GANNETT WELSH & KOTLER FUNDS, 497, 1996-12-10

GANNETT WELSH & KOTLER FUNDS
497, 1996-12-10

Previous: FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS INC, 424B5, 1996-12-10

Next: UGLY DUCKLING CORP, 4, 1996-12-10

PROSPECTUS
December 4, 1996

THE GANNETT WELSH & KOTLER FUNDS
222 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
(617) 236-8900

GW&K EQUITY FUND
- ------------------------------------------------------------------------------

The GW&K Equity Fund (the "Fund"), a separate series of The Gannett
Welsh & Kotler Funds, seeks long-term total return, from a combination of
capital growth and growth of income, by investing in a diversified portfolio of
equity securities.

Gannett Welsh & Kotler, Inc. (the "Adviser"), 222 Berkeley Street,
Boston, Massachusetts 02116, manages the Fund's investments. The Adviser is an
independent investment counsel firm that has advised individual and
institutional clients since 1974.

Prior to the offering of Fund shares to the public, the Fund will
exchange its shares for portfolio securities of GW&K Equity Fund, L.P. and, as a
result, such exchange may result in adverse tax consequences to future
shareholders of the Fund (see "Taxes").

This Prospectus sets forth concisely the information about the Fund
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated December 4, 1996 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. The Fund's address is 222 Berkeley Street, Boston,
Massachusetts 02116 and its telephone number is 1-888-495-3863. A copy of the
Statement of Additional Information can be obtained at no charge by calling or
writing the Fund.

TABLE OF CONTENTS
Expense Information........................................................2
Investment Objective, Investment Policies and
Risk Considerations......................................................3
How to Purchase Shares.....................................................8
Shareholder Services.......................................................9
How to Redeem Shares......................................................10
Exchange Privilege........................................................11
Dividends and Distributions...............................................12
Taxes.....................................................................13
Operation of the Fund.....................................................14
Distribution Plan.........................................................16
Calculation of Share Price................................................17
Performance Information...................................................17
- ----------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

EXPENSE INFORMATION

Shareholder Transaction Expenses

Sales Load Imposed on Purchases . . . . . . . . . . . . . . . None
Sales Load Imposed on Reinvested Dividends. . . . . . . . . . None
Exchange Fee. . . . . . . . . . . . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . . None*

* A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How
to Redeem Shares."

Annual Fund Operating Expenses (as a percentage of average net assets)

Management Fees After Waivers . . . . . . . . . . . .75%(A)
12b-1 Fees. . . . . . . . . . . . . . . . . . . . . .00%(B)
Other Expenses. . . . . . . . . . . . . . . . . . . .50%
-----
Total Fund Operating Expenses After Waivers . . . . 1.25%(C)

(A) Absent waivers of management fees, such fees would be 1.00%.

(B) The Fund may incur 12b-1 fees of up to .25% per annum. Long-term
shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted by the National
Association of Securities Dealers.

The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on estimated amounts for the current fiscal year. THE EXAMPLE BELOW SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.

Example

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period: 1 Year $13
3 Years 40

- 2 -

<PAGE>

INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS

The Fund is a series of The Gannett Welsh & Kotler Funds (the "Trust").
The investment objective of the Fund is to seek long-term total return, from a
combination of capital growth and growth of income, by investing in a
diversified portfolio of equity securities. Equity securities include common
stocks and securities convertible into common stock (such as convertible bonds,
convertible preferred stocks and warrants). The Fund is not intended to be a
complete investment program, and there is no assurance that its investment
objective can be achieved. The Fund's investment objective may be changed by the
Board of Trustees without shareholder approval, but only after notification has
been given to shareholders and after this Prospectus has been revised
accordingly. If there is a change in the Fund's investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.

The Fund pursues its investment objective by following flexible long-term
investment policies emphasizing companies with strong balance sheets and growth
potential. Securities will be purchased for the Fund's portfolio if, in the
Adviser's opinion, their prices are undervalued or attractively valued. Measures
such as price-to-earnings ratios and ratios of market price to book value in
comparison with similar measures for companies included in the Standard & Poor's
Index of 500 Common Stocks will be used to determine value. The Fund will also
seek out companies which have experienced earnings and dividend growth at, or
above, market norms. While the Fund intends to invest primarily in companies
which are leaders in their respective industries, the Fund will also invest in
less well known companies.

The Adviser intends to assemble a portfolio of securities diversified as
to company and industry. The Adviser will consider the desirability of
increasing or reducing the Fund's investment in the particular industry to which
the issuer of a security belongs in view of the Fund's goal of achieving
industry diversification. The Adviser expects that each economic sector within
the Standard & Poor's Index of 500 Common Stocks will be represented in the
Fund's portfolio.

Investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the Adviser. As a result, the return and net asset value
of the Fund will fluctuate.

- 3 -

<PAGE>

The Fund will invest primarily in domestic equity securities, although it
may invest in foreign companies through the purchase of sponsored American
Depository Receipts (certificates of ownership issued by an American bank or
trust company as a convenience to investors in lieu of the underlying shares
which such bank or trust company holds in custody) or other securities of
foreign issuers that are publicly traded in the United States. When selecting
foreign investments, the Adviser will seek to invest in securities that have
investment characteristics and qualities comparable to the kinds of domestic
securities in which the Fund invests. Investment in securities of foreign
issuers involves somewhat different investment risks from those affecting
securities of domestic issuers. In addition to credit and market risks,
investments in foreign securities involve sovereign risk, which includes local
political and economic developments, potential nationalization, withholding
taxes on dividend or interest payments and currency blockage. Foreign companies
may have less public or less reliable information available about them and may
be subject to less governmental regulation than U.S. companies. Securities of
foreign companies may be less liquid or more volatile than securities of U.S.
companies.

The Fund expects to invest primarily in securities currently paying
dividends, although it may buy securities that are not paying dividends but
offer prospects for growth of capital or future income. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
common stocks and securities convertible into common stock (such as convertible
bonds, convertible preferred stocks and warrants). The Fund may invest in
preferred stocks and bonds without regard to quality ratings assigned by rating
organizations such as Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Group ("S&P"). Lower-rated securities (commonly called "junk
bonds"), i.e. securities rated Baa or below by Moody's or BBB or below by S&P,
or the equivalent, will have speculative characteristics (including the
possibility of default or bankruptcy of the issuers of such securities, market
price volatility based upon interest rate sensitivity, questionable
creditworthiness and relative liquidity of the secondary trading market).
Because lower-rated securities have been found to be more sensitive to adverse
economic changes or individual corporate developments and less sensitive to
interest rate changes than higher-rated investments, an economic downturn could
disrupt the market for such securities and adversely affect the value of
outstanding bonds and the ability of issuers to repay principal and interest. In
addition, in a declining interest rate market, issuers of lower-rated securities
may exercise redemption or call provisions, which may force the Fund, to the
extent it owns such securities, to replace those securities with lower yielding
securities. This could result in a decreased return for investors. The Fund does
not currently intend to

- 4 -

<PAGE>

invest more than 5% of its net assets in lower-rated securities. If subsequent
to its purchase by the Fund, the reduction of a security's rating below Baa or
BBB causes the Fund to hold more than 5% of its net assets in lower-rated
securities, the Adviser will sell a sufficient amount of such lower-rated
securities, subject to market conditions and the Adviser's assessment of the
most opportune time for sale, in order to lower the percentage of the Fund's net
assets invested in such securities to 5% or less.

When the Adviser believes substantial price risks exist for common stocks
and securities convertible into common stocks because of uncertainties in the
investment outlook or when in the judgment of the Adviser it is otherwise
warranted in selling to manage the Fund's portfolio, the Fund may temporarily
hold for defensive purposes all or a portion of its assets in short-term
obligations such as bank debt instruments (certificates of deposit, bankers'
acceptances and time deposits), commercial paper rated A-3 or better by S&P or
Prime-3 or better by Moody's, shares of money market investment companies, U.S.
Government obligations having a maturity of less than one year or repurchase
agreements. The Fund may invest up to 10% of its total assets in shares of money
market investment companies. Investments by the Fund in shares of money market
investment companies may result in duplication of advisory, administrative and
distribution fees. The Fund will not invest more than 5% of its total assets in
securities of any single investment company and will not purchase more than 3%
of the outstanding voting securities of any investment company.

If, in addition to believing that substantial price risks exist for common
stocks and securities convertible into common stocks, the Adviser believes that
market indicators point to lower interest rates, the Fund may, in seeking to
achieve its investment objective, invest up to 35% of its net assets in U.S.
Government obligations of any maturity. "U.S. Government obligations" include
securities which are issued or guaranteed by the United States Treasury, by
various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. U.S. Treasury obligations are backed by the "full faith and credit"
of the United States Government. U.S. Treasury obligations include Treasury
bills, Treasury notes and Treasury bonds. U.S. Treasury obligations also include
the separate principal and interest components of U.S. Treasury obligations
which are traded under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Agencies and instrumentalities established by
the United States Government include the Federal Home Loan Banks, the Federal
Land Bank, the Government National Mortgage Association, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student
Loan Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal

- 5 -

<PAGE>

Intermediate Credit Bank, the Federal Financing Bank, the Federal Farm Credit
Banks, the Federal Agricultural Mortgage Corporation, the Financing Corporation
of America and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the United States Government while
others are supported only by the credit of the agency or instrumentality, which
may include the right of the issuer to borrow from the United States Treasury.
U.S. Government obligations are subject to price fluctuations based upon changes
in the level of interest rates, which will generally result in all those
securities changing in price in the same way, i.e. all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise.

The Fund may also engage in the following investment techniques, each of
which may involve certain risks:

REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the
Fund purchases a security and simultaneously commits to resell that security to
the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, the Fund could experience both delays
in liquidating the underlying security and losses. To minimize these
possibilities, the Fund intends to enter into repurchase agreements only with
its Custodian, banks having assets in excess of $10 billion and the largest and,
in the Adviser's judgment, most creditworthy primary U.S. Government securities
dealers. The Fund will enter into repurchase agreements which are collateralized
by U.S. Government obligations or other liquid high-grade debt obligations.
Collateral for repurchase agreements is held in safekeeping in the customer-only
account of the Fund's Custodian at the Federal Reserve Bank. At the time the
Fund enters into a repurchase agreement, the value of the collateral, including
accrued interest, will equal or exceed the value of the repurchase agreement
and, in the case of a repurchase agreement exceeding one day, the seller agrees
to maintain sufficient collateral so that the value of the underlying
collateral, including accrued interest, will at all times equal or exceed the
value of the repurchase agreement. The Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result thereof, more than
15% of the value of the net assets of the Fund would be invested in such
securities and other illiquid securities.

- 6 -

<PAGE>

to at least 100% of the current value of the loaned securities plus accrued
interest. Although the Fund does have the ability to make loans of all of its
portfolio securities, it is the present intention of the Trust, which may be
changed without shareholder approval, that such loans will not be made with
respect to the Fund if as a result the aggregate of all outstanding loans
exceeds one-third of the value of the Fund's total assets. Securities lending
will afford the Fund the opportunity to earn additional income because the Fund
will continue to be entitled to the interest payable on the loaned securities
and also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. The
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial rights. The Fund may pay reasonable fees in
connection with arranging such loans.

BORROWING AND PLEDGING. The Fund may borrow money from banks provided
that, immediately after any such borrowing, there is asset coverage of 300% for
all borrowings of the Fund. The Fund will not make any borrowing which would
cause its outstanding borrowings to exceed one-third of its total assets. The
Fund may pledge assets in connection with borrowings but will not pledge more
than one-third of its total assets. Borrowing magnifies the potential for gain
or loss on the portfolio securities of the Fund and, therefore, if employed,
increases the possibility of fluctuation in the Fund's net asset value. This is
the speculative factor known as leverage. The Fund's policies on borrowing and
pledging are fundamental policies which may not be changed without the
affirmative vote of a majority of its outstanding shares. It is the Fund's
present intention, which may be changed by the Board of Trustees without
shareholder approval, to limit its borrowings to 5% of its total assets only for
emergency or extraordinary purposes and not for leverage.

- 7 -

<PAGE>

expenses and transaction costs. High turnover may result in the Fund recognizing
greater amounts of income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to shareholders in order
to maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").

HOW TO PURCHASE SHARES

Your initial investment in the Fund ordinarily must be at least $2,000
($1,000 for tax-deferred retirement plans). The Fund may, in the Adviser's sole
discretion, accept certain accounts with less than the stated minimum initial
investment. Shares of the Fund are sold on a continuous basis at the net asset
value next determined after receipt of a purchase order by the Trust. Purchase
orders received by dealers prior to 4:00 p.m., Eastern time, on any business day
and transmitted to the Trust's transfer agent, MGF Service Corp., by 5:00 p.m.,
Eastern time, that day are confirmed at the net asset value determined as of the
close of the regular session of trading on the New York Stock Exchange on that
day. It is the responsibility of dealers to transmit properly completed orders
so that they will be received by MGF Service Corp. by 5:00 p.m., Eastern time.
Dealers may charge a fee for effecting purchase orders. Direct purchase orders
received by MGF Service Corp. by 4:00 p.m., Eastern time, are confirmed at that
day's net asset value. Direct investments received by MGF Service Corp. after
4:00 p.m., Eastern time, and orders received from dealers after 5:00 p.m.,
Eastern time, are confirmed at the net asset value next determined on the
following business day.

You may open an account and make an initial investment in the Fund by
sending a check and a completed account application form to MGF Service Corp.,
P.O. Box 5354, Cincinnati, Ohio 45201- 5354. Checks should be made payable to
the "GW&K Equity Fund." An account application is included in this Prospectus.

The Trust mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not issued. The Trust reserves the
rights to limit the amount of investments and to refuse to sell to any person.

Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, MGF Service Corp. and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone exchanges) made available to
investors.

- 8 -

<PAGE>

Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or MGF Service Corp. in the transaction.

You may also purchase shares of the Fund by wire. Please telephone MGF
Service Corp. (Nationwide call toll-free 888-495- 3863) for instructions. You
should be prepared to give the name in which the account is to be established,
the address, telephone number and taxpayer identification number for the
account, and the name of the bank which will wire the money.

Your investment will be made at the net asset value next determined after
your wire is received together with the account information indicated above. If
the Trust does not receive timely and complete account information, there may be
a delay in the investment of your money and any accrual of dividends. To make
your initial wire purchase, you are required to mail a completed account
application to MGF Service Corp. Your bank may impose a charge for sending your
wire. There is presently no fee for receipt of wired funds, but the Trust
reserves the right to charge shareholders for this service upon thirty days
prior notice to shareholders.

You may purchase and add shares to your account by mail or by bank wire.
Checks should be sent to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable or endorsed to the "GW&K Equity Fund."
Bank wires should be sent as outlined above. You may also make additional
investments at the Trust's offices at 222 Berkeley Street, Boston, Massachusetts
02116. Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such a requirement.

SHAREHOLDER SERVICES

Contact MGF Service Corp. (Nationwide call toll-free
888-495-3863) for additional information about the shareholder
services described below.

Automatic Withdrawal Plan

If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $100 each. There is no
charge for this service.

Tax-Deferred Retirement Plans

Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:

- 9 -

<PAGE>

-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit organizations
meeting certain requirements of the Internal Revenue Code

Direct Deposit Plans

Shares of the Fund may be purchased through direct deposit plans offered
by certain employers and government agencies. These plans enable a shareholder
to have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Fund.

Automatic Investment Plan

You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $100 under the plan. MGF Service Corp. pays
the costs associated with these transfers, but reserves the right, upon thirty
days written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.

HOW TO REDEEM SHARES

You may redeem shares of the Fund on each day that the Trust is open for
business by sending a written request to the Fund. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any eligible guarantor institution, including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.

- 10 -

<PAGE>

written notice, to change the processing fee. All charges will be deducted from
your account by redemption of shares in your account. Your bank or brokerage
firm may also impose a charge for processing the wire. In the event that wire
transfer of funds is impossible or impractical, the redemption proceeds will be
sent by mail to the designated account.

You may also redeem shares by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on the
shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.

You will receive the net asset value per share next determined after
receipt by MGF Service Corp. of your redemption request in the form described
above. Payment is made within three business days after tender in such form,
provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares of
the Fund by certified check or wire. At the discretion of the Trust or MGF
Service Corp., corporate investors and other associations may be required to
furnish an appropriate certification authorizing redemptions to ensure proper
authorization.

The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.

EXCHANGE PRIVILEGE

Shares of the Fund may be exchanged for shares of the other series of the
Trust, the GW&K Government Securities Fund, at net asset value. Shares of the
Fund may also be exchanged at net asset value for shares of the Short Term
Government Income Fund (a series of Midwest Trust), which invests in short-term
U.S. Government obligations backed by the "full faith and credit" of the United
States and seeks high current income consistent with protection of capital.
Shares of the Short Term Government Income Fund acquired via exchange may be
re-exchanged for shares of the Fund at net asset value.

- 11 -

<PAGE>

market activity), consider requesting your exchange by mail or by visiting the
Trust's offices at 222 Berkeley Street, Boston, Massachusetts 02116. An exchange
will be effected at the next determined net asset value after receipt of a
request by MGF Service Corp.

Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact MGF Service Corp. to obtain a
current prospectus and more information about exchanges among the funds.

DIVIDENDS AND DISTRIBUTIONS

The Fund expects to distribute substantially all of its net investment
income, if any, on an annual basis. The Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.

Distributions are paid according to one of the following options:

Share Option - income distributions and capital gains
distributions reinvested in additional
shares.

Income Option - income distributions and short-term
capital gains distributions paid in
cash; long-term capital gains
distributions reinvested in additional
shares.

Cash Option - income distributions and
capital gains distributions paid in
cash.

You should indicate your choice of option on your application. If no
option is specified on your application, distributions will automatically be
reinvested in additional shares. All distributions will be based on the net
asset value in effect on the payable date.

If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then current net
asset value and your account will be converted to the Share Option.

- 12 -

<PAGE>

TAXES

The Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. The Fund intends to distribute substantially all of its net
investment income and any realized capital gains to its shareholders.
Distributions of net investment income and net realized short-term capital
gains, if any, are taxable to investors as ordinary income. Dividends
distributed by the Fund from net investment income may be eligible, in whole or
in part, for the dividends received deduction available to corporations.
Distributions of net realized long-term capital gains are taxable as long-term
capital gains regardless of how long you have held your Fund shares. Redemptions
of shares of the Fund are taxable events on which a shareholder may realize a
gain or loss.

It is anticipated that, prior to the offering of shares of the Fund to the
public, the Fund will exchange its shares for portfolio securities of GW&K
Equity Fund, L.P. (the "Partnership"), a Delaware limited partnership, after
which the Partnership would dissolve and distribute Fund shares received pro
rata to its partners. Following this exchange transaction (the "Exchange"),
partners of the Partnership will constitute all of the shareholders of the Fund,
except for shares representing seed capital contributed to the Fund by Harold G.
Kotler and Edward B. White. The Exchange is intended to qualify as a tax-free
reorganization, with no gain or loss to be recognized by the Partnership or its
partners. The Exchange may result in adverse tax consequences to future
shareholders of the Fund. As a result of this Exchange, the Fund may acquire
securities that have appreciated in value from the date they were originally
acquired by the Partnership. If these appreciated securities were to be sold by
the Fund after the Exchange, the amount of the gain would be taxable to future
shareholders as well as to shareholders who received Fund shares in the
Exchange. The effect of this for future shareholders would be to immediately tax
them on a distribution that represents a return of the purchase price of their
shares rather than an increase in the value of their investment. The effect on
shareholders who received Fund shares in the Exchange would be to reduce their
potential liability for tax on capital gains by spreading such liability over a
larger asset base. As of June 30, 1996, the amount of unrealized capital gains
of the Partnership was $6,187,300 (or 34% of the Partnership's net assets as of
that date).

- 13 -

<PAGE>

taxes on distributions. Shareholders should consult their tax advisors about the
tax effect of distributions and withdrawals from the Fund and the use of the
Automatic Withdrawal Plan and the Exchange Privilege. The tax consequences
described in this section apply whether distributions are taken in cash or
reinvested in additional shares. See "Taxes" in the Statement of Additional
Information for further information.

OPERATION OF THE FUND

The Fund is a diversified series of The Gannett Welsh & Kotler Funds, an
open-end management investment company organized as a Massachusetts business
trust on April 30, 1996. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.

The Trust retains Gannett Welsh & Kotler, Inc., 222 Berkeley Street,
Boston, Massachusetts 02116 (the "Adviser"), to manage the Fund's investments.
The Adviser is an independent investment counsel firm that has advised
individual and institutional clients since 1974. The controlling shareholders of
the Adviser are Harold G. Kotler and Benjamin H. Gannett. The Adviser has not
previously provided investment advisory services to a registered investment
company. The Fund pays the Adviser a fee, payable monthly, at the annual rate of
1.00% of the average value of its daily net assets.

As of the date of this Prospectus, Harold G. Kotler and Edward B. White
are the sole shareholders of the Fund.

Mr. White, a Principal and Senior Vice President of the Adviser, is
primarily responsible for managing the Fund's portfolio. Mr. White has been
employed by the Adviser since 1989.

In addition to the advisory fee, the Fund is responsible for the payment
of all operating expenses, including fees and expenses in connection with
membership in investment company organizations, brokerage fees and commissions,
legal, auditing and accounting expenses, expenses of registering shares under
federal and state securities laws, expenses related to the distribution of the
Fund's shares (see "Distribution Plan"), insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, transfer agent,
administrator, and accounting and pricing agent of the Fund, fees and expenses
of members of the Board of Trustees who are not interested persons of the Trust,
the cost of preparing and distributing prospectuses, statements, reports and
other documents to shareholders, expenses of shareholders' meetings and proxy
solicitations, and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Fund may be a party and indemnification of the
Trust's officers and Trustees with respect thereto.

- 14 -

<PAGE>

The Trust has retained MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio,
to serve as the Fund's transfer agent, dividend paying agent and shareholder
service agent. MGF Service Corp. is a subsidiary of Leshner Financial, Inc., of
which Robert H. Leshner is the controlling shareholder.

MGF Service Corp. also provides accounting and pricing services to the
Fund. MGF Service Corp. receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.

In addition, MGF Service Corp. has been retained to provide administrative
services to the Fund. In this capacity, MGF Service Corp. supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange Commission and state securities
authorities. The Fund pays MGF Service Corp. a fee, payable monthly, for these
administrative services at the annual rate of .10% of the average value of its
daily net assets up to $100,000,000, .075% of such assets from $100,000,000 to
$200,000,000 and .05% of such assets in excess of $200,000,000; provided,
however, that the minimum fee is $1,000 per month.

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may consider sales of shares of the Fund
as a factor in the selection of brokers and dealers to execute portfolio
transactions of the Fund.

Shares of the Fund have equal voting rights and liquidation rights, and
are voted in the aggregate and not by series except in matters where a separate
vote is required by the Investment Company Act of 1940 or when the matter
affects only the interest of a particular series. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.

- 15 -

<PAGE>

DISTRIBUTION PLAN

Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
has adopted a plan of distribution (the "Plan") under which the Fund may
directly incur or reimburse the Adviser for certain distribution-related
expenses, including payments to securities dealers and others who are engaged in
the sale of shares of the Fund and who may be advising investors regarding the
purchase, sale or retention of such shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by MGF Service Corp.; expenses of
formulating and implementing marketing and promotional activities, including
direct mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than existing
shareholders of the Fund; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of the Fund's shares.

The annual limitation for payment of expenses pursuant to the Plan is .25%
of the Fund's average daily net assets. Unreimbursed expenditures will not be
carried over from year to year. In the event the Plan is terminated by the Fund
in accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the date the Plan terminates.

Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by regulatory authorities, and the
overall return to those shareholders availing themselves of the bank services
will be lower than to those shareholders who do not. The Fund may from time to
time purchase securities issued by banks which provide such services; however,
in selecting investments for the Funds, no preference will be shown for such
securities.

- 16 -

<PAGE>

CALCULATION OF SHARE PRICE

On each day that the Trust is open for business, the share price (net
asset value) of the shares of the Fund is determined as of the close of the
regular session of trading on the New York Stock Exchange, currently 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.

U.S. Government obligations are valued at their most recent bid prices as
obtained from one or more of the major market makers for such securities. Other
portfolio securities are valued as follows: (1) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the average of the highest current independent bid and lowest
current independent offer, (2) securities traded in the over-the-counter market,
and which are not quoted by NASDAQ, are valued at the average of the highest
current independent bid and lowest current independent offer as of the close of
the regular session of trading on the New York Stock Exchange on the day the
securities are being valued, (3) securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market, and (4) securities (and other assets)
for which market quotations are not readily available are valued at their fair
value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.

PERFORMANCE INFORMATION

From time to time, the Fund may advertise its "average annual total
return." Average annual total return figures are based on historical earnings
and are not intended to indicate future performance.

- 17 -

<PAGE>

periods will be stated in an advertisement) that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment. The calculation of "average annual total return" assumes the
reinvestment of all dividends and distributions. The Fund may also advertise
total return (a "nonstandardized quotation") which is calculated differently
from "average annual total return". A nonstandardized quotation of total return
may be a cumulative return which measures the percentage change in the value of
an account between the beginning and end of a period, assuming no activity in
the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation of total return may also indicate
average annual compounded rates of return over periods other than those
specified for "average annual total return." A nonstandardized quotation of
total return will always be accompanied by the Fund's "average annual total
return" as described above.

From time to time the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc.("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average, the Standard & Poor's 500
Stock Index, the Value Line Composite Index, the NASDAQ Composite Index and the
Russell 2000 Index. In connection with a ranking, the Fund may provide
additional information, such as the particular category of funds to which the
ranking relates, the number of funds in the category, the criteria upon which
the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. The Fund may also present its performance and other
investment characteristics, such as volatility or a temporary defensive posture,
in light of the Adviser's view of current or past market conditions or
historical trends.

PRIOR PERFORMANCE OF GW&K EQUITY FUND, L.P. The investment performance
illustrated below represents, from August 1, 1991 forward, the performance for
the GW&K Equity Fund, L.P. (the "Partnership"), which was managed by the Adviser
with investment objectives, policies and strategies substantially similar to
those to be employed by the Adviser in managing the Fund. It should be noted
that the Partnership is not registered under the Investment Company Act of 1940;
if the Partnership had been so registered, performance may have been adversely
affected.

- 18 -

<PAGE>

While the Adviser will employ for the Fund investment objectives and
strategies that are substantially similar to those that were employed by the
Adviser in managing the Partnership, the Adviser, in managing the Fund, may be
subject to certain restrictions on its investment activities to which, as
investment adviser to the Partnership, it was not previously subject. Examples
include limits on the percentage of assets invested in securities of issuers in
a single industry, and requirements on distributing income to shareholders.
Operating expenses will be incurred by the Fund which were not incurred by the
Partnership.

The following performance data, which represents the prior performance
data of the Partnership and not the prior performance of the Fund, should not be
relied upon by investors as an indication of future performance of the Fund.
This performance data measures the percentage change in the value of an account
in the Partnership between the beginning and end of a period and is net of all
expenses incurred by the Partnership.

PERIODIC RATES OF RETURN

GW&K S&P Russell
Equity 500 2000
Period Fund, L.P. Index Index

August 1 -
December 31, 1991 10.86%* 9.09%* 10.47%*

Year Ended
December 31, 1992 6.19% 7.61% 18.40%

Year Ended
December 31, 1993 18.34% 10.12% 18.90%

Year Ended
December 31, 1994 -4.07% 1.31% -3.20%

Year Ended
December 31, 1995 40.21% 37.50% 26.20%

January 1 -
June 30, 1996 10.81%* 10.04%* 10.36%*

August 1, 1991
through June 30,1996
- --------------------
Annualized Return 15.73% 14.66% 15.97%
Cumulative Return 107.63% 98.15% 109.72%

* Not Annualized

- 19 -

<PAGE>

The S&P 500 Index is an unmanaged index of 500 stocks, the purpose of
which is to portray the pattern of common stock price movement. The Russell 2000
Index, representing approximately 11% of the U.S. equity market, is an unmanaged
index comprised of the 2,000 smallest U.S. domiciled publicly-traded common
stocks in the Russell 3000 Index.

- 20 -

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS
222 Berkeley Street
Boston, Massachusetts 02116
Nationwide: (Toll-Free) 888-495-3863

BOARD OF TRUSTEES
Arlene Zoe Aponte-Gonzalez
Benjamin H. Gannett
Morton S. Grossman
Harold G. Kotler
Timothy P. Neher
Josiah A. Spaulding, Jr.
Allan Tofias

INVESTMENT ADVISER
GANNETT WELSH & KOTLER, INC.
222 Berkeley Street
Boston, Massachusetts 02116
(617) 236-8900

TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

Shareholder Service
Nationwide: (Toll-Free) 888-495-3863

Rate Line
Nationwide: (Toll-Free) 800-852-4052

No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the Fund to sell
shares in any State to any person to whom it is unlawful for the Fund to make
such offer in such State.

- 21 -

<PAGE>
ACCOUNT APPLICATION
<TABLE>
<CAPTION>
<S> <C> <C>
Please mail account application to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354 ACCOUNT NO. G2-___________________________
(For Fund Use Only)
THE GANNETT WELSH
& KOTLER FUNDS: FOR BROKER/DEALER USE ONLY
GW&K EQUITY FUND Firm Name:_______________________________________
Home Office Address:_____________________________
Branch Address:__________________________________
Rep Name & No.:__________________________________
Rep Signature:___________________________________
Initial Investment of $_________________________ ($2,000 minimum)

o Check or draft enclosed payable to the Fund.

o Bank Wire From: _______________________________________________________________________________________________________________

o Exchange From: _______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)

ACCOUNT NAME S.S. #/TAX I.D.#

________________________________________________________________________________ ______________________________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)

________________________________________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other ___________________

ADDRESS PHONE

___________________________________________________________________________________________________ ( )_______________________
Street or P.O. Box Business Phone

___________________________________________________________________________________________________ ( )_______________________
City State Zip Home Phone

Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship presumed) o Partnership o Corporation
o Trust o Custodial o Non-Profit o Other

Occupation and Employer Name/Address______________________________________________________________________________________________

Are you an associated person of an NASD member? o Yes o No

TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed above is my
correct number. Check box if appropriate:
o I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.

DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions paid in cash.

SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal age,
and that he has full authority and legal capacity for himself or the organization named below, to make this investment and to use
the options selected above. The investor appoints MGF Service Corp. as his agent to enter orders for shares whether by direct
purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of the Trust for credit
to the investor's account and to surrender for redemption shares held in the investor's account for payment of service charges
incurred by the investor. The investor further agrees that MGF Service Corp. can cease to act as such agent upon ten days' notice in
writing to the investor at the address contained in this Application. The investor hereby ratifies any instructions given pursuant
to this Application and for himself and his successors and assigns does hereby release the Trust, Gannett Welsh & Kotler, Inc.,
MGF Service Corp., and their respective officers, employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, MGF Service Corp., nor their respective affiliates will be liable for complying
with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or MGF Service Corp., or both, will employ
reasonable procedures to determine that telephone instructions are genuine. If the Trust and/or MGF Service Corp. do not employ such
procedures, they may be liable for losses due to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon telephone instructions, providing written confirmation
of the transactions and/or tape recording telephone instructions. The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid backup withholding.

____________________________________________________________________ _______________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any

____________________________________________________________________ _______________________________________________________
Title of Corporate Officer, Trustee, etc. Date

NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE THE RESOLUTION FORM ON THE REVERSE
SIDE. UNLESS OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
<PAGE>
AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND)
The Automatic Investment Plan is available for all established accounts of The Gannett Welsh & Kotler Funds. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $100.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $100.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.

Please invest $ _________________per month in the GW&K Equity Fund ABA Routing Number _________________________________

FI Account Number __________________________________

o Checking Account o Savings Account

______________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
______________________________________________________________________ o the 15th day of each month
City State o both the 15th and last business day

X_____________________________________________________________________ X___________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)

(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's records.)

PLEASE ATTACH A VOIDED CHECK FOR THE AUTOMATIC INVESTMENT PLAN.

INDEMNIFICATION TO DEPOSITOR'S BANK
In consideration of your participation in a plan which MGF Service Corp. ("MGF") has put into effect, by which amounts,
determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by MGF, MGF hereby agrees:
MGF will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment by you
of any amount drawn by the Fund to their own order on the account of your depositor or from any liability to any person whatsoever
arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such amount. MGF will
defend, at its own cost and expense, any action which might be brought against you by any person or persons whatsoever because of
your actions taken pursuant to the foregoing request or in any manner arising by reason of your participation in this arrangement.
MGF will refund to you any amount erroneously paid by you to the Fund if the claim for the amount of such erroneous payment
is made by you within six (6) months from the date of such erroneous payment; your participation in this arrangement and that
of the Fund may be terminated by thirty (30) days written notice from either party to the other.

AUTOMATIC WITHDRAWAL PLAN (COMPLETE FOR WITHDRAWALS FROM THE FUND)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day
of the month of _________________________.

Please Indicate Withdrawal Schedule (Check One):

o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o ANNUALLY -- Please make withdrawals on the last business day of the month of: ____________________ .

Please Select Payment Method (Check One):

o EXCHANGE: Please exchange the withdrawal proceeds into another account number: ____ ____-- ____ ____ ____ ____
o CHECK: Please mail a check for my withdrawal proceeds to the mailing address on this account.
o ACH TRANSFER: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below. I
understand that the transfer will be completed in two to three business days and that there is no charge.
o BANK WIRE: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will be
completed in one business day and that there is an $8.00 fee.

PLEASE ATTACH A VOIDED ________________________________________________________________________________________________
CHECK FOR ACH OR BANK WIRE Bank Name Bank Address

________________________________________________________________________________________________
Bank ABA# Account # Account Name

o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my withdrawal proceeds to the mailing address below:

Name of payee______________________________________________________________________________________________________________________

Please send to:____________________________________________________________________________________________________________________
Street address City State Zip

RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of The Gannett Welsh & Kotler Funds (the Trust) and that
____________________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to appoint
MGF Service Corp. as redemption agent of the corporation or organization for shares of the applicable series of the Trust, to
establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges
elected on the Application.
CERTIFICATE

I hereby certify that the foregoing resolutions are in conformity with the Charter and Bylaws or other empowering documents of the

____________________________________________________________________________________________________________________________________
(Name of Organization)

incorporated or formed under the laws of____________________________________________________________________________________________
(State)

and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held
on___________________________________ at which a quorum was present and acting throughout, and that the same are now in full force
and effect.
I further certify that the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.

NAME TITLE

___________________________________________________________ _____________________________________________________________

Witness my hand and seal of the corporation or organization this _____ day of ___________________________, 19___

___________________________________________________________ _____________________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)

*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed by
another officer.
</TABLE>
<PAGE>

PROSPECTUS
December 4, 1996

THE GANNETT WELSH & KOTLER FUNDS
222 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
(617) 236-8900

GW&K GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------

The GW&K Government Securities Fund (the "Fund"), a separate series of
The Gannett Welsh & Kotler Funds, seeks total return, through both income and
capital appreciation. The Fund will invest primarily in obligations issued or
guaranteed as to principal and interest by the United States Government, its
agencies or instrumentalities.

TABLE OF CONTENTS

Expense Information...........................................................2
Investment Objective, Investment Policies and
Risk Considerations.........................................................3
How to Purchase Shares........................................................8
Shareholder Services..........................................................9
How to Redeem Shares.........................................................10
Exchange Privilege...........................................................11
Dividends and Distributions..................................................11
Taxes........................................................................12
Operation of the Fund........................................................12
Distribution Plan............................................................14
Calculation of Share Price...................................................14
Performance Information......................................................15
- -------------------------------------------------------------------------------

EXPENSE INFORMATION

Shareholder Transaction Expenses

* A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How
to Redeem Shares."

Annual Fund Operating Expenses (as a percentage of average net assets)

Management Fees After Waivers . . . . . . . . . . . .50%(A)
12b-1 Fees. . . . . . . . . . . . . . . . . . . . . .00%(B)
Other Expenses. . . . . . . . . . . . . . . . . . . .50%
----
Total Fund Operating Expenses After Waivers . . . . 1.00%(C)

(A) Absent waivers of management fees, such fees would be .75%.

Example

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period: 1 Year $10
3 Years 32

- 2 -

<PAGE>

INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS

The Fund is a series of The Gannett Welsh & Kotler Funds (the "Trust").
The investment objective of the Fund is to seek total return, through both
income and capital appreciation. The Fund is not intended to be a complete
investment program, and there is no assurance that its investment objective can
be achieved. The Fund's investment objective may be changed by the Board of
Trustees without shareholder approval, but only after notification has been
given to shareholders and after this Prospectus has been revised accordingly. If
there is a change in the Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial position and needs. Unless otherwise indicated, all
investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.

Under normal market conditions, at least 65% of the Fund's total assets
will be invested in U.S. Government obligations. "U.S. Government obligations"
include securities which are issued or guaranteed by the United States Treasury,
by various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. U.S. Treasury obligations are backed by the "full faith and credit"
of the United States Government. U.S. Treasury obligations include Treasury
bills, Treasury notes and Treasury bonds. U.S. Treasury obligations also include
the separate principal and interest components of U.S. Treasury obligations
which are traded under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Agencies and instrumentalities established by
the United States Government include the Federal Home Loan Banks, the Federal
Land Bank, the Government National Mortgage Association, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student
Loan Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing Bank,
the Federal Farm Credit Banks, the Federal Agricultural Mortgage Corporation,
the Financing Corporation of America and the Tennessee Valley Authority. Some of
these securities are supported by the full faith and credit of the United States
Government while others are supported only by the credit of the agency or
instrumentality, which may include the right of the issuer to borrow from the
United States Treasury.

The Fund may invest up to 35% of its total assets in preferred stocks
and debt securities which are not U.S. government obligations (including
corporate debt securities, bank debt instruments, mortgage-backed and
asset-backed securities and U.S. dollar-denominated fixed-income securities
issued by foreign

- 3 -

<PAGE>

issuers, foreign branches of U.S. banks and U.S. branches of foreign banks)
without regard to quality ratings assigned by rating organizations such as
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group
("S&P").
Lower-rated debt securities (commonly called "junk bonds"), i.e.
securities rated Baa or below by Moody's or BBB or below by S&P, or the
equivalent, may be subject to certain risk factors to which other securities are
not subject to the same degree. An economic downturn tends to disrupt the market
for lower-rated bonds and adversely affect their values. Such an economic
downturn may be expected to result in increased price volatility of lower-rated
bonds and of the value of the Fund's shares, and an increase in issuers'
defaults on such bonds. Also, many issuers of lower-rated bonds are
substantially leveraged, which may impair their ability to meet their
obligations. In some cases, the securities in which the Fund invests are
subordinated to the prior payment of senior indebtedness, thus potentially
limiting the Fund's ability to recover full principal or to receive payments
when senior securities are in default. The credit rating of a security does not
necessarily address its market value risk. Also, ratings may, from time to time,
be changed to reflect developments in the issuer's financial condition.
Lower-rated securities held by the Fund have speculative characteristics which
are apt to increase in number and significance with each lower rating category.
When the secondary market for lower-rated bonds becomes increasingly illiquid,
or in the absence of readily available market quotations for lower-rated bonds,
the relative lack of reliable, objective data makes the responsibility of the
Trustees to value such securities more difficult, and judgment plays a greater
role in the valuation of portfolio securities. Also, increased illiquidity of
the market for lower-rated bonds may affect the Fund's ability to dispose of
portfolio securities at a desirable price. In addition, if the Fund experiences
unexpected net redemptions, it could be forced to sell all or a portion of its
lower-rated bonds without regard to their investment merits, thereby decreasing
the asset base upon which the Fund's expenses can be spread and possibly
reducing the Fund's rate of return. Also, prices of lower-rated bonds have been
found to be less sensitive to interest rate changes and more sensitive to
adverse economic changes and individual corporate developments than more highly
rated investments. Certain laws or regulations may have a material effect on the
Fund's investments in lower-rated bonds.

The Fund does not currently intend to invest more than 35% of its net
assets in lower-rated debt securities. If subsequent to its purchase by the
Fund, the reduction of a security's rating below Baa or BBB causes the Fund to
hold more than 35% of its net assets in lower-rated securities, the Adviser will
sell a sufficient amount of such lower-rated securities, subject to

- 4 -

<PAGE>

market conditions and the Adviser's assessment of the most opportune time for
sale, in order to lower the percentage of the Fund's net assets invested in such
securities to 35% or less.

There is no limit on the maturity of the securities in which the Fund
may invest. The average maturity of the Fund may be as high as 20 years or may
be shorter depending on the Adviser's assessment of the current and future
interest rate environment. Securities with longer maturities generally offer
both higher yields and greater exposure to market fluctuation from changes in
interest rates. Consequently, to the extent the Fund is significantly invested
in securities with longer maturities, investors in the Fund should be aware that
there is a possibility of greater fluctuation in the Fund's net asset value.

Investments in debt securities are subject to inherent market risks and
fluctuations in value due to changes in earnings, economic conditions, quality
ratings and other factors beyond the control of the Adviser. Debt securities are
subject to price fluctuations based upon changes in the level of interest rates,
which will generally result in all those securities changing in price in the
same way, i.e., the securities experiencing appreciation when interest rates
decline and depreciation when interest rates rise. As a result, the return and
net asset value of the Fund will fluctuate.

For defensive purposes, the Fund may temporarily hold all or a portion
of its assets in money market instruments. The money market instruments which
the Fund may own from time to time include U.S. Government obligations having a
maturity of less than one year, shares of money market investment companies,
commercial paper rated A-3 or better by S&P or Prime-3 or better by Moody's,
repurchase agreements, bank debt instruments (certificates of deposit, time
deposits and bankers' acceptances) and U.S. dollar-denominated instruments
issued by domestic or foreign branches of U.S. banks and U.S. branches of
foreign banks. The Fund may invest up to 10% of its total assets in shares of
money market investment companies. Investments by the Fund in shares of money
market investment companies may result in duplication of advisory,
administrative and distribution fees. The Fund will not invest more than 5% of
its total assets in securities of any single investment company and will not
purchase more than 3% of the outstanding voting securities of any investment
company.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest in
mortgage-backed securities, which are mortgage loans made by banks, savings and
loan institutions, and other lenders which are assembled into pools. Often these
securities are issued and guaranteed by an agency or instrumentality of the
United States Government, though not necessarily backed by the

- 5 -

<PAGE>

full faith and credit of the United States Government, or are collateralized by
U.S. Government obligations. The Fund invests in mortgage-backed securities
representing undivided ownership interests in pools of mortgage loans, including
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC)
Certificates and so-called "CMOs" -- i.e., collateralized mortgage obligations
which are issued by non-governmental entities.

The Fund may also invest in stripped mortgage-backed securities, which
are derivative multiclass mortgage securities issued by agencies or
instrumentalities of the United States Government, 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-backed securities are usually
structured with two classes that receive different proportions of the interest
and principal distributions on a pool of mortgage assets. A common type of
stripped mortgage-backed security will have one class receiving all of the
interest from the mortgage assets (the interest-only or "IO" class), while the
other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on the securities' 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 security
is rated AAA or Aaa, and could even lose its entire investment. Although
stripped mortgage-backed securities are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers,
these securities were only recently developed. As a result, established trading
markets have not developed for certain stripped mortgage-backed securities. The
Fund will not invest more than 15% of its net assets in stripped mortgage-backed
securities and CMOs for which there is no established market and other illiquid
securities. The Fund may invest more than 15% of its net assets in stripped
mortgage-backed securities and CMOs deemed to be liquid if the Adviser
determines, under the direction of the Board of Trustees, that the security can
be disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of the Fund's net asset value per share.
In addition, pursuant to the position of the staff of the Securities and
Exchange Commission, the Fund will not invest more than 5% of its total assets
in any CMO which is an investment company under the Investment Company Act of
1940 and will not invest more than 10% of its total assets in all such CMOs and
securities of other investment companies.

- 6 -

<PAGE>

The rate of return on mortgage-backed securities such as GNMA, FNMA and
FHLMC Certificates, CMOs and stripped mortgage-backed securities may be affected
by the rate of early prepayment of principal on the underlying loans. Prepayment
rates vary widely and may be affected by changes in market interest rates. It is
not possible to accurately predict the average life of a particular pool.
Reinvestment of principal may occur at higher or lower rates than the original
yield. Therefore, the actual maturity and realized yield on mortgage-backed
securities will vary based upon the prepayment experience of the underlying pool
of mortgages.

The Fund's investments in mortgage-backed securities may be extremely
sensitive to changes in interest rates because they subject the Fund to
extension risk, i.e., the possibility that rising interest rates may cause
prepayments to occur at a slower than expected rate. This particular risk may
effectively change a mortgage-backed security which was considered short- or
intermediate-term at the time of purchase into a long-term security. Long-term
debt securities generally fluctuate more widely in response to changes in
interest rates than short- or intermediate-term debt securities. During times of
rapidly rising interest rates, the Fund may have a portfolio of securities with
a much higher average life than was anticipated at the time such securities were
purchased. Thus, an increase in interest rates would not only likely decrease
the value of the Fund's mortgage-backed securities, but would also increase the
inherent volatility of the Fund by effectively converting short-term debt
securities into long-term debt securities.

Asset-backed securities may include such securities as Certificates for
Automobile Receivables and Credit Card Receivable Securities. Certificates for
Automobile Receivables represent undivided fractional interests in a pool of
motor vehicle retail installment sales contracts. Underlying sales contracts are
subject to prepayment, which may reduce the overall return to certificate
holders. Certificate holders may also experience delays in payment or losses if
the full amounts due on underlying sales contracts are not realized because of
unanticipated costs of enforcing the contracts or because of depreciation,
damage or loss of the vehicles securing the contracts, or other factors. Credit
Card Receivable Securities are backed by receivables from revolving credit card
agreements. An acceleration in cardholders' payment rates may adversely affect
the overall return to holders of such certificates. Unlike most other
asset-backed securities, Credit Card Receivable Securities are unsecured
obligations of the credit cardholders. The Fund may also invest in other
asset-backed securities that may be developed in the future, provided that this
Prospectus is revised before the Fund does so. The Fund will not invest more
than 15% of its net assets in asset-backed securities for which there is no
established market and other illiquid securities.

- 7 -

<PAGE>

Mortgage-backed securities, when they are issued, have stated
maturities of up to forty years, depending on the length of the mortgages
underlying the securities. In practice, unscheduled or early payments of
principal on the underlying mortgages may make the securities' effective
maturity shorter than this. A security based on a pool of forty-year mortgages
may have an average life of as short as two years. The average life of
asset-backed securities may also be substantially less than the stated maturity
of the contracts or receivables underlying such securities. It is common
industry practice to estimate the average life of mortgage-backed and
asset-backed securities based on assumptions regarding prepayments. The Fund
will assume an average life based on the prepayment characteristics of the
underlying mortgages or other assets.

BANK DEBT INSTRUMENTS. The Fund may invest in certificates of deposit,
time deposits and bankers' acceptances issued by commercial banks. Certificates
of deposit are receipts from a bank for funds deposited for a specified period
of time at a specified rate of return. Bankers' acceptances are time drafts
drawn on commercial banks by borrowers, usually in connection with international
commercial transactions. Time deposits are generally similar to certificates of
deposit, but are uncertificated. The Fund will not invest more than 15% of its
net assets in time deposits maturing in greater than seven days and other
illiquid securities.

The Fund will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation, (ii) in the case
of U.S. banks, it is a member of the Federal Deposit Insurance Corporation, and
(iii) in the case of foreign banks, the security is, in the opinion of the
Adviser, of an investment quality comparable with other debt securities which
may be purchased by the Fund. These limitations do not prohibit investments in
securities issued by foreign branches of U.S. banks, provided such U.S. banks
meet the foregoing requirements.

FOREIGN SECURITIES. The Fund may invest in U.S. dollar-denominated
fixed-income securities issued by foreign issuers, foreign branches of U.S.
banks and U.S. branches of foreign banks. Investment in securities of foreign
issuers and in foreign branches of domestic banks involves somewhat different
investment risks from those affecting securities of domestic issuers. In
addition to credit and market risks, investments in foreign securities involve
sovereign risk, which includes local political and economic developments,
potential nationalization, withholding taxes on dividend or interest payments
and currency

- 8 -

<PAGE>

blockage. Foreign companies may have less public or less reliable information
available about them and may be subject to less governmental regulation than
U.S. companies. Securities of foreign companies may be less liquid or more
volatile than securities of U.S. companies. The Fund will not invest more than
15% of its net assets in foreign securities which, in the opinion of the
Adviser, are not readily marketable and other illiquid securities.

REAL ESTATE SECURITIES. The Fund will not invest in real estate
(including limited partnership interests), but may invest in readily marketable
securities secured by real estate or interests therein or issued by companies
that invest in real estate or interests therein. The Fund may also invest in
readily marketable interests in real estate investment trusts ("REITs"). REITs
are generally publicly traded on the national stock exchanges and in the
over-the-counter market and have varying degrees of liquidity. Although the Fund
is not limited in the amount of REITs it may acquire, the Fund does not
presently intend to invest more than 5% of its net assets in REITs.

The Fund may also engage in the following investment techniques, each
of which may involve certain risks:

WHEN-ISSUED SECURITIES. The Fund may purchase securities on a
when-issued basis. Delivery of and payment for these securities may occur a
month or more after the date of the purchase commitment. The securities are
subject to market fluctuations during this period and no interest accrues to the
Fund until settlement. The Fund maintains with the Custodian a segregated
account of cash, U.S. Government obligations or other liquid high-grade debt
obligations in an amount at least equal to these commitments.

- 9 -

<PAGE>

interest, will equal or exceed the value of the repurchase agreement and, in the
case of a repurchase agreement exceeding one day, the seller agrees to maintain
sufficient collateral so that the value of the underlying collateral, including
accrued interest, will at all times equal or exceed the value of the repurchase
agreement. The Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of the net
assets of the Fund would be invested in such securities and other illiquid
securities.

LENDING PORTFOLIO SECURITIES. The Fund may, from time to time, lend
securities on a short-term basis (i.e., for up to seven days) to banks, brokers
and dealers and receive as collateral cash, U.S. Government obligations or
irrevocable bank letters of credit (or any combination thereof), which
collateral will be required to be maintained at all times in an amount equal to
at least 100% of the current value of the loaned securities plus accrued
interest. Although the Fund does have the ability to make loans of all of its
portfolio securities, it is the present intention of the Trust, which may be
changed without shareholder approval, that such loans will not be made with
respect to the Fund if as a result the aggregate of all outstanding loans
exceeds one-third of the value of the Fund's total assets. Securities lending
will afford the Fund the opportunity to earn additional income because the Fund
will continue to be entitled to the interest payable on the loaned securities
and also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. The
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial rights. The Fund may pay reasonable fees in
connection with arranging such loans.

BORROWING AND PLEDGING. The Fund may borrow money from banks provided
that, immediately after any such borrowings, there is asset coverage of 300% for
all borrowings of the Fund. The Fund will not make any borrowing which would
cause its outstanding borrowings to exceed one-third of its total assets. The
Fund may pledge assets in connection with borrowings but will not pledge more
than one-third of its total assets. Borrowing magnifies the potential for gain
or loss on the portfolio securities of the Fund and, therefore, if employed,
increases the possibility of fluctuation in the Fund's net asset value. This is
the speculative factor known as leverage. The Fund's policies on borrowing and
pledging are fundamental policies which may not be changed without the
affirmative vote of a majority of its

- 10 -

<PAGE>

outstanding shares. It is the Fund's present intention, which may be changed by
the Board of Trustees without shareholder approval, to limit its borrowings to
5% of its total assets only for emergency or extraordinary purposes and not for
leverage.

PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading
as a primary means of achieving its investment objective. However, the Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. Although the annual portfolio turnover rate of the
Fund cannot be accurately predicted, it is not expected to exceed 100%, but may
be either higher or lower. A 100% turnover rate would occur, for example, if all
the securities of the Fund were replaced once in a one-year period. High
turnover involves correspondingly greater commission expenses and transaction
costs and increases the possibility that the Fund will not qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code.
The Fund will not qualify as a regulated investment company if it derives 30% or
more of its gross income from gains (without offset for losses) from the sale or
other disposition of securities held for less than three months. High turnover
may result in the Fund recognizing greater amounts of income and capital gains,
which would increase the amount of income and capital gains which the Fund must
distribute to shareholders in order to maintain its status as a regulated
investment company and to avoid the imposition of federal income or excise taxes
(see "Taxes").

HOW TO PURCHASE SHARES

Your initial investment in the Fund ordinarily must be at least
$2,000 ($1,000 for tax-deferred retirement plans). The Fund may, in the
Adviser's sole discretion, accept certain accounts with less than the stated
minimum initial investment. Shares of the Fund are sold on a continuous basis at
the net asset value next determined after receipt of a purchase order by the
Trust. Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on
any business day and transmitted to the Trust's transfer agent, MGF Service
Corp., by 5:00 p.m., Eastern time, that day are confirmed at the net asset value
determined as of the close of the regular session of trading on the New York
Stock Exchange on that day. It is the responsibility of dealers to transmit
properly completed orders so that they will be received by MGF Service Corp. by
5:00 p.m., Eastern time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by MGF Service Corp. by 4:00 p.m., Eastern time,
are confirmed at that day's net asset value. Direct investments received by MGF
Service Corp. after 4:00 p.m., Eastern time, and orders received from dealers
after 5:00 p.m., Eastern time, are confirmed at the net asset value next
determined on the following business day.

- 11 -

<PAGE>

You may open an account and make an initial investment in the Fund by
sending a check and a completed account application form to MGF Service Corp.,
P.O. Box 5354, Cincinnati, Ohio 45201- 5354. Checks should be made payable to
the "GW&K Government Securities Fund". An account application is included in
this Prospectus.

The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust reserves
the rights to limit the amount of investments and to refuse to sell to any
person.

Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or MGF Service Corp. in the transaction.

Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to MGF Service Corp. Your bank may impose a charge
for sending your wire. There is presently no fee for receipt of wired funds, but
the Trust reserves the right to charge shareholders for this service upon thirty
days prior notice to shareholders.

- 12 -

<PAGE>

request must contain the name of your account and your account number to permit
proper crediting to your account. While there is no minimum amount required for
subsequent investments, the Trust reserves the right to impose such a
requirement.

SHAREHOLDER SERVICES

Contact MGF Service Corp. (Nationwide call toll-free 800-495-3863) for
additional information about the shareholder services described below.

Automatic Withdrawal Plan

Tax-Deferred Retirement Plans

Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:

-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code

Direct Deposit Plans

Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.

Automatic Investment Plan

- 13 -

<PAGE>

HOW TO REDEEM SHARES

You may redeem shares of the Fund on each day that the Trust is open
for business by sending a written request to the Fund. The request must state
the number of shares or the dollar amount to be redeemed and your account
number. The request must be signed exactly as your name appears on the Trust's
account records. If the shares to be redeemed have a value of $25,000 or more,
your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, municipal securities brokers and dealers,
government securities brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations.

Redemption requests may direct that the proceeds be wired directly to
your existing account in any commercial bank or brokerage firm in the United
States. If your instructions request a redemption by wire, you will be charged
an $8 processing fee. The Trust reserves the right, upon thirty days written
notice, to change the processing fee. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.

You may also redeem shares by placing a wire redemption request through
a securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.

- 14 -

<PAGE>

EXCHANGE PRIVILEGE

Shares of the Fund may be exchanged for shares of the other series of
the Trust, the GW&K Equity Fund, at net asset value. Shares of the Fund may also
be exchanged at net asset value for shares of the Short Term Government Income
Fund (a series of Midwest Trust), which invests in short-term U.S. Government
obligations backed by the "full faith and credit" of the United States and seeks
high current income consistent with protection of capital. Shares of the Short
Term Government Income Fund acquired via exchange may be re-exchanged for shares
of the Fund at net asset value.

You may request an exchange by sending a written request to MGF Service
Corp. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example, during times of unusual
market activity), consider requesting your exchange by mail or by visiting the
Trust's offices at 222 Berkeley Street, Boston, Massachusetts 02116. An exchange
will be effected at the next determined net asset value after receipt of a
request by MGF Service Corp.

DIVIDENDS AND DISTRIBUTIONS

All of the net investment income of the Government Securities Fund is
expected to be declared as a dividend to shareholders of record on each business
day of the Trust and paid monthly. The Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.

Distributions are paid according to one of the following options:

Share Option - income distributions and capital gains
distributions reinvested in additional
shares.

- 15 -

<PAGE>

Income Option - income distributions and short-term
capital gains distributions paid in
cash; long-term capital gains
distributions reinvested in additional
shares.

Cash Option - income distributions and capital gains
distributions paid in cash.

TAXES

The Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. The Fund intends to distribute substantially all of its net
investment income and any realized capital gains to its shareholders.
Distributions of net investment income and net realized short-term capital
gains, if any, are taxable to investors as ordinary income. Since the investment
income of the Fund is derived from interest rather than dividends, no portion of
such distributions is eligible for the dividends received deduction available to
corporations. Distributions of net realized long-term capital gains are taxable
as long-term capital gains regardless of how long you have held your Fund
shares. Redemptions of shares of the Fund are taxable events on which a
shareholder may realize a gain or loss.

The Fund will mail to each of its shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Fund may be subject to
state and local taxes on distributions. Shareholders should consult their tax
advisors about the tax effect of distributions and withdrawals from the Fund and
the use of the Automatic Withdrawal Plan and the Exchange Privilege. The tax
consequences described in this section apply whether distributions are taken in
cash or reinvested in additional shares. See "Taxes" in the Statement of
Additional Information for further information.

- 16 -

<PAGE>

OPERATION OF THE FUND

The Fund is a diversified series of The Gannett Welsh & Kotler Funds,
an open-end management investment company organized as a Massachusetts business
trust on April 30, 1996. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.

The Trust retains Gannett Welsh & Kotler, Inc., 222 Berkeley Street,
Boston, Massachusetts 02116 (the "Adviser"), to manage the Fund's investments.
The controlling shareholders of the Adviser are Harold G. Kotler and Benjamin H.
Gannett. The Adviser is an independent investment counsel firm that has advised
individual and institutional clients since 1974. The Adviser has not previously
provided investment advisory services to a registered investment company. The
Fund pays the Adviser a fee at the annual rate of .75% of the average value of
its daily net assets.

As of the date of this Prospectus, Harold G. Kotler and Edward B. White
are the sole shareholders of the Fund.

Jeanne M. Skettino, a Principal and Senior Vice President of the
Adviser, is primarily responsible for managing the portfolio of the Fund. Ms.
Skettino has been employed by the Adviser since 1992. Previously, she was a
product manager and senior consultant in the Financial Consulting and Software
Products divisions of Logica North America, a software products and consulting
firm.

In addition to the advisory fee, the Fund is responsible for the
payment of all operating expenses, including fees and expenses in connection
with membership in investment company organizations, brokerage fees and
commissions, legal, auditing and accounting expenses, expenses of registering
shares under federal and state securities laws, expenses related to the
distribution of the Fund's shares (see "Distribution Plan"), insurance expenses,
taxes or governmental fees, fees and expenses of the custodian, transfer agent,
administrator, and accounting and pricing agent of the Fund, fees and expenses
of members of the Board of Trustees who are not interested persons of the Trust,
the cost of preparing and distributing prospectuses, statements, reports and
other documents to shareholders, expenses of shareholders' meetings and proxy
solicitations, and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Fund may be a party and indemnification of the
Trust's officers and Trustees with respect thereto.

The Trust has retained MGF Service Corp., P.O. Box 5354, Cincinnati,
Ohio, to serve as the Fund's transfer agent, dividend paying agent and
shareholder service agent. MGF Service Corp. is a subsidiary of Leshner
Financial, Inc., of which Robert H.
Leshner is the controlling shareholder.

- 17 -

<PAGE>

In addition, MGF Service Corp. has been retained to provide
administrative services to the Fund. In this capacity, MGF Service Corp.
supplies executive, administrative and regulatory services, supervises the
preparation of tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the Securities and Exchange
Commission and state securities authorities. The Fund pays MGF Service Corp. a
fee, payable monthly, for these administrative services at the annual rate of
.100% of the average value of its daily net assets up to $100,000,000, .075% of
such assets from $100,000,000 to $200,000,000 and .050% of such assets in excess
of $200,000,000; provided, however, that the minimum fee is $1,000 per month.

Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may consider sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund.

DISTRIBUTION PLAN

- 18 -

<PAGE>

provided by MGF Service Corp.; expenses of formulating and implementing
marketing and promotional activities, including direct mail promotions and mass
media advertising; expenses of preparing, printing and distributing sales
literature and prospectuses and statements of additional information and reports
for recipients other than existing shareholders of the Fund; expenses of
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable; and
any other expenses related to the distribution of the Fund's shares.

The annual limitation for payment of expenses pursuant to the Plan is
.25% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.

CALCULATION OF SHARE PRICE

- 19 -

<PAGE>

be materially affected. The net asset value per share of the Fund is calculated
by dividing the sum of the value of the securities held by the Fund plus cash or
other assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent.

U.S. Government obligations are valued at their most recent bid prices
as obtained from one or more of the major market makers for such securities.
Other portfolio securities are valued as follows: (i) securities which are
traded on stock exchanges or are quoted by NASDAQ are valued at the last
reported sale price as of the close of the regular session of trading on the New
York Stock Exchange on the day the securities are being valued, or, if not
traded on a particular day, at the closing bid price, (ii) securities traded in
the over-the-counter market, and which are not quoted by NASDAQ, are valued at
the last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of each Fund will fluctuate with the
value of the securities it holds.

PERFORMANCE INFORMATION

From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.

The "average annual total return" of the Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in an advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions. The Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative

- 20 -

<PAGE>

return which measures the percentage change in the value of an account between
the beginning and end of a period, assuming no activity in the account other
than reinvestment of dividends and capital gains distributions. A
nonstandardized quotation of total return may also indicate average annual
compounded rates of return over periods other than those specified for "average
annual total return." A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.

The "yield" of the Fund is computed by dividing the net investment
income per share earned during a thirty-day (or one month) period stated in the
advertisement by the net asset value per share on the last day of the period
(using the average number of shares entitled to receive dividends). The yield
formula assumes that net investment income is earned and reinvested at a
constant rate and annualized at the end of a six-month period.

From time to time the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc.("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.

- 21 -

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS
222 Berkeley Street
Boston, Massachusetts 02116

BOARD OF TRUSTEES
Arlene Zoe Aponte-Gonzalez
Benjamin H. Gannett
Morton S. Grossman
Harold G. Kotler
Timothy P. Neher
Josiah A. Spaulding, Jr.
Allan Tofias

INVESTMENT ADVISER
GANNETT WELSH & KOTLER, INC.
222 Berkeley Street
Boston, Massachusetts 02116
(617) 236-8900

TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

Shareholder Service
Nationwide: (Toll-Free) 888-495-3863

Rate Line
Nationwide: (Toll-Free) 800-852-4052

- 22 -

<PAGE>
ACCOUNT APPLICATION
<TABLE>
<CAPTION>
<S> <C> <C>
Please mail account application to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354 ACCOUNT NO. G1-___________________________
(For Fund Use Only)
THE GANNETT WELSH
& KOTLER FUNDS: FOR BROKER/DEALER USE ONLY
GW&K GOVERNMENT SECURITIES FUND Firm Name:_______________________________________
Home Office Address:_____________________________
Branch Address:__________________________________
Rep Name & No.:__________________________________
Rep Signature:___________________________________
Initial Investment of $_________________________ ($2,000 minimum)

o Check or draft enclosed payable to the Fund.

o Bank Wire From: ________________________________________________________________________________________________________________

o Exchange From: ________________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)

ACCOUNT NAME S.S. #/TAX I.D.#

________________________________________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other ___________________

ADDRESS PHONE

___________________________________________________________________________________________________ ( )________________________
Street or P.O. Box Business Phone

___________________________________________________________________________________________________ ( )________________________
City State Zip Home Phone

Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship presumed) o Partnership o Corporation
o Trust o Custodial o Non-Profit o Other

Occupation and Employer Name/Address______________________________________________________________________________________________

Are you an associated person of an NASD member? o Yes o No

____________________________________________________________________ _______________________________________________________
Title of Corporate Officer, Trustee, etc. Date

Please invest $ _____________ per month in the GW&K Government Securities Fund ABA Routing Number _________________________________

FI Account Number __________________________________

o Checking Account o Savings Account

(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's records.)

PLEASE ATTACH A VOIDED CHECK FOR THE AUTOMATIC INVESTMENT PLAN.

Please Indicate Withdrawal Schedule (Check One):

Please Select Payment Method (Check One):

PLEASE ATTACH A VOIDED ________________________________________________________________________________________________
CHECK FOR ACH OR BANK WIRE Bank Name Bank Address

________________________________________________________________________________________________
Bank ABA# Account # Account Name

o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my withdrawal proceeds to the mailing address below:

Name of payee__________________________________________________________________.____________________________________________________

Please send to:____________________________________________________________________________________________________________________
Street address City State Zip

I hereby certify that the foregoing resolutions are in conformity with the Charter and Bylaws or other empowering documents of the

____________________________________________________________________________________________________________________________________
(Name of Organization)

incorporated or formed under the laws of____________________________________________________________________________________________
(State)

NAME TITLE

___________________________________________________________ _____________________________________________________________

Witness my hand and seal of the corporation or organization this _____ day of ___________________________, 19___

___________________________________________________________ _____________________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)

*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed by
another officer.
</TABLE>
<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENT OF ADDITIONAL INFORMATION

December 4, 1996

GW&K Equity Fund
GW&K Government Securities Fund

This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the applicable Fund of The Gannett
Welsh & Kotler Funds dated December 4, 1996. A copy of a Fund's Prospectus can
be obtained by writing the Trust at 222 Berkeley Street, Boston, Massachusetts
02116, or by calling the Trust nationwide toll-free 888-495-3863.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

The Gannett Welsh & Kotler Funds
222 Berkeley Street
Boston, Massachusetts 02116

TABLE OF CONTENTS
PAGE

THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . 3

DEFINITIONS, POLICIES AND RISK CONSIDERATIONS. . . . . . . . 4

QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS. . . 13

INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . 17

TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . 19

THE INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . 20

DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . 22

SECURITIES TRANSACTIONS. . . . . . . . . . . . . . . . . . . 23

PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . 25

CALCULATION OF SHARE PRICE . . . . . . . . . . . . . . . . . 25

TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

REDEMPTION IN KIND . . . . . . . . . . . . . . . . . . . . . 26

HISTORICAL PERFORMANCE INFORMATION . . . . . . . . . . . . . 27

PRINCIPAL SECURITY HOLDERS . . . . . . . . . . . . . . . . . 29

CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . 29

AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . 29

MGF SERVICE CORP . . . . . . . . . . . . . . . . . . . . . . 29

STATEMENTS OF ASSETS AND LIABILITIES . . . . . . . . . . . . 30

- 2 -

<PAGE>

THE TRUST

The Gannett Welsh & Kotler Funds (the "Trust") was organized as a
Massachusetts business trust on April 30, 1996. The Trust currently offers two
series of shares to investors: the GW&K Equity Fund and the GW&K Government
Securities Fund (referred to individually as a "Fund" and collectively as the
"Funds"). Each Fund has its own investment objective and policies.

Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.

Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of any instance where such result has occurred. In addition, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Agreement and Declaration of Trust also provides for the
indemnification out of the Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Moreover,
it provides that the Trust will, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon. As a result, and particularly because the Trust assets are
readily marketable and

- 3 -

<PAGE>

ordinarily substantially exceed liabilities, management believes that the risk
of shareholder liability is slight and limited to circumstances in which the
Trust itself would be unable to meet its obligations. Management believes that,
in view of the above, the risk of personal liability is remote.

It is anticipated that, prior to the offering of shares of the GW&K
Equity Fund to the public, the Fund will exchange its shares for portfolio
securities of GW&K Equity Fund, L.P., a Delaware limited partnership (the
"Partnership"), after which the Partnership would dissolve and distribute the
Fund shares received pro rata to its partners, along with cash received from the
sale of portfolio securities, if any, of the Partnership not acquired by the
Fund. Following the exchange transaction (the "Exchange"), the partners of the
Partnership will constitute all of the holders of Fund shares, except for shares
representing seed capital contributed to the Fund by the Adviser.

DEFINITIONS, POLICIES AND RISK CONSIDERATIONS

A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objectives, Investment
Policies and Risk Considerations") appears below:

Majority. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
either Fund) means the lesser of (1) 67% or more of the outstanding shares of
the Trust (or the applicable Fund) present at a meeting, if the holders of more
than 50% of the outstanding shares of the Trust (or the applicable Fund) are
present or represented at such meeting or (2) more than 50% of the outstanding
shares of the Trust (or the applicable Fund).

Commercial Paper. Commercial paper consists of short-term (usually
maturing in from one to two hundred seventy days) unsecured promissory notes
issued by corporations in order to finance their current operations. Each Fund
will only invest in commercial paper rated in one of the three highest
categories by either Moody's Investors Service, Inc. (Prime-1, Prime-2 or
Prime-3) or Standard & Poor's Ratings Group (A-1, A-2 or A-3), or which, in the
opinion of the Adviser, is of equivalent investment quality. Certain notes may
have floating or variable rates. Variable and floating rate notes with a demand
notice period exceeding seven days will be subject to each Fund's restriction on
illiquid investments (see "Investment Limitations") unless, in the judgment of
the Adviser, such note is liquid.

- 4 -

<PAGE>

The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: valuation of the management of the issuer;
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and, recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1, Prime-2 or Prime-3.
Commercial paper rated A-1 (highest quality) by Standard & Poor's Ratings Group
has the following characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A" or better, although in some
cases "BBB" credits may be allowed; the issuer has access to at least two
additional channels of borrowing; basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; typically, the issuer's
industry is well established and the issuer has a strong position within the
industry; and, the reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2, or A-3.

Bank Debt Instruments. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from fourteen days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been drawn on it by a
customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Each Fund will not invest in time
deposits maturing in more than seven days if, as a result thereof, more than 15%
of the value of its net assets would be invested in such securities and other
illiquid securities.

- 5 -

<PAGE>

Mortgage-Backed and Asset-Backed Securities. The average life of
mortgage-backed securities varies with the maturities of the underlying mortgage
instruments (generally up to 30 years) and with the extent of prepayments of the
mortgages themselves. Any such prepayments are passed through to the certificate
holder, reducing the stream of future payments. Prepayments tend to rise in
periods of falling interest rates, decreasing the average life of the
certificate and generating cash which must be invested in a lower interest rate
environment. This could limit the appreciation potential of the certificates
when compared to similar debt obligations which may not be paid down at will.
The coupon rates of mortgage-backed securities are lower than the interest rate
on the underlying mortgages by the amount of fees paid to the issuing agencies,
usually approximately 1/2 of 1%. When prevailing interest rates increase, the
value of the mortgage-backed securities may decrease, as do other non-redeemable
debt securities. However, when interest rates decline, the value of
mortgage-backed securities may not rise on a comparable basis with other
non-redeemable debt securities.

Mortgage-backed securities include certificates issued by the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation and
the Government National Mortgage Association. The Federal National Mortgage
Association ("FNMA") is a government sponsored corporation owned entirely by
private stockholders. The guarantee of payments under these instruments is that
of FNMA only. They are not backed by the full faith and credit of the U.S.
Treasury but the U.S. Treasury may extend credit to FNMA through discretionary
purchases of its securities. The average life of the mortgages backing newly
issued FNMA Certificates is approximately 10 years. The Federal Home Loan
Mortgage Corporation ("FHLMC") is a corporate instrumentality of the U.S.
Government whose stock is owned by the Federal Home Loan Banks. Certificates
issued by FHLMC represent interests in mortgages from its portfolio. FHLMC
guarantees payments under its certificates but this guarantee is not backed by
the full faith and credit of the United States and FHLMC does not have authority
to borrow from the U.S. Treasury. The average life of the mortgages backing
newly issued FHLMC Certificates is approximately 10 years. The Government
National Mortgage Association ("GNMA") Certificates represent pools of mortgages
insured by the Federal Housing Administration or the Farmers Home Administration
or guaranteed by the Veterans Administration. The guarantee of payments under
GNMA Certificates is backed by the full faith and credit of the United States.
The average life of the mortgages backing newly issued GNMA Certificates is
approximately 12 years.

The GW&K Government Securities Fund may also purchase mortgage-backed
securities issued by financial institutions, mortgage banks, and securities
broker-dealers (or affiliates of such institutions established to issue these
securities) in the form of collateralized mortgage obligations ("CMOs"). CMOs
are obligations fully collateralized directly or indirectly by a pool

- 6 -

<PAGE>

of mortgages on which payments of principal and interest are passed through to
the holders of the CMOs, although not necessarily on a pro rata basis, on the
same schedule as they are received. The most common structure of a CMO contains
four classes of securities; the first three pay interest at their stated rates
beginning with the issue date, the final one is typically an accrual class (or Z
bond). The cash flows from the underlying mortgage collateral are applied first
to pay interest and then to retire securities. The classes of securities are
retired sequentially. All principal payments are directed first to the
shortest-maturity class (or A bonds). When those securities are completely
retired, all principal payments are then directed to the next-shortest-maturity
security (or B bond). This process continues until all of the classes have been
paid off. Because the cash flow is distributed sequentially instead of pro rata
as with pass-through securities, the cash flows and average lives of CMOs are
more predictable, and there is a period of time during which the investors in
the longer-maturity classes receive no principal paydowns.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage banks, and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. In
addition, such issuers may be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-backed securities.
Pools created by non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because of the absence of
direct or indirect government or agency guarantees. Timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers, and the mortgage poolers. Such insurance,
guarantees, and the creditworthiness of the issuers thereof will be considered
in determining whether a mortgage-backed security meets the GW&K Government
Securities Fund's investment quality standards. There can be no assurance that
the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements. The Fund may buy mortgage-backed
securities without insurance or guarantees, if the Adviser determines that the
securities meet the Fund's quality standards. The Fund will not purchase
mortgage-backed securities or any other assets which, in the opinion of the
Adviser, are illiquid if, as a result, more than 15% of the value of the Fund's
net assets will be illiquid. The Adviser will, consistent with the Fund's
investment objective, policies, and quality standards, consider making
investments in new types of mortgage-backed securities as such securities are
developed and offered to investors.

- 7 -

<PAGE>

The GW&K Government Securities Fund may also purchase other
asset-backed securities (unrelated to mortgage loans) such as Certificates for
Automobile ReceivablesSM ("CARS"SM) and Credit Card Receivable Securities. CARS
represent undivided fractional interests in a trust whose assets consist of a
pool of motor vehicle retail installment sales contracts and security interests
in the vehicles securing the contracts. Payments of principal and interest on
CARS are "passed-through" monthly to certificate holders, and are guaranteed up
to certain amounts by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the trust. Underlying sales
contracts are subject to prepayment, which may reduce the overall return to
certificate holders. Certificate holders may also experience delays in payment
or losses on CARS if the full amounts due on underlying sales contracts are not
realized by the trust because of unanticipated legal or administrative costs of
enforcing the contracts, or because of depreciation, damage, or loss of the
vehicles securing the contracts, or other factors. Credit Card Receivable
Securities are backed by receivables from revolving credit card agreements.
Credit balances on revolving credit card agreements ("Accounts") are generally
paid down more rapidly than are automobile contracts. Most of the Credit Card
Receivable Securities issued publicly to date have been pass-through
certificates. In order to lengthen the maturity of Credit Card Receivable
Securities, most such securities provide for a fixed period during which only
interest payments on the underlying Accounts are passed through to the security
holder and principal payments received on such Accounts are used to fund the
transfer to the pool of assets supporting the securities of additional credit
card charges made on an Account. The initial fixed period usually may be
shortened upon the occurrence of specified events which signal a potential
deterioration in the quality of the assets backing the security, such as the
imposition of a cap on interest rates. The ability of the issuer to extend the
life of an issue of Credit Card Receivable Securities thus depends upon the
continued generation of additional principal amounts in the underlying Accounts
and the non-occurrence of specified events. The Internal Revenue Code of 1986,
which phased out the deduction for consumer interest, as well as competitive and
general economic factors, could adversely affect the rate at which new
receivables are created in an Account and conveyed to an issuer, shortening the
expected weighted average life of the related security, and reducing its yield.
An acceleration in cardholders' payment rates or any other event which shortens
the period during which additional credit card charges on an Account may be
transferred to the pool of assets supporting the related security could have a
similar effect on the weighted average life and yield. Credit card holders are
entitled to the protection of state and federal consumer credit laws, many of
which give such holder the right to set off certain amounts against balances
owed on the credit card, thereby reducing amounts paid on Accounts. In addition,
unlike most other asset-backed securities, Accounts are unsecured obligations of
the cardholder.

- 8 -

<PAGE>

STRIPS. STRIPS are U.S. Treasury bills, notes, and bonds that have been
issued without interest coupons or stripped of their unmatured interest coupons,
interest coupons that have been stripped from such U.S. Treasury securities, and
receipts or certificates representing interests in such stripped U.S. Treasury
securities and coupons. A STRIPS security pays no interest in cash to its holder
during its life although interest is accrued for federal income tax purposes.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value. Investing in STRIPS may help
to preserve capital during periods of declining interest rates. For example, if
interest rates decline, GNMA Certificates owned by a Fund which were purchased
at greater than par are more likely to be prepaid, which would cause a loss of
principal. In anticipation of this, a Fund might purchase STRIPS, the value of
which would be expected to increase when interest rates decline.

STRIPS do not entitle the holder to any periodic payments of interest
prior to maturity. Accordingly, such securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt obligations of
comparable maturities which make periodic distributions of interest. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, STRIPS eliminate the reinvestment risk and lock in a rate of
return to maturity. Current federal tax law requires that a holder of a STRIPS
security accrue a portion of the discount at which the security was purchased as
income each year even though the Fund received no interest payment in cash on
the security during the year.

When-Issued Securities and Securities Purchased On a To-Be- Announced
Basis. The GW&K Government Securities Fund may purchase debt obligations on a
"when-issued" or "to-be-announced" basis. The Fund will only make commitments to
purchase securities on a when-issued or to-be-announced ("TBA") basis with the
intention of actually acquiring the securities. In addition, the Fund may
purchase securities on a when-issued or TBA basis only if delivery and payment
for the securities takes place within 120 days after the date of the
transaction. In connection with these investments, the Fund will direct the
Custodian to place cash, U.S. Government obligations or other liquid high-grade
debt obligations in a segregated account in an amount sufficient to make payment
for the securities to be purchased. When a segregated account is maintained
because the Fund purchases securities on a when-issued or TBA basis, the assets
deposited in the segregated account will be valued daily at market for the
purpose of determining the adequacy of the securities in the account. If the
market value of such

- 9 -

<PAGE>

securities declines, additional cash or securities will be placed in the account
on a daily basis so that the market value of the account will equal the amount
of the Fund's commitments to purchase securities on a when-issued or TBA basis.
To the extent funds are in a segregated account, they will not be available for
new investment or to meet redemptions. Securities purchased on a when-issued or
TBA basis and the securities held in the Fund's portfolio are subject to changes
in market value based upon changes in the level of interest rates (which will
generally result in all of those securities changing in value in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, the Fund remains substantially fully invested at the same time
that it has purchased securities on a when-issued or TBA basis, there will be a
possibility that the market value of the Fund's assets will experience greater
fluctuation. The purchase of securities on a when-issued or TBA basis may
involve a risk of loss if the broker-dealer selling the securities fails to
deliver after the value of the securities has risen.

When the time comes for the Fund to make payment for securities
purchased on a when-issued or TBA basis, the Fund will do so by using then
available cash flow, by sale of the securities held in the segregated account,
by sale of other securities or, although it would not normally expect to do so,
by directing the sale of the securities purchased on a when-issued or TBA basis
themselves (which may have a market value greater or less than the Fund's
payment obligation). Although the Fund will only make commitments to purchase
securities on a when-issued or TBA basis with the intention of actually
acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable by the Adviser as a matter of
investment strategy.

Repurchase Agreements. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
by the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.

- 10 -

<PAGE>

Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and, in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit quality at least
equal to a Fund's investment criteria for portfolio securities and will be held
by the Custodian or in the Federal Reserve Book Entry System.

For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by a Fund subject to a repurchase agreement as being
owned by that Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the security. If a court characterized the transaction as a loan and a
Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case a Fund may
incur a loss if the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities

- 11 -

<PAGE>

subject to the repurchase agreement will equal or exceed the repurchase price.
It is possible that a Fund will be unsuccessful in seeking to enforce the
seller's contractual obligation to deliver additional securities.

Loans of Portfolio Securities. Each Fund may lend its portfolio
securities subject to the restrictions stated in its Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the dividends or interest on loaned securities
and also receive one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be shared with the
borrower. The Funds may also pay fees to placing brokers as well as custodian
and administrative fees in connection with loans. Fees may only be paid to a
placing broker provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services rendered, that the
Trustees separately consider the propriety of any fee shared by the placing
broker with the borrower, and that the fees are not used to compensate the
Adviser or any affiliated person of the Trust or an affiliated person of the
Adviser or other affiliated person. The terms of the Funds' loans must meet
applicable tests under the Internal Revenue Code and permit the Funds to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.

Foreign Securities. Subject to each Fund's investment policies and
quality and maturity standards, the Funds may invest in the securities (payable
in U.S. dollars) of foreign issuers and in the securities of foreign branches of
U.S. banks such as negotiable certificates of deposit (Eurodollars). Because the
Funds may invest in foreign securities, investment in the Funds involves risks
that are different in some respects from an investment in a fund which invests
only in securities of U.S. domestic issuers. Foreign investments may be affected
favorably or unfavorably by changes in currency rates and exchange control
regulations. There may be less publicly available information about a foreign
company than about a U.S. company and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. There may be less governmental
supervision of securities markets, brokers and issuers of securities. Securities
of some foreign companies are less liquid or more volatile than securities of
U.S. companies and foreign brokerage commissions and custodian fees are

- 12 -

<PAGE>

generally higher than in the United States. Settlement practices may include
delays and may differ from those customary in United States markets. Investments
in foreign securities may also be subject to other risks different from those
affecting U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, restrictions on foreign investment
and repatriation of capital, imposition of withholding taxes on dividend or
interest payments, currency blockage (which would prevent cash from being
brought back to the United States), and difficulty in enforcing legal rights
outside the United States.

Warrants and Rights. Warrants are options to purchase equity securities
at a specified price and are valid for a specific time period. Rights are
similar to warrants, but normally have a short duration and are distributed by
the issuer to its shareholders. The GW&K Equity Fund may purchase warrants and
rights, provided that the Fund does not invest more than 5% of its net assets at
the time of purchase in warrants and rights other than those that have been
acquired in units or attached to other securities. Of such 5%, no more than 2%
of the Fund's assets at the time of purchase may be invested in warrants which
are not listed on either the New York Stock Exchange or the American Stock
Exchange.

QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS

The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for corporate bonds in which the Funds may invest are as follows:

Moody's Investors Service, Inc.

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

- 13 -

<PAGE>

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Standard & Poor's Ratings Group

AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.

AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.

A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

- 14 -

<PAGE>

BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.

BB, B, CCC and CC - Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

C - The rating C is reserved for income bonds on which no interest is
being paid.

D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.

The ratings of Moody's Investors Service, Inc. and Standard
& Poor's Ratings Group for preferred stocks in which the Funds
may invest are as follows:

Moody's Investors Service, Inc.

aaa - An issue which is rated aaa is considered to be a top- quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.

aa - An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.

a - An issue which is rated a is considered to be an upper- medium
grade preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.

baa - An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.

ba - An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.

- 15 -

<PAGE>

b - An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.

caa - An issue which is rated caa is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payments.

Standard & Poor's Ratings Group

AAA - This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.

AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.

A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.

BBB - An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.

BB, B and CCC - Preferred stock rated BB, B and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

CC - The rating CC is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.

C - A preferred stock rated C is a non-paying issue.

D - A preferred stock rated D is a non-paying issue with the issuer in
default on debt instruments.

- 16 -

<PAGE>

INVESTMENT LIMITATIONS

The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to either Fund without the affirmative vote of a
majority of the outstanding shares of that Fund.

The limitations applicable to each Fund are:

1. Borrowing Money. The Fund will not borrow money, except from
a bank, provided that immediately after any such borrowing there is asset
coverage of 300% for all borrowings of the Fund.

2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings. Deposit of payment
by the Fund of initial or maintenance margin in connection with futures
contracts and related options is not considered a pledge or hypothecation of
assets.

3. Margin Purchases. The Fund will not purchase any securities
on "margin" (except such short-term credits as are necessary for the clearance
of transactions). The deposit of funds in connection with transactions in
options, futures contracts, and options on such contracts will not be
considered a purchase on "margin."

4. Short Sales. The Fund will not make short sales of securities, or
maintain a short position, other than short sales "against the box."

5. Commodities. The Fund will not purchase or sell commodities
or commodity contracts including futures, except that the Fund may purchase or
sell put or call options, financial futures contracts and related options.

6. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities, a Fund may be deemed
an underwriter under certain federal securities laws.

7. Real Estate. The Fund will not purchase, hold or deal in real
estate or real estate mortgage loans, including real estate limited partnership
interests, except that the Fund may purchase (a) securities of companies
(other than limited

- 17 -

<PAGE>

partnerships) which deal in real estate, (b) securities which are secured by
interests in real estate or by interests in mortgage loans including securities
secured by mortgage-backed securities or (c) readily marketable interests in
real estate investment trusts.

8. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
bonds, debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness.

9. Industry Concentration. The Fund will not invest more than 25% of
its total assets in any particular industry.

10. Senior Securities. The Fund will not issue or sell any senior
security as defined by the Investment Company Act of 1940 except in so far as
any borrowing that the Fund may engage in may be deemed to be an issuance of a
senior security.

The Trust does not intend to pledge, mortgage or hypothecate the assets
of either Fund. The Trust does not intend to make short sales of securities
"against the box" as described in investment limitation 4. The statements of
intention in this paragraph reflect nonfundamental policies which may be changed
by the Board of Trustees without shareholder approval.

Other current investment policies of the Fund, which are not
fundamental and which may be changed by action of the Board of Trustees without
shareholder approval, are as follows:

1. Illiquid Investments. The Fund will not purchase securities for
which no readily available market exists or engage in a repurchase agreement
maturing in more than seven days if, as a result thereof, more than 15% of the
value of the net assets of the Fund would be invested in such securities.

2. Investing for Control. The Fund will not invest in companies for
the purpose of exercising control or management.

3. Other Investment Companies. The Fund will not invest more than 10%
of its total assets in securities of other investment companies. The Fund will
not invest more than 5% of its total assets in the securities of any single
investment company. The Fund will not hold more than 3% of the outstanding
voting stock of any single investment company.

4. Securities Owned by Affiliates. The Fund will not purchase or retain
the securities of any issuers if those officers and Trustees of the Trust or
officers, directors, or principals of its Adviser, owning individually more than
one-half of 1% of the securities of such issuer, own in the aggregate more than
5% of the securities of such issuer.

- 18 -

<PAGE>

5. Mineral Leases. The Fund will not purchase oil, gas or other
mineral leases, rights or royalty contracts.

6. Voting Securities of Any Issuer. The Fund will not purchase more
than 10% of the outstanding voting securities of any one issuer.

With respect to the percentages adopted by the Trust as maximum
limitations on a Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.

TRUSTEES AND OFFICERS

The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk.
Estimated Annual
Compensation
NAME AGE POSITION HELD From the Trust
---- --- ------------- --------------
*Harold G. Kotler 52 President/Trustee $ 0
*Benjamin H. Gannett 54 Treasurer/Trustee 0
Arlene Zoe Aponte-Gonzalez 40 Trustee 4,000
Morton S. Grossman 72 Trustee 4,000
Timothy P. Neher 49 Trustee 4,000
+Josiah A. Spaulding, Jr. 45 Trustee 4,000
+Allan Tofias 66 Trustee 4,000
Irwin M. Heller 50 Secretary 0

*
Messrs. Kotler and Gannett, as principals of Gannett Welsh & Kotler,
Inc., the Trust's investment adviser, are "interested persons" of the
Trust within the meaning of Section 2(a)(19) of the Investment Company
Act of 1940.

+ Member of Audit Committee.

The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:

HAROLD G. KOTLER, 222 Berkeley Street, Boston, Massachusetts, is
President and a principal of the Adviser and of GSD, Inc., the General Partner
of the GW&K Equity Fund, L.P. (a limited partnership investing in equity
securities). He is also a director of ICON Consulting (a consulting company).

BENJAMIN H. GANNETT, 222 Berkeley Street, Boston, Massachusetts, is
Executive Vice President and Treasurer of the Adviser.

- 19 -

<PAGE>

ARLENE ZOE APONTE-GONZALEZ, 100 Technology Center Drive, Stoughton,
Massachusetts is an Associate Director of Reebok International Ltd. (a
sportswear company). She previously was a Director of The Boston Plan for
Excellence.

MORTON S. GROSSMAN, P.O. Box 110, Quincy, Massachusetts, is President
and Chairman of the Board of The Grossman Companies, Inc. (a real estate
management company). He previously was a director of Workingmen's Co-Op Bank
(a financial institution).

TIMOTHY P. NEHER, Lewis Wharf, Boston, Massachusetts, is a
Vice-Chairman of Continental Cablevision, Inc. (a telecommunications company),
and is a Director of Turner Broadcasting, Inc. (a broadcasting company) and The
Golf Channel, Inc. (a golf programming company).

JOSIAH A. SPAULDING, JR., 270 Tremont Street, Boston, Massachusetts,
is the President and Chief Executive Officer of The Wang Center for the
Performing Arts (an entertainment company).

ALLAN TOFIAS, 59 Moradrock Road, Wellesley, Massachusetts, is Chairman
of the Board of Tofias Fleishman Shapiro & Co. P.C. (an accounting and business
consulting firm).

IRWIN M. HELLER, 177 Hampshire Road, Wellesley, Massachusetts, is a
Partner of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, PC (a law firm).

Each non-interested Trustee will receive an annual retainer of $2,000
and a $500 fee for each Board meeting attended and will be reimbursed for travel
and other expenses incurred in the performance of their duties.

THE INVESTMENT ADVISER

Gannett Welsh & Kotler, Inc. (the "Adviser") is the Trust's investment
manager. Messrs. Kotler and Gannett, as principals of the Adviser, may directly
or indirectly receive benefits from the advisory fees paid to the Adviser. Under
the terms of the investment advisory agreement between the Trust and the
Adviser, the Adviser manages the Funds' investments. The GW&K Equity Fund pays
the Adviser a fee computed and accrued daily and paid monthly at an annual rate
of 1.00% of its average daily net assets. The GW&K Government Securities Fund
pays the Adviser a fee computed and accrued daily and paid monthly at an annual
rate of .75% of its average daily net assets.

The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to

- 20 -

<PAGE>

which the Trust may be a party. The Funds may have an obligation to indemnify
the Trust's officers and Trustees with respect to such litigation, except in
instances of willful misfeasance, bad faith, gross negligence or reckless
disregard by such officers and Trustees in the performance of their duties. The
Adviser bears promotional expenses in connection with the distribution of the
Funds' shares to the extent that such expenses are not assumed by the Funds
under their plan of distribution (see below). The compensation and expenses of
any officer, Trustee or employee of the Trust who is an officer, director or
employee of the Adviser are paid by the Adviser.

By its terms, the Trust's investment advisory agreement will remain in
force until December 3, 1998 and from year to year thereafter, subject to annual
approval by (a) the Board of Trustees or (b) a vote of the majority of a Fund's
outstanding voting securities; provided that in either event continuance is also
approved by a majority of the Trustees who are not interested persons of the
Trust, by a vote cast in person at a meeting called for the purpose of voting on
such approval. The Trust's investment advisory agreement may be terminated at
any time, on sixty days' written notice, without the payment of any penalty, by
the Board of Trustees, by a vote of the majority of a Fund's outstanding voting
securities, or by the Adviser. The investment advisory agreement automatically
terminates in the event of its assignment, as defined by the Investment Company
Act of 1940 and the rules thereunder.

The Adviser will reimburse the Funds to the extent that the expenses of
a Fund for any fiscal year exceed the applicable expense limitations imposed by
state securities administrators, as such limitations may be lowered or raised
from time to time. The most restrictive limitation is presently 2.5% of the
first $30 million of average daily net assets, 2% of the next $70 million of
average daily net assets and 1.5% of average daily net assets in excess of $100
million. If any such reimbursement is required, the payment of the advisory fee
at the end of any month will be reduced or postponed or, if necessary, a refund
will be made to the Funds at the end of such month. Certain expenses such as
brokerage commissions, if any, taxes, interest, extraordinary items and other
expenses subject to approval of state securities administrators are excluded
from such limitations. If the expenses of a Fund approach the applicable
limitation in any state, the Trust will consider the various actions that are
available to it, including suspension of sales to residents of that state.

The names "Gannett Welsh & Kotler" and "GW&K" are property rights of
the Adviser. The Adviser may use the names "Gannett Welsh & Kotler" and "GW&K"
in other connections and for other purposes, including in the name of other
investment companies. The Trust has agreed to discontinue any use of the names
"Gannett Welsh & Kotler" or "GW&K" if the Adviser ceases to be employed as the
Trust's investment manager.

- 21 -

<PAGE>

DISTRIBUTION PLAN

As stated in each Fund's Prospectus, the Funds have adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 which permits each Fund to pay for expenses incurred in the
distribution and promotion of the Funds' shares, including but not limited to,
the printing of prospectuses, statements of additional information and reports
used for sales purposes, advertisements, expenses of preparation and printing of
sales literature, promotion, marketing and sales expenses and other
distribution-related expenses, including any distribution fees paid to
securities dealers or other firms who have executed a distribution or service
agreement with the Trust. The Plan expressly limits payment of the distribution
expenses listed above in any fiscal year to a maximum of .25% of the average
daily net assets of each Fund. Unreimbursed expenses will not be carried over
from year to year.

Agreements implementing the Plan (the "Implementation Agreements"),
including agreements with dealers wherein such dealers agree for a fee to act as
agents for the sale of the Funds' shares, are in writing and have been approved
by the Board of Trustees. All payments made pursuant to the Plan are made in
accordance with written agreements.

The continuance of the Plan and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plan or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. The Plan may be terminated at any
time by a vote of a majority of the Independent Trustees or by a vote of the
holders of a majority of the outstanding shares of a Fund. In the event the Plan
is terminated in accordance with its terms, the affected Fund will not be
required to make any payments for expenses incurred by the Adviser after the
termination date. Each Implementation Agreement terminates automatically in the
event of its assignment and may be terminated at any time by a vote of a
majority of the Independent Trustees or by a vote of the holders of a majority
of the outstanding shares of a Fund on not more than 60 days' written notice to
any other party to the Implementation Agreement. The Plan may not be amended to
increase materially the amount to be spent for distribution without shareholder
approval. All material amendments to the Plan must be approved by a vote of the
Trust's Board of Trustees and by a vote of the Independent Trustees.

In approving the Plan, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plan will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of

- 22 -

<PAGE>

the Funds' assets for distribution expenses under the Plan should assist in the
growth of the Funds which will benefit the Funds and their shareholders through
increased economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plan is in effect, all amounts spent by the Funds pursuant
to the Plan and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. In addition, the
selection and nomination of those Trustees who are not interested persons of the
Trust are committed to the discretion of the Independent Trustees during such
period.

As principals of the Adviser, Messrs. Gannett and Kotler may be deemed
to have a financial interest in the operation of the Plan and the Implementation
Agreements.

SECURITIES TRANSACTIONS

Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.

Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of the GW&K
Government Securities Fund are generally traded on a net basis and transactions
in such securities do not normally involve brokerage commissions, the cost of
portfolio securities transactions of the Fund will consist primarily of dealer
or underwriter spreads.

The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Funds and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Adviser determines in good faith that the commission is reasonable in relation
to

- 23 -

<PAGE>

the value of the brokerage and research services provided. The determination may
be viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.

Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.

The Adviser may aggregate purchase and sale orders for the Funds and
its other clients if it believes such aggregation is consistent with its duty to
seek best execution for the Funds and its other clients. The Adviser will not
favor any advisory account over any other account, and each account that
participates in an aggregated order will participate at the average share price
for all transactions of the Adviser in that security on a given business day,
with all transaction costs shared on a pro rata basis.

CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act of 1940. The Code significantly
restricts the personal investing activities of all access persons of the Adviser
and, as described below, imposes additional, more onerous, restrictions on
investment personnel of the Adviser. The Code requires that all access persons
of the Adviser preclear any personal securities (with limited exceptions, such
as U.S. Government obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition or limitation
applicable to the proposed investment. In addition, no access person may
purchase or sell any security which, at that time, is being purchased or sold
(as the case may be), or to the knowledge of the access person is being
considered for purchase or sale, by either Fund. The substantive restrictions
applicable to investment personnel of the Adviser include a ban on acquiring any
securities in an initial public offering. Furthermore, the Code provides for
trading "blackout periods" which prohibit trading by investment personnel of the
Adviser within periods of trading by either Fund in the same (or equivalent)
security.

- 24 -

<PAGE>

PORTFOLIO TURNOVER

A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that the portfolio turnover rate for each Fund
normally will not exceed 100%. A 100% turnover rate would occur if all of a
Fund's portfolio securities were replaced once within a one year period.

Generally, each Fund intends to invest for long-term purposes. However,
the rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when the Adviser believes that portfolio
changes are appropriate.

CALCULATION OF SHARE PRICE

The share price (net asset value) of the shares of each Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time) on each day the Trust is open
for business. The Trust is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Trust may also be open for business on other days in which there is
sufficient trading in either Fund's portfolio securities that its net asset
value might be materially affected. For a description of the methods used to
determine the share price, see "Calculation of Share Price" in the Prospectus.

TAXES

Each Fund's Prospectus describes generally the tax treatment of
distributions by the Funds. This section of the Statement of Additional
Information includes additional information concerning federal taxes.

Each Fund intends to qualify annually for the special tax treatment
afforded a "regulated investment company" under Subchapter M of the Internal
Revenue Code so that it does not pay federal taxes on income and capital gains
distributed to shareholders. To so qualify a Fund must, among other things, (i)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currency, or certain other
income (including but not limited to gains from options, futures and forward
contracts)

- 25 -

<PAGE>

derived with respect to its business of investing in stock, securities or
currencies; (ii) derive less than 30% of its gross income in each taxable year
from the sale or other disposition of the following assets held for less than
three months: (a) stock or securities, (b) options, futures or forward contracts
not directly related to its principal business of investing in stock or
securities; and (iii) diversify its holdings so that at the end of each quarter
of its taxable year the following two conditions are met: (a) at least 50% of
the value of the Fund's total assets is represented by cash, U.S. Government
securities, securities of other regulated investment companies and other
securities (for this purpose such other securities will qualify only if the
Fund's investment is limited in respect to any issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Fund's assets is
invested in securities of any one issuer (other than U.S. Government securities
or securities of other regulated investment companies).

A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.

A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.

The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholdings or demonstrates an
exemption from withholding.

REDEMPTION IN KIND

Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make

- 26 -

<PAGE>

an election pursuant to Rule 18f-1 under the Investment Company Act of 1940.
This election will require the Funds to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of each Fund during any 90 day
period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.

HISTORICAL PERFORMANCE INFORMATION

From time to time, each Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1 + T)n = ERV
Where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)

The calculation of average annual total return assumes the reinvestment
of all dividends and distributions. If a Fund has been in existence less than
one, five or ten years, the time period since the date of the initial public
offering of shares will be substituted for the periods stated. Each Fund may
also advertise total return (a "nonstandardized quotation") which is calculated
differently from average annual total return. A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation may also indicate average annual
compounded rates of return over periods other than those specified for average
annual total return. A nonstandardized quotation of total return will always be
accompanied by a Fund's average annual total return as described above.

From time to time, each of the Funds may also advertise its yield. A
yield quotation is based on a 30-day (or one month) period and is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:

- 27 -

<PAGE>

Yield = 2[(a-b/cd + 1)6 - 1]
Where:

a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period

Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that a Fund
owns the security. Generally, interest earned (for the purpose of "a" above) on
debt obligations is computed by reference to the yield to maturity of each
obligation held based on the market value of the obligation (including actual
accrued interest) at the close of business on the last business day prior to the
start of the 30-day (or one month) period for which yield is being calculated,
or, with respect to obligations purchased during the month, the purchase price
(plus actual accrued interest). With respect to the treatment of discount and
premium on mortgage or other receivables-backed obligations which are expected
to be subject to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an increase or
decrease to interest income during the period and discount or premium on the
remaining security is not amortized.

The performance quotations described above are based on historical
earnings and are not intended to indicate future performance.

To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Funds may use the following
publications or indices to discuss or compare Fund performance:

Lipper Mutual Fund Performance Analysis and Lipper Fixed Income Fund
Performance Analysis measure total return and average current yield for the
mutual fund industry and rank individual mutual fund performance over specified
time periods assuming reinvestment of all distributions, exclusive of sales
loads. The GW&K Equity Fund may provide comparative performance information
appearing in the Growth and Income Funds category and the GW&K Government
Securities Fund may provide comparative performance

- 28 -

<PAGE>

information appearing in the General U.S. Government Funds category. In
addition, the Funds may use comparative performance information of relevant
indices, including the S&P 500 Index and the Dow Jones Industrial Average. The
S&P 500 Index is an unmanaged index of 500 stocks, the purpose of which is to
portray the pattern of common stock price movement. The Dow Jones Industrial
Average is a measurement of general market price movement for 30 widely held
stocks listed on the New York Stock Exchange.

In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the Fund will continue
this performance as compared to such other averages.

PRINCIPAL SECURITY HOLDERS

Richard B. Cohen, 637 Washington Street, Brookline, Massachusetts
02146, is expected to own of record 5.60% of the outstanding shares of the GW&K
Equity Fund upon the consummation of the Exchange.

CUSTODIAN

Investors Bank & Trust Company, 89 South Street, Boston, Massachusetts
02111, has been retained to act as Custodian for the Funds' investments.
Investors Bank and Trust acts as each Fund's depository, safekeeps its portfolio
securities, collects all income and other payments with respect thereto,
disburses funds as instructed and maintains records in connection with its
duties.

AUDITORS

The firm of Arthur Andersen LLP has been selected as independent public
accountants for the Trust for the fiscal year ending September 30, 1997. Arthur
Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of
the Trust's financial statements and advises the Funds as to certain
accounting matters.

MGF SERVICE CORP.

The Trust's transfer agent, MGF Service Corp. ("MGF"), maintains the
records of each shareholder's account, answers shareholders' inquiries
concerning their accounts, processes

- 29 -

<PAGE>

purchases and redemptions of the Funds' shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
MGF receives for its services as transfer agent a fee payable monthly at an
annual rate of $17 per account from the GW&K Equity Fund and $21 per account
from the GW&K Government Securities Fund, provided, however, that the minimum
fee is $1,000 per month for each Fund. In addition, the Funds pay out-of-pocket
expenses, including but not limited to, postage, envelopes, checks, drafts,
forms, reports, record storage and communication lines.

MGF also provides accounting and pricing services to the Funds. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable MGF to perform its duties, each Fund pays MGF
a fee in accordance with the following schedule:

Average Monthly Net Assets Monthly Fee

0 - $ 50,000,000 $2,000
50 - 100,000,000 2,500
100 - 250,000,000 3,000
Over 250,000,000 4,000

In addition, each Fund pays all costs of external pricing services.

In addition, MGF is retained to provide administrative services to the
Funds. In this capacity, MGF supplies non-investment related statistical and
research data, internal regulatory compliance services and executive and
administrative services. MGF supervises the preparation of tax returns, reports
to shareholders of the Funds, reports to and filings with the Securities and
Exchange Commission and state securities commissions, and materials for meetings
of the Board of Trustees. For the performance of these administrative services,
each Fund pays MGF a fee at the annual rate of .100% of the average value of its
daily net assets up to $100,000,000, .075% of such assets from $100,000,000 to
$200,000,000 and .050% of such assets in excess of $200,000,000; provided,
however, that the minimum fee is $1,000 per month for each Fund.

STATEMENTS OF ASSETS AND LIABILITIES

The Funds' Statements of Assets and Liabilities as of October 17, 1996,
which have been audited by Arthur Andersen LLP, are attached to this Statement
of Additional Information.

- 30 -

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF

OCTOBER 17, 1996

TOGETHER WITH

AUDITORS' REPORT

- 31 -

<PAGE>

ARTHUR ANDERSEN LLP

Report of Independent Public Accountants

To the Trustees and Shareholders of
The Gannett Welsh & Kotler Funds:

We have audited the accompanying statements of assets and liabilities
of the GW&K Equity Fund and the GW&K Government Securities Fund as of October
17, 1996. These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the statements of assets and liabilities referred to
above present fairly, in all material respects, the financial position of the
GW&K Equity Fund and the GW&K Government Securities Fund as of October 17, 1996
in conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP
Arthur Andersen LLP

Cincinnati, Ohio
October 25, 1996

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF OCTOBER 17,1996

GW&K
GW&K GOVERNMENT
EQUITY SECURITIES
FUND FUND

ASSETS:
Cash $ 98,834 $ 2,000
Organization costs (Note 2) 34,500 34,500
---------- ----------

Total assets 133,334 36,500
---------- ----------

LIABILITIES:
Accrued expenses (Note 2) 34,500 34,500
---------- ----------

Total liabilities 34,500 34,500
---------- ----------

Net assets for shares of
beneficial interest outstanding $ 98,834 $ 2,000
========== ==========

Shares outstanding 9,883 200
========== ==========

Net asset value, offering price
and redemption price per share $ 10.00 $ 10.00
========== ==========

The accompanying notes are an integral part of this statement.

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF OCTOBER 17, 1996

(1) The Gannett Welsh & Kotler Funds (the Trust) is a diversified
open-end investment company established as a Massachusetts
business trust under a Declaration of Trust dated April 24,
1996. The Trust has established two series to date, the
GW&K Equity Fund and the GW&K Government Securities Fund
(the Funds). The Trust has had no operations except for the
initial issuance of shares. On October 17, 1996, 9,883
shares of the GWK Equity Fund and 200 shares of the GW&K
Government Securities Fund were issued for cash at $10.00
per share.

(2) Expenses incurred in connection with the organization of the
Trust and the initial offering of shares are estimated to be
$69,000, which includes $40,000 paid to MGF Service Corp.,
the Funds' administrator. These expenses have been paid by
Gannett Welsh & Kotler, Inc. (the Adviser). Upon
commencement of the public offering of shares of the Funds,
each Fund will reimburse the Adviser for an equal share of
such expenses, with that amount being capitalized and
amortized on a straight-line basis over five years. As of
October 17, 1996, all outstanding shares of the Funds were
held by affiliates of the Adviser, who purchased these
initial shares in order to provide the Trust with its
required capital. In the event the initial shares of the
Funds are redeemed by any holder thereof at any time prior
to the complete amortization of organizational expenses, the
redemption proceeds payable with respect to such shares will
be reduced by the pro rata share (based upon the portion of
the shares redeemed in relation to the required minimum
initial capitalization) of the unamortized deferred
organizational expenses as of the date of such redemption.

(3) Reference is made to the Prospectus and this Statement of
Additional Information for a description of the Advisory Agreement,
the Plan of Distribution, Administration Agreement, tax aspects of
the Funds and the calculation of the net asset value of shares of
the Funds.