KEELEY All Cap Value Fund

Investor Class (A) Shares: KACVX

Institutional Class (I) Shares: KACIX

Manager Commentary and Attribution [PDF]

Fund Commentary - 4th Quarter 2016

The market entered the final quarter of a bullish 2016 with some trepidation. Stock market implications surrounding the U.S. presidential election and the Federal Reserve’s (Fed) interest rate hike raised investor caution. But the uncertainty was quickly dismissed and a risk-on rally ensued post the Trump victory. U.S. equity markets finished the year strong, with the S&P 500 Index gaining 12.0% for the year and 3.8% for the quarter. Small cap stocks were especially strong, and value outperformed growth across all market caps. Among U.S. equities, small cap value stocks led the way as the Russell 2000 Value Index gained 31.7% for the year, rising 14.1% in the fourth quarter. Midcap value stocks also finished the year in bullish fashion with the Russell Mid Cap Value Index closing the year up 20% and the quarter up 5.5%, while large caps, represented by the Russell 1000 Value Index, gained 17.3% for the year and was up 6.7% in the fourth quarter.

Energy and Financials were particularly strong in the fourth quarter. The Energy sector continued to rebound from last year’s plummeting oil prices as crude gained 11.4% in the fourth quarter (up 45% for the year) following OPEC’s decision to cut production. The Fed’s interest rate hike had a positive effect on Financials this quarter, though rising interest rates may pose challenges for high dividend yielding stocks in Telecom, Utilities, and Consumer Staples sectors. Given the uncertainty surrounding the Affordable Care Act (Obamacare) and potential reforms by the new administration, Health Care stocks struggled in the fourth quarter. In our view, the U.S. economy looks relatively healthy – GDP gained 3.5 percent in the third quarter (its best quarterly change in two years), and the unemployment rate closed 2016 at 4.7%. We are also encouraged by generally positive earnings growth and believe that companies should see positive growth and revenues in 2017.

For the fourth quarter of 2016, the Keeley All Cap Value Fund underperformed the Russell 3000 Value Index, gaining 5.83% versus 7.24%. Overall, the Fund experienced positive stock selection, whereas sector allocation weights hindered performance. The Fund benefited from an overweight and positive stock selection in Utilities and although the underweight in Financials hurt performance, strong stock selection in the sector made it a positive contributor this quarter. Additionally, a slight overweight and strong stock selection in Technology drove positive results, as did an underweight in the underperforming Consumer Staples sector. The Fund was also helped by its overweight and stock selection in Industrials, as well as avoiding Telecom.

Stock selection in the Materials sector made it the leading detractor from a sector perspective, despite the fact that the slight overweight generated positive results. In addition, the impact of rising interest rates had negative effects both in terms of the Fund’s overweight as well as stock selection in the Real Estate sector. The Fund also struggled in the lagging Consumer Discretionary and Health Care sectors, where moderate overweights and poor stock selection hurt performance. Stock selection in Energy also detracted from relative performance.

Given the strength in Financials this quarter, the Fund’s top contributors were intrinsically linked to this sector: Voya Financial (VOYA), Hanmi Financial Corporation (HAFC) and Air Lease Corporation (AL). All three companies would be beneficiaries of higher interest rates, a lower corporate tax rate, and less regulation.

Hanmi will also benefit from continued cost cutting and operational improvements at its core banking business. For Voya, the perceptive risk of their closed block variable annuity book, which management claims is fully hedged, would decline as rates rise. Though categorized as an industrial stock, we believe the market has begun to view Air Lease Corporation as a financial given its business in the purchase and leasing of commercial jet aircraft to airlines and is a beneficiary of higher interest rates.

Tribune Media Co. (TRCO) was the Fund’s leading detractor this quarter. Despite the company’s review and sale of non-core assets (i.e., real estate, Gracenote database, internet property CareerBuilder) to unlock value and return capital to shareholders, weak political advertising spending during this Presidential election year put pressure on the entire broadcasting group.

Given the volatile Health Care sector this quarter, the Fund’s position in Shire (SHPG) was also a leading detractor. Headline risk regarding potential pharmaceutical price controls has impacted the stock. With continued synergies from its acquisition of Baxalta and trading at 11x earnings, we feel the stock remains quite attractive.

Another leading detractor was Kennedy-Wilson Holdings (KW). Despite beating expectations for its third quarter report, was similarly impacted by macro concerns regarding the effects of higher interest rates on its real estate operations.

Over the course of 2016, we noticed a lot of mean reversion tendencies within the Fund. Sectors or stocks that had a rough month or quarter rebounded the following quarter, or vice versa. Similar behavior occurred between growth and value stocks as well as large caps versus small caps. We believe this type of activity is likely to persist in 2017, especially as markets grapple with the uncertainty of a Trump administration. Rising interest rates should benefit Financials, yet Health Care will likely be volatile given the uncertainty surrounding Obamacare. Looking forward, we are excited about the prospects for more corporate changes among U.S. value stocks.

Though we are disappointed by the Fund’s relative underperformance this quarter, we are encouraged by the amount of performance dispersion that took shape. Within the Russell 3000 Value Index, the worst-performing sector was Health Care, declining nearly 5%, while the top performing sector was Financials, up over 22%. We believe this dispersion is highly advantageous for active stock pickers, particularly when it comes to the inefficiencies in the small and mid cap value segments. In addition, when markets shun or avoid particular stocks due to the lack of readily available information, we believe in our investment process to identify those names that are undergoing some form of transformation. These transformations include ownership changes (spin-offs, divestitures, de-mutualizations), operating changes (new management, cost cutting, M&A) and capital restructurings (emergence from bankruptcy, refinancing, capital reallocation). We also look forward to taking advantage of shifts in the marketplace, including regulatory changes and industry consolidation.

As always, thank you for your support of the KEELEY All Cap Value Fund.

KEELEY All Cap Value Fund Standardized Performance Information

The performance reflected herein is for the Class A shares without load. "Without load" does not reflect the deduction of the maximum 4.50% sales fee (load), which reduces the performance quoted. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Most current performance data may be obtained at www.KeeleyFunds.com.

The Fund's adviser has contractually agreed to waive a portion of its management fee or reimburse the Fund if total ordinary operating expenses during the current fiscal year as a percentage of the Fund's average net assets exceed 1.39% for Class A Shares and 1.14% for Class I Shares. The waiver excludes expenses related to taxes, interest charges, dividend expenses incurred on securities that a Fund sells short, litigation and other extraordinary expenses, brokerage commissions and other charges relating to the purchase and sale of portfolio securities. The waiver is in effect through January 31, 2017.

This summary represents the views of the portfolio managers as of 12/31/16. Those views may change, and the Fund disclaims any obligation to advise investors of such changes. For the purpose of determining the Fund's holdings, securities of the same issuer are aggregated to determine the weight in the Fund. Portfolio holdings are subject to change without notice and are not intended as recommendations of individual securities.

Risks: Smaller and medium-sized company stocks are more volatile and less liquid than larger, more established company securities.

Prior to investing, investors should carefully consider the Fund's investment objective, risks, charges and expenses as detailed in the prospectus and summary prospectus. To obtain a prospectus or a summary prospectus, call us at 800.533.5344 or visit www.keeleyfunds.com. The prospectus/summary prospectus should be read carefully before investing.

Performance attribution is commonly used to measure the quality of the separate decisions that go into the management of an investment portfolio compared to a benchmark index. This analysis tries to isolate the effect and measure the return contribution of market allocation, which analyzes the positive/negative impact of a portfolio's allocation to groupings such as geographic regions or market sectors, and stock selection, which analyzes the positive/negative impact of the portfolio manager's security ownership and weighting decisions within a wider grouping. The performance attribution data in this quarterly commentary was prepared by Keeley-Teton Advisors, LLC ("Keeley-Teton") using the following constraints: (1) Fund portfolio holdings are as of the beginning of each day; index constituents are as of the end of the day. That means that the Fund's holdings are not included until the day after acquisition (when it is included in the portfolio as of the beginning of the next business day), and a portfolio holding that is sold is included in the analysis through the end of the day on which it is sold, and that the values at which securities are included in the analysis are the values as of the beginning of the day. For the index, securities are included at their values at the end of the day. (2) The securities values used in the analysis are the prices used by Keeley-Teton Advisors, LLC ("Keeley-Teton") in its internal records for the Fund and the prices used by the index provider for the benchmark index. If a price from either of those sources is unavailable, pricing information from FactSet is used. Pricing information from the index provider or from FactSet may differ from the pricing information used by Keeley-Teton Advisors, LLC ("Keeley-Teton"). (3) For the purpose of assigning portfolio security holdings to a particular sector and/or industry, Keeley-Teton Advisors, LLC ("Keeley-Teton") assigns the securities in accordance with the sector and industry classifications of the Global Industry Classification Standard (GICS) developed by MSCI and Standard and Poor's (to the extent available) as a primary source and FactSet (to the extent available) as a secondary source for this information. In the event Keeley-Teton Advisors, LLC ("Keeley-Teton") securities information vendors do not classify a security's issuer to a particular sector or industry or if the published classification appears to be incorrect, Keeley-Teton Advisors, LLC ("Keeley-Teton") may classify the security's issuer according to its own judgment, using other securities information vendors, the company description and other publicly available information about the company's peer group. Sector and/or industry classifications may change over time. The attribution information provided in this commentary includes summaries of attribution by market sector. Attribution is not precise and should be considered to be an approximation of the relative contribution of each of the sectors considered. The information on performance by sector reflects the aggregated gross return of the Fund's securities. Contributions to the Fund's performance by sector (computed as described above) were compared against the contributions to the aggregate return of the stocks comprising the index, by sector, as reported by FactSet Databases. Holdings returns for this commentary are calculated as total returns, which reflect any dividends or income earned during the period. Prior to 9/30/16, holdings returns were based upon price percentage change.

The Global Industry Classification Standard ("GICS") was developed by and is the exclusive property and a service mark of MSCI Inc. ("MSCI") and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") and is licensed for use by Keeley-Teton Advisors, LLC ("Keeley-Teton"). Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Data provided for performance attribution are estimates based on unaudited portfolio results. Performance contributors and detractors were not realized gains or losses for the Fund during the quarter. Market performance presented solely for informational purposes. The S&P 500 Index is designed to act as a barometer for the overall U.S. stock market. The index is unmanaged, consisting of 500 stocks that are chosen on the basis of market size, liquidity, and industry grouping. The S&P 500 is a market value weighted index with each stock’s weight in the index proportionate to its market value. The Russell 2000® Value Index is an unmanaged index that measures the performance of the small-cap value segment of the U.S. equity universe and includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000® Index is an unmanaged index that measures the performance of the smallest 2,000 companies by market capitalization of the Russell 3000® Index. The Russell 2500® Value Index is an unmanaged index that measures the performance of the small to mid-cap value segment of the U.S. equity universe and includes those Russell 2500 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2500® Index is an unmanaged index that measures the performance of the 2,500 smallest companies by market capitalization of the Russell 3000® Index. The Russell Midcap® Value Index is an unmanaged index that measures the performance of the mid-cap value segment of the U.S. equity universe and includes those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap® Index is an unmanaged index that measures the performance of the 800 smallest companies by market capitalization of the Russell 1000® Index. The Russell 1000® Index is an unmanaged index that measures the performance of the 1,000 largest companies by market capitalization of the Russell 3000® Index. The Russell 3000® Value Index is an unmanaged index that measures the performance of the broad value segment of the U.S. equity universe and includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 3000® Index is an unmanaged index that measures the performance of the 3,000 largest U.S. companies by market capitalization. These Index figures do not reflect any deduction for fees, expenses or taxes, and are not available for direct investment. Securities in the Fund may not match those in the indexes and performance of the Fund will differ. The KEELEY All Cap Value Fund, KEELEY Small-Mid Cap Value Fund, KEELEY Small Cap Value Fund, KEELEY Small Cap Dividend Value Fund, and KEELEY Mid Cap Dividend Value are distributed by G.distributors, LLC.

The top ten holdings of KACVX as of December 31, 2016 include Voya Financial, Inc. (5.28%), NRG Energy, Inc. (5.08%), Apache Corporation (4.12%), Air Lease Corporation (4.03%), EOG Resources, Inc. (3.92%), Equity Commonwealth (3.78%), Shire PLC Sponsored ADR (3.72%), Kennedy-Wilson Holdings, Inc. (3.68%), Howard Hughes Corporation (3.66%), and Generac Holdings, Inc. (3.61%).

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. The prospectus, which contains more complete information about this and other matters, should be read carefully before investing. To obtain a prospectus, please call 888-933-5391 or visit keeleyfunds.com.