Under normal circumstances, the subadviser seeks to maintain an investment
portfolio with a weighted average effective duration of no less than two years and no more than eight years. The duration of the Funds portfolio may vary materially from its target, from time to time, and there is no assurance that the
duration of the Funds portfolio will meet its target.
Portfolio securities may be sold at any time. Sales may occur when the subadviser
perceives deterioration in the credit fundamentals of the issuer, believes there are negative macro political considerations that may affect the issuer, determines to take advantage of a better investment opportunity, or the individual security has
reached the subadvisers sell target.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the
Fund.
Asset-Backed and Mortgage-Backed Securities Risks.
Asset-backed and mortgage-backed securities are subject to risks of
prepayment. This is more likely to occur when interest rates decline because many borrowers refinance mortgages to take advantage of more favorable rates. Prepayments on mortgage backed securities are also affected by other factors, such as the
volume of home sales. The Funds yield will be reduced if cash from prepaid securities is reinvested in securities with lower interest rates. The risk of prepayment may also decrease the value of mortgage-backed securities. Asset-backed
securities may have a higher level of default and recovery risk than mortgage-backed securities. However, both of these types of securities may decline in value because of mortgage foreclosures or defaults on the underlying obligations.
Credit risk is greater for mortgage-backed securities that are subordinate to another security (i.e., if the holder of a mortgage-backed security is entitled
to receive payments only after payment obligations to holders of the other security are satisfied). Mortgage-backed securities issued by private issuers, whether or not such obligations are subject to guarantees by the private issuer, may entail
greater risk than mortgage-backed securities guaranteed by the U.S. government. Recent market events have caused the markets for asset-backed and mortgage-backed securities to experience significantly lower valuations and reduced liquidity.
Below Investment Grade (High Yield) Securities Risk.
Bonds and other fixed income securities are rated by national ratings agencies.
These ratings generally assess the ability of the issuer to pay principal and interest. Issuers of securities that are rated below investment grade (i.e., Ba1/BB+ or lower) and their unrated equivalents are typically in poor financial health, and
their ability to pay interest and principal is uncertain. The prices of such securities may be more vulnerable to bad economic news, or even the expectation of bad news, than higher rated or investment grade bonds and other fixed income securities.
These securities are considered speculative and are commonly known as junk bonds.
Call Risk.
Call risk is the possibility that
an issuer may redeem a fixed income security before maturity (a call) at a price below its current market price. An increased likelihood of a call may reduce the securitys price. If a fixed income security is called, the Fund may have to
reinvest the proceeds in other fixed income securities with lower interest rates, higher credit risks, or other less favorable characteristics.
Credit Risk.
Credit risk (also called default risk) is the risk that the issuer of a security will not be able to make principal and interest
payments on a debt issue. The credit ratings of issuers could change and negatively affect the Funds share price or yield. When the Fund uses derivative instruments to seek credit exposure to underlying issuers, it is subject to the credit
risk of both the underlying issuer(s) and the counterparty (typically a broker or bank) to the instrument.
Emerging Market Risk.
In
addition to the general foreign securities risks, investing in emerging market countries is subject to a number of risks, including:
n
|
|
Economic structures that are less diverse and mature than those of developed countries
|
n
|
|
Less stable political systems and less developed legal systems
|
n
|
|
National policies that may restrict foreign investment
|
n
|
|
Wide fluctuations in the value of investments
|
n
|
|
Smaller securities markets making investments less liquid
|
n
|
|
Special custody arrangements
|
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty
in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with
securities traded in U.S. markets.
Prospectus
|
60
The value of the securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the U.S.
dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other
political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally
different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Investment Company Risk.
The Fund may invest in securities of other investment companies, including ETFs, open-end funds and closed-end funds. The risks of investment in other investment companies
typically reflect the risk of the types of securities in which the funds invest. Investments in ETFs and closed-end funds are subject to the additional risk that shares of the fund may trade at a premium or discount to their net asset value per
share. When the Fund invests in another investment company, shareholders of the Fund bear their proportionate share of the other investment companys fees and expenses as well as their share of the Funds fees and expenses.
Interest Rate Risk.
If interest rates rise, bond prices will fall. The longer the maturity of a bond, the more sensitive a bonds price
will be to changes in interest rates. In other words, a long-term bond (30-year) will have greater price sensitivity than a short-term bond (2-year). Short-term and long-term bond prices and interest rates do not typically move the same amount or
for the same reasons. Interest rate changes will impact high yield bonds in different ways depending on credit ratings. BB rated bonds are more vulnerable to prevailing rates and act more like their investment grade counterparts. For bonds rated B
and below, credit risk is more significant than interest rate risk. The value of securities with variable interest rates are generally less sensitive to interest rate changes then fixed rate securities. However, variable rate securities may decrease
in value if prevailing rates decrease or if variable rates do not rise as much as rates in general.
Inverse Floating Rate Securities
Risk.
Inverse floating rate securities (inverse floaters) are debt instruments that involve special risks as compared to investments in other fixed income securities. Inverse floaters are derivatives that involve leverage and
could magnify the Funds gains or losses. In addition, an inverse floater will experience greater price volatility than a fixed-rate obligation of similar credit quality, particularly if it is leveraged. The interest payment received on inverse
floaters generally will decrease when short-term interest rates increase. The markets for inverse floaters may be less developed and have less liquidity than the markets of more traditional fixed income securities. Inverse floaters have greater
interest rate risk and a higher degree of volatility than more traditional fixed income securities. In addition, some inverse floaters display extreme sensitivity to changes in prepayments.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the
security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their
recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the
investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Municipal Securities Risks.
Municipal securities are subject to risks based on many factors, including deregulation, changes or proposed changes
in the federal and state tax structure, economic and regulatory developments, court rulings and other factors. The value of municipal securities may be affected more by supply and demand factors or the creditworthiness of the issuer than by market
interest rates. Repayment of municipal securities depends on the ability of the issuer or project backing such securities to generate taxes or revenues.
Senior Loans Risk.
Senior loans may not be rated by a rating agency, registered with the Securities and Exchange Commission or any state securities commission or listed on any national securities
exchange. Therefore, there may be less publicly available information about them than for registered or exchange-listed securities. An economic downturn generally leads to a higher non-payment rate, and a senior loan may lose significant value
before a default occurs. In addition, any specific collateral used to secure a senior loan may decline in value or become illiquid, which would adversely affect the senior loans value. There can be no assurance that liquidation of such
collateral would satisfy the borrowers obligation in the event of non-payment of scheduled interest or principal or that such collateral could be readily liquidated. No active trading market may exist for certain senior loans, which may impair
the ability of a fund to realize full value in the event of the need to sell a senior loan and which may make it difficult to value senior loans.
U.S. Government Agency Securities Risk.
Certain U.S. government agency securities are backed by the right of the issuer to borrow from the U.S. Treasury while others are supported only by the
credit of the issuer or instrumentality. While the U.S. government may provide financial support to U.S. government-sponsored agencies or instrumentalities, such as various actions taken to stabilize the Federal National Mortgage Association and
Federal Home Loan Mortgage Corporation in 2008, no assurance can be given that it will always do so. Such securities are neither issued nor guaranteed by the U.S. Treasury.
Prospectus
|
61
FUND PERFORMANCE
The bar chart shows the
performance of the Class N shares of the Fund for the period shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the classes have different expenses.
The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The Fund makes updated performance
information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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|
|
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|
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|
|
|
|
|
|
|
|
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|
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Best quarter:
|
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|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
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|
|
|
|
|
|
|
|
|
ASTON/DoubleLine Core Plus
Fixed Income Fund
|
|
|
|
1 Year
|
|
|
Since Inception
|
|
Class N Shares
(Inception 7/18/11):
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 7/18/11):
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return Before Taxes
|
|
|
|
|
|
|
|
|
Barclays Capital U.S. Aggregate Bond Index
(Reflects no deduction for taxes, expenses or
fees. Index return since inception for Class N shares is computed from [ , 2011]. Index return for Class I shares, since inception, computed from
[ , 2011], is [ ]%.
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary
.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. DoubleLine Capital LP (DoubleLine) serves as the subadviser to the Fund.
Mr. Jeffrey E. Gundlach, founder and Chief Executive Officer of DoubleLine
®
and lead portfolio manager of DoubleLines core plus fixed income investment strategy, has served as the Funds Lead Portfolio Manager since the Funds
inception in July 2011. Mr. Philip A. Barach, President of DoubleLine, has served as Portfolio Manager for the Fund since its inception in July 2011. Ms. Bonnie Baha, CFA, a DoubleLine portfolio manager, has served as Portfolio
Manager for the Fund since its inception in July 2011. Ms. Luz M. Padilla, a DoubleLine portfolio manager, has served as Portfolio Manager for the Fund since its inception in July 2011.
Prospectus
|
62
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
100,000
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
63
ASTON/TCH Fixed Income Fund
INVESTMENT OBJECTIVE
The Fund seeks high current income consistent with prudent risk of capital.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.55
|
%
|
|
|
0.55
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 0.94% of the Funds average daily net assets with respect to Class N shares and 0.69% of the Funds average daily net assets with respect to Class I shares. Prior to February 28,
2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds.
|
Example
This example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all
your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[
|
]
|
|
$
|
[
|
]
|
|
$
|
[
|
]
|
|
$
|
[
|
]
|
Class I Shares
|
|
|
[
|
]
|
|
|
[
|
]
|
|
|
[
|
]
|
|
|
[
|
]
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Fund invests at least 80% of its assets in bonds, primarily intermediate-term investment-grade fixed income securities. The Fund may invest in securities of the U.S. government
and its agencies, corporate notes and bonds, mortgage- and asset-backed securities and short-term money market instruments. The portfolio managers select securities based on various methods of quantitative and fundamental analysis and research.
The portfolio managers seek to maintain an average weighted portfolio maturity of three to ten years. The portfolio managers emphasize
investment-grade fixed income securities, but may invest in high yield securities. The Fund may use futures, swaps and other derivatives for hedging purposes, to manage portfolio duration or to seek total return. Derivatives are expected to consist
primarily of futures contracts, interest rate swaps and credit default swaps. Derivatives may be used to hedge interest rate risk and credit risk. Derivatives also may be used to seek exposure to asset classes in which the Fund is authorized to
invest. For example, derivatives may provide exposure to specific credits that are not available in the cash markets, or may provide more efficient access to such credits. Derivatives will not be used to seek exposure to asset classes that the Fund
may not invest in directly. The net notional (or market exposure) of derivatives instruments will not exceed the net assets of the Fund.
The Fund
may invest in foreign securities.
The portfolio managers manage risk through ongoing monitoring of sector, quality and issuer exposures, and
ongoing analysis of duration, convexity, and maturity.
Prospectus
|
64
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Asset-Backed and Mortgage-Backed Securities Risks.
Asset-backed and mortgage-backed securities are subject to risks of prepayment. This is more likely to occur when interest rates decline because
many borrowers refinance mortgages to take advantage of more favorable rates. Prepayments on mortgage backed securities are also affected by other factors, such as the volume of home sales. The Funds yield will be reduced if cash from prepaid
securities is reinvested in securities with lower interest rates. The risk of prepayment may also decrease the value of mortgage-backed securities. Asset-backed securities may have a higher level of default and recovery risk than mortgage-backed
securities. However, both of these types of securities may decline in value because of mortgage foreclosures or defaults on the underlying obligations.
Credit risk is greater for mortgage-backed securities that are subordinate to another security (i.e., if the holder of a mortgage-backed security is entitled to receive payments only after payment
obligations to holders of the other security are satisfied). Mortgage-backed securities issued by private issuers, whether or not such obligations are subject to guarantees by the private issuer, may entail greater risk than mortgage-backed
securities guaranteed by the U.S. government.
Below Investment Grade (High Yield) Securities Risk.
Bonds and other fixed income
securities are rated by national ratings agencies. These ratings generally assess the ability of the issuer to pay principal and interest. Issuers of securities that are rated below investment grade (i.e., Ba1/BB+ or lower) and their unrated
equivalents are typically in poor financial health, and their ability to pay interest and principal is uncertain. The prices of such securities may be more vulnerable to bad economic news, or even the expectation of bad news, than higher rated or
investment grade bonds and other fixed income securities. These securities are considered speculative and are commonly known as junk bonds.
Call Risk.
Call risk is the possibility that an issuer may redeem a fixed income security before maturity (a call) at a price below its current market price. An increased likelihood of a call may
reduce the securitys price. If a fixed income security is called, the Fund may have to reinvest the proceeds in other fixed income securities with lower interest rates, higher credit risks, or other less favorable characteristics.
Credit Risk.
Credit risk (also called default risk) is the risk that the issuer of a security will not be able to make principal and interest
payments on a debt issue. The credit ratings of issuers could change and negatively affect the Funds share price or yield. When the Fund uses derivative instruments to seek credit exposure to underlying issuers, it is subject to the credit
risk of both the underlying issuer(s) and the counterparty (typically a broker or bank) to the instrument.
Derivatives Risk.
Risks
associated with derivatives may include the risk that the derivative is not well correlated with the security, index or currency to which it relates, the risk that derivatives may not have the intended effects and may result in losses or missed
opportunities, the risk that the Fund will be unable to sell the derivative because of an illiquid secondary market, the risk that a counterparty is unwilling or unable to meet its obligations, and the risk that the derivative transaction could
expose the Fund to the effects of leverage, which could increase the Funds exposure to the market and magnify potential losses. There is no guarantee that derivatives, to the extent employed, will have the intended effect, and their use could
cause lower returns or even losses to the Fund. The use of derivatives by the Fund to hedge risk may reduce the opportunity for gain by offsetting the positive effect of favorable price movements. The use of over-the-counter derivatives subjects the
Fund to credit risk of the counterparty of the instrument. The use of certain derivatives provides exposure to the underlying market or other reference asset in excess of the cash investment of the Fund. The use of derivatives can magnify gains and
losses.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not
typically associated with investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision.
There may be difficulty in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than
similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in
exchange rates or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S.
dollar terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial
reporting standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Interest Rate Risk.
If interest rates rise, bond prices will fall. The longer the maturity of a bond, the more sensitive a bonds price will
be to changes in interest rates. In other words, a long-term bond (30-year) will have greater price sensitivity than a short-term bond (2-year). Short-term and long-term bond prices and interest rates do not typically move the same amount or for the
same reasons. Interest rate changes will impact high yield bonds in different ways depending on credit ratings. BB rated bonds are more vulnerable to prevailing rates and act more like their investment grade counterparts. For bonds rated B and
below, credit risk is more significant than interest rate risk.
Liquidity Risk.
When there is no willing buyer and investments cannot
be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to
take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Prospectus
|
65
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio
managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
U.S. Government
Agency Securities Risk.
Certain U.S. government agency securities are backed by the right of the issuer to borrow from the U.S. Treasury while others are supported only by the credit of the issuer or instrumentality. While the U.S.
government may provide financial support to U.S. government-sponsored agencies or instrumentalities, such as various actions taken to stabilize the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation in 2008, no
assurance can be given that it will always do so. Such securities are neither issued nor guaranteed by the U.S. Treasury.
FUND PERFORMANCE
The bar chart shows how the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N
shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the classes have different expenses. The annual returns of the Class I shares would be higher than the
returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The Fund makes updated performance information available on the Funds website,
www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/TCH Fixed Income Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
10 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 12/13/93):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 7/31/00):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Barclays Capital U.S. Aggregate Bond Index
(Reflects no deduction for taxes, expenses or
fees. Index return since inception for Class N shares is computed from November 30, 1993. Index return for Class I shares, since inception, is [ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Taplin, Canida & Habacht, LLC (TCH) became the subadviser on December 1, 2006. Performance
prior to that date reflects the performance of a previous subadviser.
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state and local taxes. [In some instances, the Return After Tax on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the
investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant
to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. TCH serves as the subadviser to the Fund.
Ms. Tere Alvarez Canida, CFA, President and Managing Principal of TCH, Mr. Alan M. Habacht, a principal for TCH, Mr. William J. Canida, CFA, a principal for TCH, and Scott M.
Kimball, a portfolio manager at TCH, serve as Portfolio Managers of the Fund. Ms. Canida, Mr. Habacht, and Mr. Canida have served as the Funds Portfolio Managers since December 2006. Mr. Kimball has served as the
Funds Portfolio Manager since February 2013.
Prospectus
|
66
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
67
ASTON/Lake Partners LASSO Alternatives Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term total return with reduced correlation to the conventional stock and bond markets.
FEES AND EXPENSES
The table below describes the fee and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
1.00
|
%
|
|
|
1.00
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28,
2014, to the extent that operating expenses exceed 1.45% of the Funds average daily net assets with respect to Class N shares and 1.20% of the Funds average daily net assets with respect to Class I shares (the Operating Expense
Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was
waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement of operations through the completion of the first three full fiscal years to the extent that the Funds
Total Annual Operating Expenses for a class, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, remains at or below the Operating Expense Limit after
such reimbursement.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if
you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for
one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio) except that it generally does not incur transaction costs when it buys mutual
fund shares. Underlying funds will also incur these costs. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in
annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund is structured as a fund of funds. Under normal circumstances, the Fund pursues its objective by investing primarily in a
managed portfolio of other open-end investment companies registered under the Investment Company Act of 1940, as amended (the 1940 Act), that use alternative or hedging strategies (Alternative Mutual Funds). The Fund may also
invest in closed-end funds, exchange-traded funds and exchange-traded notes, which provide exposure to hedging or alternative investment strategies. Under normal circumstances, the Fund will invest at least 80% of its net assets in Alternative
Mutual Funds and other investments with exposure to hedging or alternative investment strategies. The Funds strategy is implemented by the subadviser using its proprietary LASSO
®
, Long and Short Strategic
Opportunities
®
, strategy. The LASSO strategy is intended to produce long-term total returns with less volatility
than the overall stock market and reduced correlation to conventional asset classes, across a variety of market climates.
Hedging strategies used
by underlying funds include the use of short selling, options, futures, derivatives or similar instruments in an attempt to mitigate risk. Alternative investment strategies include long/short, market neutral and arbitrage strategies; commodities or
commodity-linked investments; leverage; derivatives; illiquid, private placement or distressed securities; and other investments and investment techniques that are expected to have reduced correlation with major market indices. The Fund generally
seeks to maintain net equity exposure ranging from twenty percent to fifty percent of net assets.
Prospectus
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68
The subadviser employs a top down and bottom up approach to underlying fund selection. Top down measures include an assessment of economic trends and market
opportunities and an evaluation of strategy dynamics and risks. The bottom up portion of the investment process involves both qualitative and quantitative measures. In selecting underlying funds the subadviser looks at certain criteria, including
consistency of performance, on both an absolute and relative basis, changes in volatility and correlations over time, investment style of the underlying fund including the investment process and portfolio characteristics, character of the underlying
fund manager and transparency with investors and sound organizational structure. To manage risk, the subadviser monitors volatility and net equity exposure, maintains a diversified portfolio, utilizes a dynamic and flexible allocation process across
changing investment environments and applies judgment to a strong sell discipline. The Funds investment strategies may result in high portfolio turnover.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that
the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund. The risks discussed below for the underlying funds expose the Fund to the same risks.
Aggressive Investment Technique Risk.
Investing in underlying funds that use investment techniques and financial instruments that may be considered
aggressive, including the use of futures contracts, options on futures contracts, securities and indices, forward contracts, swap agreements and similar instruments, exposes the Fund to potentially dramatic changes (losses) in the value of certain
of its portfolio holdings. Such techniques may include short sales or other techniques that are intended to provide inverse exposure to a particular market or other asset class.
CFTC Regulation Risk
. The Fund is presently exempt from regulation as a commodity pool under Commodity Futures Trading Commission (CFTC) Rule 4.5. However, the CFTC has adopted
amendments to CFTC Rule 4.5, which may subject the Fund to regulation by the CFTC, and the Fund may be required to operate subject to applicable CFTC requirements, including registration, disclosure and operational requirements under the Commodity
Exchange Act. Compliance with these additional requirements may increase Fund expenses. While the investment adviser and subadviser intend to operate the Fund within the parameters of the exemption, the application of these amendments to
funds-of-funds is not certain.
Commodity Risk.
Investing in underlying funds that invest long or short in the commodities
market and commodities-linked instruments, such as exchange-traded notes, may subject the Fund to greater volatility than investments in traditional securities. Commodities include energy, metals, agricultural products, livestock and minerals.
Underlying funds may buy certain commodities (such as gold) or may invest in commodity linked derivative instruments. The value of commodities and commodity contracts are affected by a variety of factors, including global supply and demand, changes
in interest rates, commodity index volatility, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargos, government regulation, tariffs and taxes, world events and economic, political
and regulatory developments. The Funds ability to invest in underlying funds that invest in the commodities market and its ability to invest in commodities linked instruments may be significantly limited by the federal income tax rules
applicable to regulated investment companies. The Funds ability to invest in underlying funds that invest in the commodities market may also be limited by Commodity Exchange Act rules.
Credit Risk.
Credit risk (also called default risk) is the risk that the issuer of a security will not be able to make principal and interest payments
on a debt issue. The credit ratings of issuers could change and negatively affect the Funds share price or yield. When underlying funds use derivative instruments to seek credit exposure to underlying issuers, the underlying funds are subject
to the credit risk of both the underlying issuer(s) and the counterparty (typically a broker or bank) to the instrument. When underlying funds invest in asset-backed securities, mortgage-backed securities and collateralized mortgage obligations, the
underlying funds are subject to the credit risks of the underlying assets that collateralize the instrument. Recent instability in the credit markets has resulted in increased delinquencies and credit losses on certain asset-backed and
mortgage-backed securities.
Currency Risk.
The value of the securities held by an underlying fund may be affected by changes in exchange
rates or control regulations. If a local currency gains against the U.S. dollar, the value of the security increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the security decreases in U.S. dollar
terms.
Derivatives Risk.
Risks associated with derivatives may include the risk that the derivative is not well correlated with the
security, index or currency to which it relates, the risk that derivatives may not have the intended effects and may result in losses or missed opportunities, the risk that an underlying fund will be unable to sell the derivative because of an
illiquid secondary market, the risk that a counterparty is unwilling or unable to meet its obligations, and the risk that the derivative transaction could expose the underlying fund to the effects of leverage, which could increase the underlying
funds exposure to the market and magnify potential losses. There is no guarantee that derivatives, to the extent employed, will have the intended effect, and their use could cause lower returns or even losses to the underlying fund. The use of
derivatives by an underlying fund to hedge risk may reduce the opportunity for gain by offsetting the positive effect of favorable price movements. The use of over-the-counter derivatives subjects the Fund to credit risk of the counterparty of the
instrument. The use of certain derivatives provides exposure to the underlying market or other reference asset in excess of the cash investment of the underlying fund. The use of derivatives can magnify gains or losses.
Exchange-Traded and Closed-End Fund Risk.
The risks of investment in other investment companies typically reflect the risk of the types of securities
in which the underlying funds invest. Investments in exchange-traded funds (ETFs) and closed-end funds are subject to the additional risk that shares of the underlying fund may trade at a premium or discount to their net asset value per
share. There may also not be an active trading market available for shares of some ETFs or closed-end funds. Additionally, trading of ETF and closed-end fund shares may be halted or delisted by the listing exchange. When the Fund invests in another
investment company, shareholders of the Fund bear their proportionate share of the other investment companys fees and expenses as well as their share of the Funds fees and expenses.
Prospectus
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69
Exchange-Traded Note Risk.
The returns of exchange-traded notes (ETNs) are based on the performance of a specified market index minus
applicable fees. The risks of ETNs include the risk of the reference index. The value of an ETN is also subject to the credit risk of the issuer. Thus, the value of an ETN may drop due to a decline in an issuers credit quality or a downgrade
in the issuers credit rating, even if there is no change or an increase in the reference index. ETNs are subject to the additional risk that notes may trade at a premium or discount to their reference index. There may also not be an active
trading market available for some ETNs. Additionally, trading of ETNs may be halted or delisted by the listing exchange. When the Fund invests in an ETN, shareholders of the Fund bear their proportionate share of the ETNs fees and expenses as
well as their share of the Funds fees and expenses.
Fixed Income Risk.
Investing in underlying funds that invest long or short in
fixed income securities subjects the Fund to additional risks, which include credit risk, interest risk, maturity risk, investment grade securities risk, municipal securities risk and prepayment risk. These risks could affect the value of a
particular investment by the Fund, possibly causing the Funds share price and total return to be reduced and fluctuate more than other types of investments.
Foreign Securities Risk.
Investing in underlying funds that invest long or short in foreign issuers involves risks not associated with U.S. investments, including settlement risks, currency
fluctuation, foreign tax risks, different financial reporting practices and regulatory standards, high costs of trading, changes in political conditions, expropriation, investment and repatriation restrictions as well as settlement and custody
risks.
Fund-of-Funds Structure Risk.
Your cost of investing in the Fund will be higher than the cost of investing directly in the
underlying funds. In addition, costs may be higher than mutual funds that invest directly in stocks and bonds. Furthermore, the Fund may be prevented from fully allocating assets to an underlying fund due to regulatory limitations which may impact a
fund-of-funds.
Leveraged ETF Risk.
Leveraged ETFs seek to provide returns that are a multiple of a stated benchmark, typically using a
combination of derivatives strategies. Like other forms of leverage, leveraged ETFs increase risk exposure relative to the amount invested and can lead to significantly greater losses than a comparable unleveraged portfolio. Because leveraged ETFs
typically seek to obtain their objective on a daily basis, holding leveraged ETFs for longer than a day may produce unexpected results particularly when the benchmark index experiences large ups and downs.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, an underlying fund may need to
accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the underlying funds value or prevent the fund from being able to take advantage of other investment opportunities. Less
liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager
Risk.
The performance of the Fund is dependent upon the advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a
particular underlying funds share price. An underlying fund may decline in value even when the values of stocks or bonds in general are rising. Overall financial market risks affect the value of the underlying funds and thus the share price of
the Fund. Factors such as domestic, economic growth and market conditions, interest rate levels and political events affect the securities markets.
Non-Diversified Risk.
An underlying fund that is non-diversified may invest a larger percentage of its assets in a given security than a diversified
fund. As a result, it may be more susceptible to a single adverse economic, political or regulatory occurrence affecting one or more issuers in which a large percentage of its assets is invested and may experience increased volatility due to its
investments in those securities.
Portfolio Turnover Risk.
Frequent trading of securities by the Fund or underlying funds may result in
a higher than average level of capital gains, including short-term gains, and will result in greater transaction costs to the Fund. Higher portfolio turnover may increase the level of short-term capital gains. To the extent distributions to
shareholders are made from net-short-term capital gains of the Fund (i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net capital losses on securities held or treated as held by the Fund for
more than one year), the distributions will be taxed at ordinary income rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater transaction costs and higher expenses as a result of portfolio turnover
can negatively impact the Funds performance.
Short Sales Risk.
The underlying funds may sell securities short. Short sales
involve the risk that an underlying fund will incur a loss by subsequently buying a security at a higher price than the price at which the fund previously sold the security short. Any loss will be increased by the amount of compensation, dividends
or interest the fund must pay to the lender of the security. Because a loss incurred by an underlying fund on a short sale results from increases in the value of the security, losses on a short sale are theoretically unlimited. In addition, the Fund
may not be able to close out a short position at a particular time or at an acceptable price. A lender may request that borrowed securities be returned on short notice, and the fund may have to buy the securities sold short at an unfavorable price.
If this occurs at a time when other short sellers of the same security want to close out their positions, it is more likely that the Fund would have to close out its short position at an unfavorable price. If underlying funds take both long and
short positions, there is a risk that the value of securities held long might decrease and the value of securities sold short might increase in response to activities of an individual company or general market conditions. In this case, an underlying
funds potential losses could exceed those of mutual funds that hold only long positions.
Prospectus
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70
FUND PERFORMANCE
The bar chart shows how
the performance of the Class I shares of the Fund has varied from year to year over the periods shown. Class I shares and Class N shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the
classes have different expenses. The annual returns of the Class N shares would be lower than the returns of the Class I shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The
Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class I Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
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]%
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Worst quarter:
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[
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]
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[
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]%
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The following table indicates how the Funds average annual returns for different calendar periods compared to the
returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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ASTON/Lake Partners LASSO Alternatives Fund
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1 Year
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Since Inception
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Class I Shares
(Inception 4/01/09):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions and Sale of Fund Shares
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[ ]
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%
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[ ]
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%
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Class N Shares
(Inception 3/03/10):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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HFRX Equity Hedge Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares computed from February 28, 2010 is
[ ]%).
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[ ]
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%
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[ ]
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%
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Lake Partners, Inc. (Lake Partners) serves as the subadviser to the Fund.
Mr. Frederick C. Lake, Co-Chairman and Treasurer of Lake Partners, and Mr. Ronald A. Lake, Co-Chairman and President of Lake Partners,
have served as Co-Portfolio Managers of the Fund since the Funds inception in April 2009.
Prospectus
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71
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
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Minimum Initial Investment
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Subsequent Investments
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Class N
Regular Accounts
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$
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2,500
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$
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50
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Individual Retirement Accounts (IRAs)
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$
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500
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$
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50
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Education Savings Accounts (ESAs)
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$
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500
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$
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50
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Custodial Accounts for Minors (UGMA/UTMA)
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$
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500
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$
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50
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Class I
Institutional Accounts
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$
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100,000
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$
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50
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TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
72
ASTON Dynamic Allocation Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
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Class I Shares
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Management Fees
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0.80
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%
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0.80
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%
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Distribution and Service (12b-1) Fees
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0.25
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%
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None
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Other Expenses
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[ ]
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%
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[ ]
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%
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Acquired Fund Fees and Expenses
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[ ]
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%
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[ ]
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%
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Total Annual Fund Operating Expenses
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[ ]
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%
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[ ]
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%
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Fee Waiver and/or Expense Reimbursement
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[ ]
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%
(a)
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[ ]
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%
(a)
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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[ ]
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%
(a)
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[ ]
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%
(a)
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(a)
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The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage
commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.30% of the Funds average daily net assets with respect to Class N shares
and 1.05% of the Funds average daily net assets with respect to Class I shares (the Operating Expense Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of
Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement
of operations through the completion of the first three full fiscal years to the extent that the Funds Total Annual Operating Expenses for a class, not including investment-related costs (such as brokerage commissions), interest, taxes,
extraordinary expenses and acquired fund fees and expenses remains at or below the Operating Expense Limit after such reimbursement.
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Example
This example is intended to help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The
example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Class N Shares
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$
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[
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]
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$
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[
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]
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$
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[
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]
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$
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[
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]
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Class I Shares
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[
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]
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[
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]
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[
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]
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[
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by investing primarily in exchange-traded funds (ETFs) that represent a variety of asset classes and investment styles. Under normal circumstances, the Fund invests
at least 80% of its assets in shares of ETFs. An ETF is an investment company that seeks to track the performance of an index (before fees and expenses) by holding in its portfolio either the securities that comprise the index or a representative
sample of the securities in the index. ETFs offer investment in a wide variety of asset classes, including: a wide range of market capitalizations, equity, international, commodities, real estate, fixed income, derivatives and currency. The Fund may
also invest in leveraged or inverse ETFs. As new ETF products become available, the asset classes available to the Fund will expand. In addition, the Fund may invest in exchange-traded notes (ETNs) and may also utilize exchange-listed
put and call options to hedge and/or to increase equity exposure.
Prospectus
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73
The portfolio manager uses quantitative and qualitative fundamental analysis to select securities from the available universe of ETFs traded on
U.S. markets. The portfolio is constructed by applying a proprietary mathematical investment process to select a portfolio of ETFs in a more efficient combination than the Funds composite market benchmark. The goal of the proprietary
mathematical process is to create an optimal portfolio that is designed to produce returns in excess of its market benchmark with an equal or lesser amount of risk. The Funds investment strategies may result in high portfolio turnover.
Because the Fund places primary emphasis on capital appreciation, the Fund expects to allocate a significant portion of its assets to underlying
funds that emphasize stocks and to allocate a lesser proportion of its assets to underlying funds that emphasize bonds. Sector exposure is a residual of the investment process and the Fund may, from time to time, have exposure to a single sector or
a group of related sectors that react similarly to market, economic or other events. The Fund may invest without limit in cash, cash equivalents and money market instruments when favorable investment opportunities are not available.
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Aggressive ETF Investment Technique Risk.
Investing in ETFs that use investment techniques and financial instruments that may be considered aggressive, including the use of futures contracts,
options on futures contracts, securities and indices, forward contracts, swap agreements, and similar instruments, exposes the Fund to potentially dramatic changes (losses) in the value of its portfolio holdings. Such techniques may include short
sales or other techniques that are intended to provide inverse exposure to a particular market or other asset class.
Commodity ETF
Risk.
Investing in ETFs that invest long or short in the commodities market and investing in commodity linked instruments, such as exchange-traded notes, may subject the Fund to greater volatility than investments in traditional securities.
Commodities include energy, metals, agricultural products, livestock and minerals. ETFs may buy certain commodities (such as gold) or may invest in commodity-linked derivative instruments. The value of commodities and commodity contracts are
affected by a variety of factors, including global supply and demand, changes in interest rates, commodity index volatility, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargos,
government regulation, tariffs and taxes, world events and economic, political and regulatory developments. The Funds ability to invest in ETFs that invest in the commodities market and its ability to invest in commodity linked instruments may
be significantly limited by the federal income tax rules applicable to regulated investment companies.
Credit ETF Risk.
Credit
risk (also called default risk) is the risk that the issuer of a security will not be able to make principal and interest payments on a debt issue. The credit ratings of issuers could change and negatively affect the Funds share price or
yield. When underlying ETFs use derivatives instruments to seek credit exposure to underlying issuers, they are subject to the credit risk of both the underlying issuer(s) and the counterparty (typically a broker or bank) to the instrument. When
underlying ETFs invest in asset-backed securities, mortgage-backed securities and collateralized mortgage obligations, the ETFs are subject to the credit risks of the underlying assets that collateralize the instrument.
Derivatives Risk.
Risks associated with derivatives may include the risk that the derivative is not well correlated with the security, index or
currency to which it relates, the risk that derivatives may not have the intended effects and may result in losses or missed opportunities, the risk that the Fund will be unable to sell the derivative because of an illiquid secondary market, the
risk that a counterparty is unwilling or unable to meet its obligations, and the risk that the derivative transaction could expose the Fund to the effects of leverage, which could increase the Funds exposure to the market and magnify potential
losses. There is no guarantee that derivatives, to the extent employed, will have the intended effect, and their use could cause lower returns or even losses to the Fund. The use of derivatives by the Fund to hedge risk may reduce the opportunity
for gain by offsetting the positive effect of favorable price movements. The use of over-the-counter derivatives subjects the Fund to credit risk of the counterparty instrument. The use of certain derivatives provides exposure to the underlying
market or other reference asset in excess of the cash investment of the Fund. The use of derivatives can magnify gains and losses.
Equity ETF
Risk.
n
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|
Market Risk.
Overall stock market risks affect the value of ETFs, and thus the share price of the Fund. Factors such as domestic economic
growth and market conditions, interest rate levels and political events affect the securities markets.
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n
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|
Small- and Mid-Cap Company Risk.
Investing in ETFs that own securities of small- and mid-cap companies may involve greater risks than
investing in securities of larger, more established issuers. Small- and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the
securities of larger, more established companies. Also, small- and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility
and may decline significantly in market downturns.
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n
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|
Foreign Securities Risk.
Investing in ETFs that invest in foreign issuers involves risks not associated with U.S. investments, including settlement
risks, currency fluctuation, local withholding and other taxes, different financial reporting practices and regulatory standards, high costs of trading, changes in political conditions, expropriation, investment and repatriation restrictions and
settlement and custody risks.
|
n
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|
Emerging Market Risk.
The Fund may invest in ETFs that invest in issuers located in emerging markets. Emerging market countries may have
relatively unstable governments, less diverse economies and less liquid securities markets. Companies in emerging markets are often smaller, less seasoned and more recently organized.
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Fixed Income ETF Risk.
Investing in ETFs that own fixed income securities subject the Fund to additional risks, which include credit risk,
interest risk, maturity risk, investment grade securities risk, municipal securities risk and prepayment risk. These risks could affect the value of a particular investment by the Fund, possibly causing the Funds share price and total return
to be reduced and fluctuate more than other types of investments.
Prospectus
|
74
Fund-of-Funds Structure Risk.
Your cost of investing in a fund that invests in ETFs will be higher than the cost of investing directly in the
underlying ETFs and may be higher than mutual funds that invest directly in stocks and bonds. Shareholders of the Fund bear their proportionate share of an ETFs fees and expenses as well as their share of the Funds fees and expenses.
Also, the Fund may be prevented from fully allocating assets to an ETF due to fund-of-funds investment limitations. The risks of investing in ETFs typically reflect the risks of the types of securities in which the ETFs invest.
Inverse ETF Risk.
Inverse or short ETFs seek to deliver returns that are opposite of the return of a benchmark (e.g., if the
benchmark goes up by 1%, the ETF will go down by 1%), typically using a combination of derivative strategies. Similar to the risks presented by short sales of securities, inverse ETFs seek to profit from falling market prices and will lose money if
the market benchmark index goes up in value. Because inverse ETFs typically seek to obtain their objective on a daily basis, holding inverse ETFs for longer than a day may produce unexpected results particularly when the benchmark index experiences
large ups and downs. Inverse ETFs may also be leveraged.
Leveraged ETF Risk.
Leveraged ETFs seek to provide returns that are a
multiple of a stated benchmark, typically using a combination of derivatives strategies. Like other forms of leverage, leveraged ETFs increase risk exposure relative to the amount invested and can lead to significantly greater losses than a
comparable unleveraged portfolio. Because leveraged ETFs typically seek to obtain their objective on a daily basis, holding leveraged ETFs for longer than a day may produce unexpected results particularly when the benchmark index experiences large
ups and downs.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers
and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a particular
companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Portfolio
Turnover Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital gains, including short-term gains, and will result in greater transaction costs to the Fund. High portfolio turnover
may increase the level of short-term capital gains. To the extent distributions to shareholders are made from net short-term capital gains (i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net
capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary income rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater
transaction costs and higher expenses as a result of portfolio turnover can negatively impact the Funds performance.
Real Estate
ETF Risk.
ETFs investing in securities of real estate investment trusts (REITs) may be affected by changes in the value of the REITs underlying properties and by defaults by borrowers or tenants. ETFs may invest in REITs
with limited diversification and may be subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic conditions. When growth
is slowing, demand can restrain construction and buying and selling activity, and may reduce the appeal of real estate investments. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders,
and may be subject to defaults by borrowers and self-liquidations. The return of a REIT ETF may be adversely affected when interest rates are high or rising. Distributions to shareholders attributable to dividends received from REIT ETFs generally
will be taxed as ordinary income for federal income tax purposes.
Sector Concentration Risk.
Investing in sector-specific funds may
entail greater risks than investing in funds diversified across sectors. ETFs that invest in a limited number of industries within a sector may be subject to a greater level of market risk and their performance may be more volatile than funds that
do not concentrate their investments in a specific sector.
Tracking Risk.
ETFs in which the Fund invests will not be able to
replicate exactly the performance of the indices they track because the total return generated by the securities will be reduced by transaction costs incurred in adjusting the actual balance of the securities. In addition, ETFs in which the Fund
invests will incur expenses not incurred by their applicable indices. Certain securities comprising the indices tracked by ETFs may, from time to time, temporarily be unavailable, which may further impede an ETFs ability to track their
applicable indices.
Trading Discount Risk.
The market value of ETF shares may differ from net asset value. This difference in price
may be due to the fact that ETF shares supply and demand is not always identical to supply and demand for an ETFs underlying basket of securities. At times, an ETFs shares may trade at a premium or discount to its net asset value.
Prospectus
|
75
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
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]%
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|
Worst quarter:
|
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[
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]
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[
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]%
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The table below indicates how the Funds average annual return for the calendar period compared to the returns of
broad-based securities market indices and a composite intended to reflect the general securities market.
Average Annual Total
Returns
(For the periods ended December 31, 2012)
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ASTON Dynamic Allocation Fund
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1 Year
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Since Inception
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Class N Shares
(Inception 1/10/08):
|
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|
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Return Before Taxes
|
|
|
[ ]
|
%
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[ ]
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%
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Return After Taxes on Distributions
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions and Sale of Fund Shares
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[ ]
|
%
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|
|
[ ]
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%
|
Class I Shares
(Inception 11/02/10):
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|
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|
Return Before Taxes
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[ ]
|
%
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[ ]
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%
|
Barclays Capital U.S. Aggregate Bond Index
(Reflects no deduction for taxes, expenses or
fees. Index return since inception for Class N shares is computed from December 31, 2007. Index return for Class I shares, since inception, computed from October 31, 2010, is [ ]%.)
|
|
|
[ ]
|
%
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|
|
[ ]
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%
|
MSCI World Ex-US Index
(Reflects no deduction for taxes, expenses or fees. Index return
since inception for Class N shares is computed from December 31, 2007. Index return for Class I shares, since inception, computed from October 31, 2010, is
[ ]%.)
|
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[ ]
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%
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[ ]
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%
|
Russell 3000 Index
(Reflects no deduction for taxes, expenses or fees. Index return since
inception for Class N shares is computed from December 31, 2007. Index return for Class I shares, since inception, computed from October 31, 2010, is
[ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
35% Russell 3000 Index / 35% MSCI World Ex-US Index / 30% Barclays Capital U.S. Aggregate Bond Index
(Reflects no deduction for taxes, expenses or fees. Index return since inception for Class N shares is computed from December 31, 2007. Index return for Class I shares, since inception, computed from
October 31, 2010, is [ ]%.)
|
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|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
Prospectus
|
76
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Smart Portfolios, LLC (Smart) serves as the subadviser to the Fund.
Mr. Bryce James, President and Chief Investment Officer of Smart, has served as portfolio manager since the Funds inception in January 2008.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by
telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
|
|
Minimum Initial Investment
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|
Subsequent Investments
|
|
Class N
Regular Accounts
|
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$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
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|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
77
ASTON/Anchor Capital Enhanced Equity Fund
(formerly, ASTON/M.D. Sass Enhanced Equity Fund)
INVESTMENT OBJECTIVE
The Fund seeks total return through a combination of a high level of current income and capital appreciation.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
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Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
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|
0.70
|
%
|
|
|
0.70
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5% and operating
expenses remained the same.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
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1 Year
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3 Years
|
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5 Years
|
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10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
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|
[ ]
|
|
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|
[ ]
|
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[ ]
|
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[ ]
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|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by investing primarily in a diversified portfolio of large-cap and mid-cap equity securities traded in U.S. markets and by writing covered call options on a substantial
portion of the Funds long equity portfolio. The portfolio managers focus on companies with regular quarterly dividends and with market capitalizations of $4 billion or more at the time of acquisition. The Fund places primary emphasis on
the generation of income. Option premiums and dividend income are expected to constitute a significant portion of total return. Under normal circumstances, the Fund invests at least 80% of its assets in equity securities.
Equity Selection
The portfolio manager
selects equity securities using a bottom-up investment approach focusing on the fundamentals of each company. The portfolio manager emphasizes a companys current dividend yield, free cash flow and stability. The Fund may invest in equity
securities of foreign issuers that are traded in U.S. markets.
Covered Call Strategy
On an ongoing and consistent basis, the portfolio manager intends to write (sell) covered call options on a substantial portion of the Funds long
equity portfolio as a means of enhancing return. Call options are contracts that give the holder (buyer) of the option, in return for payment of a premium, the right, but not the obligation, to purchase from the writer of the option the
security underlying the option at a specified exercise price prior to the expiration date. As the writer of a call option, the Fund receives the premium from the purchaser of the option and has the obligation, upon exercise of the option, to deliver
the underlying security upon payment of the exercise price. If the option expires without being exercised, the Fund is not required to deliver the underlying security but retains the premium received.
The Fund generally writes covered call options that are out-of-the money to generate premium income for the Fund. A call option is out-of-the money if the
exercise price is above the current market price for the underlying security. The Fund will generally buy back call options that reach the exercise price, in lieu of allowing them to be exercised, and write a new option at a higher exercise price.
Prospectus
|
78
In addition to writing covered call options, the Fund may also use certain derivatives transactions for hedging purposes or to seek total return. The
portfolio manager currently intends to purchase put options on securities in the Funds portfolio and put options on securities indices.
The portfolio manager actively manages risk and adheres to a strong sell discipline.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that
the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Covered
Call Option Risk.
Investments in covered calls involve certain risks. These risks include:
n
|
|
By selling covered call options, the Fund limits its opportunity to profit from an increase in the price of the underlying stock above the exercise price,
but continues to bear the risk of a decline in the value of the underlying stock. While the Fund receives a premium for writing the call option, the price the Fund realizes from the sale of stock upon exercise of the option could be substantially
below its current market price.
|
n
|
|
A liquid market may not exist for options held by the Fund. If the Fund is not able to close out an options transaction, the Fund will not be able to sell
the underlying security until the option expires or is exercised.
|
n
|
|
The Funds investment strategy may also result in a lack of liquidity of the purchase and sale of portfolio securities. Because the Fund generally
will hold the stocks underlying the call options, the Fund may be less likely to sell the stocks in its portfolio to take advantage of new investment opportunities.
|
If the Fund generates premiums from its sale of call options, these premiums typically will result in short-term capital gains for federal income tax purposes. Distributions of net short-term capital gain
are taxable to shareholders as ordinary income for federal income tax purposes. Transactions involving the disposition of the Funds underlying securities (whether pursuant to the exercise of a call option or otherwise) will give rise to
capital gains or losses. Because the Fund will have no control over the exercise of the call options, it may be forced to realize capital gains or losses at inopportune times and it will not be able to control whether such gains or losses are
short-term or long-term for federal income tax purposes. The Funds portfolio turnover rate does not take into account short-term capital gains generated from premiums on the sale of call options. The Fund is not designed for investors seeking
a tax efficient investment.
Derivatives Risk.
Risks associated with derivatives may include the risk that the derivative is not well
correlated with the security, index or currency to which it relates, the risk that derivatives may not have the intended effects and may result in losses or missed opportunities, the risk that the Fund will be unable to sell the derivative because
of an illiquid secondary market, the risk that a counterparty is unwilling or unable to meet its obligations, and the risk that the derivative transaction could expose the Fund to the effects of leverage, which could increase the Funds
exposure to the market and magnify potential losses. There is no guarantee that derivatives, to the extent employed, will have the intended effect, and their use could cause lower returns or even losses to the Fund. The use of derivatives by the
Fund to hedge risk may reduce the opportunity for gain by offsetting the positive effect of favorable price movements. The use of over-the-counter derivatives subjects the Fund to credit risk of the counterparty instrument. The use of certain
derivatives provides exposure to the underlying market or other reference asset in excess of the cash investment of the Fund. The use of derivatives can magnify gains and losses.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the
security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their
recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the
investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a particular
companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Mid-Cap Company
Risk.
Investments in mid-cap companies may entail greater risks than investments in larger, more established companies. Mid-cap companies generally have narrower product lines, more limited financial resources and a more limited trading
market for their stocks compared with larger companies. As a result, their stock prices may experience greater volatility and may decline significantly in market downturns.
Prospectus
|
79
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
The following table indicates how the Funds average annual return for the calendar period compared to the returns
of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
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|
|
|
|
|
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|
|
|
ASTON/Anchor Capital Enhanced Equity Fund
|
|
|
|
1 Year
|
|
|
Since Inception
|
|
Class N Shares
(Inception 1/15/08):
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 3/03/10):
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Standard & Poors (S&P) 500 Index
(Reflects no deduction for taxes,
expenses or fees. Index return since inception for Class N shares is computed from December 31, 2007. Index return for Class I shares, since inception, computed from February 28, 2010 is [ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
As of June 30, 2012, the Fund changed its name from ASTON/M.D. Sass Enhanced Equity Fund to ASTON/Anchor
Capital Enhanced Equity Fund and Anchor Capital Advisors LLC (Anchor Capital) became the subadviser. Performance prior to that date reflects the performance of previous subadvisers. However, Mr. Altman has served as a portfolio
manager since the Funds inception in January 2008.
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the
investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant
to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Anchor Capital serves as the subadviser to the Fund.
Mr. Ronald L. Altman, Senior Vice President and Senior Portfolio Manager of Anchor Capital, has served as the Funds Portfolio Manager since its inception in January 2008.
Prospectus
|
80
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
81
ASTON/River Road Long-Short Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide absolute return while minimizing volatility over a full market cycle.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
1.20
|
%
|
|
|
1.20
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(b)
|
|
|
[ ]
|
%
(b)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(b)
|
|
|
[ ]
|
%
(b)
|
(a)
|
Other expenses include dividends or
interest on short sales of securities, which are paid to the lender of a security, and stock loan fees, which are paid to the prime broker.
|
(b)
|
The adviser is contractually obligated
to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses and dividend and interest
expenses related to short sales, through February 28, 2014, to the extent that operating expenses exceed 1.70% of the Funds average daily net assets with respect to Class N shares and 1.45% of the Funds average daily net assets with
respect to Class I shares (Operating Expense Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of the Trust. For a period of up to three years from
the fiscal year end during which such amount was waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from commencement of operations through the completion of the first three full fiscal
years to the extent that the Funds Total Annual Operating Expenses for a class, not including investment related costs (such as brokerage commissions), interest, taxes, extraordinary expenses, acquired fund fees and expenses, remains at or
below the Operating Expense Limit after such reimbursement.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating
expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the
above assumptions, your costs would be:
|
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1 Year
|
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3 Years
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5 Years
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|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
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|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its investment objective by taking long and short positions in equity securities. The Funds portfolio managers believe that a combination of long and short positions may provide
positive returns through a complete market cycle and may offer reduced risk. The allocation between long and short positions is a result of the fundamental investment process. The Fund does not intend to be market neutral and anticipates that it
will normally hold a higher percentage of its assets in long positions (i.e., the Fund will be net long). The Funds equity investments consist primarily of domestic common stock but may also include other types of equity such as
foreign stock, preferred stock, convertible securities and real estate investment trusts (REITs). The Fund may use instruments such as exchange-traded funds (ETFs), options, futures and other index-based investments to manage
its exposure between long and short positions. Derivative use, if any, is expected to consist primarily of put and call options on securities. Cash is a residual of the investment process. When the portfolio manager is unable to find investment
opportunities that meet the Funds criteria, the Funds cash balances may increase. The Fund is classified as non-diversified.
Prospectus
|
82
In selecting both long and short positions, the portfolio managers employ a value-driven, bottom-up approach. When the Fund takes a long position, it
purchases a stock outright. The Fund takes long positions in securities that the portfolio managers believe will rise in value. For long positions, the portfolio managers seek to identify companies they believe have certain characteristics
including:
n
|
|
Priced at a discount to absolute value
|
n
|
|
Attractive business model
|
n
|
|
Shareholder-oriented management
|
n
|
|
Undiscovered, under-followed, misunderstood
|
The Fund takes short positions in securities that the portfolio managers believe will go down in value. For short positions, the portfolio managers seek to identify companies they believe have certain
characteristics including:
n
|
|
Priced at a premium to absolute value
|
n
|
|
Unattractive business model
|
n
|
|
Poor shareholder-orientation
|
n
|
|
Unrealistic expectations
|
n
|
|
Avoiding strong momentum
|
When
the Fund takes a short position, it sells a stock that it does not own at the current market price in anticipation that the market price will go down. To complete a short sale, the Fund must borrow the security to make delivery to the buyer. The
Fund is then obligated to replace the borrowed security by purchasing the security in the open market at the time of closing out the short sale. The price at such time may be more or less than at the time the security was sold. Until the borrowed
security is returned, the Fund is required to pay the lender amounts equal to any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium to the lender, which would
increase the cost of the security sold. The proceeds of the short sale will be retained by the broker to the extent necessary to meet margin requirements, until the short position is closed. For additional information regarding short sales, please
see the
Additional Information Regarding Investment Strategies
Section.
The net market exposure will fluctuate
with market opportunities but will generally be between 10% and 90%. To manage risk the portfolio managers may use controls and techniques to systemically reduce market exposure upon the occurrence of certain trigger events.
PRINCIPAL RISKS
You could lose money by
investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund. The Fund may be subject to the following risks directly through
investment in individual securities or indirectly through investment in ETFs or derivative instruments.
Convertible Risk.
Convertible
preferred securities are subject to the risks of equity securities and fixed income securities. The lower the premium, the more likely the price of the convertible will follow the price of the underlying common stock. Higher premium convertibles are
more likely to exhibit the behavior of bonds because the likelihood of conversion is lower. In that case, the price of convertible preferred shares normally will fall as interest rates rise. Conversely, as rates fall, the price of convertible
preferred shares will rise.
The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer
and any call provisions. There is the risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the
appropriate time frame.
Derivatives Risk.
Risks associated with derivatives may include the risk that the derivative is not well
correlated with the security, index or currency to which it relates, the risk that derivatives may not have the intended effects and may result in losses or missed opportunities, the risk that the Fund will be unable to sell the derivative because
of an illiquid secondary market, the risk that a counterparty is unwilling or unable to meet its obligations, and the risk that the derivative transaction could expose the Fund to the effects of leverage, which could increase the Funds
exposure to the market and magnify potential losses. There is no guarantee that derivatives, to the extent employed, will have the intended effect, and their use could cause lower returns or even losses to the Fund. The use of derivatives by the
Fund to hedge risk may reduce the opportunity for gain by offsetting the positive effect of favorable price movements. The use of over-the-counter derivatives subjects the Fund to credit risk of the counterparty instrument. The use of certain
derivatives provides exposure to the underlying market or other reference asset in excess of the cash investment of the Fund. The use of derivatives can magnify gains and losses.
Exchange-Traded and Closed-End Fund Risk.
The risks of investment in other investment companies typically reflect the risk of the types of securities in which the underlying funds invest. Investments
in ETFs and closed-end funds are subject to the additional risk that shares of the underlying fund may trade at a premium or discount to their net asset value per share. There may also not be an active trading market available for shares of some
ETFs or closed-end funds. Additionally, trading of ETF and closed-end fund shares may be halted or delisted by the listing exchange. An inverse ETF is a fund that is constructed by using various derivative instruments to profit from a decline in the
underlying benchmark. Investing in these ETFs is similar to holding various short positions, or using a combination of advanced investment strategies to profit from falling prices. When the Fund invests in another investment company, shareholders of
the Fund bear their proportionate share of the other investment companys fees and expenses as well as their share of the Funds fees and expenses.
Prospectus
|
83
Similarly, short sales of ETFs are subject to the specific risks described under Short Sale Risk. In addition, if the Fund sells short shares of
ETFs that are financially leveraged, such short sales may be expected to exhibit enhanced volatility in market price as compared to short sales of similar ETFs without a leveraged capital structure.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be difficulty
in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs associated with
securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates or control
regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in
economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting standards and other
regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need to accept a
lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid securities
are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The
performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a
particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Non-Diversification Risk.
The Fund may invest a larger percentage of its assets in a given security than a diversified fund. As a result, it may be
more susceptible to a single adverse economic, political or regulatory occurrence affecting one or more issuers in which a large percentage of its assets is invested and may experience increased volatility due to its investments in those securities.
Portfolio Turnover Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital
gains, including short-term gains, and will result in greater transaction costs to the Fund. High portfolio turnover may increase the level of short term capital gains. To the extent distributions to shareholders are made from net short-term capital
gains (i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary
income rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater transaction costs and higher expenses as a result of portfolio turnover may negatively impact the Funds performance.
REIT Risk.
Exposure to real estate markets, through securities of real estate investment trusts (REITs) or other instruments, will be
subject to risks of specific properties or property types and by default rates of borrowers or tenants. Some REITs may have limited diversification and may be subject to risks inherent in investments in a limited number of properties, in a narrow
geographic area, or in a single property type. REITs are also affected by general economic conditions. When growth is slowing, demand for property decreases and prices may decline. Rising interest rates, which drive up mortgage and financing costs,
can restrain construction and buying and selling activity, and may reduce the appeal of real estate investments. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject
to defaults by borrowers and self-liquidations. A REITs return may be adversely affected when interest rates are high or rising. Distributions to shareholders attributable to dividends received from REITs generally are taxed as ordinary income
for federal income purposes.
Short Sales Risk.
Short sales involve the risk that the Fund will incur a loss by subsequently buying a
security at a higher price than the price at which the Fund previously sold the security short. Any loss will be increased by the amount of compensation, dividends or interest the Fund must pay to the lender of the security. Because a loss incurred
on a short sale results from increases in the value of the security, losses on a short sale are theoretically unlimited. In addition, the Fund may not be able to close out a short position at a particular time or at an acceptable price. A lender may
request that borrowed securities be returned on short notice, and the Fund may have to buy the securities sold short at an unfavorable price. If this occurs at a time when other short sellers of the same security want to close out their positions,
it is more likely that the Fund would have to close out its short position at an unfavorable price. If this occurs at a time when other short sellers of the same security also want to close out their positions, a short squeeze may occur.
A short squeeze occurs when demand is greater than supply for the security sold short. A short squeeze makes it more likely that the Fund will have to cover its short sale at an unfavorable price. If that happens, the Fund will lose some
or all of the potential profit from, or even incur a loss on, the short sale. The Funds use of short sales may have a leveraging effect on the Funds portfolio.
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for growth. Typically, their valuation levels are less
than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic conditions, the Funds return may be adversely affected during a market downturn and when value stocks are out of
favor.
Prospectus
|
84
FUND PERFORMANCE
The bar chart shows the
performance of the Class N shares of the Fund for the period shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent that the classes have different expenses.
The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing in the Fund. The Fund makes updated performance
information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
|
]%
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|
Worst quarter:
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[
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]
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[
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]%
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The following table indicates how the Funds average annual returns for different calendar periods compared to
the returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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|
ASTON/River Road Long-Short Fund
(a)
|
|
|
|
1 Year
|
|
|
Since Inception
|
|
Class N Shares
(Inception 5/4/11):
|
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|
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|
Return Before Taxes
|
|
|
[ ]
|
%
|
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[ ]
|
%
|
Return After Taxes on Distributions
|
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[ ]
|
%
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[ ]
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%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Russell 3000 Index (
Reflects no deduction for taxes, expenses or fees. Index return since
inception for Class N shares is computed from [ ].
)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
(a)
|
Class I shares are new, and therefore
no returns are shown for Class I shares.
|
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the
investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant
to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. River Road Asset Management, LLC (River Road) serves as subadviser to the Fund.
Mr. Matthew W. Moran, CFA, a portfolio manager at River Road, serves as the Funds Lead Portfolio Manager and Mr. Daniel Johnson, CFA,
CPA, a portfolio manager at River Road, serves as the Funds Co-Portfolio Manager. Mr. Moran has served as the Funds Portfolio Manager since the Funds inception in May 2011. Mr. Johnson has served as the Funds
Portfolio Manager since March 2012.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by
telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
|
|
Minimum Initial Investment
|
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Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
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$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
Prospectus
|
85
TAX INFORMATION
The Funds distributions
are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through
tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO
BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson
to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
Prospectus
|
86
ASTON/Barings International Fund
INVESTMENT OBJECTIVE
The Fund seeks to provide total return.
FEES AND EXPENSES
The table below describes the fee and expenses that you may pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from
your investment)
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Class N Shares
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Class I Shares
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Redemption Fee on Shares Held Less Than 90 Days
(as a percentage of amount
redeemed)
|
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2.00
|
%
|
|
|
2.00
|
%
|
ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)
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Class N Shares
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Class I Shares
|
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Management Fees
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1.00
|
%
|
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|
1.00
|
%
|
Distribution and Service (12b-1) Fees
|
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|
0.25
|
%
|
|
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None
|
|
Other Expenses
|
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[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
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|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
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|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage
commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.40% of the Funds average daily net assets with respect to Class N shares
and 1.15% of the Funds average daily net assets with respect to Class I shares (the Operating Expense Limit). Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of
Trustees of Aston Funds. For a period of up to three years from the fiscal year end during which such amount was waived or reimbursed, the adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed from the commencement
of operations through the completion of the first three full fiscal years to the extent that the Funds Total Annual Operating Expenses for a class, not including investment-related costs (such as brokerage commissions), interest, taxes,
extraordinary expenses and acquired fund fees and expenses remains at or below the Operating Expense Limit after such reimbursement.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The example shows the operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The
example assumes that the average annual return was 5%, operating expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
|
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1 Year
|
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3 Years
|
|
|
5 Years
|
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|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Fund invests at least 80% of its assets in common stock and other equity securities of non-U.S. companies.
The portfolio managers employ a growth at a reasonable price (GARP) strategy. GARP investing involves buying stocks that have a reasonable price/earnings ratio in relationship to a companys
earnings growth rate. The investment process combines bottom-up and top-down analysis. Bottom-up analysis is based on global company research that seeks to identify positive catalysts for outperformance or earnings surprise based on both growth and
value factors. Top-down analysis seeks to assess the relative attractiveness of countries and sectors.
Prospectus
|
87
The Fund may invest in companies of all sizes and market capitalization levels. The Funds investment strategies may result in high portfolio turnover.
The Fund invests primarily in companies in Europe, Australasia, Middle East and the Far East (EAFE) and emerging markets. Under normal conditions, the Fund will invest in issuers from at least five countries excluding the U.S.
PRINCIPAL RISKS
You could lose
money by investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Emerging Market Risk.
In addition to the general foreign securities risks, investing in emerging market countries is subject to a number of
risks, including:
n
|
|
Economic structures that are less diverse and mature than those of developed countries
|
n
|
|
Less stable political systems and less developed legal systems
|
n
|
|
National policies that may restrict foreign investment
|
n
|
|
Wide fluctuations in the value of investments
|
n
|
|
Smaller securities markets making investments less liquid
|
n
|
|
Special custody arrangements
|
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with
investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less governmental supervision. There may be
difficulty in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is generally higher than similar costs
associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be affected by changes in exchange rates
or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding decreases in U.S. dollar
terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing and financial reporting
standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other taxes.
GARP Style Risk.
GARP investing involves buying stocks that have a reasonable price/earnings ratio in relationship to a companys earnings
growth rate. Growth stocks may be more volatile than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may need
to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less liquid
securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager
Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or
its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or
changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Portfolio Turnover Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital gains, including short-term gains, and will result in greater
transaction costs to the Fund. High portfolio turnover may increase the level of short-term capital gains. To the extent distributions to shareholders are made from net short-term capital gains (i.e., net capital gain on securities held or treated
as held by the Fund for one year or less minus any net capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary income rates for federal income tax purposes, rather than at
the lower long-term capital gains rates. Greater transaction costs and higher expenses as a result of portfolio turnover can negatively impact the Funds performance.
Small-Cap and Mid-Cap Company Risk.
Investing in securities of small-cap and mid-cap companies may involve greater risks than investing in securities of larger, more established issuers. Small-cap and
mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the securities of larger, more established companies. Also, small-cap and mid-cap
companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility and may decline significantly in market downturns.
FUND PERFORMANCE
The bar chart shows how
the performance of the Class I shares of the Fund has varied from year to year over the periods shown. Class I shares and Class N shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class N shares would be lower than the returns of the Class I shares due to 12b-1 fees paid by Class N shares. This information may
Prospectus
|
88
help illustrate the risks of investing in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with
all mutual funds, past performance (before and after taxes) does not guarantee future performance.
Class I Shares
Calendar Year Total Return
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
|
[
|
]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
The following table indicates how the Funds average annual returns of Class I shares for different calendar
periods compared to the returns of a broad-based securities market index.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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|
|
|
|
ASTON/Barings International Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
Since Inception
|
|
Class I Shares
(Inception 11/02/07):
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class N Shares
(Inception 3/03/10):
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
N/A
|
|
|
|
[ ]
|
%
|
MSCI EAFE Index
(Reflects no deduction for taxes, expenses or fees. Index return since
inception for Class I shares is computed from October 31, 2007. Index return for Class N shares, since inception, computed from February 28, 2010, is
[ ]%)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class I shares. After-tax returns for Class N shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Baring International Investment Limited (Barings) serves as the subadviser to the Fund.
Mr. David Bertocchi, CFA, International & World Equity Investment Manager of Barings serves as Portfolio Manager of the Fund.
Mr. Bertocchi has served as Portfolio Manager of the Fund since April 2008.
PURCHASE AND SALE OF FUND SHARES
Shares of the Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire
transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
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|
|
|
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|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
Prospectus
|
89
TAX INFORMATION
The Funds distributions
are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through
tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO
BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson
to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
Prospectus
|
90
ASTON/Harrison Street Real Estate Fund
INVESTMENT OBJECTIVE
The Fund seeks total return through a combination of growth and income.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from
your investment)
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|
|
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Class N Shares
|
|
|
Class I Shares
|
|
Redemption Fee on Shares Held Less Than 90 Days (as a percentage of amount redeemed)
|
|
|
2.00
|
%
|
|
|
2.00
|
%
|
ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
1.00
|
%
|
|
|
1.00
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage
commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.37% of the Funds average daily net assets with respect to Class N shares
and 1.12% of the Funds average daily net assets with respect to Class I shares. Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating
expenses remained the same, and expenses were capped for one year in each period.
Although your actual costs may be higher or lower, based on the
above assumptions, your costs would be:
|
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|
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|
|
|
|
|
|
|
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|
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|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Class N Shares
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Class I Shares
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Fund invests at least 80% of its assets in real estate investment trusts (REITs) and common stocks and other equity securities of U.S. and foreign companies
principally engaged in the real estate sector.
The Fund emphasizes publicly traded real estate-related securities of companies domiciled in the
United States and Canada. The Fund does not invest in real estate directly. The Fund is classified as non-diversified.
Securities are selected
for the Fund using a fundamental bottom-up stock selection process. The portfolio managers use a proprietary relative cash flow multiple analysis to estimate values of portfolio companies, which takes into account multiple factors including:
Prospectus
|
91
The portfolio managers also use a proprietary model to assess net asset value (NAV) based on both quantitative measures and incorporating a
qualitative assessment of management ability. A warranted share price is calculated from a combination of the outputs from the multiple analysis model and the NAV model. While securities are selected primarily from the universe of companies
comprising the benchmark index, the Fund may invest to a limited degree in companies outside of the benchmark index. To manage risk, the portfolio managers employ portfolio constraints such as limits on position size, market capitalization and
geographic and sector exposure. The Funds investment strategies may result in high portfolio turnover.
PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that the Funds investment objective will be achieved. The following is a
summary of the principal risks of investing in the Fund.
Foreign Securities Risk.
Investing in the securities of foreign issuers
involves special risks and considerations not typically associated with investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and
markets may also have less governmental supervision. There may be difficulty in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and
selling foreign securities is generally higher than similar costs associated with securities traded in U.S. markets.
The value of the
securities held by the Fund may be affected by changes in exchange rates or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against
the U.S. dollar, the value of the holding decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the
Fund. In foreign countries, accounting, auditing and financial reporting standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also
be subject to foreign withholding and other taxes.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high
price-to-earnings ratios. Growth stocks may be more volatile than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may
suffer.
Liquidity Risk.
When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may
need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Less
liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock market conditions, changes in the economy or changes in a
particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Non-Diversification Risk.
The Fund may invest a larger percentage of its assets in a given security than a diversified fund. As a result, it may be
more susceptible to a single adverse economic, political or regulatory occurrence affecting one or more issuers in which a large percentage of its assets is invested and may experience increased volatility due to its investments in those securities.
Portfolio Turnover Risk.
Frequent trading of the Funds portfolio holdings may result in a higher than average level of capital
gains, including short-term gains, and will result in greater transaction costs to the Fund. High portfolio turnover may increase the level of short-term capital gains. To the extent distributions to shareholders are made from net short-term capital
gains (i.e., net capital gain on securities held or treated as held by the Fund for one year or less minus any net capital losses on securities held or treated as held by the Fund for more than one year), the distributions will be taxed at ordinary
income rates for federal income tax purposes, rather than at the lower long-term capital gains rates. Greater transaction costs and higher expenses as a result of portfolio turnover can negatively impact the Funds performance.
REIT Risk.
Securities of REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. Some
REITs may have limited diversification and may be subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. Real estate is also affected by general economic conditions.
When growth is slowing, demand for property decreases and prices may decline. Rising interest rates, which drive up mortgage and financing costs, can restrain construction and buying and selling activity, and may reduce the appeal of real estate
investments. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs return may be adversely affected when
interest rates are high or rising. Distributions from REITs generally are taxed as ordinary income for federal income tax purposes.
Sector
Concentration Risk.
The Fund may entail greater risks than investing in funds diversified across sectors. Because the Fund may at times have a significant portion of its assets in one or more related sectors, the Fund may be subject to a greater
level of market risk and its performance may be more volatile than a fund that does not concentrate its investments in a specific sector.
Value Style Risk.
Value investing involves buying stocks that are out of favor and/or undervalued in comparison to their peers or their prospects for
growth. Typically, their valuation levels are less than those of growth stocks. Because different types of stocks go out of favor with investors depending on market and economic conditions, the Funds return may be adversely affected during a
market downturn and when value stocks are out of favor.
Prospectus
|
92
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best quarter:
|
|
|
[
|
]
|
|
[ ]%
|
|
Worst quarter:
|
|
|
[
|
]
|
|
[ ]%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates how the Funds average annual returns for different calendar periods compared to
the returns of broad-based securities market indices. Average annual total returns for both indices are included in the table below.
Average Annual Total Returns
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Harrison Street Real Estate Fund
|
|
|
|
1 Year
|
|
|
5 Years
|
|
|
10 Years
|
|
|
Since Inception
|
|
Class N Shares
(Inception 12/30/97):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Return After Taxes on Distributions and Sale of Fund Shares
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Class I Shares
(Inception 9/20/05):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before Taxes
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
N/A
|
|
|
|
[ ]
|
%
|
FTSE/NAREIT All Equity REITs Total Return Index
(Reflects no deduction for taxes,
expenses or fees. Index return since inception for Class N shares is computed from December 31, 1997. Index return for Class I shares, since inception, computed from September 30, 2005, is [ ]%.)
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Harrison Street Securities, LLC (HSS) became the subadviser to the Fund on June 30, 2011. Performance
prior to that date reflects the performance of a previous subadviser. Performance prior to September 22, 2001 reflects the performance of a predecessor fund.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. [In some instances, the Return After
Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns
depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. HSS serves as the subadviser to the Fund.
Mr. Reagan Pratt and Mr. James Kammert, CFA, each a principal and managing member of HSS, serve as Co-Portfolio Managers of the Fund. Mr. Pratt and Mr. Kammert have served as the
Funds Portfolio Managers since June 2011.
Prospectus
|
93
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Custodial Accounts for Minors (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
|
94
ASTON/Montag & Caldwell Balanced Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term total return.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Class N Shares
|
|
|
Class I Shares
|
|
Management Fees
|
|
|
0.75
|
%
|
|
|
0.75
|
%
|
Distribution and Service (12b-1) Fees
|
|
|
0.25
|
%
|
|
|
None
|
|
Other Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Acquired Fund Fees and Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Total Annual Fund Operating Expenses
|
|
|
[ ]
|
%
|
|
|
[ ]
|
%
|
Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
|
|
[ ]
|
%
(a)
|
|
|
[ ]
|
%
(a)
|
(a)
|
The adviser is contractually obligated to waive management fees and/or reimburse ordinary operating expenses, not including investment-related costs (such as brokerage
commissions), interest, taxes, extraordinary expenses and acquired fund fees and expenses, through February 28, 2014, to the extent that operating expenses exceed 1.35% of the Funds average daily net assets with respect to Class N shares
and 1.10% of the Funds average daily net assets with respect to Class I shares. Prior to February 28, 2014, the arrangement may be amended or terminated for a class only by a vote of the Board of Trustees of Aston Funds.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example shows the
operating expenses you would incur as a shareholder if you invested $10,000 in the Fund over the time periods shown and you redeem all your shares at the end of those periods. The example assumes that the average annual return was 5%, operating
expenses remained the same, and expenses were capped for each period.
Although your actual costs may be higher or lower, based on the above
assumptions, your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Class N Shares
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$
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[ ]
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$
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[ ]
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$
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[ ]
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$
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[ ]
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Class I Shares
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[ ]
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[ ]
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[ ]
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[ ]
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PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and
may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the
Funds portfolio turnover rate was [ ]%.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in a combination of equity, fixed income and short-term securities. Generally, between 50% and 70% of the Funds total assets will be invested in equity securities and at
least 25% will be invested in fixed income securities to provide a stable flow of income. The portfolio allocation will vary based upon the portfolio managers assessment of the return potential of each asset class. For equity investments, the
portfolio manager uses a bottom-up approach to stock selection and seeks high quality, well-established large-cap companies that the portfolio manager believes are growing their near-term earnings at an above average rate. The Fund defines a
large-cap company as one having a market capitalization of $5 billion or more at the time of acquisition. The portfolio manager emphasizes valuation to find companies selling at a discount to their intrinsic value. These companies must pass an
initial capitalization screen and:
n
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Have a strong history of earnings growth
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n
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Be attractively priced, relative to the companys potential for above average long-term earnings and revenue growth
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n
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Have strong balance sheets
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n
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Have a sustainable competitive advantage
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n
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Be currently, or have the potential to become, industry leaders
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n
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Have the potential to outperform during market downturns
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The Fund may invest in foreign securities (directly and through depositary receipts).
Prospectus
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95
When selecting equity securities, the portfolio manager limits sector and individual security exposure and adheres to a strong sell discipline in order to
minimize risk.
When selecting fixed income securities, the portfolio manager strives to maximize total return and minimize risk primarily through
actively adjusting the portfolios duration and sector weightings. Emphasis is also placed on diversification and credit analysis.
The Fund
will invest only in fixed income securities with an A or better rating. Investments will include:
n
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U.S. government securities
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n
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Mortgage/asset-backed securities
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n
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Money market securities and repurchase agreements
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PRINCIPAL RISKS
You could lose money by investing in the Fund. There can be no assurance that
the Funds investment objective will be achieved. The following is a summary of the principal risks of investing in the Fund.
Credit
Risk.
Credit risk (also called default risk) is the risk that the issuer of a security will not be able to make principal and interest payments on a debt issue. The credit ratings of issuers could change and negatively affect the Funds
share price or yield.
Foreign Securities Risk.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. The securities of foreign companies may be less liquid and may fluctuate more widely than those traded in U.S. markets. Foreign companies and markets may also have less
governmental supervision. There may be difficulty in enforcing contractual obligations and little public information about the companies. Trades typically take more time to settle and clear, and the cost of buying and selling foreign securities is
generally higher than similar costs associated with securities traded in U.S. markets.
The value of the securities held by the Fund may be
affected by changes in exchange rates or control regulations. If a local currency gains against the U.S. dollar, the value of the holding increases in U.S. dollar terms. If a local currency declines against the U.S. dollar, the value of the holding
decreases in U.S. dollar terms. Changes in economic, tax or foreign investment policies, or other political, governmental or economic actions can adversely affect the value of the securities in the Fund. In foreign countries, accounting, auditing
and financial reporting standards and other regulatory practices and requirements are generally different from those required for U.S. companies. Investments in securities of foreign issuers may also be subject to foreign withholding and other
taxes.
Growth Style Risk.
Growth investing involves buying stocks that have relatively high price-to-earnings ratios. Growth stocks may be
more volatile than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer.
Interest Rate Risk.
If interest rates rise, bond prices will fall. The longer the maturity of a bond, the more sensitive a bonds price will be
to changes in interest rates. In other words, a long-term bond (30-year) will have greater price sensitivity than a short-term bond (2-year). Short-term and long-term bond prices and interest rates do not typically move the same amount or for the
same reasons. Interest rate changes will impact high yield bonds in different ways depending on credit ratings. BB rated bonds are more vulnerable to prevailing rates and act more like their investment grade counterparts. For bonds rated B and
below, credit risk is more significant than interest rate risk.
Liquidity Risk.
When there is no willing buyer and investments cannot be
readily sold at the desired time or price, the Fund may need to accept a lower price or may not be able to sell the security at all. An inability to sell securities can adversely affect the Funds value or prevent the Fund from being able to
take advantage of other investment opportunities. Less liquid securities are more difficult to dispose of at their recorded values and are subject to increased spreads and volatility.
Manager Risk.
The performance of the Fund is dependent upon the investment advisers skill in selecting managers and the portfolio managers skill in making appropriate investments. As a
result, the Fund may underperform its benchmark or its peers.
Market Risk.
The Funds share price can move down in response to stock
market conditions, changes in the economy or changes in a particular companys stock price. An individual stock may decline in value even when the value of stocks in general is rising.
Prepayment Risk.
Mortgage-backed securities carry prepayment risk. Prices and yields of mortgage-backed securities assume that the underlying mortgages will be paid off according to a preset schedule.
If the underlying mortgages are paid off early, such as when homeowners refinance as interest rates decline, the Fund may be forced to reinvest the proceeds in lower yielding, higher priced securities. This may reduce the Funds total return.
U.S. Government Agency Securities Risk.
Certain U.S. government agency securities are backed by the right of the issuer to borrow from the
U.S. Treasury while others are supported only by the credit of the issuer or instrumentality. While the U.S. government may provide financial support to U.S. government-sponsored agencies or instrumentalities, such as various actions taken to
stabilize the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation in 2008, no assurance can be given that it will always do so. Such securities are neither issued nor guaranteed by the U.S. Treasury.
Prospectus
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96
FUND PERFORMANCE
The bar chart shows how
the performance of the Class N shares of the Fund has varied from year to year over the periods shown. Class N shares and Class I shares are invested in the same portfolio of securities, so the annual returns would differ only to the extent
that the classes have different expenses. The annual returns of the Class I shares would be higher than the returns of the Class N shares due to 12b-1 fees paid by Class N shares. This information may help illustrate the risks of investing
in the Fund. The Fund makes updated performance information available on the Funds website, www.astonfunds.com, or by calling 800-992-8151. As with all mutual funds, past performance (before and after taxes) does not guarantee future
performance.
Class N Shares
Calendar Year Total Return
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Best quarter:
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[
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]
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[
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]%
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Worst quarter:
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[
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]
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[
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]%
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The table below indicates how the Funds average annual returns for different calendar periods compared to the
returns of broad-based securities market indices and a composite intended to reflect the asset allocation characteristics of balanced funds in general.
Average Annual Total Returns
(For the periods ended December 31, 2012)
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ASTON/Montag & Caldwell Balanced Fund
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1 Year
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5 Years
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10 Years
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Since Inception
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Class N Shares
(Inception 11/2/94):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Return After Taxes on Distributions and Sale of Fund Shares
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Class I Shares
(Inception 12/31/98):
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Return Before Taxes
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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S&P 500 Index
(Reflects no deduction for taxes, expenses or fees. Index shares are
computed from October 31, 1994. Index return for Class I shares, since inception, computed from December 31, 1998, is [ ]%.)
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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Barclays Capital U.S. Government Credit Bond Index
(Reflects no deduction for taxes,
expenses or fees. Index shares are computed from October 31, 1994. Index return for Class I shares, since inception, is [ ]%.)
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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60% S&P 500 Index/40% Barclays Capital U.S. Government Credit Bond Index
(Reflects no
deduction for taxes, expenses or fees. Index shares are computed from October 31, 1994. Index return for Class I shares, since inception, is [ ]%.)
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[ ]
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%
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[ ]
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%
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[ ]
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%
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[ ]
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%
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. [In some instances, the Return After Taxes on Distributions and Sale of Fund Shares may be greater than Return Before Taxes because the investor is assumed to be able to use
the capital loss of the sale of Fund shares to offset other taxable gains.] After-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N shares. After-tax returns for Class I shares will vary.
MANAGEMENT
Aston Asset Management, LP serves as investment adviser to the Fund. Montag & Caldwell, LLC (Montag & Caldwell) serves as the subadviser to the Fund.
Mr. Ronald E. Canakaris, CFA, Chairman and Chief Investment Officer of Montag & Caldwell, has served as Portfolio Manager of the Fund
since November 2004. Helen Donahue, CFA, Vice President of Montag & Caldwell, has served as Portfolio Manager of the Fund since February 2013.
Prospectus
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97
PURCHASE AND SALE OF FUND SHARES
Shares of the
Fund may be purchased, exchanged, or redeemed on any business day by written request (Aston Funds, P.O. Box 9765, Providence, RI 02940), wire transfer, online access (www.astonfunds.com), or by telephone (800-992-8151). Investors who wish to
purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly.
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Class and Account Type
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Minimum Initial Investment
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Subsequent Investments
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Class N
Regular Accounts
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$
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2,500
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$
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50
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Individual Retirement Accounts (IRAs)
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$
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500
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$
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50
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Education Savings Accounts (ESAs)
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$
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500
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$
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50
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Custodial Accounts for Minors (UGMA/UTMA)
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$
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500
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$
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50
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Class I
Institutional Accounts
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$
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1 Million
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$
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50
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TAX INFORMATION
The Funds distributions are generally taxable as ordinary income or capital gains for federal income tax purposes, unless you are investing through a
tax-deferred account such as a 401(k) or individual retirement account. Distributions on investments made through tax-deferred vehicles, such as 401(k) plans or IRAs, may be taxed later upon withdrawal of assets from those plans or accounts.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys
website for more information.
Prospectus
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98
Additional Information Regarding Investment Strategies
Each Funds non-fundamental investment policies may be changed by the Board of Trustees without shareholder approval. Each of ASTON/Herndon Large Cap Value Fund, ASTON/Cornerstone Large Cap Value Fund,
ASTON/TAMRO Diversified Equity Fund, ASTON/Fairpointe Mid Cap Fund, ASTON/Montag & Caldwell Mid Cap Growth Fund, ASTON/TAMRO Small Cap Fund, ASTON/Silvercrest Small Cap Fund, ASTON/River Road Small Cap Value Fund, ASTON/LMCG Small Cap
Growth Fund, ASTON Small Cap Fund, ASTON/DoubleLine Core Plus Fixed Income Fund, ASTON/TCH Fixed Income Fund, ASTON/Lake Partners LASSO Alternatives Fund, ASTON Dynamic Allocation Fund, ASTON/Anchor Capital Enhanced Equity Fund and ASTON/Harrison
Street Real Estate Fund has adopted a non-fundamental policy of investing at least 80% of its assets in the type of investments suggested by its name in accordance with Rule 35d-1 of the 1940 Act. Pursuant to such rule, shareholders will receive at
least 60 days notice of a change in such policy.
In addition to the principal investment strategies described in the Fund Summaries,
there may be times when the Funds use secondary investment strategies in seeking to achieve their investment objectives. Information regarding such secondary strategies, as well as additional information regarding certain principal strategies, is
shown below.
Asset-Backed Securities
Asset-backed securities are payable from pools of obligations other than mortgages. Most asset-backed securities involve consumer or commercial debts with maturities of less than ten years. However, almost
any type of fixed income assets (including other fixed income securities) may be used to create an asset-backed security. Asset-backed securities may take the form of notes or pass through certificates. Asset-backed securities have prepayment risks.
Below Investment Grade (High Yield) Securities
Below investment grade (high yield) securities are lower rated, higher yielding securities issued by corporations. They are generally rated below investment-grade (i.e., Ba1/BB+ and below) by national bond
rating agencies, or if unrated, are judged by an adviser or a subadviser to be of equivalent quality. They are considered speculative and are commonly known as junk bonds.
Collateralized Mortgage Obligations
Collateralized mortgage obligations are fixed income
securities secured by mortgage loans and other mortgage-backed securities. Collateralized mortgage obligations carry general fixed income securities risks and risks associated with mortgage-backed securities.
Commercial Paper
Commercial paper is a
short-term fixed income security issued by a bank, corporation or other borrower. There is the risk that the issuer of the commercial paper will not be able to make principal and/or interest payments. Commercial paper may include securities issued
in reliance on the private placement exemption under Section 4(2) of the Securities Act of 1933, as amended. Section 4(2) paper is generally sold to an institutional investor, such as a Fund, that agrees that it is purchasing the paper for
investment and not with a view to public distribution. Any resale of Section 4(2) commercial paper must similarly be in an exempt transaction.
Convertible Securities
Convertible securities are fixed income or equity securities that pay
interest or dividends and that may be exchanged on certain terms into common stock of the same corporation.
Because of the conversion feature,
the market value of convertible securities tends to move together with the market value of the underlying stock. The value of convertible securities is also affected by prevailing interest rates, the credit quality of the issuer and any call
provisions. There is the risk that the issuer of the security will not be able to make principal and/or interest payments as well as the risk that the holder of the security may not take advantage of the convertible features in the appropriate time
frame.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses. Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. A Fund may also purchase interests in bank loans made to companies. The credit risks of corporate debt securities vary widely among issuers.
In addition, the credit risk of an issuers debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower
ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of senior securities may
receive amounts otherwise payable to the holders of subordinated securities.
Some subordinated securities, such as trust preferred and capital
securities notes, also permit the issuer to defer payments under certain circumstances. For example, insurance companies issue securities known as surplus notes that permit the insurance company to defer any payment that would reduce its capital
below regulatory requirements.
Prospectus
|
99
Debentures
Debentures are bonds or promissory
notes that are secured by the general credit of the issuer, but not secured by specific assets of the issuer. There is the risk that the issuer of the security will not be able to make principal and/or interest payments.
Defensive Strategy
There may be times when a
Fund takes temporary positions that may not follow its principal investment strategies for defensive reasons. This includes investing all or a portion of its total assets in cash or cash equivalents, such as money market securities and repurchase
agreements. Although a Fund would do this in seeking to avoid losses, following a defensive strategy could reduce the benefit from any market upswings.
Depositary Receipts of Foreign Securities
Depositary receipts represent ownership of securities
in foreign companies and are held in banks and trust companies. They can include ADRs, which are traded on U.S. exchanges and are U.S. dollar-denominated, EDRs, which are traded on European exchanges and may not be denominated in the same
currency as the security they represent, and GDRs, which are issued globally and evidence a similar ownership arrangement.
Although ADRs, EDRs
and GDRs do not eliminate the risks inherent in investing in the securities of foreign issuers, which include market, political, currency and regulatory risk, by investing in ADRs, EDRs or GDRs rather than directly in securities of foreign issuers,
a Fund may avoid currency risks during the settlement period for purchases or sales. In general, there is a large, liquid market in the United States for many ADRs. The information available for ADRs is subject to the accounting, auditing and
financial reporting standards of the domestic market or exchange on which they are traded, in which standards are more uniform and more exacting than those to which many foreign issuers may be subject. A Fund may invest in ADRs sponsored or
unsponsored by the issuer of the underlying security. In the case of an unsponsored ADR, a Fund may bear higher expenses and encounter greater difficulty in receiving shareholder communications than it would have with a sponsored ADR.
Derivatives
The Funds may invest in
derivatives primarily for hedging purposes, to maintain liquidity or in anticipation of changes in portfolio composition, as set forth in the principal strategies of a Fund. Derivatives have a return tied to a formula based upon an interest rate,
index, price of a security, or other measurement. Derivatives include options, futures, forward contracts, swaps and related products.
Hedging involves using derivatives to offset a potential loss in one position by establishing an interest in an opposite position. Any loss generated by the
derivative should be offset by gains in the hedged investment. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. A Fund may realize a loss if interest rates, security prices or indices move in the opposite
direction than the subadviser anticipates.
Derivatives will only be used when consistent with the objectives and strategy of a Fund. The
subadviser will ensure that the effective market exposure resulting from the use of derivatives will not exceed the total amount available for investment within a Fund (i.e., the use of derivatives will not result in a Fund being leveraged). All
derivative positions will be covered by that Funds existing assets.
Equity Securities
Equity securities represent a share of an issuers earnings and assets, after the issuer pays its liabilities. A Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to the payment of any dividends or distributions. However, equity securities offer greater potential for appreciation than many other types of securities, because their
value may increase with the value of the issuers business. Types of equity securities include common stocks, preferred stocks, warrants and rights, convertible securities and other securities that represent underlying local shares, such as
depositary receipts.
ETFs
An
ETF is an investment company that seeks to track the performance of an index by holding in its portfolio shares of all the companies, or a representative sample of the companies, that are components of a particular index. ETFs are traded on a
securities exchange based on their market value. When a Fund invests in another investment company, shareholders of the Fund bear their proportionate share of the other investment companys fees and expenses, including operating, registration,
trustee, licensing and marketing, as well as their share of the Funds fees and expenses.
ETNs
An ETN is a security that combines aspects of a bond and an ETF. ETN returns are based upon the performance of a market index or a specific strategy, and can
be held to maturity as a debt security. ETNs are traded on a securities exchange. Their value is based on their reference index or strategy and the credit quality of the issuer. ETNs are subject to the additional risk that they may trade at a
premium or discount to value attributable to their reference index. When a Fund invests in an ETN, shareholders of the Fund bear their proportionate share of the ETNs fees and expenses, as well as their share of the Funds fees and
expenses.
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the principal amount of the security, normally within a specified time. Fixed income securities provide more regular income than equity securities. However, the returns on
fixed income securities are limited and normally do not increase with the issuers earnings. This limits the potential appreciation of fixed income securities as compared to equity securities.
Prospectus
|
100
A securitys yield measures the annual income earned on a security as a percentage of its price. A securitys yield will increase or decrease
depending upon whether it costs less (a discount) or more (a premium) than the principal amount. If the issuer may redeem the security before its scheduled maturity, the price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have higher yields. Equity Funds may invest in fixed income securities to offset the volatility of the stock market. Fixed income securities provide a stable flow of income
for a Fund.
Foreign Securities
Foreign securities are securities issued by corporations, governments and other issuers located outside the United States. Foreign securities are subject to
additional risks.
Interest Only Security
A type of fixed income security that entitles the holder to payments derived from the interest payments on underlying loan pools or securities.
Inverse Floaters
Inverse floaters are debt instruments with a floating rate of interest that
bears an inverse relationship to changes in short-term market interest rates. In addition, like most other fixed-income securities, the value of inverse floaters will decrease as interest rates increase. As a result, as short-term rates increase,
both the market price and the yield of an inverse floater will fall.
Mortgage-Backed Securities
Mortgage-backed securities represent interests in pools of mortgages. The mortgages that comprise a pool normally have similar interest rates, maturities and
other terms. Mortgages may have fixed or adjustable interest rates. Interests in pools of adjustable rate mortgages are known as ARMs. Mortgage-backed securities come in a variety of forms. Many have extremely complicated terms. The simplest form of
mortgage-backed securities is pass-through certificates. An issuer of pass-through certificates gathers monthly payments from an underlying pool of mortgages. Then, the issuer deducts its fees and expenses and passes the balance of the payments onto
the certificate holders once a month. Holders of pass-through certificates receive a pro rata share of all payments and prepayments from the underlying mortgages. As a result, the holders assume all the prepayment risks of the underlying mortgages.
Municipal Securities
Municipal
securities, including municipal bonds and notes, are fixed income securities issued by states, counties, cities and other political subdivisions and authorities. Municipal bonds include general obligation bonds, which are backed by the full faith
and credit of the issuer and may be repaid from any revenue source, and revenue bonds, which may be repaid only from the revenue of a specific facility or source. Municipal securities may be issued by industrial and economic development authorities,
school and college authorities, housing authorities, healthcare facility authorities, municipal utilities, transportation authorities and other public agencies. Many municipalities issue short-term municipal notes to fund their current operations
before collecting taxes or other municipal revenues. Municipalities also may issue notes to fund capital projects prior to issuing long-term bonds. Issuers typically repay the notes at the end of their fiscal year, either with taxes, other revenues
or proceeds from newly issued notes or bonds.
Principal Only Security
A principal only security entitles the holder to payments derived from the principal payments on underlying loan pools or securities. The yield on a principal only security depends primarily on the
prepayment rates of the underlying loans or securities and generally increases as the prepayment speed of the underlying loan or security increases.
Other Investment Companies
The Funds may invest in securities of other investment companies,
including ETFs, open-end funds and closed-end funds. An ETF is an investment company that seeks to track the performance of an index by holding in its portfolio shares of all the companies, or a representative sample of the companies, that are
components of a particular index. Closed-end funds are investment companies that typically issue a fixed number of shares that trade on a securities exchange or over-the-counter. The risks of investment in other investment companies typically
reflect the risk of the types of securities in which the funds invest. Investments in ETFs and closed-end funds are subject to the additional risk that shares of the fund may trade at a premium or discount to their net asset value per share. A Fund
may not purchase more than 3% of another investment companys outstanding shares unless the investment company and/or the Fund has received an order for exemptive relief from such limitation from the SEC and the investment company and the Fund
take appropriate steps to comply with any conditions of such order. When a Fund invests in another investment company, shareholders of the Fund bear their proportionate share of the other investment companys fees and expenses as well as their
share of the Funds fees and expenses.
Preferred Stocks
Preferred stocks are stocks that pay dividends at a specified rate. Dividends are paid on preferred stocks before they are paid on common stocks. In addition, preferred stockholders have priority over common
stockholders as to the proceeds from the liquidation of a companys assets, but are subordinate to the claims of all creditors.
Prospectus
|
101
PTPs
PTPs include master limited partnerships
and certain other partnerships that meet conditions contained in the Internal Revenue Code of 1986, as amended (the Code). In order to be treated as a partnership for federal income tax purposes, a PTP must generally derive a substantial
amount of its income and gains from certain sources, including from the exploration, development, mining or production, processing, refining, transportation or marketing of minerals or natural resources. Other PTPs may be treated as partnerships for
federal income tax purposes if certain other limited exceptions under the Code apply. PTPs are typically organized as either limited partnerships or limited liability companies and are listed and traded on a U.S. securities exchange.
REITs
REITs are generally
publicly traded entities that invest in office buildings, apartment complexes, industrial facilities, shopping centers and other commercial spaces. REITs are pooled investment vehicles that typically invest directly in real estate, in mortgages and
loans collateralized by real estate, or in a combination of the two. Equity REITs invest primarily in real estate that produces income from rentals. Mortgage REITs invest primarily in mortgages and derive their income from interest payments. REITs
usually specialize in a particular type of property and may concentrate their investments in particular geographical areas. REITs issue stocks and most REIT stocks trade on the major stock exchanges or over-the-counter.
Repurchase Agreements
Repurchase agreements,
or repos, are transactions in which a security (usually a government security) is purchased with a simultaneous commitment to sell it back to the seller (a commercial bank or recognized securities dealer) at an agreed upon price on an agreed upon
date, usually the next day. If the seller of the underlying security under the repurchase agreement should default on its obligation to repurchase the underlying security, a Fund may experience delay or difficulty in exercising its right to realize
upon the security. Additionally, a Fund may incur a loss if the value of the security should decline, as well as any disposition costs in liquidating the security.
Royalty Income Trusts
Royalty income trusts can be organized in a variety of ways in the United
States, Canada and other countries. Beneficial units in royalty income trusts generally represent interests in profits derived from the production of oil or other minerals.
Rule 144A Securities
Rule 144A securities are restricted securities that can be sold
to qualified institutional buyers under the Securities Act of 1933, as amended. Investing in Rule 144A securities may increase the illiquidity of a Funds investments in the event that an adequate trading market does not exist for these
securities.
U.S. Government Securities
U.S. government securities are fixed income obligations of the U.S. government and its various agencies. U.S. government securities issued by the U.S. Treasury (bills, notes and bonds) are backed
by the full faith and credit of the federal government. Some government securities not issued by the U.S. Treasury also carry the governments full faith and credit backing on principal or interest payments. Some securities are backed by
the issuers right to borrow from the U.S. Treasury and some are backed only by the credit of the issuing organization. All government securities are considered creditworthy. This guarantee, however, does not extend to the market prices
for such securities, which can fluctuate.
Prospectus
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102
Summary of Investment Strategies
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Fund
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Asset-and-Mortgage Backed Securities
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Below Investment Grade (High Yield) Securities
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Collateralized Mortgage Obligations
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Convertible Securities
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Corporate Debt Securities
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Defensive Strategy
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Depositary Receipts of Foreign Securities
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Derivatives (e.g., Options, Forwards, Futures, Swaps)
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Equity Securities
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ETFs/ ETNs
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Fixed Income Securities
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Foreign Securities
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Preferred Stocks
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PTPs
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REITs
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Royalty Income Trusts
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Rule 144A Securities
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Securities of Other Investment Companies*
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U.S. Government Securities
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ASTON/Montag & Caldwell Growth
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X
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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ASTON/Herndon Large Cap Value
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X
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X
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X
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XP
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X
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X
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X
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ASTON/Cornerstone Large Cap Value
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X
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X
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XP
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X
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X
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ASTON/TAMRO Diversified Equity
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X
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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ASTON/River Road Dividend All Cap Value
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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X
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X
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X
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X
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ASTON/River Road Dividend All Cap Value II
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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X
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X
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X
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X
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ASTON/Fairpointe Mid Cap
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X
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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ASTON/Montag & Caldwell Mid Cap Growth
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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ASTON/TAMRO Small Cap
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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ASTON/River Road Select Value
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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ASTON/River Road Small Cap Value
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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X
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ASTON/River Road Independent Value
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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X
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X
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ASTON/LMCG Small Cap Growth
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X
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X
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XP
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X
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X
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ASTON/Veredus Select Growth
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X
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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X
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ASTON Small Cap
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X
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X
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X
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X
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X
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XP
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X
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X
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X
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X
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X
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X
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ASTON/Silvercrest Small Cap
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X
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X
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XP
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X
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X
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X
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X
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ASTON/DoubleLine Core Plus Fixed Income
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XP
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XP
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XP
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X
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XP
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X
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X
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X
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XP
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XP
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X
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X
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X
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XP
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ASTON/TCH Fixed Income
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XP
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X
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X
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X
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XP
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X
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X
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XP
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X
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X
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XP
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ASTON/Lake Partners LASSO Alternatives**
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X
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X
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X
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XP
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X
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ASTON Dynamic Allocation**
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X
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X
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XP
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ASTON/Anchor Capital Enhanced Equity
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X
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X
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XP
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XP
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X
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X
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ASTON/River Road Long-Short
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X
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X
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X
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XP
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XP
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X
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X
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X
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X
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ASTON/Barings International
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X
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X
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X
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X
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XP
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XP
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X
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X
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X
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ASTON/Harrison Street Real Estate
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X
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XP
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X
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X
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X
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XP
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ASTON/Montag & Caldwell Balanced
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XP
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X
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XP
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XP
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X
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X
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X
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XP
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XP
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X
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X
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X
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XP
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*
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All of the Funds may use securities of other investment companies as a cash sweep vehicle. This category on the chart does not reflect the usage of securities of other
investment companies as a cash sweep vehicle or the use of ETFs/ETNs.
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**
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Reflects investment strategies of the Fund and is not intended to reflect the investment strategies of the underlying funds in which the Fund may invest.
|
X
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= Investment strategy applicable to a Fund.
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P
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= Components of a Funds principal investment strategy.
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Portfolio Holdings
A description of the policies and procedures with respect
to the disclosure of each Funds portfolio holdings is available in the Statement of Additional Information (SAI) and on our website at www.astonfunds.com.
Prospectus
|
103
Investment Terms
The
following is a list of terms with definitions that you may find helpful as you read this prospectus.
All-Cap Strategy.
An all-cap
strategy invests in the equity securities of issuers of any market capitalization, and generally will hold securities of issuers representing a range of sizes.
American Depositary Receipts (ADRs).
ADRs represent ownership of securities in foreign stock and are issued by U.S. banks and trust companies. ADRs are denominated in U.S. dollars and are traded
on a U.S. exchange.
Bottom-Up Investing.
Bottom-up investing is an investing approach in which securities are researched and chosen
individually with less consideration given to economic or market cycles.
Call Option.
A call option is an agreement that gives an investor
the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.
Closed-End Fund.
A closed-end fund is a registered investment company that typically issues a fixed number of shares that trade on a securities
exchange or over-the-counter.
Convexity.
Convexity is a measure of how the duration of a bond changes as interest rates change; the
greater the convexity of a bond, the greater the exposure of interest rate risk to the portfolio.
Correlation.
Correlation is a
statistical measure of how two securities move in relation to each other.
Covered Call.
A covered call is an options strategy whereby an
investor holds a long position in an asset and writes (sells) call options on the same asset in an attempt to generate increased income from the asset.
Derivative.
A derivative is a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties.
Diversification.
Diversification is the practice of investing in a broad range of securities to reduce risk.
Duration.
Duration is a calculation of the average life of a bond (or portfolio of bonds) that is a useful measure of the bonds price
sensitivity to interest rate changes. The higher the duration number, the greater the risk and reward potential of the bond.
EAFE
Countries.
EAFE countries are countries located in Europe, Australasia and the Far East.
Emerging Markets.
Emerging markets are
countries whose economy and securities markets are considered by the World Bank to be emerging or developing. Emerging market countries may be located in such regions as Asia, Latin America, the Middle East, Southern Europe, Eastern Europe and
Africa.
Equity Securities.
Equity securities are ownership interests in corporations and other entities, such as common stocks, preferred
stocks, convertible securities, rights and warrants.
European Depositary Receipts (EDRs).
EDRs represent ownership of securities in
foreign stock and are issued by a foreign bank. EDRs are generally denominated in foreign currencies and may not be denominated in the same currency as the securities they represent. Generally, EDRs are designed for use in the foreign securities
markets.
Exchange-Traded Fund (ETF).
An ETF is an investment company that seeks to track the performance of an index by holding in its
portfolio either the contents of the index or a representative sample of the securities in the index.
Exchange-Traded Note (ETN).
An ETN
is a security that combines aspects of a bond and an ETF. ETN returns are based upon the performance of a market index or a specific strategy, and can be held to maturity as a debt security.
Expense Ratio.
A funds expense ratio is its cost of doing business, expressed as a percentage of its net assets and disclosed in a prospectus.
Fundamental Analysis.
Fundamental analysis involves assessing whether a particular stock or group of stocks is undervalued or overvalued at its
current market price based on an analysis of the balance sheet and income statement of the company. Fundamental analysis considers various historical financial statistics or metrics such as return on equity, free cash flow, price-to-earnings ratio,
and similar measures to determine future trends in a companys stock.
Global Depositary Receipts (GDRs).
GDRs represent ownership of
securities in foreign stock and are issued by a foreign bank. GDRs are generally denominated in foreign currencies and may not be denominated in the same currency as the securities they represent. Generally, GDRs are designed for use in the foreign
securities markets.
Growth at a Reasonable Price (GARP).
GARP investing involves buying stocks that have a reasonable price-to-earnings
ratio in relationship to a companys earnings growth rate.
Growth Style Investing.
Growth style investing involves buying stocks
of companies that are generally industry leaders with above-average, sustainable growth rates. Typically, growth stocks are the stocks of the fastest growing companies in the most rapidly growing sectors of the economy. Growth stock valuation levels
(e.g., price-to-earnings ratio) will generally be higher than those of value stocks.
Prospectus
|
104
Hedged Mutual Fund.
A hedged mutual fund is a mutual fund that uses short-selling, hedging or other alternative strategies. Short-selling and
other hedging instruments may be used in an effort to manage risk or to profit from downward movements of securities or markets. The risks of hedged mutual funds may differ and are sometimes greater than those of conventional mutual funds.
Investment Objective.
A funds investment objective is the goal that an investor and a mutual fund seek together. Examples
include current income, total return, long-term capital growth, etc.
Intrinsic Value.
A companys intrinsic value is an estimation of
its actual value, irrespective of its stock price.
Issuer.
An issuer is a company, municipality or government agency that issues a
security, such as a stock, bond or money market security.
Large-Cap Stocks.
Large-cap stocks are stocks issued by large companies.
Unless otherwise defined by a Fund, a large-cap company is defined as one with a market capitalization of $5 billion or more. Typically, large-cap companies are established, well-known companies; some may be multinationals.
Limited Partnerships.
A limited partnership is a business organization with one or more general partners who manage the business and are
personally liable for the partnerships debts, and one or more limited partners who are liable only to the extent of their investment in the partnership.
Management Fee.
The management fee is the amount that a mutual fund pays to the investment adviser for its services.
Market Capitalization.
Market capitalization is the value of a corporation or other entity as determined by the market price of its securities.
Mid-Cap Stocks.
Mid-cap stocks are stocks issued by mid-sized companies. Unless otherwise defined by a Fund, a mid-cap company is defined as one
with a market capitalization between $1.5 billion and $5 billion, which is similar to the range of the Standard & Poors MidCap 400 Index (S&P 400).
Mutual Fund.
A mutual fund is an investment company that stands ready to buy back its shares at their current net asset value. Most mutual funds continuously offer new shares to investors.
Net Asset Value (NAV).
The NAV is the per share value of a mutual fund, found by subtracting the funds liabilities from its
assets and dividing by the number of shares outstanding. Mutual funds calculate their NAVs at least once a day.
Publicly Traded Partnerships
(PTPs).
PTPs are limited partnerships that have interests traded in the equity securities market.
Put Option.
A put option is an
agreement that gives an investor the right (but not the obligation) to sell a stock, commodity, or other instrument at a specific price within a specific time period.
Real Estate Investment Trusts (REITs).
REITs are pooled investment vehicles that typically invest directly in real estate, in mortgages and loans collateralized by real estate, or in a
combination of the two.
Risk/Reward Trade-Off.
Risk/reward trade-off is the principle that an investment must offer higher potential
returns as compensation for the likelihood of increased volatility.
Royalty Income Trusts.
Royalty income trusts are trusts whose
securities are listed on a securities exchange, generally in Canada or the U.S., and which control an underlying company whose business is the acquisition, exploitation, production and sale of oil and natural gas. Royalty income trusts generally pay
out to unit holders the majority of the cash flow that they receive from the production and sale of underlying oil and natural gas reserves. The amount of distributions paid on royalty income trust units will vary from time based on production
levels, commodity prices, royalty rates and certain expenses, deductions and costs, as well as on the distribution payouts ratio policies adopted.
Small-Cap Stocks.
Small-cap stocks are stocks issued by smaller companies. Unless otherwise defined by a Fund, a small-cap company is defined as one with a market capitalization of less than
$1.5 billion, which approximates the size of the largest company in the Russell 2000 Index.
Top-Down Investing.
Top-down
investing is an investing approach in which securities are chosen by looking at the industry or sector level based on market trends and/or economic forecasts.
Total Return.
Total return is a measure of a funds performance that encompasses all elements of return: dividends, capital gains distributions and changes in net asset value. Total return
is the change in value of an investment over a given period, assuming investment of dividends and capital gains distributions, expressed as a percentage of the initial investment.
12b-1 Fee.
A 12b-1 fee is a mutual fund fee, named for the SEC rule that permits it, used to pay for distribution costs (such as advertising and commissions paid to dealers) and shareholder
services. If a fund has a 12b-1 fee, it is found in the fee table of its prospectus. (See
Distribution and Services Plan 12b-1 Fees
in the
Shareholder Information
Section.)
Value Style Investing.
Value style investing involves buying stocks that are out of favor and/or undervalued compared to their peers. Generally,
value stock valuation levels are lower than growth stock valuation levels.
Volatility.
Volatility reflects how much the value of the
markets or a security may change. High volatility means that prices change dramatically over a short time period. Low volatility means that prices do not fluctuate dramatically, but change at a steady pace. Volatility is a measure of risk.
Weighted Average Effective Duration.
Weighted average effective duration is a calculation of the weighted average life of a portfolio of
bonds that provides a measure of the portfolio of bonds sensitivity to cash flow changes, which takes into account interest rate changes and cash flow changes (i.e. having a bond called).
Prospectus
|
105
Yield.
Yield is a measure of net income (dividends and interest) earned by the securities in a funds portfolio, less a funds
expenses, during a specified period. A funds yield is expressed as a percentage of the maximum offering price per share on a specified day.
Yield Curve.
The yield curve is the relation between the interest rate (or cost of borrowing) and the time to maturity of the debt. A normal yield
curve is upward sloping, in other words, the yield increases as the maturity lengthens. An inverted yield curve occurs when short-term yields are higher than long-term yields.
Zero-Coupon Bonds.
Zero-coupon bonds are debt securities that do not pay interest at regular intervals and are issued at a discount from face value. The discount approximates the total amount of
interest the bond will accrue from the date of issuance to maturity.
Prospectus
|
106
Management of the Funds
INVESTMENT ADVISER
Aston Asset Management, LP
Aston Asset
Management, LP (Aston or the Adviser), 120 N. LaSalle Street, 25th Floor, Chicago, IL 60602, is the investment adviser to the Funds. Aston is a majority-owned and independently managed indirect subsidiary
of Affiliated Managers Group, Inc. (AMG). More information on AMG is available in the SAI. Aston was formed in April 2006 and as of December 31, 2012, Aston had approximately $[__] billion in assets under management.
Aston provides investment advisory, mutual fund administration and distribution-related services to Aston Funds. Aston manages each Fund by selecting one or
more investment managers (each a Subadviser) to manage the Funds portfolio on a subadvisory basis. Aston is responsible for identifying and selecting each Funds investment managers, monitoring the performance of such
managers, and terminating managers.
The SEC has granted an exemptive order to Aston and Aston Funds that allows Aston to allocate and
reallocate assets of the Funds between and among any subadvisers so selected pursuant to a manager of managers structure. Under this structure, Aston has the authority to retain and terminate subadvisers, engage new subadvisers and make
material revisions to the terms of the subadvisory agreements subject to the approval of the Board of Trustees, but not shareholder approval.
General
As the investment adviser to the
Funds, Aston is paid an annual management fee based on the average daily net assets of a Fund. Out of its fee, Aston pays the Subadviser(s) of each Fund. The table, later in this
Management of the Funds
Section, shows the
management fees paid by each Fund to Aston for the most recent fiscal year. The investment advisory agreement with Aston may be terminated at any time by the Fund or the Adviser upon 60 days written notice to the other party. A Fund may
effect termination by an action of the Board of Trustees or by a vote of a majority of the Funds outstanding voting securities.
A
discussion regarding the basis for the Board of Trustees approval of the Funds investment advisory agreement and subadvisory agreements will be included in the Funds next annual or semi-annual report to shareholders following such
approval.
SUBADVISERS
The accompanying information highlights each Funds Subadviser and its portfolio manager(s).
ASTON/Montag & Caldwell Growth Fund
ASTON/Montag & Caldwell Mid Cap Growth Fund
ASTON/Montag & Caldwell Balanced Fund
Montag & Caldwell, LLC (and its
predecessor), 3455 Peachtree Road NE Suite 1200, Atlanta, Georgia 30326, was founded in 1945. As of December 31, 2012, Montag & Caldwell managed approximately $[ ] billion in assets.
ASTON/Herndon Large Cap Value Fund
Herndon Capital Management, LLC, 191 Peachtree Street, NE, Suite 2500, Atlanta, GA 30303, is an institutional investment management firm specializing in
large capitalization equity strategies. Founded in 2001, the firm is majority-owned by Atlanta Life Financial Group, a 100 year old financial services firm, which is majority owned by the Alonzo F. and Norris B. Herndon Foundation, Inc. Members of
Herndon senior management currently own 45% of the firm. As of December 31, 2012, Herndon managed approximately $[ ] billion in assets.
ASTON/Cornerstone Large Cap Value Fund
Cornerstone Investment Partners, LLC, Phipps Tower,
3438 Peachtree Road NE, Suite 900, Atlanta, GA 30326, was founded in 2001. Cornerstone is 100% owned by CIM Holdings, LLC, which is 100% owned by Cornerstones employees. As of December 31, 2012, Cornerstone had approximately
$[ ] billion in assets under management.
ASTON/TAMRO Diversified Equity Fund
ASTON/TAMRO Small Cap Fund
TAMRO Capital
Partners LLC, 1701 Duke Street, Suite 250, Alexandria, Virginia 22314, was founded in 2000. TAMRO is majority-owned by the principals of the firm. As of December 31, 2012, TAMRO managed approximately $[ ] billion in
assets.
ASTON/River Road Dividend All Cap Value Fund
ASTON/River Road Dividend All Cap Value Fund II
ASTON/River Road Select Value Fund
ASTON/River Road Small Cap Value Fund
ASTON/River Road Independent Value Fund
ASTON/River Road Long-Short Fund
River Road Asset Management, LLC, Meidinger Tower, 462 South Fourth Street, Suite 1600, Louisville, Kentucky 40202, was founded in 2005. River Road is a
wholly-owned subsidiary of Aviva Investors North America Holdings, Inc., which is an indirect subsidiary of Aviva plc. As of December 31, 2012, River Road managed approximately $[ ] billion in assets.
Prospectus
|
107
ASTON/Fairpointe Mid Cap Fund
Fairpointe
Capital LLC, One North Franklin, Suite 3300, Chicago, Illinois 60606, was founded in 2011. Fairpointe is majority-owned by its employees. As of December 31, 2012, Fairpointe managed approximately $[ ] billion in assets.
ASTON/LMCG Small Cap Growth Fund
Lee Munder Capital Group, LLC, 200 Clarendon Street, 28th Floor, Boston, MA 02116, was founded in August 2000. LMCG is majority-owned by Convergent Capital
Management, LLC. As of December 31, 2012, LMCG had assets of approximately $ [ ] billion under management.
ASTON/Veredus Select Growth Fund
ASTON Small Cap Fund
[Todd-Veredus Asset
Management LLC, National City Tower, 101 South Fifth Street, Suite 3100, Louisville, Kentucky 40202, was founded in 2009 as a result of the combination of Veredus Asset Management LLC (which served as the Subadviser to the Funds since their
inception) and Todd Investment Advisors. Todd-Veredus is principally owned by its employees. As of December 31, 2012, Todd-Veredus managed approximately $[ ] billion in assets.
]
ASTON/Silvercrest Small Cap Fund
Silvercrest
Asset Management Group LLC, 1330 Avenue of the Americas, 38th Fl., New York NY 10019, was founded in 2002.[ Silvercrest is majority-owned by its employees.] As of December 31, 2012, Silvercrest managed approximately $[ ]
billion in assets.
ASTON/DoubleLine Core Plus Fixed Income Fund
DoubleLine Capital LP, 333 South Grand Avenue, Suite 1800, Los Angeles, CA 90071, was founded in December 2009 by Mr. Jeffrey Gundlach and other key members of DoubleLines investment team. As of
December 31, 2012, DoubleLine managed approximately $[ ] billion in assets.
ASTON/TCH Fixed Income Fund
Taplin, Canida & Habacht LLC, 1001 Brickell Bay Drive, Suite 2100 Miami, Florida 33131, was founded in 1985. TCH is a
majority-owned subsidiary of BMO Financial Corp., a subsidiary of the Bank of Montreal. As of December 31, 2012, TCH had approximately $[ ] billion in assets under management.
ASTON/Lake Partners LASSO Alternatives Fund
Lake Partners, Inc., 4 High Ridge Park, Suite 300, Stamford, CT 06905, was founded in 1989. The firm is wholly owned by its senior investment professionals
and founders, Mr. Frederick C. Lake and Mr. Ronald A. Lake. As of December 31, 2012, Lake Partners managed approximately $[ ] million in assets and provided investment consulting services to
approximately $[ ] billion in assets.
ASTON Dynamic Allocation Fund
Smart Portfolios, LLC, 17865 Ballinger Way NE, Lake Forest Park, Washington 98155, was formed in April 2002 as Asset Labs, LLC. The firm was registered as an
investment adviser in 2004 as Star Investment Advisors, LLC and changed its name to Smart Portfolios, LLC in 2005. The firm is wholly owned by Shield Holdings, LLC. Shield Holdings, LLC is owned by Mr. Bryce James. As of December 31, 2012,
Smart Portfolios had approximately $[ ] million in assets under management.
ASTON/Anchor Capital Enhanced Equity Fund
Anchor Capital Advisors LLC, One Post Office Square, Suite 3850, Boston, MA 02109, was established in 1983. Eighty percent (80%) of
Anchor Capital is owned by Anchor Capital Holdings LLC, which is a wholly-owned subsidiary of publicly-held Boston Private Financial Holdings, Inc. As of December 31, 2012, Anchor Capital had assets of approximately $[ ]
billion under management. Anchor Capital has not previously managed mutual fund accounts.
ASTON/Barings International Fund
Baring International Investment Limited, 155 Bishopsgate, London, EC2M 3XY, United Kingdom, was founded in 1980. Baring International
Investment Limited is a subsidiary of Baring Asset Management Limited (together with its subsidiaries and Baring Asset Management LLC constitute Barings). As of December 31, 2012, Barings managed approximately
$[ ] billion in assets.
ASTON/Harrison Street Real Estate Fund
Harrison Street Securities, LLC, 71 South Wacker Drive, Suite 3575, Chicago, Illinois 60606. HSS was founded in 2005 as Transwestern Securities Management,
L.L.C. by Transwestern Investment Company, L.L.C. (TIC), James Kammert and Reagan Pratt. As of December 31, 2010, the controlling members and managers of the firm are HS Securities Holdings, LLC, a Delaware limited liability company
that acquired the interests of TIC, James Kammert and Reagan Pratt. As of December 31, 2012, HSS managed approximately $[ ] million in assets.
Prospectus
|
108
|
|
|
Portfolio Management
|
ASTON/Montag & Caldwell Growth
Fund
|
|
|
Ronald E. Canakaris, CFA, CIC
|
|
Portfolio Manager since the Funds inception in 1994; Chairman and Chief Investment
Officer of Montag & Caldwell. Mr. Canakaris has been with the firm since 1972 and is responsible for developing the firms investment process. He has a BSBA from the University of Florida and holds the Chartered Financial Analyst
designation.
|
ASTON/Montag & Caldwell Balanced
Fund
|
|
|
Ronald E. Canakaris, CFA, CIC
|
|
Portfolio Manager since the Funds inception in 1994. Please see above.
|
|
|
Helen Donahue, CFA
|
|
Co-Portfolio Manager of the Fund since March 2013; Ms. Donahue is a portfolio manager of
equities and fixed income at Montag & Caldwell. Ms. Donahue joined Montag & Caldwell in 1997 and has over 20 years of investment industry experience. Prior to joining Montag & Caldwell, she served as an Assistant Vice President and fixed
income portfolio manager for Legg Mason Capital Management. Ms. Donahue holds the Chartered Financial Analyst designation. Her professional affiliations include the CFA Institute and the CFA Society of Atlanta.
|
ASTON/Montag & Caldwell Mid Cap Growth
Fund
|
|
|
Andrew W. Jung, CFA
|
|
Co-Portfolio Manager since the Funds inception in November 2007, Vice President and Security Analyst. Mr. Jung
joined Montag & Caldwell in 2001 as a research analyst. Prior to joining Montag & Caldwell, he was an analyst at Strong Capital Management, following the financial services sector for several large-cap growth funds, and at the
Robinson-Humphrey Company in Atlanta, where he followed banks and thrifts. He has a BA from Marquette University and an MBA from Emory University, and holds the Chartered Financial Analyst designation. His professional affiliations include the CFA
Institute and the CFA Society of Atlanta.
|
|
|
M. Scott Thompson, CFA
|
|
Co-Portfolio Manager since the Funds inception in November 2007, Vice President and
Security Analyst. Mr. Thompson joined Montag & Caldwell in 1992 upon graduating from the University of the South with a BA in Economics. He has an MBA from Emory University and holds the Chartered Financial Analyst designation. His
professional affiliations include the CFA Institute and the CFA Society of Atlanta, for which he formerly served as trustee.
|
ASTON/Herndon Large Cap Value Fund
|
|
|
Randell Cain, CFA
|
|
Portfolio Manager since the Funds inception in March 2010. Mr. Cain joined Herndon in
2002 and is a principal and Portfolio Manager. Prior to joining Herndon, he was a portfolio manager at NCM Capital for five years. Mr. Cain received a BS from Morehouse College, a Bachelor of Industrial Engineering from Georgia Institute of
Technology, and an MBA from Harvard Business School. Mr. Cain holds the Chartered Financial Analyst designation.
|
ASTON/Cornerstone Large Cap Value Fund
|
|
|
John Campbell, CFA
|
|
Portfolio Manager since July 2011. Mr. Campbell is Chief Investment Officer of Cornerstone and is responsible for maintaining
and adhering to the firms overall investment philosophy and process. Mr. Campbell has been with the firm since 2005 and has been in the industry since 1982. He has a BS from State University of New York at Fredonia and holds the Chartered
Financial Analyst designation.
|
|
|
Rick van Nostrand,
CFA
|
|
Portfolio Manager since July 2011. Mr. Van Nostrand is a portfolio manager of Cornerstone and is responsible for fundamental
research and oversight coverage for a portion of the portfolio holdings. Mr. van Nostrand has been with the firm since 2005. He has a BS from Southern Methodist University and an MBA from the Wharton School at the University of Pennsylvania, and he
holds the Chartered Financial Analyst designation.
|
|
|
Cameron Clement,
CFA
|
|
Portfolio Manager since July 2011. Mr. Clement is a portfolio manager of Cornerstone and is responsible for fundamental
research and oversight coverage for a portion of the portfolio holdings. Mr. Clement has been with the firm since 2008. Prior to joining Cornerstone in 2008, Mr. Clement was a portfolio manager with Invesco Capital Management since January 2003. He
is a graduate of the University of Strathclyde in Glasgow, Scotland and holds the Chartered Financial Analyst designation.
|
|
|
Dean Morris, CFA
|
|
Portfolio Manager since July 2011. Mr. Morris is a portfolio manager of Cornerstone and is
responsible for fundamental research and oversight coverage for a portion of the portfolio holdings. Mr. Morris has been with the firm since 2008. Prior to joining Cornerstone in 2008, Mr. Morris was a quantitative analyst with Invesco Capital
Management since October 1997. He is a graduate of Williams College and has an MBA from the University of Chicago, and he holds the Chartered Financial Analyst designation.
|
Prospectus
|
109
|
|
|
Portfolio Management
|
ASTON/TAMRO
Diversified Equity Fund
ASTON/TAMRO Small Cap Fund
|
|
|
Philip D. Tasho, CFA
|
|
Portfolio Manager since the Funds inception in November 2000 and Chief Executive Officer and Chief Investment Officer of
TAMRO. Mr. Tasho is responsible for the day-to-day management of the Funds. He began his investment management career in 1980. He received his MBA from George Washington University and holds the Chartered Financial Analyst
designation.
|
|
|
Timothy A. Holland, CFA
|
|
Co-Portfolio Manager since February 2010. Mr. Holland is a principal and analyst at TAMRO,
covering companies within the Financial and Materials sectors. He also monitors broad economic and political trends and analyzes the potential impact on portfolios at the sector level. Mr. Holland joined TAMRO in April 2005 after nearly five years
with Manley Asset Management LP. Mr. Holland earned his BA from Drew University and holds the Chartered Financial Analyst designation.
|
ASTON/River Road
Dividend All Cap Value Fund
ASTON/River Road Dividend All Cap Value Fund II
|
|
|
Henry W. Sanders, III, CFA
|
|
Lead Portfolio Manager of ASTON/River Road Dividend All Cap Value Fund and ASTON/River Road Dividend All Cap Value Fund II
since each Funds inception and Executive Vice President of River Road. Mr. Sanders was formerly employed as Senior Vice President and portfolio manager for Commonwealth SMC Capital Inc. from 2002 to 2005. He received his BS from
Bellarmine University, his MBA from Boston College, and he holds the Chartered Financial Analyst designation.
|
|
|
Thomas S. Forsha, CFA
|
|
Co-Portfolio Manager of ASTON/River Road Dividend All Cap Value Fund since June 2007, Co-Portfolio Manager of ASTON/River Road
Dividend All Cap Value Fund II since inception and Vice President of River Road. Mr. Forsha was formerly employed by ABN AMRO from 1998 to 2005, where he served as equity analyst and portfolio manager and was responsible for the management of
the North America equity allocation of the firms Global High Income Equity Fund. He received his BS in Finance from The Ohio State Universitys Fisher College of Business and his MBA from The University of Chicagos Graduate School
of Business. Mr. Forsha holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Louisville.
|
|
|
James C. Shircliff, CFA
|
|
Co-Portfolio Manager of ASTON/River Road Dividend All Cap Value Fund and ASTON/River Road
Dividend All Cap Value Fund II since each Funds inception and Chief Investment Officer of River Road. Mr. Shircliff was formerly employed as portfolio manager and Director of Research for Commonwealth SMC (SMC Capital, Inc.) from 1998 to
2005. Additionally, Mr. Shircliff has more than 35 years of investment management experience. He received his BS from the University of Louisville and holds the Chartered Financial Analyst designation.
|
ASTON/River Road
Select Value Fund
ASTON/River Road Small Cap Value Fund
|
|
|
James C. Shircliff, CFA
|
|
Portfolio Manager since each Funds inception. Please see above.
|
|
|
R. Andrew Beck
|
|
Portfolio Manager since each Funds inception, as well as CEO and President of River Road. Mr. Beck was formerly
employed as Senior Vice President and Portfolio Manager for Commonwealth SMC (SMC Capital, Inc.) from 1999-2005. Mr. Beck received his BS from the University of Louisville and his MBA from Babson College.
|
|
|
J. Justin Akin
|
|
Portfolio Manager since March 2012 and portfolio manager of River Road. Mr. Akin was
formerly employed as an equity research analyst at Commonwealth SMC (SMC Capital, Inc.) from 2003-2005. Mr. Akin received a BS in economics from Centre College.
|
ASTON/River Road Independent Value Fund
|
|
|
Eric Cinnamond, CFA
|
|
Portfolio Manager since the Funds inception in December 2010, Mr. Cinnamond is Vice
President and Portfolio Manager of River Roads independent value investment strategy. Mr. Cinnamond has 18 years of investment industry experience. Prior to joining River Road, Mr. Cinnamond served as a portfolio manager at Intrepid Capital
Management from 1998 to 2010. Prior to Intrepid Capital Management, Mr. Cinnamond was a co-portfolio manager and analyst at Evergreen Asset Management from 1996 to 1998. Mr. Cinnamond received his BBA in Finance from Stetson University, his MBA from
the University of Florida, and he holds the Chartered Financial Analyst designation.
|
ASTON/River Road Long-Short Fund
|
|
|
Matthew W. Moran, CFA
|
|
Lead portfolio manager since the Funds inception in May 2011, Mr. Moran is a portfolio manager at River Road. Mr. Moran
has 10 years of investment industry experience. Prior to joining River Road, Mr. Moran was employed by Morningstar from 2005 to 2006, as an equity analyst. Mr. Moran was employed by Citigroup as an associate from 2001 to 2005. He received his BS in
Finance from Bradley University, his MBA from the University of Chicago Booth School of Business, and he holds the Chartered Financial Analyst designation.
|
|
|
Daniel Johnson, CFA
|
|
Co-portfolio manager since March 2012, Mr. Johnson is a portfolio manager at River Road.
Prior to joining River Road, Mr. Johnson served as a public accountant with PricewaterhouseCoopers from 2005 to 2006. He received his BS in accounting and a Masters in Accountancy from the University of Kentucky. Mr. Johnson holds the Certified
Public Accountant and Chartered Financial Analyst designations.
|
Prospectus
|
110
|
|
|
Portfolio Management
|
ASTON/Fairpointe Mid Cap Fund
|
|
|
Thyra E. Zerhusen
|
|
Portfolio Manager of the Fund since May 1999. Ms. Zerhusen is the principal founder, CEO and Chief Investment Officer of
Fairpointe Capital. Prior to founding Fairpointe Capital in 2011, Ms. Zerhusen was the Chief Investment Officer of Mid Cap Equities at Optimum Investment Advisors beginning in October 2003. From April 1999 to September 2003 she was on the investment
team of Talon Asset Management. She has a Diplom Ingenieur from the Swiss Federal Institute of Technology and an MA in Economics from the University of Illinois.
|
|
|
Marie L. Lorden
|
|
Co-Portfolio Manager of the Fund since March 2009; Ms. Lorden is a co-founder and a portfolio manager of Fairpointe
Capital. Prior to co-founding Fairpointe Capital in 2011, Ms. Lorden served as a member of the Mid Cap Investment Team at Optimum Investment Advisors for over 7 years. Ms. Lorden is responsible for research and analysis of existing and
potential holdings, as well as mutual fund, institutional relationships, and portfolio management. Previously, Ms. Lorden held positions specializing in equity product analysis with Zurich Insurance Group, Driehaus Capital Management, and The
Burridge Group. Ms. Lorden received her BS from Elmhurst College and her MBA from the Keller Graduate School of Management.
|
|
|
Mary L. Pierson
|
|
Co-Portfolio Manager of the Fund since March 2009; Ms. Pierson is a co-founder and a
portfolio manager of Fairpointe Capital. Prior to co-founding Fairpointe Capital in 2011, Ms. Pierson served as a member of the Mid Cap Investment Team at Optimum Investment Advisors for 7 years. Ms. Pierson is responsible for research and
analysis of existing and potential holdings, as well as mutual fund, institutional relationships, and portfolio management. Her prior experience includes 15 years with Harris Bancorp and Harris Futures Corporation. While General Manager at Harris
Futures Corporation, she was responsible for managing all aspects of the institution, which operated as a financial futures broker. Ms. Pierson received her BA in Economics from DePauw University, her MA in Economics from Northwestern University and
her MBA in Finance from The University of Chicago.
|
ASTON/LMCG Small Cap Growth Fund
|
|
|
Andrew Morey, CFA
|
|
Portfolio Manager since the Funds inception in November 2010. Mr. Morey, portfolio
manager for LMCGs Small and Small/Mid Cap Growth investment strategies, joined LMCG in February 2012. Mr. Morey has 20 years of investment management experience and prior to joining LMCG, he served as portfolio manager at Crosswind
Investments, LLC for Crosswinds Small and Small/Mid Cap investment strategies. Previously, Mr. Morey was the founder and a portfolio manager of Tartan Partners, LLC from 2005 to 2007. Prior to Tartan Partners, Mr. Morey worked at State Street
Research & Management as a portfolio manager, and at Gabelli & Co. as a research analyst. Mr. Morey holds the Chartered Financial Analyst designation.
|
ASTON Small Cap Fund
|
|
|
[B. Anthony Weber
|
|
Lead Portfolio Manager since the Funds inception in 1998 and Co-President and Chief Investment Officer of the growth
strategy at Todd-Veredus. Mr. Weber is responsible for the day-to-day management of the Fund. Mr. Weber was President and Senior Portfolio Manager of SMC Capital, Inc. from 1993-1998. He has over 30 years of investment management
experience. He received a BA from Centre College of Kentucky.]
|
|
|
[Charles F. Mercer, Jr., CFA
|
|
Co-Portfolio Manager of the Fund since January 2009 and is Co-Portfolio Manager of Todd-Veredus. Mr. Mercer was the
Director of Research from 1998 to 2003. Mr. Mercer has a BA from Vanderbilt University and holds the Chartered Financial Analyst designation.
]
|
|
|
[Michael E. Johnson, CFA
|
|
Co-Portfolio Manager of the Fund and Co-Portfolio Manager of Todd-Veredus since January 2009. Mr. Johnson joined
Todd-Veredus in March of 2000 as a research analyst. From August 2003 through December 2008, he was the Director of Research. He received a BS in Finance from Ball State University and holds the Chartered Financial Analyst
designation.]
|
|
|
[John R. Prys, CFA
|
|
Co-Portfolio Manager of the Fund since February 2012 and Mr. Prys is a Co-Portfolio Manager of Todd-Veredus. Mr. Prys
joined Veredus in 2002 as a Research Analyst and was promoted to Director of Research in January 2009. Mr. Prys holds a BS from the University of Louisville and holds the Chartered Financial Analyst designation as well as the Certified Public
Accountant designation.]
|
|
|
[Katherine A. Kuntz,
CFA
|
|
Co-Portfolio Manager of the Fund since February 2012 and Mrs. Kuntz is Co-Portfolio Manager
of Todd-Veredus. Mrs. Kuntz joined Todd-Veredus in 2004 and between 2004 and 2012 Mrs. Kuntz is a Research Analyst for Todd-Veredus. Mrs. Kuntz has a BA from Bellarmine College and holds the Chartered Financial Analyst designation as well as
the Certified Public Accountant designation.]
|
ASTON/Veredus Select Growth Fund
|
|
|
[B. Anthony Weber
|
|
Lead Portfolio Manager of the Fund since September 2002. Please see above.]
|
|
|
[Charles F. Mercer, Jr., CFA
|
|
Co-Portfolio Manager of the Fund since the Funds inception in December 2001. Please see above.]
|
|
|
[Michael E. Johnson, CFA
|
|
Co-Portfolio Manager of the Fund since January 2009. Please see above.]
|
|
|
[John R. Prys, CFA
|
|
Co-Portfolio Manager of the Fund since February 2012; Please see above.]
|
|
|
[Katherine A. Kuntz,
CFA
|
|
Co-Portfolio Manager of the Fund since February 2012; Please see
above.]
|
Prospectus
|
111
|
|
|
Portfolio Management
|
ASTON/Silvercrest Small Cap Fund
|
|
|
Roger W. Vogel, CFA
|
|
Portfolio Manager since inception in December 2011. Mr. Vogel is a Managing Director of
Silvercrest and has been the lead portfolio manager for Silvercrests value equity investment strategies, including its small cap investment strategy, since he joined Silvercrest in April of 2002. Prior to Silvercrest, Mr. Vogel was a
Managing Director at Credit Suisse Asset Management where he co-managed both small-cap and large-cap portfolios. He arrived at Credit Suisse as a result of the merger with Donaldson, Lufkin and Jenrette, where he worked since 1993 in a similar
capacity. Previously, Mr. Vogel was a portfolio manager at Chemical Bank and Manufacturers Hanover Trust.
|
ASTON/DoubleLine Core Plus Fixed Income
Fund
|
|
|
Jeffrey E. Gundlach
|
|
Lead Portfolio Manager of the Fund since its inception in July 2011 and lead portfolio manager of the DoubleLine core plus
fixed income investment strategy. Mr. Gundlach is the founder of DoubleLine and has been Chief Executive Officer and Chief Investment Officer of DoubleLine since its inception in December 2009. For the five-year period prior to founding DoubleLine,
Mr. Gundlach was Chief Investment Officer and Group Managing Director for Trust Company of the West (TCW). He was also President and Chief Investment Officer for TCW Asset Management Company.
|
|
|
Philip A. Barach
|
|
Mr. Barach has been Portfolio Manager of the Fund since its inception in July 2011 and President of DoubleLine since its
inception in December 2009. As part of the Funds portfolio management team, Mr. Barach assists in overseeing the implementation of the Funds overall strategy. For the five-year period prior to founding DoubleLine, Mr. Barach was Group
Managing Director at TCW, where he partnered with Mr. Gundlach to manage over $70 billion in fixed income assets.
|
|
|
Bonnie Baha
|
|
Ms. Baha has been Portfolio Manager of the Fund since its inception in July 2011 and a portfolio manager of DoubleLine since
its inception in December 2009. As part of the Funds portfolio management team, Ms. Baha manages the global developed credit portion of the Funds portfolio. For the five-year period prior to joining DoubleLine, Ms. Baha was a Managing
Director at TCW.
|
|
|
Luz M. Padilla
|
|
Ms. Padilla has been Portfolio Manager of the Fund since its inception in July 2011 and a
portfolio manager of DoubleLine since January 2010. As part of the Funds portfolio management team, Ms. Padilla manages the emerging markets fixed income portion of the Funds portfolio. For the five-year period prior to joining
DoubleLine, Ms. Padilla was a Managing Director at TCW.
|
ASTON/TCH Fixed Income Fund
|
|
|
Tere Alvarez Canida, CFA
|
|
Co-Portfolio Manager of the Fund since December 2006 and President and Managing Principal of TCH. Ms. Canida has over
25 years of investment experience. She previously served as Vice President and Senior Investment Officer of Southeast Bank. She received her BS from Georgetown University, and her MBA from George Washington University. Ms. Canida holds the
Chartered Financial Analyst designation.
|
|
|
Alan M. Habacht
|
|
Co-Portfolio Manager of the Fund since December 2006 and a principal of TCH. Mr. Habacht has over 35 years of
investment experience. Before joining TCH, he served as Senior Vice President and portfolio manager for INVESCO Capital Management. He received his BA in Finance from Boston University.
|
|
|
William J. Canida, CFA
|
|
Co-Portfolio Manager of the Fund since December 2006 and a principal of TCH. Mr. Canida has over 30 years of
investment experience. Prior to joining TCH, he served as Vice President and Senior Investment Officer for Harris Trust Company of Florida. Mr. Canida received his BA and his MBA from Indiana University. He has also attended the National
Graduate Trust School of Northwestern University. Mr. Canida holds the Chartered Financial Analyst designation.
|
|
|
Scott M. Kimball, CFA
|
|
Co-Portfolio Manager of the Fund since February 2013 and portfolio manager at TCH. Mr.
Kimball joined TCH in 2007 and the TCH portfolio management team in 2011. In his current role he is responsible for implementing the teams strategies and monitoring the return objectives and guidelines set forth for client accounts. He has
over eight years of investment experience and has previously worked with Merrill Lynch and Charles D. Hyman and Company. Mr. Kimball graduated from Stetson University in 2003 and holds the Chartered Financial Analyst designation.
|
ASTON/Lake Partners LASSO Alternatives
Fund
|
|
|
Frederick C. Lake
|
|
Portfolio Manager of the LASSO strategy and the Fund since the Funds inception in April 2009. He is the Co-Chairman and
Treasurer of Lake Partners, which he co-founded in 1989. Mr. Lake has over 30 years of experience in the investment industry. He directs research and portfolio management of investment programs using multiple mutual funds and alternative mutual
funds. Mr. Lake received a BA from Harvard University.
|
|
|
Ronald A. Lake
|
|
Co-Portfolio Manager of the LASSO strategy and the Fund since the Funds inception in
April 2009. He is the Co-Chairman and President of Lake Partners, which he co-founded in 1989. Mr. Lake is editor-in-chief of
Evaluating and Implementing Hedge Fund Strategies
. He has over 30 years of investment experience. He is responsible
for asset allocation, investment strategy and supervision of multi-manager programs focusing on alternative investments, or integrating alternative and traditional investments. Mr. Lake received a BA from Harvard University and an MCRP in
public policy from Harvard University.
|
Prospectus
|
112
|
|
|
Portfolio Management
|
ASTON Dynamic Allocation Fund
|
|
|
Bryce James
|
|
Portfolio Manager since the Funds inception. Mr. James co-founded Smart Portfolios LLC in 2002 and serves as President
and Chief Investment Officer. Mr. James has over 25 years of investment experience and is the head of the firms investment committee. He received a BS in Accounting, Finance and Marketing from Central Washington
University.
|
ASTON/Anchor Capital Enhanced Equity Fund
|
|
|
Ronald L. Altman
|
|
Portfolio Manager since the Funds inception in January 2008. Mr. Altman joined Anchor
Capital in June 2012 as Senior Vice President and Senior Portfolio Manager. Prior to Anchor Capital, Mr. Altman was a Portfolio Manager of the enhanced equity strategy at M.D. Sass Investors Services, Inc., the previous subadviser to the Fund.
From 2005 to 2009, Mr. Altman was a Partner and Portfolio Manager of the enhanced equity income strategy at MB Investment Partners, Inc. Mr. Altman has over 40 years of experience in the investment research and money management business in
various positions.
|
ASTON/Barings International Fund
|
|
|
David Bertocchi, CFA
|
|
Portfolio Manager of the Fund since April 2008. Mr. Bertocchi joined Barings in 2000 and was
appointed Divisional Director in 2004. With over 10 years of investment experience, Mr. Bertocchi is a member of the World Equity Group at Barings and is responsible for international equity, focused on EAFE markets, and global portfolios. In 2010
he was appointed to the Strategic Policy Group at Barings, the companys global macro research and asset allocation team. Previously, he managed the Baring Global Equity Unit Trust and the global institutional funds. He is a past member of
Barings European and UK equity teams. Mr. Bertocchi holds an MBA from London Business School and a BS in Mechanical Engineering from the University of Calgary (Canada). He holds the Chartered Financial Analyst designation.
|
ASTON/Harrison Street Real Estate Fund
|
|
|
Reagan A. Pratt
|
|
Co-Portfolio Manager since June 2011. Mr. Pratt is a principal and portfolio manager as well as a member of the Board of
Managers of HSS. Mr. Pratt founded HSS in 2005, in association with TIC and Mr. Kammert. From 2001 through 2004, Mr. Pratt was a portfolio manager with Heitman Real Estate Securities LLC. Mr. Pratt is responsible for managing the public real estate
securities portfolios of HSS and the day-to-day operation of HSS. Mr. Pratt has a bachelors degree in economics and geography from the University of Guelph (Ontario, Canada) and a Master of Science Business Administration (Urban Land
Economics) from the University of British Columbia (British Columbia, Canada).
|
|
|
James H. Kammert, CFA
|
|
Co-Portfolio Manager since June 2011. Mr. Kammert is a principal and portfolio manager as
well as a member of the Board of Managers of HSS. Mr. Kammert founded HSS in March 2005, in association with TIC and Mr. Pratt. Along with Mr. Pratt, Mr. Kammert is responsible for managing the public real estate securities portfolios of HSS. Mr.
Kammert joined HSS in August 2005. From 2003 through mid-2005, Mr. Kammert was Director of Research for European Investors, Inc. Prior to joining European Investors, Mr. Kammert was Vice President and co-head of Goldman Sachs & Co.s U.S.
REIT research team for over four years. Mr. Kammert graduated from Lafayette College with a BA in Economics & Business and earned an MBA from the University of Chicago. Mr. Kammert holds the Chartered Financial Analyst designation and is a
CPA.
|
Additional information about the portfolio managers compensation, other accounts managed by the portfolio managers
and the portfolio managers ownership of securities in the Funds is available in the SAI.
Prospectus
|
113
MANAGEMENT FEES
|
|
|
|
|
|
|
Fund Name
|
|
Management Fee
|
|
Management Fee Paid for
Fiscal Year Ended 10/31/12
|
|
|
|
(as a percentage of net assets)
|
|
(as a percentage of net assets)
|
|
ASTON/Montag & Caldwell Growth Fund
|
|
First $800 million 0.80%
Over $800 million up to $6 billion 0.60%
Over $6 billion up to $12 billion 0.55%
over $12 billion 0.50%
|
|
|
[
|
]%
|
ASTON/Herndon Large Cap Value Fund
(a)
|
|
0.80%
|
|
|
[
|
]%
|
ASTON/Cornerstone Large Cap Value Fund
(a),(b)
|
|
0.80%
|
|
|
[
|
]%
|
ASTON/TAMRO Diversified Equity Fund
(a)
|
|
0.80%
|
|
|
[
|
]%
|
ASTON/River Road Dividend All Cap Value Fund
(a)
|
|
0.70%
|
|
|
[
|
]%
|
ASTON/River Road Dividend All Cap Value Fund II
(a),(d)
|
|
0.70%
|
|
|
[
|
]%
|
ASTON/Fairpointe Mid Cap Fund
|
|
First $100 million 0.80%
Next $300 million 0.75%
Over $400 million 0.70%
|
|
|
[
|
]%
|
ASTON/Montag & Caldwell Mid Cap Growth Fund
(a),(c)
|
|
0.85%
|
|
|
[
|
]%
|
ASTON/TAMRO Small Cap Fund
|
|
0.90%
|
|
|
[
|
]%
|
ASTON/River Road Select Value Fund
|
|
1.00%
|
|
|
[
|
]%
|
ASTON/River Road Small Cap Value Fund
|
|
0.90%
|
|
|
[
|
]%
|
ASTON/River Road Independent Value Fund
(a),(d)
|
|
1.00%
|
|
|
[
|
]%
|
ASTON/LMCG Small Cap Growth Fund
(a)
|
|
1.00%
|
|
|
[
|
]%
|
ASTON/Veredus Select Growth Fund
(a)
|
|
0.80%
|
|
|
[
|
]%
|
ASTON Small Cap Fund
(a
)
|
|
1.00%
|
|
|
[
|
]%
|
ASTON/Silvercrest Small Cap Fund
(a),(d)
|
|
1.00%
|
|
|
[
|
]%
|
ASTON/DoubleLine Core Plus Fixed Income Fund
(a)
|
|
0.55%
|
|
|
[
|
]%
|
ASTON/TCH Fixed Income Fund
(a)
|
|
0.55%
|
|
|
[
|
]%
|
ASTON/Lake Partners LASSO Alternatives Fund
(a)
|
|
1.00%
|
|
|
[
|
]%
|
ASTON Dynamic Allocation Fund
(a)
|
|
0.80%
|
|
|
[
|
]%
|
ASTON/Anchor Capital Enhanced Equity Fund
(a)
|
|
0.70%
|
|
|
[
|
]%
|
ASTON/River Road Long-Short Fund
(a)
|
|
1.20%
|
|
|
[
|
]%
|
ASTON/Barings International Fund
(a)
|
|
1.00%
|
|
|
[
|
]%
|
ASTON/Harrison Street Real Estate Fund
(a)
|
|
1.00%
|
|
|
[
|
]%
|
ASTON/Montag & Caldwell Balanced Fund
(a)
|
|
0.75%
|
|
|
[
|
]%
|
(a)
Taking into account fee waivers then in effect.
(b)
The Adviser voluntarily waived management fees and/or reimbursed expenses for the ASTON/Cornerstone Large Cap Value Fund at 1.19% and 0.94% for the Class N and Class I shares, respectively through
February 28, 2012. Effective February 29, 2012, the voluntary expense limitation was replaced with a contractual expense limitation of 1.30% for Class N and 1.05% for Class I shares.
(c)
Effective February 29, 2012, the voluntary expense limitation for the ASTON/Montag & Caldwell Mid Cap Growth Fund was replaced with a contractual expense limitation of 1.25%.
(d)
The ASTON/Silvercrest Small Cap Fund commenced operations on December 27, 2011. The ASTON/River Road Dividend All Cap Value Fund II commenced operations on June 27, 2012.
[
(e)
For the year ended October 31, 2012, the Adviser was reimbursed by the Fund for recoupment of prior year fee waivers.
]
Prospectus
|
114
LMCG Related Performance
The following tables show the performance of a composite which represents the performance of the portfolio manager established at another firm and included the fully discretionary small-cap U.S. growth
equity accounts that were managed by the firm. The ASTON/LMCG Small Cap Growth Fund was included in the composite. As of December 31, 2012, the composite was comprised of [6] accounts and assets of $[ ] million. Effective
February 2012, the portfolio manager joined LMCG. The investment objective, policies and strategies of the ASTON/LMCG Small Cap Growth Fund are substantially similar to those of the accounts comprising the composite.
The performance of the composite does not represent the historical performance of the ASTON/LMCG Small Cap Growth Fund and should not be considered
indicative of future performance of the Fund.
Performance for all periods below represents the performance that occurred while the portfolio
manager was at a prior firm and not the historical results of LMCG, and there is no assurance that similar results will be achieved at LMCG. Results may differ because of, among other factors, differences in brokerage commissions, account expenses
including management fees, the size of positions taken in relation to account size, diversification of the portfolio, timing of purchases and sales and availability of cash for new investment. The Fund has been advised that, as the lead portfolio
manager of the strategy at his prior firm, Mr. Morey had full discretionary authority over the selection of investments for accounts comprising the composite and no other person played a significant role in the investment decision-making
process.
An independent third party, whose primary function is the verification of performance data for compliance with
Global Investment Performance Standards (GIPS
®
) conducted a review of the track record for compliance with the
portability requirements of the GIPS
®
. The prior firm has a written agreement with LMCG allowing its use of the
performance history and supporting records.
The performance of the separate accounts presented below is not calculated using
the same methodology as that which is prescribed for performance calculations used by registered investment companies. The net-of-fee returns below are calculated by deducting investment management fees of the accounts from gross returns. Gross
returns are calculated in accordance with GIPS
®
. In addition, the separate accounts for which performance is
presented are not subject to the same type of expenses as the Fund. If the Funds fees and expenses had been used in calculating the composites performance, the performance of the composite would have been lower.
In addition, the accounts comprising the composite are not subject to certain investment limitations, diversification requirements and other restrictions
imposed by the 1940 Act and the Code, which if applicable, may have adversely affected the performance results of the composite. The results for different products may vary.
Total Return
|
|
|
|
|
|
|
|
|
Calendar
Year end
|
|
LMCG
Small Cap
Growth
Composite
|
|
|
Russell
2000
Growth
Index
|
|
2012
|
|
|
[
|
]%
|
|
|
[
|
]%
|
2011
|
|
|
(9.37
|
)%
|
|
|
(2.91
|
)%
|
2010
|
|
|
32.60
|
%
|
|
|
29.09
|
%
|
2009
|
|
|
51.79
|
%
|
|
|
34.47
|
%
|
2008
|
|
|
(34.01
|
)%
|
|
|
(38.54
|
)%
|
Average Annual Total Return
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
Period
|
|
LMCG
Small Cap
Growth
Composite
|
|
|
Russell
2000
Growth
Index
|
|
One Year
|
|
|
[
|
]%
|
|
|
[
|
]%
|
Since Inception
(a)
|
|
|
[
|
]%
|
|
|
[
|
]%
|
(a)
Since inception return is computed from 12/31/07.
Prospectus
|
115
Herndon Related Performance
The following
tables show the performance of a composite of all fully discretionary U.S. large-cap value equity accounts managed by Herndon, including the ASTON/Herndon Large Cap Value Fund. As of December 31, 2012, the composite was comprised of [91]
accounts and assets of $[ ] billion. The investment objective, policies and strategies of the ASTON/Herndon Large Cap Value Fund are substantially similar to those of the accounts comprising the composite.
The performance of the composite does not represent the historical performance of the ASTON/Herndon Large Cap Value Fund and should not be considered
indicative of future performance of the Fund. Results may differ because of, among other factors, differences in brokerage commissions, account expenses including management fees, the size of positions taken in relation to account size,
diversification of the portfolio, timing of purchases and sales and availability of cash for new investment.
The performance
of the accounts presented below is not calculated using the same methodology as that which is prescribed for performance calculations used by registered investment companies. The net-of-fee returns below are calculated by deducting investment
management fees of the accounts from gross returns. Gross returns are calculated in accordance with GIPS
®
. In
addition, the accounts for which performance is presented are not subject to the same type of expenses as the Fund. If the Funds fees and expenses had been used in calculating the composites performance, the performance of the composite
would have been lower.
In addition, the accounts comprising the composite are not subject to certain investment limitations, diversification
requirements and other restrictions imposed by the 1940 Act and the Code, as amended, which if applicable, may have adversely affected the performance results of the composite. The results for different products may vary.
Total Return
|
|
|
|
|
|
|
|
|
Year end
|
|
Herndon
Large Cap
U.S. Value
Composite
|
|
|
Russell
1000
Value
Index
|
|
2012
|
|
|
[
|
]%
|
|
|
[
|
]%
|
2011
|
|
|
1.15
|
%
|
|
|
0.39
|
%
|
2010
|
|
|
18.77
|
%
|
|
|
15.51
|
%
|
2009
|
|
|
35.85
|
%
|
|
|
19.69
|
%
|
2008
|
|
|
(32.17
|
)%
|
|
|
(36.85
|
)%
|
2007
|
|
|
9.89
|
%
|
|
|
(0.17
|
)%
|
2006
|
|
|
14.81
|
%
|
|
|
22.25
|
%
|
2005
|
|
|
15.30
|
%
|
|
|
7.05
|
%
|
2004
|
|
|
28.63
|
%
|
|
|
16.49
|
%
|
2003
|
|
|
31.02
|
%
|
|
|
30.03
|
%
|
Average Annual Total Return
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
Period
|
|
Herndon
Large Cap
U.S. Value
Composite
|
|
|
Russell
1000
Value
Index
|
|
One Year
|
|
|
[
|
]%
|
|
|
[
|
]%
|
Five Years
|
|
|
[
|
]%
|
|
|
[
|
]%
|
Ten Years
|
|
|
[
|
]%
|
|
|
[
|
]%
|
Prospectus
|
116
River Road Independent Value Related Performance
The following tables show the performance of a composite comprised of all fully discretionary accounts in River Roads independent value investment strategy, including the ASTON/River Road Independent
Value Fund. As of December 31, 2012, the composite was comprised of [7] accounts with assets of $[ ] million. The investment objective, policies and strategies of the
ASTON/River Road Independent Value Fund are substantially similar to those of the accounts comprising the composite, notwithstanding changes in the market capitalization range of the strategy over time. Prior to 2009, the market capitalization range
for the independent value strategy was $100 million to $2 billion. Due to market volatility causing changes in the benchmark index of the composite, the current market capitalization range of the strategy is from $100 million to $5 billion. The
performance of the composite does not represent the historical performance of the ASTON/River Road Independent Value Fund and should not be considered indicative of future performance of the Fund.
Performance for periods prior to September 1, 2010 represent the performance that occurred while the portfolio manager was at a
prior firm and not the historical results of River Road, and included the fully discretionary small-cap equity accounts that were managed by the firm and reported in accordance with GIPS
®
. There is no assurance that similar results will be achieved at River Road. Results may differ because of, among other factors, differences in brokerage commissions,
account expenses including management fees, the size of positions taken in relation to account size, diversification of the portfolio, timing of purchases and sales and availability of cash for new investment. The Fund has been advised that, as the
lead portfolio manager of the strategy at his prior firm, Mr. Cinnamond had full discretionary authority over the selection of investments for accounts comprising the composite and no other person played a significant role in the investment
decision-making process.
An independent third party, whose primary function is the verification of performance data for
compliance to GIPS
®
standards, conducted a review of this track record for compliance with the portability
requirements of the GIPS
®
standards for River Road. The prior firm has a written agreement with River Road allowing
its use of the performance history and supporting records.
The performance of the accounts presented below is not calculated
using the same methodology as that which is prescribed for performance calculations used by registered investment companies. The net-of-fee returns below are calculated by deducting investment management fees of the accounts from gross returns.
Gross returns are calculated in accordance with GIPS
®
. In addition, the accounts for which performance is presented
are not subject to the same type of expenses as the Fund. If the Funds fees and expenses had been used in calculating the composites performance, the performance of the composite would have been lower.
In addition, the accounts comprising the composite are not subject to certain investment limitations, diversification requirements and other restrictions
imposed by the 1940 Act and the Code, which if applicable, may have adversely affected the performance results of the composite. The results for different products may vary.
Total Return
|
|
|
|
|
|
|
|
|
Year end
|
|
River Road
Independent
Value
Composite
|
|
|
Russell
2000
Value
|
|
2012
|
|
|
[
|
]%
|
|
|
[
|
]%
|
2011
|
|
|
8.41
|
%
|
|
|
(5.50
|
)%
|
2010
|
|
|
18.25
|
%
|
|
|
24.50
|
%
|
2009
|
|
|
30.55
|
%
|
|
|
20.58
|
%
|
2008
|
|
|
(7.10
|
)%
|
|
|
(28.92
|
)%
|
2007
|
|
|
7.96
|
%
|
|
|
(9.78
|
)%
|
2006
|
|
|
11.44
|
%
|
|
|
23.48
|
%
|
2005
|
|
|
3.38
|
%
|
|
|
4.71
|
%
|
2004
|
|
|
12.82
|
%
|
|
|
22.25
|
%
|
2003
|
|
|
16.91
|
%
|
|
|
46.03
|
%
|
Average Annual Total Return
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
|
|
Period
|
|
River Road
Independent
Value
Composite
|
|
|
Russell
2000
Value
|
|
One Year
|
|
|
[
|
]%
|
|
|
[
|
]%
|
Five Years
|
|
|
[
|
]%
|
|
|
[
|
]%
|
Ten Years
|
|
|
[
|
]%
|
|
|
[
|
]%
|
Prospectus
|
117
Silvercrest Related Performance
The following
tables show the performance of a composite of all fully discretionary small-cap equity accounts managed by Silvercrest. As of December 31, 2012, the composite was comprised of [98] separately managed accounts with aggregate assets of
$[ ] million. The investment objective, policies and strategies of the ASTON/Silvercrest Small Cap Fund are substantially similar to those of the accounts comprising the composite.
The performance of the composite does not represent the historical performance of the ASTON/Silvercrest Small Cap Fund and should not be considered
indicative of future performance of the Fund. Results may differ because of, among other factors, differences in brokerage commissions, account expenses including management fees, the size of positions taken in relation to account size,
diversification of the portfolio, timing of purchases and sales, and availability of cash for new investment.
The
performance of the separate accounts presented below is not calculated using the same methodology as that which is prescribed for performance calculations used by registered investment companies. The net-of-fee returns below are calculated by
deducting investment management fees of the accounts from gross returns. Gross returns are calculated in accordance with Global Investment Performance Standards (GIPS
®
). In addition, the separate accounts for which performance is presented are not subject to the same type of expenses as the Fund. If the Funds fees and expenses
had been used in calculating the composites performance, the performance of the composite would have been lower.
In addition, the accounts
comprising the composite are not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act, and the Code, which if applicable, may have adversely affected the performance results of the
composite. The results for different products may vary.
Total Return
|
|
|
|
|
|
|
|
|
Year end
|
|
Silvercrest
Small
Cap Equity
Composite
|
|
|
Russell
2000
Value
|
|
2012
|
|
|
[
|
]%
|
|
|
[
|
]%
|
2011
|
|
|
[
|
]%
|
|
|
[
|
]%
|
2010
|
|
|
24.56
|
%
|
|
|
24.50
|
%
|
2009
|
|
|
23.49
|
%
|
|
|
20.58
|
%
|
2008
|
|
|
(15.25
|
)%
|
|
|
(28.92
|
)%
|
2007
|
|
|
3.50
|
%
|
|
|
(9.78
|
)%
|
2006
|
|
|
18.38
|
%
|
|
|
23.48
|
%
|
2005
|
|
|
3.30
|
%
|
|
|
4.71
|
%
|
2004
|
|
|
20.98
|
%
|
|
|
22.25
|
%
|
2003
|
|
|
26.69
|
%
|
|
|
46.03
|
%
|
Average Annual Total Return
(For the periods ended December 31, 2012)
|
|
|
|
|
|
|
Periods
|
|
Silvercrest
Small
Cap Equity
Composite
|
|
Russell
2000 Value
|
|
One Year
|
|
[ ]%
|
|
|
[
|
]%
|
Five Years
|
|
[ ]%
|
|
|
[
|
]%
|
Ten Years
|
|
[ ]%
|
|
|
[
|
]%
|
Prospectus
|
118
Shareholder Information
OPENING AN ACCOUNT
n
|
|
Read this prospectus carefully.
|
n
|
|
Determine how much you want to invest. The minimum initial and subsequent investment requirements for the applicable class of each Aston Fund are as
follows:
|
|
|
|
|
|
|
|
|
|
Class and Account Type
|
|
Minimum Initial Investment
|
|
|
Subsequent Investments
|
|
Class N
Regular Accounts
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Individual Retirement Accounts (IRAs)
|
|
$
|
500
|
|
|
$
|
50
|
|
Education Savings Accounts (ESAs) (except R Class)
|
|
$
|
500
|
|
|
$
|
50
|
|
Uniform Gift to Minor Accounts/Uniform Transfer to Minor Accounts (UGMA/UTMA)
|
|
$
|
500
|
|
|
$
|
50
|
|
Class I
Institutional Accounts (except ASTON/Lake Partners LASSO Alternatives Fund, ASTON/DoubleLine Core Plus Fixed Income Fund and ASTON/River Road Dividend All Cap Value
Fund II)
|
|
$
|
1 Million
|
|
|
$
|
50
|
|
Class I
ASTON/Lake Partners LASSO Alternatives Fund, ASTON/DoubleLine Core Plus Fixed Income Fund and ASTON/River Road Dividend All Cap Value Fund II
|
|
$
|
100,000
|
|
|
$
|
50
|
|
Class R
Retirement Plans
|
|
$
|
2,500
|
|
|
$
|
50
|
|
Class R shares are sold primarily to qualified retirement plans, retirement savings programs and other similar programs
offered primarily through financial intermediaries. Contact your financial representative or plan sponsor.
n
|
|
Minimum initial investment requirements may be waived:
|
|
n
|
|
For trustees of Aston Funds, employees of the Adviser, the Advisers employees spouses, employees of the Subadvisers, the Subadvisers
employees spouses, and affiliates of the Adviser.
|
|
n
|
|
By means of a letter of intent from an investor or financial adviser/consultant expressing intent to purchase shares over a specified period
of time to meet the minimum investment requirement (Class I only).
|
|
n
|
|
For certain omnibus accounts, mutual fund advisory platforms and registered investment advisors, banks, trust companies or similar financial institutions
investing for their own account or for the account of their clients or customers for whom such institution is exercising investment discretion, or otherwise acting on behalf of clients or customers.
|
|
n
|
|
For individual accounts of a financial intermediary that charges an ongoing fee to its customers for its services or offers Fund shares through a no-load
network or platform, and for accounts invested through fee-based advisory accounts, certain wrap programs and similar programs with approved financial intermediaries.
|
|
n
|
|
By Aston Funds in its discretion.
|
n
|
|
Balances within the same Fund may be aggregated to meet the Class I minimum initial investment requirements for the accounts of:
|
|
n
|
|
Clients of a financial adviser/consultant or clients of a financial intermediary that acts in an advisory capacity.
|
|
n
|
|
Immediate family members (i.e., an individuals spouse, parents, children, siblings and in-laws).
|
|
n
|
|
A corporation or other legal entity.
|
n
|
|
For Class N and Class I shareholders, complete the account application and carefully follow the instructions. If you have any questions, please call
800-992-8151. Remember to complete the Purchase, Exchange and Redemption Authorization section of the account application to establish your account privileges, and to avoid any delay and inconvenience of needing to request these in
writing at a later date.
|
n
|
|
For Class R shareholders, complete the account application through your financial representative.
|
n
|
|
Purchase, exchange and redemption requests (each an Investment Request) must be in good order. Investment Requests received in
good order and processed before the New York Stock Exchange (the NYSE) market close, typically 4:00 p.m. Eastern Time (ET), receive that business days closing NAV. Investment Requests received after
that time receive the following business days NAV.
|
n
|
|
An Investment Request received that is not in good order will receive the NAV on the date the Investment Request is received in good
order.
|
An Investment Request is in good order when:
n
|
|
The account number and Fund name are included;
|
n
|
|
The amount of the transaction is specified in dollars or shares;
|
n
|
|
Signatures of all owners appear exactly as they are registered on the account in original form, as photocopies are not acceptable;
|
n
|
|
Any required Medallion Signature Guarantees are included; and
|
n
|
|
Other supporting legal documents (as necessary) are present, including such
Requirements for Written Requests
as described later in
this
Shareholder Information
Section.
|
Prospectus
|
119
Effective on the respective dates shown (each, a Soft Close Effective Date), each of the following Funds (each, a Closed Fund),
ASTON/TAMRO Small Cap Fund (October 16, 2009) and ASTON/River Road Dividend All Cap Value Fund (December 16, 2011), are closed to new investors until further notice, with the following limited exceptions, where the exception processing is
operationally feasible:
|
n
|
|
Financial advisors and/or financial consultants who have clients invested in ASTON/TAMRO Small Cap Fund may open new accounts for current or new clients
and add to such accounts, provided that the Fund determines that such investments will not harm its investment process.
|
|
n
|
|
Financial advisors and/or financial consultants who have clients invested in ASTON/River Road Dividend All Cap Value Fund may add to the accounts of such
clients. Financial advisors and/or financial consultants who have clients invested in ASTON/River Road Dividend All Cap Value Fund may only open new accounts if the opening of such accounts is approved by the Fund, and where the Fund determines that
such investments will not harm its investment process;
|
|
n
|
|
Financial advisors who have approved the inclusion of ASTON/River Road Dividend All Cap Value Fund as an investment option for their clients, and such
inclusion has been approved by the Fund, may designate the Fund as an investment option for their clients;
|
|
n
|
|
Participants in a retirement plan that includes a Closed Fund as an investment option on the Funds Soft Close Effective Date may continue to
designate the particular Closed Fund as an investment option;
|
|
n
|
|
Trustees of Aston Funds, employees of Aston and the respective Subadviser of a Closed Fund and their immediate household family members may open new
accounts in the particular Closed Fund and add to such accounts;
|
|
n
|
|
Each Closed Fund reserves the right to make additional exceptions to limit the above exceptions or otherwise to modify its respective closure policy at
any time and to reject any investment for any reason.
|
Make your initial investment using the table below as a guideline. If
your Investment Request is your initial purchase into the Funds, your account number will be assigned to you upon the Funds receipt of the Investment Request in good order.
|
|
|
TO OPEN AN ACCOUNT
(Class N and Class I shares only*)
|
|
TO ADD TO AN ACCOUNT ($50 MINIMUM)
(All share Classes)
|
Buying Shares Through Your Financial Representative
|
n
Your financial representative is responsible for transmitting the order
promptly.
|
|
n
Your financial representative is responsible for transmitting the order
promptly.
|
Buying Shares By Mail:
Aston Funds
P.O. Box 9765
Providence, RI 02940
Buying Shares Via
Overnight Delivery:
Aston Funds
4400 Computer Drive
Westborough, MA
01581
|
n
Complete and sign your application.
n
We accept checks, bank drafts and money orders for purchases. Checks must be
drawn on U.S. banks. There is a charge of a minimum of $20 for returned checks. Please see Other Features later in this Shareholder Information Section.
n
Make checks payable to Aston Funds and mail them to the address listed
above.
n
We do not accept cash, travelers checks, temporary checks, post-dated checks,
credit card courtesy checks or second/third party checks (which are checks made payable to someone other than the Funds, including you).
n
If you anticipate the need to make subsequent trades via telephone or via bank transfer (wire transfer or ACH transfer), please indicate that in the Purchase, Exchange and Redemption
Authorizations section of your account application.
n
If you have indicated on your
account application that you intend to make trades in your account via ACH bank transfer, please verify that your bank or credit union is a member of the ACH (Automated Clearing House).
|
|
n
Return the investment slip from a statement with your check in the envelope
provided and mail to us at the above address.
n
We accept checks, bank drafts,
money orders, wires and ACH for purchases. Checks must be drawn on U.S. banks. There is a charge of a minimum of $20 for returned checks. Please see Other Features later in this
Shareholder Information
Section.
n
Make checks payable to Aston Funds and mail them to the address listed
above.
n
We do not accept cash, travelers checks, temporary checks, post-dated checks,
credit card courtesy checks or second/third party checks (which are checks made payable to someone other than the Funds, including you) .
n
For purchases via bank wire transfer or ACH transfer, give the following wire/ACH information to your bank:
The Bank of New York Mellon
ABA #011001234
For: Aston Funds
A/C 0000733296
FBO Aston Fund Number
Your Account Number
Your Name
Taxpayer Identification Number or Social Security Number
n
For your protection, our current Internet capabilities allow Class N and Class I
shareholders to check balances and transfer monies only between Aston Funds in the same class. Please contact us via mail with a signed letter of instruction for all other changes to your
account.
|
Prospectus
|
120
|
|
|
TO OPEN AN ACCOUNT
(Class N and Class I shares only*)
|
|
TO ADD TO AN ACCOUNT ($50 MINIMUM)
(All share Classes)
|
Buying Shares By Phone: 800-992-8151
|
n
You cannot open an account over the phone.
|
|
n
When you are ready to add your account, call Aston Funds and tell the
representative the Fund name, account number, the name(s) in which the account is registered and the amount of your investment.
n
To place your request with an Investor Services Associate, call between 9:00 a.m. and 7:00 p.m. ET, Monday - Friday.
n
Trade authorizations via telephone or via bank must be valid and on file, as
indicated on the Purchase, Exchange and Redemption Authorizations section of your account application.
n
For purchase via bank wire or ACH transfer, instruct your bank to wire or ACH transfer the amount of your investment and provide your bank with the below information. Your bank may charge
a fee for wire or ACH transfers.
The Bank of New York
Mellon
ABA #011001234
For: Aston Funds
A/C 0000733296
FBO Aston Fund Number
Your Account Number
Your Name
Taxpayer Identification Number or Social Security Number
|
Buying Shares By Internet: www.astonfunds.com
|
(Class N shares only*)
n
To open a new account youll need to provide bank account information plus
the social security number and date of birth for each account owner and beneficiary.
n
Open an account online by completing the Aston Funds online account application.
or
(Class N and Class I shares only*)
n
Download the appropriate account
application(s) from the website. Complete and sign the application(s). Make your check payable to Aston Funds and mail it to the address under By Mail above.
|
|
n
Complete the Purchase, Exchange and Redemption Authorization section
of your account application.
n
Self-register for online account access at www.astonfunds.com. Your social
security number or employer identification number, account number and other security validating information will be required for registration.
n
When you are ready to add to your account, access your account through Aston Funds website and enter your purchase instructions in the secure area for shareholders only called
Account Access. ACH purchases on the Internet may take 3 or 4 business days.
n
For your protection, our current Internet capabilities allow Class N and Class I shareholders to check balances and transfer monies only between Aston Funds in the same class. Please
contact us via mail with a signed letter of instruction for all other changes to your account.
|
*
|
Class R shares are sold primarily to qualified retirement plans, retirement savings programs and similar programs offered primarily through financial intermediaries. To
open an account for Class R shares of an applicable Aston Fund, please contact your financial representative or plan sponsor. Class I shares are not eligible for the establishment of new accounts through the Funds website.
|
The Funds or their agents will not be responsible for any unauthorized telephone or online order when reasonable procedures
designed to verify the identity of the investor are followed.
Other Aston Funds and share classes may be available through separate
prospectuses. Please call 800-992-8151 for more information.
EXCHANGING SHARES
When you exchange your shares, you authorize the sale of your shares in one fund to purchase shares of another fund. In other words, you are requesting a
sale and then a purchase. The exchange of your shares may be a taxable event for federal income tax purposes if the shares are not held in a tax-deferred account and may subject you to a redemption fee. After you have opened an account with us, you
can exchange your shares within Aston Funds to meet your changing investment goals or other needs. This privilege is not designed for frequent trading (which may subject you to a redemption fee) and may be difficult to implement in times of drastic
market changes.
You can exchange shares from one Aston Fund to another within the same class of shares. All exchanges to open new accounts must
meet the minimum initial investment requirements. Exchanges may be made by mail, through the Internet or by phone at 800-992-8151 if you chose this option when you opened your account.
Prospectus
|
121
In addition, the Aston Money Market FundBedford Shares of the Money Market Portfolio of The RBB Fund, Inc. offered in connection with the Aston Funds
(the Aston Money Market Fund) is available as an exchange option for shareholders of the Aston Funds Class N shares. The Aston Money Market Fund prospectus, including applicable investment minimums, is available by contacting Aston Funds
by mail, through the internet or by phone at 800-992-8151. Please read the Aston Money Market Fund prospectus carefully before investing.
For federal income tax purposes, each exchange into a different fund is treated as a sale and a new purchase. As a result, an investor holding shares in a
non-tax-deferred account is generally subject to federal income tax on any appreciation on the shares exchanged.
Aston Funds reserves the right
to limit, impose charges upon, terminate or otherwise modify the exchange privilege by sending written notice to shareholders. All exchange requests must be in good order.
Aston may allow eligible shareholders to convert their shares between classes within the same Fund, for example from Class I to Class N or vice versa, if offered in the shareholders state of residence.
No sales charges or other charges will apply to any such exchange. For federal income tax purposes, a same-fund exchange is not expected to result in the recognition by the investor of a capital gain or loss.
SELLING/REDEEMING SHARES
Once you have opened an account with us, you can sell your shares to meet your changing investment goals or other needs. You may redeem Class R shares through your financial representative or directly from
Aston Funds. All redemption requests must be in good order.
The following table shows guidelines for selling shares.
|
|
|
APPLIES TO:
|
|
TO SELL SOME OR ALL OF YOUR SHARES:
|
Selling Through Your Financial Representative
|
n
All share classes and accounts of any type.
|
|
n
Your financial representative is responsible for transmitting the order
promptly.
|
Selling Shares By Mail:
Aston Funds
P.O. Box 9765
Providence, RI 02940
Selling Shares Via
Overnight Delivery:
Aston Funds
4400 Computer Drive
Westborough, MA
01581
|
n
All share classes and accounts of any type.
n
Sales or redemptions of any size (for redemptions over $50,000, please see
What is a Medallion Signature Guarantee? later in this Shareholder Information Section).
|
|
n
Write and sign a letter of instruction indicating the Fund name, Fund number,
your account number, the name(s) in which the account is registered and the dollar value or number of shares you wish to sell.
n
Include all signatures and any additional documents that may be required. Signatures must be in original form, as photocopies are not accepted. Please see
Selling Shares in
Writing
later in this
Shareholder Information
Section.
n
Mail to us at the address
above.
n
A check will be mailed to the name(s) and address in which the account is
registered. If you would like the check mailed to a different address, you must write a letter of instruction and have it Medallion Signature Guaranteed.
n
Proceeds may also be sent by wire or ACH (see Other Features later in this
Shareholder Information
Section).
|
Selling Shares By Phone: 800-992-8151
|
n
Class N, Class I and non-retirement accounts.
n
Sales of up to $50,000 (for accounts with telephone account
privileges).
|
|
n
For automated service 24 hours a day using your touch-tone phone, call
800-992-8151.
n
To place your request with an Investor Services Associate, call between
9:00 a.m. and 7:00 p.m. ET, Monday - Friday.
n
A check will be mailed to the
name(s) and address in which the account is registered. If you would like the check to be mailed to a different address, you must write a letter of instruction and have it Medallion Signature Guaranteed.
n
Proceeds may also be sent by wire or ACH. Please see Other Features
later in this
Shareholder Information
Section.
n
The Funds reserve the right to
refuse any telephone sales request and may modify the procedures at any time. The Funds make reasonable attempts to verify that telephone instructions are genuine, but you are responsible for any loss that you may incur from telephone
requests.
|
Prospectus
|
122
|
|
|
APPLIES TO:
|
|
TO SELL SOME OR ALL OF YOUR SHARES:
|
Selling Shares By Internet: www.astonfunds.com
|
n
Class N, Class I, and non-retirement accounts.
|
|
n
Complete the Purchase, Exchange and Redemption Authorization section
of your account application.
n
Self-register online for account access at www.astonfunds.com. Your social
security number or employer identification number, account number and other security validating information will be required for registration.
n
When you are ready to redeem a portion of your account, access your account through Aston Funds website and enter your redemption instructions in the secure area for shareholders
only called Account Access. A check for the proceeds will be mailed to you at your address of record.
n
Proceeds may also be sent by wire or ACH. Please see Other Features later in this
Shareholder Information
Section.
|
The Funds or their agents will not be responsible for any unauthorized telephone or online order when reasonable
procedures designed to verify the identity of the investor are followed.
Selling Shares in Writing
In certain circumstances, you must make your request to sell shares in writing. You may need to include a Medallion Signature Guarantee (which protects you
against fraudulent orders) and additional items with your request, as shown in the table below.
We require Medallion Signature Guarantees if:
n
|
|
your address of record has changed within the past 30 days;
|
n
|
|
you are selling more than $50,000 worth of shares (exceptions may apply for the Montag & Caldwell Growth Fund Class I and the Montag &
Caldwell Balanced Fund Class I); or
|
n
|
|
you are requesting payment other than by a check mailed to the address of record and payable to the registered owner(s) or other than by wire or ACH sent
to the bank account of the registered owner(s).
|
What is a Medallion Signature Guarantee?
A Medallion Signature Guarantee verifies the authenticity of your signature and may be obtained from a domestic bank or trust company, broker, dealer,
clearing agency, savings association or other financial institution that participates in a Medallion Program recognized by the Securities Transfer Association.
Medallion Signature Guarantees help ensure that major transactions or changes to your account are in fact authorized by you. For example, we require a Medallion Signature Guarantee on written redemption
requests for more than $50,000. The three recognized Medallion Programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (NYSE MSP).
Signature guarantees from financial institutions that do not participate in one of these programs will not be accepted.
Prospectus
|
123
A notary public stamp or seal cannot be substituted for a Medallion Signature Guarantee.
|
|
|
Seller
|
|
Requirements for Written Requests
|
Owners of individual, joint, sole proprietorship, UGMA/UTMA, or general partner
accounts
|
|
n
Letter of instruction
n
On the letter, the signatures and titles of all persons authorized to sign for the account, exactly as the account is registered, must be in original form, as photocopies are not
accepted
n
Medallion Signature Guarantee,
if applicable (see above)
|
Owners of corporate or association accounts
|
|
n
Letter of instruction
n
On the letter, the signatures and titles of all persons authorized to sign for the account, exactly as the account is registered, must be in original form, as photocopies are not
accepted
n
Medallion Signature Guarantee,
if applicable (see above)
|
Owners or trustees of trust accounts
|
|
n
Letter of instruction
n
On the letter, the signature of the trustee(s) must be in original form, as photocopies are not accepted
n
If the names of all trustees are not registered on the account, a copy of the trust document certified within the past 12 months
n
Medallion Signature Guarantee,
if applicable (see above)
|
Joint tenancy shareholders whose co-tenants are deceased
|
|
n
Letter of instruction signed by the surviving tenant must be in original form, as
photocopies are not accepted
n
Certified copy of death certificate
n
Medallion Signature
Guarantee,
if applicable (see above)
|
Executors of shareholder estates
|
|
n
Letter of instruction signed by executor must be in original form, as photocopies
are not accepted
n
Certified copy of order appointing executor
n
Medallion Signature Guarantee,
if applicable (see
above)
|
Administrators, conservators, guardians and other sellers or account types not listed
above
|
|
n
Call 800-992-8151 for instructions
n
Medallion Signature Guarantee,
if applicable (see above)
|
IRA accounts
|
|
n
IRA distribution request form completed and signed. Call 800-992-8151 for a form,
or download a form from our website, www.astonfunds.com.
|
In addition to the situations described above, Aston Funds may require Medallion Signature Guarantees in other circumstances
based on the amount of the redemption request or other factors.
OTHER FEATURES
The following other features are also available to buy and sell shares of the Funds.
Wire.
To purchase and sell shares via the Federal Reserve Wire System:
n
|
|
You must authorize Aston Funds to honor wire instructions before using this feature. Complete the appropriate section on the application when opening your
account or call 800-992-8151 to add the feature after your account is opened. Call 800-992-8151 before your first use to verify that this feature is set up on your account.
|
n
|
|
To sell shares by wire, you must designate the U.S. commercial bank account(s) into which you wish the redemption proceeds deposited.
|
For accounts with existing wire instructions, wire redemptions may be placed over the phone. Consult your banking institution
for any fees it may charge associated with wire transfers. Any changes made to existing wire instructions will only be accepted with a Medallion Signature Guaranteed letter of instruction.
Automated Clearing House (ACH).
To transfer money between your bank account and your Aston Funds account(s):
n
|
|
You must authorize Aston Funds to honor ACH instructions before using this feature. Complete the appropriate section on the application when opening your
account or call 800-992-8151 to add the feature after your account is opened. Call 800-992-8151 before your first use to verify that this feature is set up on your account.
|
n
|
|
Most transfers are completed within three business days of your call. ACH purchases will receive the NAV calculated on the day the money is received.
|
n
|
|
There is no fee to your mutual fund account for this transaction.
|
Redemptions in Kind
The Funds have elected, under Rule 18f-1 under the 1940 Act, to pay
sales proceeds in cash up to $250,000 or 1% of each Funds total value, whichever is less, during any 90-day period to any one shareholder.
Prospectus
|
124
Larger redemptions may be detrimental to existing shareholders. While we intend to pay all sales proceeds in cash, we reserve the right to make higher
payments to you in the form of certain marketable securities of a Fund. This is called redemption in kind. You may need to pay certain sales charges related to a redemption in kind, such as brokerage commissions, when you sell the
securities. For shares that are not held in a tax-deferred account, redemptions in kind are taxable events for federal income tax purposes in the same manner as when the sales proceeds are paid in cash.
Involuntary Redemptions
To reduce expenses,
we may convert your fund position(s), redeem your fund position(s) and/or close your fund position(s) if the balance in your fund position(s) falls below the required investment minimum due to transaction activity or for any other reason. We may
convert your fund position(s) in Class I shares of a Fund to the respective Class N shares of that Fund, if applicable. Unless you did not meet the minimum initial investment, we will give you 30 days notice before we convert, redeem, or
close your fund position(s). This gives you an opportunity to purchase enough shares to raise the value of your fund position(s) above the applicable minimum initial investment. We will not redeem or close Fund position(s) in IRAs, Education Savings
Accounts, custodial accounts for minors, or active Automatic Investment Plans because they do not meet the applicable minimum investment requirement. We may close Fund position(s) in IRAs, Education Savings Accounts, custodial accounts for minors,
or active Automatic Investment Plans due to insufficient information as it relates to customer identification procedures. If these account types are invested in Class I shares below the required minimum investment, we may convert the Fund
position(s) to the Class N. Additionally, we will not convert Class I accounts where there is an effective letter of intent. Redemption fees will not be assessed on involuntary redemptions or involuntary conversions.
TRANSACTION POLICIES
Calculating Share Price
When you buy,
exchange, or sell shares, the NAV next determined is used to price your purchase or sale. The NAV for each share class of a Fund is determined each business day at the close of regular trading on the NYSE (typically 4:00 p.m. ET) by
dividing the net assets of the class by the number of shares outstanding. Currently, the Funds observe the following holidays: New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Generally, securities are priced using market quotes or, for debt securities, evaluated prices obtained from independent pricing services. If market quotations are not available or are deemed
unreliable, securities are valued at fair value as determined by the Adviser in accordance with guidelines adopted and periodically reviewed by the Board of Trustees. These circumstances may arise, for instance, when trading in a security is
suspended, the exchange or market on which a security is traded closes early, or the trading volume in a security is limited, calling into question the reliability of market quotations. In such a case, a Funds value for a security may be
different from the last quoted market price. Fair value pricing for certain types of securities in which a Fund may invest, including prices received from pricing services, is inherently a process of estimates and judgments. Changes in the value of
portfolio investments priced at fair value may be less frequent and of greater magnitude than changes in the price of securities that trade frequently in the market place, resulting in potentially greater net asset value volatility. In addition, due
to the subjective and variable nature of fair value pricing, it is possible that the fair value determined for a particular security may be materially different from the value realized upon such securitys sale. Since 2008, certain segments of
the mortgage-backed securities market, in particular, have been volatile and difficult to value.
Quotations of foreign securities denominated in
foreign currency are converted to U.S. dollar equivalents using foreign exchange quotations received from independent dealers. Events affecting the values of portfolio securities that occur between the time when their prices are determined and
the close of regular trading on the NYSE may not be reflected in the calculation of NAV. If events materially affecting the value of such securities occur during such period, then these securities may be valued at fair value as determined by the
Adviser in accordance with guidelines adopted by the Board of Trustees.
Certain Funds may invest in certain securities which are primarily listed
on foreign exchanges that trade on weekends and other days when a Fund does not price its shares. Therefore, the value of a Funds holdings may change on days when you will not be able to purchase or redeem its shares.
In addition, changes in values in the U.S. markets subsequent to the close of a foreign market may affect the values of securities traded in the foreign
market. Under a Funds fair value pricing policies, the values of foreign securities may be adjusted from their last closing prices if such movements in the U.S. market exceed a specified threshold. As a result of the foregoing, it is
possible that fair value prices will be used by a Fund to a significant extent. The Funds have retained an independent statistical fair value pricing service to assist in the fair valuation of securities principally traded in a foreign market in
order to adjust for possible changes in value that may occur between the close of the foreign exchange and the time as of which Fund shares are priced.
Execution of Requests
Each Fund is open on each business day that the NYSE is open for trading.
The NYSE is not open on weekends or national holidays. Investment requests are executed at the NAV next calculated after Aston Funds or an authorized broker or designee receives your mail, telephone or Internet request in good order.
Purchase orders and redemption requests for each Fund must be received by the close of regular trading on the NYSE (typically 4:00 p.m. ET) for same day processing. On days when the Federal Reserve Cash Settlement System closes earlier than
normal, these times may be accelerated. Sales proceeds are normally sent the next business day, but are always sent within seven days of receipt of a request in good order. Brokers and their authorized designees are responsible for
forwarding purchase orders and redemption requests to the Funds.
Shares of Aston Funds can also be purchased through broker-dealers, banks and
trust departments that may charge you a transaction or other fee for their services. These fees are not charged if you purchase shares directly from Aston Funds.
A Fund may be required to freeze or redeem your account if there appears to be suspicious activity or if account information matches information on a government list of known terrorists or other
suspicious persons.
Prospectus
|
125
Aston Funds reserves the right to:
n
|
|
Refuse any purchase or exchange of shares if it could adversely affect a Fund or its operations;
|
n
|
|
Suspend the offering of Fund shares;
|
n
|
|
Change the initial and additional investment minimums or waive these minimums for any investor;
|
n
|
|
Delay sending you your sales proceeds for up to 15 days if you purchased shares by check. A charge of a minimum of $20 will be assessed if any check
used to purchase shares is returned; and
|
n
|
|
Change, withdraw or waive various services, fees and account policies.
|
Customer Identification Program
Federal law requires Aston Funds to obtain, verify and record
identifying information for each investor who opens or reopens an account with Aston Funds. An investor may be an individual or a person other than an individual (such as a corporation, partnership or trust). Such identifying information may include
the name, residential or business street address, principal place of business, local office or other physical location (for a person other than an individual), date of birth (for an individual), social security or taxpayer identification number or
other identifying information. Applications without the required information, or without any indication that a social security or taxpayer identification number has been applied for, may not be accepted. After acceptance, to the extent permitted by
applicable law and its customer identification program, Aston Funds reserves the right (a) to place limits on transactions in any account until the identity of the investor is verified; or (b) to refuse an investment in Aston Funds or to
involuntarily redeem an investors shares at the current share price and close an account in the event that an investors identity is not verified within 90 days, regardless of the type of account. This may cause shares in the
investors account to be redeemed at a loss. You may be subject to taxes if Aston Funds liquidates your account due to insufficient information as it relates to customer identification procedures. Aston Funds and its agents will not be
responsible for any loss or adverse tax effect in an investors account resulting from the investors delay in providing all required identifying information or from closing an account and redeeming an investors shares when an
investors identity cannot be verified.
Short-Term and Excessive Trading
The Funds are designed for long-term investors. Each Fund discourages and does not knowingly accommodate short-term and excessive trading. Such trading increases brokerage and administrative costs, may
result in increased taxable gains to remaining shareholders, and may disrupt portfolio management. For example, the Funds may be unable to effectively invest the proceeds from certain purchase or exchange requests under certain market conditions or
may incur losses on the sale of investments. These risks may be more pronounced for Funds investing in securities that are more difficult to value or that are susceptible to pricing arbitrage (e.g., foreign securities, high yield securities and
small-cap securities). Thus, such trading may negatively impact a Funds NAV and result in dilution to long-term shareholders.
In an effort
to protect long-term shareholders, the Funds Board of Trustees has adopted policies and procedures that seek to deter short-term trading and excessive trading and to detect such trading activity at levels that may be detrimental to the Funds.
These policies and procedures include the following:
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Certain Funds have adopted a redemption fee of 2.00% for shares that are held less than 90 calendar days;
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The Funds have adopted certain fair valuation practices intended to protect the Funds from time zone arbitrage with respect to foreign securities and
other trading practices that seek to exploit stale prices; and the Funds reserve the right to:
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Reject any purchase, including exchange purchases, which could adversely affect the Funds or their operations.
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Limit, terminate or otherwise modify the exchange privilege of any shareholder deemed to be engaged in activities that may be detrimental to the Funds.
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Reject any purchase, including exchange purchases, from investors if there appears to be evidence of short-term or excessive trading.
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Permanently prevent future purchases and exchanges from occurring in accounts where short-term or excessive trading is apparent.
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Delay sending redemption proceeds for up to seven days (generally applies in cases of very large redemptions, excessive trading, or during unusual market
conditions).
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Suspend redemptions as permitted by law (e.g., in emergency situations).
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In making the determination to exercise these rights, the Funds may consider an investors trading history in the Funds and accounts under common ownership or control.
The Funds seek to employ reasonable measures to detect short-term and excessive trading at levels that may be detrimental to the Funds. Accordingly, the
Funds use certain materiality and volume thresholds in applying the policies and procedures, but otherwise seek to apply the policies and procedures uniformly to all shareholders. With respect to accounts held through intermediaries, such
intermediaries generally are contractually obligated to provide the Funds with certain shareholder trading information. However, the Funds cannot directly control activity through all channels and are dependent on intermediaries to enforce the
Funds policies and procedures. In certain cases, intermediaries may be unable to implement these policies or may not be able to implement policies and procedures in the same manner as the Funds due to system or other constraints. Shareholders
who invest through omnibus accounts may be subject to policies and procedures that differ from those applied by the Funds to direct shareholders. The Funds reserve the right to limit an intermediarys future access to the Funds, up to and
including terminating the selling agreement with the intermediary. There is no assurance that the Funds policies and procedures will be effective in limiting and deterring short-term and excessive trading in all circumstances.
Redemption Fees
The following Funds
assess a 2.00% fee on redemptions (including exchanges) of Fund shares sold or exchanged within 90 calendar days of purchase: ASTON/Barings International Fund and ASTON/Harrison Street Real Estate Fund.
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126
Redemption fees are paid to the respective Fund to help offset transaction costs and to protect the Funds long-term shareholders. Each Fund will use
the first-in, first-out (FIFO) method to determine the holding period. Under this method, the date of the redemption or exchange will be compared to the earliest purchase date of shares held in the account. If this holding period is
less than the required holding period, the fee will be charged.
The Funds will notify intermediaries, such as broker-dealers or plan
administrators, of the Funds policies and procedures and request the intermediaries to track and remit redemption fees to the Fund. However, due to limitations with system capabilities, certain broker-dealers, banks, plan administrators and
other intermediaries may not be able to track and collect redemption fees at this time, or their method for tracking and calculating redemption fees may differ from those of the Funds. There is no assurance that the Funds redemption fee
policies and procedures will be effective in limiting or deterring short-term and excessive trading in all circumstances. Redemption fees may not be assessed in certain circumstances, including the following: shares purchased through reinvested
distributions; certain distributions required by law or due to shareholder hardship; redemptions through a Systematic Withdrawal Plan; redemption of shares through an Automatic Investment Plan; accounts held through intermediaries that are unable to
assess redemption fees and do not report sufficient information to the Funds to impose a redemption fee (as discussed above); and circumstances where the Funds administrator believes it to be in the best interest of the Funds and in accordance
with the Funds policies and procedures to waive the redemption fee on behalf of the Funds.
ACCOUNT POLICIES
AND DIVIDENDS
Account Statements
In general, you will receive quarterly account statements. In addition, you will also receive account statements:
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After every transaction that affects your account balance (except for dividend reinvestments, Automatic Investment Plans or Systematic Withdrawal Plans);
and
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After any change of name or address of the registered owner(s).
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You will also receive an annual statement that describes the federal income tax characteristics of any dividends and distributions your Fund has paid to shareholders during the year.
Aston Funds may charge a fee for certain services, such as providing historical account documents.
Mailings to Shareholders
To help reduce Fund expenses and environmental waste, Aston Funds
combines mailings for multiple accounts going to a single household by delivering Fund reports (annual and semi-annual reports, prospectuses, etc.) in a single envelope. If you do not want us to continue consolidating your Fund mailings and would
prefer to receive separate mailings with multiple copies of Fund reports, please call one of our Investor Services Associates at 800-992-8151.
Distributions
The Funds distribute income
dividends and net capital gains. Income dividends represent the earnings from a Funds investments less its expenses; capital gains generally occur when a Fund sells a portfolio security for more than the original purchase price.
Dividends
The following table shows the
Funds dividend and distribution schedules.
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Distribution Schedule
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Dividends, if any
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Capital Gains Distributions, if any
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ASTON/DoubleLine Core Plus Fixed Income Fund, ASTON/TCH Fixed Income Fund,
ASTON/River Road Dividend All Cap Value Fund and ASTON/River Road Dividend All Cap Value Fund II
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Declared and paid monthly
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Distributed at least once a year, generally in December
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ASTON/Anchor Capital Enhanced Equity Fund and ASTON/Montag & Caldwell
Balanced Fund
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Declared and paid quarterly
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Distributed at least once a year, generally in December
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All Other Funds
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Declared and paid annually
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Distributed at least once a year, generally in December
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Dividend Reinvestments
Investors may have their dividends and distributions reinvested in additional shares of the same Fund. If you choose this option, or if you do not indicate a choice, your dividends and distributions will be
automatically reinvested on the dividend payable date. You can also choose to have a check for your dividends and distributions mailed to you by choosing this option on your account application.
Uncashed Checks
Checks should be cashed upon
receipt, as interest will not be paid on uncashed checks. State escheat laws generally require Aston Funds to remit uncashed checks to the appropriate state after a specific period of time, which varies by state.
Prospectus
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127
ADDITIONAL INVESTOR SERVICES
Automatic Investment Plan (Class N Shares only)
The Automatic Investment Plan (AIP)
allows you to set up a scheduled transfer of funds from your bank account to the Fund(s) of your choice. You determine the AIP investment amount (the minimum AIP investment amount is $50) and you can terminate the program at any time. The minimum
initial investment for accounts containing an AIP instruction is the same as all other accounts. To take advantage of this feature, complete the appropriate sections of the account application.
Aston Funds Website
Aston Funds maintains
a website located at www.astonfunds.com. You can purchase, exchange and redeem shares and access information such as your account balance and the Funds NAVs through our website. Self-register for online account access at www.astonfunds.com.
Your social security number or employee identification number, account number and other security validity information will be required for registration. You may also need to have bank account information, wire instructions, ACH instructions or other
options established on your account.
Aston Funds has procedures in place to try to prevent unauthorized access to your account information.
The Funds and their agents will not be responsible for any losses resulting from unauthorized transactions on our website.
Systematic
Withdrawal Plan (Class N Shares only)
This plan may be used for periodic withdrawals (at least $50 by check or ACH) from your account. To
take advantage of this feature you must:
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Have at least $50,000 in your account;
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Determine the schedule: monthly, quarterly, semi-annually or annually; and
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Call 800-992-8151 to add a Systematic Withdrawal Plan to your account.
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Retirement Plans and Education Savings Accounts (Class N and Class R Shares, as applicable)
Aston Funds offer a range of retirement plans, including Traditional, Roth, SIMPLE IRAs and SEP IRAs for Class N and Class R shareholders. Aston Funds also
offers Education Savings Accounts for Class N shareholders, which allow you to save for qualified elementary, secondary and higher education costs. Using these plans, you can invest in any Fund with a low minimum investment of $500. The annual
maintenance fee for IRAs and Education Savings Accounts is $15 per account (not to exceed $30 per shareholder), but it is waived if you have $35,000 or more in assets. The fee is assessed every December for the current calendar year. To find
out more, call Aston Funds at 800-992-8151.
DISTRIBUTION AND SERVICES PLAN 12b-1 FEES
To pay for the cost of promoting the Funds and servicing your shareholder account, the Funds have adopted a 12b-1 plan for Class N and Class R shares. Under
this plan, a Fund pays a fee at an annual rate of not more than 0.25% of each Funds Class N shares average daily net assets and 0.50% of Class R shares average daily net assets to the distributor for certain expenses associated
with the distribution of Fund shares and administrative services provided to Fund shareholders. The fee is accrued daily and payable monthly. Over time, these fees may increase the cost of your investment and may cost more than paying other types of
sales charges.
COMPENSATION TO INTERMEDIARIES
In addition to payments under a Rule 12b-1 plan, the Funds may bear costs associated with compensating intermediaries that perform sub-transfer agency, sub-accounting and other administrative services for
Fund shareholder accounts. Aston may also compensate intermediaries that distribute and/or service investors in the Funds out of its own assets and not as an additional charge to the Funds. Additional payments to intermediaries may represent a
premium over payments made by other fund families, and may create an added incentive for investment professionals to sell or recommend the Funds over other funds offered by competing fund families. The additional payments may differ for each fund
within the Aston family of funds, including within the same intermediary, and across intermediaries, or within the same Fund at the same intermediary.
In addition, representatives of the distributor may be compensated through Adviser incentive programs in a manner that favors one Aston Fund or group of Funds over another Aston Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Subadvisers attempt to obtain the best possible price and most favorable execution of transactions in their portfolio securities. There may be times when a Subadviser may pay one broker-dealer a
commission that is greater than the amount that another broker-dealer may charge for the same transaction. The Subadvisers generally determine in good faith if the commission paid was reasonable in relation to the brokerage or research services
provided by the broker-dealer. In selecting and monitoring broker-dealers and negotiating commissions, the Subadvisers consider, among other factors, a broker-dealers reliability, availability of research, the quality of its execution services
and its financial condition.
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128
Dividends, Distributions and Taxes
Dividends and Distributions
The Funds pay dividends and distribute capital gains at different
intervals. All dividends and distributions are automatically reinvested at NAV unless you choose to receive them in a cash payment. You can change your payment options at any time by writing to us.
Taxes
Certain tax considerations may apply to
your investment in an Aston Fund. The following is a general description of certain federal income tax considerations. Further information regarding the federal income tax consequences of investing in the Funds is included in the SAI. If you have
any tax-related questions relating to your investment in an Aston Fund, please consult your tax adviser.
For federal income tax purposes:
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Dividends and distributions on Class R shares will generally not be subject to current federal income taxation provided such shares are held in a
qualified tax-deferred retirement plan. Distributions to you from a qualified tax-deferred retirement plan, however, will generally be subject to federal income tax and possibly federal withholding tax. In addition, backup withholding tax (see
below) may apply to dividends, distributions and redemption proceeds received by a qualified tax-deferred retirement plan unless the required certification is provided to Aston Funds. To the extent Fund shares are not held in a qualified
tax-deferred retirement plan, the following federal income tax consequences will generally apply. Please consult with your plan administrator regarding the tax status of your retirement plan.
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The tax treatment of dividends and distributions is the same whether you reinvest the dividends and distributions or elect to receive them in cash. We
will send you a statement with the federal income tax status of your dividends and distributions for the prior year generally by February 15.
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Distributions of any net investment income, other than qualified dividend income, are taxable to you as ordinary income.
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Distributions of qualified dividend income (i.e., generally dividends received by a Fund from domestic corporations and certain foreign corporations)
generally will be taxed to individuals and other non-corporate investors in the Funds at federal income tax rates applicable to long-term capital gains, provided you meet certain holding period and other requirements contained in the Code with
respect to your Fund shares, and the Fund meets similar holding period and other requirements with respect to the dividend paying stock. [Unless extended by future legislation, the favorable treatment of qualified dividend income will expire for
taxable years beginning after December 31, 2012.] Dividends received by a Fund from most REITs and certain foreign corporations are not expected to qualify for treatment as qualified dividend income when distributed by a Fund. Therefore, it is
not expected that a significant amount of the ASTON/Harrison Street Real Estate Funds distributions will be eligible for qualified dividend income treatment.
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If a Fund receives dividends from another investment company that qualifies as a regulated investment company, including an ETF, for federal income tax
purposes and the investment company designates such dividends as qualified dividend income, then the Fund may in turn designate that portion of its distributions derived from those dividends as qualified dividend income, provided the Fund meets
certain holding period and other requirements with respect to the shares of the investment company.
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Distributions of net capital gain (net long-term capital gain less any net short-term capital loss) are taxable as long-term capital gain regardless of
how long you may have held shares of a Fund. In contrast, distributions of net short-term capital gain (net short-term capital gain less any net long-term capital loss) are taxable as ordinary income regardless of how long you may have held shares
of a Fund. Because distributions of net short-term capital gain are taxable as ordinary income, you generally cannot offset net short-term capital gain distributions you receive from a Fund with capital losses.
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A Funds use of a fund-of-funds structure could affect the amount, timing and type of distributions from the Fund and, therefore, may increase the
amount of taxes payable by you. Generally, the character of the dividends and distributions a Fund receives from another investment company will pass through to you, subject to certain exceptions, as long as the Fund and the investment
company each qualify as a regulated investment company under the Code.
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Some of a Funds investments may be subject to special provisions of the Code that may increase the amount of gain recognized by the Fund, defer the
Funds losses, accelerate the Funds recognition of gain, affect the character of such income and affect the amount, timing and type of distributions from the Fund, which may increase the amount of taxes payable by you.
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Distributions declared to the shareholders of record in October, November or December and paid on or before January 31 of the succeeding year will be
treated for federal income tax purposes as if received by shareholders on December 31 of the year in which the distribution was declared.
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When you sell shares or exchange shares for shares of another Fund (other than shares held in a tax-deferred account), it generally is considered a
taxable event for you. Depending on the purchase price and the sale price of the shares you sell or exchange, you may have a gain or a loss on the transaction. The gain or loss will generally be treated as a long-term capital gain or loss if you
held your shares for more than one year. If you held your shares for one year or less, the gain or loss will generally be treated as a short-term capital gain or loss. Short-term capital gains are taxable at ordinary federal income tax rates. [For
taxable years beginning on or before December 31, 2012, long-term capital gains are taxable to individuals and other non-corporate investors at a maximum federal income tax rate of 15%. For taxable years beginning after December 31, 2012,
the maximum long-term capital gains rate will return to 20%, unless Congress enacts legislation providing otherwise.] You are responsible for any tax liabilities generated by your transactions.
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If you do not provide Aston Funds with your complete and correct taxpayer identification number and required certification, or if the Internal Revenue
Service so notifies us, you may be subject to backup withholding tax on dividends, distributions and redemption proceeds.
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Prospectus
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129
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If you purchase shares of a Fund just before a dividend or distribution, you will pay the full price for the shares and receive a portion of the purchase
price back as a taxable distribution. This is referred to as buying a dividend.
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If a Fund qualifies (by having more than 50% of the value of its total assets at the close of the taxable year consist of stock or securities in foreign
corporations or by being a qualified fund of funds) and elects to pass through foreign taxes paid on its investments during the year, such taxes will be reported to you as income. You may, however, be able to claim an offsetting tax credit or
deduction on your federal income tax return, depending on your particular circumstances and provided you meet certain holding period and other requirements. Tax-exempt holders of Fund shares, such as qualified tax-deferred retirement plans, will not
benefit from such a deduction or credit.
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A Funds ability to invest in some investments, including certain ETFs that invest in the commodities market and commodity-linked instruments, may be
significantly limited by the federal income tax rules applicable to regulated investment companies.
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Tax reporting changes effective January 1, 2012 require Aston Funds to report cost basis and holding period information to both the Internal Revenue
Service and shareholders for gross proceeds from the sales of shares of Aston Funds purchased on or after January 1, 2012. This information will be reported on Form 1099-B, beginning with the 2012 tax year. The deadline for mailing Form 1099-B
to shareholders is February 15. Absent shareholder instructions, Aston Funds will calculate and report cost basis information using its default method of average cost. If you hold shares of Aston Funds through a financial intermediary, the
financial intermediary will be responsible for this reporting and the financial intermediarys default cost basis method may apply. Please consult your tax adviser for additional information regarding cost basis reporting and your situation.
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Prospectus
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130
Financial Highlights
These financial highlights tables are intended to help you understand the Funds financial performance. The following schedules present financial
highlights for one outstanding share of each Fund throughout the periods indicated. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from the Funds financial statements as of October 31, 2012. The financial statements for the Funds have been audited by
[ ], whose report along with those Funds financial statements, is included in the Funds annual report, which is available upon request.
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ASTON/Montag & Caldwell
Growth Fund Class N
Filed by amendment
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Prospectus
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131
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ASTON/Montag & Caldwell
Growth Fund Class I
Filed by amendment
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ASTON/Montag & Caldwell
Growth Fund Class R
Filed by amendment ,
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Prospectus
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132
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ASTON/Herndon Large Cap Value Fund
Class N
Filed by amendment ,
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ASTON/Herndon Large Cap Value Fund
Class I
Filed by amendment
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Prospectus
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133
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ASTON/Cornerstone Large Cap Value Fund
Class N
Filed by amendment
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ASTON/Cornerstone Large Cap Value Fund
Class I
Filed by amendment
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Prospectus
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134
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ASTON/TAMRO Diversified Equity Fund
Class N
Filed by amendment
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ASTON/TAMRO Diversified Equity Fund
Class I
Filed by amendment
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Prospectus
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ASTON/River Road Dividend All Cap
Value Fund Class N
Filed by amendment
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ASTON/River Road Dividend All Cap
Value Fund Class I
Filed by amendment
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Prospectus
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ASTON/River Road Dividend All Cap
Value Fund II Class N
Filed by amendment
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ASTON/River Road Dividend All Cap
Value Fund II Class I
Filed by amendment
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Prospectus
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ASTON/Fairpointe Mid Cap Fund
Class N
Filed by amendment
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ASTON/Fairpointe Mid Cap
Fund Class I
Filed by amendment
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Prospectus
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138
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ASTON/Montag & Caldwell Mid
Cap Growth Fund Class N
Filed by amendment
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Prospectus
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139
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ASTON/TAMRO Small Cap Fund
Class N
Filed by amendment
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ASTON/TAMRO Small Cap Fund
Class I
Filed by amendment
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Prospectus
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140
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ASTON/River Road Select Value Fund
Class N
Filed by amendment
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ASTON/River Road Select Value Fund
Class I
Filed by amendment
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Prospectus
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141
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ASTON/River Road Small
Cap Value Fund Class N
Filed by amendment
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ASTON/River Road Small Cap Value Fund
Class I
Filed by amendment
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Prospectus
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142
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ASTON/River Road Independent Value
Fund Class N
Filed by amendment
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ASTON/River Road Independent Value
Fund Class I
Filed by amendment
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Prospectus
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ASTON/LMCG Small Cap Growth Fund
Class N
(formerly, ASTON Small Cap Growth Fund)
Filed by amendment
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ASTON/LMCG Small Cap Growth Fund
Class I
(formerly, ASTON Small Cap Growth Fund)
Filed by amendment
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Prospectus
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144
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ASTON/Veredus Select Growth Fund
Class N
Filed by amendment
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ASTON/Veredus Select Growth Fund
Class I
Filed by amendment
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Prospectus
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145
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ASTON Small Cap Fund
Class N
(formerly, ASTON/Veredus Small Cap Growth Fund)
Filed by amendment
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ASTON Small Cap Fund
Class I
(formerly, ASTON/Veredus Small Cap Growth Fund)
Filed by amendment
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Prospectus
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146
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ASTON/Silvercrest Small Cap
Fund
Class N
Filed by amendment
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ASTON/Silvercrest Small Cap Fund
Class I
Filed by amendment
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Prospectus
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147
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ASTON/DoubleLine Core Plus Fixed
Income Fund Class N
Filed by amendment
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ASTON/DoubleLine Core Plus Fixed
Income Fund Class I
Filed by amendment
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Prospectus
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148
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ASTON/TCH Fixed Income Fund
Class N
Filed by amendment ,
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ASTON/TCH Fixed Income Fund
Class I
Filed by amendment
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Prospectus
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149
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ASTON/Lake Partners LASSO Alternatives
Fund Class N
Filed by amendment
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ASTON/Lake Partners LASSO Alternatives
Fund Class I
Filed by amendment
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Prospectus
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150
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ASTON Dynamic Allocation Fund
Class N
Filed by amendment
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ASTON Dynamic Allocation Fund
Class I
Filed by amendment
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Prospectus
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151
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ASTON/Anchor Capital Enhanced Equity
Fund Class N
(formerly, ASTON/M.D. Sass Enhanced Equity Fund)
Filed by amendment
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ASTON/Anchor Capital Enhanced Equity
Fund Class I
(
formerly, ASTON/M.D. Sass Enhanced Equity Fund)
Filed by amendment
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Prospectus
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152
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ASTON/River Road Long-Short Fund
Class N
Filed by amendment
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Prospectus
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153
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ASTON/Barings International Fund
Class N
Filed by amendment ,
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ASTON/Barings International Fund
Class I
Filed by amendment
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Prospectus
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154
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ASTON/Harrison Street Real Estate Fund
Class N
Filed by amendment
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ASTON/Harrison Street Real Estate Fund
Class I
Filed by amendment
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Prospectus
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155
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ASTON/
Montag &
Caldwell Balanced Fund
Class N
Filed by amendment
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ASTON/Montag & Caldwell Balanced
Fund
Class I
Filed by amendment
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Prospectus
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156
General Information
If you
wish to know more about Aston Funds, you will find additional information in the following documents:
SHAREHOLDER REPORTS
You will receive an unaudited semi-annual report dated April 30 and an annual report dated October 31, which is audited by an independent
registered public accounting firm. The annual report contains a discussion of the market conditions and investment strategies that significantly affected each Funds performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, which is incorporated into this prospectus by reference and dated February 28, 2013, as amended from time to time, is available to you without
charge and can be mailed to you upon request. It contains more detailed information about the Funds.
HOW TO OBTAIN REPORTS
Contacting Aston Funds
You can
get free copies of the reports and SAI, request other information and get answers to your questions about the Funds by contacting:
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Address:
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Aston Funds
P.O.
Box 9765
Providence, RI 02940
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Phone:
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Shareholder Services & Fund Literature
Investment Advisor Services
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800-992-8151
800-597-9704
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Website:
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www.astonfunds.com
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Obtaining Information from the SEC
You can visit the EDGAR Database on the SECs website at http://www.sec.gov to view the SAI and other information. You can also view and copy information about the Funds at the SECs Public
Reference Room in Washington, D.C. To find out more about the Public Reference Room, you can call the SEC at 202 551-8090. Also, you can obtain copies of this information after paying a duplicating fee, by electronic request at the
following E-mail address: publicinfo@sec.gov, or by writing the SECs Public Reference Section, Washington D.C. 20549-1520.
Investment
Company Act File Number: 811-8004
Prospectus
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157
Aston Funds
P.O.
Box 9765
Providence, RI 02940
ATN PRO 12
ASTON FUNDS
STATEMENT OF ADDITIONAL INFORMATION
February 28, 2013
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Ticker Symbols
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EQUITY FUNDS
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Class N
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Class I
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Class R
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ASTON/Montag & Caldwell Growth Fund
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MCGFX
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MCGIX
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MCRGX
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ASTON/Herndon Large Cap Value Fund
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AALIX
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AHRNX
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ASTON/Cornerstone Large Cap Value Fund
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RVALX
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AAVIX
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ASTON/TAMRO Diversified Equity Fund
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ATLVX
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ATDEX
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ASTON/River Road Dividend All Cap Value Fund
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ARDEX
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ARIDX
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ASTON/River Road Dividend All Cap Value Fund II
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ADVTX
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ADIVX
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ASTON/Fairpointe Mid Cap Fund
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CHTTX
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ABMIX
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ASTON/Montag & Caldwell Mid Cap Growth Fund
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AMCMX
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ASTON/TAMRO Small Cap Fund
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ATASX
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ATSIX
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ASTON/River Road Select Value Fund
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ARSMX
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ARIMX
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ASTON/River Road Small Cap Value Fund
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ARSVX
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ARSIX
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ASTON/River Road Independent Value Fund
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ARIVX
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ARVIX
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ASTON/LMCG Small Cap Growth Fund
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ACWDX
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ACWIX
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ASTON/Veredus Select Growth Fund
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AVSGX
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AVISX
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ASTON Small Cap Fund
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VERDX
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AVEIX
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ASTON/Silvercrest Small Cap Fund
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ASCTX
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ACRTX
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FIXED INCOME FUNDS
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ASTON/DoubleLine Core Plus Fixed Income Fund
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ADBLX
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ADLIX
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ASTON/TCH Fixed Income Fund
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CHTBX
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CTBIX
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ALTERNATIVE FUNDS
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ASTON/Lake Partners LASSO Alternatives Fund
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ALSNX
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ALSOX
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ASTON Dynamic Allocation Fund
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ASENX
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ADNAX
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ASTON/Anchor Capital Enhanced Equity Fund
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AMBEX
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AMDSX
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ASTON/River Road Long-Short Fund
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ARLSX
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[ ]
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INTERNATIONAL FUND
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ASTON/Barings International Fund
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ABARX
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ABIIX
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SECTOR FUND
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ASTON/Harrison Street Real Estate Fund
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ARFCX
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AARIX
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BALANCED FUND
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ASTON/Montag & Caldwell Balanced Fund
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MOBAX
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MOBIX
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This Statement of Additional Information dated February 28, 2013 (SAI)
provides supplementary information pertaining to shares representing interests in twenty-five of the [twenty-six] available investment portfolios (each a Fund and collectively, the Funds) of Aston Funds (the
Trust).
This SAI is not a prospectus and should be read only in conjunction with the Funds current
prospectus dated February 28, 2013, as amended or supplemented from time to time (the Prospectus). No investment in any of the Funds should be made without first reading the Prospectus.
The audited financial statements for the fiscal year ended October 31, 2012 for the Funds are incorporated herein by reference to
the Funds Annual Reports as filed with the Securities and Exchange Commission (SEC). This SAI is incorporated by reference to the Prospectus.
You may obtain a prospectus, annual report or semi-annual report, when available, at no charge by contacting the Trust at
Aston Funds, P.O. Box 9765, Providence, RI 02940 or 800-992-8151
or by
downloading such information from
www.astonfunds.com
. The website does not form a part of the Prospectus or SAI.
TABLE OF CONTENTS
i
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS SAI OR IN THE PROSPECTUS IN CONNECTION WITH THE OFFERINGS MADE BY THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THE
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST OR THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
THE FUNDS
Aston Funds, 120 N. LaSalle Street, 25
th
Floor, Chicago, Illinois 60602, is an open-end management investment company. Each Fund is classified as diversified
under the Investment Company Act of 1940, as amended (the 1940 Act), except
ASTON/Harrison Street Real Estate Fund
and
ASTON/River Road Long-Short Fund
, which are classified as non-diversified. Each Fund is a series of the
Trust, which was formed as a Delaware statutory trust on September 10, 1993.
INVESTMENT
OBJECTIVES, STRATEGIES AND RISK CONSIDERATIONS
The following supplements the information contained in the Prospectus
concerning the investment objective(s), strategies and risks of investing in the Funds. Except as otherwise stated below or in the Prospectus, a Fund may invest in the portfolio investments included in this section. The investment practices
described below, except as further set forth in Investment Restrictions are not fundamental and may be changed by the Board of Trustees of the Trust (the Board) without the approval of shareholders.
American Depositary Receipts (ADRs), Continental Depositary Receipts (CDRs), European Depositary Receipts (EDRs)
and Global Depositary Receipts (GDRs)
ADRs are securities, typically issued by a U.S. financial institution
(a depositary), that evidence ownership interest in a security or a pool of securities issued by a foreign issuer and deposited with the depositary. EDRs, which are sometimes referred to as CDRs, are securities, typically issued by a
non-U.S. financial institution, that evidence ownership interest in a security or a pool of securities issued by either a U.S. or foreign issuer. GDRs are issued globally and evidence a similar ownership arrangement. Generally, ADRs are designed for
trading in the U.S. securities market. EDRs are designed for trading in European securities markets and GDRs are designed for trading in non-U.S. securities markets. Generally, depositary receipts may be available through sponsored or
unsponsored facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and a depositary, whereas an unsponsored facility may be established by a depositary without participation by the
issuer of the underlying security. Holders of unsponsored depositary receipts generally bear all the costs of the unsponsored facility. The depositary of an unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities.
Asset-Backed Securities
Asset-backed securities are securities backed
by installment contracts, credit card and other receivables or other financial type assets. Asset-backed securities represent interests in pools of assets in which payments of both interest and principal on the securities are made
monthly, thus in effect passing through monthly payments made by the individual borrowers on the assets underlying securities, net of any fees paid to the issuer or guarantor of the securities. The average life of asset-backed securities
varies with the maturities of the underlying assets. An asset-backed securitys stated maturity may be shortened if the underlying assets are pre paid, and the securitys total return may be difficult to predict precisely. The risk that
recovery on repossessed collateral might be unavailable or inadequate to support payments on asset-backed securities is greater than in the case for mortgage-backed securities. Falling interest rates generally result in an increase in the rate of
prepayments while rising interest rates generally decrease the rate of prepayments. An acceleration in prepayments in response to sharply falling interest rates will shorten the securitys average maturity and limit the potential appreciation
in the securitys value relative to a conventional debt security.
1
Below Investment-Grade (High Yield) Debt Securities
Fixed income securities rated Ba or lower by Moodys Investor Service (Moodys) or BB or lower by
Standard & Poors (S&P), frequently referred to as junk bonds, are considered to be predominantly speculative. They generally offer higher yields than bonds issued by entities with stronger creditworthiness.
Such securities are subject to a substantial degree of credit risk. High-yield bonds held by a Fund may be issued as a consequence of corporate restructurings, such as leveraged buy-outs, mergers, acquisitions, debt recapitalizations or similar
events. Additionally, high-yield bonds are often issued by smaller, less creditworthy companies or by highly leveraged firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The
risks posed by bonds issued under such circumstances are substantial. Changes by recognized rating agencies in their rating of any security and in the ability of an issuer to make payments of interest and principal will ordinarily have a more
dramatic effect on the values of these investments than on the values of higher-rated securities. Such changes in value will not affect cash income derived from these securities, unless the issuers fail to pay interest or principal when due. Such
changes will, however, affect a Funds net asset value per share.
The higher yields from low-grade bonds are intended to
compensate for the higher default rates on such securities. However, there can be no assurance that diversification will protect a Fund from widespread bond defaults brought about by a sustained economic downturn, or that yields will offset default
rates on high-yield bonds. Issuers of these securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. In addition,
such issuers may not have more traditional methods of financing available to them and may be unable to repay debt at maturity by refinancing.
The value of lower-rated debt securities will be influenced not only by changing interest rates, but also by the bond markets perception of credit quality and the outlook for economic growth. When
economic conditions appear to be deteriorating, lower rated bonds may decline in market value due to investors heightened concern over credit quality, regardless of prevailing interest rates. Adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease the value and liquidity of lower-rated securities held by a Fund, especially in a thinly traded market. Illiquid or restricted securities held by a Fund may involve valuation difficulties. Trading
in the secondary market for high-yield bonds may become thin and market liquidity may be significantly reduced. Even under normal conditions, the market for high-yield bonds may be less liquid than the market for investment-grade corporate bonds.
There are fewer securities dealers in the high-yield market, and purchasers of high-yield bonds are concentrated among a smaller group of securities dealers and institutional investors. In periods of reduced market liquidity, high-yield bond prices
may become more volatile.
Lower-Rated Securities Market
An economic downturn or increase in interest rates
is likely to have an adverse effect on the lower-rated securities market generally (resulting in more defaults) and on the value of lower-rated securities contained in the portfolios of a Fund.
Sensitivity to Economic and Interest Rate Changes
The economy and interest rates can affect lower-rated securities
differently from other securities. For example, the prices of lower-rated securities are more sensitive to adverse economic changes or individual corporate developments than are the prices of higher-rated investments. Also, during an economic
downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service their principal and interest payment obligations, to meet projected business
goals or to obtain additional financing. If the issuer of a lower-rated security defaulted, a Fund may incur additional expenses to seek recovery. In addition, periods of economic uncertainty and changes can be expected to result in increased
volatility of market prices of lower-rated securities and a Funds net asset values.
2
Liquidity and Valuation
To the extent that an established secondary
market does not exist and a particular obligation is thinly traded, the obligations fair value may be difficult to determine because of the absence of reliable, objective data. As a result, a Funds valuation of the obligation and the
price it could obtain upon its disposition could differ.
Credit Ratings
The credit ratings of Moodys
and S&P are evaluations of the safety of principal and interest payments. There is a risk that credit rating agencies may fail to timely change the credit ratings to reflect subsequent events. Therefore, in addition to using recognized rating
agencies and other sources, the investment adviser or subadviser also performs its own analysis of issuers in selecting investments for a Fund. The investment adviser or subadvisers analysis of issuers may include, among other things, historic
and current financial condition, current and anticipated cash flow and borrowing strength of management, responsiveness to business conditions, credit standing and current and anticipated results of operations.
Yields and Ratings
The yields on certain obligations are dependent on a variety of factors, including general market
conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moodys and S&P represent their
respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different
market prices.
While any investment carries some risk, certain risks associated with lower-rated securities are different
from those for investment-grade securities. The risk of loss through default is greater because lower-rated securities are usually unsecured and are often subordinate to an issuers other obligations. Additionally, the issuers of these
securities frequently have high debt levels and are thus more sensitive to difficult economic conditions, individual corporate developments and rising interest rates. Consequently, the market price of these securities may be quite volatile and may
result in wider fluctuations of a Funds net asset value per share.
Borrowing
A Fund may not borrow money or issue senior securities, except as described in this paragraph or as described in Investment
Restrictions. Any policy under Investment Restrictions which contradicts policies described in this paragraph governs that applicable Funds policy on borrowing. A Fund may borrow from banks or enter into reverse repurchase
agreements for temporary purposes in amounts up to 10% of the value of its total assets. A Fund may not mortgage, pledge or hypothecate any assets, except in connection with permitted borrowing or other permitted investment techniques. Any borrowing
will be from a bank with asset coverage of at least 300%, if required. In the event that such asset coverage shall at any time fall below 300%, a Fund shall, within three days thereafter (not including Sundays or holidays) or such longer period as
the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%.
Cash Liquidation for Redemption
The
ASTON Small Cap Fund
may
participate in a program with ReFlow Fund LLC (ReFlow), which is designed to provide an alternative liquidity source for mutual funds experiencing redemptions of their shares. In order to pay cash to shareholders who redeem their shares
on a given day, a mutual fund typically must hold cash in its portfolio, liquidate portfolio securities, or borrow money, all of which impose certain costs on the Fund. ReFlow provides participating mutual funds with another source of cash by
standing ready to purchase shares from the Fund equal to the amount of the Funds net redemptions on a given day. ReFlow then generally redeems those shares when the Fund experiences net sales or when the shares have been outstanding for the
holding limit of 28 days, whichever comes first. In return for this service, the Fund will pay a fee to ReFlow at a rate determined by a daily auction with other participating mutual funds.
3
The costs to the Fund for participating in ReFlow are expected to be influenced by and
comparable to the cost of other sources of liquidity, such as the Funds short-term lending arrangements or the costs of selling portfolio securities to meet redemptions. ReFlow is prohibited from acquiring more than 3% of the outstanding
voting securities of the Fund.
Convertible Securities
Common stock occupies the most junior position in a companys capital structure. Convertible securities entitle the holder to exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time, and to receive interest or dividends until the holder elects to convert. The provisions of any convertible security determine its ranking in a companys capital
structure. In the case of subordinated convertible debentures, the holders claims on assets and earnings are subordinated to the claims of other creditors and are senior to the claims of preferred and common shareholders. In the case of
preferred stock and convertible preferred stock, the holders claims on assets and earnings are subordinated to the claims of all creditors but are senior to the claims of common shareholders.
Derivative Instruments
The term derivatives has been used to identify a range and variety of financial instruments. In general, a derivative is
commonly defined as a financial instrument whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset, a specific security or an index of securities. As is the case with other types
of investments, a Funds derivative instruments may entail various types and degrees of risk, depending upon the characteristics of the derivative instrument and a Funds overall portfolio.
Each Fund may use derivative instruments for hedging purposes, to maintain liquidity or in anticipation of changes in the composition of
its portfolio holdings or as otherwise provided in the Prospectus. Certain Funds may use derivatives to seek exposure to a particular market or asset class in an attempt to achieve their objective. A Fund will invest in one or more derivatives only
to the extent that the instrument under consideration is judged by the investment adviser or subadviser to be consistent with a Funds overall investment objective and policies. In making such judgment, the potential benefits and risks will be
considered in relation to a Funds other portfolio investments.
Where not specified, investment limitations with respect
to a Funds derivative instruments will be consistent with such Funds existing percentage limitations with respect to its overall investment policies and restrictions. The types of derivative securities in which certain Funds are
permitted to invest include, but are not limited to, forward commitments, foreign currency contracts, futures contracts, options, and swap agreements.
Certain investment transactions expose the Funds to an obligation to make future payments to third parties. Examples of these types of transactions, include, but are not limited to, derivatives such as
swaps, futures, forwards, and options. To the extent that a Fund engages in such transactions, the Fund will (to the extent required by applicable law) either (1) segregate cash or liquid assets in the prescribed amount or (2) otherwise
cover its future obligations under the transaction, such as by holding an offsetting investment. If a Fund segregates sufficient cash or other liquid assets or otherwise covers its obligations under such transactions, the Fund will not
consider the transactions to be borrowings for purposes of its investment restrictions or senior securities under the 1940 Act, and therefore, such transactions will not be subject to the 300% asset coverage requirement under the 1940
Act otherwise applicable to borrowings by the Fund.
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In some cases (e.g., with respect to futures and forwards that are contractually required to
cash-settle), a Fund will segregate cash or other liquid assets with respect to the amount of the daily net (marked-to-market) obligation arising from the transaction, rather than the notional amount of the underlying contract. By
segregating assets in an amount equal to the net obligation rather than the notional amount, a Fund will have the ability to employ leverage to a greater extent than if it set aside cash or other liquid assets equal to the notional amount of the
contract which may increase the risk associated with such transactions. Whenever a Fund is required to segregate assets for 1940 Act purposes, notations on the books of the Trusts custodian or fund accounting agent are sufficient to constitute
a segregated account.
Assets used as segregation or cover cannot be sold while the position in the corresponding
transaction is open, unless they are replaced with other appropriate assets. As a result, the commitment of a large portion of the Funds assets for segregation and cover purposes could impede portfolio management or the Funds
ability to meet redemption requests or other current obligations. Segregating assets or otherwise covering for these purposes does not necessarily limit the percentage of the assets of the Fund that may be at risk with respect to certain
derivative transactions.
Dollar Rolls
Dollar roll transactions consist of the sale of mortgage-backed securities to a bank or broker-dealer, together with a commitment to purchase similar, but not necessarily identical, securities at a future
date. Any difference between the sale price and the purchase price is netted against the interest income foregone on the securities to arrive at an implied borrowing (reverse repurchase) rate. Alternatively, the sale and purchase transactions that
constitute the dollar roll can be executed at the same price, with a Fund being paid a fee as consideration for entering into the commitment to purchase. Dollar rolls may be renewed after cash settlement and initially may involve only a firm
commitment agreement by a Fund to buy a security. A Fund will segregate cash or liquid securities in an amount at least equal to its obligations under the dollar roll transaction. Whenever a Fund is required to segregate assets for 1940 Act
purposes, notations on the books of the Trusts custodian or fund accounting agent are sufficient to constitute a segregated account.
If the broker-dealer to whom a Fund sells the security becomes insolvent, a Funds right to purchase or repurchase the security may be restricted. Also, the value of the security may change adversely
over the term of the dollar roll, such that the security that a Fund is required to repurchase may be worth less than the security that a Fund originally held.
Equity Securities
Equity securities represent a share of an issuers
earnings and assets, after the issuer pays its liabilities. The Funds cannot predict the income they will receive from equity securities because issuers generally have discretion as to the payment of any dividends or distributions. However, equity
securities offer greater potential for appreciation than many other types of securities, because their value may increase with the value of the issuers business. The following describes various types of equity securities in which the Funds
invest.
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Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks receive the issuers earnings after the issuer pays its
creditors and any preferred stockholders. As a result, changes in an issuers earnings may influence the value of its common stock.
Preferred Stocks
Preferred stocks have the right to receive
specified dividends or distributions before the issuer makes payments on its common stock. Some preferred stocks also participate in dividends and distributions paid on common stock. Preferred stocks may also permit the issuer to redeem the stock. A
Fund may treat such redeemable preferred stock as a fixed income security.
Warrants and Rights
Warrants give a Fund the option to buy the issuers equity securities at a specified price (the exercise price) at a specified
future date (the expiration date). A Fund may buy the designated securities by paying the exercise price before the expiration date. Warrants may become worthless if the price of the stock does not rise above the exercise price by the expiration
date. This increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants,
except companies typically issue rights to existing stockholders.
Exchange-Traded Notes
Exchange-traded notes (ETNs) are securities that combine aspects of a bond and an exchange-traded fund (ETF). ETN
returns are based upon the performance of a market index or other reference asset less fees, and can be held to maturity as a debt security. ETNs are traded on a securities exchange. Their value is based on their reference index or strategy and the
credit quality of the issuer. ETNs are subject to the additional risk that they may trade at a premium or discount to value attributable to their reference index. When a Fund invests in an ETN, shareholders of the Fund bear their proportionate share
of the ETNs fees and expenses, as well as their share of the Funds fees and expenses. There may also not be an active trading market available for some ETNs. Additionally, trading of ETNs may be halted or delisted by the listing
exchange.
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of the principal or adjusted periodically. In addition, the issuer of a fixed
income security must repay the principal amount of the security, normally within a specified time. Fixed income securities provide more regular income than equity securities. However, the returns on fixed income securities are limited and normally
do not increase with the issuers earnings. This limits the potential appreciation of fixed income securities as compared to equity securities.
A securitys yield measures the annual income earned on a security as a percentage of its price. A securitys yield will increase or decrease depending upon whether it costs less (a discount) or
more (a premium) than the principal amount. If the issuer may redeem the security before its scheduled maturity, the price and yield on a discount or premium security may change based upon the probability of an early redemption. Securities with
higher risks generally have higher yields.
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The following describes various types of fixed income securities in which a Fund may invest.
Treasury Securities
Treasury securities are direct obligations of the federal government. Treasury securities are generally regarded as having the lowest credit risks.
Agency Securities
Agency securities are issued by a federal agency or other government sponsored entity (a GSE) acting under federal authority. The U.S. government supports some GSEs with its full faith and
credit. Other GSEs receive support through federal subsidies, loans or other benefits. A few GSEs have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. Agency
securities are generally regarded as having low credit risks, but not as low as treasury securities.
Although a GSE
guarantee protects against credit risks, it does not reduce the market and prepayment risks of these mortgage-backed securities.
Corporate Debt Securities
Corporate debt securities are fixed
income securities issued by businesses. Notes, bonds, debentures and commercial paper are the most prevalent types of corporate debt securities. Certain Funds may also purchase interests in bank loans to companies. The credit risks of corporate debt
securities vary widely among issuers.
In addition, the credit risk of an issuers debt security may vary based on its
priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make
payments on senior securities. In addition, in the event of bankruptcy, holders of senior securities may receive amounts otherwise payable to the holders of subordinated securities. Some subordinated securities, such as trust preferred and capital
securities notes, also permit the issuer to defer payments under certain circumstances. For example, insurance companies issue securities known as surplus notes that permit the insurance company to defer any payment that would reduce its capital
below regulatory requirements.
Commercial Paper
Commercial paper is an issuers obligation with a maturity of less than nine months. Companies typically issue commercial paper to
pay for current expenditures. Most issuers constantly reissue their commercial paper and use the proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue to obtain liquidity in this fashion, its commercial paper may default.
Demand Instruments
Demand instruments are corporate debt securities that the issuer must repay upon demand. Other demand instruments require a third party, such as a dealer or bank, to repurchase the security for its face
value upon demand.
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Pooled Vehicles
The Funds may invest in debt securities indirectly through pooled products typically organized as trust structures (e.g., TRAINS and
TRACERS) and typically sold pursuant to Rule 144A under the Securities Act of 1933, as amended (the 1933 Act). TRAINS, TRACERS and similar products contain a basket of debt securities that are designed to provide broad credit exposure in
a single product. The Funds will incur transaction costs associated with such products and may be subject to the credit risk of the sponsoring entity.
Forward Foreign Currency Exchange Contracts
Many international equity
securities in which a Fund may invest will be traded in foreign currencies. A Fund may engage in certain foreign currency transactions, such as forward foreign currency exchange contracts, to guard against fluctuations in currency exchange rates in
relation to the U.S. dollar or to the weighting of particular foreign currencies. In addition, a Fund may buy and sell foreign currency futures contracts and options on foreign currencies and foreign currency futures. A Fund may use such investments
for hedging purposes or as otherwise provided in the Prospectus, including for total return purposes.
A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract.
By entering into a forward foreign currency exchange contract, a Fund locks in the exchange rate between the currency it will deliver and the currency it will receive for the duration of the contract. As a result, a Fund reduces its
exposure to changes in the value of the currency it will deliver and increases its exposure to changes in the value of the currency it will exchange into. Contracts to sell foreign currencies would limit any potential gain which might be realized by
a Fund if the value of the hedged currency increases. A Fund may enter into these contracts for the purpose of hedging against foreign exchange risks arising from a Funds investment or anticipated investment in securities denominated in
foreign currencies. Such hedging transactions may not be successful and may eliminate any chance for a Fund to benefit from favorable fluctuations in relevant foreign currencies. In the case of a forward foreign currency exchange contract, a Fund
will segregate cash or liquid securities at least in an amount equal to its obligations under the contract. Whenever a Fund is required to segregate assets for 1940 Act purposes, notations on the books of the Trusts custodian or fund
accounting agent are sufficient to constitute a segregated account. See also Derivative Instruments.
A Fund may
also enter into forward foreign currency exchange contracts for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one currency to another. To the extent that it does so, a Fund will be
subject to the additional risk that the relative value of currencies will be different than anticipated by the particular Funds investment adviser or subadviser. A Fund may use one currency (or a basket of currencies) to hedge against adverse
changes in the value of another currency (or a basket of currencies) when exchange rates between the two currencies are positively correlated. A Fund may also use foreign currency futures contracts and related options on currencies for the same
reasons for which forward foreign currency exchange contracts are used.
The use of currency transactions can result in a Fund
incurring losses as a result of a number of factors including the imposition of exchange controls, suspension of settlements, or the inability to deliver or receive a specified currency.
Foreign Securities
Foreign securities may subject a Fund to investment
risks that differ in some respects from those related to investments in U.S. domestic issuers. Such risks may include costs in connection with conversions between various currencies, limited publicly available information regarding foreign issuers,
lack of uniformity in accounting, auditing and financial standards and requirements, greater securities
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market volatility, less liquidity of securities, less government supervision and regulations of securities markets, future adverse political and economic developments, the possible imposition of
withholding taxes on interest, dividends or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to
changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales
commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those with respect to domestic issuers of similar securities or
obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. Government regulation in many of the countries of interest to a Fund may
limit the extent of a Funds investment in companies in those countries. Further, it may be more difficult for a Funds agents to keep currently informed about corporate actions that may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than within the U.S., increasing the risk of delayed settlements of portfolio securities. Certain markets may require payment for securities before delivery. A Funds
ability and decisions to purchase and sell portfolio securities may be affected by laws or regulations relating to the convertibility of currencies and repatriation of assets. Some countries restrict the extent to which foreigners may invest in
their securities markets.
Investments in securities of foreign issuers are frequently denominated in foreign currencies
(including the Euro and other multinational currency units) and the value of a Funds assets measured in U.S. dollars may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and a Fund may
incur costs in connection with conversions between various currencies. A Fund may enter into forward foreign currency contracts as a hedge against possible variations in foreign exchange rates or to hedge a specific security transaction or portfolio
position. Currently, only a limited market, if any, exists for hedging transactions relating to currencies in emerging markets, including Latin American and Asian markets. This may limit a Funds ability to effectively hedge its investments in
such markets if it chose to do so.
Securities of issuers located in countries with developing securities markets pose greater
liquidity risks and other risks than securities of issuers located in developed countries and traded in more established markets. Low liquidity in markets may adversely affect a Funds ability to buy and sell securities and cause increased
volatility. Developing countries may at various times have less stable political environments than more developed nations. Changes of control may adversely affect the pricing of securities from time to time. Some developing countries may afford only
limited opportunities for investing. In certain developing countries, a Fund may be able to invest solely or primarily through ADRs or similar securities and government approved investment vehicles, including closed-end investment companies.
The settlement systems in certain emerging markets, including Asian, South American and Eastern European countries such
as Russia, are less developed than in more established markets. As a result, there may be a risk that settlement may be delayed and that cash or securities of a Fund may be in jeopardy because of failures or of defects in the systems used. In
particular, market practice may require that payment be made prior to receipt of the security which is being purchased or that delivery of a security must be made before payment is received. In such cases, default by the executing broker or bank
might result in a loss to a Fund investing in emerging market securities.
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Foreign investments involve risks unique to the local political, economic, and
regulatory structures in place, as well as the potential for social instability, military unrest, or diplomatic developments that could prove adverse to the interests of U.S. investors. Individual foreign economies can differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position. In addition, significant external political and economic
risks currently affect some foreign countries. For example, both Taiwan and China still claim sovereignty over one another and there is a demilitarized border and hostile relations between North and South Korea. War and terrorism affect many
countries, especially those in Africa and the Middle East. Many countries throughout the world are dependent on a healthy U.S. economy and are adversely affected when the U.S. economy weakens or its markets decline. For example, in 2007 and 2008,
the meltdown in the U.S. subprime mortgage market quickly spread throughout global credit markets, triggering a liquidity crisis that affected fixed-income and equity markets around the world. European countries can be significantly affected by the
tight fiscal and monetary controls that the European Economic and Monetary Union (EMU) imposes for membership. Europes economies are diverse, its governments are decentralized, and its cultures vary widely. Recently, several EU
countries, including Greece, Ireland, Italy, Spain, and Portugal, have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. There is continued concern about
national-level support for the euro and the accompanying coordination of fiscal and wage policy among EMU member countries. Member countries are required to maintain tight control over inflation, public debt, and budget deficit to qualify for
membership in the EMU. These requirements can severely limit EMU member countries ability to implement monetary policy to address regional economic conditions.
Governments in certain foreign countries continue to participate to a significant degree, through ownership interest or regulation, in their respective economies. Action by these governments could have a
significant effect on market prices of securities and payment of dividends. The economies of many foreign countries are heavily dependent upon international trade and are accordingly affected by protective trade barriers and economic conditions of
their trading partners. The enactment by these trading partners of protectionist trade legislation could have a significant adverse effect upon the securities markets of such countries.
In making investment decisions for a Fund, an investment adviser or subadviser evaluates the risks associated with investing Fund assets
in a particular country, including risks stemming from a countrys financial infrastructure and settlement practices; the likelihood of expropriation, nationalization or confiscation of invested assets; prevailing or developing custodial
practices in the country; the countrys laws and regulations regarding the safekeeping, maintenance and recovery of invested assets; the likelihood of government-imposed exchange control restrictions which could impair the liquidity of Fund
assets maintained with custodians in that country, as well as risks from political acts of foreign governments. An investment advisers or subadvisers decisions regarding these risks may not be correct or may prove to be unwise and any
losses resulting from investing in foreign countries will be borne by the Fund.
Holding Fund assets in foreign countries
presents additional risks including, but not limited to, the risks that a particular foreign custodian or depositary will not exercise proper care with respect to Fund assets or will not have the financial strength or adequate practices and
procedures to properly safeguard Fund assets. A Fund may be precluded from investing in certain foreign countries until such time as adequate custodial arrangements can be established.
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions
A Fund may purchase or sell securities on a when-issued or delayed-delivery basis and make contracts to purchase or sell securities for a fixed price at a future date beyond customary settlement time.
Securities purchased or sold on a when-issued, delayed-delivery or forward commitment basis involve a risk of loss if the value of the security to be purchased declines prior to the settlement date. Although a
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Fund would generally purchase securities on a when-issued, delayed-delivery or forward commitment basis with the intention of acquiring the securities, a Fund may dispose of such securities prior
to settlement if its investment adviser or subadviser deems it appropriate to do so.
A Fund may dispose of or re-negotiate a
when-issued or forward commitment after entering into these transactions. A Fund will normally realize a capital gain or loss in connection with these transactions. For purposes of determining a Funds average dollar-weighted maturity, the
maturity of when-issued or forward commitment securities will be calculated from the commitment date.
When a Fund purchases
securities on a when-issued, delayed-delivery or forward commitment basis, a Fund will segregate cash or liquid securities having a value (determined daily) at least equal to the amount of a Funds purchase commitments. In the case of a forward
commitment to sell portfolio securities, a Fund will segregate the portfolio securities while the commitment is outstanding. Whenever a Fund is required to segregate assets for 1940 Act purposes, notations on the books of the Trusts custodian
or fund accounting agent are sufficient to constitute a segregated account. See also Derivative Instruments.
These procedures are designed to ensure that a Fund will maintain sufficient assets at all times to cover its obligations under
when-issued purchases, forward commitments and delayed-delivery transactions.
Futures Contracts
Futures contracts are generally considered to be derivative securities. Typically, maintaining a futures contract or selling an option
thereon requires a Fund to deposit with a financial intermediary as security for its obligations an amount of cash or other specified assets (initial margin) which initially is typically 1% to 10% of the face amount of the contract (but may be
higher in some circumstances). Additional cash or assets (variation margin) may be required to be deposited thereafter on a daily basis as the marked to market value of the contract fluctuates.
At maturity, a futures contract obligates a Fund to take or make delivery of certain securities or the cash value of a securities index.
A Fund may sell a futures contract in order to offset a decrease in the market value of its portfolio securities that might otherwise result from a market decline. A Fund may do so either to hedge the value of its portfolio of securities as a whole,
or to protect against declines, occurring prior to sales of securities, in the value of the securities to be sold. Conversely, a Fund may purchase a futures contract in anticipation of purchases of securities. In addition, a Fund may utilize futures
contracts in anticipation of changes in the composition of its portfolio holdings or to seek exposure to a particular market or asset class in an attempt to achieve its objective.
For federal income tax purposes, some gains derived by a Fund from the use of such instruments will be treated as a combination of
short-term and long-term capital gains and, if not offset by realized capital losses incurred by a Fund, will be distributed to shareholders and will be taxable to shareholders as a combination of ordinary income and long-term capital gain.
A Fund may purchase and sell call and put options on futures contracts traded on an exchange or board of trade. When a Fund
purchases an option on a futures contract, it has the right to assume a position as a purchaser or seller of a futures contract at a specified exercise price at any time during the option period. When a Fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is exercised. In anticipation of a market advance, a Fund may purchase call options on futures contracts as a substitute for the purchase of futures contracts to hedge against a
possible increase in the price of securities that a Fund intends to purchase. Similarly, if the market is expected to decline, a Fund might purchase put options or sell call options on futures contracts rather than
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sell futures contracts. In connection with a Funds position in a futures contract or option thereon, a Fund will segregate cash or liquid securities or will otherwise cover its position in
accordance with applicable requirements of the SEC. Whenever a Fund is required to segregate assets for 1940 Act purposes, notations on the books of the Trusts custodian or fund accounting agent are sufficient to constitute a segregated
account. See also Derivative Instruments.
A Fund may enter into a contract for the purchase or sale for future
delivery of securities, including index contracts. While futures contracts provide for the delivery of securities, deliveries usually do not occur. Contracts are generally terminated by entering into offsetting transactions.
A Fund may enter into such futures contracts to protect against the adverse effects of fluctuations in security prices or interest rates
without actually buying or selling the securities. For example, if interest rates are expected to increase, a Fund might enter into futures contracts for the sale of debt securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities owned by a Fund. If interest rates did increase, the value of the debt securities in the portfolio would decline, but the value of the futures contracts to a Fund would increase at approximately the same rate,
thereby keeping the net asset value of a Fund from declining as much as it otherwise would have. Similarly, when it is expected that interest rates may decline, futures contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices. Since the fluctuations in the value of futures contracts should be similar to those of debt securities, a Fund could take advantage of the anticipated rise in value of debt securities without actually buying them until
the market had stabilized. At that time, the futures contracts could be liquidated and a Fund could then buy debt securities on the cash market.
A stock index futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock
index at the close of the last trading day of the contract and the price at which the agreement was made. Open futures contracts are valued on a daily basis and a Fund may be obligated to provide or receive cash reflecting any decline or increase in
the contracts value. No physical delivery of the underlying stocks in the index is made in the future.
With respect to
options on futures contracts, when a Fund is temporarily not fully invested, it may purchase a call option on a futures contract to hedge against a market advance. The purchase of a call option on a futures contract is similar in some respects to
the purchase of a call option on an individual security. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based, or the price of the underlying debt securities, it may or may not be less
risky than ownership of the futures contract or underlying debt securities. As with the purchase of futures contracts, when a Fund is not fully invested, it may purchase a call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial hedge against the declining price of the security or
foreign currency that is deliverable upon exercise of the futures contract. If the futures price at the expiration of the option is below the exercise price, a Fund will retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the value of a Funds portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against the increasing price of the security or foreign currency, which is
deliverable upon exercise of the futures contract. If the futures price at the expiration of the option is higher than the exercise price, a Fund will retain the full amount of the option premium, which provides a partial hedge against any increase
in the price of securities that a Fund intends to purchase.
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Call and put options on stock index futures are similar to options on securities except
that, rather than the right to purchase or sell stock at a specified price, options on a stock index future give the holder the right to receive cash. Upon exercise of the option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated balance in the writers futures margin account, which represents the amount by which the market price of the futures contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the futures contract. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and the closing price of the futures contract on the expiration date.
If
a put or call option which a Fund has written is exercised, that Fund may incur a loss which will be reduced by the amount of the premium it received. Depending on the degree of correlation between changes in the value of its portfolio securities
and changes in the value of its options positions, a Funds losses from existing options on futures may to some extent be reduced or increased by changes in the value of portfolio securities.
To the extent that market prices move in an unexpected direction, a Fund may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if a Fund is hedged against the possibility of an increase in interest rates and interest rates decrease instead, that Fund would lose part or all of the benefit of the increased
value, which it has because it would have offsetting losses in its futures position. In addition, in such situations, if a Fund had insufficient cash, it may be required to sell securities from its portfolio to meet daily variation margin
requirements. Such sales of securities may, but will not necessarily, be at increased prices which reflect the rising market. A Fund may be required to sell securities at a time when it may be disadvantageous to do so.
Options on securities, futures contracts, options on futures contracts and options on currencies may be traded on foreign exchanges. Such
transactions may not be regulated as effectively as similar transactions in the U.S., may not involve a clearing mechanism and related guarantees and are subject to the risk of governmental actions affecting trading in or the prices of foreign
securities. Some foreign exchanges may be principal markets so that no common clearing facility exists and a trader may look only to the broker for performance of the contract. The value of such positions also could be adversely affected by
(i) other complex foreign political, legal and economic factors, (ii) lesser availability than in the U.S. of data on which to make trading decisions, (iii) delays in the Trusts ability to act upon economic events occurring in
foreign markets during non-business hours in the U.S., (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the U.S. and (v) lesser trading volume. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the currencies in which trading is done on foreign exchanges, any profits that a Fund might realize in trading could be eliminated by adverse changes in the exchange rate, or a
Fund could incur losses as a result of those changes.
Further, with respect to options on futures contracts, a Fund may seek
to close out an option position by writing or buying an offsetting position covering the same securities or contracts with the same exercise price and expiration date. The ability to establish and close out positions on options will be subject to
the maintenance of a liquid secondary market, which cannot be assured.
Illiquid Securities
A Fund may invest up to 15% of its net assets in securities that are illiquid. Securities are generally considered illiquid if they
cannot be disposed of within seven days in the ordinary course of business at approximately the price at which a Fund values the security. Illiquid securities will generally include but are not limited to: insurance funding agreements, repurchase
agreements and time deposits with notice/termination dates in excess of seven days; unlisted over-the-counter options; swap agreements, interest rate caps, floors and collars; and certain securities which are subject to trading restrictions because
they are not registered under the 1933 Act. Foreign securities that are restricted as to resale in the U.S., but are freely tradable in their local market, are not considered illiquid.
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Investment Company Shares
Investments by a Fund in other investment companies, including closed-end funds and ETFs, will be subject to the limitations of the 1940
Act, the rules and regulations thereunder and in certain circumstances SEC exemptive orders. By investing in securities of an investment company, Fund shareholders will indirectly bear the fees and expenses of that investment company in addition to
a Funds own fees and expenses. The Funds may rely on SEC orders that permit them to invest in certain investment companies beyond the limits contained in the 1940 Act, subject to certain terms and conditions of those orders. Pursuant to SEC
rules, the Funds may invest in shares of affiliated and unaffiliated money market funds.
Money Market Instruments
Money market instruments include but are not limited to the following: short-term corporate obligations, Certificates of Deposit
(CDs), Eurodollar Certificates of Deposit (Euro CDs), Yankee Certificates of Deposit (Yankee CDs), foreign bankers acceptances, foreign commercial paper, letter of credit-backed commercial paper, time
deposits, loan participations (LPs), variable- and floating-rate instruments, separately traded interest and principal securities (STRIPS) and master demand notes. Bank obligations may include bankers acceptances,
negotiable certificates of deposit and non-negotiable time deposits earning a specified return, issued for a definite period of time by a U.S. bank that is a member of the Federal Reserve System or is insured by the Federal Deposit Insurance
Corporation (FDIC), or by a savings and loan association or savings bank that is insured by the FDIC. Bank obligations also include U.S. dollar-denominated obligations of foreign branches of U.S. banks or of U.S. branches of foreign
banks, all of the same type as domestic bank obligations. Investments in bank obligations are limited to the obligations of financial institutions having more than $1 billion in total assets at the time of purchase.
Domestic and foreign banks are subject to extensive but different government regulations, which may limit the amount and types of their
loans and the interest rates that may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds to finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of U.S. branches of foreign banks may subject a Fund to
additional investment risks, including future political and economic developments, possible imposition of withholding taxes on interest income, possible seizure or nationalization of foreign deposits, possible establishment of exchange controls or
the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. In addition, foreign branches of U.S. banks and U.S. branches of foreign banks may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting and record keeping standards than those applicable to domestic branches of U.S. banks. Investments in the obligations of U.S. branches of foreign banks or foreign
branches of U.S. banks will be made only when the investment adviser or subadviser believes that the credit risk with respect to the investment is minimal.
Euro CDs, Yankee CDs and foreign bankers acceptances involve risks that are different from investments in securities of U.S. banks. The major risk, which is sometimes referred to as sovereign
risk, pertains to possible future unfavorable political and economic developments, possible withholding taxes, seizures of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect payment
of principal or interest. Investment in foreign commercial paper
14
also involves risks that are different from investments in securities of commercial paper issued by U.S. companies. Non-U.S. securities markets generally are not as developed or efficient as
those in the U.S. Such securities may be less liquid and more volatile than securities of comparable U.S. corporations. Non-U.S. issuers are not generally subject to uniform accounting and financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers. In addition, there may be less public information available about foreign banks, their branches and other issuers.
Time deposits usually trade at a premium over Treasuries of the same maturity. Investors regard such deposits as carrying some credit risk, which Treasuries may not. Also, investors regard time deposits
as being sufficiently less liquid than Treasuries; hence, investors demand some extra yield for buying time deposits rather than Treasuries.
Commercial paper may include variable- and floating-rate instruments, which are unsecured instruments that permit the interest on indebtedness thereunder to vary. Variable-rate instruments provide for
periodic adjustments in the interest rate. Floating-rate instruments provide for automatic adjustment of the interest rate whenever some other specified interest rate changes. Some variable- and floating-rate obligations are direct lending
arrangements between the purchaser and the issuer and there may be no active secondary market. However, in the case of variable- and floating-rate obligations with the demand feature, a Fund may demand payment of principal and accrued interest at a
time specified in the instrument or may resell the instrument to a third party. In the event an issuer of a variable- or floating-rate obligation defaulted on its payment obligation, a Fund might be unable to dispose of the note because of the
absence of a secondary market and could, for this or other reasons, suffer a loss to the extent of the default. Substantial holdings of variable- and floating-rate instruments could reduce portfolio liquidity.
Mortgage-Backed Securities and Mortgage Pass-Through Securities
Ginnie Mae (formally known as the Government National Mortgage Association) is a government-owned corporation that is an agency of the U.S. Department of Housing and Urban Development. The timely payment
of principal and interest on mortgage-backed securities issued or guaranteed by Ginnie Mae is backed by Ginnie Mae and the full faith and credit of the U.S. government, Fannie Mae (formally known as the Federal National Mortgage Association) and
Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation) were government-sponsored corporations owned entirely by private stockholders until 2008. Both issue mortgage-related securities that contain guarantees as to timely payment
of interest and principal but that are not backed by the full faith and credit of the U.S. government. Securities issued by Ginnie Mae and other mortgage-backed securities may be purchased at a premium over the maturity value of the underlying
mortgages. This premium is not guaranteed and would be lost if prepayment occurs. Mortgage-backed securities issued by U.S. government agencies or instrumentalities other than Ginnie Mae are not full faith and credit obligations. Certain
obligations, such as those issued by the Federal Home Loan Banks, Fannie Mae and Freddie Mac, are supported only by the credit of the issuer. Unscheduled or early payments on the underlying mortgages may shorten the securities effective
maturities and reduce returns. A Fund may agree to purchase or sell these securities with payment and delivery taking place at a future date.
The value of the securities issued by Fannie Mae and Freddie Mac fell sharply in 2008 due to concerns that the firms did not have sufficient capital to offset losses. In September 2008, the U.S. Treasury
announced that Fannie Mae and Freddie Mac had been placed in conservatorship by the Federal Housing Finance Agency (FHFA), a newly created independent regulator created under the Federal Housing Finance Regulatory Reform Act of 2008 (the
Reform Act). Fannie Mae and Freddie Mac continue to rely on the support of the U.S. Treasury and FHFA to continue operations, and it is not known when the conservatorships will be terminated or what changes will be made to their
operations following the conservatorships.
15
FHFA, as conservator or receiver for Fannie Mae and Freddie Mac, has the power to
repudiate any contract entered into by Fannie Mae or Freddie Mac prior to FHFAs appointment as conservator or receiver, as applicable, if FHFA determines, in its sole discretion, that performance of the contract is burdensome and that
repudiation of the contract promotes the orderly administration of Fannie Maes or Freddie Macs affairs. The Reform Act requires FHFA to exercise its right to repudiate any contract within a reasonable period of time after its appointment
as conservator or receiver. Such a repudiation may result in a reduction in interest payments made to holders of Fannie Mae or Freddie Mac securities.
In addition, under the Reform Act, certain rights provided to holders of mortgage-backed securities issued by Fannie Mae and Freddie Mac under the operative documents related to such securities may not be
enforced against FHFA, or enforcement of such rights may be delayed, during the conservatorship or any future receivership. For example, the operative documents for Fannie Mae and Freddie Mac mortgage-backed securities may provide that an event of
default on the part of Fannie Mae or Freddie Mac includes the appointment of a conservator or receiver. However, under the Reform Act, holders of such securities may not enforce their rights if the event of default arises solely because a
conservator or receiver has been appointed. The Reform Act also provides that no person may exercise any right or power to terminate, accelerate or declare an event of default under certain contracts to which Fannie Mae or Freddie Mac is a party, or
obtain possession of or exercise control over any property of Fannie Mae or Freddie Mac, or affect any contractual rights of Fannie Mae or Freddie Mac, without the approval of FHFA, as conservator or receiver, for a period of 45 or 90 days following
the appointment of FHFA as conservator or receiver, respectively.
Other mortgage-backed securities are issued by private
issuers, generally originators of and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. These private label securities may be supported by U.S.
government mortgage-backed securities or some form of non-government credit enhancement. Mortgage-backed securities have either fixed or adjustable interest rates. The rate of return on mortgage-backed securities may be affected by prepayments of
principal on the underlying loans, which generally increase as interest rates decline. As a result, when interest rates decline, holders of these securities normally do not benefit from appreciation in market value to the same extent as holders of
other non-callable debt securities. In addition, like other debt securities, the values of mortgage-related securities, including government and government-related mortgage pools, generally will fluctuate in response to market interest rates.
The market value and yield of these mortgage-backed securities can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages. These securities represent ownership in a pool of federally insured mortgage loans with a maximum maturity of 30 years. A decline in interest rates may lead to a faster rate of repayment of the underlying
mortgages, and may expose a fund to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by a fund, the prepayment right will tend to limit to some degree the increase in net asset value of a fund
because the value of the mortgage-backed securities held by a fund may not appreciate as rapidly as the price of non-callable debt securities. Mortgage-backed securities are subject to the risk of prepayment and the risk that the underlying loans
will not be repaid. Because principal may be prepaid at any time, mortgage-backed securities may involve significantly greater price and yield volatility than traditional debt securities. At times, a Fund may invest in securities that pay higher
than market interest rates by paying a premium above the securities par value. Prepayments of these securities may cause losses on securities purchased at a premium. Unscheduled payments, which are made at par value, will cause a fund to
experience a loss equal to any unamortized premium.
16
When interest rates rise, mortgage prepayment rates tend to decline, thus lengthening
the life of a mortgage-related security and increasing the price volatility of that security, affecting the price volatility of a Funds shares. The negative effect of interest rate increases on the market-value of mortgage backed securities is
usually more pronounced than it is for other types of fixed-income securities potentially increasing the volatility of a Fund.
Interests in pools of mortgage-backed securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or
specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a pass-through of the monthly payments made by the individual borrowers on
their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs
which may be incurred. Some mortgage-related securities (such as securities issued by Ginnie Mae) are described as modified pass-throughs. These securities entitle the holder to receive all interest and principal payments owed on the
mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.
Certain Funds may also invest in pass-through certificates issued by non-governmental issuers. Pools of conventional residential mortgage loans created by such issuers generally offer a higher rate of
interest than government and government-related pools because there are no direct or indirect government guarantees of payment. Timely payment of interest and principal of these pools is, however, generally supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance. The insurance and guarantees are issued by government entities, private insurance and the mortgage poolers. A Fund may buy mortgage-related securities with or without insurance
or guarantees if through an examination of the loan experience and practices of the poolers, an investment adviser or subadviser determines that the securities meet a Funds investment objectives and policies. The markets for certain
mortgage-backed securities, particularly private label (non-governmental) securities, may be very thin. A Funds ability to dispose of its positions in such securities will depend upon the degree of liquidity in the market for such securities.
It is impossible to predict the degree of liquidity of such securities in the future.
Multiple Class Mortgage-Backed
Securities
A Fund may invest in multiple class mortgage-backed securities including collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMIC Certificates). CMOs and REMIC
Certificates are debt instruments, and these securities may be issued by U.S. government agencies and instrumentalities such as Fannie Mae or Freddie Mac or by trusts formed by private originators of, or investors in, mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of
mortgage loans or mortgage-backed securities the payments on which are used to make payments on the CMOs or multiple class mortgage-backed securities. REMIC Certificates represent beneficial ownership interests in a REMIC trust, generally consisting
of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage-backed securities. To the extent that a CMO or REMIC Certificate is collateralized by Ginnie Mae guaranteed mortgage-backed securities, holders of the CMO or REMIC
Certificate receive all interest and principal payments owed on the mortgage pool, net of certain fees, regardless of whether the mortgagor actually makes the payments, as a result of the Ginne Mae guaranty, which is backed by the full faith and
credit of the U.S. government. The obligations of Fannie Mae or Freddie Mac under their respective guaranty of the REMIC Certificates are obligations solely of Fannie Mae or Freddie Mac, respectively.
17
The principal of and interest on the mortgage-backed securities may be allocated among
the several classes, also referred to as tranches in various ways. Each tranche of a mortgage-backed security is issued at a specified coupon rate or adjustable rate and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a mortgage-backed security may cause it to be retired substantially earlier than the stated maturities or final distribution dates. Interest is paid or accrued on all classes on a monthly, quarterly or
semi-annual basis. In certain structures (known as sequential pay CMOs or REMIC Certificates), payments of principal, including any principal prepayments, on the mortgage-backed securities generally are applied to the classes of CMOs or
REMIC Certificates in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs or REMIC Certificates until all other classes having an earlier final distribution date have
been paid in full. Additional structures of CMOs and REMIC Certificates include, among others, parallel pay CMOs and REMIC Certificates. Parallel pay CMOs or REMIC Certificates are those which are structured to apply principal payments
and prepayments of the mortgage- backed securities to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in parallel pay or sequential pay structures. These securities include
accrual certificates (Z Bonds), which only accrue interest at a specified rate until all other certificates having an earlier final distribution date have been retired and are converted thereafter to an interest-paying security, and
planned amortization class (PAC) certificates, which are parallel pay REMIC Certificates that generally require that specified amounts of principal be applied on each payment date to one or more classes of REMIC Certificates (PAC
Certificates), even though all other principal payments and prepayments of the mortgage-backed securities are then required to be applied to one or more other classes of the PAC Certificates. The scheduled principal payments for the PAC
Certificates generally have the highest priority on each payment date after interest due has been paid to all classes entitled to receive interest currently. Shortfalls, if any, are added to the amount payable on the next payment date. The PAC
Certificate payment schedule is taken into account in calculating the final distribution date of each class of PAC. In order to create PAC tranches, one or more tranches generally must be created that absorb most of the volatility in the underlying
mortgage-backed securities. These tranches tend to have market prices and yields that are much more volatile than other PAC classes.
One or more tranches of a CMO or a REMIC Certificate (collectively, floating-rate CMOs) may have coupon rates which reset periodically at a specified increment over an index such as the London
Interbank Offered Rate (LIBOR). These floating-rate CMOs may be backed by fixed-rate or adjustable-rate mortgages. Floating-rate CMOs are typically issued with lifetime caps on the coupon rate. These caps, similar to the caps
on adjustable-rate mortgages, represent a ceiling beyond which the coupon rate on a floating-rate CMO may not be increased regardless of increases in the interest rate index to which the floating-rate CMO is geared. The structure and performance of
floating-rate tranches will vary widely as interest rates change.
Resets
The interest
rates paid on the floating-rate CMOs in which a Fund may invest generally are readjusted at intervals of one year or less to an increment over some predetermined interest rate index. There are three main categories of indices: those based on U.S.
Treasury securities, those derived from a calculated measure such as a cost of funds index or a moving average of mortgage rates. Commonly utilized indices include: the one-year, three-year and five-year constant maturity Treasury rates, the
three-month Treasury bill rate, the six-month Treasury bill rate, rates on longer-term Treasury securities, the
11
th
District Federal Home Loan Bank Cost of Funds, the
National Median Cost of Funds, the one-, three- or six-month or one-year LIBOR, the prime rate of a specific bank or commercial paper rates. Some indices, such as the one-year constant maturity Treasury rate, closely mirror changes in market
interest rate levels. Others, such as the 11
th
District
Federal Home Loan Bank Cost of Funds index, tend to lag behind changes in market rate levels and tend to be somewhat less volatile.
18
Caps and Floors
The underlying mortgages which collateralize the
floating-rate CMOs in which a Fund may invest will frequently have caps and floors which limit the maximum amount by which the loan rate to the residential borrower may change up or down (1) per reset or adjustment interval and (2) over
the life of the loan. Some residential mortgage loans restrict periodic adjustments by limiting changes in the borrowers monthly principal and interest payments rather than limiting interest rate changes. These payment caps may result in
negative amortization.
CMOs and REMIC Certificates are subject to credit risk, interest rate risk and liquidity risk.
Generally, CMOs and REMIC Certificates issued by U.S. government agencies and instrumentalities have lower credit risk than private label CMOs and REMIC Certificates because the underlying mortgages are either guaranteed by the U.S. government or
carry an implicit guarantee of a government-sponsored enterprise. Private label CMOs and REMIC Certificates may carry higher credit risk, depending on the underlying collateral. The degree of credit risk will be reflected in the credit rating of the
security. Yields on private label CMOs and REMIC Certificates historically have been higher than the yields on CMOs and REMIC Certificates issued or guaranteed by U.S. government agencies. However, the risk of loss due to default on such instruments
is higher since they are not guaranteed by the U.S. government. The Funds will not invest in subordinated privately issued CMOs and REMIC Certificates. CMOs and REMIC Certificates have a high degree of interest rate risk. The value of a CMO and a
REMIC Certificate will fluctuate more widely in response to interest rate changes than a standard debt security.
Liquidity
risk is the risk that the investor will be unable to find a buyer interested in purchasing the security or willing to pay the desired price for the security. If a Fund has to sell the security before maturity, some of the principal could be lost.
The markets for CMOs and REMIC Certificates, particularly private label CMOs and REMIC Certificates, at times may be very thin. A Funds ability to dispose of its positions in such securities will depend upon the degree of liquidity in the
market for such securities. It is impossible to predict the degree of liquidity of such securities in the future.
The
prices of certain CMOs and REMIC Certificates, depending on their structure and the rate of prepayments, may be volatile. Some CMOs may also not be as liquid as other securities. In addition, the value of a CMO or REMIC Certificate, including those
collateralized by mortgage-backed securities issued or guaranteed by U.S. government agencies or instrumentalities, may be affected by other factors, such as the availability of information concerning the pool and its structure, the creditworthiness
of the servicing agent for the pool, the originator of the underlying assets, or the entities providing credit enhancement. The value of these securities also can depend on the ability of their servicers to service the underlying collateral and is,
therefore, subject to risks associated with servicers performance, including mishandling of documentation. A Fund is permitted to invest in other types of mortgage-backed securities that may be available in the future to the extent consistent
with its investment policies and objective.
Stripped Mortgage Securities
Stripped Mortgage Securities may be
issued by Federal agencies, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped
Mortgage Securities not issued by Federal agencies will be treated by the Funds as illiquid securities so long as the staff of the Securities and Exchange Commission maintains its position that such securities are illiquid. Stripped Mortgage
Securities issued by Federal agencies generally will be treated by the Funds as liquid securities under procedures adopted by the Funds and approved by the Board.
Stripped Mortgage Securities usually are structured with two classes that receive different proportions of the interest and principal distribution of a pool of mortgage assets. A common type of Stripped
Mortgage Security will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class
will receive all of the interest (the interest-only or IO
19
class), while the other class will receive all of the principal (the principal-only or PO class). PO classes generate income through the accretion of the deep discount at which such
securities are purchased, and, while PO classes do not receive periodic payments of interest, they receive monthly payments associated with scheduled amortization and principal prepayment from the mortgage assets underlying the PO class. The yield
to maturity on a PO or an IO class security is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A slower than expected rate of principal payments may have an adverse effect on a
PO class securitys yield to maturity. If the underlying mortgage assets experience slower than anticipated principal repayment, the Fund may fail to fully recoup its initial investment in these securities. Conversely, a rapid rate of principal
payments may have a material adverse effect on an IO class securitys yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in
these securities even if the securities are rated in the highest rating categories (Aaa by Moodys or AAA by S&P). Stripped mortgage securities have greater market volatility than other types of mortgage securities
in which a Fund invests.
A Fund may purchase Stripped Mortgage Securities for income, or for hedging purposes to protect
the Funds portfolio against interest rate fluctuations. For example, since an IO class will tend to increase in value as interest rates rise, it may be utilized to hedge against a decrease in value of other fixed-income securities in a rising
interest rate environment.
Impact of Sub-Prime Mortgage Market
A Fund may invest in mortgage-backed,
asset-backed and other fixed-income securities whose value and liquidity may be adversely affected by the critical downturn in the sub-prime mortgage lending market in the United States. Sub-prime loans, which have higher interest rates, are made to
borrowers with low credit ratings or other factors that increase the risk of default. Concerns about widespread defaults on sub-prime loans have also created heightened volatility and turmoil in the general credit markets. As a result, a Funds
investments in certain fixed-income securities may decline in value, their market value may be more difficult to determine, and a Fund may have more difficulty disposing of them.
Other Mortgage-Backed Securities
The investment adviser or subadviser anticipates that governmental,
government-related or private entities may create mortgage loan pools and other mortgage-related securities offering mortgage pass-through and mortgage-collateralized investments in addition to those described above. The mortgages underlying these
securities may include alternative mortgage instruments, that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may differ from customary long-term fixed-rate mortgages. As new types of
mortgage-related securities are developed and offered to investors, the investment adviser or subadviser will, consistent with a Funds investment objective and policies, consider making investments in such new types of mortgage-related
securities.
General Risks Of Mortgage Securities
Mortgage securities differ from conventional bonds in
that principal is paid back over the life of the mortgage security rather than at maturity. As a result, the holder of the mortgage securities (i.e., the Fund) receives monthly scheduled payments of principal and interest and may receive unscheduled
principal payments representing payments on the underlying mortgages. When the holder reinvests the payments and any unscheduled prepayments of principal it receives, it may receive a rate of interest that is lower than the rate on the existing
mortgage securities. For this reason, mortgage securities may be less effective than other types of securities as a means of locking in long-term interest rates.
20
A decline in interest rates may lead to a faster rate of repayment of the underlying
mortgages and expose a Fund to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by a Fund, the prepayment right of mortgagors may decrease or limit the increase in net asset value of a Fund
because the value of the mortgage-backed securities held by a Fund may decline more than or may not appreciate as much as the price of non-callable debt securities. To the extent market interest rates increase beyond the applicable cap or maximum
rate on a mortgage security, the market value of the mortgage security would likely decline to the same extent as a conventional fixed-rate security. The volatility of the security would likely increase, however, because the expected decline in
prepayments would lead to longer effective maturity of the underlying mortgages. An investment in mortgage securities is also subject to extension risk, which is the risk that interest rates will rise and prepayment speeds will slow, and the Fund
will be left holding the security longer than expected and miss out on opportunities to earn higher rates in the new interest rate environment.
In addition, to the extent mortgage securities are purchased at a premium, mortgage foreclosures and unscheduled principal prepayments may result in some loss of the holders principal investment to
the extent of the premium paid. On the other hand, if mortgage securities are purchased at a discount, both a scheduled payment of principal and an unscheduled prepayment of principal will increase current and total returns and, in the case of an
unscheduled payment of principal, will accelerate the recognition of income which when distributed to shareholders will be taxable as ordinary income for federal income tax purposes.
With respect to pass-through mortgage pools issued by non-governmental issuers, there can be no assurance that the private insurers
associated with such securities can meet their obligations under the policies. Securities issued by certain private organizations may not be readily marketable. The purchase of such securities is subject to each Funds limit with respect to
investment in illiquid securities.
Municipal Securities
Municipal securities consist of (i) debt obligations issued by or on behalf of public authorities to obtain funds to be used for various public facilities, for refunding outstanding obligations, for
general operating expenses, and for lending such funds to other public institutions and facilities, and (ii) certain private activity and industrial development bonds issued by or on behalf of public authorities to obtain funds to provide for
the construction, equipment, repair, or improvement of privately operated facilities. General obligation bonds are backed by the taxing power of the issuing municipality. Revenue bonds are backed by the revenues of a project or facility; tolls from
a toll bridge for example. The payment of principal and interest on private activity and industrial development bonds generally is dependent solely on the ability of the facilitys user to meet its financial obligations and the pledge, if any,
of real and personal property so financed as security for such payment.
Municipal securities include both municipal notes and
municipal bonds. Municipal notes include general obligation notes, tax anticipation notes, revenue anticipation notes, bond anticipation notes, certificates of indebtedness, demand notes and construction loan notes. Municipal bonds include general
obligation bonds, revenue or special obligation bonds, private activity and industrial development bonds.
A Funds
investments in municipal securities is limited to those obligations that are sufficiently liquid that they can be sold at or near their carrying value within a reasonably short period of time and either (i) are subject to no greater than
moderate credit risk; or (ii) if the issuer of the municipal securities, or the entity supplying the revenues or other payments from which the issue is to be paid, has been in continuous operation for less than three years, including the
operation of any predecessors, the securities are subject to a minimal or low amount of credit risk.
The municipal securities
in which a Fund may invest include both tax-exempt and taxable securities. The interest paid on most municipal obligations is generally exempt from federal income tax for most investors. However, certain municipal obligations do not qualify for
federal tax-exempt status because (i) they did not receive necessary authorization for tax-exempt treatment from state or local
21
government authorities; (ii) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing; or (iii) they finance public or private activities that do not
qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing
to replenish a municipalitys underfunded pension plan.
If permitted by a Funds investment policies, the
investment adviser or subadviser, as applicable, may purchase industrial development and pollution control bonds. These bonds are issued by or on behalf of public authorities to raise money to finance various privately-operated facilities for
business and manufacturing, housing, sports, and pollution control. These bonds are also used to finance public facilities such as airports, mass transit systems, ports and parking facilities. The payment of the principal and interest on such bonds
is dependent solely on the ability of the facilitys user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment.
Options
A call option
enables the purchaser, in return for the premium paid, to purchase securities from the writer of the option at an agreed price up to an agreed date. The advantage is that the purchaser may hedge against an increase in the price of securities it
ultimately wishes to buy or may take advantage of a rise in a particular index. Except as otherwise provided in the Prospectus or in this SAI, a Fund will only purchase call options to the extent that the premiums paid on all outstanding call
options do not exceed 20% of such Funds total assets. A Fund will only sell or write call options on a covered basis (e.g., on securities it holds in its portfolio). A put option enables the purchaser of the option, in return for the premium
paid, to sell the security underlying the option to the writer at the exercise price during the option period. The writer of the option has the obligation to purchase the security from the purchaser of the option. The advantage is that the purchaser
can be protected should the market value of the security decline or should a particular index decline. Except as otherwise provided in the Funds Prospectus or in this SAI, a Fund will only purchase put options to the extent that the premiums
on all outstanding put options do not exceed 20% of that Funds total assets. A Fund will only write put options on a secured basis. Cash or other collateral will be segregated by a Fund for such options. Whenever a Fund is required to
segregate assets for 1940 Act purposes, notations on the books of the Trusts custodian or fund accounting agent are sufficient to constitute a segregated account. A Fund will receive premium income from writing put options, although it may be
required, when the put is exercised, to purchase securities at higher prices than the current market price. At the time of purchase, a Fund will receive premium income from writing call options, which may offset the cost of purchasing put options
and may also contribute to that Funds total return. A Fund may lose potential market appreciation if the judgment of its investment adviser or subadviser is incorrect with respect to interest rates, security prices or the movement of indices.
See also Derivative Instruments.
An option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive cash from the seller equal to the difference between the closing price of the index and the exercise price of the option.
Closing transactions essentially let a Fund offset put options or call options prior to exercise or expiration. If a Fund cannot effect a closing transaction, it may have to hold a security it would
otherwise sell, or deliver a security it might want to hold.
A Fund may use exchange-traded options, and as permitted by law,
options traded over-the-counter. It is the position of the SEC that over-the-counter options are illiquid. Accordingly, a Fund will invest in such options only to the extent consistent with its 15% limit on investments in illiquid securities.
22
Options are generally considered to be derivative securities. Options may relate to
particular securities, stock indices or financial instruments, they may or may not be listed on a national securities exchange and they may or may not be issued by the Options Clearing Corporation. Options trading is a highly specialized activity
which entails greater than ordinary investment risk. Options on particular securities may be more volatile than the underlying securities, and on a percentage basis, an investment in options may be subject to greater fluctuation than an investment
in the underlying securities themselves.
A Fund will write call options only if they are covered. In the case of
a call option on a security, the option is covered if a Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash
consideration is required, cash or liquid securities in such amount will be segregated by a Fund) upon conversion or exchange of other securities held by it. For a call option on an index, the option is covered if a Fund maintains with its custodian
a diversified stock portfolio or liquid assets equal to the contract value.
A call option is also covered if a Fund holds a
call on the same security or index as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of the call written or (ii) greater than the exercise price of the call written provided the
difference is maintained by a Fund in cash or liquid securities in a segregated account with its custodian or fund accounting agent. A Fund will write put options only if they are secured by liquid assets maintained in a segregated
account by the Trusts custodian or fund accounting agent in an amount not less than the exercise price of the option at all times during the option period. Whenever a Fund is required to segregate assets for 1940 Act purposes, notations on the
books of the Trusts custodian or fund accounting agent are sufficient to constitute a segregated account. See also Derivative Instruments.A Funds obligation to sell a security subject to a covered call option written by it,
or to purchase a security subject to a secured put option written by it, may be terminated prior to the expiration date of the option by a Funds execution of a closing purchase transaction, which is effected by purchasing on an exchange an
option of the same series as the previously written option. Such a purchase does not result in the ownership of an option. A closing purchase transaction will ordinarily be effected to realize a profit on an outstanding option, to prevent an
underlying security from being called, to permit the sale of the underlying security or to permit the writing of a new option containing different terms on such underlying security. The cost of such a liquidation purchase plus transaction costs may
be greater than the premium received upon the original option, in which event a Fund will have incurred a loss in the transaction.
There is no assurance that a liquid secondary market will exist for any particular option. An option writer, unable to effect a closing purchase transaction, will not be able to sell the underlying
security (in the case of a covered call option) or liquidate the segregated securities (in the case of a secured put option) until the option expires or the optioned security is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline or appreciation in the security during such period.
Purchasing
Call Options
Except as otherwise provided in the Funds Prospectus or in this SAI, each Fund may purchase call options to the extent that premiums paid by a Fund do not aggregate more than 20% of that Funds total assets.
When a Fund purchases a call option in return for a premium paid by the Fund to the writer of the option, that Fund obtains the right to buy the security underlying the option at a specified exercise price at any time during the term of the option.
The writer of the call option, who receives the premium upon writing the option, has the obligation, upon exercise of the option, to deliver the underlying security against payment of the exercise price. The advantage of purchasing call options is
that a Fund may alter portfolio characteristics and modify portfolio maturities without incurring the cost associated with transactions, except the cost of the option.
23
Following the purchase of a call option, a Fund may liquidate its position by effecting a
closing sale transaction by selling an option of the same series as the option previously purchased. A Fund will realize a profit from a closing sale transaction if the price received on the transaction is more than the premium paid to purchase the
original call option; a Fund will realize a loss from a closing sale transaction if the price received on the transaction is less than the premium paid to purchase the original call option.
Although a Fund will generally purchase only those call options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time, and for some options no secondary market on an exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that a Fund would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of such options and upon the subsequent disposition of the
underlying securities acquired through the exercise of such options. Further, unless the price of the underlying security changes sufficiently, a call option purchased by a Fund may expire without any value to a Fund, in which event a Fund would
realize a capital loss which will be short-term unless the option was held for more than one year.
Covered Call
Writing
A Fund may write covered call options from time to time on such portions of their portfolios, without limit, as an investment adviser or subadviser determines is appropriate in pursuing a Funds investment objective. The
advantage to a Fund of writing covered calls is that the Fund receives a premium that is additional income. However, if the security rises in value, a Fund may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an exercise notice by the broker-dealer, through whom such call
option was sold, requiring the writer to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option or upon entering a closing purchase transaction. A closing purchase
transaction, in which a Fund, as writer of an option, terminates its obligation by purchasing an option of the same series as the option previously written, cannot be effected with respect to an option once the option writer has received an exercise
notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on an outstanding call
option, to prevent an underlying security from being called, to permit the sale of the underlying security or to enable a Fund to write another call option on the underlying security with either a different exercise price or expiration date or both.
A Fund may realize a net gain or loss from a closing purchase transaction depending upon whether the net amount of the original premium received on the call option is more or less than the cost of effecting the closing purchase transaction. Any loss
incurred in a closing purchase transaction may be partially or entirely offset by the premium received from a sale of a different call option on the same underlying security. Such a loss may also be wholly or partially offset by unrealized
appreciation in the market value of the underlying security. Conversely, a gain resulting from a closing purchase transaction could be offset in whole or in part by a decline in the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the market value of the underlying security during the option period if such security is sold or there is another recognition event. If a call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security equal to the difference between the cost of the underlying security and the proceeds of the sale of the security plus the amount of the premium on the option less the commission paid.
24
A Fund will write call options only on a covered basis, which means that a Fund will own the
underlying security subject to a call option at all times during the option period. Unless a closing purchase transaction is effected, a Fund would be required to continue to hold a security which it might otherwise wish to sell, or deliver a
security it would want to hold. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written.
Purchasing Put Options
Except as otherwise provided in the Funds Prospectus or in this SAI, a Fund will only
purchase put options to the extent that the premiums on all outstanding put options do not exceed 20% of the Funds total assets. Except as otherwise provided in the Funds Prospectus or in this SAI, with regard to the writing of put
options, each Fund will limit the aggregate value of the obligations underlying such put options to 50% of its total assets. The purchase of the put option on substantially identical securities held by a Fund will constitute a short sale for federal
income tax purposes, which may result in a short-term capital gain on the sale of the security if such substantially identical securities were held by that Fund for not more than one year as of the date of the short sale or were acquired by that
Fund after the short sale and on or before the closing date of the short sale.
A put option purchased by a Fund gives it the
right to sell one of its securities for an agreed price up to an agreed date. A Fund may purchase put options in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the
option (protective puts). The ability to purchase put options allows a Fund to protect unrealized gains in an appreciated security in their portfolios without actually selling the security. If the security does not drop in value, a Fund
will lose the value of the premium paid. A Fund may sell a put option which it has previously purchased prior to the sale of the securities underlying such option. Such sale will result in a net gain or loss depending on whether the amount received
on the sale is more or less than the premium and other transaction costs paid on the put option.
A Fund may sell a put option
purchased on individual portfolio securities. Additionally, a Fund may enter into closing sale transactions. A closing sale transaction is one in which a Fund, when it is the holder of an outstanding option, liquidates its position by selling an
option of the same series as the option previously purchased.
Writing Put Options
A Fund may also write put
options on a secured basis which means that a Fund will segregate liquid assets with its custodian or fund accounting agent in an amount not less than the exercise price of the option at all times during the option period. Whenever a Fund is
required to segregate assets, notations on the books of the Trusts custodian or fund accounting agent are sufficient to constitute a segregated account. The amount of liquid assets held in the segregated account will be adjusted on a daily
basis to reflect changes in the market value of the securities covered by the put option written by a Fund. Secured put options will generally be written in circumstances where the investment adviser or subadviser wishes to purchase the underlying
security for a Funds portfolio at a price lower than the current market price of the security. In such event, that Fund would write a secured put option at an exercise price which, reduced by the premium received on the option, reflects the
lower price it is willing to pay. See also Derivative Instruments.
Following the writing of a put option, a Fund
may wish to terminate the obligation to buy the security underlying the option by effecting a closing purchase transaction. This is accomplished by buying an option of the same series as the option previously written. However, a Fund may not effect
such a closing transaction after it has been notified of the exercise of the option.
25
Foreign Currency Options
A Fund may buy or sell put and call options on
foreign currencies either on exchanges or in the over-the-counter market. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a
foreign currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits that may limit the ability of
a Fund to reduce foreign currency risk using such options.
Publicly Traded Partnerships
Publicly traded partnerships are generally limited partnerships (or limited liability companies), the units of which may be listed and
traded on a securities exchange or are readily tradeable on a secondary market (or its substantial equivalent). The Funds may invest in publicly traded partnerships that are treated as partnerships for federal income tax purposes, subject to certain
limitations contained in the Internal Revenue Code of 1986, as amended (the Code), for qualification as a regulated investment company. These include master limited partnerships (MLPs) and other entities qualifying under
limited exceptions in the Code. Many MLPs derive income and gain from the exploration, development, mining or production, processing, refining, transportation or marketing of any mineral or natural resource or from real property. The value of MLP
units fluctuates predominantly based on prevailing market conditions and the success of the MLP. The Funds may purchase common units of a MLP on an exchange as well as directly from the MLP or other parties in private placements. Unlike owners of
common stock of a corporation, owners of common units of a MLP have limited voting rights and have no ability to annually elect directors. MLPs generally distribute all available cash flow (cash flow from operations less maintenance capital
expenditures) in the form of quarterly distributions, but a Fund will be required to include in its taxable income its allocable share of the MLPs income regardless of whether any distributions are made by the MLP. Thus, if the distributions
received by a Fund are less than that Funds allocable share of the MLPs income, the Fund may be required to sell other securities so that it may satisfy the requirements to qualify as a regulated investment company and avoid federal
income and excise taxes. Common units typically have priority as to minimum quarterly distributions. In the event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the
MLP.
An investment in MLP units involves some risks that differ from an investment in the common stock of a corporation.
Holders of MLP units have limited control and voting rights on matters affecting the partnership. Holders of MLP units of a particular MLP are also exposed to a remote possibility of liability for the obligations of that MLP under limited
circumstances not expected to be applicable to the Funds. A Fund will not acquire any interests in MLPs that are believed to expose the assets of a Fund to liabilities incurred by the MLP. In addition, the value of a Funds investment in MLPs
depends largely on the MLPs being treated as partnerships for federal income tax purposes. If an MLP does not meet certain federal income tax requirements to maintain partnership status, or if it is unable to do so because of tax law changes, it
would be taxed as a corporation. In that case, the MLP would be obligated to pay income tax at the entity level and distributions received by a Fund generally would be taxed as dividend income. As a result, there could be a reduction in a
Funds cash flow and there could be a material decrease in the value of that Funds shares.
Real Estate Investment Trusts
Securities of real estate investment trusts (REITs) may be affected by changes in the value of their
underlying properties and by defaults by borrowers or tenants. Mortgage REITs may be affected by the quality of the credit extended. Furthermore, REITs are dependent on specialized management skills. Some REITs may have limited diversification and
may be subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or
unitholders, and may be subject to defaults by borrowers and to self-liquidations. Investment in REITs may subject a Fund to risks associated with the direct ownership of real estate, such as decreases in real estate values,
26
overbuilding, increased competition and other risks related to local or general economic conditions, increases in operating costs and property taxes, changes in zoning laws, casualty or
condemnation losses, possible environmental liabilities, regulatory limitations on rent and fluctuations in rental income. Equity REITs generally experience these risks directly through fee or leasehold interests, whereas mortgage REITs generally
experience these risks indirectly through mortgage interests unless the mortgage REIT forecloses on the underlying real estate. Changes in interest rates may also affect the value of a Funds investment in REITs. In addition, the performance of
a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Code, or its failure to maintain exemption from registration under the 1940 Act. Rising interest rates may cause the value of the REIT securities in which
a Fund may invest to fall. Conversely, falling interest rates may cause their value to rise. Changes in the value of portfolio securities does not necessarily affect cash income derived from these securities but may affect a Funds net asset
value.
Repurchase Agreements
A Fund may enter into repurchase agreements pursuant to which a Fund purchases portfolio assets from a bank or broker-dealer concurrently with an agreement by the seller to repurchase the same assets from
a Fund at a later date at a fixed price. If the seller should default on its obligation to repurchase the underlying security, a Fund may experience delay or difficulty in exercising its right to realize upon the security. Additionally, a Fund may
incur a loss if the value of the security should decline, as well as disposition costs in liquidating the security.
The
repurchase price generally equals the price paid by a Fund plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement).
The financial institutions with which a Fund may enter into repurchase agreements are banks and non-bank dealers of U.S. government
securities that are listed on the Federal Reserve Bank of New Yorks list of reporting dealers and banks, if such banks and non-bank dealers are deemed creditworthy by the investment adviser or subadviser. The investment adviser or subadviser
will continue to monitor the creditworthiness of the seller under a repurchase agreement and will require the seller to maintain during the term of the agreement the value of the securities subject to the agreement at not less than the repurchase
price.
Restricted Securities
Each Fund will limit investments in securities of issuers which a Fund is restricted from selling to the public without registration under the 1933 Act, to no more than 5% of a Funds total assets,
excluding restricted securities eligible for resale pursuant to Rule 144A or Regulation S under the 1933 Act, that have been determined to be liquid by the Funds investment adviser or subadviser, pursuant to guidelines adopted by the Board.
Securities of foreign issuers that are restricted as to resale in the U.S., but are freely tradeable in their local market, are not subject to this restriction.
Reverse Repurchase Agreements
Reverse repurchase agreements involve the
sale of securities held by a Fund pursuant to that Funds agreement to repurchase the securities at an agreed upon price, date and rate of interest. During the reverse repurchase agreement period, a Fund continues to receive principal and
interest payments on these securities. Such agreements are considered to be borrowings under the 1940 Act and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Fund will segregate
cash or liquid securities in an amount at least equal to the market value of the securities, plus accrued interest. (Liquid securities as used in the Prospectus and this SAI include
27
equity securities and debt securities that are unencumbered and marked-to-market daily.) Whenever a Fund is required to segregate assets for 1940 Act purposes, notations on the books of the
Trusts custodian or fund accounting agent are sufficient to constitute a segregated account. Reverse repurchase agreements involve the risk that the market value of the securities sold by a Fund may decline below the price at which a Fund is
obligated to repurchase such securities. See also Derivative Instruments.
Royalty Income Trusts
A royalty income trust is a trust whose securities are listed on a securities exchange, generally in Canada or the U.S., and which
controls an underlying company whose business is the acquisition, exploitation, production and sale of oil and natural gas. Royalty income trusts generally pay out to unit holders the majority of the cash flow that they receive from the production
and sale of underlying oil and natural gas reserves. The amount of distributions paid on royalty income trust units will vary from time to time based on production levels, commodity prices, royalty rates and certain expenses, deductions and costs,
as well as on the distribution payout ratio policies adopted. As a result of distributing the bulk of their cash flow to unitholders, the ability of a royalty income trust to finance internal growth through exploration is limited. Royalty income
trusts generally grow through acquisition of additional oil and gas properties or producing companies with proven reserves of oil and gas, funded through the issuance of additional equity or, where the trust is able, additional debt. Royalty income
trusts are exposed to many of the same risks as energy and natural resources companies, such as commodity pricing risk, supply and demand risk and depletion and exploration risk.
Rule 144A Securities
A Fund may purchase securities which are not
registered under the 1933 Act but which can be sold to qualified institutional buyers in accordance with Rule 144A under the 1933 Act. Any such security will not be considered illiquid so long as it is determined by the investment
adviser or subadviser, under guidelines approved by the Board, that an adequate trading market exists for that security. This investment practice could have the effect of increasing the level of illiquidity in a Fund during any period that qualified
institutional buyers become uninterested in purchasing these restricted securities.
Securities Lending
A Fund may seek additional income at times by lending its portfolio securities to broker-dealers and financial institutions provided
that: (1) the loan is secured by collateral that is continuously maintained in an amount at least equal to the current market value of the securities loaned, (2) the Fund may call the loan at any time with proper notice and receive the
securities loaned, (3) the Fund will continue to receive interest and/or dividends paid on the loaned securities and may simultaneously earn interest on the investment of any cash collateral, and (4) the aggregate market value of all
securities loaned by the Fund will not at any time exceed 25% of the total assets of such Fund.
Collateral will normally
consist of cash or cash equivalents, securities issued by the U.S. government or its agencies or instrumentalities or irrevocable letters of credit. Securities lending by a Fund involves the risk that the borrower may fail to return the loaned
securities or maintain the proper amount of collateral. Therefore, a Fund will only enter into such lending after a review by the investment adviser or subadviser of the borrowers financial statements, reports and other information as may be
necessary to evaluate the creditworthiness of the borrower. Such reviews will be conducted on an ongoing basis as long as the loan is outstanding.
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Short Sales
Selling securities short involves selling securities the seller (e.g., a Fund) does not own (but has borrowed) in anticipation of a decline in the market price of such securities. To deliver the
securities to the buyer, the seller must arrange through a broker to borrow the securities and, in so doing, the seller becomes obligated to replace the securities borrowed at their market price at the time of the replacement. In a short sale, the
proceeds the seller receives from the sale are retained by a broker until the seller replaces the borrowed securities. The seller may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the securities
until they are replaced.
The Fund may incur a loss as a result of the short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces the borrowed security, and the Fund may realize a gain if the security declines in price between those same dates. Although the Funds potential for gain as a result of
a short sale is limited to the price at which it sold the security short less the cost of borrowing the security, the potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. To borrow
the security, the Fund may also be required to pay a premium, which would increase the cost of the security sold. The Fund may not always be able to close out a short position at a particular time or at an acceptable price. A lender may request that
the borrowed securities be returned to it on short notice, and the Fund may have to buy the borrowed securities at an unfavorable price. If this occurs at a time when other short sellers of the same security also want to close out their positions,
it is more likely that the Fund will have to cover its short sale at an unfavorable price and potentially reduce or eliminate any gain, or cause a loss, as a result of the short sale.
A short sale is against the box if, at all times during which the short position is open, a Fund owns at least an equal
amount of the securities or securities convertible into, or exchangeable without further consideration for, securities of the same issuer as the securities that are sold short.
A Fund may also maintain short positions in forward currency exchange transactions, in which a Fund agrees to exchange currency that it
does not own at that time for another currency at a future date and specified price in anticipation of a decline in the value of the currency sold short relative to the currency that a Fund has contracted to receive in the exchange. To ensure that
any short position of a Fund is not used to achieve leverage, a Fund segregates cash or liquid assets equal to the fluctuating market value of the currency as to which any short position is being maintained. Whenever a Fund is required to segregate
assets for 1940 Act purposes, notations on the books of the Trusts custodian or fund accounting agent are sufficient to constitute a segregated account.
Short-Term Trading
Securities may be sold in anticipation of a market
decline or purchased in anticipation of a market rise and later sold. In addition, a security may be sold and another purchased at approximately the same time to take advantage of what a Fund believes to be a temporary disparity in the normal yield
relationship between the two securities. Such trading may be expected to increase a Funds portfolio turnover rate and the expenses incurred in connection with such trading and may result in recognition of greater levels of short-term capital
gain, which is taxed for federal income tax purposes, to shareholders as ordinary income when distributed by a Fund.
Swap
Agreements
A Fund may enter into interest rate, index, credit default, equity and currency exchange rate swap agreements.
These transactions would be entered into in an attempt to obtain a particular return when it is considered desirable to do so, possibly at a lower cost to a Fund than if the Fund had invested directly in the asset that yielded the desired return.
Swap agreements are two-party contracts entered into primarily
29
by institutional investors for periods ranging from a few weeks to more than one year. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of
return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a
normal amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a basket of securities representing a particular index.
A Fund may enter into credit default swap agreements. The buyer in a credit default contract is obligated to pay
the seller a periodic stream of payments over the term of the contract provided that no credit event with respect to any underlying reference obligation has occurred. If a credit event occurs, the seller typically must pay the buyer the
par value (full notional value) of the reference obligation in exchange for the reference obligation. A Fund may either be the buyer or the seller in the transaction. If a Fund is a buyer and no credit event occurs, the Fund loses its
investment and recovers nothing. However, if a credit event occurs, the buyer receives full notional value for a reference obligation that may have little or no value. As a seller, a Fund typically receives a fixed rate of income throughout the term
of the contract, which typically is between six months and three years, provided a credit event does not occur. If a credit event occurs, the seller typically must pay the buyer the full notional amount of the reference obligation. Credit default
swaps involve more risk than if a Fund had invested in the reference obligation directly because the Fund can obtain credit exposure in excess of its cash obligations under the agreement.
Most swap agreements entered into by a Fund calculate the obligations of the parties to the agreement on a net basis.
Consequently, the Funds current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the
agreement (the net amount). The Funds current obligations under a swap agreement will be accrued daily (offset against amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by
the maintenance of a segregated account consisting of liquid assets to limit any potential leveraging of the Funds portfolio. Whenever a Fund is required to segregate assets for 1940 Act purposes, notations on the books of the Trusts
custodian or fund accounting agent are sufficient to constitute a segregated account. See also Derivative Instruments.
Obligations under swap agreements so covered will not be construed to be senior securities for purposes of the Funds investment restriction concerning senior securities. Except as
otherwise indicated in the Funds Prospectus or in this SAI, a Fund will not enter into a swap agreement with any single party if the net amount owed or to be received under existing contracts with that party would exceed 5% of the Funds
assets.
Whether a Funds use of swap agreements will be successful in furthering its investment objective will depend on
the investment adviser or subadvisers ability to correctly predict whether certain types of investments are likely to produce greater returns than other investments. Because they are two-party contracts and because they may have terms of
greater than seven days, swap agreements may be considered to be illiquid investments. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement
counterparty. A Fund will enter into swap agreements only with counterparties that meet certain standards for creditworthiness (generally, such counterparties would have to be eligible counterparties under the terms of the Funds repurchase
agreement guidelines). Certain restrictions imposed by the Code for qualification as a regulated investment company may limit a Funds ability to use swap agreements. The swap market is a relatively new market and is largely unregulated. It is
possible that developments in the swap market, including potential government regulation, could adversely affect the Funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
30
Temporary Defensive Positioning
The investments and strategies described throughout the Funds Prospectus are those the subadvisers intend to use under normal
circumstances. When a subadviser determines that market or other conditions warrant, a Fund may invest up to 100% of its assets in money market instruments or hold U.S. dollars. When a Fund is investing for temporary or defensive purposes, it is not
pursuing its investment goal.
Unit Investment Trusts
A Unit Investment Trust (UIT) is a type of investment company. Investments in UITs are subject to regulations limiting a Funds acquisition of investment company securities. Standard and
Poors Depositary Receipts (SPDRs), DIAMONDS, MDYs and similar investments are interests in UITs that may be obtained directly from the UIT or purchased in the secondary market. SPDRs consist of a portfolio of securities
substantially similar to the component securities of the Standard and Poors 500 Composite Stock Price Index. DIAMONDS and MDYs consist of a portfolio of securities substantially similar to the component securities of the Dow Jones Industrial
Average and of the Standard and Poors MidCap 400 Index, respectively.
The price of a UIT interest is derived and
based upon the securities held by the UIT. Accordingly, the level of risk involved in the purchase or sale of a UIT interest is similar to the risk involved in the purchase or sale of traditional common stock, with the exception that the pricing
mechanism for UITs is based on a basket of stocks. Disruptions in the markets for the securities underlying UITs purchased or sold by a Fund could result in losses on UITs. Trading in UITs involves risks similar to the risks, involved in the writing
of options on securities, described above under Options.
Interests in UITs are not individually redeemable,
except upon termination of the UIT. To redeem, a Fund must accumulate a certain amount of UIT interests. The liquidity of small holdings of UITs, therefore, depends upon the existence of a secondary market. Upon redemption of a UIT interest, a Fund
receives securities and cash identical to the deposit required of an investor wishing to purchase a UIT interest that day.
Zero Coupon
Bonds
Zero coupon securities are debt securities issued or sold at a discount from their face value that do not entitle
the holder to any periodic payment of interest prior to maturity, a specified redemption date or a cash payment date. The amount of the discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and perceived credit quality of the issuer.
Zero coupon securities also may take the form of debt
securities that have been stripped of their unmatured interest coupons, the coupons themselves and receipts or certificates representing interests in such stripped debt obligations and coupons. The market prices of zero coupon securities are
generally more volatile than the market prices of interest-bearing securities and respond more to changes in interest rates than interest-bearing securities with similar maturities and credit qualities. For federal income tax purposes, the original
issue discount on the zero coupon bonds must be included ratably in the income of a Fund as the income accrues even though payment has not been received. The Funds nevertheless intend to distribute an amount of cash equal to the currently accrued
original issue discount, and this may require liquidating securities at times they might not otherwise do so and may result in capital gain or loss.
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Other Investments
The Board may, in the future, authorize a Fund to invest in securities other than those listed here and in the Funds Prospectus, provided that such investment would be consistent with that
Funds investment objective and that it would not violate any fundamental investment policies or restrictions applicable to that Fund.
CFTC Regulation
A
notice of eligibility for exclusion from the definition of the term commodity pool operator has been filed with the National Futures Association with respect to each Fund. On February 9, 2012, the Commodity Futures Trading
Commission (CFTC) adopted amendments to its rules that became effective on December 31, 2012. A Fund that seeks to claim the exclusion after December 31, 2012 would be limited in its ability to use futures and options on
futures or commodities or engage in swap transactions. If a Fund was no longer able to claim the exclusion, Aston Asset Management, LP (Aston or the Adviser) would be required to register as a commodity pool
operator, and such Fund and the Adviser would be subject to regulation under the Commodity Exchange Act. The application of the amended rules to funds-of-funds remains unclear. Accordingly, the Adviser has filed for relief with
respect to the Funds that operate as fund-of-funds which defers compliance until the later of June 30, 2013 or six months following the effective date of any CFTC guidance regarding the application of the amended rules to
fund-of-funds.
ASTON
/
Lake Partners LASSO Alternatives Fund
and ASTON Dynamic Allocation Fund
Fund-of-Funds Structure
The following supplements the information contained above and in the Prospectus concerning the investment
objective, strategies and risks of investing in
ASTON
/
Lake Partners LASSO Alternatives Fund and ASTON Dynamic Allocation Fund. For this portion of the SAI, the terms Fund and Funds refer only to ASTON/Lake Partners
LASSO Alternatives Fund and ASTON Dynamic Allocation Fund.
Section 12(d)(1)(A) of the 1940 Act, in relevant part,
prohibits a registered investment company from acquiring shares of an investment company if after such acquisition the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets
of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company except in reliance on certain exceptions contained in the 1940 Act and the rules and regulations
thereunder. The Trust and Aston Asset Management, LP have obtained an exemptive order from the SEC that allows the Funds to invest in both affiliated and unaffiliated investment companies in excess of the limits in Section 12(d)(1) of the 1940
Act subject to the terms and conditions of such order. Prior to its investment in shares of an unaffiliated investment company in excess of the limit in section 12(d)(1)(A)(i) of the 1940 Act, the acquiring fund and the underlying fund must execute
an agreement that is designed to ensure that the board of the underlying fund and its investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order.
Notwithstanding the foregoing, the Funds generally may purchase or redeem, without limitation, shares of any affiliated or unaffiliated
money market funds, including unregistered money market funds, so long as the Funds do not pay a sales load or service fee in connection with the purchase, sale or redemption or if such fees are paid, the Funds investment adviser must waive
its management fee in an amount necessary to offset the amounts paid.
32
Other Investment Companies
Investment Company Shares
As indicated above, investments by the
Funds in underlying funds will be subject to the limitations of the 1940 Act, the rules and regulations thereunder and in certain circumstances SEC exemptive orders. A Fund may rely on SEC orders that permit it to invest in certain underlying fund
shares beyond the limits contained in the 1940 Act, subject to the terms and conditions of those orders. By investing in securities of an underlying fund, a Funds shareholders will indirectly bear the fees and expenses of that underlying fund
in addition to a Funds own fees and expenses. Pursuant to SEC rules, the Funds may invest in shares of affiliated and unaffiliated money market funds.
Open-End Mutual Funds
Open-end mutual funds are investment
companies that issue new shares continuously and redeem shares daily. The risks of investment of open-end mutual funds typically reflect securities in which the funds invest. The net asset value per share of an open-end fund will fluctuate daily
depending upon the performance of the securities held by the fund. Open-end mutual funds are offered in a wide variety of asset classes including: large cap, mid cap, small cap, equity, international, sector, fixed-income and alternative
non-traditional strategies. Each type of fund may have a different investment objective and strategy and different investment portfolio. Different funds may also be subject to different risks, volatility and fees and expenses. When a Fund invests in
shares of an open-end fund, shareholders of the Fund bear their proportionate share of the open-end funds fees and expenses, as well as their share of the Funds fees and expenses.
Exchange-Traded Funds
ETFs are typically organized as open-end investment companies or unit investment trusts. ETFs are traded on exchanges similar to stocks. A passive ETF is an investment company that seeks to track the
performance of an index (before fees and expenses) by holding in its portfolio either the securities that comprise the index or a representative sample of the securities in the index. An actively managed ETF is an investment company that seeks to
outperform the performance of an index. ETFs offer investment in a wide variety of asset classes, including: large-cap, mid-cap, small-cap, equity, international, commodities, real estate, fixed income, derivatives and currency. ETFs offer
investments in a range of securities including index based, actively managed and target date funds. As new ETF products become available, the asset classes and strategies available to the Funds will expand.
Unlike interests in conventional mutual funds, ETFs are traded throughout the day on a national securities exchange, whereas mutual fund
interests are typically only bought and sold at closing net asset values. ETFs are designed to be tradable in the secondary market on a national securities exchange on an intra-day basis, and to be created and redeemed principally in-kind in large
blocks (typically 50,000 shares), called creation units, at each days next calculated net asset value. The in-kind creation or redemption is for a portfolio of the underlying securities of the ETF. There may also be a cash component. These
arrangements are designed to protect ongoing shareholders from adverse effects on the portfolio of the ETF that could arise from frequent cash creation and redemption transactions. In a conventional mutual fund, redemptions can have an adverse tax
impact on taxable shareholders because of the mutual funds need to sell portfolio securities to obtain cash to meet fund redemptions. These sales
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may generate taxable gains for the shareholders of the mutual fund, whereas an ETFs in-kind redemption mechanism generally will not lead to a federal income tax event for a Fund or its
ongoing shareholders. The Funds do not intend to purchase and redeem creation units, but intend to purchase and sell ETFs primarily through national securities exchanges.
There is a risk that the ETFs in which the Funds invest may terminate due to extraordinary events that may cause any of the service providers to the ETFs, such as the trustee or sponsor, to close or
otherwise fail to perform their obligations to the ETF. Also, because the ETFs in which the Funds intend to principally invest may be granted licenses by agreement to use the indices as a basis for determining their compositions and/or otherwise to
use certain trade names, the ETFs may terminate if such license agreements are terminated. In addition, an ETF may terminate if its entire net asset value falls below a certain amount. Although the Funds believe that, in the event of the termination
of an underlying ETF, they will be able to invest instead in shares of an alternate ETF tracking the same market index or another market index with the same general market, there is no guarantee that shares of an alternate ETF would be available for
investment at that time. Unlike many investment companies, many ETFs are not currently actively managed. Thus, an ETF would not necessarily sell a security because the securitys issuer was in financial trouble unless that security
is removed from the index.
Closed-End Funds
Closed-end funds are investment companies that typically issue a fixed number of shares that trade on a securities exchange or
over-the-counter. The risks of investment in closed-end funds typically reflect the risk of the types of securities in which the funds invest. Investments in closed-end funds are subject to the additional risk that shares of the fund may trade at a
premium or discount to their net asset value per share. Closed-end funds come in many varieties and can have different investment objectives, strategies and investment portfolios. They also can be subject to different risks, volatility and fees and
expenses. When the Fund invests in shares of a closed-end fund, shareholders of the Fund bear their proportionate share of the closed-end funds fees and expenses, as well as their share of the Funds fees and expenses.
Exchange-Traded Notes
The Funds and underlying funds may invest in ETNs. ETNs are securities that combine aspects of a bond and an ETF. ETN returns are based
upon the performance of a market index or other reference asset less fees, and can be held to maturity as a debt security. ETNs are traded on a securities exchange. Their value is based on their reference index or strategy and the credit quality of
the issuer. ETNs are subject to the additional risk that they may trade at a premium or discount to value attributable to their reference index. When a Fund invests in an ETN, shareholders of the Fund bear their proportionate share of the ETNs
fees and expenses, as well as their share of the Funds fees and expenses. There may also not be an active trading market available for some ETNs. Additionally, trading of ETNs may be halted or delisted by the listing exchange.
Illiquid Securities
A
Fund may invest up to 15% of its net assets in securities that are illiquid. Securities are generally considered illiquid if they cannot be disposed of in seven days in the ordinary course of business at approximately the price at which the Fund
values the security. The underlying funds may also invest in illiquid securities. Illiquid securities will generally include but are not limited to: insurance funding agreements, repurchase agreements and time deposits with notice/termination dates
in excess of seven days; unlisted over-the-counter options; swap agreements, interest rate caps, floors and collars; and certain securities which are subject to trading restrictions because they are not registered under the 1933 Act. Foreign
securities that are restricted as to resale in the U.S., but are freely tradable in their local market, are not considered illiquid.
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Investment Risk
The underlying funds cover a wide variety of asset classes. The risks associated with various types of underlying funds that invest in different asset classes are described below. As new underlying fund
products become available, a Fund will be able to invest in those funds, consistent with its investment objective and subject to its investment policies and restrictions.
Aggressive Investment Technique Risk
Underlying funds may use
investment techniques and financial instruments that could be considered aggressive, including the use of futures contracts, options on futures contracts, securities and indices, forward contracts, swap agreements and similar instruments. An
underlying funds investment in financial instruments may involve a small investment relative to the amount of investment exposure assumed and may result in losses that exceed the amounts invested in those instruments. Such instruments,
particularly when used to create leverage, may expose the underlying fund to potentially dramatic changes (losses or gains) in the value of the instruments and imperfect correlation between the value of the instruments and the relevant security or
index. The use of aggressive investment techniques also exposes an underlying fund to risks different from, or possibly greater than, the risks associated with investing directly in securities on which the aggressive technique is based, including:
1) the risk that an instrument is temporarily mispriced; 2) credit, performance or documentation risk on the amount each underlying fund expects to receive from a counterparty; 3) the risk that securities prices, interest rates and currency markets
will move adversely and an underlying fund will incur significant losses; 4) imperfect correlation between the price of financial instruments and movements in the prices of the underlying securities; 5) the risk that the cost of holding a financial
instrument might exceed its total return; and 6) the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, both of which may make it difficult or impossible to adjust an
underlying funds position in a particular instrument when desired.
Currency Risk
The Funds assets and net asset value are denominated in U.S. dollars. Investing in underlying funds that have exposure to
currencies other than the U.S. dollar involves certain risks. The value of such underlying funds shares relate directly to the value of foreign securities held by the underlying fund. Fluctuations in the price of foreign securities could
materially and adversely affect the value of the underlying funds shares. The price of the currency may fluctuate widely. Several factors may affect the price of the currency, including, but not limited to: debt level and trade deficit;
inflation rates of the United States and foreign countries and investors expectations concerning inflation rates; investment and trading activities of mutual funds, hedge funds and currency funds; and global or regional political, economic or
financial events and conditions. In addition, a currency may not maintain its long-term value in terms of purchasing power in the future. When the price of the countrys currency declines relative to another currency, it is expected that the
price of an underlying fund holding such a currency will decline as well.
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Commodity Risk
Investing in underlying funds that have exposure to investments in the commodities market may subject the Funds to greater volatility
than investments in traditional securities. Commodities include metals, energy, agricultural products, livestock and minerals. Certain underlying funds may buy certain commodities (such as gold) or may invest in commodity-linked derivative
instruments. The value of commodities and commodity contracts are affected by a variety of factors, including, but not limited to: global supply and demand, changes in interest rates, commodity index volatility, and factors affecting a particular
industry or commodity, such as drought, floods, weather, livestock disease, embargos, government regulation, tariffs and taxes, world events and economic, political and regulatory developments. The Funds ability to invest in underlying funds
that invest in or have exposure to investments in the commodities market may be significantly limited by the federal income tax rules applicable to regulated investment companies.
Concentration Risk
Some underlying funds may be concentrated in a narrow industry. Concentration risk results from maintaining exposure to issuers conducting business in a specific industry. The risk of concentrating
investments in a limited number of issuers in a particular industry is that the underlying fund will be more susceptible to the risks associated with that industry than a fund that does not concentrate its investments. An index-based underlying fund
may have significant exposure to individual companies or industry sectors that constitute a significant portion of the referenced index. As a result, such an underlying fund will be more susceptible to the risks associated with that specific company
or industry sector, which may be different from the risks generally associated with the companies contained in the index. In addition, the
ASTON/Lake Partners LASSO Alternatives Fund
limits its investments to a limited universe of investment
companies that focus on hedging or alternative investment strategies.
Derivative Instruments Risk
The term derivatives has been used to identify a range and variety of financial instruments. In general, a derivative is
commonly defined as a financial instrument whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset, a specific security or an index of securities. As is the case with other types
of investments, an underlying funds derivative instruments may entail various types and degrees of risk, depending upon the characteristics of the derivative instrument and an underlying funds overall portfolio. Underlying funds may use
derivative instruments for hedging purposes, to maintain liquidity or in anticipation of changes in the composition of its portfolio holdings or as otherwise provided in an underlying funds prospectus.
The types of derivative securities in which underlying funds invest may include, but are not limited to, forward commitments, foreign
currency contracts, futures contracts, options, swap agreements and commodity-linked derivative instruments.
Forward
Foreign Currency Exchange Contracts Risk.
An underlying fund may engage in certain foreign currency transactions, such as forward foreign currency exchange contracts, to guard against fluctuations in currency exchange rates in relation to the
U.S. dollar or to the weighting of particular foreign currencies. In addition, an underlying fund may buy and sell foreign currency futures contracts and options on foreign currencies and foreign currency futures.
A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. By entering into a forward foreign currency exchange contract, an underlying fund locks in the exchange
rate between the currency it will deliver and the currency it will receive for the duration of the contract. As a result, an underlying fund reduces its exposure to changes in the value of the currency it will deliver and increases its exposure to
changes in the value of the currency it will exchange into. Contracts to sell foreign currencies would limit any potential gain which might be realized by an underlying fund if the value of the hedged currency
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increases. An underlying fund may enter into these contracts for the purpose of hedging against foreign exchange risks arising from an underlying funds investment or anticipated investment
in securities denominated in foreign currencies. Such hedging transactions may not be successful and may eliminate any chance for an underlying fund to benefit from favorable fluctuations in relevant foreign currencies.
An underlying fund may also enter into forward foreign currency exchange contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one currency to another. To the extent that it does so, an underlying fund will be subject to the additional risk that the relative value of currencies will be different than
anticipated by the particular funds investment adviser or subadviser. An underlying fund may use one currency (or a basket of currencies) to hedge against adverse changes in the value of another currency (or a basket of currencies) when
exchange rates between the two currencies are positively correlated. An underlying fund may also use foreign currency futures contracts and related options on currencies for the same reasons for which forward foreign currency exchange contracts are
used.
The use of currency transactions can result in an underlying fund incurring losses as a result of a number of factors
including the imposition of exchange controls, suspension of settlements, or the inability to deliver or receive a specified currency.
Futures Contracts Risk.
Futures contracts are generally considered to be derivative securities. An underlying fund may engage in such practices for hedging purposes or to maintain liquidity or as
otherwise provided in the funds prospectus. Typically, maintaining a futures contract or selling an option thereon requires an underlying fund to deposit with a financial intermediary as security for its obligations an amount of cash or other
specified assets (initial margin) which initially is typically 1% to 10% of the face amount of the contract (but may be higher in some circumstances). Additional cash or assets (variation margin) may be required to be deposited thereafter on a daily
basis as the marked- to- market value of the contract fluctuates.
At maturity, a futures contract obligates an underlying
fund to take or make delivery of certain securities or the cash value of a securities index. An underlying fund may sell a futures contract in order to offset a decrease in the market value of its portfolio securities that might otherwise result
from a market decline. An underlying fund may do so either to hedge the value of its portfolio of securities as a whole, or to protect against declines, occurring prior to sales of securities, in the value of the securities to be sold. Conversely,
an underlying fund may purchase a futures contract in anticipation of purchases of securities. In addition, an underlying fund may utilize futures contracts in anticipation of changes in the composition of its portfolio holdings.
For federal income tax purposes, some gains derived by a fund from the use of such instruments will be treated as a combination of
short-term and long-term capital gains and, if not offset by realized capital losses incurred by a fund, will be distributed to shareholders and will be taxable to shareholders as a combination of ordinary income and long-term capital gain.
Underlying funds may purchase and sell call and put options on futures contracts traded on an exchange or board of trade.
When a fund purchases an option on a futures contract, it has the right to assume a position as a purchaser or seller of a futures contract at a specified exercise price at any time during the option period. When a fund sells an option on a futures
contract, it becomes obligated to purchase or sell a futures contract if the option is exercised. In anticipation of a market advance, a fund may purchase call options on futures contracts as a substitute for the purchase of futures contracts to
hedge against a possible increase in the price of securities that a fund intends to purchase. Similarly, if the market is expected to decline, an underlying fund might purchase put options or sell call options on futures contracts rather than sell
futures contracts.
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Underlying funds may enter into a contract for the purchase or sale for future delivery of
securities, including index contracts. While futures contracts provide for the delivery of securities, deliveries usually do not occur. Contracts are generally terminated by entering into offsetting transactions.
Underlying funds may enter into such futures contracts to protect against the adverse effects of fluctuations in security prices or
interest rates without actually buying or selling the securities. For example, if interest rates are expected to increase, an underlying fund might enter into futures contracts for the sale of debt securities. Such a sale would have much the same
effect as selling an equivalent value of the debt securities owned by an underlying fund. If interest rates did increase, the value of the debt securities in the portfolio would decline, but the value of the futures contracts to an underlying fund
would increase at approximately the same rate, thereby keeping the net asset value of an underlying fund from declining as much as it otherwise would have. Similarly, when it is expected that interest rates may decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of securities at higher prices. Since the fluctuations in the value of futures contracts is expected to be similar to those of debt securities, an underlying fund could take advantage of the
anticipated rise in value of debt securities without actually buying them until the market had stabilized. At that time, the futures contracts could be liquidated and an underlying fund could then buy debt securities on the cash market.
A stock index futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement was made. Open futures contracts are valued on a daily basis and an underlying fund may
be obligated to provide or receive cash reflecting any decline or increase in the contracts value. No physical delivery of the underlying stocks in the index is made in the future.
With respect to options on futures contracts, when an underlying fund is temporarily not fully invested, it may purchase a call option on
a futures contract to hedge against a market advance. The purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based, or the price of the underlying debt securities, it may or may not be less risky than ownership of the futures contract or underlying debt securities. As with the purchase of futures
contracts, when an underlying fund is not fully invested, it may purchase a call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial hedge against the declining price of the security or foreign currency that is deliverable upon exercise of the futures contract. If
the futures price at the expiration of the option is below the exercise price, an underlying fund will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in the value of an
underlying funds portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against the increasing price of the security or foreign currency, which is deliverable upon exercise of the futures contract. If
the futures price at the expiration of the option is higher than the exercise price, an underlying fund will retain the full amount of the option premium, which provides a partial hedge against any increase in the price of securities that an
underlying fund intends to purchase.
Call and put options on stock index futures are similar to options on securities except
that, rather than the right to purchase or sell stock at a specified price, options on a stock index future give the holder the right to receive cash. Upon exercise of the option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated balance in the writers futures margin account, which represents the amount by which the market price of the futures
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contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the futures contract. If an option is exercised on the last trading day prior
to the expiration date of the option, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing price of the futures contract on the expiration date.
If a put or call option which an underlying fund has written is exercised, that underlying fund may incur a loss which will be reduced by
the amount of the premium it received. Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its options positions, an underlying funds losses from existing options on
futures may to some extent be reduced or increased by changes in the value of portfolio securities.
To the extent that market
prices move in an unexpected direction, an underlying fund may not achieve the anticipated benefits of futures contracts or options on futures contracts or may realize a loss. For example, if an underlying fund is hedged against the possibility of
an increase in interest rates and interest rates decrease instead, that underlying fund would lose part or all of the benefit of the increased value, which it has because it would have offsetting losses in its futures position. In addition, in such
situations, if an underlying fund had insufficient cash, it may be required to sell securities from its portfolio to meet daily variation margin requirements. Such sales of securities may, but will not necessarily, be at increased prices which
reflect the rising market. An underlying fund may be required to sell securities at a time when it may be disadvantageous to do so.
Options on securities, futures contracts, options on futures contracts and options on currencies may be traded on foreign exchanges. Such transactions may not be regulated as effectively as similar
transactions in the U.S., may not involve a clearing mechanism and related guarantees and are subject to the risk of governmental actions affecting trading in or the prices of foreign securities. Some foreign exchanges may be principal markets so
that no common clearing facility exists and a trader may look only to the broker for performance of the contract. The value of such positions also could be adversely affected by (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the U.S. of data on which to make trading decisions, (iii) delays in the underlying funds ability to act upon economic events occurring in foreign markets during non-business hours in the U.S.,
(iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the U.S. and (v) lesser trading volume. In addition, unless a fund hedges against fluctuations in the exchange rate between the
U.S. dollar and the currencies in which trading is done on foreign exchanges, any profits that a fund might realize in trading could be eliminated by adverse changes in the exchange rate, or a fund could incur losses as a result of those changes.
Further, with respect to options on futures contracts, an underlying fund may seek to close out an option position by writing
or buying an offsetting position covering the same securities or contracts and have the same exercise price and expiration date. The ability to establish and close out positions on options will be subject to the maintenance of a liquid secondary
market, which cannot be assured.
Options Risk.
A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed price up to an agreed date. The advantage is that the purchaser may hedge against an increase in the price of securities it ultimately wishes to buy or may take advantage of a rise in a
particular index. A put option enables the purchaser of the option, in return for the premium paid, to sell the security underlying the option to the writer at the exercise price during the option period. The writer of the option has the obligation
to purchase the security from the purchaser of the option. The advantage is that the purchaser can be protected should the market value of the security decline or should a particular index decline. An underlying fund will receive premium income from
writing put options, although it may be required, when the put is exercised, to purchase securities at higher prices than the current market price. At the time of purchase, an underlying fund will receive
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premium income from writing call options, which may offset the cost of purchasing put options and may also contribute to that underlying funds total return. An underlying fund may lose
potential market appreciation if the judgment of its investment adviser or subadviser is incorrect with respect to interest rates, security prices or the movement of indices.
An option on a securities index gives the purchaser of the option, in return for the premium paid, the right to receive cash from the seller equal to the difference between the closing price of the index
and the exercise price of the option.
Closing transactions essentially let an underlying fund offset put options or call
options prior to exercise or expiration. If an underlying fund cannot effect a closing transaction, it may have to hold a security it would otherwise sell or deliver a security it might want to hold.
Options are generally considered to be derivative securities. Options may relate to particular securities, stock indices or financial
instruments they may or may not be listed on a national securities exchange, and they may or may not be issued by the Options Clearing Corporation. Options trading is a highly specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying securities, and on a percentage basis, an investment in options may be subject to greater fluctuation than an investment in the underlying securities themselves.
In the case of a call option on a security, the option is covered if an underlying fund owns the security underlying the call
or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or liquid securities in such amount will be segregated by a fund) upon conversion or
exchange of other securities held by it. For a call option on an index, the option is covered if an underlying fund maintains with its custodian a diversified stock portfolio or liquid assets equal to the contract value.
A call option is also covered if a fund holds a call on the same security or index as the call written where the exercise price of the
call held is (i) equal to or less than the exercise price of the call written or (ii) greater than the exercise price of the call written provided the difference is maintained by a fund in cash or liquid securities in a segregated account
with its custodian or fund accounting agent.
An underlying funds obligation to sell a security subject to a covered
call option written by it, or to purchase a security subject to a secured put option written by it, may be terminated prior to the expiration date of the option by a funds execution of a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series as the previously written option. Such a purchase does not result in the ownership of an option. A closing purchase transaction will ordinarily be effected to realize a profit on an outstanding
option, to prevent an underlying security from being called, to permit the sale of the underlying security or to permit the writing of a new option containing different terms on such underlying security. The cost of such a liquidation purchase plus
transaction costs may be greater than the premium received upon the original option, in which event a fund will have incurred a loss in the transaction.
There is no assurance that a liquid secondary market will exist for any particular option. An option writer, unable to effect a closing purchase transaction, will not be able to sell the underlying
security (in the case of a covered call option) or liquidate the segregated securities (in the case of a secured put option) until the option expires or the optioned security is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline or appreciation in the security during such period.
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Purchasing Call Options
: When an underlying fund purchases a call option, in return
for a premium paid by the fund to the writer of the option, that fund obtains the right to buy the security underlying the option at a specified exercise price at any time during the term of the option. The writer of the call option, who receives
the premium upon writing the option, has the obligation, upon exercise of the option, to deliver the underlying security against payment of the exercise price. The advantage of purchasing call options is that a fund may alter portfolio
characteristics and modify portfolio maturities without incurring the cost associated with transactions, except the cost of the option.
Following the purchase of a call option, an underlying fund may liquidate its position by effecting a closing sale transaction by selling an option of the same series as the option previously purchased.
An underlying fund will realize a profit from a closing sale transaction if the price received on the transaction is more than the premium paid to purchase the original call option; an underlying fund will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium paid to purchase the original call option.
There is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange may exist. In such event, it may not be possible to effect closing transactions in particular options, with the result that a fund would have to exercise its options in order to realize any profit
and would incur brokerage commissions upon the exercise of such options and upon the subsequent disposition of the underlying securities acquired through the exercise of such options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by an underlying fund may expire without any value to the underlying fund, in which event the underlying fund would realize a capital loss which will be short-term unless the option was held for more than one
year.
Covered Call Writing:
An underlying fund may write covered call options. The advantage to an underlying fund of
writing covered calls is that the fund receives a premium that is additional income. However, if the security rises in value, an underlying fund may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an exercise notice by the broker-dealer through whom such call
option was sold, requiring the writer to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option or upon entering a closing purchase transaction. A closing purchase
transaction, in which an underlying fund, as writer of an option, terminates its obligation by purchasing an option of the same series as the option previously written, cannot be effected with respect to an option once the option writer has received
an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on an
outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to enable an underlying fund to write another call option on the underlying security with either a different exercise
price or expiration date or both. An underlying fund may realize a net gain or loss from a closing purchase transaction depending upon whether the net amount of the original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing purchase transaction may be partially or entirely offset by the premium received from a sale of a different call option on the same underlying security. Such a loss may also
be wholly or partially offset by unrealized appreciation in the market value of the underlying security. Conversely, a gain resulting from a closing purchase transaction could be offset in whole or in part by a decline in the market value of the
underlying security.
If a call option expires unexercised, an underlying fund will realize a short-term capital gain in the
amount of the premium on the option less the commission paid. Such a gain, however, may be offset by depreciation in the market value of the underlying security during the option period if such security is sold or there is another recognition event.
If a call option is exercised, an underlying fund will realize a gain or loss from the sale of the underlying security equal to the difference between the cost of the underlying security and the proceeds of the sale of the security plus the amount
of the premium on the option less the commission paid.
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Purchasing Put Options:
An underlying fund may invest in put options. The purchase of
the put option on substantially identical securities held by an underlying fund will constitute a short sale for federal income tax purposes, which may result in a short-term capital gain on the sale of the security if such substantially identical
securities were held by that fund for not more than one year as of the date of the short sale or were acquired by that fund after the short sale and on or before the closing date of the short sale.
A put option purchased by an underlying fund gives it the right to sell one of its securities for an agreed price up to an agreed date.
An underlying fund would purchase put options in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the option (protective puts). The ability to purchase
put options allows an underlying fund to protect unrealized gains in an appreciated security in their portfolios without actually selling the security. If the security does not drop in value, an underlying fund will lose the value of the premium
paid. An underlying fund may sell a put option which it has previously purchased prior to the sale of the securities underlying such option. Such sale will result in a net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which is sold.
An underlying fund may sell a put
option purchased on individual portfolio securities. Additionally, an underlying fund may enter into closing sale transactions. A closing sale transaction is one in which an underlying fund, when it is the holder of an outstanding option, liquidates
its position by selling an option of the same series as the option previously purchased.
Writing Put Options:
Underlying funds may also write put options. Secured put options will generally be written in circumstances where the investment adviser of the underlying fund wishes to purchase the underlying security for the funds portfolio at a price
lower than the current market price of the security. In such event, that underlying fund would write a secured put option at an exercise price which, reduced by the premium received on the option, reflects the lower price it is willing to pay.
Following the writing of a put option, an underlying fund may wish to terminate the obligation to buy the security underlying
the option by effecting a closing purchase transaction. This is accomplished by buying an option of the same series as the option previously written. However, an underlying fund may not affect such a closing transaction after it has been notified of
the exercise of the option.
Foreign Currency Options:
Underlying funds may buy or sell put and call options on foreign
currencies either on exchanges or in the over-the-counter market. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a foreign
currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits that may limit the ability of an
underlying fund to reduce foreign currency risk using such options.
Swap Agreements Risk.
Underlying funds may enter
into interest rate, index, credit default, equity, and currency exchange rate swap agreements. These transactions would be entered into in an attempt to obtain a particular return when it is considered desirable to do so, possibly at a lower cost to
a fund than if the underlying fund had invested directly in the asset that yielded the desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one
year. In a standard swap transaction, two parties agree to exchange
42
the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be
exchanged or swapped between the parties are generally calculated with respect to a normal amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular
foreign currency, or in a basket of securities representing a particular index. .
An underlying fund may enter
into credit default swap agreements. The buyer in a credit default contract is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no credit event with respect to any
underlying reference obligation has occurred. If a credit event occurs, the seller typically must pay the buyer the par value (full notional value) of the reference obligation in exchange for the reference obligation. An underlying fund
may either be the buyer or the seller in the transaction. If an underlying fund is a buyer and no credit event occurs, the fund loses its investment and recovers nothing. However, if a credit event occurs, the buyer receives full notional value for
a reference obligation that may have little or no value. As a seller, an underlying fund typically receives a fixed rate of income throughout the term of the contract, which typically is between six months and three years, provided a credit event
does not occur. If a credit event occurs, the seller typically must pay the buyer the full notional amount of the reference obligation even though the reference obligation may have little or no value. Credit default swaps involve more risk than if
an underlying fund had invested in the reference obligation directly because the fund can obtain credit exposure in excess of its cash obligations under the agreement.
Many swap agreements entered into by an underlying fund calculate the obligations of the parties to the agreement on a net basis. Consequently, the underlying funds current obligations
(or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the net amount). Payments
under certain swap agreements, however, including credit default swaps, are not calculated on a net basis. For example, when an underlying fund sells credit protection, it has an obligation to pay the buyer the full notional value of the
reference obligation, which amount generally is not determined on a net basis.
Whether an underlying funds use of swap
agreements will be successful in furthering its investment objective will depend on the funds investment adviser or subadvisers ability to correctly predict whether certain types of investments are likely to produce greater returns than
other investments. Because they are two-party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid investments. Moreover, an underlying fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. Generally, an underlying fund will enter into swap agreements only with counterparties that meet certain standards for
creditworthiness (generally, such counterparties would have to be eligible counterparties under the terms of the funds repurchase agreement guidelines). Certain restrictions imposed by the Code for qualification as a regulated investment
company may limit an underlying funds ability to use swap agreements. The swap market is a relatively new market and is largely unregulated. It is possible that developments in the swap market, including potential government regulation, could
adversely affect the funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
Commodity-Linked Derivative Instruments Risk.
An underlying fund may invest in commodity-linked derivative instruments, including structured notes. The value of a commodity-linked derivative
instrument typically is based on the price movements of a particular commodity, a commodity futures contract or commodity index, or some other readily measurable economic variable dependent upon changes in the value of commodities or the commodities
markets.
43
An underlying fund may invest in derivative debt instruments with principal and/or coupon
payments linked to the value of commodities, commodity futures contracts, or the performance of commodity indices. These are commodity-linked or index-linked notes. They are sometimes referred to as structured
notes because the terms of the debt instrument may be structured by the issuer of the note and the purchaser of the note, such as the underlying fund. These notes may be issued by banks, brokerage firms, insurance companies and other
corporations.
The values of these notes will rise and fall in response to changes in the underlying commodity or related
index or investment. These notes expose the underlying fund economically to movements in commodity prices, but a particular note is primarily a debt obligation. These notes also are subject to credit and interest rate risks that in general affect
the value of debt securities. Therefore, at the maturity of the note, the underlying fund may receive more or less principal than it originally invested. The underlying fund might receive interest payments on the note that are more or less than the
stated coupon interest rate payments.
The structured notes an underlying fund enters into are expected to involve leverage,
meaning that the value of the instrument will be calculated as a multiple of the upward or downward price movement of the underlying index. The prices of commodity-linked instruments may move in different directions than investments in traditional
equity and debt securities in periods of rising inflation. Of course, there can be no guarantee that the underlying funds commodity-linked investments would not be correlated with traditional financial assets under any particular market
conditions.
Commodity-linked structured notes may be issued by U.S. and foreign banks, brokerage firms, insurance companies
and other corporations. These notes are debt securities of the issuer and so, in addition to fluctuating in response to changes in the underlying commodity index, will be subject to credit and interest rate risks that typically affect debt
securities.
Distressed and Defaulted Securities Risk
The underlying funds may invest in the securities of financially distressed and bankrupt issuers, including debt obligations that are in
covenant or payment default. Such investments generally trade significantly below par and are considered speculative. The repayment of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid only after
lengthy workout or bankruptcy proceedings, during which the issuer might not make any interest or other payments. Typically such workout or bankruptcy proceedings result in only partial recovery of cash payments or an exchange of the defaulted
obligation for other debt or equity securities of the issuer or its affiliates, which may in turn be illiquid or speculative.
Equity Risk
Underlying funds may invest long or short in a wide variety of equities, including U.S., foreign and emerging market equities, as well as large cap, mid-cap and small cap stocks. Equities and securities
with equity characteristics entail various risks which can affect underlying funds.
Credit Risk
. Credit risk is the
risk that the issuer of a security or counterparty to a transaction will be unable or unwilling to make timely principal and/or interest payments, or otherwise will be unable or unwilling to honor its financial obligations. If the issuer or
counterparty fails to honor its obligations, the value of that security and of the particular underlying funds shares may be reduced.
44
Market Risk
. Overall stock market risks affect the value of underlying funds, and
thus the share price of the Funds. Factors such as domestic economic growth and market conditions, interest rate levels and political events affect the securities markets.
Small and Mid-Cap Company Risk
. Investing in underlying funds that own securities of small- and mid-cap companies may involve greater risks than investing in securities of larger, more established
issuers. Small- and mid-cap companies generally have limited product lines, markets and financial resources. Their securities may trade less frequently and in more limited volume than the securities of larger, more established companies. Also,
small- and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger companies. As a result, their stock prices may experience greater volatility and may decline significantly in market downturns.
Foreign Securities Risk
. Investing in underlying funds that invest in foreign issuers involves risks not associated
with U.S. investments, including settlement risks, currency fluctuation, local withholding and other taxes, different financial reporting practices and regulatory standards, high costs of trading, changes in political conditions, expropriation,
investment and repatriation restrictions and settlement and custody risks.
Emerging Market Risk
. The Funds may invest
in underlying funds that invest in issuers located in emerging markets. Emerging market countries may have relatively unstable governments, less diverse economies and less liquid securities markets. Companies in emerging markets are often smaller,
less seasoned and more recently organized.
Exchange-Traded Note Risk
Underlying funds may invest in ETNs. The returns of ETNs are based on the performance of a specified market index minus applicable fees.
The risks of ETNs include the risk of the reference index. The value of an ETN is also subject to the credit risk of the issuer. Thus, the value of an ETN may drop due to a decline in an issuers credit quality or a downgrade in the
issuers credit rating, even if there is no change or an increase in the reference index. ETNs are subject to the additional risk that notes may trade at a premium or discount to their reference index. When the Fund invests in an ETN,
shareholders of the Fund bear their proportionate share of the ETNs fees and expenses as well as their share of the Funds fees and expenses. There may also not be an active trading market available for some ETNs. Additionally, trading of
ETNs may be halted or delisted by the listing exchange.
Fixed Income Risk
Underlying funds may invest long or short in a wide variety of fixed income securities and instruments. Fixed income securities and
instruments entail various risks which can affect underlying funds.
Credit Risk
. Credit risk is the risk that the
issuer or guarantor of a debt security or counterparty to a transaction involving one or more bonds in an underlying funds portfolio will be unable or unwilling to make timely principal and/or interest payments, or otherwise will be unable or
unwilling to honor its financial obligations. If the issuer, guarantor, or counterparty fails to pay interest, an underlying funds income may be reduced. If the issuer, guarantor, or counterparty fails to repay principal, the value of that
security and of the particular underlying funds shares may be reduced. Underlying funds may be subject to credit risk to the extent that they invest in debt securities which involve a promise by a third party to honor an obligation with
respect to the debt security. Credit risk is particularly significant for investments in junk bonds or lower than investment-grade securities.
45
Interest Rate Risk
.
The price of a bond or a fixed income security is
dependent upon interest rates. Therefore, the share price and total return of an underlying fund, when investing a significant portion of its assets in bonds or fixed income securities, will vary in response to changes in interest rates. A rise in
interest rates generally causes the value of a bond to decrease, and vice versa. There is the possibility that the value of the particular underlying funds investment in bonds or fixed income securities may fall because bonds or fixed income
securities generally fall in value when interest rates rise. The longer the term of a bond or fixed income instrument, the more sensitive it will be to fluctuations in value from interest rate changes. Changes in interest rates may have a
significant effect if the particular underlying fund is then holding a significant portion of its assets in fixed income securities with long-term maturities.
In the case of mortgage-backed securities, rising interest rates tend to extend the term to maturity of the securities, making them even more susceptible to interest rate changes. When interest rates
drop, not only can the value of fixed income securities drop, but also the yield can drop, particularly where the yield is tied to changes in interest rates, such as adjustable mortgages. Also when interest rates drop, the holdings of
mortgage-backed securities by an underlying fund can reduce returns if the owners of the underlying mortgages pay off their mortgages sooner than expected since the funds prepaid must be reinvested at the then lower prevailing rates. This is known
as prepayment risk. When interest rates rise, the holdings of mortgage-backed securities by an underlying fund can reduce returns if the owners of the underlying mortgages pay off their mortgages later than anticipated. This is known as extension
risk.
Maturity Risk
.
Maturity risk is another factor that can affect the value of a particular underlying
funds debt holdings. Certain underlying funds may not have a limitation policy regarding the length of maturity of its debt holdings. In general, the longer the maturity of a debt obligation, the higher its yield and the greater its
sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield and the greater the price stability.
Investment-Grade Securities Risk
.
Debt securities are rated by national bond rating agencies. Securities rated BBB by S&P or Fitchs Investor Service, Inc. (Fitch) or
Baa by Moodys are considered investment-grade securities, but are somewhat riskier than more highly rated investment-grade obligations (those rated A or better by S&P or Fitch and Aa or better by Moodys) because they are regarded as
having only an adequate capacity to pay principal and interest, are considered to lack outstanding investment characteristics, and may be speculative. Such investment-grade securities will be subject to higher credit risk and may be subject to
greater fluctuations in value than higher-rated securities.
Municipal Securities Risk
. Municipal securities are
subject to the risk that litigation, legislation or other political events, local business or economic conditions or the bankruptcy of the issuer could have a significant effect on an issuers ability to make payments of principal and/or
interest.
Municipal securities can be significantly affected by political changes as well as uncertainties in the municipal
market related to taxation, legislative changes or the rights of municipal security holders. Because many securities are issued to finance similar projects, especially those relating to education, health care, transportation and utilities,
conditions in those sectors can affect the overall municipal market. In addition, changes in the financial condition of an individual municipal insurer can affect the overall municipal market.
Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by
the discontinuance of the taxation supporting the project or assets or the inability to collect revenues from the project or from the assets. If the Internal Revenue Service (IRS) determines an issuer of a municipal security has not
complied with applicable federal income tax requirements, interest from the security could become taxable for federal income tax purposes and the security could decline significantly in value.
46
Below Investment Grade (High Yield) Debt Securities Risk
Fixed income securities rated Ba or lower by Moodys or BB or lower by S&P, frequently referred to as junk bonds,
are considered to be of poor standing and predominantly speculative. They generally offer higher yields than higher rated bonds. Such securities are subject to a substantial degree of credit risk. Such medium- and low-grade bonds held by an
underlying fund may be issued as a consequence of corporate restructurings, such as leveraged buy-outs, mergers, acquisitions, debt recapitalizations or similar events. Additionally, high-yield bonds are often issued by smaller, less creditworthy
companies or by highly leveraged firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by bonds issued under such circumstances are substantial. Changes by
recognized rating agencies in their rating of any security and in the ability of an issuer to make payments of interest and principal will ordinarily have a more dramatic effect on the values of these investments than on the values of higher-rated
securities. Such changes in value will not affect cash income derived from these securities, unless the issuers fail to pay interest or dividends when due. Such changes will, however, affect an underlying funds net asset value per share.
In the past, the high yields from low-grade bonds have more than compensated for the higher default rates on such securities.
However, there can be no assurance that diversification will protect an underlying fund from widespread bond defaults brought about by a sustained economic downturn, or that yields will continue to offset default rates on high-yield bonds in the
future. Issuers of these securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. In addition, such issuers may
not have more traditional methods of financing available to them and may be unable to repay debt at maturity by refinancing.
The value of lower-rated debt securities will be influenced not only by changing interest rates, but also by the bond markets
perception of credit quality and the outlook for economic growth. When economic conditions appear to be deteriorating, low- and medium-rated bonds may decline in market value due to investors heightened concern over credit quality, regardless
of prevailing interest rates. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of lower-rated securities held by an underlying fund, especially in a thinly traded market.
Illiquid or restricted securities held by an underlying fund may involve valuation difficulties. Trading in the secondary market for high-yield bonds may become thin and market liquidity may be significantly reduced. Even under normal conditions,
the market for high-yield bonds may be less liquid than the market for investment-grade corporate bonds. There are fewer securities dealers in the high-yield market, and purchasers of high-yield bonds are concentrated among a smaller group of
securities dealers and institutional investors. In periods of reduced market liquidity, high-yield bond prices may become more volatile.
Lower-Rated Securities Market
An economic downturn or increase in interest rates is likely to have an adverse effect on the lower-rated securities market generally (resulting in more
defaults) and on the value of lower-rated securities contained in the portfolios of an underlying fund which holds these securities.
47
Sensitivity to Economic and Interest Rate Changes
The economy and interest
rates can affect lower-rated securities differently from other securities. For example, the prices of lower-rated securities are more sensitive to adverse economic changes or individual corporate developments than are the prices of higher-rated
investments. Also, during an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals or to obtain additional financing. If the issuer of a lower-rated security defaulted, an underlying fund may incur additional expenses to seek recovery. In addition, periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices of lower-rated securities and an underlying funds net asset values.
Liquidity and Valuation
To the extent that an established secondary market does not exist and a particular obligation is thinly traded, the obligations fair value may be difficult to
determine because of the absence of reliable, objective data. As a result, an underlying funds valuation of the obligation and the price it could obtain upon its disposition could differ.
Credit Ratings
The credit ratings of Moodys and S&P are evaluations of the safety of principal and interest
payments of lower-rated securities. There is a risk that credit rating agencies may fail to timely change the credit ratings to reflect subsequent events. Therefore, in addition to using recognized rating agencies and other sources, an underlying
funds investment adviser or subadviser also performs its own analysis of issuers in selecting investments for an underlying fund. An underlying funds investment adviser or subadvisers analysis of issuers may include, among other
things, historic and current financial condition, current and anticipated cash flow and borrowing strength of management, responsiveness to business conditions, credit standing and current and anticipated results of operations.
Yields and Ratings
The yields on certain obligations are dependent on a variety of factors, including general market
conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of Moodys and S&P represent their
respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different
market prices.
While any investment carries some risk, certain risks associated with lower-rated securities are different
from those for investment-grade securities. The risk of loss through default is greater because lower-rated securities are usually unsecured and are often subordinate to an issuers other obligations. Additionally, the issuers of these
securities frequently have high debt levels and are thus more sensitive to difficult economic conditions, individual corporate developments and rising interest rates. Consequently, the market price of these securities may be quite volatile and may
result in wider fluctuations of an underlying funds net asset value per share.
Geographical Concentration Risk
Certain underlying funds that focus their investments in particular countries or geographic regions may be
particularly susceptible to economic, political or regulatory events affecting those countries or regions. In addition, currency devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to
occur in countries that have already experienced such devaluations. As a result, underlying funds that focus their investments in a particular geographic region or country may be more volatile than a more geographically diversified fund.
48
Correlation Risk
There is a risk that changes in the value of hedging instruments used on underlying funds will not match those of the investment being
hedged. Underlying funds benchmarked to an inverse multiple of an index should lose value as the index or security underlying such ETFs benchmark is increasing (gaining value), a result that is the opposite from traditional mutual funds.
Borrowing/Leverage Risk
Underlying funds may borrow money for investment purposes, commonly referred to as leveraging. As a result, the underlying funds exposure to fluctuations in the price of its assets will
be increased as compared to its exposure if the fund did not borrow. Borrowing activities by an underlying fund will amplify any increase or decrease in the net asset value of the fund. In addition, the interest which the underlying fund pays on
borrowed money, together with the additional costs of maintaining a borrowing facility, are additional costs borne by the fund and could reduce or eliminate any net investment profits. Unless profits on assets acquired with borrowed funds exceed the
costs of borrowing, the use of borrowing will diminish the investment performance of the underlying fund compared with what it would have been without borrowing. When the underlying fund borrows money it must comply with certain asset coverage
requirements, which at times may require the fund to dispose of some of its portfolio holdings even though it may be disadvantageous to do so at the time.
Short Sales Risk
Underlying funds may sell securities short.
Selling securities short involves selling securities the seller (e.g., a fund) does not own (but has borrowed) in anticipation of a decline in the market price of such securities. To deliver the securities to the buyer, the seller must arrange
through a broker to borrow the securities and, in so doing, the seller becomes obligated to replace the securities borrowed at their market price at the time of the replacement. In a short sale, the proceeds the seller receives from the sale are
retained by a broker until the seller replaces the borrowed securities. The seller may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced.
A short sale is against the box if, at all times during which the short position is open, a fund owns at least an equal
amount of the securities or securities convertible into, or exchangeable without further consideration for, securities of the same issuer as the securities that are sold short.
An underlying fund may also maintain short positions in forward currency exchange transactions, in which a fund agrees to exchange
currency that it does not own at that time for another currency at a future date and specified price in anticipation of a decline in the value of the currency sold short relative to the currency that a fund has contracted to receive in the exchange.
Short sales involve the risk that an underlying fund will incur a loss by subsequently buying a security at a higher price
than the price at which the underlying fund previously sold the security short. Any loss will be increased by the amount of compensation, dividends or interest the fund must pay to the lender of the security. Because a loss incurred by an underlying
fund on a short sale results from increases in the value of the security, losses on a short sale are theoretically unlimited and disproportionate to its potential profit. In addition, an underlying fund may not be able to close out a short position
at a particular time or at an acceptable price. A lender may request that borrowed securities be returned on short notice, and the underlying fund may have to buy the securities sold short at an unfavorable price. If this occurs at a time when other
short sellers of the same security want to close out their positions, it is more likely that the underlying fund would have to close out its short position at an unfavorable price.
49
If an underlying fund takes both long and short positions, there is a risk that the value of
securities held long might decrease and the value of securities sold short might increase in response to activities of an individual company or general market conditions. In this case, an underlying funds potential losses could exceed those of
mutual funds that hold only long positions.
Real Estate Investment Trust Risk
Investing in underlying funds that own securities of real estate investment trusts (REITs) subjects the underlying fund to
the risk of changes in the value of the REITs properties and defaults by borrowers or tenants. Some REITs may have limited diversification and may be subject to risks inherent in investments in a limited number of properties, in a narrow
geographic area, or in a single property type. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and self-liquidations. A REITs
return may be adversely affected when interest rates are high or rising. A REITs return may be adversely affected if financing is not readily available or if regulations governing REITs change.
Non-Diversified Risk
Certain underlying funds have the ability to concentrate a relatively high percentage of their investments in the securities of a small number of issuers. This would make the performance of the underlying
fund more susceptible to a single economic, political or regulatory event than a diversified mutual fund or ETF might be. This risk may be particularly acute with respect to an underlying fund whose index underlying its benchmark comprises a small
number of stocks or other securities.
INVESTMENT RESTRICTIONS
The investment objective of each Fund and investment restrictions set forth below are fundamental policies and may not be changed as to a
Fund without the approval of a majority of the outstanding voting shares (as defined in the 1940 Act) of the Fund. Unless otherwise indicated, all percentage limitations governing the investments of each Fund apply only at the time of transaction.
Accordingly, if a percentage restriction is adhered to at the time of investment, a later increase or decrease in the percentage which results from a relative change in values or from a change in a Funds total assets will not be considered a
violation.
The Funds subject to each investment restriction are listed below such restriction. The applicable Funds
may
not
:
(1) Purchase or sell real estate (but this restriction shall not prevent the
Funds from investing directly or indirectly in portfolio instruments secured by real estate or interests therein or acquiring securities of real estate investment trusts or other issuers that deal in real estate), interests in oil, gas and/or
mineral exploration or development programs or leases.
ASTON/Montag & Caldwell Growth
ASTON/Cornerstone Large Cap Value
ASTON/TAMRO
Diversified Equity
ASTON/Fairpointe Mid Cap
ASTON/TAMRO Small Cap
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/TCH Fixed Income
ASTON/Harrison Street Real Estate
ASTON/Montag & Caldwell Balanced
50
(2) Purchase or sell real estate (but this restriction
shall not prevent the Funds from investing directly or indirectly in portfolio instruments secured by real estate or interests therein or acquiring securities of real estate investment trusts or other issuers that deal in real estate).
ASTON/Herndon Large Cap Value
ASTON/River
Road Dividend All Cap Value
ASTON/River Road Dividend All Cap Value II
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/River Road Select Value
ASTON/River Road Small Cap Value
ASTON/River Road Independent Value
ASTON/LMCG Small Cap Growth
ASTON/DoubleLine Core Plus Fixed Income
ASTON/Lake Partners LASSO Alternatives
ASTON
Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/River Road Long-Short
ASTON/Barings International
ASTON/Silvercrest Small Cap
(3)
Purchase the securities of issuers conducting their principal business activities in the same industry (other than obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities) if immediately after such purchase the value of a Funds investments in such industry would exceed 25% of the value of the total assets of the Fund, except
ASTON/Harrison Street Real Estate Fund
, which will have a
concentration in the real estate sector.
ASTON/Montag & Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/Cornerstone Large Cap Value
ASTON/TAMRO Diversified Equity
ASTON/River Road
Dividend All Cap Value
ASTON/River Road Dividend All Cap Value II
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/TAMRO Small Cap
ASTON/River Road Select
Value
ASTON/River Road Small Cap Value
ASTON/River Road Independent Value
ASTON/LMCG Small Cap Growth
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/DoubleLine Core Plus Fixed Income
ASTON/TCH Fixed Income
ASTON/Anchor Capital Enhanced Equity
ASTON/River Road Long-Short
ASTON/Barings
International
ASTON/Harrison Street Real Estate
ASTON/Montag & Caldwell Balanced
ASTON/Silvercrest Small Cap
51
(4) Act as an underwriter of securities, except that, in
connection with the disposition of a security, a Fund may be deemed to be an underwriter as that term is defined in the 1933 Act.
ASTON/Montag & Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/Cornerstone
Large Cap Value
ASTON/TAMRO Diversified Equity
ASTON/River Road Dividend All Cap Value
ASTON/River Road Dividend All Cap Value II
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/TAMRO Small Cap
ASTON/River Road Select Value
ASTON/River Road Small Cap Value
ASTON/River
Road Independent Value
ASTON/LMCG Small Cap Growth
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/DoubleLine Core Plus Fixed Income
ASTON/TCH Fixed Income
ASTON/Lake Partners
LASSO Alternatives
ASTON Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/River Road Long-Short
ASTON/Barings International
ASTON/Harrison Street Real Estate
ASTON/Montag & Caldwell Balanced
ASTON/Silvercrest Small Cap
(5)
As to 75% of the total assets of each Fund, purchase the securities of any one issuer (other than securities issued by the U.S. government or its agencies or instrumentalities) if immediately after
such purchase, more than 5% of the value of the Funds total assets would be invested in securities of such issuer.
ASTON/Montag & Caldwell Growth
ASTON/TAMRO Diversified Equity
ASTON/Fairpointe
Mid Cap
ASTON/TAMRO Small Cap
ASTON/River Road Small Cap Value
ASTON/Veredus
Select Growth
ASTON Small Cap
ASTON/TCH Fixed Income
ASTON/Montag & Caldwell Balanced
(6) Borrow money or issue senior securities, except that each Fund may borrow from banks and enter into
reverse repurchase agreements for temporary purposes in amounts up to one-third of the value of its total assets at the time of such borrowing. The Funds may not mortgage, pledge or hypothecate any assets, except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the total assets of the Fund at the time of its borrowing. All borrowings will be done from a bank and asset coverage of at least 300% is
required. A Fund will not purchase securities when borrowings exceed 5% of that Funds total assets.
52
ASTON/Montag & Caldwell Growth
ASTON/TAMRO Diversified Equity
ASTON/River Road Dividend All Cap Value
ASTON/Fairpointe Mid Cap
ASTON/TAMRO Small Cap
ASTON/River Road Small Cap Value
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/TCH Fixed Income
ASTON/Montag & Caldwell Balanced
(7)
Invest more than 5% of its total assets in securities of companies less than three years old. Such three-year periods shall include the operation of any predecessor trust or companies.
ASTON/Montag & Caldwell Growth
ASTON/TAMRO Diversified Equity
ASTON/Fairpointe
Mid Cap
ASTON/TAMRO Small Cap
ASTON/River Road Small Cap Value
ASTON/Veredus
Select Growth
ASTON Small Cap
ASTON/TCH Fixed Income
ASTON/Montag & Caldwell Balanced
(8) Purchase or sell commodities or commodity contracts, except that a Fund may enter into futures
contracts and options thereon in accordance with such Funds investment objectives and policies.
ASTON/Montag & Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/TAMRO Diversified Equity
ASTON/River Road
Dividend All Cap Value
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/TAMRO Small Cap
ASTON/River Road Select Value
ASTON/River Road
Small Cap Value
ASTON/River Road Independent Value
ASTON/LMCG Small Cap Growth
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/DoubleLine Core Plus
Fixed Income
ASTON/TCH Fixed Income
ASTON/Anchor Capital Enhanced Equity
ASTON/River Road Long-Short
ASTON/Barings International
ASTON/Montag & Caldwell Balanced
ASTON/Silvercrest Small Cap
53
(9) Make investments in securities for the purpose of
exercising control.
ASTON/Montag & Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/TAMRO Diversified Equity
ASTON/River Road Dividend All Cap Value
ASTON/River Road Dividend All Cap Value II
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/TAMRO Small Cap
ASTON/River Road Select Value
ASTON/River Road Small Cap Value
ASTON/River
Road Independent Value
ASTON/LMCG Small Cap Growth
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/DoubleLine Core Plus Fixed Income
ASTON/TCH Fixed Income
ASTON/Lake Partners
LASSO Alternatives
ASTON Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/River Road Long-Short
ASTON/Barings International
ASTON/Montag & Caldwell Balanced
ASTON/Silvercrest Small Cap
(10)
Purchase the securities of any one issuer if, immediately after such purchase, a Fund would own more than 10% of the outstanding voting securities of such issuer.
ASTON/Montag & Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/TAMRO
Diversified Equity
ASTON/River Road Dividend All Cap Value
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/TAMRO Small Cap
ASTON/River Road Select
Value
ASTON/River Road Small Cap Value
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/TCH Fixed Income
ASTON/Anchor Capital
Enhanced Equity
ASTON/Barings International
ASTON/Montag & Caldwell Balanced
(11)
Sell securities short or purchase securities on margin, except such short-term credits as are necessary for the clearance of transactions. For this purpose, the deposit or payment by a Fund for initial
or maintenance margin in connection with futures contracts is not considered to be the purchase or sale of a security on margin.
54
ASTON/Montag & Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/TAMRO Diversified Equity
ASTON/River Road Dividend All Cap Value
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/TAMRO Small Cap
ASTON/River Road Select Value
ASTON/River Road Small Cap Value
ASTON/LMCG
Small Cap Growth
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/DoubleLine Core Plus Fixed Income
ASTON/TCH Fixed Income
ASTON/Lake Partners
LASSO Alternatives
ASTON Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/Barings International
ASTON/Montag & Caldwell Balanced
(12)
Make loans, except that this restriction shall not prohibit (a) the purchase and holding of debt instruments in accordance with a Funds investment objectives and policies, (b) the
lending of portfolio securities, or (c) the entry into repurchase agreements with banks or broker-dealers.
ASTON/Montag &
Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/TAMRO Diversified Equity
ASTON/River Road Dividend All Cap Value
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/TAMRO Small Cap
ASTON/River Road Select Value
ASTON/River Road Small Cap Value
ASTON/LMCG
Small Cap Growth
ASTON/Veredus Select Growth
ASTON Small Cap
ASTON/DoubleLine Core Plus Fixed Income
ASTON/TCH Fixed Income
ASTON/Lake Partners
LASSO Alternatives
ASTON Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/Barings International
ASTON/Montag & Caldwell Balanced
(13)
Invest in puts, calls, straddles or combinations thereof, except to the extent disclosed in the SAI.
ASTON/Montag & Caldwell Growth
ASTON/Herndon Large Cap Value
ASTON/TAMRO Diversified Equity
ASTON/River Road
Dividend All Cap Value
ASTON/Fairpointe Mid Cap
ASTON/Montag & Caldwell Mid Cap Growth
55
ASTON/TAMRO Small Cap
ASTON/River Road Select Value
ASTON/River Road Small Cap Value
ASTON/LMCG Small Cap Growth
ASTON/Veredus
Select Growth
ASTON Small Cap
ASTON/DoubleLine Core Plus Fixed Income
ASTON/TCH Fixed Income
ASTON/Lake Partners LASSO Alternatives
ASTON
Dynamic Allocation
ASTON/Barings International
ASTON/Montag & Caldwell Balanced
(14)
Borrow money or issue senior securities, except that a Fund may borrow from banks and enter into reverse repurchase agreements for temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing.
ASTON/Herndon Large Cap Value
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/River Road Select Value
ASTON/LMCG Small Cap Growth
ASTON/DoubleLine Core Plus Fixed Income
ASTON/Lake Partners LASSO Alternatives
ASTON
Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/Barings International
(15) As to 75%
of the total assets of the Fund, purchase the securities of any one issuer (other than cash, other investment companies and securities issued by the U.S. government or its agencies or instrumentalities) if immediately after such purchase, more than
5% of the value of the Funds total assets would be invested in the securities of such issuer.
ASTON/Herndon Large Cap Value
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/River Road Select Value
ASTON/LMCG Small Cap Growth
ASTON/Lake Partners LASSO Alternatives
ASTON
Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/Barings International
(16) Issue
senior securities (as defined in the 1940 Act), except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC.
ASTON/Herndon Large Cap Value
ASTON/Cornerstone Large Cap Value
ASTON/River Road Dividend All Cap Value
ASTON/River Road Dividend All Cap Value II
ASTON/Montag & Caldwell Mid Cap Growth
ASTON/River Road Select Value
ASTON/River Road Small Cap Value
56
ASTON/River Road Independent Value
ASTON/LMCG Small Cap Growth
ASTON/DoubleLine Core Plus Fixed Income
ASTON/Lake Partners LASSO Alternatives
ASTON
Dynamic Allocation
ASTON/Anchor Capital Enhanced Equity
ASTON/River Road Long-Short
ASTON/Barings International
ASTON/Harrison Street Real Estate
ASTON/Silvercrest Small Cap
(17)
Purchase the securities of issuers conducting their principal business activities in the same industry (other than obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities) if immediately after such purchase the value of the Funds investments in such industry would exceed 25% of the value of the total assets of the Funds; provided that investments in another registered investment company are
not considered to be issued by members of any industry.
ASTON/Lake Partners LASSO Alternatives
ASTON Dynamic Allocation
(18)
Purchase or sell commodities or commodity contracts unless acquired as a result of ownership securities or other investments. This limitation does not preclude the Funds from entering into futures
contracts and options thereon in accordance with the Funds investment objective and policies, from investing in securities or other instruments backed by commodities or from investing in companies, which are engaged in a commodities business
or have a significant portion of their assets in commodities.
ASTON/Lake Partners LASSO Alternatives
ASTON Dynamic Allocation
(19)
Borrow money, except that a Fund may borrow money (a) for temporary or emergency purposes in an amount not exceeding 5% of the Funds total assets determined at the time of the borrowing; and
(b) from banks or by engaging in reverse repurchase agreements. Asset coverage of at least 300% is required for all borrowings, except where a Fund has borrowed money for temporary purposes in amounts not exceeding 5% of its total assets.
ASTON/Cornerstone Large Cap Value
ASTON/Harrison Street Real Estate
(20)
Make loans, except as permitted by the 1940 Act, and the rules and regulations thereunder.
ASTON/Cornerstone Large Cap Value
ASTON/River
Road Independent Value
ASTON/River Road Long-Short
ASTON/Harrison Street Real Estate
ASTON/River Road Dividend All Cap Value II
ASTON/Silvercrest Small Cap
(21)
Purchase securities of any issuer (except securities issued or guaranteed by the U.S. government, its agencies or instrumentalities and repurchase agreements involving such securities) if as a result
more than 5% of the total assets of the Fund would be invested in the securities of such issuer or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund. This restriction applies to 75% of the Funds
assets.
57
ASTON/Cornerstone Large Cap Value
(22) As to 75% of the total assets of the Fund, (i) purchase the securities of any one issuer (other than cash, other investment companies and
securities issued by the U.S. government or its agencies or instrumentalities) if immediately after such purchase, more than 5% of the value of the Funds total assets would be invested in securities of such issuer; or (ii) purchase more
than 10% of the outstanding voting securities of such issuer.
ASTON/River Road Independent Value
ASTON/DoubleLine Core Plus Fixed Income
ASTON/River Road Dividend All Cap Value II
ASTON/Silvercrest Small Cap
(23)
Purchase securities on margin, except such short-term credits as are necessary for the clearance of transactions. For this purpose, the deposit or payment by the Fund for initial or maintenance margin
in connection with futures contracts is not considered to be the purchase or sale of a security on margin.
ASTON/River Road Independent Value
ASTON/River Road Long-Short
ASTON/River Road Dividend All Cap Value II
ASTON/Silvercrest Small Cap
(24)
Borrow money, except that the Fund may borrow from banks and enter into reverse repurchase agreements for temporary purposes in amounts up to one-third of the value of its total assets at the time of
such borrowing.
ASTON/River Road Independent Value
ASTON/River Road Long-Short
ASTON/River Road Dividend All Cap Value II
ASTON/Silvercrest Small Cap
(25)
Purchase physical commodities, except to the extent permitted under the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief or unless acquired as a result of the
ownership of securities or instruments, but this restriction shall not prohibit the Fund from purchasing futures contracts, options, foreign currencies or forward contracts, swaps, caps, collars, floors and other financial instruments or from
investing in securities of any kind.
ASTON/River Road Dividend All Cap Value II
The underlying funds in which the
ASTON/Lake Partners LASSO Alternatives Fund
and
ASTON Dynamic Allocation Fund
will invest
have adopted certain investment restrictions that may be more or less restrictive than those listed for the applicable Fund above, thereby allowing the Fund to participate in certain investment strategies indirectly that are prohibited under the
fundamental investment restrictions listed above for the relevant Fund. The investment restrictions for such underlying funds will be set forth in their respective prospectuses and statements of additional information.
58
With respect to limitiation (8) above, such limitation should not be deemed to
prohibit investments in forwards, swaps or other instruments that were not deemed commodity interests prior to July 21, 2010.
NON-FUNDAMENTAL INVESTMENT POLICIES
For
purposes of
ASTON/Harrison Street Real Estate Funds
investment policies, a company is principally engaged in the real estate industry if (i) it derives at least 50% of its revenues or profits from the ownership,
construction, management, financing, or sale of residential, commercial, or industrial real estate or (ii) it has at least 50% of the fair market value of its assets invested in residential, commercial, or industrial real estate. Companies in
the real estate industry may include, but are not limited to, REITs or other securitized real estate investments, MLPs that are treated as corporations for federal income tax purposes and that invest in interests in real estate, real estate
operating companies, real estate brokers or developers, financial institutions that make or service mortgages, and companies with substantial real estate holdings, such as lumber and paper companies, hotel companies, residential builders and
land-rich companies.
ASTON/Cornerstone Large Cap Value
and
ASTON/Harrison Street Real Estate Funds
may enter
into futures contract transactions only to the extent that obligations under such contracts represent less than 20% of the Funds assets. The aggregate value of option positions may not exceed 10% of a Funds net assets as of the time such
options are entered into by a Fund.
Each of
ASTON/Herndon Large Cap Value Fund, ASTON/Cornerstone Large Cap Value
Fund, ASTON/TAMRO Diversified Equity Fund, ASTON/Fairpointe Mid Cap Fund, ASTON/Montag & Caldwell Mid Cap Growth Fund, ASTON/TAMRO Small Cap Fund, ASTON/Silvercrest Small Cap Fund, ASTON/River Road Small Cap Value Fund, ASTON/LMCG Small Cap
Growth Fund, ASTON Small Cap Fund, ASTON/DoubleLine Core Plus Fixed Income Fund, ASTON/TCH Fixed Income Fund, ASTON/Lake Partners LASSO Alternatives Fund, ASTON/Anchor Capital Enhanced Equity Fund
and
ASTON/Harrison Street Real Estate Fund
has a policy to invest, under normal circumstances, at least 80% of its assets, plus the amount of any borrowings for investment purposes, in the type of investments suggested by its name as described in the Prospectus in accordance with Rule
35d-1 of the 1940 Act. Pursuant to such rule, shareholders will receive at least 60 days notice of a change of such policy.
TRUSTEES AND OFFICERS OF THE TRUST
Under
Delaware law, the business and affairs of the Trust are managed under the direction of the Board. Information pertaining to the Trustees and officers of the Trust is set forth below. The term officer means the president, vice president,
secretary, treasurer, controller or any other officer who performs a policy making function.
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Name, Address, Age and
Position(s)
with Trust
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Term of
Office
(1)
and
Length
of Time
Served
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in
Fund
(2)
Complex
Overseen
by Trustee
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Other
Trusteeships/
Directorships
Held by Trustee
During Past
Five Years
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Experience,
Qualifications,
Attributes,
Skills for Board
Membership
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Independent Trustees
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William E. Chapman, II
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 71
Trustee; Independent Chairman
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Since 2010
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President and Owner, Longboat Retirement Planning Solutions (1998-present); Trustee of Bowdoin College (2002-present); Hewitt Associates, LLC (part time) (provider of
Retirement and Investment Education Seminars) (2002-2009)
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[25]
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Director of Harding, Loevner Funds, Inc. (6 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio); Trustee of
The Managers Funds, Managers AMG Funds, Managers Trust I and Managers Trust II (39 portfolios)
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Significant board experience;
significant executive
experience with several financial services firms; continuing service as
Independent Chairman of the Board.
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59
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Name, Address, Age and
Position(s) with Trust
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Term of
Office
(1)
and
Length
of Time
Served
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in Fund
(2)
Complex
Overseen
by Trustee
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Other
Trusteeships/
Directorships
Held by Trustee
During Past
Five Years
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Experience,
Qualifications,
Attributes,
Skills for Board
Membership
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Edward J. Kaier
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 67
Trustee
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Since 2010
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Attorney at Law and Partner, Teeters Harvey Gilboy & Kaier LLP (2007-present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007)
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[25]
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Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio); Trustee of The Managers Funds, Managers AMG Funds, Managers Trust I and Managers
Trust II (39 portfolios)
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Significant board experience; practicing attorney.
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Gregory T. Mutz
c/o Aston
Funds
120 N. LaSalle Street
Chicago,
IL 60602
Age: 67
Trustee
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Since 1993
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Chairman and CEO of AMLI Residential Properties Trust (a Multifamily REIT), a successor company to AMLI Realty Co. (2004-present); Vice Chairman of UICI (NYSE: UCI) (an insurance
holding company) (2003-2004)
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[25]
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Member of Board of Genesis Financial Solutions (a privately-held company based in Portland, Oregon providing debt recovery, consumer lending and credit card services)
(2005-present); a member of the Board of WAN S.A., a residential real estate company headquartered in Warsaw, Poland (2008-present); a member of the Board of Suknip International Limited, a residential real estate company headquartered in St.
Petersburg, Russia (2008-present); Formerly, Director of Alico, Inc. (NASDAQ: ALCO) (agribusiness) (2005-2009)
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Significant board experience; previous service as lead independent trustee; significant executive experience with several financial services firms.
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Steven J. Paggioli
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 62
Trustee
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Since 2010
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Independent Consultant (2002-present); formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment
Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001)
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[25]
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Trustee, Professionally Managed Portfolios (43 portfolios); Trustee of The Managers Funds, Managers AMG Funds, Managers Trust I and Managers Trust II (38 portfolios);
Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel
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Significant board experience; significant executive experience with several financial services firms; former service with financial service
regulator.
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60
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Name, Address, Age and
Position(s) with Trust
|
|
Term of
Office
(1)
and
Length
of Time
Served
|
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Principal Occupation(s)
During Past Five Years
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|
Number of
Portfolios
in Fund
(2)
Complex
Overseen
by Trustee
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Other
Trusteeships/
Directorships
Held by Trustee
During Past
Five Years
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Experience,
Qualifications,
Attributes,
Skills for Board
Membership
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Eric Rakowski
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 54
Trustee
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Since 2010
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Professor, University of California at Berkeley School of Law (1990-present)
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[25]
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Director of Harding, Loevner Funds, Inc. (6 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio); Trustee of The Managers
Funds, Managers AMG Funds, Managers Trust I and Managers Trust II (39 portfolios)
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Significant board experience; former practicing attorney; currently professor of law.
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Robert B. Scherer
c/o Aston
Funds
120 N. LaSalle Street
Chicago,
IL 60602
Age: 71
Trustee
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Since 1999
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President of The Rockridge Group, Ltd. (title insurance industry consulting services) (1994-present)
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[25]
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Director, Title Reinsurance Company (insurance for title agents)(1998-present)
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Significant board experience; continuing service as Chair of the Audit Committee; significant executive experience as chief financial officer of insurance and financial services
firm.
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Thomas R. Schneeweis,
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 65
Trustee
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Since 2010
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Professor of Finance, University of Massachusetts (1977-present); Director, CISDM at the University of Massachusetts, (1996-present); President, TRS Associates (1982-present);
President, Alternative Investment Analytics, LLC (formerly Schneeweis Partners, LLC) (2001-present); Partner, White Bear Partners, LLC (2007-2010); Partner, S Capital Management, LLC (2007-present); Partner, Northampton Capital Management, LLC
(2004-2010)
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[25]
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Trustee of The Managers Funds, Managers AMG Funds, Managers Trust I and Managers Trust II (39 portfolios)
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Significant board experience; currently professor of finance; significant executive experience with several investment
partnerships.
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61
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Name, Address, Age and
Position(s) with Trust
|
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Term of
Office
(1)
and
Length
of Time
Served
|
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in Fund
(2)
Complex
Overseen
by Trustee
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Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years
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Experience,
Qualifications,
Attributes,
Skills for Board
Membership
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Interested Trustees
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Stuart D. Bilton, CFA
(3)
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 66
Trustee; Chief Executive Officer
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Trustee since 1993; Chief Executive Officer since 2010
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Chief Executive Officer, Aston Asset Management, LP (2006-present); Chairman, Aston Funds (1993-2010)
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[25]
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Director, Baldwin & Lyons, Inc. (property and casualty insurance firm) (1987-present); Director, Highbury Financial Inc. (2009-2010)
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Significant board experience; significant executive experience with several financial services firms; former Chairman of the Board.
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Jeffrey S. Murphy
(3)
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 46
Trustee
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Since 2010
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Senior Vice President, Affiliated Managers Group, Inc. (2007-present); Vice President, Affiliated Managers Group, Inc. (1995-2007)
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[25]
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N/A
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Significant financial industry experience; significant executive experience with several financial services firms.
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Officer(s) Who Are Not Trustees
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Kenneth C. Anderson
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 48
President
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Since 1993
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President, Aston Asset Management, LP (2006-present); Director, Highbury Financial Inc. (2009-2010); CPA
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N/A
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N/A
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N/A
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Gerald F. Dillenburg
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 46
Senior Vice President,
Secretary, Chief
Operating
Officer and Chief
Compliance Officer
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Since 1996
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Chief Compliance Officer and Chief Operating Officer, Aston Asset Management, LP (2006-present); Chief Financial Officer, Aston Asset Management, LP (2006-2010); CPA
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N/A
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N/A
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N/A
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Laura M. Curylo
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 44
Chief Financial Officer and Treasurer
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Since 2010
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Chief Financial Officer, Aston Asset Management, LP (2010-present); Vice President and Controller, Aston Asset Management, LP (2006-present); CPA
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N/A
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N/A
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N/A
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Christine C. Carsman
c/o Aston Funds
120 N. LaSalle Street
Chicago, IL 60602
Age: 60
Chief Legal Officer
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Since 2010
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Senior Vice President (2007-present) and Deputy General Counsel (2011-present), Chief Regulatory Counsel (2004-2011), Vice President (2004-2007), Affiliated Managers Group, Inc.;
Trustee, Managers AMG Funds, The Managers Funds, Managers Trust I and Managers Trust II (2011-present); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP
(1995-2004)
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N/A
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N/A
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N/A
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(1)
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A Trustee serves for an indefinite term until the earliest of: (i) removal by two-thirds of the Board or shareholders, (ii) resignation, death or incapacity,
(iii) the election and qualification of his successor, in accordance with the By-Laws of the Trust, or (iv) the last day of the fiscal year in which he attains the age of 75 years. Officers serve for an indefinite term until the earliest
of: (i) removal by the Board, (ii) resignation, death or incapacity, or (iii) the election and qualification of their successors, in accordance with the By-Laws of the Trust.
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62
(2)
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The term Fund Complex includes all series of Aston Funds.
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(3)
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Interested person of the Trust as defined in the 1940 Act. Mr. Bilton is considered an interested person because of his affiliation with
Aston Asset Management, LP which acts as the Funds investment adviser. Mr. Murphy is considered an interested person because of his affiliation with Affiliated Managers Group, Inc., the ultimate parent of the investment
adviser, and related entities.
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Board of Trustees, Leadership Structure and Committees
Experience and Qualifications
The table above provides a summary of the experience, qualifications, attributes and skills of each Trustee in light of the Trusts business and structure. The Board believes that the significance of
each Trustees experience, qualifications, attributes or skills is an individual matter (meaning that experience that is important for one Trustee may not have the same value for another) and that these factors are best evaluated at the board
level, with no single Trustee, or particular factor, being indicative of Board effectiveness. However, the Board believes that Trustees need to be able to critically review, evaluate, question and discuss information provided to them, and to
interact effectively with Trust management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties. The Board believes that each of its members has these abilities based upon their skills,
experience, judgment, analytical ability, diligence, ability to work effectively with other Board members, and a commitment to the interests of shareholders. Experience relevant to having these abilities may be achieved through a Trustees
educational background; business, professional training or practice (e.g., finance or law), or academic positions; experience from service as a board member (including the Board of the Trust) or as an executive of investment funds, other financial
services firms, not-for-profit entities or other organizations; and/or other life experiences.
Board Structure
The Board has general oversight responsibility with respect to the business and affairs of the Trust. Because all Funds in the Fund
Complex are series of the Trust, a single Board oversees the operations of all the Aston Funds. The Board establishes policies and reviews and approves contracts and their continuance. The Trustees regularly request and/or receive reports from
Aston, the Trusts other service providers and the Trusts Chief Compliance Officer (the CCO). The Board currently is composed of nine Trustees, seven of whom are not interested persons (as that term is defined in
the 1940 Act) and are designated in the table above as Independent Trustees. An Independent Trustee serves as the Chairman of the Board (the Independent Chairman). The Independent Chairman, among other things, chairs meetings
of the Trustees, consults with the Chief Executive Officer on the agenda, and facilitates communication among the Independent Trustees, management of the Funds and the full Board. The Board believes that a chairman without any conflicts of interests
arising from a position with Trust management promotes the independent oversight function of the Board.
The Board has
established three standing committees. The Audit Committee is responsible for monitoring the Funds accounting policies, financial reporting and internal control system; monitoring the work of the Funds independent accountants; and
providing an open avenue of communication among the independent accountants, Fund management and the Board. The Nominating and Governance Committee is primarily responsible for the identification and recommendation of individuals for Board
membership and for overseeing the administration of the Trusts Governance Guidelines. The Nominating and Governance Committee will consider nominees recommended by shareholders whose resumes have been submitted by U.S. mail or courier service
to the Trusts Secretary for the attention of the Chairman of the Nominating and Governance Committee. All of the Independent Trustees serve as members of the Audit Committee and Nominating and Governance Committee. Mr. Scherer serves as
Chairman of the Audit
63
Committee. Mr. Mutz serves as Chairman of the Nominating and Governance Committee. The Valuation Committee is responsible for fair valuing securities of the Funds as may be necessary from
time to time. The Valuation Committee members are Messrs. Bilton (Chairman), Scherer, Chapman (alternate) and Schneeweis (alternate). The Trusts day-to-day operations are managed by the Adviser and other service providers. The Board and the
committees meet regularly throughout the year to review the Trusts activities, including, fund performance, valuation matters and compliance with regulatory requirements, and to review contractual arrangements with service providers. The Audit
Committee, Nominating and Governance Committee and Valuation Committee held two, one and zero meeting(s), respectively, during the fiscal year ended October 31, 2012.
Risk Oversight
Through its oversight role, through its
committees and through the Trusts officers and service providers, the Board performs a risk oversight function for the Trust consisting, among other things, of the following activities: (1) receiving and reviewing reports related to the
performance and operations of the Funds at regular Board meetings, and on an ad hoc basis as needed; (2) reviewing and approving, as applicable, the compliance policies and procedures of the Trust; (3) meeting with portfolio management
teams to review investment strategies, techniques and the processes used to manage related risks; (4) meeting with representatives of key service providers, including the Adviser, administrator, distributor, transfer agent, custodian and
independent registered public accounting firm of the Funds, to review and discuss the activities of the Funds and to provide direction with respect thereto; and (5) receiving reports from the CCO on a variety of matters at regular and special
meetings of the Board and its committees, as applicable, including matters relating to risk management. The Trusts treasurer also reports regularly to the Audit Committee on the Trusts internal controls and accounting and financial
reporting policies and practices. The Audit Committee also receives reports from the Trusts independent registered public accounting firm on internal control and financial reporting matters. On at least a quarterly basis, the Board meets with
the Trusts CCO, including separate meetings with the Independent Trustees in executive session, to discuss issues related to portfolio compliance and, on at least an annual basis, receives a report from the CCO regarding the effectiveness of
the Trusts compliance program. In addition, the Board receives reports from the Adviser and subadvisers on the investments and securities trading of the Funds, as well as reports from the Valuation Committee meetings. The Board also receives
reports from the Trusts primary service providers on a periodic or regular basis, including the Adviser and the Trusts custodian, distributor and transfer agent. The Board also requires the Adviser to report to the Board on other matters
relating to risk management on a regular and as needed basis, including reports on testing the compliance procedures of the Trust and its service providers.
Fund Ownership
Set forth in the table below is the dollar
range of equity securities held in each Fund and the aggregate dollar range of securities in the same family of investment companies beneficially owned by each current Trustee at December 31, 2012.
64
|
|
|
|
|
Name of Trustee
|
|
Dollar Range of Equity Securities in
the Fund
|
|
Aggregate Dollar Range of
Equity Securities in All
Registered Investment
Companies Overseen by
Trustee in Family of
Investment Companies
|
Independent
Trustees
|
|
|
|
|
William E. Chapman, II
|
|
|
|
|
Edward J. Kaier
|
|
|
|
|
Gregory T. Mutz
|
|
|
|
|
Steven J. Paggioli
|
|
|
|
|
Eric Rakowski
|
|
|
|
|
Robert B. Scherer
|
|
|
|
|
Thomas. R. Schneeweis
|
|
|
|
|
Interested Trustees
|
|
|
|
|
Stuart D. Bilton
|
|
|
|
|
Jeffrey S. Murphy
|
|
|
|
|
Remuneration
The Trustees of the Trust who are not affiliated with the Adviser or any subadviser receive an annual retainer, meeting fees and reimbursement for out-of-pocket expenses for each meeting of the Board they
attend. The Independent Chairman and standing committee chairs receive an additional retainer. No officer or employee of the Adviser or any subadviser or their affiliates receives any compensation from Aston Funds for acting as a Trustee of the
Trust. The officers of the Trust receive no compensation directly from Aston Funds for performing the duties of their offices, except that the Trust compensates the Administrator for providing an officer to serve as Funds Chief Compliance
Officer.
The table below shows the total fees that were paid to each of the Trustees during the fiscal year ended
October 31, 2012. No individual, including all Trustees and officers of the Trust, received more than $120,000 in aggregate compensation from the Trust for the same period.
|
|
|
|
|
|
|
|
|
|
|
Trustee
|
|
Aggregate
Compensation
Received From the
Trust
|
|
|
Pension or Retirement
Benefits
Accrued (as part of
Fund Expenses)
|
|
Annual Benefits
Upon
Retirement
|
|
Total Compensation
from Trust
and Fund
Complex
|
Independent Trustees
|
|
|
|
|
|
|
|
|
|
|
William E. Chapman, II
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
Edward J. Kaier
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
Gregory T. Mutz
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
Steven J. Paggioli
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
Eric Rakowski
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
Robert B. Scherer
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
Thomas R. Schneeweis
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
Interested Trustees
|
|
|
|
|
|
|
|
|
|
|
Stuart D. Bilton
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
N/A
|
Jeffrey S. Murphy
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
N/A
|
65
As of January 31, 2013, Trustees and officers of the Trust as a group owned less
than 1% of the outstanding shares of any class of each Fund, except for their ownership of
[.]
Code of Ethics
The Trust, the Adviser, the subadvisers and the
principal underwriter have each adopted a code of ethics (the Codes of Ethics) under Rule 17j-1 of the 1940 Act. The Codes of Ethics permit personnel, subject to the Codes of Ethics and their restrictive provisions, to invest in
securities, including securities that may be purchased or held by the Trust on behalf of the Funds.
PROXY VOTING POLICIES AND PROCEDURES
The Trust has delegated the voting of portfolio securities on behalf of the
Funds to its subadvisers. Each subadviser has adopted proxy voting policies and procedures (the Proxy Voting Policies and Procedures) for use in connection with determining how to vote proxies related to portfolio securities, including
the procedures to be used if a vote presents a conflict of interest between the interests of a Funds shareholders and those of the applicable subadviser. The Proxy Voting Policies and Procedures are included under Appendix B.
If
ASTON Dynamic Allocation Fund
and
ASTON/Lake Partners LASSO Alternatives Fund
rely on Section 12(d)(1)(F) in
purchasing securities issued by another investment company, each Fund must either seek instructions from its shareholders with regard to the voting of all proxies with respect to its investment in such securities and vote such proxies only in
accordance with the instructions, or vote the shares held by it in the same proportion as the vote of all other holders of the securities (echo voting). Each Fund intends to vote such other investment companies shares in the same proportion as the
vote of all other holders of such securities.
Information regarding how the Trust voted proxies related to portfolio
securities during the most recent 12-month period ended June 30 is available without charge on the Trusts website at www.astonfunds.com and on the SECs website at
www.sec.gov
.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Listed below are the names and addresses of those shareholders who, as of January 31, 2013, owned of record or beneficially 5% or
more of the shares of a class of a Fund. Shareholders who have the power to vote a large percentage of shares (at least 25% of the voting shares of a Fund) of a particular Fund can control the Fund and determine the outcome of a shareholder meeting.
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Growth Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
66
|
|
|
|
|
|
|
ASTON/Herndon Large Cap Value Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Cornerstone Large Cap Value Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/TAMRO Diversified Equity Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value Fund
II
|
|
|
|
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
67
|
|
|
|
|
|
|
ASTON/Fairpointe Mid Cap Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth
Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/TAMRO Small Cap Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/River Road Select Value Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
68
|
|
|
|
|
|
|
ASTON/River Road Small Cap Value Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/River Road Independent Value Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/LMCG Small Cap Growth Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Veredus Select Growth Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
69
|
|
|
|
|
|
|
ASTON Small Cap Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Silvercrest Small Cap Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/DoubleLine Core Plus Fixed Income Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/TCH Fixed Income Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Lake Partners LASSO Alternatives Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
70
|
|
|
|
|
|
|
ASTON Dynamic Allocation Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Anchor Capital Enhanced Equity Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
71
|
|
|
|
|
|
|
|
ASTON/River Road Long-Short Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Barings International Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Harrison Street Real Estate Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Balanced Fund
|
Shareholder Name and Address
|
|
Class
|
|
Shares Owned
|
|
Percent of Class
|
72
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
As
described in the Prospectus, the Trust employs Aston to manage the investment and reinvestment of the assets of the Funds and to continuously review, supervise and administer the Funds investment programs under an investment advisory agreement
with respect to each Fund (the Investment Advisory Agreement). Aston has engaged various subadvisers to manage the day-to-day investment management of the Funds portfolios. The advisory services provided by Aston for each Fund and
the fees received by it for such services for the Funds most recent fiscal year are described in the Prospectus.
Aston is a majority-owned and independently managed indirect subsidiary of Affiliated Managers Group, Inc. (AMG). A wholly-owned subsidiary of AMG, Manor LLC, serves as the General Partner of
Aston, and senior management and key employees of Aston have an equity interest in Aston. Aston commenced operations on December 1, 2006 and converted to a Delaware limited partnership on April 15, 2010 in connection with AMGs
acquisition of a controlling interest in Aston. Aston is located at 120 N. LaSalle Street, 25
th
Floor, Chicago, Illinois 60602. As of December 31, 2012, Aston had approximately $[ ] billion in assets under management.
AMG, a Delaware corporation with a principal place of business at 600 Hale Street, Prides Crossing, Massachusetts 01965, is
an asset management company that holds interests in investment management firms. The common stock of AMG is publicly traded on the New York Stock Exchange under the symbol AMG. As of December 31, 2012, AMGs affiliated managers had
approximately $ billion in assets under management.
For the services provided and the expenses assumed pursuant to the Investment Advisory Agreement with Aston, Aston receives a management
fee from each Fund at an annual rate based on the Funds average daily net assets, computed daily and payable monthly, at the following annual rates:
73
|
|
|
Fund
|
|
Gross Advisory Fee
(as a % of average daily net assets)
|
|
|
ASTON/Montag & Caldwell Growth
|
|
0.80% for the first $800 million
0.60% over $800 million up to $6 billion
0.55% over $6 billion up to $12 billion
0.50% over $12 billion
|
ASTON/Herndon Large Cap Value
|
|
0.80%
|
ASTON/Cornerstone Large Cap Value
|
|
0.80%
|
ASTON/TAMRO Diversified Equity
|
|
0.80%
|
ASTON/River Road Dividend All Cap Value
|
|
0.70%
|
ASTON/River Road Dividend All Cap Value II
|
|
0.70%
|
ASTON/Fairpointe Mid Cap
|
|
0.80% for the first $100 million
0.75% for next $300 million
0.70% over $400 million
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
0.85%
|
ASTON/TAMRO Small Cap
|
|
0.90%
|
ASTON/River Road Select Value
|
|
1.00%
|
ASTON/River Road Small Cap Value
|
|
0.90%
|
ASTON/River Road Independent Value
|
|
1.00%
|
ASTON/LMCG Small Cap Growth
|
|
1.00%
|
ASTON/Veredus Select Growth
|
|
0.80%
|
ASTON Small Cap
|
|
1.00%
|
ASTON/Silvercrest Small Cap
|
|
1.00%
|
ASTON/DoubleLine Core Plus Fixed Income
|
|
0.55%
|
ASTON/TCH Fixed Income
|
|
0.55%
|
ASTON/Lake Partners LASSO Alternatives
|
|
1.00%
|
ASTON Dynamic Allocation
|
|
0.80%
|
ASTON/Anchor Capital Enhanced Equity
|
|
0.70%
|
ASTON/River Road Long-Short
|
|
1.20%
|
ASTON/Barings International
|
|
1.00%
|
|
|
|
ASTON/Harrison Street Real Estate
|
|
1.00%
|
ASTON/Montag & Caldwell Balanced
|
|
0.75%
|
Aston has entered into an Expense Limitation Agreement with the Trust, on behalf of the Fund,
through February 28, 2014, for the following Funds:
|
|
|
|
|
Fund
|
|
Class I
|
|
Class N
|
|
|
|
ASTON/Cornerstone Large Cap Value
|
|
1.05%
|
|
1.30%
|
ASTON/TAMRO Diversified Equity
|
|
0.95%
|
|
1.20%
|
ASTON/River Road Dividend All Cap Value
|
|
1.05%
|
|
1.30%
|
ASTON/Veredus Select Growth
|
|
1.05%
|
|
1.30%
|
ASTON Small Cap
|
|
1.24%
|
|
1.49%
|
ASTON/TCH Fixed Income
|
|
0.69%
|
|
0.94%
|
ASTON/Harrison Street Real Estate
|
|
1.12%
|
|
1.37%
|
ASTON/Montag & Caldwell Balanced
|
|
1.10%
|
|
1.35%
|
74
Aston has entered into an Expense Reimbursement Agreement with the Trust, on behalf of
each Fund, through February 28, 2014, under which Aston will waive its fees or reimburse the Funds expenses to the extent that the Funds annual operating expense, not including interest, taxes, investment-related costs (such as
brokerage commissions), extraordinary expenses and acquired fund fees and expenses, exceed the rates shown in the table below:
|
|
|
|
|
Fund
|
|
Class I
|
|
Class N
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
1.25%
|
ASTON/Herndon Large Cap Value
|
|
1.05%
|
|
1.30%
|
ASTON/River Road Select Value
|
|
1.25%
|
|
1.50%
|
ASTON/River Road Independent Value
|
|
1.17%
|
|
1.42%
|
ASTON/LMCG Small Cap Growth
|
|
1.10%
|
|
1.35%
|
ASTON/Lake Partners LASSO Alternatives
|
|
1.20%
|
|
1.45%
|
ASTON Dynamic Allocation
|
|
1.05%
|
|
1.30%
|
ASTON/Anchor Capital Enhanced Equity
|
|
1.15%
|
|
1.40%
|
ASTON/River Road Long-Short
|
|
1.45%
|
|
1.70%
|
ASTON/DoubleLine Core Plus Fixed Income
|
|
0.69%
|
|
0.94%
|
ASTON/Barings International
|
|
1.15%
|
|
1.40%
|
ASTON/Silvercrest Small Cap
|
|
1.15%
|
|
1.40%
|
ASTON/River Road Dividend All Cap Value II
|
|
1.05%
|
|
1.30%
|
In connection with the Expense Reimbursement Agreement for each class of shares for each Fund
listed above, the Fund has agreed that for a period of up to three years from the end of the fiscal year end in which such amount was waived or reimbursed, the Adviser is entitled to be reimbursed by the Fund for fees waived and expenses reimbursed
from the commencement of operations of the class of shares through the completion of the Funds first three full fiscal years of that class to the extent that the Funds expense ratio with respect to that class, not including interest,
taxes, investment-related costs (such as brokerage commissions), extraordinary expenses and acquired fund fees and expenses, remains at or below the operating expense cap after such reimbursement.
The investment advisory fees earned by Aston for each Fund for the fiscal years ended October 31, 2012, October 31, 2011 and
October 31, 2010 as well as the amount of fees waived or expenses reimbursed, are set forth below.
75
Fiscal year ended October 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Gross
Advisory
Fees
|
|
|
Waived
Fees
|
|
|
Net Advisory
Fees After Fee
Waivers
|
|
|
Reimbursed
Expenses
|
|
ASTON/Montag & Caldwell Growth
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
ASTON/Herndon Large Cap Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Cornerstone Large Cap Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/TAMRO Diversified Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value II
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Fairpointe Mid Cap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/TAMRO Small Cap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/River Road Select Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/River Road Small Cap Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/River Road Independent Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/LMCG Small Cap Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Veredus Select Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON Small Cap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/
Silvercrest Small Cap
(2
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/DoubleLine Core Plus Fixed Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/TCH Fixed Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON Dynamic Allocation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/
Anchor Capital Enhanced Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/River Road Long-Short
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Barings International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Harrison Street Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
ASTON/River Road Dividend All Cap Value II commenced operations on June 27, 2012.
(2)
ASTON/Silvercrest Small Cap commenced operations on December 27, 2011.
76
Fiscal year ended October 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Gross
Advisory
Fees
|
|
|
Waived
Fees
|
|
|
Net Advisory
Fees After Fee
Waivers
|
|
|
Reimbursed
Expenses
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Growth
|
|
$
|
21,121,626
|
|
|
$
|
-
|
|
|
$
|
21,121,626
|
|
|
$
|
-
|
|
ASTON/Herndon Large Cap Value
|
|
|
96,494
|
|
|
|
(96,494
|
)
|
|
|
-
|
|
|
|
(33,322
|
)
|
ASTON/Cornerstone Large Cap Value
|
|
|
852,399
|
|
|
|
(210,762
|
)
|
|
|
641,637
|
|
|
|
-
|
|
ASTON/TAMRO Diversified Equity
|
|
|
172,138
|
|
|
|
(91,258
|
)
|
|
|
80,880
|
|
|
|
-
|
|
ASTON/ River Road Dividend All Cap Value
|
|
|
2,883,458
|
|
|
|
-
|
|
|
|
2,883,458
|
|
|
|
-
|
|
ASTON/Fairpointe Mid Cap
|
|
|
19,016,950
|
|
|
|
-
|
|
|
|
19,016,950
|
|
|
|
-
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
36,460
|
|
|
|
(36,460
|
)
|
|
|
-
|
|
|
|
(35,550
|
)
|
ASTON/TAMRO Small Cap
|
|
|
8,990,344
|
|
|
|
-
|
|
|
|
8,990,344
|
|
|
|
-
|
|
ASTON/River Road Select Value
|
|
|
2,014,925
|
|
|
|
-
|
|
|
|
2,014,925
|
|
|
|
-
|
|
ASTON/River Road Small Cap Value
|
|
|
3,896,599
|
|
|
|
-
|
|
|
|
3,896,599
|
|
|
|
-
|
|
ASTON/River Road Independent Value
(1)
|
|
|
1,398,166
|
|
|
|
(244,471
|
)
|
|
|
1,153,695
|
|
|
|
-
|
|
ASTON/LMCG Small Cap Growth
(2)
|
|
|
30,281
|
|
|
|
(30,281
|
)
|
|
|
-
|
|
|
|
(160,423
|
)
|
ASTON/Veredus Select Growth
|
|
|
838,725
|
|
|
|
-
|
|
|
|
838,725
|
|
|
|
-
|
|
ASTON Small Cap
|
|
|
509,379
|
|
|
|
(81,097
|
)
|
|
|
428,282
|
|
|
|
-
|
|
ASTON/DoubleLine Core Plus Fixed Income
(3)
|
|
|
26,172
|
|
|
|
(26,172
|
)
|
|
|
-
|
|
|
|
(79,461
|
)
|
ASTON/TCH Fixed Income
|
|
|
338,364
|
|
|
|
(159,751
|
)
|
|
|
178,613
|
|
|
|
--
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
|
1,165,120
|
|
|
|
(87,814
|
)
|
|
|
1,077,306
|
|
|
|
-
|
|
ASTON Dynamic Allocation
|
|
|
401,396
|
|
|
|
(138,681
|
)
|
|
|
262,715
|
|
|
|
-
|
|
ASTON/Anchor Capital Enhanced Equity
|
|
|
780,424
|
|
|
|
-
|
|
|
|
780,424
|
|
|
|
-
|
|
ASTON/River Road Long-Short
(4)
|
|
|
19,573
|
|
|
|
(19,573
|
)
|
|
|
-
|
|
|
|
(77,535
|
)
|
ASTON/Barings International
|
|
|
531,069
|
|
|
|
(147,896
|
)
|
|
|
383,173
|
|
|
|
-
|
|
ASTON/Harrison Street Real Estate
|
|
|
382,968
|
|
|
|
(123,339
|
)
|
|
|
259,629
|
|
|
|
-
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
207,310
|
|
|
|
(61,944
|
)
|
|
|
145,366
|
|
|
|
-
|
|
(1)
ASTON/River Road Independent Value commenced investment operations
on December 31, 2010.
(2)
ASTON/LMCG Small Cap Growth commenced investment operations on November 3, 2010.
(3)
ASTON/DoubleLine Core Plus Fixed Income commenced investment operations on July 18, 2011.
(4)
ASTON/River Road Long-Short commenced investment operations on May 4, 2011.
77
Fiscal year ended October 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Gross
Advisory
Fees
|
|
|
Waived
Fees
|
|
|
Net Advisory
Fees After Fee
Waivers
|
|
|
Reimbursed
Expenses
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Growth
|
|
|
$18,731,198
|
|
|
|
$ --
|
|
|
|
$18,731,198
|
|
|
|
$ --
|
|
ASTON/Herndon Large Cap Value
(1)
|
|
|
(3,890
|
)
|
|
|
(3,890
|
)
|
|
|
--
|
|
|
|
(68,084
|
)
|
ASTON/Cornerstone Large Cap Value
|
|
|
1,857,670
|
|
|
|
(267,757
|
)
|
|
|
1,589,913
|
|
|
|
--
|
|
ASTON/TAMRO Diversified Equity
|
|
|
105,668
|
|
|
|
(56,667
|
)
|
|
|
49,001
|
|
|
|
--
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
1,470,706
|
|
|
|
--
|
|
|
|
1,470,706
|
|
|
|
--
|
|
ASTON/Fairpointe Mid Cap
|
|
|
10,708,348
|
|
|
|
--
|
|
|
|
10,708,348
|
|
|
|
--
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
26,879
|
|
|
|
(26,879
|
)
|
|
|
--
|
|
|
|
(41,091
|
)
|
ASTON/TAMRO Small Cap
|
|
|
8,052,494
|
|
|
|
--
|
|
|
|
8,052,494
|
|
|
|
--
|
|
ASTON/River Road Select Value
|
|
|
2,194,381
|
|
|
|
--
|
|
|
|
2,194,381
|
|
|
|
--
|
|
ASTON/River Road Small Cap Value
|
|
|
4,495,240
|
|
|
|
--
|
|
|
|
4,495,240
|
|
|
|
--
|
|
ASTON/Veredus Select Growth
|
|
|
777,397
|
|
|
|
(27,175
|
)
|
|
|
750,222
|
|
|
|
--
|
|
ASTON Small Cap
|
|
|
521,879
|
|
|
|
(70,603
|
)
|
|
|
451,276
|
|
|
|
--
|
|
ASTON/TCH Fixed Income
|
|
|
347,172
|
|
|
|
(230,324
|
)
|
|
|
116,848
|
|
|
|
--
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
|
136,762
|
|
|
|
(135,895
|
)
|
|
|
867
|
|
|
|
--
|
|
ASTON Dynamic Allocation
|
|
|
400,319
|
|
|
|
(74,415
|
)
|
|
|
325,904
|
|
|
|
--
|
|
ASTON/Anchor Capital Enhanced Equity
|
|
|
391,098
|
|
|
|
--
|
|
|
|
391,098
|
|
|
|
--
|
|
ASTON/Barings International
|
|
|
416,123
|
|
|
|
(134,828
|
)
|
|
|
281,295
|
|
|
|
--
|
|
ASTON/Harrison Street Real Estate
|
|
|
315,407
|
|
|
|
(97,802
|
)
|
|
|
217,605
|
|
|
|
--
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
183,953
|
|
|
|
(62,328
|
)
|
|
|
121,625
|
|
|
|
--
|
|
(1)
ASTON/Herndon Large Cap Value commenced investment operations on March 31, 2010.
Under the Investment Advisory Agreement, the Adviser is not liable for any error of judgment or mistake of law or for any loss suffered by the Trust or a Fund in connection with the performance of the
Investment Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties, or from reckless disregard of its duties and obligations thereunder.
The Investment Advisory Agreement between the Trust and Aston may be terminated with respect to a Fund by vote of the Board or by the
holders of a majority of the outstanding voting securities of the Fund, at any time without penalty, upon 60 days written notice to Aston. Aston may also terminate its advisory relationship with respect to a Fund upon 60 days written
notice to the Trust. The Investment Advisory Agreement terminates automatically in the event of its assignment.
Under
the Investment Advisory Agreement, Aston shall: (i) manage the investment and reinvestment of the assets of the Funds, (ii) continuously review, supervise and administer the investment program of the Funds, (iii) determine in its
discretion, the assets to be held uninvested, (iv) provide the Trust with records concerning the Advisers activities which are required to be maintained by the Trust and (v) render regular reports to the Trusts officers and
Board concerning the Advisers discharge of the foregoing responsibilities. The Adviser shall discharge the foregoing responsibilities subject to the oversight of the Trusts officers and the Board and in compliance with the objectives,
policies and limitations set forth in the Trusts then effective prospectus and SAI.
The Investment Advisory Agreement
with respect to a Fund, continues in effect for the Fund from year to year, so long as its continuation is approved at least annually (a) by a majority of the Trustees who are not parties to such agreement or interested persons of any such
party except in their capacity as Trustees of the Fund or (b) by the shareholders of the Fund or the Board.
78
The Investment Advisory Agreement with Aston also provides that Aston shall have the
authority, subject to applicable provisions of the 1940 Act and the regulations thereunder, to select one or more subadvisers to provide day-to-day portfolio management with respect to all or a portion of the assets of any of the Funds and to
allocate and reallocate the assets of a Fund between and among subadvisers so selected pursuant to a manager-of-managers structure. Under this structure, Aston also has the authority to retain and terminate subadvisers, engage new
subadvisers and make material revisions to the terms of the sub-investment advisory agreement with respect to a Fund (each a Sub-Investment Advisory Agreement), subject to approval of the Board, but not shareholder approval.
As described above, Aston is paid a management fee at an annual rate based on the average daily net assets of a Fund. Out of its fee,
Aston pays the subadviser(s) of each Fund. Fees paid to a subadviser of a Fund with multiple subadvisers will depend upon the fee rate negotiated with Aston and upon the percentage of the Funds assets allocated to that subadviser by Aston.
Because Aston will pay each subadvisers fees out of its own fees from the Funds, there will not be any duplication of advisory fees paid by the Funds.
Subadvisers
Under the Sub-Investment Advisory
Agreement between Aston and the subadviser(s) for each Fund, each subadviser manages a portfolio of the Fund, selects investments and places all orders for purchases and sales of that Funds securities, subject to the general oversight of the
Board and the Adviser. In addition, except as may otherwise be prohibited by law or regulation, a subadviser may, in its discretion and from time to time, waive a portion of its fee.
Each Sub-Investment Advisory Agreement provides that neither a subadviser nor any of its directors, officers, stockholders, agents or
employees shall have any liability to a Fund or any shareholder of a Fund for any error of judgment, mistake of law, or any loss arising out of any investment, or for any other act or omission in the performance by the subadviser of its duties under
the Sub-Investment Advisory Agreement except for liability resulting from willful misfeasance, bad faith, or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under the
Sub-Investment Advisory Agreement. Each Sub-Investment Advisory Agreement continues for an initial team of not more than two years and is subject to the same requirements for renewal as the Investment Advisory Agreement.
For the services provided pursuant to the Sub-Investment Advisory Agreement, Aston pays each subadviser a fee computed daily and payable
monthly. The standard sub-advisory fee rate is 50% of the applicable advisory fee less any expense waivers or reimbursements and certain payments to third-party intermediaries. In certain limited circumstances, exceptions to the standard fee
schedule apply.
Anchor Capital Advisors LLC (Anchor Capital)
Anchor Capital is the subadviser to the
ASTON/Anchor Capital Enhanced Equity Fund
. Eighty percent (80%) of Anchor Capital is
owned by Anchor Capital Holdings LLC, which is a wholly-owned subsidiary of publicly-held Boston Private Financial Holdings, Inc. Anchor Capital is located at One Post Office Square, Suite 3850, Boston, MA 02109.
The table below shows other accounts for which the portfolio manager of the Fund is primarily responsible for the day-to-day portfolio
management as of October 31, 2012.
79
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
Ronald A. Altman
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
Compensation
. Ronald L. Altmans compensation includes a base salary.
Mr. Altman also participates in standard company benefits including a 401(k) plan. Mr. Altman may also be entitled to receive a percentage of a bonus pool that is based on Anchor Capitals net operating profits. Mr. Altmans
share of the pool is determined by Anchor Capitals Chief Executive Officer and Chief Investment Officer. Accordingly, Mr. Altmans compensation is not directly based on the performance of the Fund and is not directly based on the
value of assets held in the Funds portfolio.
Material Conflicts of Interest.
The portfolio manager for the Fund
may manage multiple accounts following the same enhanced equity strategy. The portfolio manager makes decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations. Consequently, the
portfolio manager may purchase securities for one account and not another and the performance of the securities purchased for one account may vary from the performance of securities for another. Anchor Capital has adopted policies and procedures
that it believes address the conflicts associated with managing multiple accounts for multiple clients including written policies and procedures reasonably designed that seek to allocate investment opportunities on a fair and equitable basis over
time.
Baring International Investment Limited (Barings)
Barings is the subadviser to the
ASTON/Barings International Fund
. Barings is a subsidiary of Baring Asset Management Limited and
is located at 155 Bishopsgate, London, EC2M 3XY, United Kingdom. The table below shows other accounts for which the portfolio manager of the Fund is primarily responsible for the day-to-day portfolio management as of October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
David Bertocchi
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
Compensation
. The portfolio manager receives a base salary, an annual bonus and an
equity-based long-term incentive award. The compensation structure emphasizes successful firm outcomes and is oriented to make client results more important than title or length of tenure in determining total compensation. The annual bonus is based
upon the employees success in meeting annual performance objectives, how the employee has performed as part of the organization and how the company has performed as a whole. The equity-based long-term incentive award is calculated by a formula
linked to firm revenues, profits, and assets under management.
80
Material Conflicts of Interest
. The portfolio manager for the Fund manages
multiple accounts, including the Fund. The portfolio manager makes decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations that the portfolio manager believes are applicable to
that account. Consequently, the portfolio manager may purchase securities for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts.
The portfolio manager may place transactions on behalf of other accounts that are contrary to investment decisions made on behalf of the Fund, or make investment decisions that are similar to those made for the Fund, both of which have the potential
to adversely affect the price paid or received by the Fund or the size of the security position obtainable for the Fund.
It is possible that an investment opportunity may be suitable for both the Fund and other accounts managed by the portfolio manager, but
may not be available in sufficient quantities for both the Fund and the other accounts to participate fully. Similarly, there may be a limited opportunity to sell an investment held by the Fund and another account. Barings has procedures designed to
ensure fair treatment of clients in the allocation of trades. Barings has adopted policies and procedures that it believes address the conflicts associated with managing multiple accounts for multiple clients, although there is no assurance that
such policies and procedures will adequately address such conflicts.
Cornerstone Investment Partners, LLC
(Cornerstone)
Cornerstone is the subadviser to the
ASTON/Cornerstone Large Cap Value Fund
.
Cornerstone is located at Phipps Tower, 3438 Peachtree Road NE, Suite 900, Atlanta, GA 30326. Cornerstone was founded in 2001 and is 100% owned by CIM Holdings, LLC, which is 100% owned by Cornerstones employees.
The table below shows other accounts for which the portfolio managers of the Fund are jointly and primarily responsible for the
day-to-day portfolio management as of October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
John Campbell, CPA
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rick Van Nostrand, CPA
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron Clement, CPA
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean Morris, CPA
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
81
Compensation.
The compensation structure for investment professionals has three
components: a base salary, a discretionary bonus, and the opportunity to acquire equity in the firm. The discretionary bonus is a function of the overall profitability of the firm, the portfolio managers contribution to the investment process,
and the overall success of Cornerstones clients. The discretionary bonus can be several times the amount of the base salary representing the bulk of an investment professionals compensation. Compensation is not based on the performance
of individual client accounts but rather of the success of the firm as a whole.
Material Conflict of
Interest
. In some cases, the portfolio managers for the Fund may manage multiple accounts following Cornerstones large-cap value and balanced strategies. The portfolio managers may place transactions on behalf of other accounts that
are contrary to investment decisions made on behalf of the Fund, or make investment decisions that differ from those made for the Fund to the extent of client restrictions on accounts, both of which have the potential to adversely affect the price
paid or received by the Fund or the size of the security position obtained for the Fund. Cornerstone has adopted policies and procedures that it believes address the conflict associated with managing multiple accounts for multiple clients, including
written policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.
DoubleLine Capital LP (DoubleLine)
DoubleLine Capital
LP is the subadviser to the
ASTON/DoubleLine Core Plus Fixed Income Fund
. DoubleLine was founded in 2009 by Jeffrey Gundlach and other key members of DoubleLines investment team. DoubleLine is located at 333 South Grand Avenue, Suite
1800, Los Angeles, CA 90071.
The table below shows other accounts for which the portfolio managers of the Fund are
jointly and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
82
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets Managed
with Advisory
Fee Based
on
Performance
|
|
|
|
|
|
Jeffrey Gundlach
|
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Registered Investment Companies
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Other Pooled Investment Vehicles
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|
Other Accounts
|
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|
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|
Philip Barach
|
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Registered Investment Companies
|
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|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
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|
|
|
|
|
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|
|
|
Bonnie Baha, CFA, CIC
|
|
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|
Registered Investment Companies
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|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luz Padilla
|
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|
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Registered Investment Companies
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|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
Material Conflicts of Interest.
From time to time, potential and actual conflicts of interest
may arise between a portfolio managers management of the investments of the Fund, on the one hand, and the management of other accounts, on the other. Potential and actual conflicts of interest also may result because of the firms other
business activities. Other accounts managed by a portfolio manager might have similar investment objectives or strategies as the Fund, be managed (benchmarked) against the same index as the Funds benchmark, or otherwise hold, purchase, or sell
securities that are eligible to be held, purchased or sold by the Fund. The other accounts might also have different investment objectives or strategies than the Fund.
Knowledge and Timing of Fund Trades.
A potential conflict of interest may arise as a result of a portfolio managers management of the Fund. Because of their positions with the Fund, the
portfolio managers know the size, timing and possible market impact of the Funds trades. It is theoretically possible that a portfolio manager could use this information to the advantage of other accounts under management, and it is also
theoretically possible that actions could be taken (or not taken) to the detriment of the Fund.
Investment
Opportunities.
A potential conflict of interest may arise as a result of the portfolio managers management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for both the Fund and
other accounts managed by a portfolio manager, but securities may not be available in sufficient quantities for both the Fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by the
Fund and another account. DoubleLine has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.
83
Under DoubleLines allocation procedures, investment opportunities are allocated among
various investment strategies based on individual account investment guidelines, the firms investment outlook, cash availability and a series of other factors. DoubleLine has also adopted additional internal practices to complement the general
trade allocation policy that are designed to address potential conflicts of interest due to the side-by-side management of the Fund and certain pooled investment vehicles, including investment opportunity allocation issues.
Conflicts potentially limiting the Funds investment opportunities may also arise when the Fund and other clients of DoubleLine
invest in different parts of an issuers capital structure, such as when the Fund owns senior debt obligations of an issuer and other clients own junior tranches of the same issuer. In such circumstances, decisions over whether to trigger an
event of default, over the terms of any workout, or how to exit an investment may result in conflicts of interest. In order to minimize such conflicts, a portfolio manager may avoid certain investment opportunities that would potentially give rise
to conflicts with other clients or DoubleLine may enact internal procedures designed to minimize such conflicts, which could have the effect of limiting the Funds investment opportunities. Additionally, if DoubleLine acquires material
non-public information in connection with its business activities for other clients, a portfolio manager or other investment personnel may be restricted from purchasing securities or selling certain securities for the Fund or other clients. When
making investment decisions where a conflict of interest may arise, DoubleLine will endeavor to act in a fair and equitable manner between the Fund and other clients; however, in certain instances the resolution of the conflict may result in
DoubleLine acting on behalf of another client in a manner that may not be in the best interest, or may be opposed to the best interest, of the Fund.
Performance Fees and Personal Investments.
A portfolio manager may advise certain accounts with respect to which the advisory fee is based entirely or partially on performance or in respect of
which the portfolio manager may have made a significant personal investment. Such circumstances may create a conflict of interest for a portfolio manager in that a portfolio manager may have an incentive to allocate the investment opportunities that
he or she believes might be the most profitable to such other accounts instead of allocating them to the Fund. DoubleLine has adopted policies and procedures reasonably designed to allocate investment opportunities between the Fund and performance
fee based accounts on a fair and equitable basis over time.
Compensation.
The overall objective of DoubleLines
compensation program for portfolio managers is to attract competent and expert investment professionals and to retain them over the long-term. Compensation is comprised of several components which, in the aggregate are designed to achieve these
objectives and to reward the portfolio managers for their contribution to the success of their clients and the firm. Portfolio managers are compensated through a combination of base salary, discretionary bonus and equity participation. Bonuses and
equity generally represent most of the portfolio managers compensation. However, in some cases, portfolio managers may have a profit sharing interest in the revenue or income related to the areas for which the portfolio managers are
responsible. Such profit sharing arrangements can comprise a significant portion of a portfolio managers overall compensation.
Salary.
Salary is agreed to with managers at time of employment and is reviewed from time to time. It does not change significantly and often does not constitute a significant part of a portfolio
managers compensation.
Discretionary Bonus/Guaranteed Minimums.
Portfolio managers receive discretionary
bonuses. However, in some cases, pursuant to contractual arrangements, some portfolio managers may be entitled to a mandatory minimum bonus if the sum of their salary and profit sharing does not reach certain levels.
Equity Incentives.
Portfolio managers participate in equity incentives based on overall firm performance, through direct ownership
interests or participation in stock option or stock appreciation plans. These ownership interests or participation interests provide eligible portfolio managers the opportunity to participate in the financial performance of the firm as a whole.
Participation is generally determined in the firms discretion, taking into account factors relevant to the portfolio managers contribution to the success of the firm.
84
Other Plans and Compensation Vehicles
. Portfolio managers may elect to participate in
DoubleLines 401(k) plan, to which they may contribute a portion of their pre- and post-tax compensation to the plan for investment on a tax-deferred basis. DoubleLine may also choose, from time to time, to offer certain other compensation
plans and vehicles, such as a deferred compensation plan, to portfolio managers.
Summary
. As described above, an
investment professionals total compensation is determined through a subjective process that evaluates numerous quantitative and qualitative factors, including the contribution made to the overall investment process. Not all factors apply to
each investment professional, and there is no particular weighting or formula for considering certain factors. Among the factors considered are: relative investment performance of portfolios (although there are no specific benchmarks or periods of
time used in measuring performance); complexity of investment strategies; participation in the investment teams dialogue; contribution to business results and overall business strategy; success of marketing/business development efforts and
client servicing; seniority/length of service with the firm; management and supervisory responsibilities; and fulfillment of the firms leadership criteria.
Fairpointe Capital LLC (Fairpointe)
Fairpointe
serves as subadviser to the
ASTON/Fairpointe Mid Cap Fund
. Fairpointe was founded in 2011 and is 100% employee-owned. Thyra E. Zerhusen, Marie L. Lorden and Mary L. Pierson, each a Principal and Executive Committee member, serve as
co-portfolio managers of the Fund. Ms. Zerhusen, CEO and CIO of Fairpointe, has served as the Funds portfolio manager since May 1999. Ms. Lorden, Portfolio Manager of Fairpointe and Ms. Pierson, Portfolio Manager of Fairpointe,
have served as portfolio managers of the Fund since April 2009 after serving as long time analysts to the Fund from 2003 and 2004. The firm provides investment advisory services to institutions and individuals. Fairpointe is located at One North
Franklin, Suite 3300, Chicago, IL 60606.
The table below shows other accounts for which the portfolio managers of the Fund
are jointly and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed
(in
millions)
|
|
Number
of
Accounts Managed
with Advisory Fee
Based on
Performance
|
|
Assets Managed
with Advisory
Fee
Based on
Performance
|
|
|
|
|
|
Thyra Zerhusen
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marie Lorden
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Pierson
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
85
Compensation
. Ms. Zerhusen, Ms. Lorden and Ms. Pierson are principals
in the business of Fairpointe. Each receives a base salary and participates in the profits of Fairpointe. The majority of their compensation is tied to the success of Fairpointe.
Material Conflicts of Interest
. The portfolio managers manage multiple accounts, including the Fund. The portfolio managers make
investment decisions for each account based on the investment objectives, policies and other relevant investment considerations that the portfolio managers believe are applicable to each account. Such actions may be taken for one account and not
another and may result in varying holding and performance among clients. Fairpointe has adopted policies and procedures designed to prevent conflicts among multiple accounts, although there can be no assurance that such policies and procedures will
adequately address such conflicts.
Harrison Street Securities, LLC (HSS)
HSS is the subadviser to the
ASTON/Harrison Street Real Estate Fund
. HSS is located at 71 South Wacker Drive, Suite 3575, Chicago,
IL 60606. HSS is majority-owned by HS Securities Holdings, LLC.
The table below shows other accounts for which the portfolio
managers of the Fund are jointly and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
Regan A. Pratt
1
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Kammert, CFA
1
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
1
Messrs.
Pratt and Kammert are responsible for the management of the North American assets of the Other Pooled Investment Vehicles and Other Accounts. Their managed portion is represented above.
Compensation.
Messrs. Pratt and Kammert are principals in the business of HSS. Both Mr. Pratt and Mr. Kammert receive a
base salary and participate in profits of HSS. All of their compensation is tied to the success of HSS.
Material Conflicts
of Interest.
The portfolio managers manage multiple accounts, including the Fund. The portfolio managers make decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations that
the portfolio managers believe are applicable to that account. Consequently, the portfolio managers may purchase securities for one account and not another account, and the performance of securities purchased for one account may vary from the
performance of securities purchased for other accounts. A portfolio manager may place transactions on behalf of other accounts that are contrary to investment decisions made on behalf of the Fund, or make investment decisions that are similar to
those made for the Fund, both of which have the potential to
86
adversely affect the price paid or received by the Fund or the size of the security position obtainable for the Fund. HSS has adopted policies and procedures that it believes address the
conflicts associated with managing multiple accounts for multiple clients, although there is no assurance that such policies and procedures will adequately address such conflicts.
Herndon Capital Management, LLC (Herndon)
Herndon is the subadviser to the
ASTON/Herndon Large Cap Value Fund
. Herndon was founded and registered with the SEC in 2001 and
began managing assets in June 2002. The firm is an affiliate of Atlanta Life Financial Group (ALFG), a 106-year-old financial services firm that is located at Herndon Plaza, 100 Auburn Avenue, NE #300, Atlanta, GA 30303.
The table below shows other accounts for which the portfolio manager of the Fund is primarily responsible for the day-to-day portfolio
management as of October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed(in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets Managed
with Advisory
Fee Based on
Performance
|
|
|
|
|
|
Randell A. Cain Jr., CFA
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
Compensation
. Herndon has implemented a compensation program for its portfolio
managers/principals based on several components including peer group performance of the portfolios as measured against a designated universe of managers as well as profitability of the firm. For the purposes of this Fund, peer group performance will
be measured against the PSN Large Cap Value Universe. The goal of the portfolio management team is to outperform the medium manager in the PSN Large Cap Value Universe over a five-year period. When the portfolio management team outperforms or
underperforms the median manager in the universe, it is rewarded accordingly. The Herndon executive team believes that tying performance of the Fund to compensation of the portfolio management team keeps the portfolio management teams
interests aligned with those of our underlying clients.
Analysts are compensated on the basis of a subjective assessment of
their contribution to the analytical portion of the investment process. Herndons compensation program is designed to attract qualified talent, promote teamwork and to align employer and employee interests by giving key employees a vested
interest in the companys long-term performance.
All employees of Herndon, with the exception of the sales team who
receive commissions, are entitled to receive a bonus that will be driven by the profits of the company. Every year a bonus pool is funded by a pre-determined percent of the companys pre-tax profits. This bonus/profit sharing is distributed
based on a combination of factors including tenure, role within the organization, and an evaluation by the employees immediate supervisor.
This bonus/profit sharing is expected to become the primary component of every employees overall compensation as the companys profitability grows over time.
87
The portfolio manager has a five-year agreement effective July 1, 2009 with one year
renewals thereafter. The portfolio manager has signed a non-compete agreement.
Material Conflicts of Interest.
Herndon
seeks to identify potential conflicts of interest resulting from a portfolio managers management of both the Fund and multiple separate accounts. The portfolio manager makes decisions for each account including the Fund based on the investment
objectives, guidelines, directions, policies, practices and other relevant investment considerations that the portfolio manager believes are applicable to that account. Consequently, the portfolio manager may purchase securities for one account and
not another account, and the performance of securities purchased for one account may vary from the performance of the securities purchased for the accounts. The portfolio manager may place transactions on behalf of other accounts that are contrary
to investment decisions made on behalf of the Fund, or make investment decisions that are similar to those made for the Fund, both of which have the potential to adversely affect the price paid or received by the Fund or the size of the security
position obtainable for the Fund. Herndon has adopted policies and procedures that it believes addresses the potential conflicts of interest including the allocation of investment opportunities on a fair and equitable basis over time; although there
is no assurance that such policies and procedures will adequately address such conflicts. The firms Code of Ethics governs personal trading by all employees and contains policies and procedures to ensure that client interests are paramount.
Lake Partners, Inc. (Lake Partners)
Lake Partners is the subadviser to the
ASTON/Lake Partners LASSO Alternatives Fund
. Lake Partners is wholly-owned by Messrs.
Frederick C. Lake and Ronald A. Lake. Lake Partners is located at 4 High Ridge Park, Suite 300, Stamford, CT 06905.
The table
below shows other accounts for which the portfolio managers of the Fund are jointly and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
Frederick C. Lake
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald A. Lake
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
Compensation
. As the sole owners of the subadviser, compensation to the portfolio managers
for their services to the Fund is allocated out of the subadvisers income, which is equal to net revenue minus the subadvisers expenses.
The income of the subadviser and, therefore, the compensation of the portfolio managers, are determined primarily by the amount of assets under management or advisement at the subadviser as well as the
investment performance of accounts managed by the subadviser.
88
Material Conflicts of Interest
. The portfolio managers for the Fund manage multiple
accounts, including the Fund. The portfolio managers make decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations that the portfolio managers believe are applicable to that
account. Consequently, the portfolio managers may purchase securities for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts. A
portfolio manager may place transactions on behalf of other accounts that are contrary to investment decisions made on behalf of a fund, or make investment decisions that are similar to those made for a fund, both of which have the potential to
adversely affect the price paid or received by a fund or the size of the security position obtainable for a fund. Lake Partners has adopted policies and procedures that it believes address the conflicts associated with managing multiple accounts for
multiple clients, although there is no assurance that such policies and procedures will adequately address such conflicts.
Lee Munder Capital Group, LLC (LMCG)
LMCG is the subadviser to the
ASTON/LMCG Small Cap Growth Fund
[and the
ASTON Small Cap Fund
]. LMCG
was founded in 2000 by Mr. Lee P. Munder and is located at 200 Clarendon Street, 28
th
Floor, Boston, MA 02116.
The table below shows other
accounts for which the portfolio manager of the Fund was primarily responsible for the day-to-day portfolio management as of October 31,
2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets Managed
with Advisory
Fee Based on
Performance
|
|
|
|
|
|
Andrew Morey
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
Compensation.
The portfolio managers compensation consists of three
components: a competitive annual salary, a revenue share tied directly to the managers strategy and the benefits from equity ownership. Revenue share related incentives are based on the overall revenue derived from the applicable
investment strategy. The percentage of revenue is determined by the investment teams gross performance versus a peer group universe, on a blended basis, generally over a trailing one year, three year and five year time horizon.
Material Conflicts of Interest.
The portfolio manager oversees multiple accounts in the investment strategy which
includes the Fund. The portfolio manager makes decisions at the strategy level and implements those decisions at the account level based on the specific investment objectives, policies, practices and other relevant investment considerations that the
portfolio manager believes are applicable to each account. Consequently, the portfolio manager may purchase securities for one account and not another account, and the performance of securities purchased for one account may vary from the performance
of securities purchased for other accounts. LMCG has adopted policies and procedures that it believes address the conflicts associated with managing multiple accounts for multiple clients, although there is no assurance that such policies and
procedures will adequately address such conflicts.
89
Montag & Caldwell, LLC (Montag & Caldwell)
Montag & Caldwell is the subadviser to the
ASTON/Montag & Caldwell Growth Fund,
ASTON/Montag & Caldwell Mid Cap Growth Fund
and
ASTON/Montag & Caldwell Balanced Fund
. Montag & Caldwell is located at 3455 Peachtree Road NE, Suite 1200, Atlanta, GA 30326. Montag & Caldwell is 100%
employee owned.
The table below shows other accounts for which the portfolio managers of the Funds listed above are jointly
and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
(In Millions)
|
|
|
|
|
|
Ronald E. Canakaris, CFA
1
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helen Donahue, CFA
1
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew W. Jung, CFA
1
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Scott Thompson, CFA
1
|
|
|
|
|
|
|
|
|
Registered Investment Companies
|
|
|
|
|
|
|
|
|
Other Pooled Investment Vehicles
|
|
|
|
|
|
|
|
|
Other Accounts
|
|
|
|
|
|
|
|
|
1
Mr. Canakaris is responsible for the management of the ASTON/Montag & Caldwell Growth Fund; Mr. Canakaris and Ms. Donahue are jointly responsible for the management of
ASTON/Montag & Caldwell Balanced Fund; and Messrs. Jung and Thompson are jointly responsible for the management of the ASTON/Montag & Caldwell Mid Cap Growth Fund.
Compensation
. Compensation for the portfolio managers includes an annual fixed base salary plus incentive compensation, which may
be significantly larger than the base salary. Compensation is determined by the Executive Committee, which is comprised of Montag & Caldwells Chairman and Chief Executive Officer/President, and is based on the success of the firm in
achieving clients investment objectives and providing excellent client service. The portfolio managers may also participate in a bonus arrangement that is partially based on identifying new business prospects and obtaining new clients. Other
components of the portfolio managers compensation include a 401(k) savings and profit sharing plan. Incentive compensation is not based on performance or the value of assets held in any Funds portfolio.
Compensation is not directly related to the size, growth or fees received from the management of any particular portfolios.
Material Conflicts of Interest
. In some cases, the portfolio managers for the Funds may manage multiple accounts following
Montag & Caldwells large cap-growth, mid-cap growth and balanced strategies. The portfolio managers may place transactions on behalf of other accounts that are contrary to investment decisions made on behalf of a Fund, or make
investment decisions that are similar to those made for a Fund to the extent of client restrictions on accounts, both of which have the potential to adversely affect the price paid or received by a Fund or the size of the security position
obtainable for a
90
Fund. Some overlap in holdings may exist between Montag & Caldwell's mid-cap growth strategy and its large-cap growth strategy. Montag & Caldwell has adopted policies and
procedures that it believes address the conflicts associated with managing multiple accounts for multiple clients, including written policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over
time. Compensation is not based on the performance of individual client accounts but rather of the firm as a whole and the firm's Code of Ethics governs personal trading by all employees and contains written policies and procedures to ensure that
client interests are paramount.
River Road Asset Management, LLC (River Road)
River Road is the subadviser to the
ASTON/River Road Dividend All Cap Value Fund, ASTON/River Road Dividend All Cap Value Fund II,
ASTON/River Road Small Cap Value Fund
,
ASTON/River Road Select Value Fund, ASTON/River Road Independent Value Fund
and
ASTON/River Road Long-Short Fund
. River Road is located at Meidinger Tower, Suite 1600, 462 South Fourth Street,
Louisville, KY 40202, and is a wholly-owned subsidiary of Aviva Investors North America Holdings, Inc. which is an indirect subsidiary of Aviva plc.
The table below shows other accounts for which the portfolio managers of the Funds listed above are jointly and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
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Number of
Accounts
Managed
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Total Assets
Managed (in
millions)
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Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
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Assets
Managed with
Advisory Fee
Based on
Performance
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James C. Shircliff, CFA
1,2
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Henry W. Sanders, III,
CFA
1
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Thomas S. Forsha, CFA
1
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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R. Andrew Beck
2
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Eric K. Cinnamond
3
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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91
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Number of
Accounts
Managed
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Total Assets
Managed (in
millions)
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Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
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Assets
Managed with
Advisory Fee
Based on
Performance
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Matthew W. Moran, CFA
4
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Daniel R. Johnson, CFA, CPA
4
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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J. Justin Akin
2
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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1
Messrs.
Shircliff, Sanders and Forsha are jointly responsible for the management of the ASTON/River Road Dividend All Cap Value Fund and ASTON/River Road Dividend All Cap Value Fund II.
2
Messrs. Shircliff, Beck and Akin are jointly responsible for the management of the ASTON/River Road Small Cap Value Fund and ASTON/River Road Select Value Fund.
3
Mr. Cinnamond is responsible for the management of the ASTON/River Road Independent Value Fund.
4
Messers.
Moran and Johnson are jointly responsible for the management of the ASTON/River Road Long-Short Fund.
Compensation
. Compensation for each portfolio manager listed above includes an annual fixed base salary. Additionally, for
non-contractual portfolio managers, there is potential incentive compensation up to a pre-determined fixed rate. The incentive compensation is primarily based on the composite portfolio performance relative to the relevant peer group and /or
benchmark indices over a 1-, 3-, and 5-year period, with the longer term periods receiving greater emphasis. The relevant index for
ASTON/River Road Small Cap Value Fund
and
ASTON/River Road Independent Value Fund
is the Russell 2000
Value Index; for
ASTON/River Road Dividend All Cap Value Fund,
ASTON/River Road Dividend All Cap Value
Fund II
and
ASTON/River Road Long-Short Fund,
the Russell 3000 Value Index; and for
ASTON/River Road Select Value
Fund,
the Russell 2500 Value Index. Additional incentive consideration may be awarded for professional development and contribution to the organizations broader performance metrics. For portfolio managers with longer-term employment
agreements (contractual arrangements), incentive compensation has been contractually determined at a fixed percentage of their base salary. R. Andrew Beck, James C. Shircliff, and Henry W. Sanders are contractual portfolio managers.
Material Conflicts of Interest
. The portfolio managers for each Fund manage multiple accounts, including their respective Fund.
The portfolio managers make decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations that the portfolio managers believe are applicable to that account. Consequently, the
portfolio managers may purchase securities for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts. A portfolio manager may place
transactions on behalf of other accounts that are contrary to investment decisions made on behalf of a Fund, or make investment decisions that are similar to those made for a Fund, both of which have the potential to adversely affect the price paid
or received by a Fund or the size of the security position obtainable for a Fund. River Road has adopted policies and procedures that it believes address the conflicts associated with managing multiple accounts for multiple clients, including long
only and long-short products, although there is no assurance that such policies and procedures will adequately address such conflicts.
92
Silvercrest Asset Management Group LLC (Silvercrest)
Silvercrest is the subadviser to the
ASTON/Silvercrest Small Cap Fund
. Silvercrest was founded in 2002 and is
located at 1330 Avenue of the Americas, 38th Fl., New York, NY 10019. Silvercrest is a wholly-owned subsidiary of Silvercrest L.P., which is majority-owned by Silvercrest employees.
The table below shows other accounts for which the portfolio manager of the Fund is primarily responsible for the day-to-day portfolio
management as of October 31, 2012.
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Number of
Accounts
Managed
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Total Assets
Managed
(in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
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Assets Managed
with Advisory
Fee Based on
Performance
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Roger W. Vogel, CFA
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Material Conflicts of Interest
. The portfolio manager for the Fund manages multiple
accounts, including the Fund. Conflicts of interest may arise where the structure of financial or other benefits available to the portfolio manager differs among these accounts. The portfolio manager may advise other pooled investment vehicles which
pay a performance-based advisory fee. This may create an incentive to favor such vehicles over other accounts advised by the portfolio manager. In addition, the portfolio manager may devote unequal time and attention to the funds and accounts for
which he provides investment advice. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those funds and accounts as might be the case if he were
to devote substantially more attention to a single fund. The portfolio manager makes decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations that the portfolio manager believes
are applicable to that account. Consequently, the portfolio manager may purchase securities for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities purchased
for other accounts. The portfolio manager may place transactions on behalf of other accounts that are contrary to investment decisions made on behalf of the Fund, or make investment decisions that are similar to those made for the Fund, both of
which have the potential to adversely affect the price paid or received by the Fund or the size of the security position obtainable for the Fund. If the portfolio manager identifies a limited investment opportunity that may be suitable for multiple
funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit the funds ability to take full advantage of the investment opportunity. Silvercrest has adopted policies and procedures that it
believes address the conflicts associated with managing multiple accounts for multiple clients, although there is no assurance that such policies and procedures will adequately address such conflicts.
Compensation
. Compensation for the portfolio manager listed above includes an annual fixed based salary and potential incentive
compensation up to a pre-determined fixed rate. The incentive compensation is primarily based on assets under management and composite portfolio performance relative to the relevant benchmark index over a rolling 2-year period. The relevant index
for the Fund is the Russell 2000 Value Index. Additional incentive consideration may be awarded for professional development and contribution to the organizations broader performance metrics.
93
Smart Portfolios, LLC (Smart)
Smart is the subadviser to the
ASTON Dynamic Allocation Fund
. Smart was formed in April, 2002 as Asset Labs, LLC. The firm was
registered as an investment adviser in 2004 as Star Investment Advisors, LLC and changed its name to Smart Portfolios LLC in 2005. The firm is wholly owned by Shield Holdings, LLC. Shield Holdings, LLC is owned by Mr. Bryce James. Smart is
located at 17865 Ballinger Way NE, Seattle, WA 98155.
The table below shows other accounts for which the portfolio manager of
the Fund is primarily responsible for the day-to-day portfolio management as of October 31, 2012.
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Number of
Accounts
Managed
|
|
Total Assets
Managed
(in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
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Bryce James
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Compensation
. The portfolio manager receives an annual base salary, discretionary bonus
and a stock award incentive plan. The portfolio managers annual base salary is based on Smarts evaluation of the market for the portfolio managers service to the company and the amount of that portfolio managers
responsibility. The portfolio managers discretionary bonus is determined by the president and majority owner of Smart and is primarily based on the achievement or advancement of the companys objectives and the efforts of the portfolio
manager deemed to be above normal job responsibilities or higher than that normally expected of that portfolio manager. The discretionary bonus may be in the form of cash, deferred profit interests or company shares. The portfolio manager also
receives stock award incentives that are vested evenly over a period of years and redeemable at termination of employment. The stock award incentives are determined at the time of hiring and based on the portfolio managers level of
responsibility. Additionally, the portfolio manager may receive a bonus on new business generated. Because Mr. James also has an equity stake in Shield Holdings, LLC and Smart, he will also benefit from increases in Smarts income.
Material Conflicts of Interest
. All separately managed account portfolios managed in the ETF Allocation Strategy
will occasionally hold the same positions as the Fund. The portfolio manager encounters similar conflicts within and among its other strategies and the separately managed accounts in those strategies. Therefore, the portfolio manager employs a
trading rotation system for executing orders which is designed to equitably distribute purchase and sale opportunities among the portfolio managers clients.
94
TAMRO Capital Partners LLC (TAMRO)
TAMRO is the subadviser to the
ASTON/TAMRO Diversified Equity Fund
and
ASTON/TAMRO Small Cap Fund
. TAMRO is located at 1701
Duke Street, Suite 250, Alexandria, VA 22314. TAMRO is majority-owned by the principals of the firm.
The table below shows
other accounts for which the portfolio managers of the Funds listed above are jointly and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
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Number of
Accounts
Managed
|
|
Total Assets
Managed
(in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
(In Millions)
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Philip D. Tasho, CFA
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Timothy Holland
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Compensation
. Portfolio manager and equity analyst compensation is comprised of an annual
base salary, potential for an annual bonus based on a combination of job performance and TAMROs overall company performance, and potential income through equity participation in the firm.
Material Conflicts of Interest
. Certain conflicts of interest may arise in connection with the management of multiple portfolios.
Potential conflicts include, for example, conflicts in the allocation of investment opportunities in a way that favors other accounts, including performance-based fee accounts, over a Fund. TAMRO has adopted policies and procedures that are designed
to minimize the effects of these conflicts. Responsibility for managing TAMRO client portfolios is organized according to the investment discipline. When managing portfolios, the manager will generally purchase and sell securities across
all portfolios that he manages in each investment discipline. TAMRO will aggregate orders to purchase or sell the same security for multiple accounts when it believes such aggregation is consistent with its duty to seek best execution on behalf
of its clients. Some orders for certain client accounts may, by investment restriction or otherwise, not be available for aggregation. To the extent trades are aggregated, shares purchased or sold are generally allocated to the portfolios
on a pro rata basis. TAMRO believes that it has designed policies and procedures that are designed to manage any potential conflicts in an appropriate manner.
Taplin, Canida & Habacht, LLC (TCH)
TCH
is the subadviser to the
ASTON/TCH Fixed Income Fund
. TCH is a registered investment adviser founded in 1985 with offices at 1001 Brickell Bay Drive, Suite 2100, Miami, FL 33131. A majority interest in TCH is owned by M&I Investment
Management Corp., which is a wholly-owned subsidiary of BMO Financial Corp., which is in turn a wholly-owned subsidiary of Bank of Montreal Holding, Inc. (BMO), a publicly-held Canadian bank holding. The table below shows other accounts
for which the portfolio managers of the Fund are primarily responsible for the day-to-day portfolio management as of October 31, 2012
95
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|
Number of
Accounts
Managed
|
|
Total Assets
Managed
(in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based on
Performance
|
|
Assets
Managed with
Advisory Fee
Based on
Performance
|
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Tere Alvarez Canida
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Alan M. Habacht
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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William J. Canida
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Scott M. Kimball
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Compensation
. Compensation for the portfolio managers listed above includes an annual base
salary with an additional bonus based on the profits of the company. The portfolio managers compensation is not based on the performance of the Fund. Compensation is not directly based on value of assets held in the Fund.
Material Conflicts of Interest
. TCH furnishes investment management and advisory services to other accounts, and TCH shall be at
all times free, in its discretion, to make recommendations to other accounts which may be the same as, or may be different from those made to the Fund. It is TCHs policy to allocate, within its reasonable discretion, investment opportunities
to the Fund over a period of time on a fair and equitable basis relative to TCHs other accounts. TCH, its affiliates, and any officer, director, stockholder, employee or any member of their families may or may not have an interest in the
securities whose purchase and sale TCH may recommend, and such recommendations with respect to securities of the same kind may be the same as or different from the action which TCH, or any of its affiliates, or any partner, officer, director,
stockholder, employee, or any member of their families, or other investors may take with respect hereto. In addition, TCH may aggregate certain trades done on the behalf of the client with trades in the same security on the same day done on behalf
of other clients of TCH that utilize the same broker as the client. The purpose of such aggregation will be to obtain for the client, where possible, a better execution price(s) than would be the case if the clients transaction were not
aggregated with the trades of other clients. TCH has adopted policies and procedures that it believes address the conflicts associated with managing multiple accounts, although there is no assurance that such policies and procedures will adequately
address such conflicts.
[Todd-Veredus Asset Management LLC (Todd-Veredus)
Todd-Veredus is the subadviser to the
ASTON Small Cap Fund
and
ASTON/Veredus Select Growth Fund.
Todd-Veredus is located at National City Tower, 101 South 5
th
Street, Suite 3100, Louisville, KY 40202. B. Anthony Weber is the largest shareholder of the firm.
The table below shows other accounts for which the portfolio managers of the Funds listed above are jointly and primarily responsible for the day-to-day portfolio management as of October 31, 2012.
96
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|
Number of
Accounts
Managed
|
|
Total Assets
Managed (in
millions)
|
|
Number of
Accounts
Managed with
Advisory Fee
Based
on
Performance
|
|
Assets
Managed with
Advisory Fee
Based
on
Performance
(In Millions)
|
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B. Anthony Weber
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Michael E. Johnson, CFA
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Charles F. Mercer, Jr., CFA
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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John R. Prys, CFA
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Katherine A. Kuntz, CFA
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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Compensation
. Compensation for the portfolio managers listed above includes an annual base
salary and a performance/ownership share. The performance/ownership bonus, which typically represents a significant majority of total compensation, is based on each portfolio managers ownership share in the firms income.
Todd-Vereduss income will be determined mainly by the investment performance of accounts in the firm of which the Funds are a percentage. Compensation is not directly based on value of assets held in the Funds portfolio, and Todd-Veredus
has already determined the maximum amount of assets that can be managed in each investment style and communicated such amounts to the Funds Trustees.
Material Conflicts of Interest
. The portfolio managers for each Fund manage multiple accounts, including their respective Fund and a hedge fund from which Todd-Veredus receives a performance based
fee and in which members of Todd-Veredus have an interest. The portfolio managers make decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations that the portfolio managers
believe are applicable to that account. Consequently, the portfolio managers may purchase securities for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities
purchased for other accounts. A portfolio manager may place transactions on behalf of other accounts that are contrary to investment decisions made on behalf of a Fund, or make investment decisions that are similar to those made for a Fund, both of
which have the potential to adversely affect the price paid or received by a Fund or the size of the security position obtainable for a Fund. Todd-Veredus has adopted policies and procedures that it believes address the conflicts associated with
managing multiple accounts for multiple clients, although there is no assurance that such policies and procedures will adequately address such conflicts.]
97
Ownership of Securities
. The table below shows the dollar range of equity
securities in each Fund beneficially owned by the Funds portfolio manager(s) as of October 31, 2012.
|
|
|
|
|
Fund
|
|
Portfolio Manager
|
|
Dollar Range of
Securities in the Fund
|
|
|
|
ASTON/Montag & Caldwell Growth
|
|
Ronald Canakaris
|
|
|
|
|
|
ASTON/Herndon Large Cap Value
|
|
Randell A. Cain Jr.
|
|
|
|
|
|
ASTON/Cornerstone Large Cap Value
|
|
Christopher Reynolds
John Campbell
Wayne Holbrook
Rick van Nostrand
|
|
|
|
|
|
ASTON/TAMRO Diversified Equity
|
|
Philip D. Tasho
Timothy Holland
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value
|
|
James C. Shircliff
Henry W. Sanders, III
Thomas S. Forsha
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value
II
(1)
|
|
James C. Shircliff
Henry W. Sanders, III
Thomas S. Forsha
|
|
|
|
|
|
ASTON/Fairpointe Mid Cap
|
|
Thyra Zerhusen
Marie Lorden
Mary Pierson
|
|
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
Andrew Jung
M. Scott Thompson
|
|
|
|
|
|
ASTON/TAMRO Small Cap
|
|
Philip D. Tasho
Timothy Holland
|
|
|
|
|
|
ASTON/River Road Select Value
|
|
James. C. Shircliff
R. Andrew Beck
J. Justin Akin
|
|
|
|
|
|
ASTON/River Road Small Cap Value
|
|
James C. Shircliff
R. Andrew Beck
J. Justin Akin
|
|
|
|
|
|
ASTON/River Road Independent Value
|
|
Eric K. Cinnamond
|
|
|
|
|
|
ASTON/LMCG Small Cap Growth
|
|
Andrew Morey
|
|
|
98
|
|
|
|
|
Fund
|
|
Portfolio Manager
|
|
Dollar Range of
Securities in the Fund
|
|
|
|
ASTON/Veredus Select Growth
|
|
B. Anthony Weber
Charles F. Mercer, Jr.
Michael E. Johnson
John R. Prys
Katherine A. Kuntz
|
|
|
|
|
|
ASTON Small Cap
|
|
B. Anthony Weber
Charles F. Mercer, Jr.
Michael E. Johnson
John R. Prys
Katherine A. Kuntz
|
|
|
|
|
|
ASTON/Silvercrest Small Cap
(2)
|
|
Roger W. Vogel
|
|
|
|
|
|
ASTON/DoubleLine Core Plus Fixed Income
|
|
Jeffrey Gundlach
Philip Barach
Bonnie Baha
Luz Padilla
|
|
|
|
|
|
ASTON/TCH Fixed Income
|
|
Tere Alvarez Canida
Alan M. Habacht
William J. Canida
|
|
|
|
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
Frederick C. Lake
Ronald A. Lake
|
|
|
|
|
|
ASTON Dynamic Allocation
|
|
Bryce James
|
|
|
|
|
|
ASTON/
Anchor Capital Enhanced Equity
|
|
Ronald A. Altman
|
|
|
|
|
|
ASTON/River Road Long-Short
|
|
Matthew W. Moran
Daniel Johnson
|
|
|
|
|
|
ASTON/Barings International
|
|
David Bertocchi
|
|
|
|
|
|
ASTON/Harrison Street Real Estate
|
|
James H. Kammert
Regan A. Pratt
|
|
|
|
|
|
ASTON/Montag & Caldwell Balanced
|
|
Ronald Canakaris
Helen Donahue
|
|
|
(1)
ASTON/River Road
Dividend All Cap Value II commenced operations on June 27, 2012.
(2)
ASTON/Silvercrest Small Cap commenced operations on
December
27, 2011.
For the fiscal years ended October 31, 2012, October 31, 2011 and October 31, 2010, Aston Asset Management, LP paid
the following sub-advisory fees to each Funds subadviser:
99
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Net Fees FYE
Paid-
2012
|
|
Net
Fees FYE
Paid-
2011
|
|
|
Net
Fees FYE
Paid-
2010
|
|
|
|
|
|
ASTON/Montag & Caldwell Growth
|
|
|
|
|
$9,904,473
|
|
|
|
$8,862,061
|
|
ASTON/Herndon Large Cap Value
(1)
|
|
|
|
|
*
|
|
|
|
*
|
|
ASTON/Cornerstone Large Cap Value
(2)
|
|
|
|
|
357,079
|
|
|
|
821,626
|
|
ASTON/TAMRO Diversified Equity
|
|
|
|
|
86,069
|
|
|
|
48,538
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
|
|
1,429,589
|
|
|
|
730,536
|
|
ASTON/River Road Dividend All Cap Value II
(3)
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/Fairpointe Mid Cap
(4)
|
|
|
|
|
8,178,725
|
|
|
|
3,783,226
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
|
*
|
|
|
|
*
|
|
ASTON/TAMRO Small Cap
|
|
|
|
|
4,495,173
|
|
|
|
4,026,247
|
|
ASTON/River Road Select Value
|
|
|
|
|
964,620
|
|
|
|
1,090,959
|
|
ASTON/River Road Small Cap Value
|
|
|
|
|
1,854,748
|
|
|
|
2,189.106
|
|
ASTON/River Road Independent Value
(5
)
|
|
|
|
|
681,859
|
|
|
|
N/A
|
|
ASTON/LMCG Small Cap Growth
(6
)
|
|
|
|
|
*
|
|
|
|
N/A
|
|
ASTON/Veredus Select Growth
|
|
|
|
|
409,312
|
|
|
|
368,084
|
|
ASTON Small Cap
(7)
|
|
|
|
|
197,840
|
|
|
|
212,129
|
|
ASTON/Silvercrest Small Cap
(8)
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/DoubleLine Core Plus Fixed Income
(9)
|
|
|
|
|
*
|
|
|
|
N/A
|
|
ASTON/TCH Fixed Income
|
|
|
|
|
60,562
|
|
|
|
27,503
|
|
ASTON/Lake Partners LASSO Alternatives
(10)
|
|
|
|
|
534,676
|
|
|
|
14,076
|
|
ASTON Dynamic Allocation
|
|
|
|
|
127,892
|
|
|
|
161,823
|
|
ASTON/
Anchor Capital Enhanced Equity
(11
)
|
|
|
|
|
387,422
|
|
|
|
194,621
|
|
ASTON/River Road Long-Short
(12)
|
|
|
|
|
*
|
|
|
|
N/A
|
|
ASTON/Barings International
|
|
|
|
|
179,102
|
|
|
|
140,070
|
|
ASTON/Harrison Street Real Estate
(13
)
|
|
|
|
|
108,600
|
|
|
|
91,316
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
|
|
60,561
|
|
|
|
51,893
|
|
*The calculation of the sub-advisory fee for each Fund is based upon the formula described on pages - and -. The formula resulted in a negative amount and
therefore no sub-advisory fee was payable for the fiscal year.
(1)
ASTON/Herndon Large Cap Value commenced operations on March 31, 2010.
(2)
On July 15, 2011, Cornerstone became the subadviser to ASTON/Cornerstone Large Cap Value. Amounts prior to that time were paid to a previous subadviser.
(3)
ASTON/River
Road Dividend All Cap Value II commenced operations on June 27, 2012.
(4
)
On April 30, 2011, Fairpointe became the subadviser to ASTON/Fairpointe Mid Cap. Amounts prior to that time were
paid to a previous subadviser.
(
5
)
ASTON/River Road Independent Value commenced operations on December 31, 2010.
(
6
)
ASTON/LMCG Small Cap Growth commenced investment operations on November 3, 2010. On February 17, 2012, Lee
Munder Capital Group, LLC became the subadviser to the Fund. Amounts prior to that time were paid to previous subadviser.
[
(7)
On
January 31, 2013, LMCG became subadviser to ASTON Small Cap. Amounts prior to that time were paid to the previous subadviser.]
(8)
ASTON/Silvercrest
Small Cap commenced operations on December 27, 2011.
(9)
ASTON/DoubleLine Core Plus Fixed Income commenced operations on July 18, 2011.
(
10
)
ASTON/Lake Partners LASSO Alternatives commenced investment operations on April 1, 2009.
(
11)
On June 30, 2012, Anchor Capital Advisors LLC became
the subadviser to ASTON/Anchor Capital Enhanced Equity. Amounts prior to that time were paid to previous subadvisers.
(
12
)
ASTON/River Road Long-Short commenced operations on May 4, 2011.
(
13
)
On June 30, 2011, HSS became the subadviser to ASTON/Harrison Street Real Estate. Amounts prior to that time were
paid to a previous subadviser.
Administrator
On November 30, 2006, the Administration Agreement between the Trust and ABN AMRO Investment Fund Services, Inc. (AAIFS)
was assigned to Aston. Following the assignment, Aston became the Administrator to the Trust.
100
Under the Administration Agreement between Aston and the Trust, the Administrator is
responsible for: (1) coordinating with the custodian and the transfer agent and monitoring the services they provide to the Funds, (2) coordinating with and monitoring any other third parties furnishing services to the Funds,
(3) providing the Funds with necessary office space, telephones and other communications facilities and personnel competent to perform administrative and clerical functions, (4) supervising the maintenance by third parties of such books
and records of the Funds as may be required by applicable federal or state law, (5) preparing or supervising the preparation by third parties of all federal, state and local tax returns and reports of the Funds required by applicable law,
(6) preparing and, after approval by the Funds, filing and arranging for the distribution of proxy materials and periodic reports to shareholders of the Funds as required by applicable law, (7) preparing and, after approval by the Trust,
arranging for the filing of such registration statements and other documents with the SEC and other federal and state regulatory authorities as may be required by applicable law, (8) reviewing and submitting to the officers of the Trust for
their approval invoices or other requests for payment of the Funds expenses and instructing the Custodian to issue checks in payment thereof and (9) taking such other action with respect to the Trust or the Funds as may be necessary in
the opinion of the Administrator to perform its duties under the Administration Agreement.
As compensation for services
performed under the Administration Agreement, the Administrator receives an administration fee payable monthly at the annual rate set forth below as a percentage of the average daily net assets of the Trust.
Administration Fees
As of July 1, 2012, the fee schedule to the Administration Agreement is as follows:
|
|
|
Percentage
|
|
Average Daily Net Assets (Aggregate Fund
Complex)
|
0.0437%
|
|
Up to $7.4 billion
|
0.0412%
|
|
Over $7.4 billion
|
The Administrator also receives a monthly base fee in the amount of $1,000 per Fund.
Prior to July 1, 2012, the fee schedule to the Administration Agreement was as follows:
|
|
|
Percentage
|
|
Average Daily Net Assets (Aggregate Fund
Complex)
|
0.0490%
|
|
Up to $7.4 billion
|
0.0465%
|
|
Over $7.4 billion
|
The Administrator also received a monthly base fee in the amount of $1,000 per Fund.
The following are the total fees paid to the Administrator by each Fund for the fiscal years ended October 31, 2012,
October 31, 2011 and October 31, 2010:
101
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Administrative
Fees FYE
October 31,
2012
|
|
Administrative
Fees FYE
October 31,
2011
|
|
|
Administrative
Fees FYE
October 31,
2010
|
|
|
|
|
|
ASTON/Montag & Caldwell Growth
|
|
|
|
$
|
1,690,328
|
|
|
$
|
1,501,253
|
|
ASTON/Herndon Large Cap Value
(1)
|
|
|
|
|
22,396
|
|
|
|
9,025
|
|
ASTON/Cornerstone Large Cap Value
|
|
|
|
|
73,364
|
|
|
|
137,656
|
|
ASTON/TAMRO Diversified Equity
|
|
|
|
|
27,703
|
|
|
|
22,503
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
|
|
228,953
|
|
|
|
126,494
|
|
ASTON/River Road Dividend All Cap Value II
(2)
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/Fairpointe Mid Cap
|
|
|
|
|
1,395,964
|
|
|
|
789,715
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
|
18,684
|
|
|
|
18,137
|
|
ASTON/TAMRO Small Cap
|
|
|
|
|
529,989
|
|
|
|
482,346
|
|
ASTON/River Road Select Value
|
|
|
|
|
121,104
|
|
|
|
130,969
|
|
ASTON/River Road Small Cap Value
|
|
|
|
|
240,799
|
|
|
|
278,111
|
|
ASTON/River Road Independent Value
(3
)
|
|
|
|
|
84,211
|
|
|
|
N/A
|
|
ASTON/LMCG Small Cap Growth
(4
)
|
|
|
|
|
17,738
|
|
|
|
N/A
|
|
ASTON/Veredus Select Growth
|
|
|
|
|
69,731
|
|
|
|
66,230
|
|
ASTON Small Cap
|
|
|
|
|
43,920
|
|
|
|
40,528
|
|
ASTON/Silvercrest Small Cap
(5)
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/DoubleLine Core Plus Fixed Income
(6)
|
|
|
|
|
8,191
|
|
|
|
N/A
|
|
ASTON/TCH Fixed Income
|
|
|
|
|
62,708
|
|
|
|
61,487
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
|
|
|
74,993
|
|
|
|
21,769
|
|
ASTON Dynamic Allocation
|
|
|
|
|
42,126
|
|
|
|
41,027
|
|
ASTON/
Anchor Capital Enhanced Equity
|
|
|
|
|
76,855
|
|
|
|
47,178
|
|
ASTON/River Road Long-Short
(7)
|
|
|
|
|
8,133
|
|
|
|
N/A
|
|
ASTON/Barings International
|
|
|
|
|
66,399
|
|
|
|
58,607
|
|
ASTON/Harrison Street Real Estate
|
|
|
|
|
35,348
|
|
|
|
29,720
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
|
|
33,901
|
|
|
|
33,133
|
|
(1)
ASTON/Herndon
Large Cap Value commenced operations on March 31, 2010.
(2)
ASTON/River Road Dividend All Cap Value II commenced operations on June 27, 2012.
(3)
ASTON/River Road Independent Value commenced operations on December 31, 2010.
(
4
)
ASTON/LMCG Small Cap Growth commenced investment operations on November 3, 2010.
(
5)
ASTON/Silvercrest Small Cap commenced operations on
December 27, 2011.
(6
)
ASTON/DoubleLine Core Plus Fixed Income commenced operations on July 18, 2011.
(
7
)
ASTON/River Road Long-Short commenced operations on May 4, 2011.
Subadministrator
BNY Mellon Investment Servicing (US), Inc. (BNY Mellon or the Subadministrator), 4400 Computer Drive, Westborough, Massachusetts 01581, provides certain administrative services for
the Funds and Aston pursuant to a Subadministration and Accounting Services Agreement (the Subadministration Agreement) between Aston and BNY Mellon. On November 30, 2006, the Subadministration Agreement was assigned to Aston from
AAIFS, the former administrator to the Funds.
As Subadministrator, BNY Mellon provides the Trust with subadministrative
services, including fund accounting, regulatory reporting, necessary office space, equipment, personnel and facilities. Compensation for these services is paid under the Subadministration Agreement with the Administrator.
Subadministration Fees
The Subadministrator receives an administration fee payable by the Administrator. Effective July 1, 2012, under the terms of the Sub-Administration Agreement, subadministration fees and tax service
fees, paid by the Administrator, are accrued daily and paid monthly, at a rate of 0.0142% and 0.0025%, respectively of average daily net assets of the Trust. The Administrator additionally pays the Subadministrator a base rate subadministration fee
monthly in the amount of $1,000 per Fund. BNY Mellon did not provide tax services prior to July 1, 2012.
102
Underwriter
Foreside Funds Distributors LLC (formerly, BNY Mellon Distributors, LLC) (the Distributor), 400 Berwyn Park, 899 Cassatt
Road, Berwyn, PA 19312, and the Trust are parties to a distribution agreement effective April 1, 2012 (the Distribution Agreement) under which the Distributor serves as statutory underwriter and facilitates the registration and
distribution of shares of each series of the Trust on a continuous basis.
After the initial term, the Distribution
Agreement shall be renewed for successive one-year terms, provided such continuance is specifically approved at least annually (i) by the Trusts Board or (ii) by a vote of a majority (as defined in the 1940 Act and Rule 18f-2
thereunder) of the outstanding voting securities of the Trust, provided that in either event the continuance is also approved by a majority of the Trustees who are not parties to the Distribution Agreement and who are not interested persons (as
defined in the 1940 Act) of any party to the Distribution Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreement is terminable without penalty, on at least 60 days written
notice, by the Trusts Board, by vote of a majority (as defined in the 1940 Act and Rule 18f-2 thereunder) of the outstanding voting securities of the Trust, or by the Distributor. This Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act and the rules thereunder).
The Distribution and Services Plan
The Board has adopted distribution and services plans (the Plans) pursuant to Rule 12b-1 under the 1940 Act,
which permit the Class N and Class R shares of each Fund, as applicable, to pay certain expenses associated with the distribution of Fund shares and providing administrative services to shareholder accounts.
Rule 12b-1 regulates the circumstances under which an investment company may directly or indirectly bear expenses relating to the
distribution of its shares. Continuance of the Plans must be approved annually by a majority of the Trustees of the Trust and by a majority of the Trustees who are not interested persons of the Trust or the Distributor, as that term is
defined in the 1940 Act (Independent Trustees). In adopting the Plans, the Independent Trustees concluded in accordance with the requirements of Rule 12b-1 that there is a reasonable likelihood that the Plans will benefit each Fund and
its shareholders by resulting in greater sales of Fund shares. The Plans require that quarterly written reports of amounts spent under the Plans and the purposes of such expenditures be furnished to and reviewed by the Trustees. In accordance with
Rule 12b-1 under the 1940 Act, the Plans may be terminated with respect to any Fund by a vote of a majority of the Independent Trustees, or by a vote of a majority of the outstanding shares of that Fund. The Plans may be amended by vote of the
Trusts Board, including a majority of the Independent Trustees, cast in person at a meeting called for such purpose, except that any change that would effect a material increase in any distribution fee with respect to a Fund (or class)
requires the approval of that Funds (or classs) shareholders. All material amendments of the Plans will require approval by a majority of the Trustees of the Trust and of the Independent Trustees.
To the Trusts knowledge, no interested person of the Trust, nor any Trustee who is not an interested
person, has a direct or indirect financial interest in the operation of the Plan.
103
Under the Plans, each Fund may pay amounts not exceeding, on an annual basis, 0.25% of a
Funds average daily net assets for Class N shares and 0.50% of a Funds average daily net assets for Class R shares. From this amount, the Distributor may make payments to financial institutions and intermediaries such as banks,
savings and loan associations, insurance companies, investment counselors, broker-dealers, and the Distributors affiliates and subsidiaries as compensation for services, reimbursement of expenses incurred in connection with distribution
assistance or provision of shareholder services. The Plans for Class N shares are characterized as reimbursement plans and are directly tied to expenses incurred by the Distributor; the payments the Distributor receives during any year may not
exceed its actual expenses. The Plan for Class R shares is characterized as a compensation plan and is not directly tied to expenses incurred by the Distributor; the payments the Distributor receives during any year may exceed its actual
expenses.
Amounts spent on behalf of each Fund pursuant to such Plans during the fiscal year ended October 31, 2012, are
set forth below.
|
|
|
|
|
|
|
|
|
|
|
12b-1 Plan Expenses
|
Fund Class N Shares
|
|
Printing
|
|
Distribution
Services
|
|
Compensation
to Broker
Dealers
|
|
Compensation
to Sales
Personnel
|
ASTON/Montag & Caldwell Growth
|
|
|
|
|
|
|
|
|
ASTON/Herndon Large Cap Value
|
|
|
|
|
|
|
|
|
ASTON/Cornerstone Large Cap Value
|
|
|
|
|
|
|
|
|
ASTON/TAMRO Diversified Equity
|
|
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value II
(1)
|
|
|
|
|
|
|
|
|
ASTON/Fairpointe Mid Cap
|
|
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
|
|
|
|
|
ASTON/TAMRO Small Cap
|
|
|
|
|
|
|
|
|
ASTON/River Road Select Value
|
|
|
|
|
|
|
|
|
ASTON/River Road Small Cap Value
|
|
|
|
|
|
|
|
|
ASTON/River Road Independent Value
|
|
|
|
|
|
|
|
|
ASTON/LMCG Small Cap Growth
|
|
|
|
|
|
|
|
|
ASTON/Veredus Select Growth
|
|
|
|
|
|
|
|
|
ASTON Small Cap
|
|
|
|
|
|
|
|
|
ASTON/
Silvercrest Small Cap
(2
)
|
|
|
|
|
|
|
|
|
ASTON/DoubleLine Core Plus Fixed Income
|
|
|
|
|
|
|
|
|
ASTON/TCH Fixed Income
|
|
|
|
|
|
|
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
|
|
|
|
|
|
|
ASTON Dynamic Allocation
|
|
|
|
|
|
|
|
|
ASTON/
Anchor Capital Enhanced Equity
|
|
|
|
|
|
|
|
|
ASTON/River Road Long-Short
|
|
|
|
|
|
|
|
|
ASTON/Barings International
|
|
|
|
|
|
|
|
|
ASTON/Harrison Street Real Estate
|
|
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
|
|
|
|
|
|
(1)
ASTON/River Road
Dividend All Cap Value II commenced investment operations on June 27, 2012.
(2)
ASTON/Silvercrest Small Cap commenced investment operations on
December
27, 2011.
104
|
|
|
|
|
|
|
Fund Class N Shares
|
|
Marketing
|
|
Service
Providers
|
|
Total
|
ASTON/Montag & Caldwell Growth
|
|
|
|
|
|
|
ASTON/Herndon Large Cap Value
|
|
|
|
|
|
|
ASTON/Cornerstone Large Cap Value
|
|
|
|
|
|
|
ASTON/TAMRO Diversified Equity
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value II
(1)
|
|
|
|
|
|
|
ASTON/Fairpointe Mid Cap
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
|
|
|
ASTON/TAMRO Small Cap
|
|
|
|
|
|
|
ASTON/River Road Select Value
|
|
|
|
|
|
|
ASTON/River Road Small Cap Value
|
|
|
|
|
|
|
ASTON/River Road Independent Value
|
|
|
|
|
|
|
ASTON/LMCG Small Cap Growth
|
|
|
|
|
|
|
ASTON/Veredus Select Growth
|
|
|
|
|
|
|
ASTON Small Cap
|
|
|
|
|
|
|
ASTON/Silvercrest Small Cap
(2)
|
|
|
|
|
|
|
ASTON/DoubleLine Core Plus Fixed Income
|
|
|
|
|
|
|
ASTON/TCH Fixed Income
|
|
|
|
|
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
|
|
|
|
|
ASTON Dynamic Allocation
|
|
|
|
|
|
|
ASTON/
Anchor Capital Enhanced Equity
|
|
|
|
|
|
|
ASTON/River Road Long-Short
|
|
|
|
|
|
|
ASTON/Barings International
|
|
|
|
|
|
|
ASTON/Harrison Street Real Estate
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
|
|
|
|
(1)
ASTON/River Road
Dividend All Cap Value II commenced investment operations on June 27, 2012.
(2)
ASTON/Silvercrest Small Cap commenced investment operations on
December
27, 2011.
|
|
|
|
|
|
|
|
|
|
|
12b-1 Plan Expenses
|
Fund Class R Shares
|
|
Printing
|
|
Distribution
Services
|
|
Compensation
to Broker
Dealers
|
|
Compensation
to Sales
Personnel
|
ASTON/Montag & Caldwell Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund Class R Shares
|
|
Marketing
|
|
Service
Providers
|
|
Total
|
ASTON/Montag & Caldwell Growth
|
|
|
|
|
|
|
Redemption Fees
The Trust requests that banks, broker-dealers and other intermediaries holding omnibus accounts with a Fund impose any applicable
redemption fees at the shareholder account level. However, redemption fees may not apply to certain types of accounts held through intermediaries, including: (1) certain pension, profit-sharing and retirement plans; (2) certain broker-wrap
fee and other fee-based programs; (3) certain omnibus accounts where the omnibus account holder does not have the system capability to impose a redemption fee on its underlying customers accounts; and (4) certain intermediaries that
do not have, or do not report to the Funds, sufficient information to impose a redemption fee on their customers accounts.
105
In addition, redemption fees do not apply to: (i) premature distributions from
retirement accounts due to the disability or health of the shareholder; (ii) minimum required distributions from retirement accounts; (iii) return of excess contributions in retirement accounts where the excess is reinvested into a Fund;
(iv) redemptions resulting in the settlement of an estate due to the death of the shareholder; (v) redemptions of shares purchased through an Automatic Investment Plan; (vi) redemptions as part of a systematic withdrawal plan; and
(vii) reinvested distributions (dividends and capital gains). Contact your financial intermediary or refer to your plan documents for more information on how the redemption fee is applied to your shares.
In addition to the circumstances noted in the preceding paragraph, the Funds Administrator may waive the redemption fee at its
discretion where it believes such waiver is in the best interests of a Fund and in accordance with the Funds policies and procedures, including, but not limited to, when it determines that imposition of the redemption fee is not necessary to
deter short-term trading.
Custodian
The Bank of New York Mellon, One Wall Street, New York, NY 10286, serves as custodian of the Trusts assets on behalf of the Funds.
Transfer Agent and Dividend Paying Agent
BNY Mellon Investment Servicing (US), Inc., 4400 Computer Drive, Westborough, MA 01581, serves as transfer agent and dividend paying
agent for the Trust.
Counsel and Independent Registered Public Accounting Firm
Vedder Price P.C., with offices at 222 North LaSalle Street, Chicago, IL, 60601, serves as counsel to the Trust.
Mayer Brown LLP, with offices at 71 South Wacker Drive, Chicago, IL 60606, serves as counsel to the Independent Trustees.
[], with offices at [], is the Trusts independent registered public accounting firm.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The subadvisers are responsible for decisions to buy and sell securities for the Funds, for the placement of their portfolio business and
the negotiation of commissions, if any, paid on such transactions. In placing trades for a Fund, the subadvisers will follow the Trusts policy of seeking best execution of orders under the circumstances. Securities traded in the
over-the-counter market are generally traded on a net basis with dealers acting as principal for their own accounts without a stated commission. In over-the-counter transactions, orders are placed directly with a principal market-maker unless a
better price and execution can be obtained by using a broker. Brokerage commissions are paid on transactions in listed securities, futures contracts and options.
The subadvisers attempt to obtain the best overall price and most favorable execution of transactions in portfolio securities. However, subject to policies established by the Board, a Fund may pay a
broker-dealer a commission for effecting a portfolio transaction for a Fund in excess of the amount of commission another broker-dealer would have charged if a subadviser determines in good faith that the commission paid was reasonable in relation
to the brokerage or research services provided by such broker-dealer, viewed in terms of that particular transaction or such firms overall responsibilities with
106
respect to the clients, including the Fund, as to which it exercises investment discretion. In selecting and monitoring broker-dealers and negotiating commissions, consideration will be given to
a broker-dealers reliability, the quality of its execution services on a continuing basis and its financial condition, among other things. Research services furnished by broker-dealers through whom the Funds effect securities transactions may
be used by the subadvisers, as the case may be, in servicing all of their respective accounts; not all such services may be used in connection with the Funds. The term research services may include, but is not limited to, advice as to
the value of securities; the advisability of investing in, purchasing or selling securities; the availability of securities or purchasers or sellers of securities; and analyses or reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy or the performance of accounts.
It is likely that the broker-dealers selected based on the
foregoing considerations will include firms that also sell shares of the Funds to their customers. However, the subadvisers do not consider sales of Fund shares as a factor in the selection of broker-dealers to execute portfolio transactions for the
Funds. The Trust has implemented policies and procedures reasonably designed to prevent sales of Fund shares from being considered as a factor in the selection of broker-dealers to execute portfolio transactions for the Funds.
The subadvisers effect portfolio transactions for other investment companies and advisory accounts. The subadvisers will attempt to
equitably allocate portfolio transactions among the Funds and other client accounts whenever concurrent decisions are made to purchase or sell securities by the Funds and other accounts. In making such allocations between the Funds and other client
accounts, the main, but not exclusive, factors to be considered are the availability of cash for investment, the duration of the portfolio, the respective investment objectives, the relative size of portfolio holdings of the same or comparable
securities, the size of investment commitments generally held and the opinions of the persons responsible for recommending investments to the Funds and the others. In some cases, this procedure could have an adverse effect on the Funds. In the
opinion of the subadvisers, however, the results of such procedure will generally be in the best interest of each of the clients.
107
Amounts spent on behalf of each Fund for brokerage commissions during the fiscal years
ended October 31, 2012, October 31, 2011 and October 31, 2010 are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Brokerage
Commissions
FYE
2012
|
|
|
Brokerage
Commissions
FYE 2011
|
|
|
Brokerage
Commissions
FYE 2010
|
|
ASTON/Montag & Caldwell Growth
|
|
$
|
|
|
|
$
|
2,498,421
|
|
|
$
|
2,230,750
|
|
ASTON/Herndon Large Cap Value
(1)
|
|
|
|
|
|
|
55,067
|
|
|
|
2,054
|
|
ASTON/Cornerstone Large Cap Value
|
|
|
|
|
|
|
64,577
|
|
|
|
150,286
|
|
ASTON/TAMRO Diversified Equity
(2)
|
|
|
|
|
|
|
25,226
|
|
|
|
21,752
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
|
|
|
|
300,479
|
|
|
|
148,627
|
|
ASTON/River Road Dividend All Cap Value II
(3)
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/Fairpointe Mid Cap
|
|
|
|
|
|
|
858,607
|
|
|
|
677,184
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
|
|
|
1,426
|
|
|
|
988
|
|
ASTON/TAMRO Small Cap
|
|
|
|
|
|
|
944,692
|
|
|
|
1,437,018
|
|
ASTON/River Road Select Value
|
|
|
|
|
|
|
277,137
|
|
|
|
306,128
|
|
ASTON/River Road Small Cap Value
|
|
|
|
|
|
|
592,250
|
|
|
|
806,045
|
|
ASTON/River Road Independent Value
(4
)
|
|
|
|
|
|
|
289,100
|
|
|
|
N/A
|
|
ASTON/LMCG Small Cap Growth
(5
)
|
|
|
|
|
|
|
16,854
|
|
|
|
N/A
|
|
ASTON/Veredus Select Growth
|
|
|
|
|
|
|
611,220
|
|
|
|
857,481
|
|
ASTON Small Cap
|
|
|
|
|
|
|
473,741
|
|
|
|
587,824
|
|
ASTON/Silvercrest Small Cap
(6)
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/DoubleLine Core Plus Fixed Income
(7)
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/TCH Fixed Income
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
ASTON/Lake Partners LASSO Alternatives
(
8)
|
|
|
|
|
|
|
4,786
|
|
|
|
407
|
|
ASTON Dynamic Allocation
|
|
|
|
|
|
|
31,212
|
|
|
|
131,940
|
|
ASTON/
Anchor Capital Enhanced Equity
(
9
)
|
|
|
|
|
|
|
482,737
|
|
|
|
371,934
|
|
ASTON/River Road Long-Short
(10)
|
|
|
|
|
|
|
7,133
|
|
|
|
N/A
|
|
ASTON/Barings International
|
|
|
|
|
|
|
81,379
|
|
|
|
73,185
|
|
ASTON/Harrison Street Real Estate
|
|
|
|
|
|
|
83,366
|
|
|
|
51,749
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
|
|
|
|
13,895
|
|
|
|
13,048
|
|
(1)
ASTON/Herndon Large Cap Value commenced operations on March 31,
2010.
(2)
ASTON/TAMRO Diversified Equitys aggregate amounts of brokerage commissions for 2010, 2011 and 2012 reflect
$21,401, $24,042 and $
of brokerage commissions on securities, respectively, and $351, $1,184 and
$
of brokerage commissions relating to options, respectively.
(3)
ASTON/River Road
Dividend All Cap Value II commenced operations on June 27, 2012.
(4)
ASTON/River Road Independent Value commenced operations on
December 31, 2010.
(
5
)
ASTON/LMCG Small Cap Growth commenced investment operations on November 3, 2010.
(
6)
ASTON/Silvercrest Small Cap commenced operations on
December 27, 2011.
(7
)
ASTON/DoubleLine Core Plus Fixed Income commenced operations on July 18, 2011.
(
8
)
ASTON/Lake Partners LASSO Alternatives commenced investment operations on April 1, 2009.
(
9
)
ASTON/Anchor Capital Enhanced Equitys aggregate amounts of brokerage commissions for 2010, 2011 and 2012 reflect
$83,528, $96,293 and $
of brokerage commissions on securities, respectively, and $288,406, $386,444 and
$
brokerage commissions relating to options, respectively.
(
10
)
ASTON/River Road Long-Short commenced operations on May 4, 2011. Thes aggregate amount of brokerage
commissions for 2011 reflect $4,829 of brokerage commissions on securities and $2,304 of brokerage commissions relating to short sales.
[The aggregate dollar amount of brokerage commissions paid by certain Funds during the fiscal year ended October 31, 2012 differed materially from the aggregate amount of brokerage commissions paid
by the Funds during the fiscal years ended October 31, 2011 and/or October 31, 2010 as a result of a significant change in net assets and/or a change in portfolio turnover. ]
[There were no brokerage commissions paid by the Funds to any affiliates of the Funds or the Adviser or the subadvisers during the fiscal
years ended October 31, 2012, October 31, 2011 and October 31, 2010.]
108
As of October 31, 2012 the following Funds owned securities of their regular
brokers or dealers, as defined in Rule 10b-1 under the 1940 Act, with the following market values:
|
|
|
|
|
Fund
|
|
Broker Dealer
|
|
Market Value
|
|
|
|
|
|
|
|
|
An intermediary may offer different classes of shares to its customers and differing services to the classes, and thus, receive compensation with respect to different classes. Intermediaries may also
charge separate fees to their customers. Financial intermediaries that distribute Fund shares and/or provide sub-transfer agency, sub-accounting and other administrative services for Fund shareholder accounts may be compensated by the Adviser, in
addition to any payments made by the Distributor under a Plan. These additional payments may be subject to reimbursement by the Funds, as described below, and/or they may be made by the Adviser out of its own assets, and not as additional charges to
the Funds. The Funds may reimburse the Adviser for payments made to certain intermediaries that provide sub-transfer agency, sub-accounting and other administrative services to Fund shareholder accounts in an amount of up to 0.09% annually of a
Funds average daily net assets. The Adviser may compensate intermediaries out of its own assets, and not as additional charges to the Funds, for providing distribution-related services to the Funds and/or services to Fund shareholder accounts,
which may include, without limitation: 1) the sale of Fund shares, 2) sub-transfer agency, sub-accounting, administrative and shareholder processing services, and 3) marketing support, access to a third party platform, fund offering list or other
marketing programs and/or shelf space. Payments in connection with marketing programs include, but are not limited to, inclusion of a Fund on preferred or recommended sales lists, mutual fund supermarket platforms and other
formal sales programs granting access to the intermediarys sales force and obtaining other forms of marketing support. Additional payments may be a fixed dollar amount; may be based on the number of customer accounts maintained by the
intermediary; may be based on a percentage of the value of shares sold to, or held by, customers of the intermediary involved; or may be calculated on another basis. Payments that are in addition to payments made by the Distributor under a Plan may
represent a premium over payments made by other fund families, and intermediary investment professionals may have an added incentive to sell or recommend a Fund or share class over others offered by competing fund families. These payments may differ
for each Fund within the Aston family of funds, including within the same intermediary or within the same Fund at the same intermediary, or for the same Fund across certain intermediaries.
A number of factors are considered in determining whether to make additional payments. Such factors may include, without limitation, the
level or type of services provided by the intermediary, the level or expected level of assets or sales of shares, the Funds status on a preferred or recommended fund list, access to an intermediarys personnel, and other factors. In
addition to such payments, the Adviser may offer other incentives, including sponsorship of intermediary and third-party sponsored educational
109
seminars or other events for investment professionals and clients, and payment or reimbursement of expenses, including but not limited to meals and hotel accommodations, incurred by intermediary
investment professionals in connection with certain meetings held by the Trust or the Adviser for the purpose of training or education of such intermediary investment professionals.
Portfolio Turnover
The portfolio turnover rate for each of the
Funds is calculated by dividing the lesser of purchases or sales of portfolio investments for the reporting period by the monthly average value of the portfolio investments owned during the reporting period. The calculation excludes all securities,
including options, and short sales, whose maturities or expiration dates at the time of acquisition are one year or less. Portfolio turnover may vary greatly from year to year as well as within a particular year and may be affected by cash
requirements for redemption of shares and by requirements which must be met for the Funds to receive favorable federal income tax treatment. Portfolio turnover is generally not expected to exceed 100% in the Funds, except for
ASTON Small Cap
Fund, ASTON/Veredus Select Growth Fund
,
ASTON Dynamic Allocation Fund, ASTON/Barings International Fund
,
ASTON/Lake Partners LASSO Alternatives Fund, ASTON/River Road Long-Short Fund and ASTON/Harrison Street Real Estate Fund.
A
high portfolio turnover rate (i.e., over 100%) may result in the realization of substantial net short-term capital gains and involves correspondingly greater transaction costs. Distributions derived from net short-term capital gains of a Fund (i.e.,
net short-term capital gain in excess of net long-term capital loss) are taxable to shareholders as ordinary income for federal income tax purposes. To the extent that net long-term capital gains (i.e., net long-term capital gain in excess of net
short-term capital loss) are realized, distributions derived from such gains are generally treated as capital gain dividends for federal income tax purposes and taxed to shareholders as long-term capital gain.
[The portfolio turnover rate for each Fund for its most recent fiscal period may be found under FINANCIAL HIGHLIGHTS in each
Funds Prospectus. The portfolio turnover rate for each of
ASTON/Herndon Large Cap Value Fund, ASTON/Harrison Street Real Estate Fund
and
ASTON Dynamic Allocation Fund
varied significantly between fiscal year 2011 and fiscal year
2010 due to managing the Funds portfolios during periods of extremely high market volatility. The portfolio turnover rate for each of
ASTON/LMCG Small Cap Growth Fund
,
ASTON/River Road Independent Value Fund
and
ASTON/River
Road Long-Short Fund
each exceeded 100% because each fund commenced operations during the fiscal year ended October 31, 2011. [The portfolio turnover rate for [ ] varied
significantly between fiscal year 2012 and 2011 due to [ ]].
DISCLOSURE OF PORTFOLIO HOLDINGS
Except
for
ASTON/
TAMRO Small Cap Fund, ASTON/River Road Long-Short Fund
and
ASTON/Fairpointe Mid Cap Fund,
each Funds complete portfolio holdings as of the end of each calendar month are generally posted on the Funds
website, www.astonfunds.com, on or about the fifteenth day after the month-end.
Complete portfolio holdings for
ASTON/TAMRO Small Cap Fund, ASTON/River Road Long-Short Fund
and
ASTON/Fairpointe Mid Cap Fund
are made available as
of the end of each calendar quarter and are generally posted on the Funds website on or about the fifteenth day after the quarter-end. Portfolio holdings information is made available to investors and to Intermediaries selling Fund shares only
after its public disclosure.
The Trusts policies and procedures governing disclosure of portfolio holdings permit
nonpublic portfolio holdings to be shared with the Funds service providers and others who generally need access to such information in the performance of their contractual duties and responsibilities, including the Trusts custodian,
pricing services, fund accountants, Adviser, subadvisers, Administrator, Subadministrator,
110
independent public accountants, attorneys, officers and Trustees and each of their respective affiliates and advisers, and are subject to duties of confidentiality, including a duty not to trade
on nonpublic information. Nonpublic portfolio holdings may also be disclosed by the Funds or their duly authorized service providers to certain third parties, including mutual fund evaluation services, rating agencies, lenders or providers of a
borrowing facility, provided that (i) a good faith determination is made that the Funds have a legitimate business purpose to provide the information and the disclosure is in the Funds best interests; (ii) the recipient agrees not to
distribute the portfolio holdings or results of the analysis to third parties, other departments, or persons who are likely to use the information for purposes of purchasing or selling shares of the Funds prior to the portfolio holdings becoming
public information; and (iii) the recipient is subject to an obligation to maintain such information confidential. These conditions do not apply to portfolio holdings information released to such third parties after they have been posted on the
website.
Disclosure of the Funds portfolio holdings as an exception to the Trusts policies and procedures must be
approved by the CCO or Chief Executive Officer of the Trust. No compensation or other consideration is received by the Trust or any affiliates of the Trust for disclosure of portfolio holdings information. The Board receives reports of any potential
exceptions to, or violations of, the Trusts policies and procedures governing disclosure of portfolio holdings that are deemed to constitute a material compliance matter. The CCO or his designee is responsible for monitoring compliance with
these procedures, including requesting information from service providers.
Each Fund discloses its portfolio holdings to
the extent required by law.
111
DESCRIPTION OF SHARES
The table below summarizes the class(es) of shares that each Fund offers.
|
|
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|
Fund
|
|
Class N
|
|
Class I
|
|
Class R
|
|
|
|
|
ASTON/Montag & Caldwell Growth
|
|
|
|
|
|
|
ASTON/Herndon Large Cap Value
|
|
|
|
|
|
|
ASTON/Cornerstone Large Cap Value
|
|
|
|
|
|
|
ASTON/TAMRO Diversified Equity
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value
|
|
|
|
|
|
|
ASTON/River Road Dividend All Cap Value II
|
|
|
|
|
|
|
ASTON/Fairpointe Mid Cap
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Mid Cap Growth
|
|
|
|
|
|
|
ASTON/TAMRO Small Cap
|
|
|
|
|
|
|
ASTON/River Road Select Value
|
|
|
|
|
|
|
ASTON/River Road Small Cap Value
|
|
|
|
|
|
|
ASTON/River Road Independent Value
|
|
|
|
|
|
|
ASTON/LMCG Small Cap Growth
|
|
|
|
|
|
|
ASTON/Veredus Select Growth
|
|
|
|
|
|
|
ASTON Small Cap
|
|
|
|
|
|
|
ASTON/Silvercrest Small Cap
|
|
|
|
|
|
|
ASTON/DoubleLine Core Plus Fixed Income
|
|
|
|
|
|
|
ASTON/TCH Fixed Income
|
|
|
|
|
|
|
ASTON/Lake Partners LASSO Alternatives
|
|
|
|
|
|
|
ASTON Dynamic Allocation
|
|
|
|
|
|
|
ASTON/Anchor Capital Enhanced Equity
|
|
|
|
|
|
|
ASTON/River Road Long-Short
|
|
|
|
|
|
|
ASTON/Barings International
|
|
|
|
|
|
|
ASTON/Harrison Street Real Estate
|
|
|
|
|
|
|
ASTON/Montag & Caldwell Balanced
|
|
|
|
|
|
|
Each Fund is authorized to issue an unlimited number of shares of beneficial interest without
par value. Currently, there are three classes of shares issued by the Funds. Class N, I and R shares are not subject to an initial sales charge or a contingent deferred sales charge. Class N shares have a 12b-1 fee with a maximum annual
fee of 0.25% of average daily net assets. Class R shares are subject to a 12b-1 fee with a maximum annual fee of 0.50% of average daily net assets. Because each class has different expenses, performance will vary. Shares of each Fund represent
equal proportionate interests in the assets of that Fund only and have identical voting, dividend, redemption, liquidation and other rights, except that Class I shares have no rights with respect to a Funds Plan. All shares issued are
fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares and no conversion rights.
Minimum Initial Investments
The minimum initial investment for
Class N and Class R shares is $2,500 for each Fund, and the subsequent minimum investment is $50. The minimum initial investment for the Class N shares of each Fund by Individual Retirement Accounts, Education Savings Accounts and Uniform
Gift to Minor Accounts/Uniform Transfer to Minor Accounts is $500. The subsequent minimum investment for each account type is $50.
The minimal initial investment for Class I shares is $1,000,000, with the exception of
ASTON/Lake Partners LASSO Alternatives Fund
,
ASTON/DoubleLine Core Plus Fixed Income Fund
and
ASTON/River Road Dividend All Cap Value Fund II
, which is $100,000.
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For purposes of the investment minimum, the balances of Fund accounts of clients of a
financial consultant may be aggregated in determining whether the minimum investment has been met. This aggregation may also be applied to the accounts of immediate family members (i.e., a persons spouse, parents, children, siblings and
in-laws). In addition, the aggregation may be applied to the related accounts of a corporation or other legal entity. The Funds may waive the minimum initial investment by obtaining a letter of intent, evidencing an investors intention of
meeting the minimum initial investment in a specified period of time as continually reviewed and approved by the Board. The minimum investment requirement may be waived for Trustees of the Trust and employees of the Adviser and their spouses,
employees of the subadvisers and their spouses, and affiliates of the Adviser. The minimum investment requirement may be waived for certain omnibus accounts, mutual fund advisory platforms and registered investment advisors, banks, trust companies
or similar financial institutions investing for their own account or for the account of their clients or customers for whom such institution is exercising investment discretion, or otherwise acting on behalf of clients or customers. The minimum
investment requirement may be waived for individual accounts of a financial intermediary that charges an ongoing fee for its services or offers shares through a no-load network or platform, and for accounts invested through fee-based advisory
accounts, certain wrap programs and similar programs with approved intermediaries. The Trust reserves the right to waive a Funds minimum initial investment requirement for any reason.
There is no sales load or charge in connection with the purchase of shares. The Trust reserves the right to reject any purchase order and
to suspend the offering of shares of the Funds. The Funds also reserve the right to change the initial and subsequent investment minimums.
Anti-Money Laundering Laws
The Funds are required to comply with various federal anti-money laundering laws and regulations. Consequently, a Fund may be required to freeze the account of a shareholder if the shareholder
appears to be involved in suspicious activity or if certain account information matches information on government lists of known terrorists or other suspicious persons, or the Fund may be required to transfer the account or proceeds of the account
to a government agency.
Customer Identification Program
Federal law requires the Funds to obtain, verify and record identifying information for each investor who opens or reopens an account with Aston Funds. An investor may be an individual or a person other
than an individual (such as a corporation, partnership or trust). Such identifying information may include the name, residential or business street address, principal place of business, local office or other physical location (for a person other
than an individual), date of birth (for an individual), social security or taxpayer identification number or other identifying information. Applications without the required information, or without any indication that a social security or taxpayer
identification number has been applied for, may not be accepted. After acceptance, to the extent permitted by applicable law or its customer identification program, Aston Funds reserves the right (a) to place limits on transactions in any
account until the identity of the investor is verified; or (b) to refuse an investment in Aston Funds or to involuntarily redeem an investors shares at the current share price and close an account in the event that an investors
identity is not verified within 90 days regardless of the type of account. This may cause shares in the investors account to be redeemed at a loss. You may be subject to taxes if Aston Funds liquidates your account due to insufficient
information as it relates to customer identification procedures. Aston Funds and its agents will not be responsible for any loss or adverse tax effect in an investors account resulting from the investors delay in providing all required
identifying information or from closing an account and redeeming an investors shares when an investors identity cannot be verified.
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Voting Rights
Each issued and outstanding full and fractional share of a Fund is entitled to one full and fractional vote. Shares of a Fund participate equally in regard to dividends, distributions and liquidations
with respect to that Fund subject to preferences (such as 12b-1 fees), rights or privileges of any share class. Shareholders have equal non-cumulative voting rights. Class N and Class R shares have exclusive voting rights with respect to
the Plans for their class. On any matter submitted to a vote of shareholders, shares of each Fund will vote separately except when a vote of shareholders in the aggregate is required by law, or when the Trustees have determined that the matter
affects the interests of more than one Fund, in which case the shareholders of all such Funds shall be entitled to vote thereon.
Shareholder Meetings
The Board does not intend to hold annual meetings of shareholders of the Funds. The Trust Instrument provides that the Board will call a
meeting for the purpose of voting upon the question of removal of any Trustee when requested to do so by shareholders owning not less than 10% of the outstanding shares of the Funds entitled to vote. In addition, subject to certain conditions,
shareholders of the Funds may apply to the Trust to communicate with other shareholders to request a shareholders meeting to vote upon the removal of a Trustee.
Certain Provisions of the Trust Instrument
Under Delaware law, the
shareholders of the Funds will not be personally liable for the obligations of any Fund; a shareholder is entitled to the same limitation of personal liability extended to shareholders of corporations. To guard against the risk that Delaware law
might not be applied in other states, the Trust Instrument requires that every written obligation of the Trust or a Fund contain a statement that such obligation may only be enforced against the assets of the Trust or Fund and provides for
indemnification out of Trust or Fund property of any shareholder nevertheless held personally liable for Trust or Fund obligations.
Expenses
Expenses
attributable to the Trust, but not to a particular Fund, will be allocated to each Fund on the basis of relative net assets of the Funds. Similarly, expenses attributable to a particular Fund, but not to a particular class thereof, will be allocated
to each class of such Fund on the basis of relative net assets of the classes. General Trust expenses may include but are not limited to: insurance premiums, Trustee fees, expenses of maintaining the Trusts legal existence and fees of industry
organizations. General Fund expenses may include but are not limited to: audit fees, brokerage commissions, registration of Fund shares with the SEC, fees to the various state securities commissions, printing and postage expenses related to
preparing and distributing required documents such as shareholder reports, prospectuses and proxy statements to current shareholders, fees of the Funds custodian, Administrator, Subadministrator, transfer agent and other service providers,
including reimbursement to the Adviser for payments made to third-party service providers that provide sub-transfer agency, sub-accounting and other administrative services for shareholder accounts, and costs of obtaining quotations of portfolio
securities and pricing of Fund shares. Class-specific expenses relating to distribution and service fee payments associated with a 12b-1 plan for a particular class of shares and other costs relating to implementing or amending such plan (including
obtaining shareholder approval of such plan or any amendment thereto) will be borne solely by shareholders of such class. Other fees and expense that may differ between classes may include but are not limited to, litigation or other legal expenses
relating to a specific class, and expenses incurred as a result of matters relating to a specific class.
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Notwithstanding the foregoing, the Adviser or other service providers may waive or reimburse
the fees and expenses of a specific Fund or a class or classes to the extent permitted under Rule 18f-3 under the 1940 Act.
NET ASSET VALUE
The net asset value per share of each Fund is computed as of the close of the regular trading session on the NYSE on each day the NYSE is open for trading, typically 4:00 p.m. Eastern time. The NYSE is
closed on New Years Day, Martin Luther King Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share is computed by adding the value of all securities and other assets in the portfolio, deducting any
liabilities (expenses and fees are accrued daily) and dividing by the number of shares outstanding. The equity portfolio securities of each Fund listed or traded on a national securities exchange or reported on the NASDAQ National Market System are
valued at the last sale price or NASDAQ Official Closing Price, when appropriate. If no last sale price or NASDAQ Official Closing Price, when appropriate, is reported, the mean of the last bid and asked prices may be used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices. When market quotations are not readily available or are deemed unreliable, securities and other assets are valued at fair value as determined by the Adviser in accordance
with guidelines adopted by the Board.
Fixed income securities are valued using evaluated prices obtained from independent
pricing services in accordance with guidelines adopted and periodically reviewed by the Board. Options, futures and options on futures are valued at the settlement price as determined by the appropriate clearing corporation.
Quotations of foreign securities denominated in foreign currency are converted to U.S. dollar equivalents using foreign exchange
quotations received from independent dealers. The calculation of the net asset value of each Fund may not take place contemporaneously with the determination of the prices of certain portfolio securities of foreign issuers used in such calculation.
Further, under the Trusts procedures, the prices of foreign securities are determined using information derived from pricing services and other sources. Information that becomes known to the Trust or its agents after the time that net asset
value is calculated on any Business Day may be assessed in determining net asset value per share after the time of receipt of the information, but will not be used to retroactively adjust the price of the security so determined earlier or on a prior
day. Events affecting the values of portfolio securities that occur between the time their prices are determined and the close of regular trading on the NYSE (normally 4:00 p.m., Eastern time) may not be reflected in the calculation of net
asset value. If events materially affecting the value of such securities occur during such period, then these securities may be valued at fair value as determined by the Adviser and subadvisers in accordance with guidelines adopted by the Board.
Under the fair valuation procedures adopted by the Board, certain Funds may rely primarily on the services of a third party pricing service to determine fair value prices for foreign securities if certain market events occur.
REDEMPTIONS-IN-KIND
Larger redemptions may be detrimental to a Funds existing shareholders. While each Fund intends to pay all sales proceeds in cash, the Trust, on behalf of each Fund, reserves the right to honor any
request for redemption in excess of $250,000 during any 90-day period by making payment in whole or in part in the form of certain securities of the Fund chosen by the Fund and valued the same way as they are valued for purposes of computing the
Funds net asset value. This is called redemption-in-kind. A shareholder may need to pay certain sales charges related to a redemption-in-kind, such as brokerage commissions, when the securities are sold. For shares that are not
held in a tax deferred account, redemptions-in-kind are taxable for federal income tax purposes in the same manner as when sales proceeds are paid in cash.
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DIVIDENDS
Income dividends and capital gain distributions are reinvested automatically in additional shares at net asset value, unless you elect to
receive them in cash. Distribution options may be changed at any time by requesting a change in writing. Any check in payment of dividends or other distributions which cannot be delivered by the Post Office or which remains uncashed for a period of
more than one year may be reinvested in the shareholders account at the then current net asset value and the dividend option may be changed from cash to reinvest. Dividends are reinvested on the ex-dividend date at the net asset value
determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital, although such dividends and distributions are subject to
federal income taxes in the same manner as other distributions.
FEDERAL INCOME TAXES
The following is intended to be a general summary of certain federal income tax consequences of investing in the Funds.
It is not intended as a complete discussion of all such consequences or a discussion of circumstances applicable to certain types of shareholders. Investors are therefore advised to consult their tax advisors before making an investment decision.
Fund Taxation
Each Fund intends to qualify or to continue to qualify each year as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as amended (the Code). In order to
so qualify, a Fund must, among other things, (i) derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign
currencies, other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies and net income derived from interests in qualified
publicly traded partnerships, (ii) distribute at least 90% of its dividend, interest and certain other taxable income each year and 90% of its net tax-exempt income, and (iii) at the end of each fiscal quarter (a) maintain at least
50% of the value of its total assets in cash and cash items, U.S. government securities, securities of other RICs, and other securities of issuers which represent, with respect to each issuer, no more than 5% of the value of the Funds total
assets and 10% of the outstanding voting securities of such issuer, and (b) have no more than 25% of the value of its total assets invested in the securities (other than those of the U.S. government or other RICs) of any one issuer or of two or
more issuers which the Fund controls and which are engaged in the same, similar or related trades and businesses or in the securities of one or more qualified publicly traded partnerships. The requirements for qualification as a RIC may
significantly limit the extent to which a Fund may invest in some investments, including certain commodity ETFs and commodity-linked investments.
To the extent that a Fund qualifies for treatment as a RIC, it will not be subject to federal income tax on income and gains paid to shareholders in the form of dividends or capital gains distributions.
A federal excise tax at the rate of 4% will be imposed on the excess, if any, of a Funds required
distribution over actual distributions in any calendar year. Generally, the required distribution is 98% of a Funds ordinary income for the calendar year plus 98.2% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior years. Each Fund intends to make distributions sufficient to avoid imposition of the excise tax.
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If a Fund invests in certain pay-in-kind securities, zero coupon securities, deferred
interest securities or, in general, any other securities with original issue discount (or with market discount if the Fund elects to include market discount in income currently), the Fund must accrue income on such investments for each taxable year,
which generally will be prior to the receipt of the corresponding cash payments. However, a Fund must distribute to shareholders, at least annually, all or substantially all of its investment company taxable income (determined without regard to the
deduction for dividends paid), including such accrued income, to avoid federal income and excise taxes. Therefore, a Fund may have to dispose of its portfolio securities under disadvantageous circumstances to generate cash, or may have to leverage
itself by borrowing the cash, to satisfy these distribution requirements.
A Fund may acquire market discount bonds. A market
discount bond is a security acquired in the secondary market at a price below its redemption value (or its adjusted issue price if it is also an original issue discount bond). If a Fund invests in a market discount bond, it generally will be
required to treat any gain recognized on the disposition of such market discount bond as ordinary income (instead of capital gain) to the extent of the accrued market discount, unless the Fund elects to include the market discount in income as it
accrues.
A Funds investment in lower-rated or unrated debt securities may present issues for the Fund if the issuers of
these securities default on their obligations because the federal income tax consequences to a holder of such securities are not certain.
A Funds transactions, if any, in forward contracts, options, futures contracts and hedged investments may be subject to special provisions of the Code that, among other things, may affect the
character of gain and loss realized by a Fund (i.e., may affect whether gain or loss is ordinary or capital), accelerate recognition of income to a Fund, defer a Funds losses, and affect whether capital gain and loss is characterized as
long-term or short-term. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also may require a Fund to mark-to-market certain types of positions (i.e., treat them as if they were
closed out), which may cause a Fund to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the distribution requirements for avoiding federal income and excise taxes. The Funds will monitor their
transactions, make the appropriate tax elections, and make the appropriate entries in their books and records when they acquire any option, futures contract, forward contract, or hedged investment in order to mitigate the effect of these rules,
prevent disqualification of the Fund as a RIC, and minimize the imposition of federal income and excise taxes.
If an option
which a Fund has written expires on its stipulated expiration date, the Fund recognizes a short-term capital gain. If a Fund enters into a closing purchase transaction with respect to an option which the Fund has written, the Fund realizes a
short-term capital gain (or loss if the cost of the closing transaction exceeds the premium received when the option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which a Fund has written is exercised, the Fund realizes a capital gain or loss from the sale of the underlying security and the proceeds from such sale are increased by the premium originally received.
If an option which a Fund has purchased expires on the stipulated expiration date, the Fund realizes a short-term or long-term capital
loss for federal income tax purposes in the amount of the cost of the option. If a Fund exercises a put option, it realizes a capital gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of
the underlying security which will be decreased by the premium originally paid.
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Options held by a Fund at the end of each fiscal year on a broad-based stock index are
treated under the Code as Section 1256 contracts and will be required to be marked-to-market (i.e., treated as if they were sold) for federal income tax purposes. Sixty percent of any net gain or loss recognized on such deemed sales
or on any actual sales will be treated as long-term capital gain or loss, and the remainder will be treated as short-term capital gain or loss (60/40 gain or loss). Certain other options, futures contracts and options on futures
contracts utilized by the Funds are also Section 1256 contracts. These Section 1256 contracts held by the Funds at the end of each taxable year (and on October 31 of each year for purposes of the 4% excise tax) are also
marked-to-market with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss, together with the gain or loss on actual sales, is treated as a 60/40 gain or loss.
A Funds entry into a short sale transaction, an option or certain other transactions could be treated as the constructive sale of
an appreciated financial position, causing a Fund to realize gain, but not loss, on the position.
The application of certain
requirements for qualification as a RIC and the application of certain other federal income tax rules may be unclear in some respects in connection with investments in certain derivatives and other investments. As a result, a Fund may be required to
limit the extent to which it invests in such investments and it is also possible that the Internal Revenue Service (the IRS) may not agree with a Funds treatment of such investments. In addition, the tax treatment of derivatives
and certain other investments may be affected by future legislation, Treasury Regulations and guidance issued by the IRS (which could apply retroactively) that could affect the timing, character and amount of a Funds income and gains and
distributions to shareholders, affect whether a Fund has made sufficient distributions and otherwise satisfied the requirements to maintain its qualification as a RIC and avoid federal income and excise taxes or limit the extent to which a Fund may
invest in certain derivatives and other investments in the future.
Generally, the character of the income or capital gains
that a Fund receives from another investment company will pass through to a Funds shareholders as long as a Fund and the other investment company each qualify as RICs. However, to the extent that another investment company that qualifies as a
RIC realizes net losses on its investments for a given taxable year, a Fund will not be able to recognize its share of those losses until it disposes of shares of such investment company. Moreover, even when a Fund does make such a disposition, a
portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for federal income tax purposes as an ordinary deduction. In particular, a Fund will not be able to offset any capital losses from its
dispositions of shares of other investment companies against its ordinary income. As a result of the foregoing rules, and certain other special rules, it is possible that the amounts of net investment income and net capital gains that a Fund will be
required to distribute to shareholders will be greater than such amounts would have been had a Fund invested directly in the securities held by the investment companies in which it invests, rather than investing in shares of the investment
companies. For similar reasons, the character of distributions from a Fund (e.g., long-term capital gain, qualified dividend income, etc.) will not necessarily be the same as it would have been had a Fund invested directly in the securities held by
the investment companies in which it invests.
A Fund may invest to a limited degree in MLPs and ETFs that are treated as
qualified publicly traded partnerships for federal income tax purposes. Net income derived from an interest in a qualified publicly traded partnership is included in the sources of income from which a RIC may derive 90% of its gross income. However,
no more than 25% of the value of a RICs total assets at the end of each fiscal quarter may be invested in securities of qualified publicly traded partnerships. If an MLP or ETF in which a Fund invests is taxed as a partnership for federal
income tax purposes, the Fund will be taxable on its allocable share of the MLPs or ETFs income regardless of whether the Fund receives any distribution
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from the MLP or ETF. Thus, a Fund may be required to sell other securities in order to satisfy the distribution requirements to qualify as a RIC and to avoid federal income and excise taxes.
Distributions to a Fund from an MLP or ETF that is taxed as a partnership for federal income tax purposes will constitute a return of capital to the extent of the Funds basis in its interest in the MLP or ETF. If a Funds basis is reduced
to zero, distributions will constitute capital gain for federal income tax purposes.
Distributions from royalty and income
trusts will be treated as dividend income eligible under the 90% income test described above if the trust is treated as a corporation for U.S. federal income tax purposes. A Fund will invest only in royalty and income trusts that are expected to be
treated as corporations for U.S. federal income tax purposes.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues income or other receivables or accrues expenses or other liability denominated in a foreign currency and the time the Fund actually collects such receivable or pays such liabilities
generally are treated as ordinary income or loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain other instruments, gains or losses attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the security or contract and the date of disposition also may be treated as ordinary gain or loss. These gains and losses, referred to under the Code as Section 988 gains or losses, may
increase or decrease the amount of a Funds investment company taxable income to be distributed to its shareholders as ordinary income.
If a Fund receives an excess distribution with respect to the stock of a passive foreign investment company (PFIC), the Fund itself may be subject to federal income tax on a
portion of the excess distribution, whether or not the corresponding income is distributed by the Fund to shareholders. In general, a foreign corporation is classified as a PFIC for a taxable year if at least 50% of its assets constitute certain
investment-type assets or 75% or more of its gross income is certain investment-type income.
Under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during which the Funds held the PFIC stock. A Fund itself will be subject to U.S. federal income tax (including interest) on the portion, if any, of an excess distribution that
is so allocated to prior taxable years. Certain distributions from a PFIC as well as gain from the sale of PFIC stock are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of
the PFIC rules, certain excess distributions might have been classified as capital gain.
Rather than being taxed on the PFIC
income as discussed above, a Fund may be eligible to elect alternative tax treatment. Under an election that currently is available in certain circumstances, a Fund generally would be required to include in its gross income its share of the
PFICs income and net capital gain annually, regardless of whether distributions are received from the PFIC in a given year. In addition, another election may be available that would involve marking to market a Funds PFIC shares at the
end of each taxable year (and on certain other dates prescribed in the Code), with the result that unrealized gains are treated as though they were realized and treated as ordinary income or loss (subject to certain limitations). If this election
were made, federal income tax at the Fund level under the PFIC rules would generally be eliminated, but the Fund could, in limited circumstances, incur nondeductible interest charges. A Funds intention to qualify annually as a RIC may limit
its options with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other things, the
character of gains and the amount of gain or loss and the timing of the recognition of income with respect to PFIC shares, and may subject a Fund itself to tax on certain income from PFIC shares, the amount that must be distributed to shareholders
and that will be taxed to shareholders as ordinary income or long-term capital gain may be increased or decreased as compared to a fund that did not invest in PFIC shares.
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A Funds investments in REITs may result in the Funds receipt of cash in excess
of the REITs earnings; if the Fund distributes these amounts, these distributions could constitute a return of capital to Fund shareholders for federal income tax purposes. Investments in REIT equity securities also may require a Fund to
accrue and distribute income not yet received. To generate sufficient cash to make the requisite distributions, a Fund may be required to sell securities in its portfolio (including when it is not advantageous to do so) that it otherwise would have
continued to hold. Dividends received by a Fund from a REIT will not qualify for the corporate dividends-received deduction and generally will not constitute qualified dividend income (see Shareholder Taxation below).
The Funds may invest in REITs that hold residual interests in real estate mortgage investment conduits (REMICs). Under a
notice issued by the IRS, a portion of a Funds income from a REIT (or other pass-through entity) that is attributable to a residual interest in a REMIC (referred to in the Code as an excess inclusion) will be subject to federal
income tax in all events. The notice provides that excess inclusion income of a RIC, such as a Fund, will be allocated to shareholders of the RIC in proportion to the dividends received by such shareholders, with the same consequences as if the
shareholders held the related REMIC residual interest directly. In general, excess inclusion income allocated to shareholders (a) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions),
(b) will constitute unrelated business taxable income to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on unrelated business income,
thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a federal income tax return, to file a tax return and pay tax on such income, and (c) in the case of a foreign
shareholder, will not qualify for any reduction in U.S. federal withholding tax. In addition, if at any time during any taxable year a disqualified organization (as defined by the Code) is a record holder of a share in a RIC, then the
RIC will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the highest federal income tax rate imposed on corporations.
Shareholder Taxation
Shareholders will be subject to federal income taxes on distributions made by the Funds whether received in cash or additional shares of
the Funds. Distributions of net investment income (including any net short-term capital gain in excess of any net long-term capital loss), other than qualified dividend income, if any, will be taxable to shareholders as ordinary income.
For taxable years beginning prior to January 1, 2013, distributions of qualified dividend income, as such term is
defined in Section 1(h)(11) of the Code (generally dividends received from U.S. domestic corporations and certain qualified foreign corporations), by a Fund to its noncorporate shareholders generally will be taxed at the federal income tax
rates applicable to net capital gain, provided certain holding period and other requirements described below are satisfied. Dividends received from REITs and certain foreign corporations generally will not constitute qualified dividend income.
Distributions of net capital gain (the excess of net long-term capital gains over net short-term capital losses), if any, will be taxable to noncorporate shareholders at a maximum federal income tax rate of 15%, without regard to how long a
shareholder has held shares of a Fund. Unless extended by future legislation, the 15% federal income tax rate on net capital gain will expire for taxable years beginning after 2012 and will be replaced by a maximum federal income tax rate on net
capital gains of 20%. Dividends paid by a Fund may also qualify in part for the 70% dividends-received deduction available to corporate shareholders, provided that certain holding period and other requirements under the Code are satisfied.
Generally, however, dividends received from most REITs and on stocks of foreign issuers are not eligible for the dividends-received deduction when distributed to the Funds corporate shareholders.
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To be eligible for treatment as qualified dividend income, shareholders generally must hold
their shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. In order for dividends received by a Funds shareholders to be treated as qualified dividend income, a Fund must also meet holding
period and other requirements with respect to such dividend paying stocks it owns. A dividend will not be treated as qualified dividend income at the Fund level if the dividend is received with respect to any share of stock held for 60 days or fewer
during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, 90 days or fewer during the 181-day period beginning
90 days before such date). In addition to the above holding period requirements, a dividend will not be treated as qualified dividend income (at either the Fund or shareholder level), (1) to the extent that the recipient is under an obligation
(whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (2) if the recipient elects to have the dividend income treated as investment income for purposes
of the limitation on deductibility of investment interest, or (3) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with an
exception for stock that is readily tradable on an established securities market in the United States) or (b) treated as a PFIC.
If a Fund receives dividends from an underlying fund, including an ETF, that qualifies as a RIC and the underlying fund designates such dividends as qualified dividend income, then the Fund may in turn
designate that portion of its distributions derived from those dividends as qualified dividend income as well, provided the Fund meets the holding period and other requirements with respect to its shares of the underlying fund.
Distributions declared by a Fund during October, November or December to shareholders of record during such month and paid by
January 31 of the following year will be taxable in the year they are declared, rather than the year in which they are received. Each Fund will notify its shareholders each year of the amount and type of dividends and distributions it paid.
Gain or loss realized upon a redemption or other disposition (such as an exchange) of shares of a Fund by a shareholder
will generally be treated as long-term capital gain or loss if the shares have been held for more than one year and, if not held for such period, as short-term capital gain or loss. Any loss on the sale or exchange of shares held for six months or
less will be treated as a long-term capital loss to the extent of any long-term capital gain dividends paid to the shareholder with respect to such shares. Any loss a shareholder realizes on a sale or exchange of shares will be disallowed if the
shareholder acquires other shares of the Fund (whether through the automatic reinvestment of dividends or otherwise) or substantially identical stock or securities within a 61-day period beginning 30 days before and ending 30 days after the
shareholders sale or exchange of the shares. In such case, the shareholders tax basis in the shares acquired will be adjusted to reflect the disallowed loss. Capital losses may be subject to limitations on their use by a shareholder.
When a shareholder opens an account, IRS regulations require that the shareholder provide a taxpayer identification number
(TIN), certify that it is correct, and certify that he, she or it is not subject to backup withholding. If a shareholder fails to provide a TIN or the proper tax certifications, each Fund is required to withhold a portion of all distributions
(including dividends and capital gain distributions) and redemption proceeds paid to the shareholder. The backup withholding rate is 28% for amounts paid through 2012. This rate will expire and the backup withholding rate will be 31% for amounts
paid after December 31, 2012, unless Congress enacts legislation providing otherwise. Each Fund is also required to begin backup withholding on an account if the IRS instructs it to do so. Amounts withheld may be applied to the
shareholders federal income tax liability and the shareholder may obtain a refund from the IRS if withholding results in an overpayment of federal income tax for such year.
121
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax
will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts
to the extent that such persons modified adjusted gross income(in the case of an individual) or adjusted gross income (in the case of an estate or trust) exceeds a threshold amount.
Foreign Taxation
Income received by a Fund from sources within foreign countries may be subject to withholding and other taxes imposed by such countries.
Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. In addition, the Adviser and subadvisers intend to manage the Funds with the intention of minimizing foreign taxation in cases where it is deemed prudent to
do so. If more than 50% of the value of a Funds total assets at the close of its taxable year consists of stock or securities of foreign corporations, or if the Fund is a qualified fund of funds (see Investment Companies below),
such Fund will be eligible to elect to pass through to the Funds shareholders the amount of eligible foreign income and similar taxes paid by the Fund or in the case of a qualified fund of funds, such taxes paid by an underlying
fund that has made the election. If this election is made, a shareholder generally subject to federal income tax will be required to include in gross income (in addition to taxable dividends actually received) his or her pro rata share of foreign
taxes in computing his or her taxable income and to use such amount as a foreign tax credit against his or her U.S. federal income tax liability or deduct such amount in lieu of claiming a credit, in each case subject to certain limitations. In
particular, shareholders must hold their shares (without protection from risk of loss) for more than 15 days during the 31-day period beginning 15 days before the ex-dividend date to be eligible to claim a foreign tax credit with respect to such
dividend. These same holding period rules also generally apply at the Fund level; thus a Fund that makes an election to pass through any foreign tax amounts must also hold the stock in such foreign corporations for such specified periods. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. Each shareholder will be notified after the close of a Funds taxable year whether the foreign taxes paid by the Fund will pass through for
that year.
Generally, a credit for foreign taxes is subject to the limitation that it may not exceed the shareholders
U.S. federal income tax attributable to his or her total foreign source taxable income. For this purpose, if the pass-through election is made by a Fund, the source of the electing Funds income will flow through to shareholders of the Fund.
Gains from the sale of securities will be treated as derived from U.S. sources and certain currency fluctuation gains, including fluctuation gains from foreign currency-denominated debt securities, receivables and payables will be treated as
ordinary income derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign source passive income. Shareholders may be unable to claim a credit for the full amount of their proportionate share of the foreign
taxes paid by a Fund.
If the Fund does not satisfy the requirements for passing through to its shareholders their
proportionate shares of any foreign taxes paid by the Fund, shareholders will not be required to include such taxes in their gross incomes and will not be entitled to a tax deduction or credit for such taxes on their own federal income tax returns.
122
Investment Companies
The use of a fund-of-funds structure by
ASTON Dynamic Allocation Fund
and
ASTON/Lake Partners LASSO Alternatives Fund
(each a Fund-of-Funds) could affect the amount, timing, and
character of distributions from the Funds, and, therefore, may increase the amount of taxes payable by shareholders. Because each Fund-of-Funds will invest a large portion of its assets in shares of other funds, its distributable income and gains
will normally consist largely of distributions from the underlying funds in which it invests and gains and losses on disposition of shares of the underlying funds.
Generally, the character of the income or capital gains that a Fund-of-Funds receives from an underlying fund will pass through to the Fund-of-Funds shareholders as long as the Fund-of-Funds and
underlying fund qualify as RICs. However, to the extent that an underlying fund that qualifies as a RIC realizes net losses on its investments for a given taxable year, a Fund-of-Funds will not be able to recognize its share of those losses (so as
to offset distributions of net income or capital gains from other underlying funds in which it invests) until it disposes of shares of such underlying fund. Moreover, even when a Fund-of-Funds does make such a disposition, a portion of its loss may
be recognized as a long-term capital loss, which will not be treated as favorably for federal income tax purposes as an ordinary deduction. In particular, a Fund-of-Funds will not be able to offset any capital losses from its dispositions of
underlying fund shares against its ordinary income (including distributions of any net short-term capital gains from an underlying fund that qualifies as a RIC).
In addition, in certain circumstances, the wash sale rules may apply to a Fund-of-Funds sales of underlying fund shares that have generated losses. A wash sale occurs if shares of an
underlying fund are sold by a Fund-of-Funds at a loss and the Fund-of-Funds acquires additional shares of that same underlying fund or other substantially identical stock or securities 30 days before or after the date of the sale. The wash-sale
rules could defer losses in the Fund-of-Funds hands on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time.
As a result of the foregoing rules, and certain other special rules, it is possible that the amounts of net investment income and net
capital gains that a Fund-of-Funds will be required to distribute to shareholders will be greater than such amounts would have been had the Fund-of-Funds invested directly in the securities held by the underlying funds, rather than investing in
shares of the underlying funds. For similar reasons, the character of distributions from a Fund-of-Funds (e.g., long-term capital gain, qualified dividend income, etc.) will not necessarily be the same as it would have been had the Fund-of-Funds
invested directly in the securities held by the underlying funds.
If a Fund-of-Funds is a qualified fund of funds
(i.e., a RIC that invests at least 50% of its total assets in other RICs at the close of each quarter of its taxable year), it may elect to pass through to its own shareholders foreign tax credits received from underlying funds that make the
election to pass such foreign tax credits through to their shareholders (see Foreign Taxation above).
The
foregoing is only a general description of the federal income tax consequences of a fund-of-funds structure. Accordingly, prospective purchasers of shares of a Fund-of-Funds are urged to consult their tax advisers with specific reference to their
own tax situation, including the potential application of state, local and foreign taxes.
Other Taxes
Dividends and distributions also may be subject to state and local taxes. Shareholders are urged to consult their tax advisers regarding
the application of federal, foreign, state and local taxes to their particular situation.
The foregoing discussion
relates solely to U.S. federal income tax law as applied to U.S. investors. Non-U.S. investors should consult their tax advisers concerning the tax consequences of ownership of shares of the Fund, including the possibility that distributions may be
subject to a 30% U.S. withholding tax (or a reduced rate of withholding provided by an applicable treaty).
123
Special rules apply to foreign persons who receive distributions from a Fund that are
attributable to gain from United States real property interests (USRPIs). The Code defines USRPIs to include direct holdings of U.S. real property and any interest (other than an interest solely as a creditor) in a
United States real property holding corporation or former United States real property holding corporation. The Code defines a United States real property holding corporation as any corporation whose USRPIs make up 50% or more of the fair
market value of its USRPIs, its interests in real property located outside the United States, plus any other assets it uses in a trade or business. In general, if a Fund is a United States real property holding company (determined without regard to
certain exceptions), distributions by the Fund that are attributable to distributions received by the Fund from a lower-tier REIT that the Fund is required to treat as USRPI gain in its hands will retain their character as gains realized from USRPIs
in the hands of the foreign persons. If the foreign shareholder holds (or has held at any time during the prior year) more than a 5% interest in a class of stock of a Fund, such distributions received by the shareholder with respect to such class of
stock will be treated as gains effectively connected with the conduct of a U.S. trade or business, and subject to tax at graduated rates. Moreover, such shareholders will be required to file a U.S. income tax return for the
year in which the gain was recognized and the Fund will be required to withhold 35% of the amount of such distribution. In the case of all other foreign persons (i.e., those whose interest in the Fund did not exceed 5% at any time during the prior
year), the USRPI distribution will be treated as ordinary income (regardless of any designation by the Fund that such distribution is net capital gain) and the Fund must withhold 30% (or a lower applicable treaty rate) of the amount of the
distribution paid to such foreign persons.
In addition, if a Fund is a United States real property holding corporation or
former United States real property holding corporation, the Fund may be required to withhold U.S. tax upon a redemption of shares by a greater-than-5% shareholder that is a foreign person, and that shareholder would be required to file a U.S. income
tax return for the year of the disposition of the USRPI and pay any additional tax due on the gain.
PERFORMANCE INFORMATION
From time to time, the Trust may include general comparative information, such as statistical
data regarding inflation, securities indices or the features or performance of alternative investments, in advertisements, sales literature and reports to shareholders. The Trust may also include calculations in these communications, such as
hypothetical compounding examples or tax-free compounding examples, which describe hypothetical investment results. Such performance examples will be based on an express set of assumptions and are not indicative of the performance of any Fund. In
addition, the Trust may include charts comparing various tax-free yields versus taxable yield equivalents at different income levels.
From time to time, the yield and total return of a Fund may be quoted in advertisements, shareholder reports or other communications to shareholders.
FINANCIAL STATEMENTS
The Funds audited financial statements for the fiscal year ended October 31, 2012, including the report of, the independent registered public accounting firm for each Fund, are incorporated
herein by reference to the Funds Annual Report as filed with the SEC. The Funds Annual and Semi-Annual Reports are available upon request and without charge.
124
OTHER INFORMATION
The Prospectus and this SAI do not contain all the information included in the Registration Statement filed with the SEC under the 1933
Act with respect to the securities offered by the Trusts Prospectus. Certain portions of the Registration Statement have been omitted from the Prospectus and this SAI pursuant to the rules and regulations of the SEC. The Registration Statement
including the exhibits filed therewith may be examined at the office of the SEC in Washington, D.C.
Statements contained in
the Prospectus or in this SAI as to the contents of any contract or other document referred to, are not necessarily complete. In each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this SAI forms a part. Each such statement is qualified in all respects by such reference.
125
APPENDIX A
RATINGS OF INVESTMENTS
Standard
& Poors
Corporation
A brief description of the applicable Standard & Poors Financial Services LLC, a subsidiary of The
McGraw-Hill Companies (
Standard & Poors
or
S&P
), rating symbols and their meanings (as published by S&P) follows:
A Standard & Poors issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations,
or a specific financial program (including ratings on medium term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and
takes into account the currency in which the obligation is denominated. The opinion evaluates the obligors capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and
subordination, which could affect ultimate payment in the event of default. The issue credit rating is not a statement of fact or recommendation to purchase, sell, or hold a financial obligation or make any investment decisions. Nor is it a comment
regarding an issues market price or suitability for a particular investor.
Issue credit ratings are based on current
information furnished by the obligors or obtained by Standard & Poors from other sources it considers reliable. Standard & Poors does not perform an audit in connection with any credit rating and may, on occasion, rely
on unaudited financial information. Credit ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 daysincluding commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor
with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following considerations:
|
1.
|
Likelihood of paymentcapacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;
|
|
2.
|
Nature of and provisions of the obligation; and
|
|
3.
|
Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other
laws affecting creditors rights.
|
The issue ratings are an assessment of default risk, but may incorporate
an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation applies when
an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
A-1
|
AAA
|
An obligation rated AAA has the highest rating assigned by Standard & Poors. The obligors capacity to meet its financial commitment on
the obligation is extremely strong.
|
|
AA
|
An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligors capacity to meet its financial commitment on
the obligation is very strong.
|
|
A
|
An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
|
|
BBB
|
An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the obligation.
|
|
CC, and C
|
Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics.
BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse
conditions.
|
|
BB
|
An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions, which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
|
|
B
|
An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
|
|
CCC
|
An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor
to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
|
|
CC
|
An obligation rated CC is currently highly vulnerable to nonpayment.
|
|
C
|
A C rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of
the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the C rating may be assigned to subordinated debt, preferred stock or
other obligations on which cash payments have been suspended in accordance with the instruments terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount
of cash or replaced by other instruments having a total value that is less than par.
|
A-2
|
D
|
An obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory capital
instrument, are not made on the date due, unless Standard & Poors believes that such payments will be made within the shorter of the stated grace period but not longer than five business days. Both a longer stated grace period and the
absence of a stated grace period are irrelevant. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. An obligations rating is
lowered to D upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
|
Plus (+) or minus (-). The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating categories.
|
N.R.
|
This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poors does not
rate a particular obligation as a matter of policy.
|
Short-Term Issue Credit Ratings
|
A-1
|
A short-term obligation rated A-1 is rated in the highest category by Standard & Poors. The obligors capacity to meet its financial
commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitment on these obligations is extremely strong.
|
|
A-2
|
A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations
in higher rating categories. However, the obligors capacity to meet its financial commitment on the obligation is satisfactory.
|
|
A-3
|
A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
|
|
B
|
A short-term obligation rated B is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
|
|
C
|
A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
|
A-3
|
D
|
A short-term obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory
capital instrument, are not made on the date due even if the applicable grace period has not expired, unless Standard & Poors believes that such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
|
Moodys Investors Service, Inc.
A brief description of the applicable Moodys Investors Service, Inc. (
Moodys
) rating symbols and their meanings (as
published by Moodys) follows:
Long-Term Obligation Ratings
Moodys long-term ratings are opinions of the relative credit risk of financial obligations with an original maturity of one year or
more. They address the possibility that a financial obligation will not be honored as promised. Such ratings use Moodys Global Scale and reflect both the likelihood of default and any financial loss suffered in the event of default.
|
Aaa
|
Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level credit risk.
|
|
Aa
|
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
|
|
A
|
Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
|
|
Baa
|
Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
|
|
Ba
|
Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
|
|
B
|
Obligations rated B are considered speculative and are subject to high credit risk.
|
|
Caa
|
Obligations rated Caa are judged to be speculative, of poor standing ,and are subject to very high credit risk.
|
|
Ca
|
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
|
|
C
|
Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
|
Note
: Moodys appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aaa through Caa. The
modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
A-4
Short-Term Obligation Ratings
Moodys short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned
to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted. Moodys employs the following designations to indicate
the relative repayment ability of rated issuers:
|
P-1
|
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
|
|
P-2
|
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
|
|
P-3
|
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
|
|
NP
|
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
|
Fitch Ratings, Inc.
A brief description of the applicable Fitch Ratings, Inc. (
Fitch
) ratings
symbols and meanings (as published by Fitch) follows:
Rated entities in a number of sectors, including financial and
non-financial corporations, sovereigns and insurance companies, are generally assigned Issuer Default Ratings (IDRs). IDRs opine on an entitys relative vulnerability to default on financial obligations. The threshold default risk
addressed by the IDR is generally that of the financial obligations whose non-payment would best reflect the uncured failure of that entity. As such, IDRs also address relative vulnerability to bankruptcy, administrative receivership or similar
concepts, although the agency recognizes that issuers may also make pre-emptive and therefore voluntary use of such mechanisms.
In aggregate, IDRs provide an ordinal ranking of issuers based on the agencys view of their relative vulnerability to default,
rather than a prediction of a specific percentage likelihood of default. For historical information on the default experience of Fitch-rated issuers, please consult the transition and default performance studies available from the Fitch Ratings
website.
Long-Term Credit Ratings
|
AAA
|
Highest credit quality
. AAA ratings denote the lowest expectation of default risk. They are assigned only in case of exceptionally strong capacity
for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
|
|
AA
|
Very high credit quality
. AA ratings denote expectations of a very low default risk. They indicate very strong capacity for payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable events.
|
|
A
|
High credit quality
. A ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
|
A-5
|
BBB
|
Good credit quality
. BBB ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is
considered adequate, but adverse business or economic conditions are more likely to impair this capacity.
|
|
BB
|
Speculative
. BB ratings indicate an elevated vulnerability to default risk developing, particularly in the event of adverse changes in business or
economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.
|
|
B
|
Highly speculative
. B ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
|
|
CCC
|
Substantial credit risk
. Default is a real possibility.
|
|
CC
|
Very high levels of credit risk
. Default of some kind appears probable.
|
|
C
|
Exceptionally high levels of credit risk
. Default is imminent or inevitable, or the issuer is in standstill. Conditions that are indicative of a C
category rating for an issuer include:
|
|
a.
|
the issuer has entered into a grace or cure period following non-payment of a material financial obligation;
|
|
b.
|
the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; or
|
|
c.
|
Fitch Ratings otherwise believes a condition of RD or D to be imminent or inevitable, including through the formal announcement of a distressed
debt exchange.
|
|
RD
|
Restricted default
. RD ratings indicate an issuer that in Fitch Ratings opinion has experienced an uncured payment default on a bond, loan or
other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased operating. This would include:
|
|
a.
|
the selective payment default on a specific class or currency of debt;
|
|
b.
|
the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or
other material financial obligation;
|
|
c.
|
the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations, either in series or in parallel; or
|
|
d.
|
execution of a distressed debt exchange on one or more material financial obligations.
|
A-6
|
D
|
Default
. D ratings indicate an issuer that in Fitch Ratings opinion has entered into bankruptcy filings, administration, receivership,
liquidation or other formal winding-up procedure, or which has otherwise ceased business. Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral
feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.
|
Imminent default typically refers to the occasion where a payment default has been intimated by the
issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has
formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.
In all cases, the assignment of a default rating reflects the agencys opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the
definition of default under the terms of an issuers financial obligations or local commercial practice.
Note: The
modifiers + or - may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA Long-Term IDR category, or to Long-Term IDR categories below
B.
Specific limitations relevant to the issuer credit rating scale include:
|
|
The ratings do not predict a specific percentage of default likelihood over any given time period.
|
|
|
The ratings do not opine on the market value of any issuers securities or stock, or the likelihood that this value may change.
|
|
|
The ratings do not opine on the liquidity of the issuers securities or stock.
|
|
|
The ratings do not opine on the possible loss severity on an obligation should an issuer default.
|
|
|
The ratings do not opine on the suitability of an issuer as a counterparty to trade credit.
|
|
|
The ratings do not opine on any quality related to an issuers business, operational or financial profile other than the agencys opinion on its relative
vulnerability to default.
|
Ratings assigned by Fitch Ratings articulate an opinion on discrete and specific
areas of risk. The above list is not exhaustive, and is provided for the readers convenience.
Short-Term Obligation Ratings
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated
entity or security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as
short term based on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
A-7
|
F1
|
Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added + to denote any
exceptionally strong credit feature.
|
|
F2
|
Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.
|
|
F3
|
Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.
|
|
B
|
Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near-term adverse changes in
financial and economic conditions.
|
|
C
|
High short-term default risk. Default is a real possibility.
|
|
RD
|
Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations.
Applicable to entity ratings only.
|
|
D
|
Default. Indicates a broad-based default event for an entity, or the default of a specific short-term obligation.
|
Specific limitations relevant to the Short-Term Ratings scale include:
|
|
The ratings do not predict a specific percentage of default likelihood over any given time period.
|
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The ratings do not opine on the market value of any issuers securities or stock, or the likelihood that this value may change.
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The ratings do not opine on the liquidity of the issuers securities or stock.
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The ratings do not opine on the possible loss severity on an obligation should an obligation default.
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The ratings do not opine on any quality related to an issuer or transactions profile other than the agencys opinion on the relative vulnerability to default
of the rated issuer or obligation.
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Ratings assigned by Fitch Ratings articulate an opinion on discrete and
specific areas of risk. The above list is not exhaustive, and is provided for the readers convenience.
Rating Watches and Rating
Outlooks
Rating Watch
Rating Watches indicate that there is a heightened probability of a rating change and the likely direction of such a change. These are designated as Positive, indicating a potential upgrade,
Negative, for a potential downgrade, or Evolving, if ratings may be raised, lowered or affirmed. However, ratings that are not on Rating Watch can be raised or lowered without being placed on Rating Watch first, if
circumstances warrant such an action.
A-8
A Rating Watch is typically event-driven and, as such, it is generally resolved over a
relatively short period. The event driving the Watch may be either anticipated or have already occurred, but in both cases, the exact rating implications remain undetermined. The Watch period is typically used to gather further information and/or
subject the information to further analysis. Additionally, a Watch may be used where the rating implications are already clear, but where a triggering event (e.g. shareholder or regulatory approval) exists. The Watch will typically extend to cover
the period until the triggering event is resolved or its outcome is predictable with a high enough degree of certainty to permit resolution of the Watch.
Rating Watches can be employed by all analytical groups and are applied to the ratings of individual entities and/or individual instruments. At the lowest categories of speculative grade (CCC,
CC and C) the high volatility of credit profiles may imply that almost all ratings should carry a Watch. Watches are nonetheless only applied selectively in these categories, where a committee decides that particular events
or threats are best communicated by the addition of the Watch designation.
Rating Outlook
Rating Outlooks indicate the direction a rating is likely to move over a one- to two-year period. They reflect financial or other trends
that have not yet reached the level that would trigger a rating action, but which may do so if such trends continue. The majority of Outlooks are generally Stable, which is consistent with the historical migration experience of ratings over a one-
to two-year period. Positive or Negative rating Outlooks do not imply that a rating change is inevitable and, similarly, ratings with Stable Outlooks can be raised or lowered without a prior revision to the Outlook, if circumstances warrant such an
action. Occasionally, where the fundamental trend has strong, conflicting elements of both positive and negative, the Rating Outlook may be described as Evolving.
Outlooks are currently applied on the long-term scale to issuer ratings in corporate finance (including sovereigns, industrials, utilities, financial institutions and insurance companies) and public
finance outside the U.S.; to issue ratings in public finance in the U.S.; to certain issues in project finance; to Insurer Financial Strength Ratings; to issuer and/or issue ratings in a number of National Rating scales; and to the ratings of
structured finance transactions. Outlooks are not applied to ratings assigned on the short-term scale and are applied selectively to ratings in the CCC, CC and C categories. Defaulted ratings typically do not
carry an Outlook.
Deciding When to Assign Rating Watch or Outlook
Timing is informative but not critical to the choice of a Watch rather than an Outlook. A discrete event that is largely clear and the
terms of which are defined, but which will not happen for more than six monthssuch as a lengthy regulatory approval processwould nonetheless likely see ratings placed on Watch rather than a revision to the Outlook. An Outlook revision
may, however, be deemed more appropriate where a series of potential event risks has been identified, none of which individually warrants a Watch but which cumulatively indicate heightened probability of a rating change over the following one to two
years.
A revision to the Outlook may also be appropriate where a specific event has been identified, but where the conditions
and implications of that event are largely unclear and subject to high execution risk over an extended periodfor example a proposed, but politically controversial, privatization.
A-9
Standard Rating Actions
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Affirmed*
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The rating has been reviewed and no change has been deemed necessary.
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Confirmed
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Action taken in response to an external request or change in terms. Rating has been reviewed in either context, and no rating change has been deemed necessary.
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Downgrade*
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The rating has been lowered in the scale.
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Matured
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This action is used when an issue has reached the end of its repayment term and rating coverage is discontinued. Denoted as M.
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Paid-In-Full
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This action indicates that the issue has been paid in full. As the issue no longer exists, it is therefore no longer rated. Denoted as PIF.
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New Rating*
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Rating has been assigned to a previously unrated issue primarily used in cases of shelf issues such as MTNs or similar programs.
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No Longer
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Rating formerly assigned is no longer relevant due to a change in scale or some
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Applicable
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other non-credit event.
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Prerefunded*
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Assigned to long-term US Public Finance issues after Fitch assesses refunding escrow.
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Publish*
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Initial public announcement of rating on the agencys website, although not necessarily the first rating assigned. This action denotes when a previously private
rating is published.
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Upgrade*
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The rating has been raised in the scale.
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Withdrawn*
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The rating has been withdrawn and the issue or issuer is no longer rated by Fitch Ratings. Indicated in rating databases with the symbol WD.
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Rating Watch
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The issue or issuer has been reviewed and remains on active Rating Watch status.
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Rating Watch
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The issue or issuer has been placed on active Rating Watch status.
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Rating Watch
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Rating Watch status has changed.
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Support Floor
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Applicable only to Support ratings related to Financial Institutions, which are amended only with this
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Under Review*
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Applicable to ratings that may undergo a change in scale not related to changes in fundamental credit quality. Final action will be Revision Rating
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Revision
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The Rating Outlook status has changed independent of a full review of the underlying rating.
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* A rating action must be recorded for each rating in a required cycle to be considered compliant with
Fitch policy concerning aging of ratings. Not all Ratings or Data Actions, or changes in rating modifiers, will meet this requirement. Actions that meet this requirement are noted with an * in the above definitions.
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APPENDIX B
ASTON FUNDS
PROXY VOTING POLICIES AND PROCEDURES
1.
Definitions
.
Sub-Adviser
shall mean any investment adviser hired to implement and oversee the investment program of a respective Fund through a sub-investment advisory agreement with Aston. The term includes all sub-advisers to the Funds.
Sub-Advisers Proxy Voting Policies and Procedures
shall mean the Proxy Voting Policies and Procedures of each
Sub-Adviser, as amended from time to time.
Board
shall mean the Board of Trustees of Aston Funds.
Fund
shall mean a series of Aston Funds.
Fund Management
shall mean the Chairman of the Board of Trustees, Chief Executive Officer or Chief Financial Officer
of Aston Funds.
Trust
shall mean Aston Funds.
2.
Delegation of Proxy Voting Authority
. The Trust has delegated to the applicable Sub-Adviser responsibility for voting all
proxies for which a Fund is entitled to vote in accordance with the Proxy Voting Policies and Procedures of each Sub-Adviser, and each Sub-Adviser has accepted such delegation. Each Sub-Adviser shall provide the Board with a copy of its Proxy Voting
Policies and Procedures and such other information that the Board deems necessary.
3.
Limitations on the Advisers
Responsibilities
.
(i)
Limited Value
. Each Sub-Adviser may abstain
from voting a Fund proxy if it concludes that the Funds economic interests or the value of the portfolio holding is indeterminable or insignificant.
(ii)
Unjustifiable Costs
. Each Sub-Adviser may abstain from voting a Fund proxy for cost reasons (e.g., cost associated with voting proxies of
non-U.S. securities). In accordance with the Sub-Advisers duties, it shall weigh the costs and benefits of voting proxy proposals relating to foreign securities and shall make an informed decision with respect to whether voting a given proxy
proposal is prudent. The Sub-Advisers decision shall take into account the effect that the Funds vote, either by itself or together with other votes, is expected to have on the value of the Funds investment and whether this
expected effect would outweigh the cost of voting.
(iii)
Fund
Restrictions
. Each Sub-Adviser shall vote Fund proxies in accordance with any applicable investment restrictions of the affected Fund.
(iv)
Board Direction
. Notwithstanding the foregoing delegation to the Sub-Advisers, the Board may from time to time direct a Sub-Adviser to vote a
Funds proxies in a manner that is different from the guidelines set forth in the Sub-Advisers Proxy Voting Policies and Procedures. After its receipt of any such direction, the Sub-Adviser shall follow any such direction for proxies
received after its receipt of such direction.
B-1
4.
Subdelegation
. Each Sub-Adviser may delegate its responsibilities under these
Proxy Voting Policies and Procedures to a third party, provided that no such delegation shall relieve the Sub-Adviser of its responsibilities hereunder and the Sub-Adviser shall retain final authority and fiduciary responsibility for proxy voting.
If a Sub-Adviser delegates such responsibilities, the Sub-Adviser shall monitor the delegates compliance with these Proxy Voting Policies and Procedures.
5.
Proxy Voting Expense
. Each Sub-Adviser shall bear all expenses associated with voting its proxies and complying with applicable laws related to voting proxies (including expenses associated with
engaging third parties to vote a Funds proxies. Each Fund shall promptly reimburse the applicable Sub-Adviser for any out-of-pocket expenses incurred by such Sub-Adviser in performing services related to Institutional Shareholder Services,
Inc. maintaining a Funds proxy voting records or filings on Form N-PX.
6.
Conflicts of Interest
. Each
Sub-Adviser shall follow the Conflict of Interest provisions set forth in its Proxy Voting Policies and Procedures. Until such time as each Sub-Advisers Proxy Voting Policies and Procedures address conflicts of interest, each Sub-Adviser shall
comply with the following procedures: the Sub-Adviser shall review each Fund proxy to assess the extent, if any, to which there may be a material conflict between the interests of the applicable Fund on the one hand and the Sub-Adviser and its
affiliates, directors, officers, employees (and other similar persons) on the other hand (a potential conflict). The Sub-Adviser shall perform this assessment on a proposal-by-proposal basis and a potential conflict with respect to one
proposal in a proxy shall not indicate that a potential conflict exists with respect to any other proposal in such proxy. If the Sub-Adviser determines that a potential conflict may exist, it shall promptly report the matter to Fund Management. Fund
Management shall determine whether a potential conflict exists and is authorized to resolve any such conflict in a manner that is in the collective best interests of the applicable Fund and Sub-Advisers other clients (excluding any client that
may have a potential conflict). Without limiting the generality of the foregoing, Fund Management may resolve a potential conflict in any of the following manners:
(i) If the proposal that gives rise to a potential conflict is specifically addressed in the applicable Sub-Advisers Proxy Voting Policies and Procedures, Fund Management may direct the Sub-Adviser
to vote the proxy in accordance with the pre-determined policies and guidelines set forth in the Sub-Advisers Proxy Voting Policies and Procedures; provided that such pre-determined policies and guidelines involve little discretion on the part
of the Sub-Adviser;
(ii) Fund Management may disclose the potential conflict to the Board and obtain the Boards
consent before directing the Sub-Adviser to vote in the manner approved by the Board;
(iii) Fund Management may direct the
Sub-Adviser to engage an independent third-party to determine how the proxy should be voted; or
(iv) Fund Management may
direct the Sub-Adviser to establish an ethical wall or other informational barriers between the person(s) that are involved in the potential conflict and the person(s) making the voting decision in order to insulate the potential conflict from the
decision maker.
Each Sub-Adviser shall use commercially reasonable efforts to determine whether a potential conflict may exist, and a
potential conflict shall be deemed to exist if and only if one or more of the Sub-Advisers senior account representatives actually knew or reasonably should have known of the potential conflict.
7.
Approval of Material Changes
. Any material changes to the Trusts Proxy Voting Policies and Procedures shall be promptly
submitted to the Board for approval. Any material changes in the applicable Sub-Advisers Proxy Voting Policies and Procedures shall be reported to the Board at the next quarterly meeting following such changes.
B-2
8.
Reports to the Board
. At each quarterly meeting of the Board, each
Sub-Adviser shall submit a report to the Board (Exhibit A) describing:
(i) any issues arising under these Proxy Voting
Policies and Procedures since the last report to the Board and the resolution of such issues, including but not limited to, information about conflicts of interest not addressed in such Policies and Procedures; and
(ii) any proxy votes taken by the Sub-Adviser on behalf of the Funds since the last report to the Board which were exceptions from
the Sub-Advisers Proxy Voting Policies and Procedures and the reasons for any such exceptions.
In addition, no less frequently than
annually, Fund Management shall furnish to the Board, and the Board shall consider, a written report identifying any recommended changes in existing policies based upon the Sub-Advisers experience under these Proxy Voting Policies and
Procedures and each Sub-Advisers Proxy Voting Policies and Procedures, evolving industry practices and developments in applicable laws or regulations.
9.
Maintenance of Records
. Each Sub-Adviser shall maintain at its principal place of business the records required to be maintained by the applicable Fund with respect to proxies by the Investment
Company Act of 1940, as amended, and the Investment Advisers Act of 1940, as amended, in accordance with the requirements and interpretations thereof. Each Sub-Adviser must maintain proxy statements that it receives regarding Fund securities, but
need not to the extent that such proxy statements are available on the SECs EDGAR system. The Sub-Advisers may also rely upon a third party to maintain certain records required to be maintained by the Advisers Act and 1940 Act. Each
Sub-Adviser shall maintain and provide such records to the Fund in a mutually agreeable format for filing by the Fund on Form N-PX. Each Adviser acknowledges that the records maintained under the 1940 Act are the property of the Fund and agrees to
transfer such records to the Fund upon request.
Adopted: November 30, 2006
Amended: September 30, 2007
Amended: September 30, 2010
B-3
Anchor Capital Advisors LLC
Proxy Voting Policies, Procedures and Guidelines
As a matter of policy and as a fiduciary to our clients, Anchor Capital has responsibility for voting proxies for portfolio securities consistent with the best economic interests of its clients.
The Chief Compliance Officer (CCO) and the Investment Policy Committee (IPC) are responsible for the Companys Proxy Voting Policies and
Procedures. The CCO shall be responsible for appointing an officer of the Company to serve as the Chief Proxy Voting Officer (CPVO) and the CPVO may, in turn, designate a Proxy Voting Associate to assist in implementation of the Proxy Voting
Procedures. The CPVO is responsible for voting proxies solicited by companies and /or mutual fund sponsors (Registered Investment Companies) whose shares are held in the Companys clients portfolios. The CPVO will decide how a Proxy will
be voted.
The CPVO will review proxies solicited on behalf of the Company clients and analyze each proposal in order to determine, with
consultation if necessary with the IPC how each proposal might effect and impact the
financial and economic interests of the Companys clients
, and vote so as to achieve the most favorable short and long term economic impact for
the Companys clients.
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I.
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Proxy Voting Procedures:
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The
Company has contracted with
Broadridge Financial Solutions-Proxy Edge
to provide the Company with a proxy voting service. This electronic interface will enable the CPVO and PVA to execute proxy votes on behalf of client accounts. In addition,
Proxy Edge
has agreed to vote as instructed by the PVA paper proxies sent to it. The Company has implemented procedures to notify client transfer agents and other service providers that
Proxy Edge
is authorized to transmit voting
instructions and to vote proxies as instructed by the Company.
The CPVO shall insure that he and the PVA and other associates as might be
appropriate shall be trained on the use and administration of the
Proxy Edge
service. The CPVO shall further insure that the systems records and tracks proxy votes submitted on behalf of clients, and, where required or requested, the CPVO
shall provide clients with documentation regarding proxies voted on their behalf. Complete records of proxy votes are maintained electronically through
Proxy Edge
.
The following
is a summary of the how the Company generally votes on specific proposals. All proposals will be voted in the best economic interest of all of the Companys clients. All proxies from a specific issuer will be voted the same way for each client
absent specific and agreed upon instructions from individual clients.
B-4
Proposals Concerning Governance
Vote in Favor Of:
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Appointment of Independent Auditors
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Separate Chairman and Chief Executive Officer
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Annual election of Directors
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Broad representation of independent/non-management Directors
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Vote Against:
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Staggered board elections
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Super majority and cumulative voting
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Classification of board members
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Actions that reduce representation of shareholders
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Proposals Concerning Ownership
Vote in Favor Of:
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Stock splits and share issuance involving non material change in ownership
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Mergers and or acquisitions that are in the best economic interest of clients
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Issuance of additional shares supported by sound economic reasons
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Vote Against:
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Issuance of shares with unequal voting rights
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Different classifications of Common Stock
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Anti-takeover poison pill structures
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Proposals Concerning Compensation
Vote in Favor Of:
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Realistic and relevant short and long term performance objectives
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Non-excessive and non-dilutive employee stock purchase plans
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Annual vote on non-binding Say on Pay
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Vote Against:
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Replacing and or re-pricing of underwater options
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Excessive and or above peer group compensation for independent directors
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Issuance of excessive and dilutive stock options
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Issuance of options below current market price
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Compensation when Chairman and or CEO is greater than 5X next highest executive
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Incentive payments for results below median of peers
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Proposals Concerning Social, Political, Environmental Issues
All proposals concerning any
social, political, and or environmental issues are voted on a case by case basis.
B-5
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III.
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Conflicts of Interest
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Should a
conflict of interest arise, Anchor Capital will resolve the conflict with the view of the best interest of the investors. If Anchor Capital determines there is a material conflict of interest in connection with a proxy vote, Anchor will determine
whether voting in accordance with the guidelines described above is in the best interest of the client. It will also determine whether it is appropriate to disclose the conflict to the affected client and provide the client the opportunity to vote
the proxy themselves.
Anchor will disclose
in its Form ADV 2A that clients may contact the CCO, Kathryn Kearney, via e-mail (
kkearney@anchorcapital.com
) or telephone at 617-338-3800 to obtain information on how Anchor Capital voted and to request a copy of the Proxy Voting Policy. If
a client requests voting information, the CCO or CPVO will provide a response to the client that includes; (1) the name of the issuer; (2) the proposal voted on; and (3) how Anchor Capital voted.
Anchor will also provide a summary of the Proxy Policy in its Form ADV 2A which will be updated accordingly. Anchor will also post the Proxy Policy on
the Company web site.
This Statement of
Proxy Voting Policies and Procedures is declared effective as reviewed and approved by the Chief Compliance Officer and Investment Policy Committee on May 29, 2012.
B-6
Baring Asset Management Group Companies
(the Companies)
Proxy Voting Policies and Procedures
Executive Summary
The Companies owe fiduciary, contractual, and statutory duties to vote proxies on the securities that they manage for many of their
clients. The Companies will vote client proxies in accordance with the procedures set forth below unless the client retains in writing the right to vote proxies or the Companies determine that any benefit the client may gain from voting a proxy
would be outweighed by the costs associated therewith. For many clients, the Companies have assumed contractual responsibility to vote proxies on the securities that they manage for those clients accounts. For ERISA clients (
i.e
.,
employee benefit plans formed pursuant to the Employee Retirement Income Security Act of 1974), the Companies owe fiduciary and statutory duties to vote proxies on ERISA client securities unless the ERISA clients have explicitly retained the
obligation to do so. The Companies also vote proxies for those clients who have invested in certain commingled funds, but do not vote proxies for clients who have invested in the active/passive commingled funds maintained at State Street
Bank and Trust (State Street), as State Street retains authority to vote proxies for those clients. To ascertain whether a particular client has delegated proxy voting responsibility to the Companies, please contact the Global Events
Department or Legal and Compliance Department.
The Companies reserve the right to amend these Proxy Voting Policies and
Procedures from time to time without prior notice to their clients.
Special Circumstances When Proxy Votes May Not Be
Cast
In some cases, the Companies may determine that it is not in the best economic interests of clients to vote proxies.
For example, some non-U.S. securities issuers impose fees on shareholders or their custodians for exercising the right to vote proxies. Other issuers may block, or prohibit, shareholders from transferring or otherwise disposing of their
shares for a period of time after the securities holders have noticed their intent to vote their proxies. Moreover, some issuers require the registration of securities in the name of the beneficial owners before permitting proxies to be cast, and
thus mandate the disclosure of the identity of beneficial owners of securities, which may be contrary to the wishes of the Companies clients.
The U.S. Department of Labor (the U.S. Labor Department), which enforces ERISA, recognizes that ERISA clients may incur additional costs in voting proxies linked to shares of non-U.S.
corporations. The U.S. Labor Department advises that investment advisers, such as the Companies, should weigh the effect of voting clients shares against the cost of voting.
In these instances, the Global Events Department will notify the appropriate portfolio managers of the costs or restrictions that may
apply in voting proxies. Portfolio managers, with guidance from the Proxy Committee if desired, will weigh the economic benefit to the Companies clients of voting those proxies against the cost of doing so. The Global Events Department shall
record the reason for any proxy not being voted, which record shall be kept with the proxy voting records of the Companies.
Institutional Shareholder Services (ISS)
The Companies have contracted with ISS, an independent third party service provider, to vote the Companies clients proxies according to ISSs proxy voting recommendations. ISS will also
provide proxy analysis, vote recommendations, vote execution and record-keeping services for clients for which the Companies have proxy voting responsibility.
B-7
The clients custodians forward proxy materials to ISS for those clients who rely on
the Companies to vote proxies. ISS forwards proxy proposals along with ISS proxy analysis and vote recommendations to the Companies. The Companies maintain standing instructions that direct ISS to vote all proxies in accordance with ISS
recommendations.
ISS Conflict of Interest
There may be instances when ISS makes no recommendation on a proxy voting issue or is recused due to a conflict of interest. In these situations, the applicable portfolio manager will review the issue
and, if the Companies do not also have a conflict of interest, direct the Global Events Department to direct ISS how to vote the proxies. If the Companies have a conflict of interest, the Companies, in their sole discretion, shall either engage an
independent third party to provide a vote recommendation or contact the client for direction as to how to vote the proxies.
Override of ISS Recommendation
There may be occasions where the Companies portfolio managers seek to override ISSs recommendations if they believe that ISSs recommendations are not in accordance with the best economic
interests of clients. In the event that the Companies portfolio managers disagree with an ISS recommendation on a particular voting issue, the appropriate portfolio manager shall document in writing the reasons that the portfolio manager
believes that the ISS recommendation is not in accordance with clients best economic interests and submit such written documentation to the Global Events Department.
The Global Events Team shall review the rationale stated to ensure that it is expressed in clear, understandable and complete sentences. Any concerns should be returned to the Portfolio Manager for
clarification and revision of the rationale. The Global Events Team shall ensure that when the company is a client of Barings and we wish to vote with the company contrary to the recommendation of ISS, that the procedure set out in this policy under
Conflicts of Interest is followed.
Responsibility for the provision of a clear rationale for each occasion when
ISS recommendation is not to be followed rests with the Portfolio Manager. The Proxy Voting Committee at each meeting will collectively review and approve the rationale given. If any rationale is judged to be inadequate, further clarification will
be requested from the Portfolio Manager.
The Global Events Team can refer the matter to the Proxy Committee where they are
concerned with the rationale for overriding ISS recommendations.
Special Client Instructions
There are instances when a client has instructed the Companies how they would like the Companies to vote proxies on particular issues of corporate
governance or other matters. The Companies will be responsible for voting in accordance with the client instructions. The Global Events Department will maintain a list of clients that have provided the Companies with special proxy voting
instructions, and will ensure that the clients account is set up as a segregated account with ISS. Furthermore, the Global Events Department is responsible for sending a request form to the Client Service Representative responsible for that
client to obtain from the Client Service Representative the specific voting instructions on behalf of that client.
B-8
Proxy Committee
The Companies have established a Proxy Voting Committee, which shall include representatives from portfolio management, operations, and
legal/compliance or other functional departments as deemed appropriate who are knowledgeable regarding the proxy process. A list of the current members of the Proxy Voting Committee is attached hereto as Schedule A. A majority of the members of the
Proxy Committee shall constitute a quorum and the Proxy Committee shall act by a majority vote. The Proxy Committee meetings may be conducted in person, telephonically, or via electronic communication (e-mail). A member of the Global Events
Department will manage the proxy voting process, which includes the taking of minutes of the Proxy Committee, the voting of proxies, and the maintenance of appropriate records.
The Global Events Department shall call Proxy Committee meetings, prior to the casting of a vote, to review votes where ISS is
conflicted. In these situations, the Proxy Committee shall meet to review the issue and direct ISS how to vote the proxy. The Proxy Committee shall review information provided to it to determine if a real or perceived conflict of interest exists and
the minutes of the Proxy Committee shall describe any real or perceived conflict of interest and any procedures used to address such conflict of interest.
The Global Events Department shall also call quarterly Proxy Committee meetings to: (i) monitor the Companies adherence to these Procedures; (ii) review votes against ISS recommendations
or where ISS was conflicted; (iii) review the list of client requests for a copy of these Procedures and/or the proxy voting record; and (iv) review new corporate governance issues and industry trends and determine whether changes to these
Procedures are necessary or appropriate.
Conflicts of Interest general
To avoid voting proxies in circumstances where the Companies have or may have any conflict of interest, real or perceived, the Companies
have contracted with ISS to provide proxy analysis, vote recommendations and voting of proxies, as discussed herein. In instances where ISS has recused itself and makes no recommendation on a particular matter the portfolio manager can direct the
Global Events department to direct ISS how to vote proxies assuming the portfolio manager and the Proxy Committee confirm the Companies are not conflicted. If an override submission is requested by a portfolio manager, the Proxy Committee shall
determine how the proxy is to be voted, in which case the Proxy Committee will determine whether a conflict of interest exists and that the rationale to vote against ISS is reasonable and is in the best interests of clients.
There may be occasions when a portfolio manager and/or member of its team who are involved in the proxy voting decision may have a
conflict of interest, or the Companies have a business relationship with the company soliciting the proxy. A person shall not be considered to have a conflict of interest if the person did not know of the conflict of interest and did not attempt to
influence the outcome of a proxy vote. Any person with actual knowledge of a conflict of interest relating to a particular item shall disclose that conflict to the Global Events Department.
The following are examples of situations where a conflict of interest may exist:
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The company soliciting the proxy is a client of the Companies;
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The company soliciting the proxy is an affiliate of the Companies;
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An employee of the Companies is a also a director, officer or employee of the company soliciting the proxy; and
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A portfolio manager and/or a partner/spouse of a SIT member, who is involved in making the voting decision is a director, officer, or employee of the company soliciting
the proxy.
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B-9
To monitor the above examples of where a conflict of interest may exist, the Global Events
Department is responsible for maintaining a list of all publicly traded clients (and the clients parent company) of the Companies. The Companies currently have no affiliates that are publicly traded companies. The London Legal Department shall
maintain a list of all employees of the Companies who are directors or officers of publicly traded companies, and shall advise, as applicable, the London Head of Compliance, who will then advise the Global Events Department. The portfolio manager
and members of the SIT who are involved in the voting decision are responsible for notifying the Global Events Department, via the proxy voting form, if said portfolio manager, member or said members partner/spouse is a director, officer or
employee of the company soliciting the proxy or if the SIT member is aware of any other possible real or perceived conflicts of interest.
The Companies have a duty to vote proxies in the best interests of their clients. Therefore, in situations where there is a real or perceived conflict of interest, the Companies will either vote the
securities in accordance with a pre-determined policy based upon the recommendations of an independent third party, such as a proxy voting service, or disclose the conflict to the client and obtain the clients direction to vote the proxy.
Conflicts of interest Barings Mutual Funds
Discretionary Clients.
Where the IMA requires it OR for UK mutual funds, we cannot vote
our Clients holdings of any mutual funds or other securities managed or advised by Barings or any other member of the MassMutual group - an In-House Vote - unless we have obtained the relevant Client's prior instructions on how to
vote that particular holding - and irrespective of whether we are voting in line with ISS's recommendation.
In this scenario, each Client
will need to be contacted and their specific instructions sought on how we should vote. These instructions should be obtained in accordance with any applicable requirements as regards obtaining instructions as specified in the relevant IMA /
Authorised Signatory list, with appropriate records maintained to demonstrate that this has been done.
The default position
will be that it is assumed the client must be contacted unless proved otherwise (note: for UK mutual funds we must always contact the clients). Where the IMA does not require the client to be contacted, then we can only vote in line with ISS
recommendations. If the Portfolio Manager wishes to override ISS recommendations they must get the written agreement of the client.
Mutual Funds
In a situation where one Barings mutual fund is invested in
another Barings mutual fund then the following process should be followed.
UK Funds. These units cannot be voted. This is in
accordance with FSA requirements.
Non UK Funds. Voting should be undertaken in accordance with the provisions stated in the
general Conflict of Interest section above. If a Portfolio Manager wishes to override ISS (or another independent third party) recommendation then this will be referred to the Proxy Voting Committee for review. Any decision by the Proxy
Voting Committee to override the recommendation of an independent third party must demonstrate why it is considered to be in the interests of Barings clients.
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ISS Proxy Voting Guidelines
A copy of ISSs proxy voting guidelines can be found on the ISS Website at http://www.issproxy.com/policy/2006policy.jsp.
B-11
Cornerstone Investment Partners, LLC
PROXY VOTING POLICIES
Rule 204-2
of the Advisers Act requires that investment advisers adopt and implement policies and procedures for voting proxies in
the best interest of clients, to describe the procedures to clients, and to tell clients how they may obtain information about how CIP has actually voted their proxies. While decisions about how to vote must be determined on a case-by-case basis,
CIPs general policies and procedures for voting proxies are set forth below.
|
B.
|
Proxy Voting Principles and Guidelines
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Please see Exhibit XII
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C.
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Specific Proxy Voting Policies and Procedures
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CIP believes that each proxy proposal should be individually reviewed to determine whether the proposal is in the best interests of its clients. As a result, similar proposals for different companies may
receive different votes because of different corporate circumstances.
Edward Mitchell Jr., CFA, Managing Partner is
responsible for overseeing the proxy voting program and Broadridge is Cornerstones proxy voting platform. Broadridge provides the connectivity with all of our custodians.
For each proxy, every ballot initiative is reviewed and compared to Cornerstones Principles and Guidelines and any client specific
guidelines. Cornerstone uses research from Egan Jones to gain further insight into each ballot initiative. For any ballot items that require additional research, those items are referred to the Investment Committee for further review.
Cornerstone Investment Partners
Proxy Voting
Principles and Guidelines
Introduction
Our Proxy Voting
Principles serve as the background for our Proxy Voting Guidelines, which, in turn, act as general guidelines for the specific recommendations that we make with respect to proxy voting. It is important to recognize that such principles are not
intended to dictate but guide. Certain of the principles may be inappropriate for a given company, or in a given situation. Additionally, the principles are evolving and should be viewed in that light. Our principles are and will be influenced by
current and forthcoming legislation, rules and regulations, and stock exchange rules. Examples include:
- the Sarbanes-Oxley Act of 2002
and implementing rules promulgated by the U.S. Securities & Exchange Commission
- revised corporate governance listing standards of
the New York Stock Exchange and resulting SEC rules
- corporate governance reforms and subsequent proposed rule filings made with the SEC by
The NASDAQ Stock Market, Inc. and resulting SEC rules in general:
B-12
- Directors should be accountable to shareholders, and management should be accountable to directors.
- Information on the Company supplied to shareholders should be transparent.
- Shareholders should be treated fairly and equitably according to the principle of one share, one vote.
Principles
A. Director independence
It is our view that:
- A two-thirds
majority of the Board should be comprised of independent directors.
- Independent directors should meet alone at regularly scheduled meetings,
no less frequently than semi-annually, without the Chief Executive Officer or other non-independent directors present.
- When the Chairman of
the Board also serves as the companys Chief Executive Officer, the Board should designate one independent director to act as a leader to coordinate the activities of the other independent directors.
- Committees of the Board dealing with the following responsibilities should consist only of independent directors: audit, compensation, nomination of
directors, corporate governance, and compliance.
- No director should serve as a consultant or service provider to the Company.
- Director compensation should be a combination of cash and stock in the company, with stock constituting a significant component.
In our opinion, an independent director, by definition, has no material relationship with the Company other than his or her directorship. This avoids the
potential for conflict of interest. Specifically such director:
- should not have been employed by the Company or an affiliate within the
previous five years;
- should not be, and should not be affiliated with, a company that is an adviser or consultant to the Company or
affiliate, or to a member of the Companys senior management;
- should not be affiliated with a significant customer or supplier of the
Company or affiliate;
- should have no personal services contract with the Company or affiliate, or a member of senior management;
- should not be affiliated with a not-for-profit organization that receives significant contributions from the Company or affiliate;
- within the previous five years, should not have had any business relationship with the Company or affiliate which required disclosure in the
Companys Form 10-K;
- should not be employed by a public company at which an executive officer of the Company serves as a director;
- should not be a member of the immediate family of any person described above.
B. Board operating procedures
- The Board should adopt a written statement of its governance
principles, and regularly re-evaluate them.
- Independent directors should establish performance criteria and compensation incentives for the
Chief Executive Officer, and regularly review his or her performance against such criteria. Such criteria should align the interests of the CEO with those of shareholders, and evaluate the CEO against peer groups.
- The independent directors should be provided access to professional advisers of their own choice, independent of management.
- The Board should have a CEO succession plan, and receive periodic reports from management on the development of other members of senior management.
- Directors should have access to senior management through a designated liaison person.
- The Board should periodically review its own size, and determine the appropriate size.
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C. Requirements for individual directors
We recommend that:
- The Board should provide guidelines for directors serving on several
Boards addressing competing commitments.
- The Board should establish performance criteria for itself and for individual directors regarding
director attendance, preparedness, and participation at meetings of the Board and of committees of the Board, and directors should perform satisfactorily in accordance with such criteria in order to be re-nominated.
D. Shareholder rights
- A simple majority
of shareholders should be able to amend the companys bylaws, call special meetings, or act by written consent.
- In the election of
directors, there should be multiple nominees for each seat on the Board
- Greenmail should be prohibited.
- Shareholder approval should be required to enact or amend a poison pill (i.e., shareholder rights) plan
- Directors should be elected annually.
- The
Board should ordinarily implement a shareholder proposal that is approved by a majority of proxy votes.
- Shareholders should have effective
access to the director nomination process.
Proxy Voting Guidelines
Consistent with the above-listed principles, the proxy voting guidelines outlined below are written to guide the specific recommendations that we make to our clients. Ordinarily, we do not recommend that
clients ABSTAIN on votes; rather, we recommend that they vote FOR or AGAINST proposals (or, in the case of election of directors, that they vote FOR ALL nominees, AGAINST the nominees, or that they WITHHOLD votes for certain nominees). In the latter
instance, the recommendation on our report takes the form ALL, EXCEPT FOR and lists the nominees from whom votes should be withheld.
Whether
or not the guideline below indicates case-by-case basis, every case is examined to ensure that the recommendation is appropriate.
Board of Directors
Election of
Directors in Uncontested Elections
Case-by-case basis, examining composition of board and key board committees, attendance history,
corporate governance provisions and takeover activity, long-term company financial performance relative to a market index, directors' investment in the company, etc.
WITHHOLD votes for nominees who:
are affiliated outside directors and sit on the Audit,
Compensation, or Nominating committees
are inside directors and sit on the Audit, Compensation, or Nominating committees
are inside directors and the company does not have Audit, Compensation, or Nominating committees attend less than 75 percent of the board and committee
meetings. Participation by phone is acceptable.
ignore a shareholder proposal that is approved by a majority of the shares outstanding
ignore a shareholder proposal that is approved by a majority of the votes cast for two consecutive years
fail to act on takeover offers where the majority of the shareholders have tendered their shares
implement or renew a dead-hand or modified dead-hand poison pill
sit on
more than seven boards
B-14
In cases in which an issuer has engaged in the practice commonly referred to as options
backdating, Cornerstone will typically withhold voting for nominees serving on the issuers compensation committee, the issuers entire board of directors, and/or its chief executive officer. Such recommendations will be made on a
case-by-case basis, taking into consideration such matters as intent of the individuals involved, scope and timing of the practice, significance of financial restatement required, and corrective action taken.
Furthermore, we may recommend withholding votes from either members of an issuers compensation committee, its entire board of directors and/or its
chief executive officer where the issuer has engaged in what we judge to be other unsatisfactory compensation practices. Considerations may include such factors as pay-for-failure executive severance provisions, change-in-control
payments which are either excessive or which are not tied to loss of job or significant reduction in duties, excessive executive perquisites, unjustified changes in the performance standards applied to performance-based compensation, and executive
compensation out of proportion to performance of the issuer.
FOR responsible shareholder proposals calling for the company to name as
directors only those who receive a majority of shareholder votes.
Separating Chairman and CEO
Case-by-case basis on shareholder proposals requiring that positions of chairman and CEO be held separately.
Independent Directors
FOR shareholder
proposals asking that a two-thirds majority of directors be independent.
FOR shareholder proposals asking that boards Audit,
Compensation, and/or Nominating committees be composed exclusively of independent directors.
Case-by-case basis on proposals asking that the
Chairman be independent.
Stock Ownership Requirements
AGAINST shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director or to remain on the board.
Term Limits
AGAINST shareholder
proposals to limit tenure of outside directors.
Age Limits
AGAINST shareholder proposals to impose a mandatory retirement age for outside directors.
Director and Officer Indemnification and Liability
Case-by-case basis on director and officer indemnification and liability, using Delaware law as the standard.
AGAINST proposals to eliminate entirely directors and officers liability for monetary damages for violating the duty of care.
AGAINST indemnification proposals that would expand coverage beyond legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness.
FOR only those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if (1) the director
was found to have acted in good faith and in a manner that he or she reasonably believed was in the best interests of the company, and
(2)
only if the director's legal expenses would be covered.
Charitable or Political Contributions
AGAINST proposals regarding charitable or political contributions.
Proxy Contests (Contested Elections)
B-15
Election of Directors in Contested Elections
Case-by-case basis for voting for directors in contested elections, considering long-term financial performance of the target company relative to its industry, management's track record, background to the
proxy contest, qualifications of director nominees on both slates, evaluation of what each side is offering shareholders as well as likelihood that proposed objectives and goals will be met, and stock ownership positions.
Reimburse Proxy Solicitation Expenses
Case-by-case basis for reimbursement of proxy solicitation expenses. FOR reimbursing proxy solicitation expenses where is in favor of the dissidents.
Auditors
Ratifying
Auditors
FOR proposals to ratify auditors, unless:
Non-audit fees exceed 50% of total fees.
Auditor has a financial interest in or association with
the company, and is therefore not independent; or there is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position.
Proxy Contest Defenses
Classified
Board vs. Annual Election
AGAINST proposals to classify the board.
FOR proposals to repeal (de-stagger) classified boards and to elect all directors annually.
Removal of Directors
AGAINST proposals that provide that directors may be removed only for
cause.
FOR proposals to restore shareholder ability to remove directors with or without cause.
AGAINST proposals that provide that only continuing directors may elect replacements to fill board vacancies.
FOR proposals that permit shareholders to elect directors to fill board vacancies.
Cumulative Voting
Case-by-case basis on proposals to eliminate cumulative voting.
Calling Special Meetings
AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.
FOR shareholder proposals to allow a shareholder holding a 25% or greater interest to call a special shareholder meeting.
FOR proposals that remove restrictions on the right of shareholders to act independently of management.
Acting by Written Consent
AGAINST proposals to restrict or prohibit shareholder ability to
take action by written consent.
FOR proposals to allow or make easier shareholder action by written consent.
Altering Size of the Board
FOR
proposals to fix the size of the board.
AGAINST proposals that give management the ability to alter size of the board without shareholder
approval.
Tender Offer Defenses
B-16
Poison Pills
FOR shareholder proposals that ask the company to submit its poison pill for shareholder ratification.
Case-by-case basis for shareholder proposals to redeem a company's existing poison pill.
Case-by-case basis for management proposals to ratify a poison pill.
Fair Price
Provisions
Case-by-case basis for adopting fair price provisions, considering vote required to approve the proposed acquisition, vote
required to repeal the fair price provision, and mechanism for determining the fair price.
AGAINST fair price provisions with shareholder vote
requirements greater than a majority of disinterested shares.
Greenmail
FOR proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict the company's ability to make greenmail
payments.
Case-by-case basis for anti-greenmail proposals which are bundled with other charter or bylaw amendments.
Pale Greenmail
Case-by-case
basis for restructuring plans that involve the payment of pale greenmail.
Unequal Voting Rights
AGAINST dual-class exchange offers and dual-class recapitalizations.
Supermajority Requirement to Amend Charter or Bylaws
AGAINST management proposals to
require a supermajority shareholder vote to approve charter and bylaw amendments.
FOR shareholder proposals to lower supermajority shareholder
vote requirements for charter and bylaw amendments.
Supermajority Requirement to Approve Mergers
AGAINST management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations.
FOR shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations.
Placement of Equity with White Squire
FOR shareholder proposals to require approval of blank check preferred stock issues for other than general corporate purposes.
Other Governance Proposals
Confidential Voting
FOR shareholder proposals that request that the company adopt confidential voting, use independent tabulators, and use independent inspectors of election
as long as the proposals include clauses for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy
remains in place. If the dissidents do not agree, the confidential voting policy is waived.
FOR management proposals to adopt confidential
voting.
B-17
Equal Access
FOR shareholder proposals that would allow significant company shareholders equal access to management's proxy material in order to evaluate and propose voting recommendations on proxy proposals and
director nominees, and in order to nominate their own candidates to the board.
Bundled Proposals
Case-by-case basis for bundled or conditioned proxy proposals. Where items are conditioned upon each other, examine benefits and costs.
AGAINST in instances when the joint effect of the conditioned items is not in shareholders' best interests. FOR if the combined effect is positive.
Shareholder Advisory Committees
Case-by-case basis for establishing a shareholder advisory
committee.
Capital Structure
Common Stock Authorization
Case-by case
basis for increasing the number of shares of common stock authorized for issuance.
AGAINST increasing the number of authorized shares of the
class of stock that has superior voting rights in companies that have dual-class capitalization structures.
Stock Distributions: Splits
and Dividends
FOR management proposals to increase common share authorization for a stock split, provided that the increase in authorized
shares would not result in an excessive number of shares available for issuance, considering the industry and companys returns to shareholders.
Reverse Stock Splits
FOR management proposals to implement a reverse stock split when the
number of shares will be proportionately reduced to avoid delisting.
Case-by-case basis on proposals to implement a reverse stock split that
do not proportionately reduce the number of shares authorized for issuance.
Preferred Stock
AGAINST proposals authorizing creation of new classes of "blank check preferred stock (i.e., classes with unspecified voting, conversion, dividend
distribution, and other rights
FOR proposals to create blank check preferred stock in cases when the company specifically states
that the stock will not be used as a takeover defense.
FOR proposals to authorize preferred stock in cases where the company specifies the
voting, dividend, conversion, and other rights of such stock and the terms are reasonable.
Case-by-case basis on proposals to increase the
number of blank check preferred shares after analyzing the number of preferred shares available for issuance considering the industry and companys returns to shareholders.
Blank Check Preferred Stock
FOR shareholder proposals to have placements of
blank check preferred stock submitted for shareholder approval, except when those shares are issued for the purpose of raising capital or making acquisitions in the normal course.
Adjustments to Par Value of Common Stock
FOR management proposals to reduce the par value
of common stock.
B-18
Preemptive Rights
Case-by-case basis on shareholder proposals that seek preemptive rights, considering size of the company and shareholder characteristics.
Debt Restructurings
Case-by-case basis on proposals to increase number of common and/or
preferred shares and to issue shares as part of a debt restructuring plan, considering dilution, any resulting change in control FOR proposals that facilitate debt restructurings except where signs of self-dealing exist.
Share Repurchase Programs
FOR
management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.
Tracking
Stock
Case-by-case basis for creation of tracking stock, considering the strategic value of the transaction vs. adverse governance
changes, excessive increases in authorized stock, inequitable distribution method, diminution of voting rights, adverse conversion features, negative impact on stock option plans, and other alternatives, such as spin-offs.
Compensation of Officers and Directors
Case-by-case basis for director and officer compensation plans, but generally favoring responsible proposals calling for more use of performance-based
equity in compensation plans. The term performance-based equity will not be interpreted to include conventional stock options, but will include such tools as indexed options, restricted stock, performance-contingent options, and
premium-priced options.
Management Proposals Seeking Approval to Re-price Options
Case-by-case basis on management proposals seeking approval to re-price options.
Director Compensation
Case-by-case basis on stock-based plans for directors.
Employee Stock Purchase Plans
Case-by-case basis on employee stock purchase plans.
Amendments that Place a Maximum limit on Annual Grants or Amend
Administrative
Features
FOR plans that amend shareholder-approved plans to include administrative features or place maximum limit on annual grants that
any participant may receive to comply with the provisions of Section 162(m) of the Omnibus Budget Reconciliation Act (OBRA).
Amendments to Added Performance-Based Goals
FOR amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA.
B-19
Amendments to Increase Shares and Retain Tax Deductions under OBRA
Case-by-case basis on amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of
Section 162(m).
Approval of Cash or Cash & Stock Bonus Plans
FOR cash or cash & stock bonus plans to exempt compensation from taxes under the provisions of Section 162(m) of OBRA.
Limits on Director and Officer Compensation
FOR shareholder proposals requiring additional
disclosure of officer and director compensation.
Case-by-case basis for all other shareholder proposals seeking limits on officer and director
compensation.
Golden Parachutes and Tin Parachutes
FOR shareholder proposals to have golden and tin parachutes submitted for shareholder ratification.
Case-by-case basis on proposals to ratify or cancel golden or tin parachutes.
Employee Stock Ownership Plans (ESOPs)
FOR proposals that request shareholder approval in order to implement an ESOP or to increase authorized number of shares for existing ESOPs, except in
cases when the number of shares allocated to the ESOP is "excessive" (i.e., greater than five percent of outstanding shares).
401(k)
Employee Benefit Plans
FOR proposals to implement a 401(k) savings plan for employees.
State of Incorporation
State Takeover
Statutes
Case-by-case basis on proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control
share cash-out statutes, freeze-out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions).
Reincorporation Proposals
Case-by-case
basis on proposals to change the companys state of incorporation.
Business Combinations and Corporate Restructurings
Mergers and Acquisitions
Case-by-case
basis on mergers and acquisitions, considering projected financial and operating benefits, offer price, prospects of the combined companies, negotiation process, and changes in corporate governance.
Corporate Restructuring
Case-by-case
basis on corporate restructurings, including minority squeeze-outs, leveraged buyouts, spin-offs, liquidations, and asset sales.
Spin-offs
Case-by-case basis on spin-offs, considering tax and regulatory advantages, planned use of proceeds, market focus, and managerial
incentives.
B-20
Asset Sales
Case-by-case basis on asset sales, considering impact on the balance sheet and working capital, and value received.
Liquidations
Case-by-case basis on liquidations considering management's efforts to pursue
alternatives, appraisal value, and compensation for executives managing the liquidation.
Appraisal Rights
FOR providing shareholders with appraisal rights.
Mutual Fund Proxies
Election of Directors
Case-by-case basis for election of directors, considering board structure, director independence, director qualifications, compensation of directors
within the fund and the family of funds, and attendance at board and committee meetings.
WITHHOLD votes for directors who:
are interested directors and sit on key board committees (Audit, Nominating or Compensation committees)
are interested directors and the company does not have one or more of the following committees: Audit, Nominating or Compensation.
attend less than 75 percent of the board and committee meetings. Participation by phone is acceptable.
ignore a shareholder proposal that is approved by a majority of shares outstanding
ignore a shareholder proposal that is approved by a majority of the votes cast for two consecutive years
serve as Chairman but are not independent (e.g. serve as an officer of the funds advisor)
Converting Closed-end Fund to Open-end Fund
Case-by-case basis for conversion of closed-end fund to open-end fund, considering past performance as a closed-end fund, market in which the fund invests, measures taken by the board to address the
market discount, and past shareholder activism, board activity, and votes on related proposals.
Proxy Contests
Case-by-case basis on proxy contests, considering past performance, market in which fund invests, and measures taken by the board to address issues
raised, past shareholder activism, board activity, and votes on related proposals
.
Investment Advisory Agreements
Case-by-case basis on investment advisory agreements, considering proposed and current fee schedules, fund category and investment objective, performance
benchmarks, share price performance relative to that of peers; and magnitude of any fee increase.
New Classes or Series of Shares
FOR creating new classes or series of shares.
Preferred Stock Authorization
Case-by-case basis for authorization for or increase in
preferred shares, considering financing purpose and potential dilution for common shares.
1940 Act Policies
Case-by-case basis for 1940 Act policies, considering potential competitiveness, regulatory developments, current and potential returns, and current and
potential risk.
B-21
Changing a Fundamental Restriction to a Non-fundamental
Restriction
Case-by-case basis on
changing fundamental restriction to non-fundamental restriction, considering fund's target investments, reasons for change, and projected impact on portfolio.
Changing Fundamental Investment Objective to Non-fundamental
AGAINST proposals to change
the fund's fundamental investment objective to non-fundamental.
Name Rule Proposals
Case-by-case basis for name rule proposals, considering the following factors: political/economic changes in target market; bundling with quorum
requirements or with changes in asset allocation, and consolidation in the fund's target market.
Disposition of Assets, Termination,
Liquidation
Case-by-case basis for disposition of assets, termination or liquidation, considering strategies employed, company's past
performance, and terms of liquidation.
Charter Modification
Case-by-case basis for changes to the charter, considering degree of change, efficiencies that could result, state of incorporation, and regulatory standards and implications.
Change of Domicile
Case-by-case basis
for changes in state of domicile, considering state regulations of each state, required fundamental policies of each state; and the increased flexibility available.
Change in Sub-classification
Case-by-case basis for change in sub-classification,
considering potential competitiveness, current and potential returns, risk of concentration, and industry consolidation in the target industry.
Authorizing Board to Hire and Terminate Sub-advisors without
Shareholder Approval
AGAINST authorizing the board to hire and terminate sub-advisors
without shareholder approval
Distribution Agreements
Case-by-case basis for approving distribution agreements, considering fees charged to comparably sized funds with similar objectives, proposed distributor's reputation and past performance, and
competitiveness of fund in industry.
Master-Feeder Structure
FOR establishment of a master-feeder structure.
Changes to Charter
Case-by-case basis for changes to the charter, considering degree of change implied by the proposal, resulting efficiencies, state of incorporation, and
regulatory standards and implications.
Mergers
Case-by-case basis for proposed merger, considering resulting fee structure, performance of each fund, and continuity of management.
B-22
Shareholder Proposals
Independent Directors
FOR shareholder proposals asking that a three-quarters majority of
directors be independent.
FOR shareholder proposals asking that boards Audit, Compensation, and/or Nominating committees be composed
exclusively of independent directors.
For proposals asking that the Chairman be independent.
Establish Director Ownership Requirement
AGAINST establishing a director ownership requirement.
Reimbursement of Shareholder for Expenses Incurred
Case-by-case basis for reimbursing
proxy solicitation expenses.
FOR reimbursing proxy solicitation expenses in cases where Cornerstone is in favor of the dissidents.
Terminate the Investment Advisor
Case-by-case basis for terminating the investment advisor, considering funds performance and history of shareholder relations.
Social Issues
Energy and
Environment
AGAINST on proposals that request companies to follow the CERES Principles.
FOR reports that seek additional information, if it appears company has not adequately addressed shareholders' relevant environmental concerns.
Northern Ireland
AGAINST on
proposals related to the MacBride Principles.
FOR reports that seek additional information about progress being made toward eliminating
employment discrimination, if it appears company has not adequately addressed shareholder relevant concerns.
Military Business
AGAINST on defense issue proposals.
FOR reports that seek additional information on military related operations, if the company has been unresponsive to shareholder relevant requests.
Maquiladora Standards and International Operations Policies
AGAINST on proposals relating to the Maquiladora Standards and international operating policies.
FOR reports on international operating policy issues, if it appears company has not adequately addressed shareholder relevant concerns.
World Debt Crisis
AGAINST on proposals
dealing with Third World debt.
FOR reports on Third World debt issues, particularly when it appears company has not adequately addressed
shareholder relevant concerns.
Equal Employment Opportunity and Discrimination
AGAINST on proposals regarding equal employment opportunities and discrimination.
FOR reports that seek additional information about affirmative action efforts, if it appears company has been unresponsive to shareholder relevant requests.
B-23
Animal Rights
AGAINST on proposals that deal with animal rights.
Product Integrity and Marketing
AGAINST on ceasing production of socially questionable products.
FOR reports that seek additional information regarding product integrity and marketing issues, if it appears company has been unresponsive to shareholder relevant requests.
Human Resources Issues
AGAINST on
proposals regarding human resources issues.
FOR reports that seek additional information regarding human resources issues, if it appears
company has been unresponsive to shareholder relevant requests.
B-24
Doubleline Funds Trust
Doubleline Capital, LP
Doubleline Private Funds
PROXY VOTING, CORPORATE ACTIONS AND CLASS
ACTIONS
January 2011
I. Background
This Proxy Voting, Corporate Actions and Class Actions Policy (Policy) is adopted by DoubleLine Capital LP (DoubleLine, the
Adviser or the Firm) and DoubleLine Funds Trust (the Trust) on behalf of each of its series (the Funds) to provide a method of monitoring proxy voting and action taken in respect of corporate actions
and class actions, and reporting appropriately, to meet regulatory requirements and client needs. DoubleLine generally will exercise voting authority on behalf of its separate account clients (Clients) pursuant to contractual delegation
of such authority. Each private investment fund (such as, but not limited to, the DoubleLine Opportunistic Income Master Fund LP (and its related entities), each of which is a Private Fund and collectively Private Funds)
managed by DoubleLine also adopts this policy.
The Funds and the Private Funds rely upon DoubleLine to provide advice as to how and when to
vote proxies related to their portfolio holdings. The Funds have retained U.S. Bancorp Fund Services, LLC (USBFS) for various related administrative activities, including filing Form N-PX.
II. Issue
Rule 206(4)-6 under the Advisers Act requires every investment adviser who exercises voting authority with respect to client securities to adopt and implement written policies and procedures, reasonably
designed to ensure that the adviser votes proxies in the best interest of its clients. The procedures must address material conflicts that may arise in connection with proxy voting. The Rule further requires the adviser to provide a concise summary
of the advisers proxy voting policies and procedures and to provide copies of the complete proxy voting policy and procedures to clients upon request. Lastly, the Rule requires that the adviser disclose to clients how they may obtain
information on how the adviser voted their proxies.
III. Policy Proxies and
Corporate Actions
As a fixed income manager, it is not anticipated that DoubleLine will vote many (if any) proxies. However, because this
Proxy Policy also applies to voting and/or consent rights of securities held by DoubleLine Clients, DoubleLine will, on behalf of each Client (including the Funds or the Private Funds), with respect to debt securities, vote in circumstances such as,
but not limited to, plans of reorganization, and waivers and consents under applicable indentures. The Proxy Policy does not apply, however, to consent rights that primarily entail decisions to buy or sell investments, such as tender or exchange
offers, conversions, put options, redemption and Dutch auctions. Such decisions, while considered not to be covered within this Policy, shall be made with the Clients best interests in mind. To the extent that voting a proxy is desirable,
DoubleLine votes proxies in a manner that it believes is most likely to enhance the economic value of the underlying securities held in client accounts and considers each proposal on a case-by-case basis taking into consideration any relevant
contractual obligations as well as other relevant facts and circumstances at the time of the vote. DoubleLine will not respond to proxy solicitor requests unless DoubleLine determines that it is in the best interest of Clients to do so.
B-25
In certain limited circumstances, particularly in the area of structured finance, DoubleLine may, on behalf
of clients, enter into voting agreements or other contractual obligations that govern the voting of shares. In the event of a conflict between any such contractual requirements and the Guidelines (listed below), DoubleLine will vote in accordance
with its contractual obligations.
In addition, where the Adviser determines that there are unusual costs and/or difficulties associated with
voting a proxy, which more typically might be the case with respect to proxies of non-U.S. issuers, the Adviser reserves the right to not vote a proxy unless it determines that the potential benefits of voting the proxy exceed the expected cost to
the Client. Other factors that may influence DoubleLines determination not to vote a proxy for a debt or equity security include if: (1) the effect on the applicable Clients economic interests or the value of the portfolio holding
is insignificant in relation to the Clients portfolio; (2) the cost of voting the proxy outweighs the possible benefit to the applicable Client, including, without limitation, situations where a jurisdiction imposes share blocking
restrictions which may affect the ability of the portfolio managers to effect trades in the related security; or (3) DoubleLine otherwise has determined that it is consistent with its fiduciary obligations not to vote the proxy.
The Guidelines provide a basis for making decisions in the voting of proxies or corporate actions for Clients of DoubleLine. When voting proxies or
corporate actions, DoubleLines utmost concern is that all decisions be made solely in the interests of the Client and with the goal of maximizing the value of the Clients investments. With this goal in mind, the Guidelines cover various
categories of voting decisions and generally specify whether DoubleLine will vote (assuming it votes at all) for or against a particular type of proposal. DoubleLines underlying philosophy, however, is that its portfolio managers, who are
primarily responsible for evaluating the individual holdings of DoubleLines clients, are best able to determine how to further client interests and goals and are primarily responsible for determining how to vote proxies in accordance with this
policy. The portfolio managers may, in their discretion, take into account the recommendations of appropriate members of DoubleLines executive and senior management and, if desired, an outside service.
All proxies or corporate actions received shall be retained by the Chief Risk Officer or designate. Such records shall include whether DoubleLine voted
such proxy or corporate actions and, if so, how the proxy was voted. The records also shall be transcribed into a format such that any Clients overall proxy and corporate actions voting record can be provided upon request.
DoubleLine provides no assurance to former clients that applicable proxy or corporate actions information will be delivered to them.
IV. Proofs of Claim
DoubleLine does not complete proofs-of-claim on behalf of Clients for current or historical holdings; however, DoubleLine will assist clients with collecting information relevant to filing proofs-of-claim
when such information is in the possession of DoubleLine. DoubleLine does not undertake to complete or provide proofs-of-claim for securities that had been held any former client. DoubleLine will complete proofs-of-claim for the Funds and Private
Funds.
V. Class Actions Policy
As a fixed income manager, it is not anticipated that DoubleLine will receive regular or frequent notices regarding Class Action lawsuits related to
Client portfolio securities. In the event that Client securities become the subject of a Class Action lawsuit, the portfolio manager will assess the value to Clients in participating in such legal action. If the portfolio manager decides that
participating in the Class Action is in the Clients best interest, DoubleLine will submit appropriate documentation on Clients behalf, subject to contractual or other authority. DoubleLine may consider any relevant information in
determining
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whether participation in a Class Action lawsuit is in a Clients best interest, including the costs that would be incurred by the Client and the resources that would be expended in
participating in a Class Action, including in comparison to the Client pursuing other legal recourse against the issuer. DoubleLine also may choose to notify Clients (other than the Funds and the Private Funds) of the Class Action, which would allow
Clients to decide how or if to proceed.
DoubleLine provides no assurance to former clients that applicable class action information will be
delivered to them.
VI. Procedures for Lent Securities and Issuers in Share-blocking
Countries
At times, DoubleLine may not be able to vote proxies or take action in respect of corporate actions on behalf of Clients when
a Clients relevant securities are on loan in accordance with the Clients securities lending program that is controlled by a securities lending agent or custodian acting independently of DoubleLine. Notwithstanding this fact, in the event
that DoubleLine becomes aware of a proxy or corporate action voting matter that would enhance the economic value of the clients position and that position is lent out, DoubleLine will make reasonable efforts to inform the Client that
DoubleLine is not able to vote the proxy until or unless the Client recalls the lent security. When such situations relate to the Funds or the Private Funds, DoubleLine will take actions to recall the lent security.
In certain markets where share blocking occurs, shares must be frozen for trading purposes at the custodian or sub-custodian in order to vote. During the
time that shares are blocked, any pending trades will not settle. Depending on the market, this period can last from one day to three weeks. Any sales that must be executed will settle late and potentially be subject to interest charges or other
punitive fees. For this reason, in blocking markets, the Firm retains the right to vote or not, based on the determination of the Firms investment personnel as to whether voting would be in the Clients best interest.
VII. Procedures for Material Conflicts of Interest
Should material conflicts of interest arise as to a proxy or corporate action, the proxy or corporate action shall be brought to the attention of the Chief Compliance Officer or designate, who shall
involve other executive managers or legal counsel as may be deemed necessary by the Chief Compliance Officer to attempt to resolve such conflicts. Such individuals also shall determine the materiality of such conflict if the conflict cannot be
resolved. (An example of a specific conflict of interest that should be brought to the Chief Compliance Officer (or designate) is a situation where a proxy contest involves securities issued by a DoubleLine Client. When in doubt as to a potential
conflict, portfolio managers shall bring the proxy to the attention of the Chief Compliance Officer or designate.)
If, after appropriate
review, a material conflict is deemed to exist, DoubleLine will seek to resolve any such conflict in the best interest of the Client whose assets it is voting by pursuing any one of the following courses of action: (i) voting (or not voting) in
accordance with the voting guidelines or factors set forth in this Policy; (ii) convening a committee consisting of the Chief Compliance Officer and other non-investment executive officers of DoubleLine to assess and resolve the conflict;
(iii) voting in accordance with the recommendation of an independent third-party service provider chosen non-investment executive officers of DoubleLine; or (iv) voting (or not voting) in accordance with the instructions of such Client or
(v) not voting the Proxy (if consistent with DoubleLines fiduciary obligations).
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VIII. Procedures for Proxy Solicitation
In the event that any Employee of DoubleLine receives a request to reveal or disclose DoubleLines voting intention on a specific proxy event, then
the Employee must forward the solicitation request to the Chief Compliance Officer or designate. Such requests shall be reviewed with appropriate executive and senior management. Any written requests shall be retained with the proxy files maintained
by the Chief Operating Officer or designate.
IX. Additional Procedures for the Funds
A. Filing Form N-PX
Rule 30b1-4 under the Investment Company Act of 1940 requires mutual funds to file an annual record of proxies voted by a Fund on Form N-PX. Form N-PX must be filed each year no later than August 31
and must contain the Funds proxy voting record for the most recent twelve-month period ending June 30.
The Funds rely upon USBFS
to prepare and make their filings on Form N-PX. DoubleLine shall assist USBFS by providing information regarding any proxy votes made for the Funds within the most recent twelve-month period ending June 30. DoubleLine shall retain records of
any such votes with sufficient information to make accurate annual Form N-PX filings.
B. Providing Policies and Procedures
Mutual funds that invest in voting securities are required to describe in their statements of additional information (SAIs)
the policies and procedures that they use to determine how to vote proxies relating to securities held in their portfolios.
Funds are
required to disclose in shareholder reports that a description of the funds proxy voting policies and procedures is available (i) without charge, upon request, by calling a specified toll-free (or collect) telephone number; (ii) on
the funds website, if applicable; and (iii) on the Commissions website at http://www.sec.gov. USBFS shall ensure that such disclosures are included when preparing shareholder reports on the Funds behalf.
A Fund is required to send this description of the funds proxy voting policies and procedures within three business days of receipt of the request,
by first-class mail or other means designed to ensure equally prompt delivery. The Funds rely upon USBFS to provide this service.
The Funds
may describe file these policies and procedures as part of their registration statements on Form N-1A or chose to include these policies and procedures as part of their registration statement.
X. Recordkeeping
A. DoubleLine must maintain the documentation described in this policy for a period of not less than five (5) years from the end of the fiscal year during which the last entry was made on such
record, the first two (2) years at its principal place of business. DoubleLine will be responsible for the following procedures and for ensuring that the required documentation is retained.
B.
Client request to review proxy votes
:
Any request from a Client, whether written (including e-mail) or oral, received by any Employee of DoubleLine, must be retained.
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The Client Service group will record the identity of the client, the date of the request,
and the disposition (e.g., provided a written or oral response to clients request, referred to third party, not a proxy voting client, other dispositions, etc.).
In order to facilitate the management of proxy voting record keeping process, and to facilitate dissemination of such proxy voting records to clients, the Client Service group will distribute to any
Client requesting proxy voting information DoubleLines complete proxy voting record for the Client for the period requested. If deemed operationally more efficient, DoubleLine may choose to release its entire proxy voting record for the
requested period, with any information identifying a particular client redacted.
Furnish the information requested, free of
charge, to the Client within a reasonable time period (within 10 business days). Maintain a copy of the written record provided in response to Clients written (including e-mail) or oral request. A copy of the written response should be
attached and maintained with the Clients written request, if applicable, and maintained in an appropriate file.
Clients
can require the delivery of the proxy voting record relevant to their accounts for the five year period prior to their request.
C.
Proxy voting records:
Documents prepared or created by DoubleLine that were material to making a decision on how to vote, or that memorialized the basis for the decision.
Documentation or notes or any communications received from third parties, other industry analysts, third party service providers,
companys management discussions, etc. that were material in the basis for the decision.
XI. Disclosure
The CCO or designate will ensure that Part II of Form ADV is updated as necessary to reflect: (i) all material
changes to this policy; and (ii) regulatory requirements related to proxy voting disclosure.
Attachment A to
DoubleLine Capital LP and DoubleLine Funds Proxy Voting, Corporate Action and Class Action Policy
Guidelines
The proxy voting decisions set forth below refer to proposals by company management except for the categories of Shareholder Proposals and
Social Issue Proposals. The voting decisions in these latter two categories refer to proposals by outside shareholders.
Governance
For trustee nominees in uncontested elections
For management nominees in contested elections
For ratifying auditors, except against if the
previous auditor was dismissed because of a disagreement with the company or if the fees for non-audit services exceed 51% of total fees
For changing the company name
For approving other business
For adjourning the meeting
For technical amendments to the charter and/or bylaws
For approving financial statements
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Capital Structure
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For increasing authorized common stock
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For decreasing authorized common stock
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For amending authorized common stock
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For the issuance of common stock, except against if the issued common stock has superior voting rights
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For approving the issuance or exercise of stock warrants
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For authorizing preferred stock, except against if the board has unlimited rights to set the terms and conditions of the shares
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For increasing authorized preferred stock, except against if the board has unlimited rights to set the terms and conditions of the shares
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For decreasing authorized preferred stock
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For canceling a class or series of preferred stock
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For amending preferred stock
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For issuing or converting preferred stock, except against if the shares have voting rights superior to those of other shareholders
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For eliminating preemptive rights
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For creating or restoring preemptive rights
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Against authorizing dual or multiple classes of common stock
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For eliminating authorized dual or multiple classes of common stock
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For amending authorized dual or multiple classes of common stock
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For increasing authorized shares of one or more classes of dual or multiple classes of common stock, except against if it will allow the company to
issue additional shares with superior voting rights
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For a stock repurchase program
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For a reverse stock split, except against if the company does not intend to proportionally reduce the number of authorized shares
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Mergers and Restructuring
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For merging with or acquiring another company
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For restructuring the company
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For bankruptcy restructurings
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For reincorporating in a different state
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For a leveraged buyout of the company
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For spinning off certain company operations or divisions
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Against eliminating cumulative voting
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For adopting cumulative voting
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Board of Trustees
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For limiting the liability of trustees
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For setting the board size
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For allowing the trustees to fill vacancies on the board without shareholder approval
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Against giving the board the authority to set the size of the board as needed without shareholder approval
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For a proposal regarding the removal of trustees, except against if the proposal limits the removal of trustees to cases where there is legal cause
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For non-technical amendments to the companys certificate of incorporation, except against if an amendment would have the effect of reducing
shareholders rights
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For non-technical amendments to the companys bylaws, except against if an amendment would have the effect of reducing shareholders rights
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Anti-Takeover Provisions
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Against a classified board
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Against amending a classified board
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For repealing a classified board
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Against ratifying or adopting a shareholder rights plan (poison pill)
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Against redeeming a shareholder rights plan (poison pill)
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Against eliminating shareholders right to call a special meeting
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Against limiting shareholders right to call a special meeting
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For restoring shareholders right to call a special meeting
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Against eliminating shareholders right to act by written consent
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Against limiting shareholders right to act by written consent
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For restoring shareholders right to act by written consent
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Against establishing a supermajority vote provision to approve a merger or other business combination
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For amending a supermajority vote provision to approve a merger or other business combination, except against if the amendment would increase the vote
required to approve the transaction
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For eliminating a supermajority vote provision to approve a merger or other business combination
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Against adopting supermajority vote requirements (lock-ins) to change certain bylaw or charter provisions
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Against amending supermajority vote requirements (lock-ins) to change certain bylaw or charter provisions
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For eliminating supermajority vote requirements (lock-ins) to change certain bylaw or charter provisions
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Against expanding or clarifying the authority of the board of trustees to consider factors other than the interests of shareholders in assessing a
takeover bid
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Against establishing a fair price provision
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Fairpointe Capital LLC
Proxy Voting Summary
Fairpointe Capital LLC (Fairpointe), as a matter of policy and as a fiduciary to our clients, has responsibility for voting proxies for
portfolio securities consistent with the best economic interests of the clients. Our firm maintains written policies and procedures as to the handling, research, voting and reporting of proxy voting and makes appropriate disclosures about our
firms proxy policies and practices. Our policy and practice includes the responsibility to monitor corporate actions, receive and vote client proxies and disclose any potential conflicts of interest as well as making information available to
clients about the voting of proxies for their portfolio securities and maintaining relevant and required records. Clients may obtain information with respect to the voting of proxies for their securities by contacting their portfolio manager or the
firms compliance officer.
Fairpointe has retained Risk Metrics ISS and Broadridges ProxyEdge service to assist in the proxy
voting process. The Portfolio Managers review each proxy and will approve or override the recommendations of ISS according to the firms guidelines. The proxies are voted electronically with Broadridges ProxyEdge system. Complete records
of proxy votes are maintained electronically through ProxyEdge.
As a matter of firm policy the following guidelines are intended to assist in
the proxy voting process:
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(a)
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Fairpointe generally vote in favor of the following routine matters: name changes, election of directors, appointment of independent auditors, increase in the
outstanding common stock or other equity classes, date and place of annual meeting, ratification of directors actions on routine matters, indemnification of directors and/or officers; employee stock purchase or ownership plans within dilution
limits, annual elections and confidential voting.
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(b)
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Fairpointe generally votes in favor of mergers, acquisitions, restructurings, re-incorporations, changes in capitalization and employee and director compensation within
reason and when pay and performance are aligned. However, other financial issues may need additional consideration and may involve issues such as hostile takeovers and mergers.
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(c)
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Fairpointe will generally vote against any proposal that attempts to limit shareholder democracy, such as increased indemnification for directors and officers, certain
supermajority rights, classified boards, cumulative voting, authorization of new securities that are unduly dilutive and amending state of corporation.
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(d)
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Fairpointe intends to vote on a case-by-case basis on social issues.
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(e)
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A client may have their own set of proxy voting guidelines which may conflict with Fairpointe or another client. If such situation arises, it is our intention to comply
with client guidelines by voting proxies attributable to that client on a proportionate basis.
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Should a conflict of interest
arise, Fairpointe will resolve the conflict with the view of the best interest of the investors. If Fairpointe determines there is a material conflict of interest in connection with a proxy vote, Fairpointe will vote clients proxies according
to recommendations made by ISS, an independent third party.
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Harrison Street Securities, LLC
Proxy Voting
Policy
HSS, as a matter of policy
and as a fiduciary to our clients, has responsibility for voting proxies for portfolio securities consistent with the best economic interests of the clients. Our firm maintains written policies and procedures as to the handling, research, voting and
reporting of proxy voting and makes appropriate disclosures about our firms proxy policies and practices. Our policy and practice includes the responsibility to monitor corporate actions, receive and vote client proxies and disclose any
potential conflicts of interest as well as making information available to clients about the voting of proxies for their portfolio securities and maintaining relevant and required records.
Background
Proxy voting is an important right of shareholders and reasonable care
and diligence must be undertaken to ensure that such rights are properly and timely exercised.
Investment advisers registered with the SEC,
and which exercise voting authority with respect to client securities, are required by Rule 206(4)-6 of the Advisers Act to (a) adopt and implement written policies and procedures that are reasonably designed to ensure that client securities
are voted in the best interests of clients, which must include how an adviser addresses material conflicts that may arise between an adviser's interests and those of its clients; (b) to disclose to clients how they may obtain information from
the adviser with respect to the voting of proxies for their securities; (c) to describe to clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its clients; and (d) maintain certain records
relating to the adviser's proxy voting activities when the adviser does have proxy voting authority.
Responsibility
The Director of Operations has the responsibility for the implementation and monitoring of our proxy voting policy, practices, disclosures and record
keeping, including outlining our voting guidelines in our procedures.
Procedure
HSS has adopted procedures to implement the firms policy and reviews to monitor and ensure the firms policy is observed, implemented properly
and amended or updated, as appropriate, which include the following:
Voting Procedures
All employees will forward any proxy materials received on behalf of clients to the Director of Operations;
The Director of Operations will determine which client accounts hold the security to which the proxy relates;
Absent material conflicts, the Director of Operations will determine how HSS should vote the proxy in accordance with applicable
voting guidelines, complete the proxy and vote the proxy in a timely and appropriate manner.
Disclosure
HSS will provide conspicuously displayed information in its Disclosure Document summarizing this proxy voting policy and procedures, including a
statement that clients may request information regarding how HSS voted a clients proxies, and that clients may request a copy of these policies and procedures.
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The Director of Operations will also send a copy of this summary to all existing clients who have
previously received HSSs Disclosure Document; or the Director of Operations may send each client the amended Disclosure Document. Either mailing shall highlight the inclusion of information regarding proxy voting.
Client Requests for Information
All client requests for information regarding proxy votes, or policies and procedures, received by any employee should be forwarded to the Director
of Operations.
In response to any request the Director of Operations will prepare a written response to the client with the information
requested, and as applicable will include the name of the issuer, the proposal voted upon, and how HSS voted the clients proxy with respect to each proposal about which client inquired.
Voting Guidelines
In the absence of specific voting guidelines from the
client, HSS will vote proxies in the best interests of each particular client. HSSs policy is to vote all proxies from a specific issuer the same way for each client absent qualifying restrictions from a client. Clients are permitted to place
reasonable restrictions on HSSs voting authority in the same manner that they may place such restrictions on the actual selection of account securities.
HSS will generally vote in favor of routine corporate housekeeping proposals such as the election of directors and selection of auditors absent conflicts of interest raised by an auditors non-audit
services.
HSS will generally vote against proposals that cause board members to become entrenched or cause unequal voting rights.
In reviewing proposals, HSS will further consider the opinion of management and the effect on management, and the effect on shareholder
value and the issuers business practices.
Conflicts of Interest
HSS will identify any conflicts that exist between the interests of the adviser and the client by reviewing the relationship of HSS with the issuer of each security to determine if HSS or any of
its employees has any financial, business or personal relationship with the issuer.
If a material conflict of interest exists, the
Director of Operations will determine whether it is appropriate to disclose the conflict to the affected clients, to give the clients an opportunity to vote the proxies themselves, or to address the voting issue through other objective means such as
voting in a manner consistent with a predetermined voting policy or receiving an independent third party voting recommendation.
HSS
will maintain a record of the voting resolution of any conflict of interest.
Recordkeeping
The Director of Operations shall retain the following proxy records in accordance with the SECs five-year retention requirement.
These policies and procedures and any amendments;
Each proxy statement that HSS receives;
A record of each vote that HSS casts;
Any document HSS created that was material to making a decision how to vote proxies, or that memorializes that decision including
periodic reports to the Director of Operations or proxy committee, if applicable.
A copy of each written request from a client for
information on how HSS voted such clients proxies, and a copy of any written response.
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(NOTE: In the event an adviser retains the research, voting and/or recordkeeping services of an outside
proxy firm, the adviser must tailor its proxy policy and procedures to be consistent with the services received and the firm's actual proxy handling and voting processes.)
In addition, advisers should conduct initial due diligence reviews of any proxy service firm engaged as well as oversight on an on-going or periodic basis. These reviews of the proxy firms services
and practices should include conflicts of interest, consistency of voting with guidelines, fees and disclosures, as relevant, among other things. Advisers as a matter of best practices should document any initial and oversight reviews.
B-35
Herndon Capital Management
Proxy Voting Policy
Herndon Capital Management, LLC (HCM)
has a fiduciary obligation to, at all times, place the best interest of advisory clients (e.g. plan participants and beneficiaries) as the sole consideration when voting proxies of portfolio companies. HCM has retained Glass Lewis & Co.
(GL) for proxy voting services. GL will analyze the voting issues and carry out the actual voting process in accordance with its guidelines which have been agreed to by HCMs Proxy Committee. Proxy issues receive consideration based
on all relevant facts and circumstances.
Some accounts for which HCM is investment manager may wish to retain responsibility for proxy voting
or to assign that responsibility to a different investment manager. Such accounts must either provide HCM with a plan document that expressly precludes HCM from voting proxies or include in the contract that HCM will not vote their proxies. In the
absence of such documentation HCM has the legal responsibility and the obligation to vote for its accounts, and will do so through GL.
Proxy Committee
. HCM has established a Proxy Committee. The Proxy Committee considers its fiduciary responsibility to all clients when addressing
proxy issues. The Proxy Committee has reviewed and agreed with GLs proxy voting guidelines and instructed them to vote on HCMs behalf in accordance with those guidelines for HCMs clients. As GL amends their guidelines the Proxy
Committee will review and based on the agreement of the terms will provide GL voting instruction.
HCM provides GL with the list of accounts
and their holdings monthly to ensure that GL has record of the clients and their holdings for proxy purposes.
The Proxy Committee meets at
least annually to review any guideline changes from GL, should any exist.
In compliance with the U. S. Department of Labor, the Director of
Marketing and Operations maintains applicable records regarding proxy voting for accounts. The Director of Marketing and Operations can access a report online on any given day. Any voting decision that may require a deviation from the standard
policies will be deferred to the Proxy Committee from GL for further analysis and a final decision. In these rare situations, outside legal counsel may be sought for additional guidance, and reasons for such action will be noted in the
committees special meeting minutes.
ERISA Accounts.
It is HCMs policy to fully comply with ERISA requirements
regarding proxy voting. Some ERISA accounts for which HCM is investment manager may wish to retain responsibility for proxy voting or to assign that responsibility to a different investment manager. Such accounts must either provide HCM with a plan
document that expressly precludes HCM from voting proxies or include in the client agreement that HCM will not vote proxies on their behalf. In the absence of such documentation HCM has the legal responsibility and the obligation to vote for its
ERISA accounts.
Material Conflicts
. Regardless of material conflict, HCM through GL will, at all times, vote in the best interest of
the client.
Criteria.
GL on behalf of HCM votes proxies related to securities held by clients in a manner solely in the interest of
the client, which is in accordance with written GL guidelines. Proxy votes generally will be cast in favor of proposals that maintain or strengthen the shared interest of shareholders and management, increase shareholder value, maintain or increase
shareholder influence over the issuers board of directors and management, and maintain or increase the rights of shareholders; proxy votes generally will be cast against proposals having the opposite effect. In voting on each and every issue,
GL shall vote in the prudent and diligent fashion and only after a careful evaluation of the issue presented on the ballot.
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Checks and Balances.
Periodically, HCM will:
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1.
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Spot check to verify that proxies received have been voted in a manner consistent with the Proxy Voting Policies and Procedures and the guidelines (if any) issued by
the client, or in the case of an employee benefit plan, the plans trustee or other fiduciaries;
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2.
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Provide a proxy voting report to those clients that request it; in a manner consistent with the clients request, which may vary.
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HCM through GL will provide investment company clients with the information necessary to comply with filing requirements of Form N-PX on
a timely basis.
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Lake Partners, Inc.
Proxy Voting
November 29, 2004
As amended: March 6, 2009
Policy
Lake Partners, Inc. (the
Adviser) has adopted these policies and procedures in accordance with Rule 206(4)-6 under the Investment Advisers Act of 1940 (the Advisers Act). These policies and procedures are designed to ensure that the Adviser is
administering proxy voting matters in a manner consistent with the best interests of its clients and in accordance with its fiduciary duties under the Advisers Act and other applicable laws and regulations.
The Adviser considers the proxy vote to be an asset of the client portfolio holding the security to which the proxy relates and for which the Adviser has
voting authority. The Advisers authority to vote proxies is established by the investment management agreement (as amended from time to time) and/or the brokerage account application agreement with the client. In all circumstances, the Adviser
will comply with specific client directions to vote proxies, whether or not such client directions deviate from the Advisers policies and procedures.
The Adviser seeks to discharge its fiduciary duty to clients for whom it has proxy voting authority by monitoring corporate events and voting proxies solely in the best interests of its clients. The
Adviser evaluates all proxy proposals on an individual basis. Subject to its contractual obligations, there may be times when refraining from voting a proxy is in a clients best interest, such as when the Adviser determines that the cost of
voting the proxy exceeds the expected benefit to the client.
The Adviser typically is neither an activist in corporate governance nor an
automatic supporter of management on all proxy proposals. Generally, the Adviser will oppose management in order to further the independence of the board of directors, to preserve the rights of shareholders (such as by resisting attempts to entrench
management), and to oppose compensation packages that the Adviser deems to be excessive.
Proxy Committee: Proxy Voting Guidelines
The Adviser has established a Proxy Committee. The members of the Proxy Committee are appointed by the Board of Directors of the Adviser
from time to time and are listed on Attachment A. The Proxy Committee meets at least annually and as necessary to fulfill its responsibilities. A majority of the members of the Proxy Committee constitutes a quorum for the transaction of business.
The Controller acts as secretary of the Proxy Committee and maintains a record of Proxy Committee meetings and actions.
The Proxy Committee
is responsible for (i) the oversight and administration of proxy voting on behalf of the Advisers clients, including developing, authorizing, implementing and updating the Advisers proxy voting policies and procedures;
(ii) overseeing the proxy voting process; and (iii) engaging and overseeing any third party service provider as voting agent to receive proxy statements and/or to provide information, research or other services intended to facilitate the proxy
voting decisions made by the Adviser. The Proxy Committee typically reviews reports on
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the Advisers proxy voting activity at least annually and as necessary to fulfill its responsibilities.
The Proxy Committee reports to the Advisers Board of Directors at least annually regarding the administration of these policies and procedures and any changes deemed appropriate.
The Proxy Committee has developed a set of criteria for evaluating proxy issues. These criteria and general voting guidelines are set forth in the Advisers Proxy Voting Guidelines (the
Guidelines), a copy of which is attached hereto as Attachment B. The Proxy Committee may amend or supplement the Guidelines from time to time. All Guidelines are to be applied generally and not absolutely, such that the Advisers
evaluation of each proposal will be performed in the context of the Guidelines giving appropriate consideration to the circumstances of the company or investment company whose proxy is being voted.
Proxy Voting Procedure
The Adviser
establishes with respect to each client account whether the client retains the power to vote proxies or has delegated the responsibility for proxy voting to the Adviser. In every case where a client has delegated responsibility for voting proxies to
the Adviser, the Adviser tracks the occurrence of shareholder meetings, and obtains and evaluates the proxy information provided by the companies whose shares are being voted.
Prior to a proxy voting deadline, the appropriate analyst of the Adviser (who may be a member of the Proxy Committee) will make a determination as to how to vote each proxy proposal based on his or her
analysis of the proposal and the Guidelines. In evaluating a proxy proposal, an analyst may consider information from many sources, including management of the company or investment company, shareholder groups and independent proxy research
services. An analyst may determine that the cost of voting a proxy exceeds the expected benefit to the client. For example, calling back securities that have been loaned in order to exercise voting rights could cause a client to forego income that
otherwise would have been earned had the Adviser not sought to exercise voting rights with respect to those securities.
The Adviser is
responsible for submitting, or arranging the submission of, the proxy votes to the shareholders meetings in a timely manner.
The Adviser will
use echo voting for the investment company shares when required by law.
Conflicts of Interest
The Adviser may have a conflict of interest in voting a particular proxy. A conflict of interest could arise, for example, as a result of a business
relationship with a company or investment company, or a direct or indirect business interest in the matter being voted upon, or as a result of a personal relationship with corporate directors or candidates for directorships. Whether a relationship
creates a material conflict of interest will depend upon the facts and circumstances. Whenever an analyst determines that it is in a clients best interest to vote on a particular proposal in a manner other than in accordance with the
Guidelines (or the Guidelines do not address how to vote on the proposal), the analyst shall present the matter to the Proxy Committee, which shall be responsible for evaluating information relating to conflicts of interest in connection with voting
the client proxy.
A.
Identifying Conflicts of Interest
For purposes of identifying conflicts under these procedures, the Proxy Committee will rely on
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publicly available information about a company or investment company and its affiliates, information about
the company or investment company and its affiliates that is generally known by the Advisers employees, and other information actually known by a member of the Proxy Committee.
The Proxy Voting Committee may determine that the Adviser has a conflict of interest as a result of the following:
1.
Significant Business Relationships
The Proxy Committee will consider whether the matter involves an issuer or proponent with which the Adviser has a significant business relationship. The
Adviser has significant business relationships with certain entities, such as other investment advisory firms, vendors, clients and broker-dealers. For this purpose, a significant business relationship is one that might create an
incentive for the Adviser to vote in favor of management.
2.
Significant Personal or Family Relationships
The
Proxy Committee will consider whether the matter involves an issuer, proponent or individual with which an employee of the Adviser who is involved in the proxy voting process may have a significant personal or family relationship. For this purpose,
a significant personal or family relationship is one that would be reasonably likely to influence how the Adviser votes the proxy. Employees of the Adviser who are involved in the proxy voting process (
e.g
., analysts, portfolio
managers, Proxy Committee members, senior management, as applicable) are required to disclose to the Proxy Committee any significant personal or family relationship they may have with the issuer, proponent or individual involved in the matter.
3.
Contact with Proxy Committee Members
If an employee of the Adviser not involved in the proxy voting process
contacts any Proxy Committee member for the purpose of influencing how a proxy is to be voted, the member will immediately contact the Advisers Chief Compliance Officer who will determine: (i) whether to treat the proxy in question as one
involving a material conflict of interest; and (ii) if so, whether the member of the Proxy Committee who was contacted should recuse himself or herself from all further matters regarding the proxy.
B.
Determining Whether a Conflict is Material
In the event that the Proxy Committee determines that the Adviser has a conflict of interest with respect to a proxy proposal, the Proxy Committee shall also determine whether the conflict is
material to that proposal. The Proxy Committee may determine on a case-by-case basis that a particular proposal does not involve a material conflict of interest. To make this determination, the Proxy Committee must conclude that the
proposal is not directly related to the Advisers conflict with the issuer. If the Proxy Committee determines that a conflict is not material, then the Adviser may vote the proxy in accordance with the recommendation of the analyst.
C.
Voting Proxies Involving a Material Conflict
In the event that the Proxy Committee determines that the Adviser has a material conflict of interest with respect to a proxy proposal, the proposal shall be voted in accordance with Lake Partners
proxy voting guidelines. However, if a material conflict of interest is identified and the guidelines do not address how to vote on the proposal, the Proxy Committee may: (i) contact an independent third party to recommend how to vote on the
proposal and vote in accordance with
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the recommendation of such third party (or have the third party vote such proxy); or (ii) fully disclose
the nature of the conflict to the client and obtain the clients consent as to how Lake Partners shall vote on the proposal (or otherwise obtain instructions from the client as to how the proxy should be voted).
The Adviser may
not
address a material conflict of interest by abstaining from voting, unless the Proxy Committee has determined that abstaining
from voting on the proposal is in the best interests of clients.1
The Proxy Committee shall document the manner in which proxies involving a
material conflict of interest have been voted as well as the basis for any determination that the Adviser does not have a material conflict of interest in respect of a particular matter. Such documentation shall be maintained with the records of the
Proxy Committee.
5.
DISCLOSURE
In accordance with the Advisers Act, the Adviser reports upon request to its clients regarding the manner in which their proxies are voted. It is the Advisers general policy not to disclose to any
issuer or third party how it has voted client proxies, except as otherwise required by law.
6.
RECORD RETENTION
The Adviser maintains the books and records required by Rule 204-2(c)(2) under the Advisers Act in the manner and for the periods required.
Attachments
Attachment A Members of the Proxy Committee
Attachment B Lake Partners, Inc. Proxy Voting Guidelines
1
The existence of a material conflict of interest will not affect an
analysts determination that it is in the best interests of clients not to vote a proxy.
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Attachment A
Members of the Proxy Committee
Members of the Proxy Committee
Ronald A. Lake, Co-Chairman, President, Director
Frederick C. Lake, Co-Chairman, Secretary, Treasurer
Maurice A. Cabral, Controller, Chief Compliance Officer
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Attachment B
Lake Partners, Inc.
Proxy Voting Guidelines
One of the primary factors Lake Partners, Inc. (the Adviser) considers when determining the desirability of investing in a [particular
company] or investment company is the quality and depth of its management. Accordingly, the Adviser believes that the recommendation of management on any issue should be given substantial weight in determining how proxy issues are resolved. As a
matter of practice, the Adviser will vote on most issues presented in a [company] or investment company proxy statement in accordance with the position of the companys management, unless the Adviser determines that voting in accordance with
managements recommendation would adversely affect the investment merits of owning the security. However, the Adviser will consider each issue on its own merits, and will not support the position of the companys management in any
situation where, in the Adviser judgment, it would not be in the best interests of the client to do so.
The Adviser generally
characterizes proxy voting issues into three Levels (I, II and III). The Level of proposal will determine the depth of research required by the analyst when deciding how to vote each proxy. Level I matters normally are voted based on the
recommendation of the issuers management. Matters that could meaningfully impact the position of existing shareholders (Levels II and III) are given special consideration and voted in a manner that is believed to support the interests of
shareholders. Whenever an analyst determines that it is in a clients best interest to vote on a particular proposal in a manner other than in accordance with the Guidelines (or the Guidelines do not address how to vote on the proposal), the
analyst shall present the matter to the Proxy Committee, which shall be responsible for evaluating information relating to conflicts of interest in connection with voting the client proxy.
Level I proposals are
those which do not propose to change the structure, bylaws, or operations of a company or investment company to the detriment of the shareholders. Given the routine nature of these proposals, proxies will nearly always be voted with management.
However, the appropriate analyst of the Adviser will research the issue before making a conclusion as to how a vote would be in the best interest of the client.
- Approval of auditors
- Election of directors and officers of the corporation
- Indemnification provisions for directors
- Liability limitations of directors
- Name changes
- Declaring stock splits
- Elimination of preemptive rights
- Incentive compensation plans
- Changing the date and/or the location of the annual meetings
- Minor amendments to the articles of incorporation
- Employment contracts
between the company and its executives and remuneration for directors
- Automatic dividend reinvestment plans
- Retirement plans, pensions plans and profit sharing plans, creation of and amendments thereto
B-43
Issues in this
category are more likely to affect the structure and operations of a company or investment company and, therefore, will have a greater impact on the value of a clients investment. The applicable analyst on the security will review each issue
in this category on a case-by-case basis and perform diligent research to make a decision based on the best interest of the client. In those instances where the decision is not clear cut, the analyst will consult with the Proxy Committee and solicit
their input. As stated previously, voting decisions will be made based on the perceived best interest of the clients. Level II proposals include:
- Mergers and acquisitions
- Restructuring
- Re-incorporation or formation
- Changes in capitalization
- Increase or decrease in number of directors
- Increase or decrease in preferred stock
- Increase or decrease in common stock
- Material changes in terms for fees or
expenses of an investment company
- Material changes in investment policies or guidelines of an investment company
- Stock option plans or other compensation plans
- Social issues
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Level III (Corporate Governance) Proposals
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The Adviser generally will vote against any management proposal that clearly has the effect of restricting the ability of shareholders to realize the full potential value of their investment. In addition
to the steps taken to render a decision in the above-mentioned scenarios (Level I and Level II proposals), the analyst may find it necessary to contact company or investment company management to discuss any such proposal to gain a more complete
understanding before casting a vote. Proposals in Level III may include:
- Poison pills
- Golden parachutes
- Greenmail
- Supermajority voting
- Board classification without cumulative voting
- Confidential voting
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Lee Munder Capital Group
Proxy Voting Policy and Procedures
At Lee Munder Capital Group, LLC
(LMCG) we recognize that many decisions regarding proxy voting may affect the value of a clients account and therefore should be based on careful consideration. The following proxy voting policy sets forth our general principles
and our process for voting on securities held in client accounts where LMCG has discretion to vote proxies. Our authority to vote the proxies of our clients is established by our advisory contracts or comparable documents. In addition to SEC
requirements governing advisers, our proxy voting policies reflect the long-standing fiduciary standards and responsibilities for ERISA accounts as well.
General Principles
In order to set a framework within which proxy questions should be
considered and voted, the following general principles should be applied:
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As a fiduciary under ERISA or otherwise, the discretion to vote proxies for clients account should be exercised keeping in mind a
fiduciarys duty to use its best efforts to preserve or enhance the value of the clients account. LMCG should vote on proxy questions with the goal of fostering the interests of the client or the participants in the case of an ERISA
account.
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Proxy questions should be considered within the individual circumstances of the issuer. It is possible that individual circumstances might mean that a
given proxy question could be voted differently than what is generally done in other cases.
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It is LMCGs general policy that when we are given authority to vote proxies for a clients account, we must be authorized to vote all
proxies for the account in our discretion. We do not generally accept partial voting authority or instructions from clients on how to vote on specific issues. Certain clients may direct us to vote proxies in accordance with a specific set of
guidelines or recommendations appropriate to their circumstances in which case we will not have voting discretion but will vote in accordance with a clients direction. Our clients may wish to retain proxy voting authority and vote their own
proxies if necessary in order to satisfy their individual social, environmental or other goals.
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LMCG maintains a set
of proxy voting guidelines that describe in greater detail how we will generally vote specific issues for our clients. While it is not an exhaustive list, it is intended to serve as the foundation on which we make most of our proxy voting decisions.
These guidelines are available upon request. LMCG will from time to time review our proxy voting policy and guidelines and may adopt changes from time to time. Clients may contact their Client Service Officer or the Compliance Office by calling
(617) 380-5600 or via e-mail at
compliance@leemunder.com
for a copy of our current guidelines or to obtain a record of how we voted the proxies for their account.
B-45
Process
LMCG is responsible for fair and accurate proxy voting and for ensuring that proxies are voted in a timely manner. At LMCG, we have a dedicated Proxy Voting Administrator in the Operations Department who
oversees the proxy voting process. LMCG has also hired a third-party proxy voting vendor (currently
RiskMetrics Group
) to assist with monitoring and completing the proxy voting process. LMCG works with
RiskMetrics
to ascertain that
proxies are received and voted on a timely basis, as well as maintaining all of the proxy voting records with respect to our clients holdings. Each day we send a list of portfolio holdings to
RiskMetrics
and they notify us of
shareholder meetings and provide us with an electronic platform on which to vote proxies.
RiskMetrics
also provides us with recommendations for voting, based on criteria and guidelines LMCG has established and approved. Portfolio Managers
also provide input when appropriate.
Limitations
LMCG may abstain from voting a client proxy if, in its opinion, the value obtained by voting the proxy is outweighed by the unique cost, operational or trading constraints to a client account or
situation. In accordance with fiduciary duties, LMCG weighs the costs and benefits of voting certain proxy proposals and makes an informed decision with respect to whether voting a given proxy proposal is prudent.
Some of LMCGs clients engage in securities lending programs under which shares of an issuer could be on loan while that issuer is conducting a
proxy solicitation. As part of the securities lending program, if the securities are on loan at the record date, the proxy for that security generally cannot be voted. Because LMCG is generally not aware of when a security may be on loan, there may
no be an opportunity to recall the security prior to record date. Therefore, in most cases, those shares will not be voted.
Conflicts of
Interest
LMCG recognizes that the potential for conflicts of interest could arise in situations where we have discretion to vote client
proxies and where LMCG has material business relationships or material personal or family relationships. In the event that LMCG holds a security issued by a client in clients portfolios and we are required to vote that proxy, this situation
may also represent a conflict of interest. To address these potential conflicts we have established a Proxy Voting Committee (Committee). The Committee consists of the Chief Compliance Officer, Head of Operations and relevant Portfolio
Manager (or their designee). The Committee will use reasonable efforts to determine whether a potential conflict may exist, including maintaining a list of clients or securities that may pose a potential conflict. The list will be shared with the
Proxy Voting Administrator, proxy votes for the securities on the list will be flagged in the proxy voting system, and a Committee meeting will be scheduled when appropriate by the Operations Group. The Committee will meet to decide how to vote the
proxy of any security with respect to which LMCG has identified a potential conflict. The Committee will consider recommendations and make a decision on how to vote the proxy and also document the Committees rationale for its decision.
Lee Munder Capital Group, LLC is an indirect majority owned subsidiary of City National Corporation (CYN), a public company. It is
LMCGs general policy not to acquire or hold CYN stock on behalf of our clients. However, in the event that a client were to hold CYN in a portfolio which we manage, and LMCG was responsible for voting CYN on behalf of the client, the Proxy
Voting Committee would decide on how to vote.
Recordkeeping
LMCG shall maintain proxy voting records pursuant to Section 206-2 of the Advisers Act. Such records will include a copy of policies and procedures, proxy statements, a record of each vote that is
cast, any document created that was material to making a decision on how to vote, as well as a copy of client requests for proxy voting information and responses to such requests. LMCGs Compliance Office also relies on
RiskMetrics
to
provide certain proxy voting details promptly upon request in order to respond to certain requests for information or records.
B-46
Montag & Caldwell, Inc.
Proxy Voting Policy
If directed by Client, decisions on voting of proxies will be made by Montag & Caldwell, LLC (M&C) in accordance with these guidelines (as amended from time to time). M&C will
consider proxies as a Client asset and will vote consistently across all Client portfolios for which it has discretionary voting authority in the manner believed is most likely to enhance shareholder value. Where practical, M&C may consider
requests to vote proxies in accordance with Client specific guidelines.
If M&C is authorized to make decisions on voting
of proxies, we will have no obligation to furnish Client any proxies, notices of shareholder meetings, annual reports or other literature customarily mailed to shareholders.
Once discretionary voting authority has been delegated to M&C, Client may not at a later date direct how to vote the proxies. Clients who wish to adhere to a proprietary set of voting guidelines
should exercise their right to reserve voting authority rather than delegating this responsibility to M&C.
Should the situation arise
where M&C is an investment adviser to a company whose proxy we are authorized to vote or any other potential conflict of interest is perceived and the item falls outside the issues explicitly addressed by these guidelines, the matter will be
reviewed by the entire Proxy Committee. If an item is explicitly addressed by these guidelines it will be voted accordingly. If an item falls outside the issues explicitly addressed by these guidelines and we would vote against management, no
further review is needed. If further review is needed the Proxy Committee will first determine if the conflict is material. If it is material, the Proxy Committee will determine the steps needed to resolve the conflict before the proxy is voted.
It is against M&Cs policy for employees to serve on the board of directors of a company whose stock could be purchased for
M&Cs advisory clients.
The following guidelines establish our position on many common issues addressed in proxy solicitations and
represent how we will generally vote such issues; however, all proxy proposals will be reviewed by an investment professional to determine if shareholder interests warrant any deviation from these guidelines or if a proposal addresses an issue not
covered in the guidelines.
1. Auditors
M&C will generally vote to ratify auditors, unless:
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An auditor has a financial interest in or association with the company and is thus not independent,
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There is evidence the independent auditor has issued an inaccurate or misleading opinion,
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Fees for non-audit services are excessive.
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2. Board of Directors
M&C will generally vote for routine election or re-election of
directors.
M&C will generally vote for proposals to repeal classified boards, and to elect all directors annually.
M&C will generally vote against proposals to classify the board.
M&C will generally vote against proposals to allow cumulative voting.
B-47
3. Proxy Contests
M&C will review contested director elections on a case-by-case basis.
4. Takeover
Defenses
M&C will generally vote for shareholder proposals requesting that a company submit its poison pill to a shareholder vote or
redeem it unless the company has:
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A shareholder approved poison pill in place,
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An acceptable policy covering the future adoption of a poison pill.
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M&C will generally vote for shareholder proposals calling for a poison pill to be put to a vote within a time period of less than one year after adoption.
M&C will review on a case-by-case basis management proposals on poison pill ratification.
M&C will generally vote against proposals to require a supermajority shareholder vote.
M&C will generally vote for proposals to lower supermajority vote requirements.
5. Mergers and Corporate Restructurings
M&C will review mergers, acquisitions, and
restructurings on a case-by-case basis.
6. State of Incorporation
M&C will review proposals to change a companys state of incorporation on a case-by-case basis.
7. Capital Structure
M&C will generally vote to increase the number of shares of
common stock authorized, unless:
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The explicit purpose of the increase is to implement a non-shareholder approved rights plan (poison pill).
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M&C will generally vote against proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend
distribution, and other rights (blank check preferred stock).
M&C will review other proposals regarding preferred stock on a
case-by-case basis.
8. Compensation Issues
M&C will review the following issues on a case-by-case basis:
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Equity Compensation Plans
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Employee Stock Purchase Plans Qualified Plans
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Employee Stock Purchase Plans Non-Qualified Plans
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9. Corporate Responsibility
Shareholders often submit proposals to change lawful corporate activities in order to meet the goals of certain groups or private interests that they represent.
M&C will support management in instances where we feel acceptable efforts are made on behalf of special interests of social conscience. The burden of
corporate responsibility rests with management. We will generally vote
AGAINST
shareholder proposals regarding the following areas:
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Drug Pricing and Re-importation
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Genetically Modified Foods
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Arctic National Wildlife Refuge
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Concentrated Area Feeding Operations
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Global Warming and Kyoto Protocol Compliance
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Political Contributions
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Outsourcing/Off-shoring
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Country-specific Human Rights Reports
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Placing arbitrary restrictions on environmental practices
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10. Administrative Issues
Proxy voting guidelines will be reviewed annually and approved
by the Investment Policy Committee.
If a Clients shares are on loan at the time of voting, it is not M&Cs policy to request
that the custodian recall the shares on loan.
M&C will maintain a record of proxy voting guidelines and the annual updates
electronically.
M&C has established a Proxy Committee that consists of at least three members of the Investment Policy Committee and
includes at least one research analyst and two portfolio managers.
Proxy voting decisions will be made by at least one member of the Proxy
Committee within the framework established by these guidelines that are designed to vote in the best interests of all Clients.
M&C will
maintain a record of any document created by M&C or procured from an outside party that was material to making a decision how to vote proxies on behalf of a Client or that memorializes the basis of that decision.
M&C will maintain records detailing receipt of proxies, number of shares voted, date voted and how each issue was voted. These records will be
available upon request to those Clients for whom we have proxy voting responsibility.
B-49
M&C will maintain records of all written Client requests for information as to how M&C voted proxies
on their behalf and of M&Cs written response to the Clients written or verbal requests.
The proxy voting process will be
monitored for accuracy. A voting history report is generated by the Supervisor of Information Processing on a monthly basis. This report is provided to the Chief Compliance Officer to verify against ballot copies.
The Supervisor of Information Processing will provide the Chief Compliance Officer with a quarterly statement that all ballots were received or
reasonable steps, under the circumstances, have been taken to obtain the ballots.
Reviewed March 24, 2011
B-50
River Road Asset Management, LLC
Proxy Voting Policies and Procedures
P
ROXY
V
OTING
Policy
River Road exercises discretionary voting authority over proxies issued on securities held in client accounts unless the client has explicitly reserved
voting authority. Our policy and practice includes the responsibility to receive and vote client proxies, mitigate any potential conflicts of interest, make information available to clients about the voting of proxies for their portfolio securities,
and maintain required records. River Road, as a matter of policy and as a fiduciary to our clients, votes proxies for client securities consistent with the best economic interests of the clients. River Road engages a third-party voting agent, Glass
Lewis & Co. (Glass Lewis), to help discharge its duties.
Background
Registered investment advisers that exercise voting authority with respect to client securities are required by Rule 206(4)-6 of the Advisers Act to do
the following:
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Adopt and implement written policies and procedures that are reasonably designed to ensure that client securities are voted in the best interests of clients, which must
include how an adviser addresses material conflicts that may arise between an advisers interests and those of its clients;
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Disclose to clients how they may obtain information from the adviser with respect to the voting of proxies for their securities; and
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Describe to clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its clients.
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Advisers also must maintain certain records relating to proxy voting activities (See Books and Records).
Responsibility
The Proxy Voting
Policy Committee, the Proxy Voting Procedure Committee, and the Compliance Department are responsible for implementing and monitoring this policy.
Procedure
River Road has adopted the following procedures to implement and monitor
the firms policy:
Proxy Committees
:
River Road established two proxy committees to oversee proxy voting activities.
The
Proxy Voting Policy Committee
is responsible for establishing voting guidelines and reviewing special issues. The Committee consists at a
minimum of the Chief Investment Officer, the Director of Research, the Chief Compliance Officer, and a Compliance Department proxy designee (Proxy Designee). The Committee meets annually to review Glass Lewis proxy voting
guidelines. The Committee must determine and document where River Road disagrees with the agents guidelines, if at all, and determine necessary action, if any. The Committee is responsible for adopting the final voting
B-51
guidelines. The minutes from the meeting will be distributed to the investment team (as necessary) for their reference as they make voting decisions throughout the year. Meetings may be called by
any Committee member throughout the year, based on issues that arise.
The
Proxy Voting Procedure Committee
is responsible for
operational and procedural aspects of the proxy voting process. The Committee consists at a minimum of the Chief Compliance Officer and the Proxy Designee. The Committee meets annually to review operational or procedural issues related to
the proxy process. Meetings may be called by any Committee member throughout the year, based on issues that arise.
Voting Agent
: Glass
Lewis performs the following services:
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provides analysis of proxy proposals,
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tracks and receives proxies for which River Road clients are entitled to vote,
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votes the proxies as directed by River Road, and
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compiles and provides client voting records.
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Voting Process
:
The Proxy Designee
coordinates the proxy voting process. The steps for reviewing and submitting votes are as follows:
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The Proxy Designee reviews the Glass Lewis web-based system on at least a weekly basis for upcoming meetings.
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The Proxy Designee reconciles the number of ballots reflected by Glass Lewis to River Roads records and reports any discrepancies to Glass Lewis for follow up.
River Road makes its best efforts to ensure that all shares are voted. However, issues with receiving ballots from client custodians may prevent voting for a particular account. River Road continues to follow up with Glass Lewis and the custodian
where necessary until issues are resolved.
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If the policy recommendation and the management recommendation for all votes on a ballot are the same, the Proxy Designee will vote accordingly.
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If the policy recommendation and management recommendation are different for a particular vote, the Proxy Designee distributes Glass Lewis proxy paper for the
upcoming meeting to the appropriate member of the investment team. The investment team member is responsible for reviewing the proxy paper and making the appropriate vote decision based on this policy and the Proxy Voting Policy meeting minutes.
Where the investment team member decides to vote differently from the policy recommendation, they must document the investment rationale. The Proxy Designee then obtains prior approval from the Chief Compliance Officer, the Compliance Manager, or
their designee before submitting the vote decision.
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Client Direction
: River Roads policy is to vote all
proxies the same way for each client. Clients are permitted to place reasonable restrictions on River Roads voting authority by providing their own voting guidelines. If clients provide River Road with their voting guidelines and
River Road accepts them, River Road will instruct the voting agent to vote proxies pursuant to the client guidelines.
Conflicts of
Interest
: River Road has eliminated most conflicts of interest by using an independent third party (Glass Lewis) that votes pursuant to the guidelines adopted by the Proxy Voting Policy Committee or in accordance with River Roads direction
after following this process. In cases where River Road believes there may be an actual or perceived conflict of interest, River Road requires additional steps that may include the following:
B-52
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documenting the potential conflict of interest,
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obtaining the prior approval of the Chief Investment Officer and CCO,
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obtaining Committee review or approval,
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deferring to the voting recommendation of a third party,
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voting pursuant to client direction (following disclosure of the conflict),
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abstaining from voting,
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voting reflectively (in the same proportion and manner as other shareholders), or
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taking such other action as necessary to protect the interests of clients.
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River Road will maintain a record of the voting resolution of any conflict of interest.
Securities Lending
: Where clients have implemented securities lending programs, River Road will be unable to vote proxies for securities on loan
unless it issues instructions to the client custodian to callback the securities prior to record date. River Road typically does not instruct custodians to callback securities.
Disclosure and Client Requests for Information
: River Road discloses a summary of this policy and information on how clients may obtain a copy of this policy and records of how River Road
voted securities for their accounts in Form ADV Part 2A. Employees that receive a client request for information regarding proxy votes or policies and procedures must forward such request to the Compliance Department where necessary. The Compliance
Department is responsible for gathering the relevant information.
Testing
: The Compliance Department typically performs a monthly
review of reconciliations and proxy voting records to ensure the process is being followed.
B-53
Silvercrest Asset Management Group LLC
Proxy Voting
Policies And Procedures
Silvercrest may be responsible for voting on shareholder
proxies in connection with the securities held by its clients. Silvercrest will do so only in accordance with these policies and procedures, in the best interests of our clients, and/or as instructed by a specific client.
All capitalized terms used herein shall have the meaning set forth in the Firms Code of Conduct and Ethics, unless otherwise defined herein.
A. General.
In voting proxies,
and determining whether to vote proxies, Silvercrest is guided by general fiduciary principles. The firms goal is to act prudently, and solely in the best interest of the beneficial owners of the accounts it manages. Silvercrest attempts to
consider all aspects of its vote that could affect the value of the investment and will vote proxies in the manner that it believes will be consistent with efforts to maximize shareholder values. Silvercrest does not necessarily have an obligation
to vote every proxy; for example, Silvercrest may forego voting proxies if the client account that held the position no longer holds the position at the time of the vote, or the cost of voting (such as in the case of a vote regarding a foreign
issuer that requires being physically present to vote) outweighs the anticipated benefit to the clients account.
B. Voting Guidelines.
Silvercrest generally divides proxies into two categories in determining how to vote: management proposals and shareholder proposals.
Attached as Exhibit A hereto are guidelines to be applied in determining how to vote in each case. These guidelines are not strict, and each Silvercrest vote will depend on the facts and circumstances of each proposal, on a case-by-case basis.
Depending on the facts of a specific vote, Silvercrest may deviate from the guidelines entirely where it deems it necessary in the best interests of our clients, and/or as instructed by a specific client.
C. Conflicts of Interest.
The firms
policies and procedures regarding conflicts of interest, including those contained in the firms Code of Conduct and Ethics, govern those conflicts that arise in the context of proxy voting. Because Silvercrests business does not include
proprietary trading, investment banking or short selling, few conflicts are likely to arise in the context of proxy voting. However, where they do, the following procedures should be followed.
All conflicts of interest must be brought to the attention of the Chief Compliance Officer for resolution. The Chief Compliance Officer will work with
appropriate Silvercrest personnel to determine whether a conflict of interest is material. A conflict of interest will be considered material to the extent that it is determined that such conflict has the potential to influence Silvercrests
decision-making in voting the proxy. A conflict of interest shall be deemed material in the event that the issuer or a member of management of the issuer that is the subject of the proxy has a client relationship with Silvercrest. All other
materiality determinations will be based on an assessment of the particular facts and circumstances. The Chief Compliance Officer shall maintain a written record of all materiality determinations.
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If it is determined that a conflict of interest is not material, Silvercrest may vote proxies
notwithstanding the existence of the conflict. If it is determined that a conflict of interest is material, the Chief Compliance Officer will work with appropriate Silvercrest personnel to agree upon a method to resolve such conflict of interest
before voting proxies affected by the conflict of interest. Such methods may include:
disclosing the conflict to clients and obtaining
their consent before voting;
suggesting to clients that they engage another party to vote the proxy on their behalf;
engaging a third party to recommend a vote with respect to the proxy based on application of the policies set forth herein; or
such other action as is deemed appropriate under the circumstances given the nature of the conflict.
D. ProxyEdge.
Silvercrest has contracted with
Broadridge (formerly ADP) for the use of its ProxyEdge service, which is the automated solution for proxy voting, and retention of records related thereto.
Upon opening an account for a client, Silvercrest notifies the custodian(s) of the clients assets and instructs the custodian(s) to direct all proxy notices to Broadridge for Silvercrest.
Silvercrest then accesses ProxyEdge to review and vote proxies through the system. A historic record of the firms votes is available through ProxyEdge.
E. Notice to Clients.
Silvercrest delivers to clients notice of its proxy voting procedures in a
form and format attached hereto as Exhibit B. This notice is sent upon opening an account and clients are also notified annually that they may obtain a copy of the notice upon request.
Associated Persons are encouraged to contact the Chief Compliance Officer with any questions regarding the Firms Policies and Procedures Regarding Proxy Voting.
Exhibit A
Proxy
Voting General Guidelines
Management Proposals
I. Vote in support of management on the following ballot items, which are fairly common management-sponsored initiatives:
Elections of directors who do not appear to have been remiss in the performance of their oversight responsibilities
Approval of auditors
Directors and auditors compensation
Directors liability and indemnification
Discharge of board members and auditors
Financial statements and allocation of
income
Dividend payouts that are greater than or equal to country and industry standards
Authorization of share repurchase programs
General updating of or corrective amendments to charter
Change in Corporation Name
Elimination of cumulative voting
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II. Vote in support of management on the following items, which have potentially substantial financial
or best-interest impact:
Capitalization changes which eliminate other classes of stock and voting rights
Changes in capitalization authorization for stock splits, stock dividends, and other specifiedneeds which are no more than 50% of the existing
authorization for U.S. companies and no more than 100% of existing authorization for non-U.S. companies
Elimination of pre-emptive
rights for share issuance of less than a given percentage (country specific - ranging from 5% to 20%) of the outstanding shares
Elimination of poison pill rights
Stock purchase plans with an exercise price of not less that 85% of fair market value
Stock option plans which are incentive based and not excessive
Other stock-based plans which are appropriately structured
Reductions in
super-majority vote requirements
Adoption of anti- greenmail provisions
III. Vote against management (or do not vote in favor of management) on the following items, which have potentially substantial financial or best
interest impact:
Capitalization changes that add blank check classes of stock or classes that dilute the voting interests
of existing shareholders
Changes in capitalization authorization where management does not offer an appropriate rationaleor which are
contrary to the best interest of existing shareholders
Anti-takeover and related provisions that serve to prevent the majority of
shareholders fromexercising their rights or effectively deter appropriate tender offers and other offers
Amendments to by-laws which
would require super-majority shareholder vote to pass or repealcertain provisions
Elimination of Shareholders Right to Call
Special Meetings
Establishment of classified boards of directors
Reincorporation in a state which has more stringent anti-takeover and related provisions
Shareholder rights plans that allow the board of directors to block appropriate offers toshareholders or which trigger provisions preventing
legitimate offers from proceeding
Excessive compensation
Change-in-control provisions in non-salary compensation plans, employment contracts, andseverance agreements which benefit management and would be costly to shareholders if triggered
Adjournment of Meeting to Solicit Additional Votes
Other business as properly comes before the meeting proposals which extend blank checkpowers to those acting as proxy
Shareholder Proposals
Traditionally,
shareholder proposals have been used to encourage management and other shareholders to address socio-political issues. In accordance with ERISA, the investment manager holds that it is inappropriate to use plan assets to attempt to affect such
issues. Thus, examine shareholder proposals primarily to determine their economic impact on shareholders.
I. Vote in support of shareholders
on the following ballot items, which are fairly commonshareholder-sponsored initiatives:
Requirements that auditors attend the annual
meeting of shareholders
Establishment of an annual election of the board of directors
Mandates requiring a majority of independent directors on the Board of Directors and the audit,nominating, and compensation committees
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Mandates that amendments to bylaws or charters have shareholder approval
Mandates that shareholder-rights plans be put to a vote or repealed
Establishment of confidential voting
Expansions to reporting of financial or
compensation-related information, within reason
Repeals of various anti-takeover related provisions
Reduction or elimination of super-majority vote requirements
Repeals or prohibitions of greenmail provisions
Opting-out
of business combination provisions
II. Vote against shareholders (or do not vote in favor of shareholders) on the following initiatives,which
are fairly common shareholder-sponsored initiatives:
Limits to tenure of directors
Requirements that candidates for directorships own large amounts of stock before being eligibleto be elected
Restoration of cumulative voting in the election of directors
Requirements that the company provide costly, duplicative, or redundant reports; or reports of a non-business nature
Restrictions related to social, political, or special interest issues which affect the ability of thecompany to do business or be competitive and which have significant financial or best-interest
impact
Proposals which require inappropriate endorsements or corporate actions
Exhibit B
NOTICE TO
CLIENTS CONCERNING SILVERCREST ASSET MANAGEMENTS
PROXY VOTING POLICIES AND PROCEDURES
In voting proxies, and determining whether to vote proxies, Silvercrest Asset Management Group LLC is guided by general fiduciary principles. The
firms goal is to act prudently, and solely in the best interest of the beneficial owners of the accounts it manages. Silvercrest attempts to consider all aspects of its vote that could affect the value of the investment and will vote proxies
in the manner that it believes will be consistent with efforts to maximize shareholder values.
Enclosed are the firms guidelines with
respect to proxy voting determinations. These guidelines are not strict, and each Silvercrest vote will depend on the facts and circumstances of each proposal, on a caseby- case basis. Depending on the facts of a specific vote, Silvercrest may
deviate from the guidelines entirely where it deems it necessary in the best interests of our clients, and/or as instructed by a specific client.
After careful review and consideration, Silvercrest Asset Management Group has contracted with Broadridge (formerly ADP) for use of its ProxyEdge service for proxy data collection, vote submission and
record storage.
Should you have any questions or concerns about any of this information, please feel free to contact me at
kcampione@silvercrestgroup.com or by phone at (212) 649-0672.
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Smart Portfolios LLC
IA Policies and Procedures Manual
12/04/07 to Current
Proxy Voting
Policy
Smart Portfolios LLC, as a
matter of policy and as a fiduciary to our clients, has responsibility for voting proxies for portfolio securities consistent with the best economic interests of the clients. Our firm maintains written policies and procedures as to the handling,
research, voting and reporting of proxy voting and makes appropriate disclosures about our firms proxy policies and practices. Our policy and practice includes the responsibility to monitor corporate actions, receive
and vote client proxies and disclose any potential conflicts of interest as well as making information available to clients about the voting of proxies
for their portfolio securities and maintaining relevant and required records.
Background
Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are properly and
timely exercised.
Investment advisers registered with the SEC, and which exercise voting authority with respect to client securities, are
required by Rule 206(4)-6 of the Advisers Act to (a) adopt and implement written policies and procedures that are reasonably designed to ensure that client securities are voted in the best interests of clients, which must include how an adviser
addresses material conflicts that may arise between an adviser's interests and those of its clients; (b) to disclose to clients how they may obtain information from the adviser with respect to the voting of proxies for their securities;
(c) to describe to clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its clients; and (d) maintain certain records relating to the adviser's proxy voting activities when the adviser does
have proxy voting authority.
Responsibility
The Investment Policy Committee has the responsibility for the implementation and monitoring of our proxy voting policy, practices, disclosures and record keeping, including outlining our voting
guidelines in our procedures.
Procedure
Smart Portfolios LLC has adopted procedures to implement the firms policy and reviews to monitor and insure the firms policy is observed, implemented properly and amended or updated, as
appropriate, which include the following:
Voting Procedures
- All employees will forward any proxy materials received on behalf of clients to the Investment Policy Committee;
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- The Investment Policy Committee or designated personnel will determine which client accounts hold the
security to which the proxy relates;
- Absent material conflicts, the Investment Policy Committee will determine how Smart Portfolios LLC
should vote the proxy in accordance with applicable voting guidelines, complete the proxy and vote the proxy in a timely and appropriate manner.
Disclosure
- Smart Portfolios LLC will provide conspicuously displayed information in its
Disclosure Document summarizing this proxy voting policy and procedures, including a statement that clients may request information regarding how Smart Portfolios LLC voted a clients proxies, and that clients may request a copy of these
policies and procedures.
Client Requests for Information
- All client requests for information regarding proxy votes, or policies and procedures, received by any employee should be forwarded to Investment Policy Committee.
- In response to any request the Investment Policy Committee will prepare a written response to the client with the information requested, and as
applicable will include the name of the issuer, the proposal voted upon, and how Smart Portfolios LLC voted the clients proxy with respect to each proposal about which client inquired.
Voting Guidelines
- In the absence of specific voting guidelines from the client,
Smart Portfolios LLC will vote proxies in the best interests of each particular client. Smart Portfolios LLCs policy is to vote all proxies from a specific issuer the same way for each client absent qualifying restrictions from a client.
Clients are permitted to place reasonable restrictions on Smart Portfolios LLC's voting authority in the same manner that they may place such restrictions on the actual selection of account securities.
- Smart Portfolios LLC will generally vote in favor of routine corporate housekeeping proposals such as the election of directors and selection of
auditors absent conflicts of interest raised by an auditors non-audit services.
- Smart Portfolios LLC will generally vote against proposals
that cause board members to become entrenched or cause unequal voting rights.
- Smart Portfolios LLC will use echo voting for investment
company shares when required by law.
- In reviewing proposals, Smart Portfolios LLC will further consider the opinion of management and the
effect on management, and the effect on shareholder value and the issuers business practices.
Conflicts of Interest
- Smart Portfolios LLC will identify any conflicts that exist between the interests of the adviser and the client by reviewing the relationship of Smart
Portfolios LLC with the issuer of each security to determine if Smart Portfolios LLC or any of its employees has any financial, business or personal relationship with the issuer.
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- If a material conflict of interest exists, the Investment Policy Committee will determine whether it is
appropriate to disclose the conflict to the affected clients, to give the clients an opportunity to vote the proxies themselves, or to address the voting issue through other objective means such as voting in a manner consistent with a predetermined
voting policy or receiving an independent third party voting recommendation.
- Smart Portfolios LLC will maintain a record of the voting
resolution of any conflict of interest.
Recordkeeping
The Investment Policy Committee shall retain the following proxy records in accordance with the SECs five-year retention requirement.
- These policies and procedures and any amendments;
- Each proxy statement that Smart Portfolios
LLC receives;
- A record of each vote that Smart Portfolios LLC casts;
- Any document Smart Portfolios LLC created that was material to making a decision how to vote proxies, or that memorializes that decision including periodic reports to the Investment Policy Committee or
proxy committee, if applicable.
- A copy of each written request from a client for information on how Smart Portfolios LLC voted such
clients proxies, and a copy of any written response.
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TAMRO CAPITAL PARTNERS, LLC
PROXY VOTING
POLICIES AND PROCEDURES
Policy
TAMRO, as a matter of policy and as a fiduciary to clients, has responsibility for voting proxies for portfolio securities consistent with the best
economic interests of clients. The Company maintains written policies and procedures as to the handling, research, voting and reporting of proxy voting and makes appropriate disclosures about the Companys proxy policies and practices. Company
policy and practice includes the responsibility to monitor corporate actions, receive and vote client proxies and disclose any potential conflicts of interest as well as make information available to clients about the voting of proxies for their
portfolio securities and maintaining relevant and required records.
Unless voting authority has been explicitly reserved by the governing
documents for the client or another party, TAMRO will exercise discretionary voting authority over proxies issued on securities held in client accounts. It is TAMRO policy to vote with a focus on the basis of the investment implications of each
issue and in a manner that the Company believes is in the best interest of its clients.
Where possible, it is TAMRO policy to take action on
behalf of clients with regard to portfolio holdings which are subject to mandatory corporate actions (of a non-proxy nature) so long as the Company is in a position to: (1) have reason to know that the client portfolio holds such a security for
which there is a corporation action; and (2) have receipt of notice of corporate action from the client custodian who maintains custody of such security on behalf of the client. Common corporate actions include tender offers, spin-offs,
mergers/de-mergers, and name changes.
Background
Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are exercised properly and in a timely fashion. Investment advisers
registered with the SEC, and who exercise voting authority with respect to client securities, are required by Rule 206(4)-6 of the Advisers Act to: (1) adopt and implement written policies and procedures that are reasonably designed to ensure
that client securities are voted in the best interests of clients, which must include how an adviser addresses material conflicts that may arise between an adviser's interests and those of its clients; (2) disclose to clients how they may
obtain information from the adviser with respect to the voting of proxies for their securities; (3) describe to clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its clients; and
(4) maintain certain records relating to the adviser's proxy voting activities when the adviser does have proxy voting authority.
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Responsibility
It is the designated proxy voting specialists responsibility to review all proxies and the proxy voting service providers recommendations on how to vote each proxy. The person designated as
the proxy voting specialist changes periodically and proxy voting specialist is not part of their formal job title, though it is part of their formal employment responsibilities. Please see the CCO to determine who this employee is at
any given point in time. The proxy voting specialist brings proxy votes to the attention of the Investment Team for discussion when warranted. The Investment Team and its designated proxy service provider have the responsibility for the
implementation and monitoring of the Companys proxy voting policy, practices, disclosures and record keeping. The Investment Team considers the recommendations of the proxy service provider, but may override such recommendations as deemed
appropriate. The CIO is responsible for all override approvals.
It is the responsibility of client custodians to notify the
Company of pending corporate actions which impact securities held in client portfolios managed by TAMRO.
Procedures / Internal Controls
TAMRO has adopted procedures to implement, monitor, and amend as necessary the Companys corporate action and proxy policies, as
summarized below.
Role of Investment Team
It is the responsibility of the Investment Team to oversee the proxy process. At least annually, the Investment Team is responsible for approving or amending the guidelines it has established, reviewing
the performance of the proxy service provider, and addressing any procedural issues that may arise in proxy voting processes. Meetings may be called by any Investment Team member throughout the year, based on issues that arise.
Proxy Voting
The proxy service
provider offers analysis of proxy proposals, tracks and receives proxies for which TAMRO clients are entitled to vote, recommends proxy votes pursuant to agreed upon guidelines and compiles and provides voting records for the Company.
The steps for reviewing and submitting votes are as follows:
The proxy voting specialist reviews the proxy system on a weekly basis
The proxy voting specialist reviews the voting agendas, determines if there are any issues to report to the Investment Team,
documents evidence of Investment Team review of any issues, and maintains the copies in a proxy file.
Once a week the
Operations Department submits a file of current clients and their holdings to the proxy provider. Only clients that have delegated voting to TAMRO are included in this feed.
Monthly, TAMRO and proxy service provider carry out a full account list reconciliation.
If the Investment Team chooses to override the proxy service providers recommendations, the CIO will approve the override. This approval will typically be documented in Investment Meeting
notes; however, other documentation may occasionally be more appropriate. Documentation of CIO override approval is maintained by the proxy voting specialist.
The CCO, or designee, will review on a periodic basis the proxy files to ensure there is evidence of review.
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Under certain circumstances, TAMRO may choose not to vote proxies. Where clients have implemented securities
lending programs, TAMRO will be unable to vote proxies on behalf of securities unless it issues instructions to the client custodian to retrieve the securities prior to record date. TAMRO may choose to refrain from calling back such securities when
the voting of the proxy is not deemed to be material or the benefits of voting do not outweigh the cost of terminating the particular lending arrangement.
Voting Guidelines
In the absence of specific voting guidelines from the client,
TAMRO will vote proxies in the best interests of each particular client. The Companys policy is to vote all proxies from a specific issuer the same way for each client absent qualifying restrictions from a client. Clients are permitted to
place reasonable restrictions on the Companys voting authority in the same manner that they may place such restrictions on the actual selection of account securities.
Conflicts of Interest
There may be instances where the Company or its access
persons are subject to conflicts of interest in the voting of proxies. Conflicts of interest may exist, for example, due to personal or familial relationships of personnel or when TAMRO has a business relationship with, or is soliciting business
from, the issuing company (or an employee group of a company), or a third party that is a proponent of a particular outcome on a proxy issue. The Investment Team is responsible to assess all aspects of the relationship between TAMRO and the issuing
company in order to identify any possible or real conflicts of interest. Issues raising possible conflicts of interest are discussed by the Investment Team prior to the point of vote casting. With respect to personal conflicts of interest, the TAMRO
Code of Ethics requires all employees to avoid placing themselves in a position where their interests may conflict with those of clients and restricts their ability to engage in certain outside business activities. Investment Team members with a
personal conflict of interest regarding a particular proxy vote must recuse themselves from the proxy voting process with respect to the proxy in question. TAMRO requires documentation regarding potential conflicts of interest. In cases where it
believes there may be an actual or perceived conflict of interest, the Company requires additional steps that may include obtaining the prior approval of the CCO, obtaining Investment Team review or approval, deferring to the voting recommendation
of a third party, voting pursuant to client direction (following disclosure of the conflict), abstaining from voting, voting reflectively (in the same proportion and manner as other shareholders) or taking such other action as necessary to protect
the interests of clients. In all such cases, proxy records will fully reflect such conflicts and their resolution, and include evidence of approvals as necessary.
Recordkeeping
TAMRO and the service provider shall retain the following proxy
records in accordance with SEC retention requirements:
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These policies and procedures and any amendments.
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Each proxy statement that TAMRO receives.
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A record of each vote that TAMRO casts.
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Any document TAMRO created that was material to making a decision how to vote proxies, or that memorializes that decision.
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A copy of each written request from a client for information on how TAMRO voted such clients proxies, and a copy of any written response.
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Disclosure
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TAMRO will provide information in its Form ADV Part 2A summarizing proxy voting policy and procedures, including a statement that clients may request information
regarding how the Company voted proxies, and that clients may request a copy of these policies and procedures. Form ADV Part 2 A and B are provided at the time of contract execution and Part A is at least offered annually thereafter with a summary
of material changes.
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Other Corporate Actions
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At the time of a new client relationship, TAMRO shall direct the clients custodian to add the Company to the mailing/notification list should a corporate action
notice come to the attention of the custodian for a holding in the clients TAMRO portfolio. Copies of corporate action notices should be sent to the attention of the Trader.
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The Investment Team shall act upon all such corporate action notices upon receipt, where possible, in a manner that is deemed to be in the clients best interests.
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All copies of approved, non-mandatory corporate action records are maintained in the designated centralized client files maintained by the COO. Typically, TAMRO does
not have any such approval records as the corporate actions we process are generally mandatory.
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Client Requests for
Information
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All client requests for information regarding proxy votes, or policies and procedures, received by any employee should be forwarded to the CCO.
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In response to any request the Investment Team and its designated service provider will prepare a written response to the client with the information requested, and as
applicable will include the name of the issuer, the proposal voted upon, and the manner in which TAMRO voted the clients proxy with respect to each proposal about which the client inquired.
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TAPLIN, CANIDA & HABACHT, INC.
PROXY VOTING
POLICIES AND PROCEDURES
Policy
TCH, as a matter of policy and practice, has no authority to vote
proxies on behalf of advisory clients. The Adviser may offer assistance as to proxy matters upon a clients request, but the client in all cases has either retained the proxy voting responsibility or designated the responsibility to the
custodian or other third party. Upon client request, TCH would consider accepting such responsibility. Consequently, TCH would amend current disclosures and adopt appropriate policies.
TCHs policy of having no proxy voting responsibility is disclosed to clients in the ADV. TCH has also adopted the policy to include
disclosure in all future contracts that the Adviser does not vote proxies.
The vast majority of ERISA accounts to which TCH
acts as investment advisor are fixed-income accounts, which do not participate in proxy voting.
Background
Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are
property and timely exercised.
Investment advisers registered with the SEC, and which exercise voting authority with respect
to client securities, are required by Rule 206(4)-6 of the Investment Advisers Act to (a) adopt and implement written policies and procedures that are reasonably designed to ensure that client securities are voted in the best interests of
clients, which must include how your address material conflicts that may arise between your interests and those of your clients (b) to disclose to clients how they may obtain information from you with respect to the voting of proxies for
their securities; and (c) to describe to clients a summary of your proxy voting policies and procedures and, upon request, furnish a copy to your clients.
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VEREDUS ASSET MANAGEMENT
PROXY VOTING POLICIES AND PROCEDURES
AS OF MAY 31, 2005
I. Policy
Proxy voting is an important right of shareholders and reasonable care and diligence must be taken to ensure that such rights are
properly and timely exercised. When Veredus Asset Management (VAM) has discretion to vote the proxies of its clients, it will vote those proxies in the best interest of its clients and in accordance with these policies and procedures.
II. Voting Guidelines
In the absence of specific voting guidelines from the client, VAM will vote proxies in the best interests of the clients.
The key objectives of the following policies and procedures recognize that a companys management is entrusted with the day-to-day
operations and longer term strategic planning of the company, subject to the oversight of the companys board of directors. While ordinary business matters are primarily the responsibility of management and should be approved solely
by the corporations board of directors, these objectives also recognize that the companys shareholders must have final say over how management and directors are performing, and how shareholders rights and ownership interests are
handled, especially when matters could have substantial economic implications to the shareholders.
III. Proxy Voting Procedures
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(1)
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In an effort to assist VAM in gathering information and voting, VAM has outsourced proxy voting to Institutional Shareholder Services (ISS), a leading provider of proxy
voting and corporate governance services. All proxy ballots are sent directly to ISS from the custodian banks. ISS researches the proxy issues and provides a voting recommendation based upon their proxy-voting manual utilized consistently among all
clients (a summary of the ISS proxy voting manual may be obtained upon request). VAM accesses this information via the internet and determines if we agree with the recommendations made by ISS. VAM maintains the right to determine the final vote
made. If ISS recommends voting against management, special attention is given to the issue to determine if VAM agrees with the recommendation. VAM will research the issue and discuss it with the portfolio managers and if it is determined that a vote
with management is in the best interest of the client, we will change the vote by logging onto the ISS Proxymaster website where a manual vote change can be made.
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(2)
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As VAM is utilizing ISS, a third party proxy service, we must ensure that ISS does not have a conflict through a separate relationship with an issuer prior to VAM
accepting recommendations on voting issues. As part of our voting procedures, VAM will contact ISS and obtain information on any services ISS has performed for the issuer in question and the dollar amount paid for the service. VAM will then assess
the information and determine if a conflict exists. If it is determined that a conflict does exist, VAM will perform its own research of the issues and make an informed decision on the vote. If no conflict exists, VAM will consider the ISS
recommendation as usual.
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IV. Conflicts Of Interest
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(1)
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The Proxy Administrator will identify any conflicts that exist between the interests of VAM and its clients. This examination will include a review of the relationship
of VAM and its affiliates with the issuer of each security (and any of the issuers affiliates) to determine if the issuer is a client of VAM or an affiliate of VAM or has some other relationship with VAM or a client of VAM.
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(2)
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If a material conflict exists, VAM will determine whether voting in accordance with the voting guidelines and factors described above is in the best interests of the
client. VAM will also determine whether it is appropriate to disclose the conflict to the affected clients and, except in the case of clients that are subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA),
give the clients the opportunity to vote their proxies themselves. In the case of ERISA clients, if the Investment Management Agreement reserves to the ERISA client the authority to vote proxies when VAM determines it has a material conflict that
affects its best judgment as an ERISA fiduciary, VAM will give the ERISA client the opportunity to vote the proxies themselves, or special ERISA proxy voting procedures must provide for a pre-determined voting policy that eliminates the discretion
of VAM when voting proxies if such a conflict exists.
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V. Disclosure
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(1)
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VAM will disclose in its Form ADV Part II that clients may contact the Proxy Administrator, Amy Benningfield, via e-mail, abenningfield@veredus.com or telephone
(502) 214-5281 in order to obtain information on how VAM voted such clients proxies, and to request a copy of these policies and procedures. If a client requests this information, the Proxy Administrator will prepare a written response to
the client that lists, with respect to each voted proxy that the client has inquired about, (1) the name of the issuer; (2) the proposal voted upon and (3) how VAM voted the clients proxy.
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(2)
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A concise summary of these Proxy Voting Policies and Procedures will be included in VAMs Form ADV Part II, and will be updated whenever these policies and
procedures are updated. The Proxy Administrator will arrange for a copy of this summary to be sent to all existing clients either as a separate mailing or along with a periodic account statement or other correspondence sent to clients.
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VI. Recordkeeping
The Proxy Administrator will maintain files relating to VAMs proxy voting procedures in VAMs office. Records will be maintained and preserved for five years from the end of the fiscal year
during which the last entry was made on a record, with records for the first two years kept in the offices of VAM. Records of the following will be included in the files:
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(1)
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Copies of these proxy voting policies and procedures, and any amendments thereto.
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(2)
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A copy of any document VAM created that was material to making a decision how to vote proxies, or that memorializes that decision.
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(3)
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A copy of each written client request for information on how VAM voted such clients proxies, and a copy of any written response to any (written or oral) client
request for information on how VAM voted its proxies.
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As VAM has access to proxy statements and records of each vote cast via the ISS Proxymaster
website on the internet, we will not maintain paper copies within
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PART C: OTHER INFORMATION
ITEM 28. EXHIBITS
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(a)
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(1)
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Trust Instrument dated September 10, 1993 is incorporated herein by reference to Post-Effective Amendment No. 8 to the Registration Statement as filed on April 16,
1996.
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(2)
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State of Delaware Certificate of Amendment to Certificate of Trust dated February 25, 1998 is incorporated herein by reference to Exhibit (a)(2) to Post-Effective
Amendment No. 33 to the Registration Statement as filed on September 21, 2001.
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(3)
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State of Delaware Certificate of Amendment to Certificate of Trust dated September 10, 2001 is incorporated herein by reference to Exhibit (a)(3) to Post-Effective
Amendment No. 33 to the Registration Statement as filed on September 21, 2001.
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(4)
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State of Delaware Certificate of Amendment to Certificate of Trust dated November 29, 2006 is incorporated herein by reference to Exhibit (a)(4) to Post-Effective
Amendment No. 74 to the Registration Statement as filed on November 30, 2006.
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(b)
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(1)
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Amended and Restated By-Laws dated July 8, 2010 are incorporated herein by reference to Exhibit (b)(4) to Post-Effective Amendment No. 116 to the Registration
Statement as filed on October 20, 2010.
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(c)
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Not applicable.
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(d)
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(1)
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Investment Advisory Agreement dated April 15, 2010 between the Trust and Aston Asset Management, LP is incorporated herein by reference to Exhibit (d)(1) to
Post-Effective Amendment No. 112 to the Registration Statement as filed on August 30, 2010.
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(2)
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Revised Schedules A and B to the Investment Advisory Agreement between the Trust and Aston Asset Management, LP is incorporated herein by reference to Exhibit (d)(2) to
Post-Effective Amendment No. 142 to the Registration Statement as filed on June 22, 2012.
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(3)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and Montag & Caldwell, Inc. (currently known as Montag & Caldwell
LLC) is incorporated herein by reference to Exhibit (d)(4) to Post-Effective Amendment No. 123 to the Registration Statement as filed on February 28, 2011.
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(4)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and TAMRO Capital Partners, LLC is incorporated herein by reference to
Exhibit (d)(5) to Post-Effective Amendment No. 123 to the Registration Statement as filed on February 28, 2011.
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(5)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and Todd-Veredus Asset Management LLC is incorporated herein by reference to
Exhibit (d)(6) to Post-Effective Amendment No. 123 to the Registration Statement as filed on February 28, 2011.
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(6)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and River Road Asset Management, LLC is incorporated herein by
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1
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reference to Exhibit (d)(10) to Post-Effective Amendment No. 121 to the Registration Statement as filed on December 29, 2010.
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(7)
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Revised Schedule A to the Sub-Investment Advisory Agreement dated December 29, 2010 between Aston Asset Management, LP and River Road Asset Management, LLC is
incorporated herein by reference to Exhibit (d)(11) to Post-Effective Amendment No. 121 to the Registration Statement as filed on December 29, 2010.
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(8)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and Taplin, Canida, and Habacht, LLC is incorporated herein by reference to
Exhibit (d)(12) to Post-Effective Amendment No. 123 to the Registration Statement as filed on February 28, 2011.
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(9)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and Baring International Investment Limited is incorporated herein by reference to
Exhibit (d)(15) to Post-Effective Amendment No. 123 to the Registration Statement as filed on February 28, 2011.
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(10)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and Smart Portfolios, LLC is incorporated herein by reference to
Exhibit (d)(21) to Post-Effective Amendment No. 113 to the Registration Statement as filed on September 1, 2010.
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(11)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and Lake Partners, Inc. is incorporated herein by reference to Exhibit (d)(19)
to Post-Effective Amendment No. 123 to the Registration Statement as filed on February 28, 2011.
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(12)
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Sub-Investment Advisory Agreement dated April 15, 2010 between Aston Asset Management, LP and Herndon Capital Management, LLC is incorporated herein by reference to
Exhibit (d)(26) to Post-Effective Amendment No. 119 to the Registration Statement as filed on December 27, 2010.
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(13)
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Sub-Investment Advisory Agreement dated December 28, 2010 between Aston Asset Management, LP and River Road Asset Management, LLC is incorporated herein by reference to
Exhibit (d)(29) to Post-Effective Amendment No. 120 to the Registration Statement as filed on December 28, 2010.
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(14)
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Sub-Investment Advisory Agreement dated July 13, 2011 between Aston Asset Management, LP and DoubleLine Capital LP is incorporated herein by reference to Exhibit (d)(18) to
Post-Effective Amendment No. 137 to the Registration Statement as filed on December 30, 2011.
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(15)
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Sub-Investment Advisory Agreement dated December 21, 2011 between Aston Asset Management, LP and Silvercrest Asset Management Group LLC is incorporated herein by reference to
Exhibit (d)(25) to Post-Effective Amendment No. 136 to the Registration Statement as filed on December 21, 2011.
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(16)
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Sub-Investment Advisory Agreement dated April 29, 2011 between Aston Asset Management, LP and Fairpointe Capital, LLC is incorporated herein by reference to
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2
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Exhibit (d)(20) to Post-Effective Amendment No. 137 to the Registration Statement as filed on December 30, 2011.
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(17)
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Sub-Investment Advisory Agreement dated July 15, 2011 between Aston Asset Management, LP and Cornerstone Investment Partners, LLC is incorporated herein by reference to Exhibit
(d)(21) to Post-Effective Amendment No. 137 to the Registration Statement as filed on December 30, 2011.
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(18)
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Sub-Investment Advisory Agreement dated June 30, 2011 between Aston Asset Management, LP and Harrison Street Securities, LLC is incorporated herein by reference to Exhibit
(d)(22) to Post-Effective Amendment No. 137 to the Registration Statement as filed on December 30, 2011.
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(19)
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Sub-Investment Advisory Agreement dated February 17, 2012 between Aston Asset Management, LP and Lee Munder Capital Group, LLC is incorporated herein by reference to Exhibit
(d)(22) to Post-Effective Amendment No. 139 to the Registration Statement as filed on February 29, 2012.
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(20)
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Sub-Investment Advisory Agreement dated June 22, 2012 between Aston Asset Management, LP and River Road Asset Management, LLC is incorporated herein by reference to
Exhibit (d)(23) to Post-Effective Amendment No. 142 to the Registration Statement as filed on June 22, 2012.
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(21)
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Sub-Investment Advisory Agreement dated June 29, 2012 between Aston Asset Management, LP and Anchor Capital Advisors LLC is filed herewith as Exhibit (d)(21).
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(e)
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(1)
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Distribution Agreement between ABN AMRO Funds (currently known as Aston Funds) and ABN AMRO Distribution Services (USA), Inc. is incorporated herein by reference to
Exhibit (e)(1) to Post-Effective Amendment No. 36 to the Registration Statement filed on December 28, 2001.
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(2)
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Amended Schedule A to the Distribution Agreement between ABN AMRO Funds (currently known as Aston Funds) and ABN AMRO Distribution Services (USA), Inc. is incorporated
herein by reference to Exhibit (e)(2) to Post-Effective Amendment No. 36 to the Registration Statement filed on December 28, 2001.
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(3)
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Amendment No. 1 to Distribution Services Agreement is incorporated herein by reference to Exhibit (e)(3) to Post-Effective Amendment No. 47 to the Registration
Statement filed on February 28, 2003.
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(4)
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Amendment No. 2 to Distribution Services Agreement is incorporated herein by reference to Exhibit (e)(4) to Post-Effective Amendment No. 47 to the Registration
Statement filed on February 28, 2003.
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(5)
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Amendment No. 3 to Distribution Services Agreement is incorporated herein by reference to Exhibit (e)(5) to Post-Effective Amendment No. 47 to the Registration
Statement filed on February 28, 2003.
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(6)
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Distribution Agreement between Aston Funds and BNY Mellon Distributors, Inc. (currently known as Foreside Funds Distributors, LLC) is incorporated herein by
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3
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reference to Exhibit (e)(7) to Post-Effective Amendment No. 111 to the Registration Statement as filed on August 6, 2010.
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(7)
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Distribution Agreement between Aston Funds and Foreside Funds Distributors, LLC is filed herewith as Exhibit (e)(7).
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(8)
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Revised Schedule A to the Distribution Agreement is filed herewith as Exhibit (e)(8).
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(9)
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Form of Selling/Services Agreement for Aston Funds is incorporated herein by reference to Exhibit (e)(8) to Post-Effective Amendment No. 108 to the Registration
Statement as filed on February 26, 2010.
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(10)
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ABN AMRO Assignment Agreement is incorporated herein by reference to Exhibit (e)(9) to Post-Effective Amendment No. 74 to the Registration Statement as filed on
November 30, 2006.
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(11)
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Mutual Fund Service Agent Agreement for Wrap Processing is incorporated herein by reference to Exhibit (e)(13) to Post-Effective Amendment No. 84 to the Registration
Statement as filed on July 31, 2007.
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(f)
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Not applicable.
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(g)
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(1)
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Custodian Services Agreement dated May 5, 2003 by and between PFPC Trust Company and ABN AMRO Funds (currently known as Aston Funds) is incorporated herein by reference to
Exhibit (g)(9) to Post-Effective Amendment No. 49 as filed on June 30, 2003.
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(2)
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Amendment to the Custodian Services Agreement is incorporated herein by reference to Exhibit (g)(2) to Post-Effective Amendment No. 58 to the Registration Statement as
filed on June 23, 2005.
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(3)
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Revised Exhibit A to the Custodian Services Agreement is filed herewith as Exhibit (g)(3).
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(4)
|
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Russian Addendum to the Custodian Services Agreement for Aston/Barings International Fund is incorporated herein by reference to Exhibit (g)(4) to Post-Effective Amendment
No. 102 to the Registration Statement as filed on February 27, 2009.
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(5)
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Amendment to the Custodian Services Agreement dated December 18, 2009 is incorporated herein by reference to Exhibit (g)(6) to Post-Effective Amendment No. 108 to
the Registration Statement as filed on February 26, 2010.
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(6)
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Letter Agreement between Aston Funds and The Bank of New York Mellon appointing The Bank of New York Mellon as Foreign Custody Manager is incorporated herein by reference to
Exhibit (g)(7) to Post-Effective Amendment No. 139 to the Registration Statement as filed on February 29, 2012.
|
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(7)
|
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Amendment to Custodian Services Agreement dated July 1, 2012 is filed herewith as Exhibit (g)(7).
|
4
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(h)
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(1)
|
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Transfer Agency Services Agreement between Alleghany Funds (currently known as Aston Funds) and PFPC Inc. (currently known as BNY Mellon Investment Servicing (US) Inc.), dated
April 1, 2000, is incorporated herein by reference to Exhibit (h)(1) to Post-Effective Amendment No. 22 to the Registration Statement as filed on June 30, 2000.
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(2)
|
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Amendment No. 1 to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(2) to Post-Effective Amendment No. 22 to the
Registration Statement as filed on June 30, 2000.
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(3)
|
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Amendment No. 2 to the Transfer Agency Services Agreement is incorporated herein by reference to Post-Effective Amendment No. 26 to the Registration Statement as filed
on March 1, 2001.
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(4)
|
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Amendment No. 3 to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(4) to Post-Effective Amendment No. 51 to the
Registration Statement as filed on February 27, 2004.
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(5)
|
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Amendment No. 4 to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(5) to Post-Effective Amendment No. 51 to the
Registration Statement as filed on February 27, 2004.
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(6)
|
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Amendment No. 5 to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(6) to Post-Effective Amendment No. 51 to the
Registration Statement as filed on February 27, 2004.
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(7)
|
|
Amendment No. 6 to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(7) to Post-Effective Amendment No. 51 to the
Registration Statement as filed on February 27, 2004.
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(8)
|
|
Compliance Support Services Amendment to Transfer Agency Services Agreement is incorporated herein by reference as Exhibit (h)(9) to Post-Effective Amendment No. 55 to
the Registration Statement as filed on December 29, 2004.
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(9)
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|
Anti-Money Laundering and Privacy Amendment to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(9) to Post-Effective Amendment
No. 56 to the Registration Statement as filed on February 25, 2005.
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(10)
|
|
Customer Identification Services Amendment to Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(10) to Post-Effective Amendment
No. 56 to the Registration Statement as filed on February 25, 2005.
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(11)
|
|
Amendment to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(12) to Post-Effective Amendment No. 58 to the Registration
Statement as filed on June 23, 2005.
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(12)
|
|
Section 312 Foreign Financial Institution Amendment to the Transfer Agency Services Agreement is incorporated herein by reference to Exhibit (h)(15) to Post-Effective
Amendment No. 76 to the Registration Statement as filed on December 22, 2006.
|
5
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(13)
|
|
Revised Exhibit A to the Transfer Agency Services Agreement is filed herewith as Exhibit (h)(13).
|
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(14)
|
|
Amendment to the Transfer Agency Services Agreement dated December 18, 2009 is incorporated herein by reference to Exhibit (h)(14) to Post-Effective Amendment
No. 108 to the Registration Statement as filed on February 26, 2010.
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(15)
|
|
Amendment to Transfer Agency Services Agreement Regarding Red Flag Services is incorporated herein by reference to Exhibit (h)(15) to Post-Effective Amendment No. 106
to the Registration Statement as filed on December 30, 2009.
|
|
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(16)
|
|
Amendment to Transfer Agency Services Agreement dated July 1, 2012 is filed herewith as Exhibit (h)(16).
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|
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(17)
|
|
Administration Agreement between Alleghany Funds (currently known as Aston Funds) and Alleghany Investment Services, Inc. dated June 7, 1999, is incorporated herein by
reference to Exhibit (h) to Post-Effective Amendment No. 17 to the Registration Statement as filed on June 28, 1999.
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(18)
|
|
Amendment No. 1 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(3) to Post-Effective Amendment No. 22 to the Registration
Statement as filed on June 30, 2000.
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|
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(19)
|
|
Amendment No. 2 to the Administration Agreement is incorporated herein by reference to Exhibit (h) to Post-Effective Amendment No. 24 to the Registration Statement
as filed on December 29, 2000.
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(20)
|
|
Amendment No. 3 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(9) to Post-Effective Amendment No. 36 to the Registration
Statement as filed on December 28, 2001.
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(21)
|
|
Amendment No. 4 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(10) to Post-Effective Amendment No. 36 to the Registration
Statement as filed on December 28, 2001.
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(22)
|
|
Amendment No. 5 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(13) to Post-Effective Amendment No. 47 to the Registration
Statement as filed on February 28, 2003.
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(23)
|
|
Amendment No. 6 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(14) to Post-Effective Amendment No. 47 to the Registration
Statement as filed on February 28, 2003.
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(24)
|
|
Amendment No. 7 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(15) to Post-Effective Amendment No. 47 to the Registration
Statement as filed on February 28, 2003.
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(25)
|
|
Amendment No. 8 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(19) to Post-Effective Amendment No. 50 to the Registration
Statement as filed on December 30, 2003.
|
6
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(26
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)
|
|
Amendment No. 9 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(20) to Post-Effective Amendment No. 51 to the Registration
Statement as filed on February 27, 2004.
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(27)
|
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|
Amendment No. 10 to the Administration Agreement is incorporated herein by reference to Exhibit (h)(24) to Post-Effective Amendment No. 58 to the Registration
Statement as filed on June 23, 2005.
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(28)
|
|
|
Amendment No. 11 to the Administration Agreement is filed herewith as Exhibit (h)(28).
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(29)
|
|
|
Revised Schedule C to the Administration Agreement is incorporated by reference to Exhibit (h)(27) to Post-Effective Amendment No. 142 as filed on June 22,
2012.
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(30)
|
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|
Sub-Administration and Accounting Services Agreement between Alleghany Investment Services Inc. and PFPC Inc. (currently known as BNY Mellon Investment Servicing (US) Inc.),
dated April 1, 2000, is incorporated herein by reference to Exhibit (h)(4) to Post-Effective Amendment No. 22 to the Registration Statement as filed on June 30, 2000.
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(31)
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Amendment No. 1 to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(5) to Post-Effective Amendment
No. 22 to the Registration Statement as filed on June 30, 2000.
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(32)
|
|
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Amendment No. 2 to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Post-Effective Amendment No. 26 to the Registration
Statement as filed on March 1, 2001.
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(33)
|
|
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Amendment No. 3 to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(24) to Post-Effective Amendment
No. 56 to the Registration Statement as filed on February 25, 2005.
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(34)
|
|
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Amendment No. 4 to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(25) to Post-Effective Amendment
No. 56 to the Registration Statement as filed on February 25, 2005.
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(35)
|
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Amendment No. 5 to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(26) to Post-Effective Amendment
No. 56 to the Registration Statement as filed on February 25, 2005.
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(36)
|
|
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Amendment No. 6 to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(27) to Post-Effective Amendment
No. 56 to the Registration Statement as filed on February 25, 2005.
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(37)
|
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Amendment to Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(29) to Post-Effective Amendment No. 56 to the
Registration Statement as filed on February 25, 2005.
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(38)
|
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Amendment to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(35) to Post-Effective Amendment No. 58 to the
Registration Statement as filed on June 23, 2005.
|
7
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(39
|
)
|
|
Amendment to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(35) to Post-Effective Amendment No. 102 to the
Registration Statement as filed on February 27, 2009.
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|
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(40
|
)
|
|
Amendment to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(36) to Post-Effective Amendment No. 104 to the
Registration Statement as filed on October 5, 2009.
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(41
|
)
|
|
Revised Schedule B to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(36) to Post-Effective Amendment
No. 97 to the Registration Statement as filed on February 28, 2008.
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(42
|
)
|
|
Revised Exhibit A to the Sub-Administration and Accounting Services Agreement is filed herewith as Exhibit (h)(42).
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(43
|
)
|
|
Amendment to the Sub-Administration and Accounting Services Agreement is incorporated herein by reference to Exhibit (h)(41) to Post-Effective Amendment No. 108 to the
Registration Statement as filed on February 26, 2010.
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(44
|
)
|
|
Amendment to the Sub-Administration and Accounting Services Agreement dated July 1, 2012 is filed herewith as Exhibit (h)(44).
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(i)
|
|
|
Opinion of Vedder Price P.C. to be filed by amendment.
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(j)
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|
Not applicable.
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(k)
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|
Not applicable.
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(l)
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|
|
Not applicable.
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(m)
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(1
|
)
|
|
Distribution and Services Plan pursuant to Rule 12b-1 is incorporated herein by reference to Exhibit (m)(1) to Post-Effective Amendment No. 33 to the Registration
Statement as filed on September 21, 2001.
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(2
|
)
|
|
Amended Schedule A to Distribution and Services Plan pursuant to Rule 12b-1 is incorporated herein by reference to Exhibit (m)(2) to Post-Effective Amendment
No. 36 to the Registration Statement as filed on December 28, 2001.
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(3
|
)
|
|
Distribution and Services Plan dated June 21, 2001, and amended December 20, 2001 and March 21, 2002, pursuant to Rule 12b-1 is incorporated herein by reference to
Exhibit (m)(3) to Post-Effective Amendment No. 43 to the Registration Statement as filed on July 3, 2002.
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(4
|
)
|
|
Revised Schedule A to Distribution and Services Plan pursuant to Rule 12b-1 is incorporated by reference to
Exhibit (m)(4) to Post-Effective Amendment No. 142 as filed on June 22, 2012.
|
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(5
|
)
|
|
Distribution and Services Plan dated June 20, 2002, pursuant to Rule 12b-1 is incorporated herein by reference to Exhibit (m)(4) to Post-Effective Amendment No. 43
to the Registration Statement as filed on July 3, 2002.
|
8
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(6
|
)
|
|
Amended and Restated Distribution and Services Plan pursuant to Rule 12b-1 is incorporated herein by reference to Exhibit (m)(2) to Post-Effective Amendment No. 33 to
the Registration Statement as filed on September 21, 2001.
|
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|
(7
|
)
|
|
Amended and Restated Distribution and Services Plan pursuant to Rule 12b-1 is incorporated herein by reference to Exhibit (m)(10) to Post-Effective Amendment No. 45 to
the Registration Statement as filed on October 28, 2002.
|
|
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(8
|
)
|
|
Revised Schedule A to Amended and Restated Distribution and Services Plan pursuant to Rule 12b-1 is filed herewith as Exhibit (m)(8).
|
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|
(9
|
)
|
|
Revised Schedule A to Amended and Restated Distribution and Services Plan pursuant to Rule 12b-1 is filed herewith as Exhibit (m)(9).
|
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|
(n)
|
|
|
(1
|
)
|
|
Multiple Class Plan Pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n) to Post-Effective Amendment No. 33 to the Registration Statement as filed
on September 21, 2001.
|
|
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(2
|
)
|
|
Amended Schedule A to Multiple Class Plan Pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n)(2) to Post-Effective Amendment No. 36 to the
Registration Statement as filed on December 28, 2001.
|
|
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|
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(3
|
)
|
|
Amended Schedule A to Multiple Class Plan Pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n)(3) to Post-Effective Amendment No. 43 to the
Registration Statement as filed on July 3, 2002.
|
|
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(4
|
)
|
|
Amended Multiple Class Plan Pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n)(4) to Post-Effective Amendment No. 43 to the Registration
Statement as filed on July 3, 2002.
|
|
|
|
|
|
|
(5
|
)
|
|
Amended Multiple Class Plan pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n)(5) to Post-Effective Amendment No. 45 to the Registration
Statement as filed on October 28, 2002.
|
|
|
|
|
|
|
(6
|
)
|
|
Amended Schedule A to Multiple Class Plan Pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n)(6) to Post-Effective Amendment No. 129 to the
Registration Statement as filed on May 27, 2011.
|
|
|
|
|
|
|
(7
|
)
|
|
Amended and Restated Multiple Class Plan pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n)(7) to Post-Effective Amendment No. 133 to the
Registration Statement as filed on July 13, 2011.
|
|
|
|
(o)
|
|
|
(1
|
)
|
|
Power of Attorney dated June 24, 2010 is incorporated herein by reference to Exhibit (o)(1) to Post-Effective Amendment No. 111 to the Registration Statement as
filed on August 6, 2010.
|
|
|
|
(p)
|
|
|
(1
|
)
|
|
Amended Code of Ethics of Todd-Veredus Asset Management LLC is filed herewith as Exhibit (p)(1).
|
9
|
|
|
|
|
|
|
(2)
|
|
Amended Code of Ethics of Aston Funds is incorporated herein by reference to Exhibit (p)(2) to Post-Effective Amendment No. 116 to the Registration Statement as filed
on October 20, 2010.
|
|
|
|
|
|
(3)
|
|
Amended Code of Ethics of River Road Asset Management, LLC is filed herewith as Exhibit (p)(3).
|
|
|
|
|
|
(4)
|
|
Amended and Restated Code of Ethics of Aston Asset Management, LP is incorporated herein by reference to Exhibit (p)(7) to Post-Effective Amendment No. 133 to the
Registration Statement as filed on July 13, 2011.
|
|
|
|
|
|
(5)
|
|
Amended Code of Ethics of Taplin, Canida & Habacht, LLC is incorporated herein by reference to Exhibit (p)(8) to Post-Effective Amendment No. 123 to the
Registration Statement as filed on February 28, 2011.
|
|
|
|
|
|
(6)
|
|
Amended Code of Ethics of Baring International Investment Limited incorporated herein by reference to Exhibit (p)(8) to Post-Effective Amendment No. 137 to the
Registration Statement as filed on December 30, 2011.
|
|
|
|
|
|
(7)
|
|
Code of Ethics of Smart Portfolios, LLC is incorporated herein by reference to Exhibit (p)(19) to Post-Effective Amendment No. 91 to the Registration Statement as filed
on December 31, 2007.
|
|
|
|
|
|
(8)
|
|
Amended Code of Ethics of TAMRO Capital Partners, LLC filed herewith as Exhibit (p)(8).
|
|
|
|
|
|
(9)
|
|
Amended Code of Ethics and Standards of Practice of Montag & Caldwell LLC is filed herewith as Exhibit (p)(9).
|
|
|
|
|
|
(10)
|
|
Code of Ethics of Lake Partners, Inc. is incorporated herein by reference to Exhibit (p)(17) to Post-Effective Amendment No. 103 to the Registration Statement as filed
on March 30, 2009.
|
|
|
|
|
|
(11)
|
|
Amended Code of Ethics of Herndon Capital Management, LLC is filed herewith as Exhibit (p)(11).
|
|
|
|
|
|
(12)
|
|
Amended Code of Ethics of DoubleLine Capital LP is filed herewith as Exhibit (p)(12).
|
|
|
|
|
|
(13)
|
|
Code of Ethics of Silvercrest Asset Management Group LLC is incorporated herein by reference to Exhibit (p)(22) of Post-Effective Amendment No. 136 to the Registration Statement
as filed on December 21, 2011.
|
|
|
|
|
|
(14)
|
|
Code of Ethics of Fairpointe Capital LLC is incorporated herein by reference to Exhibit (p)(18) to Post-Effective Amendment No. 137 to the Registration Statement as filed on
December 30, 2011.
|
|
|
|
|
|
(15)
|
|
Code of Ethics of Cornerstone Investment Partners, LLC is incorporated herein by reference to Exhibit (p)(19) to Post-Effective Amendment No. 137 to the Registration Statement as
filed on December 30, 2011.
|
10
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
Code of Ethics of Harrison Street Securities, LLC is incorporated herein by reference to Exhibit (p)(20) to Post-Effective Amendment No. 137 to the Registration Statement as
filed on December 30, 2011.
|
|
|
|
|
|
|
(17
|
)
|
|
Code of Ethics of Lee Munder Capital Group, LLC is incorporated herein by reference to Exhibit (p)(20) to Post-Effective Amendment No. 139 to the Registration Statement as filed
on February 29, 2012.
|
|
|
|
|
|
|
(18
|
)
|
|
Amended Code of Ethics of Anchor Capital Advisors LLC is filed herewith as Exhibit (p)(18).
|
ITEM 29. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 30.
INDEMNIFICATION.
Section 10.2 of the Registrants Trust Instrument provides as follows:
10.2
Indemnification
. The Trust shall indemnify each of its Trustees against all liabilities and expenses (including amounts paid
in satisfaction of judgments, in compromise, as fines and penalties, and as counsel fees) reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he may be
involved or with which he may be threatened, while as a Trustee or thereafter, by reason of his being or having been such a Trustee except with respect to any matter as to which he shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties, provided that as to any matter disposed of by a compromise payment by such person, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any
other expenses shall be provided unless the Trust shall have received a written opinion from independent legal counsel approved by the Trustees to the effect that if either the matter of willful misfeasance, gross negligence or reckless disregard of
duty, or the matter of bad faith had been adjudicated, it would in the opinion of such counsel have been adjudicated in favor of such person. The rights accruing to any person under these provisions shall not exclude any other right to which he may
be lawfully entitled, provided that no person may satisfy any right of indemnity or reimbursement hereunder except out of the property of the Trust. The Trustees may make advance payments in connection with the indemnification under this
Section 10.2, provided that the indemnified person shall have given a written undertaking to reimburse the Trust in the event it is subsequently determined that he is not entitled to such indemnification.
The Trust shall indemnify officers, and shall have the power to indemnify representatives and employees of the Trust, to the same extent
that Trustees are entitled to indemnification pursuant to this Section 10.2.
Insofar as indemnification for liability
arising under the 1933 Act may be permitted to trustees, officers and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in that Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
11
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in that Act and will be governed by the final adjudication of
such issue.
Section 10.3 of the Registrants Trust Instrument, also provides for the indemnification of
shareholders of the Registrant. Section 10.3 states as follows:
10.3
Shareholders
. In case any Shareholder or
former Shareholder of any Series shall be held to be personally liable solely by reason of his being or having been a shareholder of such Series and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder
(or his heirs, executors, administrators or other legal representatives or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets belonging to the applicable Series to be held
harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Series, shall, upon request by the Shareholder, assume the defense of any claim made against the Shareholder for any act or
obligation of the Series and satisfy any judgment thereon from the assets of the Series.
In addition, the Registrant
currently has a trustees and officers liability policy covering certain types of errors and omissions.
ITEM 31. BUSINESS
AND OTHER CONNECTIONS OF ADVISERS.
|
A.
|
ASTON ASSET MANAGEMENT, LP
|
Aston Asset Management, LP (formerly, Aston Asset Management LLC) (Aston) is a registered investment adviser providing
investment management services to the Registrant.
The directors and officers of Aston are set forth below. To the knowledge
of the Registrant, unless so noted, none of these individuals is or has been at any time during the past two fiscal years engaged in any other business, profession, vocation or employment of a substantial nature.
The information required by this Item 31 with respect to any other business, profession, vocation or employment of a substantial
nature engaged in by directors and officers of Aston during the past two years is incorporated by reference to Form ADV filed by Aston pursuant to the Investment Advisers Act of 1940 (SEC File Nos. 801-71598 and 801-66837).
ITEM 32. PRINCIPAL UNDERWRITER.
|
|
|
Item 32(a)
|
|
Foreside Funds Distributors LLC (the Distributor) serves as principal underwriter for the following investment companies registered under the Investment Company Act of
1940, as amended:
|
2.
|
E.I.I. Realty Securities Trust
|
7.
|
Kalmar Pooled Investment Trust
|
8.
|
Matthews International Funds
(d/b/a Matthews Asia Funds)
|
9.
|
Metropolitan West Funds
|
10.
|
The Motley Fool Funds Trust
|
12
11.
|
New Alternatives Fund, Inc.
|
12.
|
Old Westbury Funds, Inc.
|
14.
|
Stratton Multi-Cap Fund, Inc.
|
15.
|
Stratton Real Estate Fund, Inc.
|
16.
|
The Stratton Funds, Inc.
|
18.
|
Versus Global Multi-Manager Real Estate Income Fund LLC
|
|
|
|
Item 32(b)
|
|
The following are the Officers and Managers of the Distributor, the Registrants underwriter. The Distributors main business address is 899 Cassatt Road, 400 Berwyn Park,
Suite 110, Berwyn, PA 19312.
|
|
|
|
|
|
|
|
Name
|
|
Address
|
|
Position with Underwriter
|
|
Position with Registrant
|
Mark A. Fairbanks
|
|
Three Canal Plaza, Suite 100, Portland,
ME 04101
|
|
President and Manager
|
|
None
|
Richard J. Berthy
|
|
Three Canal Plaza, Suite 100, Portland,
ME 04101
|
|
Vice President, Treasurer and Manager
|
|
None
|
Bruno S. DiStefano
|
|
899 Cassatt Road, 400 Berwyn Park, Suite 110, Berwyn, PA 19312
|
|
Vice President
|
|
None
|
Ronald C. Berge
|
|
899 Cassatt Road, 400 Berwyn Park, Suite 110, Berwyn, PA 19312
|
|
Vice President
|
|
None
|
Susan K. Moscaritolo
|
|
899 Cassatt Road, 400 Berwyn Park, Suite 110, Berwyn, PA 19312
|
|
Vice President and Chief Compliance Officer
|
|
None
|
Lisa S. Clifford
|
|
Three Canal Plaza, Suite 100, Portland,
ME 04101
|
|
Vice President and Managing Director of Compliance
|
|
None
|
Jennifer E. Hoopes
|
|
Three Canal Plaza, Suite 100, Portland,
ME 04101
|
|
Secretary
|
|
None
|
Nishant Bhatnagar
|
|
Three Canal Plaza, Suite 100, Portland,
ME 04101
|
|
Assistant Secretary
|
|
None
|
|
|
|
Item 32(c)
|
|
Not applicable.
|
ITEM 33. LOCATION OF ACCOUNTS AND RECORDS.
All records described in Section 31(a) of the 1940 Act and the rules promulgated thereunder, are maintained at the following
locations:
Adviser
Aston
Asset Management, LP, 120 N. LaSalle Street, 25th Floor, Chicago, Illinois 60602
Subadvisers
Anchor Capital Advisors LLC, One Post Office Square, Suite 3850, Boston, MA 02109
13
Baring International Investment Limited, 155 Bishopsgate, London, England EC2M 3XY
Cornerstone Investment Partners, LLC, Phipps Tower, 3438 Peachtree Rd. NE, Suite 900, Atlanta, GA 30326
DoubleLine Capital LP, 333 S. Grand Avenue, Suite 1800 Los Angeles, California 90071
Fairpointe Capital LLC, One N. Franklin Street, Suite 3300, Chicago, Illinois 60606
Harrison
Street Securities LLC, 71 South Wacker Drive, Suite 3575, Chicago, IL 60606
Herndon Capital Management, LLC, 191 Peachtree Street, NE, Suite
2500, Atlanta, Georgia 30303
Lake Partners, Inc., 4 High Ridge Park, Suite 300, Stamford, Connecticut 06905
Lee Munder Capital Group, LLC, 200 Clarendon St., 28th Floor, Boston, MA 02116
Montag & Caldwell, LLC, 3455 Peachtree Road, N.E., Suite 1200 Atlanta, GA 30326
River
Road Asset Management, LLC, Meidinger Tower, Suite 1600, 462 South Fourth Street, Louisville, Kentucky 40202
Silvercrest Asset Management
Group LLC, 1330 Avenue of the Americas, 38th Fl., New York, NY 10019
Smart Portfolios, LLC, 17865 Ballinger Way NE, Seattle, Washington 98155
TAMRO Capital Partners, LLC, 1701 Duke Street, Suite 250, Alexandria, VA 22314
Taplin, Canida & Habacht, LLC, 1001 Brickell Bay Dr., Suite 2100, Miami, FL 33131
Todd-Veredus Asset Management LLC, National City Tower, 101 South Fifth Street, Suite 3100, Louisville, KY 40202
Custodian
The Bank of New York Mellon,
One Wall Street, New York, NY 10286
Sub-Administrator and Transfer, Redemption, Dividend Disbursing and Accounting Agent
BNY Mellon Investment Servicing (US), Inc., 4400 Computer Drive, Westborough, MA 01581 and 201 Washington Street Boston, MA 02109
Distributor
Foreside Funds
Distributors LLC, 400 Berwyn, 899 Cassatt Road, Berwyn, PA 19312
ITEM 34. MANAGEMENT SERVICES.
Not Applicable.
ITEM 35. UNDERTAKINGS.
Not Applicable.
14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the
Registrant, Aston Funds, has duly caused this post-effective amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, the State of Illinois on the 28th day of December,
2012.
|
|
|
ASTON FUNDS
|
|
|
By:
|
|
/s/ Kenneth C. Anderson
|
|
|
Kenneth C. Anderson, President
|
Pursuant to the requirements of the Securities Act of 1933, this post-effective amendment to the Registration
Statement of Aston Funds has been signed below by the following persons in the following capacity and on the 28th day of December, 2012.
|
|
|
|
|
Signature
|
|
Capacity
|
|
Date
|
|
|
|
Stuart D. Bilton*
|
|
Trustee
|
|
|
Stuart D. Bilton
|
|
|
|
|
|
|
|
William E. Chapman, II*
|
|
Independent Chairman, Trustee
|
|
|
William E. Chapman, II
|
|
|
|
|
|
|
|
Edward J. Kaier*
|
|
Trustee
|
|
|
Edward J. Kaier
|
|
|
|
|
|
|
|
Jeffrey S. Murphy*
|
|
Trustee
|
|
|
Jeffrey S. Murphy
|
|
|
|
|
|
|
|
Gregory T. Mutz*
|
|
Trustee
|
|
|
Gregory T. Mutz
|
|
|
|
|
|
|
|
Steven J. Paggioli*
|
|
Trustee
|
|
|
Steven J. Paggioli
|
|
|
|
|
|
|
|
Eric P. Rakowski*
|
|
Trustee
|
|
|
Eric P. Rakowski
|
|
|
|
|
|
|
|
Robert B. Scherer*
|
|
Trustee
|
|
|
Robert B. Scherer
|
|
|
|
|
|
|
|
Thomas R. Schneeweis*
|
|
Trustee
|
|
|
Thomas R. Schneeweis
|
|
|
|
|
15
|
|
|
|
|
Signature
|
|
Capacity
|
|
Date
|
|
|
|
/s/ Kenneth C. Anderson
|
|
President
|
|
December 28, 2012
|
Kenneth C. Anderson
|
|
|
|
|
|
|
|
/s/ Laura M. Curylo
|
|
Chief Financial Officer and Treasurer
|
|
December 28, 2012
|
Laura M. Curylo
|
|
|
|
|
|
|
|
/s/ Laura M. Curylo
|
|
Attorney-in-Fact
|
|
December 28, 2012
|
Laura M. Curylo
|
|
|
|
|
* Signed by Laura M. Curylo pursuant to a Power of Attorney filed previously filed as Exhibit (o)(1) of
Post-Effective Amendment No. 111 to the Registration Statement filed on August 6, 2010.
16
EXHIBIT INDEX
|
|
|
(d)(21)
|
|
Sub-Investment Advisory Agreement for Anchor Capital Advisors LLC
|
|
|
(e)(7)
|
|
Distribution Agreement between Aston Funds and Foreside Funds Distributors LLC
|
|
|
(e)(8)
|
|
Revised Schedule A to the Distribution Agreement
|
|
|
(g)(3)
|
|
Revised Exhibit A to the Custodian Services Agreement
|
|
|
(g)(7)
|
|
Amendment to the Custodian Services Agreement
|
|
|
(h)(13)
|
|
Revised Exhibit A to the Transfer Agency Services Agreement
|
|
|
(h)(16)
|
|
Amendment to the Transfer Agency Services Agreement
|
|
|
(h)(28)
|
|
Amendment No. 11 to the Administration Agreement
|
|
|
(h)(42)
|
|
Revised Exhibit A to the Sub-Administration and Accounting Services Agreement
|
|
|
(h)(44)
|
|
Amendment to the Sub-Administration and Accounting Services Agreement
|
|
|
(m)(8)
|
|
Revised Schedule A to the Amended and Restated Distribution and Services Plan
|
|
|
(m)(9)
|
|
Revised Schedule A to the Amended and Restated Distribution and Services Plan
|
|
|
(p)(1)
|
|
Amended Code of Ethics of Todd-Veredus Asset Management LLC
|
|
|
(p)(3)
|
|
Amended Code of Ethics of River Road Asset Management, LP
|
|
|
(p)(8)
|
|
Amended Code of Ethics of TAMRO Capital Partners, LLC
|
|
|
(p)(9)
|
|
Amended Code of Ethics of Montag & Caldwell, LLC
|
|
|
(p)(11)
|
|
Amended Code of Ethics of Herndon Capital Management, LLC
|
|
|
(p)(12)
|
|
Amended Code of Ethics of DoubleLine Capital LP
|
|
|
(p)(18)
|
|
Amended Code of Ethics of Anchor Capital Advisors LLC
|
17
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