John Keeley Alternative Value Fund commentary for the fourth quarter 2014.

In the fourth calendar quarter of 2014, the KEELEY Alternative Value Fund (KALVX) fell 2.71 percent compared to a 6.09 percent increase for the Russell 2500 Value Index and a 4.93 percent rise in the S&P 500 Index. For the year ending December 31st, 2014 the Fund declined 8.15 percent compared to a 13.69 percent increase by the S&P 500 Index and a 7.11 percent rise by the Russell 2500 Value Index. Although equities rebounded from a challenging third quarter, a number of the issues that facilitated much of the recent volatility continue to exist. The volatility in the price of oil garnered the majority of the attention here in the U.S. although growing concerns about the efficacy of global growth deepened toward the end of the year. Global deflationary pressures have become the heart of these concerns and although the European Central Bank (ECB) has communicated their desire to consider Quantitative Easing (QE), it is difficult to project its effectiveness given the structural reforms needed at a local level. Despite the strong bounce in equities during the quarter, and especially in small caps which lagged for much of the year, broadly speaking, investors continued to rotate toward more defensive sectors. In the fourth quarter, the top performing sectors in the Russell 2500 Value Index were traditional safe havens such as utilities, health care, and consumer staples. The Fund trailed the Russell 2500 Value Index during the quarter due in large part to an overweight position in the lagging energy sector and poor stock selection in the financial sector by the long side of the portfolio. Holdings in the financial sector were negatively impacted by our lack of interest rate sensitive positions, as REITs did exceptionally well during the quarter. Our lack of REIT exposure is a consistent part of our process as we believe those types of companies do not possess the catalyst / corporate restructuring characteristics that we seek within our investment philosophy. As we mentioned earlier, our overweight position in energy had a negative impact on the portfolio. After making a positive contribution for much of 2014, our holdings succumbed to the pressure from the abrupt price decline in the commodity. Sub-advisor Broadmark Asset Management had difficulty hedging the portfolio in such a volatile environment with the market never really finding a consistent direction. Some of their hedges were ill-timed, and the subsequent removal of those hedges were also poorly timed which collectively detracted from the portfolio’s results during the quarter.

During the fall pullback, Broadmark was able to hedge some of that decline, but the rise in volatility in December was a challenge to performance as their risk-averse approach can at times inhibit performance.

Keeley Alternative Value Fund: Investment process

A brief look at the four pillars of our investment process show that while valuations may appear high when looking at median price-earnings multiples, but when adjusted for interest rates and inflation, they remain average. Global monetary factors are mixed. While rates remain low and policy is easy, credit spreads have widened due to the collapse in energy prices.

The short-, intermediate- and long-term sentiment models are all negative and have reached levels coincident with a pullback. Momentum is solidly negative on a short- and intermediate term basis, but the long-term models are still holding to the positive side. Typically when the intermediate-term model turns negative, there is potential for a 5%-10% correction. However, Broadmark believes the market is not in an oversold condition currently to indicate the end of the early January correction.

Currently they believe the collapse in oil is similar to what happened in the 1980s when oil went from $40 per barrel to $8 per barrel. Equity prices continued to move higher as the decline improved the economy. They believe the move in energy can be a positive for the U.S. economy and especially boost returns in consumer discretionary and retail stocks. However, concerns remain that excessive leverage could lead to a global margin call. Tactically Broadmark is watching credit conditions to adjust exposure. Every major market reaction in the past 50 years has been proceeded by widening credit spreads.

On the long-side of the Fund, going forward, we continue to expect volatility in equities until there is some stability in energy prices allowing investors to focus their attention on corporate fundamentals, where we remain optimistic. We are also enthusiastic with respect to one of our core investment themes, corporate spin-offs, which has been very fruitful of late and generated one of the most productive years ever with 60 spin-offs in 2014. This investment theme commonly produces a great amount of pricing inefciency and has historically been one of our best sources of alpha generation. We anticipate such a high level of productivity will create a strong group of investment candidates for our portfolios in 2015.

Thank you for your support of the Alternative Value Fund.

Keeley Alternative Value Fund: Performance attribution

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 Asset Management Corp. (“KAMCO”) 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 KAMCO 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 KAMCO. (3) For the purpose of assigning portfolio security holdings to a particular sector and/or industry, KAMCO 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 KAMCO 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, KAMCO may classify the security’s issuer according to its own

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