GANNETT WELSH & KOTLER FUNDS, 497, 1996-10-30

GANNETT WELSH & KOTLER FUNDS
497, 1996-10-30

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SUBJECT TO COMPLETION, DATED OCTOBER 30, 1996

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURIITES MAY NOT BE SOLD NOR MAY
OFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS
_______, 1996

THE GANNETT WELSH & KOTLER FUNDS

222 Berkeley Street
Boston, Massachusetts 02116
(617) 236-8900

GW&K EQUITY FUND

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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 _______, 1996
has been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling the number
listed below.
_________________________________________________________________ For
Information or Assistance in Opening An Account, Please Call:

Nationwide (Toll-Free) . . . . . . . . . . . . . . . 888-495-3863

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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.

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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. . . . . . . . . . . . . . . . . . . . . None(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

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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.

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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

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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

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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.

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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.

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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.

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-

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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:

-- 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

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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.

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.

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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.

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.

Exchanges may only be made for shares of funds then offered

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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.

TAXES

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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 is $6,187,300 (or 34% of the Partnership's net assets as of that
date).

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.

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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.

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

- 17 -

<PAGE>

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.

DISTRIBUTION PLAN

- 18 -

<PAGE>

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.

CALCULATION OF SHARE PRICE

- 19 -

<PAGE>

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.

- 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.

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.

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, in managing the Fund, the Adviser 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

- 21 -

<PAGE>

incurred by the Fund which were not incurred by the Partnership. The following
performance data should not be relied upon by investors as an indication of
future performance of the Fund.

Periodic Rates of Return

<S> <C> <C> <C>
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
</TABLE>

- 22 -

<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

TABLE OF CONTENTS

Expense Information . . .
Investment Objective, Investment Policies and
Risk Considerations.......................................................
How to Purchase Shares......................................................
Shareholder Services........................................................
How to Redeem Shares........................................................
Exchange Privilege..........................................................
Dividends and Distributions.................................................
Taxes.......................................................................
Operation of the Fund.......................................................
Distribution Plan...........................................................
Calculation of Share Price..................................................
Performance Information.....................................................

- -----------------------------------------------------------------

- 23 -

<PAGE>

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 Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.

- 24 -

<PAGE>

Account Application
Please mail account application to:

MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

THE GANNETT
WELSH &
KOTLER FUNDS:
GW&K EQUITY FUND

ACCOUNT NO. ___________________________
(For Fund Use Only)

FOR BROKER/DEALER USE ONLY

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

- --------------------- ---------------------------
Title of Corporate Officer, Date
Trustee, etc.

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.

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 ABA Routing Number____________________
in the GW&K Equity Fund
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
o both the 15th and last business day
___________________________________
City State

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

(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 checks. 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 on any such check 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.

<PAGE>

SUBJECT TO COMPLETION, DATED OCTOBER 30, 1996

PROSPECTUS
_______, 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.

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 _______, 1996 has been filed with the
Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the number listed below.

- -----------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:

Nationwide (Toll-Free) . . . . . . . . . . . . . . 888-495-3863

- -----------------------------------------------------------------

- 25 -

<PAGE>

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. . . . . . . . . . . . . . . . . . . . . None(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

- 26 -

<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

- 27 -

<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.

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<PAGE>

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
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.

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<PAGE>

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 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

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<PAGE>

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.

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.

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<PAGE>

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.

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.

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<PAGE>

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 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.

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<PAGE>

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.

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.

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<PAGE>

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 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

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<PAGE>

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 Government Securities Fund". An account application is included in
this Prospectus.

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.

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.

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<PAGE>

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
Government Securities 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
800-495-3863) 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:

-- 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

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<PAGE>

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.

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

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<PAGE>

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.

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.

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.

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<PAGE>

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.

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.

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.

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

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<PAGE>

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.

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.

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<PAGE>

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.

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
.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.

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<PAGE>

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.

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.

- 43 -
<PAGE>

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.

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: (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.

- 44 -

<PAGE>

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 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.

- 45 -

<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

TABLE OF CONTENTS

Expense Information . . . . . . . . . . . . . . . . . . . . . . .
Investment Objective, Investment Policies and

Risk Considerations......................................................
How to Purchase Shares.....................................................
Shareholder Services.......................................................
How to Redeem Shares.......................................................
Exchange Privilege.........................................................
Dividends and Distributions................................................
Taxes......................................................................
Operation of the Fund......................................................
Distribution Plan..........................................................
Calculation of Share Price.................................................
Performance Information....................................................

- -----------------------------------------------------------------

- 46 -

<PAGE>

- 47 -

<PAGE>

Account Application
Please mail account application to:

MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

THE GANNETT
WELSH &
KOTLER FUNDS:

GW&K GOVERNMENT SECURITIES FUND

ACCOUNT NO. ___________________________
(For Fund Use Only)

FOR BROKER/DEALER USE ONLY
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.
o Other
Name of Joint Tenant, Partner, Custodian _______________________

ADDRESS PHONE
( )------------
- ------------------------------------------------- Business Phone
Street or P.O. Box
( )------------
- ------------------------------------------------ Home Phone

City State Zip

- ----------------------------------------------- ---------------------------
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

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

- ------------------------- -----------------------------------
Title of Corporate Officer, Date
Trustee, etc.

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.

AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND)

Please invest $ _______per month in the GW&K ABA Routing Number____________
Government Securities Fund 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
o both the 15th and last business day
__________________________________
City State

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

(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 checks. 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 on any such check 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):

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

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)

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.

SUBJECT TO COMPLETION, DATED OCTOBER 30, 1996

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURIITES MAY NOT BE SOLD NOR MAY
OFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.

THE GANNETT WELSH & KOTLER FUNDS

STATEMENT OF ADDITIONAL INFORMATION

_______, 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 _______, 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.

- 48 -

<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 . . . . . . . . . . . . . . . . . . . . . 27

HISTORICAL PERFORMANCE INFORMATION . . . . . . . . . . . . . 26

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

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

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

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

- 49 -

<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
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.

- 50 -

<PAGE>

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 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.

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

- 51 -

<PAGE>

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.

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

- 52 -

<PAGE>

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 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

- 53 -

<PAGE>

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.

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

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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.

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

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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 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

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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.

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

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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 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

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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 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

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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.

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.

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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.

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.

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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.

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.

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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.

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.

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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 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

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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.

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

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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.

NAME AGE POSITION HELD

*Harold G. Kotler 52 President/Trustee
*Benjamin H. Gannett 54 Treasurer/Trustee
Arlene Zoe Aponte-Gonzalez 40 Trustee
Morton S. Grossman 72 Trustee
Timothy P. Neher 49 Trustee
+Josiah A. Spaulding, Jr. 45 Trustee
+Allan Tofias 66 Trustee
Irwin M. Heller 50 Secretary

* 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.

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).

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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 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

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<PAGE>

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 ___________, 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.

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

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<PAGE>

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 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

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<PAGE>

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 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.

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<PAGE>

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.

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

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<PAGE>

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) 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

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<PAGE>

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 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

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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:

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

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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 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.

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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.

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 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

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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.

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<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF

OCTOBER 17, 1996

TOGETHER WITH

AUDITORS' REPORT

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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 of The Gannett
Welsh & Kotler Funds 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 of The Gannett Welsh
& Kotler Funds as of October 17, 1996 in conformity with generally accepted
accounting principles.

/s/ Arthur Andersen LLP
Arthur Andersen LLP

Cincinnati, Ohio
October 25, 1996

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THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF OCTOBER 17,1996

GW&K
GW&K GOVERNMENT
EQUITY SECURITIES
FUND FUND

<S> <C> <C>
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.
</TABLE>

<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 below the required minimum initial
capitalization of $100,000 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.

<PAGE>

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