KEELEY All Cap Value Fund

Investor Class (A) Shares: KACVX

Institutional Class (I) Shares: KACIX

Manager Commentary and Attribution [PDF]

Fund Commentary - 3rd Quarter 2017

To Our Shareholders:

For the quarter ended September 30, 2017, the Keeley All Cap Value Fund’s net asset value (“NAV”) per Class A share increased 5.78% vs 3.27% for the Russell 3000 Value. Year to date, the Fund has appreciated 5.91% versus an increase of 7.72% for the Russel 3000 Value Index.

Commentary

The momentum of positive economic growth in the second quarter of 2017 continued through the third quarter. Despite the economy showing sequentially improving ISM (“Institute for Supply Management”) and employment data, the market appeared concerned that the “party was over” as comments from global central banks regarding the end of global quantitative easing dominated headlines in July. Whether it was the Federal Reserve (the “Fed”) looking to initiate a runoff of its balance sheet, the Bank of England hinting at rate increases, or the European Central Bank suggesting it was nearing the end of its bond buying, investors grappled with the scenario of an end to “peak” quantitative easing. As if to telegraph proper expectations, the Fed has regularly conveyed its intent for “measured” rate increases, tempered according to future data or persistent low inflation. Yet, fears of higher rates and the corresponding economic impact led to a weakening dollar and a decline in the yield on the 10-year Treasury from 2.27% to 2.13% by the end of August. As in the second quarter, these concerns rewarded larger cap growth stocks with outperformance versus small cap value. Altogether though, we do not see this scenario as destabilizing, but rather supportive and indicative of a healthy, growing economy that will ultimately benefit the Fund and its holdings.

The global economy continues to demonstrate its first synchronized economic expansion in many years, supported by stabilizing commodity prices and steadily climbing industrial output. Second quarter GDP grew at an annualized rate of 3.1%, which was the strongest result in over two years. This GDP growth is being propelled by the consumer, with little assistance from corporate spending as business leaders patiently wait for clarity on the structure and timing of President Trump’s promised policy changes.

Ironically, it took the unfortunate force of a string of destructive hurricanes to give Washington a wake-up call that collaboration was necessary to move forward. Unexpected to Republican leadership, President Trump cut a deal with Democrats to extend the debt ceiling, avoiding any government shutdown and any risk in the government’s ability to fund disaster relief. It was a clear signal of willingness to ensure that government action does not derail economic expansion. Add to this the urgency from Washington to get a tax reform package passed before year end, and the market re-embraced the Trump reflation trade. A reversal of the prior two months ensued with small cap value stocks, as companies with the most exposure to a rebounding US economy and those with the highest corporate tax rates, outperformed larger cap, growth companies.

Capping the quarter, September’s reading for the ISM manufacturing index topped a thirteen year high with the rise in the new orders index being consistent with strong corporate earnings and capital spending. These events sketched the picture of a resilient economy in the face of hurricane disruption, spurring the markets steadily higher.

The Fund outperformed in the third quarter of 2017, and we believe that the bulk of such outperformance came from the market recognizing the value inherent in several of our restructuring driven holdings. As we have discussed in prior commentaries, the market’s current high valuation levels and its acceptance of rising rates appears to have created a more rational investing environment focused on fundamentals. This environment should be beneficial to active investing and our restructuring driven style. For example, the announcement of a business simplification plan to unlock hidden value propelled NRG Energy (NRG) by 48% in the quarter. In addition, Visteon (VC) was up 21% in the third quarter, as hurricane driven replacement demand is expected to boost short term auto sales, while longer term, the market is positively anticipating the separation of Visteon’s system and software business from its slower growth seat business. Versum Materials (VSM) was up 19% following a strong second quarter earnings report and appears to be benefitting from the increasing importance of its materials used in the engineering and production of new semiconductor chip designs. Opportunistically, we used the sharp selloff in Energy early in the third quarter to upgrade our holdings in the services space. We sold Patterson-UTI Energy (PTEN) which was down 15%, and replaced it with larger cap, more diversified Halliburton (HAL). Although we expect both companies to do well as the energy markets recover, we believe Haliburton is better capitalized and thus represents a quality upgrade. We continue to like the energy service sector and think the tight energy labor markets and equipment will lead to pricing power in the future. The Healthcare space also lagged a strong general market. AmerisourceBergen is experiencing some pricing pressure in generics. We believe this pressure is being overly discounted in the current stock price and continue to hold. Finally, Spectrum Brands (SPB) missed second quarter expectations due mainly to self-inflicted, short-term operational issues.

The top three performing stocks in the quarter were:

NRG Energy, Inc. (NRG) is an independent producer of electricity with a portfolio of 44 Gigawatts (GW) of conventional generation and 4.8GW of renewable assets, wholly-owned and through its controlling ownership in NRG Yield (NYLD).  As is the case with restructuring stories, NRG’s stock performance has been lumpy, yet overall very positive. The stock was a top contributor in the first quarter driven by the company’s debt and cost reduction plan exceeding expectations.

However, NRG was the third worst detractor in the second quarter despite activist investors taking an equity stake in the company, recommending two new Board members, and laying out a plan for additional cost savings above the $500 million already achieved. Short-term hiccups comprised of higher than expected advisory fees related to the formation of a Business Review Committee spurred by the activists as well as warmer weather caused the company to miss earnings. The stock rebounded strongly in the third quarter on news that the Board of Directors accepted a 3-Year Plan presented by the Business Review Committee. This plan entails further cost and debt reduction plus business simplification, essentially reinforcing our initial analysis that the stock price was trading at a significant discount to the value of NRG’s individual businesses.

Visteon Corporation (VC) is an auto original equipment supplier historically focused on developing electronic clusters and cockpits for light passenger vehicles. In June 2015, the company appointed a new CEO from Harman who is transforming the company into a leader in autonomous driving systems and software (ADAS). In addition to the company posting a strong third quarter due to better than expected sales and expanded EBITDA margin from cost reduction efforts, two of its peers, Autoliv (ALV) and Delphi (DLPH), announced plans to separate out their electronics businesses to highlight the hidden ADAS value. Demonstrating the value of ADAS, earlier this year, Samsung purchased Harman (HAR) and Intel (INTC) acquired Mobileye (MBLY) at lofty valuations to gain strategic footholds.

Versum Materials (VSM) is a global provider of critical, high purity, high performance materials for the semiconductor manufacturing industry. The company, which was spun off from Air Products in 2016, is benefitting from the increasing importance of materials used in the engineering and production of new semiconductor chip designs, as well as several technology trends (Internet of Things, Virtual Reality, Artificial Intelligence, etc.). These secular tailwinds should continue to provide a favorable backdrop for growth going forward. As a newly independent, publicly-traded company coming out of a much larger industrial gas parent, Versum is benefitting from greater investor awareness and the ability to reinvest its own capital. The company is a market leader with strong margins and cash flow generation enabling it to act as a consolidator in a fragmented industry further boosting growth and market share. This is the type of story that we seek to uncover in pursuing the Fund’s corporate change theme.

The bottom three performing stocks in the quarter were:

Patterson-UTI Energy, Inc. (PTEN) is a diversified oil service company specializing in land drilling and pressure pumping. Despite solid results in the second quarter of 2017, investors remained wary of the effects of a declining rig count in the face of volatile crude oil prices as the company is an operator of land rigs. Although Patterson-UTI has grown its pressure pumping business through the opportunistic acquisition of Seventy Seven Energy (post its emergence from bankruptcy) earlier in the year and a small bolt on acquisition late in the third quarter of 2017, we replaced PTEN with larger cap, more diversified Halliburton as mentioned earlier.

Spectrum Brands Holdings, Inc. (SPB) is a diversified consumer product company that produces batteries, personal care, pet care, home and garden, hardware and auto care products for retail customers. The company reported fiscal third quarter (ending June) results that were well below Street expectations due to several transitory factors which included the effects of plant consolidation projects in the company’s auto care and hardware segments plus some retailer destocking activity in home and garden and auto care due to unfavorable weather in key US markets. Spectrum is also exiting some unprofitable product lines which created a negative headwind for the company’s sales. Most of these issues should be cleared up in a quarter or two as the company did not adjust its fiscal year 2017 (ending Sept.) guidance despite the weak third quarter. In addition, with the sale of its stake in insurance company, Fidelity & Guaranty Life (FGL), HRG Group (HRG - 58% ownership in SPB) will work with Spectrum to clarify this ownership overhang while maximizing value for HRG shareholders and being earnings per share accretive for Spectrum.

AmerisourceBergen Corporation (ABC) is a leading provider of drug distribution and other related services designed to reduce healthcare costs and improve patient outcomes. The company lagged after reporting lackluster fiscal third quarter earnings (ending June) and reducing its revenue guidance for the balance of the year due to brand inflation.  In addition, investors were disappointed that AmerisourceBergen held fast to its previously stated view that generic drug pricing will decline in the high single digits and that generic drug deflation is not improving.  We, however, remain confident because of our view that AmerisourceBergen has a superior book of business compared to its peers, remains reasonably attractive from a valuation standpoint, and has several other growth businesses such as animal health.

Conclusion

We remain optimistic that our portfolio is positioned for attractive risk-adjusted returns across a complete market cycle and that active management remains the best situated vehicle to capitalize upon market dislocations in our investment space. We believe that our approach of identifying restructuring driven change with mismatched expectations to rectify intrinsic value discounts has historically served investors well. We appreciate the confidence and trust you have placed in us and thank you for investing along with us in 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, 2018.

This summary represents the views of the portfolio managers as of 09/30/17. 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 September 30, 2017 include EOG Resources, Inc. (4.71%), Visteon Corporation (4.15%), Air Lease Corporation (4.02%), NRG Energy, Inc. (3.96%), Abbott Laboratories (3.94%), Voya Financial, Inc. (3.78%),Howard Hughes Corporation (3.53%), Versum Materials, Inc. (3.27%), and Intel Corporation (3.12%), Shire PLC Sponsored ADR (3.07%).

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.