GANNETT WELSH & KOTLER FUNDS, 485B24F, 1997-06-17

GANNETT WELSH & KOTLER FUNDS
485B24F, 1997-06-17

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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/

Pre-Effective Amendment No.

Post-Effective Amendment No. 1

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/

Amendment No. 2

(Check appropriate box or boxes)

THE GANNETT WELSH & KOTLER FUNDS

(Exact Name of Registrant as Specified in Charter)

222 Berkeley Street
Boston, Massachusetts 02116
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (617) 236-8900

T. Williams Roberts III
The Gannett Welsh & Kotler Funds
222 Berkeley Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)

Copies to:

Tina D. Hosking
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202

It is proposed that this filing will become effective (check appropriate box)

/X / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on (date) pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485

The Registrant has registered an indefinite number of shares of
beneficial interest under the Securities Act of 1933, as amended, pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended.

THE GANNETT WELSH & KOTLER FUNDS

CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
UNDER THE SECURITIES ACT OF 1933

PART A

Item No. Registration Statement Caption Caption in Prospectus

1. Cover Page Cover Page

2. Synopsis Expense Information

3. Condensed Financial Information Financial Highlights;
Performance Information

4. General Description of Registrant Investment Objective,
Investment Policies and Risk
Considerations; Operation of
the Fund

5. Management of the Fund Operation of the Fund

6. Capital Stock and Other Securities Cover Page; Operation of the
Fund; Dividends and
Distributions; Taxes

7. Purchase of Securities Being Offered How to Purchase Shares;
Shareholder Services;
Exchange Privilege;
Distribution Plan;
Calculation of Share Price;
Application

8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services;
Exchange Privilege

9. Pending Legal Proceedings Inapplicable

PART B
Caption in Statement
of Additional
Item No. Registration Statement Caption Information

10. Cover Page Cover Page

11. Table of Contents Table of Contents

(i)

<PAGE>

12. General Information and History The Trust

13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations; Quality
Ratings of Corporate Bonds
and Preferred Stocks;
Investment Limitations;
Securities Transactions;
Portfolio Turnover

14. Management of the Fund Trustees and Officers

15. Control Persons and Principal Holders Trustees and Officers
of Securities

16. Investment Advisory and Other Services The Investment Adviser;
Distribution Plan;
Custodian; Auditors;
Countrywide Fund Services,
Inc.

17. Brokerage Allocation and Other Securities Transactions
Practices

18. Capital Stock and Other Securities The Trust

19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price; Redemption in Kind

20. Tax Status Taxes

21. Underwriters Inapplicable

22. Calculation of Performance Data Historical Performance
Information

23. Financial Statements Financial Statements

</TABLE>

PART C

The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.

(ii)

<PAGE>

PROSPECTUS
June 17, 1997

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

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

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

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

Prior to the offering of Fund shares to the public, the Fund exchanged
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 June 17, 1997 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. The Fund's address is 222 Berkeley Street, Boston,
Massachusetts 02116 and its telephone number is 888-GWK-FUND (888-495-3863). A
copy of the Statement of Additional Information can be obtained at no charge by
calling or writing the Fund.

TABLE OF CONTENTS
Expense Information............................................. 2
Financial Highlights............................................ 3
Investment Objective, Investment Policies and
Risk Considerations........................................... 4
How to Purchase Shares.......................................... 9
Shareholder Services............................................10
How to Redeem Shares............................................11
Exchange Privilege..............................................12
Dividends and Distributions.....................................13
Taxes...........................................................14
Operation of the Fund...........................................15
Distribution Plan...............................................17
Calculation of Share Price......................................18
Performance Information.........................................18
- -------------------------------------------------------------------

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

<PAGE>

EXPENSE INFORMATION

Shareholder Transaction Expenses

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

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

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

Management Fees After Waivers . . . . . . . . . . . .75%(A)
12b-1 Fees. . . . . . . . . . . . . . . . . . . . . .00%(B)
Other Expenses. . . . . . . . . . . . . . . . . . . .50%
-----
Total Fund Operating Expenses After Waivers . . . . 1.25%(C)
=====
(A) Absent waivers of management fees, such fees would be 1.00%.

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

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

Example

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

1 Year $13
3 Years 40

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<PAGE>

FINANCIAL HIGHLIGHTS

The following information, which is unaudited, is an integral part of the Fund's
financial statements and should be read in conjunction with the financial
statements. The financial statements as of March 31, 1997 appear in the
Statement of Additional Information of the Fund, which can be obtained at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
888-GWK-FUND (888-495-3863)) or by writing to the Fund at the address on the
front of this Prospectus.

PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

For the Period Ended
March 31, 1997(A)
(Unaudited)

<S> <C>

Net asset value at beginning of period................................... $ 10.00
-------

Income from investment operations:
Net investment income............................................... 0.02
Net realized and unrealized losses on investments................... ( 0.19)
-------
Total from investment operations......................................... ( 0.17)
-------

Less distributions:
Dividends from net investment income................................ ----
-------
Total distributions...................................................... ----
-------

Net asset value at end of period......................................... $ 9.83
=======

Total return (not annualized)............................................ ( 1.70)%

Net assets at end of period (000's)...................................... $ 23,596

Ratio of expenses to average net assets(B)............................... 1.25%(C)

Ratio of net investment income to average net assets..................... .59%(C)

Portfolio turnover rate.................................................. 24%(C)

Average commission rate per share ....................................... $ 0.0821
- ------------------------------------------------------------------------------------

<FN>
(A) Represents the period from the initial public offering of shares
(December 10, 1996) through March 31, 1997.
(B) Absent fee waivers by the Adviser, the Fund's ratio of expenses to
average net assets would have been 1.39%(C) for the period from the
initial public offering of shares through March 31, 1997.
(C) Annualized.
</FN>
</TABLE>

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<PAGE>

INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS

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

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

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

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

- 4 -

<PAGE>

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

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

- 5 -

<PAGE>

return for investors. The Fund does not currently intend to 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

- 6 -

<PAGE>

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. 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.

- 7 -

<PAGE>

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

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

- 8 -

<PAGE>

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

HOW TO PURCHASE SHARES

Your initial investment in the Fund ordinarily must be at least
$2,000 ($1,000 for tax-deferred retirement plans). The Fund may, in the
Adviser's sole discretion, accept certain accounts with less than the stated
minimum initial investment. Shares of the Fund are sold on a continuous basis at
the net asset value next determined after receipt of a purchase order by the
Trust. Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on
any business day and transmitted to the Trust's transfer agent, Countrywide Fund
Services, Inc. (the "Transfer Agent"), 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 the Transfer Agent by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by the Transfer Agent 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 Countrywide Fund
Services, Inc., 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 Transfer Agent
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, the Transfer Agent 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.

- 9 -

<PAGE>

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

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

Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to the Transfer Agent. 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 Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable 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 the Transfer Agent (Nationwide call toll-free 888-GWK-FUND
(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.

- 10 -

<PAGE>

Tax-Deferred Retirement Plans

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

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

Direct Deposit Plans

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

Automatic Investment Plan

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. The Transfer Agent 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

- 11 -

<PAGE>

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

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

You will receive the net asset value per share next determined after
receipt by the Transfer Agent 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 the
Transfer Agent, 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 Countrywide 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 the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also

- 12 -

<PAGE>

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 the Transfer
Agent.

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 the Transfer Agent 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.

- 13 -

<PAGE>

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. 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.

Prior to the offering of shares of the Fund to the public, the Fund
exchanged its shares for portfolio securities of GW&K Equity Fund, L.P. (the
"Partnership"), a Delaware limited partnership, after which the Partnership
dissolved and distributed Fund shares received pro rata to its partners.
Following this exchange transaction (the "Exchange"), partners of the
Partnership constituted 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 was intended to qualify as a tax-free reorganization,
with no gain or loss 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 acquired securities that had appreciated in
value from the date they were originally acquired by the Partnership. If these
appreciated securities are subsequently sold by the Fund after the Exchange, the
amount of the gain will 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 the date of the Exchange, the amount of unrealized capital
gains of the Partnership was $6,218,883 (or 32.6% 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

- 14 -

<PAGE>

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.

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.

Edward B. 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.

- 15 -

<PAGE>

The Trust has retained Countrywide Fund Services, Inc. (the
"Transfer Agent"), P.O. Box 5354, Cincinnati, Ohio, to serve as the Fund's
transfer agent, dividend paying agent and shareholder service agent. The
Transfer Agent is a wholly-owned indirect subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending. The Transfer Agent also
provides accounting and pricing services to the Fund. The Transfer Agent
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, the Transfer Agent has been retained to provide
administrative services to the Fund. In this capacity, the Transfer Agent
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 the Transfer Agent 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.

- 16 -

<PAGE>

DISTRIBUTION PLAN

Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Fund has adopted a plan of distribution (the "Plan") under which the Fund may
directly incur or reimburse the Adviser for certain distribution-related
expenses, including payments to securities dealers and others who are engaged in
the sale of shares of the Fund and who may be advising investors regarding the
purchase, sale or retention of such shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by the Transfer Agent; 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.

- 17 -

<PAGE>

CALCULATION OF SHARE PRICE

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

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

PERFORMANCE INFORMATION

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

- 18 -

<PAGE>

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

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

PRIOR PERFORMANCE OF GW&K EQUITY FUND, L.P. The investment performance
illustrated below combines the performance of the GW&K Equity Fund, since its
commencement of operations on December 10, 1996, and the performance of the GW&K
Equity Fund, L.P. (the "Partnership") for periods prior to December 10, 1996.
The Partnership was managed by the Adviser with investment objectives, policies
and strategies substantially similar to those employed by the Adviser in
managing the Fund. It should be noted that the Partnership was not registered
under the Investment Company Act of 1940; if the Partnership had been so
registered, performance may have been adversely affected.

- 19 -

<PAGE>

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

With respect to periods prior to December 10, 1996, the following
performance data represents the prior performance data of the Partnership and
not the prior performance of the Fund, and should not be relied upon by
investors as an indication of future performance of the Fund. This performance
data measures the percentage change in the value of an account between the
beginning and end of a period and is net of all expenses incurred.

PERIODIC RATES OF RETURN
<TABLE>
<CAPTION>

GW&K S&P Russell
Equity 500 2000
Period Fund 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%

Year Ended
December 31, 1996 15.97% 22.96% 16.55%

January 1 -
May 31, 1997 8.76%* 15.44%* 5.68%*

August 1, 1991
through May 31,1997
Annualized Return 15.89% 17.46% 15.69%
Cumulative Return 136.34% 155.61% 134.00%

* Not Annualized

</TABLE>

- 20 -

<PAGE>

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

- 21 -

<PAGE>

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

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

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

TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

Shareholder Service
Nationwide: (Toll-Free) 888-GWK-FUND
(888-495-3863)
Rate Line
Nationwide: (Toll-Free) 800-852-4052

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

- 22 -

<PAGE>

[Logo] The
Gannett
Welsh &
Kotler
Funds

GW&K Equity Fund

Prospectus

No-Load Fund

- 23 -

<PAGE>

ACCOUNT APPLICATION
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

THE GANNETT WELSH & KOTLER FUNDS
GW&K EQUITY FUND
ACCOUNT NO. G2__________________
(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, (In case of custodial account
Organization, or Minor, etc. 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.
o By Check o By ACH to my bank checking or savings
account.
PLEASE ATTACH A VOIDED CHECK.
==============================================================================

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 Countrywide Fund Services, Inc. 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 Countrywide Fund Services, Inc. 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., Countrywide Fund
Services, Inc., and their respective officers, employees, agents and affiliates
from any and all liability in the performance of the acts instructed herein.
Neither the Trust, Countrywide Fund Services, Inc., 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 Countrywide Fund Services, Inc., or both, will employ
reasonable procedures to determine that telephone instructions are genuine. If
the Trust and/or Countrywide Fund Services, Inc. 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, BUSINESS TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE
THE RESOLUTION FORM ON THE REVERSE SIDE. UNLESS OTHERWISE SPECIFIED, EACH JOINT
OWNER SHALL HAVE FULL AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.

<PAGE>

AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND)
The Automatic Investment Plan is available for all established accounts of The
Gannett Welsh & Kotler Funds. There is no charge for this service, and it offers
the convenience of automatic investing on a regular basis. The minimum
investment is $100.00 per month. For an account that is opened by using this
Plan, the minimum initial and subsequent investments must be $100.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.

Please invest $ _____ per month in the ABA Routing Number_______________
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
City State o both the 15th and last business day

X____________________________________ X_____________________________________
(Signature of Depositor EXACTLY as it (Signature of Joint Tenant - if any)
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 Countrywide Fund
Services, Inc. ("Countrywide") 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 Countrywide, Countrywide hereby agrees:

Countrywide 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 its own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you whether
with or without cause or intentionally or inadvertently, of any such amount.
Countrywide 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. Countrywide will refund to you any
amount erroneously paid by you to the Fund if the claim for the amount of such
erroneous payment is made by you within six (6) months from the date of such
erroneous payment; your participation in this arrangement and that of the Fund
may be terminated by thirty (30) days written notice from either party to the
other.
==============================================================================

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

Please Indicate Withdrawal Schedule (Check One):

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

Please Select Payment Method (Check One):

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

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

________________________________________________
Bank ABA# Account # Account Name

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

Name of payee_________________________________________________________________

Please send to:_______________________________________________________________
Street address City State Zip

==============================================================================

RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of The
Gannett Welsh & Kotler Funds (the Trust) and that

______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the Trust,
and it is

FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. 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.

- 24 -

<PAGE>

PROSPECTUS
June 17, 1997

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

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

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

TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . . 2
Financial Highlights. . . . . . . . . . . . . . . . . . . . 3
Investment Objective, Investment Policies and
Risk Considerations . . . . . . . . . . . . . . . . . . . . 4
How to Purchase Shares. . . . . . . . . . . . . . . . . . . .11
Shareholder Services. . . . . . . . . . . . . . . . . . . . .13
How to Redeem Shares. . . . . . . . . . . . . . . . . . . . .14
Exchange Privilege. . . . . . . . . . . . . . . . . . . . . .14
Dividends and Distributions . . . . . . . . . . . . . . . . .15
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Operation of the Fund . . . . . . . . . . . . . . . . . . . .17
Distribution Plan . . . . . . . . . . . . . . . . . . . . . .18
Calculation of Share Price. . . . . . . . . . . . . . . . . .19
Performance Information . . . . . . . . . . . . . . . . . . .20

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

<PAGE>

EXPENSE INFORMATION

Shareholder Transaction Expenses

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

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

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

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

Example

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

1 Year $10
3 Years 32

- 2 -

<PAGE>

FINANCIAL HIGHLIGHTS

PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

For the Period Ended
March 31, 1997(A)
(Unaudited)

<S> <C>

Net asset value at beginning of period................................$ 10.00
-------

Income from investment operations:
Net investment income ........................................... 0.20
Net realized and unrealized gains on investments................. 0.10
-------
Total from investment operations...................................... 0.30
-------

Less distributions:
Dividends from net investment income............................. (0.20)
-------
Total distributions................................................... (0.20)
-------

Net asset value at end of period......................................$ 10.10
=======

Total return (not annualized)......................................... 3.05%
=======

Net assets at end of period (000's)...................................$ 21,367
=======

Ratio of expenses to average net assets(B)........................... .88%(C)

Ratio of net investment income to average net assets................. 6.93%(C)

Portfolio turnover rate.............................................. 84%(C)

Average commission rate per share.................................... $ ----

<FN>
(A) Represents the period from the initial public offering of shares (December
16, 1996) through March 31, 1997.
(B) Absent fee waivers, the Fund's ratio of expenses to average net assets would
have been 1.43%(C) for the period from the initial public offering of shares
through March 31, 1997.
(C) Annualized.
</FN>
</TABLE>

- 3 -

<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 issuing 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 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").

- 4 -

<PAGE>

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

The Fund does not currently intend to invest more than 35% of its net
assets in lower-rated debt securities. If subsequent to its purchase by the
Fund, the reduction of a security's rating below Baa or BBB causes the Fund to
hold more than 35% of its net assets in lower-rated securities, the Adviser will
sell a sufficient amount of such lower-rated securities, subject to 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
- 5 -

<PAGE>

securities with longer maturities, investors in the Fund should be aware that
there is a possibility of greater fluctuation in the Fund's net asset value.

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

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

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

- 6 -

<PAGE>

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

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

- 7 -

<PAGE>

of rapidly rising interest rates, the Fund may have a portfolio of securities
with a much higher average life than was anticipated at the time such securities
were purchased. Thus, an increase in interest rates would not only likely
decrease the value of the Fund's mortgage-backed securities, but would also
increase the inherent volatility of the Fund by effectively converting
short-term debt securities into long-term debt securities.

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

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.

- 8 -

<PAGE>

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

FOREIGN SECURITIES. The Fund may invest in U.S. dollar-denominated
fixed-income securities issued by foreign issuers, foreign branches of U.S.
banks and U.S. branches of foreign banks. Investment in securities of foreign
issuers and in foreign branches of domestic banks involves somewhat different
investment risks from those affecting securities of domestic issuers. In
addition to credit and market risks, investments in foreign securities involve
sovereign risk, which includes local political and economic developments,
potential nationalization, withholding taxes on dividend or interest payments
and currency blockage. Foreign companies may have less public or less reliable
information available about them and may be subject to less governmental
regulation than U.S. companies. Securities of foreign companies may be less
liquid or more volatile than securities of U.S. companies. The Fund will not
invest more than 15% of its net assets in foreign securities which, in the
opinion of the Adviser, are not readily marketable and other illiquid
securities.

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

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

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

- 9 -

<PAGE>

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.

- 10 -

<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

- 11 -

<PAGE>

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 the Transfer Agent by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by the Transfer Agent 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 Countrywide Fund
Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be
made payable to the "GW&K Government Securities Fund". An account application is
included in this Prospectus.

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

Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, The Transfer Agent 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.

You may also purchase shares of the Fund by wire. Please telephone the
Transfer Agent (Nationwide call toll-free 888-GWK-FUND (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.

- 12 -

<PAGE>

You may purchase and add shares to your account by mail or by bank
wire. Checks should be sent to Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable 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 the Transfer Agent (Nationwide call toll-free 888-GWK-FUND
(888-495-3863)) for additional information about the shareholder services
described below.

Automatic Withdrawal Plan

Tax-Deferred Retirement Plans

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

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

Direct Deposit Plans

- 13 -

<PAGE>

Automatic Investment Plan

HOW TO REDEEM SHARES

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.

- 14 -

<PAGE>

certified check or wire. At the discretion of the Trust or the Transfer Agent,
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 Countrywide 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 the
Transfer Agent. 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 the Transfer Agent.

DIVIDENDS AND DISTRIBUTIONS

All of the net investment income of the 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.

- 15 -

<PAGE>

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.

TAXES

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

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

- 16 -

<PAGE>

OPERATION OF THE FUND

The 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.

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.

The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio, to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent. The Transfer Agent is a
wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. The Transfer Agent also provides accounting and
pricing services to the Fund. The Transfer Agent 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.

- 17 -

<PAGE>

DISTRIBUTION PLAN

- 18 -

<PAGE>

CALCULATION OF SHARE PRICE

- 19 -

<PAGE>

at the last bid price as quoted by brokers that make markets in the securities)
as of the close of the regular session of trading on the New York Stock Exchange
on the day the securities are being valued, (iii) securities which are traded
both in the over-the-counter market and on a stock exchange are valued according
to the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of each Fund will fluctuate with the
value of the securities it holds.

PERFORMANCE INFORMATION

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

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

- 20 -

<PAGE>

its category as determined by Lipper, or recognized indicators. In connection
with a ranking, the Fund may provide additional information, such as the
particular category of funds to which the ranking relates, the number of funds
in the category, the criteria upon which the ranking is based, and the effect of
fee waivers and/or expense reimbursements, if any. The Fund may also present its
performance and other investment characteristics, such as volatility or a
temporary defensive posture, in light of the Adviser's view of current or past
market conditions or historical trends.

- 21 -

<PAGE>

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

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

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

TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

Shareholder Service
Nationwide: (Toll-Free) 888-GWK-FUND
(888-495-3863)
Rate Line
Nationwide: (Toll-Free) 800-852-4052

- 22 -

<PAGE>

[Logo] The
Gannett
Welsh &
Kotler
Funds

GW&K Government Securities Fund

Prospectus

No-Load Fund

- 23 -

<PAGE>

Account Application
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

THE GANNETT WELSH & KOTLER FUNDS
GW&K GOVERNMENT SECURITIES FUND
ACCOUNT NO. G1 - ___________________
(For Fund Use Only)

==============================================================================

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, (In case of custodial account
Organization, or Minor, etc. 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.
===============================================================================

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

__________________________________ _________________________________________
Title of Corporate Officer, Date
Trustee, etc.

NOTE: CORPORATIONS, BUSINESS TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE
THE RESOLUTION FORM ON THE REVERSE SIDE. UNLESS OTHERWISE SPECIFIED, EACH JOINT
OWNER SHALL HAVE FULL AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.

<PAGE>

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
City State o both the 15th and last business day

X___________________________________ X______________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
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.

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)

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.

- 24 -

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENT OF ADDITIONAL INFORMATION

June 17, 1997

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 June 17, 1997. 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-GWK-FUND (888-495-3863).

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

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

TABLE OF CONTENTS

PAGE

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

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

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

INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . 16

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

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

DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . 21

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

PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . 24

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

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

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

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

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

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

COUNTRYWIDE FUND SERVICES, INC.. . . . . . . . . . . . . . . 29

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 30

- 2 -

<PAGE>

THE TRUST

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

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

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

- 3 -

<PAGE>

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

Prior to the offering of shares of the GW&K Equity Fund to the public,
the Fund exchanged its shares for portfolio securities of GW&K Equity Fund,
L.P., a Delaware limited partnership (the "Partnership"), after which the
Partnership dissolved and distributed the Fund shares received pro rata to its
partners, along with cash received from the sale of portfolio securities.

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;

- 4 -

<PAGE>

financial strength of the parent company and the relationships which exist with
the issuer; and, recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations. These factors are all considered in determining
whether the commercial paper is rated Prime-1, Prime-2 or Prime-3. Commercial
paper rated A-1 (highest quality) by Standard & Poor's Ratings Group has the
following characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A" or better, although in some
cases "BBB" credits may be allowed; the issuer has access to at least two
additional channels of borrowing; basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; typically, the issuer's
industry is well established and the issuer has a strong position within the
industry; and, the reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2, or A-3.

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

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

- 5 -

<PAGE>

interest rate on the underlying mortgages by the amount of fees paid to the
issuing agencies, usually approximately 1/2 of 1%. When prevailing interest
rates increase, the value of the mortgage-backed securities may decrease, as do
other non-redeemable debt securities. However, when interest rates decline, the
value of mortgage-backed securities may not rise on a comparable basis with
other non-redeemable debt securities.

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

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

- 6 -

<PAGE>

securities are completely retired, all principal payments are then directed to
the next-shortest-maturity security (or B bond). This process continues until
all of the classes have been paid off. Because the cash flow is distributed
sequentially instead of pro rata as with pass-through securities, the cash flows
and average lives of CMOs are more predictable, and there is a period of time
during which the investors in the longer-maturity classes receive no principal
paydowns.

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

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

- 7 -

<PAGE>

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

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

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<PAGE>

is generally an amount significantly less than its face value. Investing in
STRIPS may help to preserve capital during periods of declining interest rates.
For example, if interest rates decline, GNMA Certificates owned by a Fund which
were purchased at greater than par are more likely to be prepaid, which would
cause a loss of principal. In anticipation of this, a Fund might purchase
STRIPS, the value of which would be expected to increase when interest rates
decline.

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

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

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<PAGE>

way, i.e., all those securities experiencing appreciation when interest rates
decline and depreciation when interest rates rise). Therefore, if in order to
achieve higher returns, the Fund remains substantially fully invested at the
same time that it has purchased securities on a when-issued or TBA basis, there
will be a possibility that the market value of the Fund's assets will experience
greater fluctuation. The purchase of securities on a when-issued or TBA basis
may involve a risk of loss if the broker-dealer selling the securities fails to
deliver after the value of the securities has risen.

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

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

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

- 10 -

<PAGE>

repurchase agreement, the value of the underlying security, including accrued
interest, will equal or exceed the value of the repurchase agreement, and, in
the case of a repurchase agreement exceeding one day, the seller will agree that
the value of the underlying security, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. The collateral
securing the seller's obligation must be of a credit quality at least equal to a
Fund's investment criteria for portfolio securities and will be held by the
Custodian or in the Federal Reserve Book Entry System.

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

- 11 -

<PAGE>

of the letter. Such terms and the issuing bank must be satisfactory to the Fund.
The Funds receive amounts equal to the dividends or interest on loaned
securities and also receive one or more of (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term debt
securities purchased with such collateral; either type of interest may be shared
with the borrower. The Funds may also pay fees to placing brokers as well as
custodian and administrative fees in connection with loans. Fees may only be
paid to a placing broker provided that the Trustees determine that the fee paid
to the placing broker is reasonable and based solely upon services rendered,
that the Trustees separately consider the propriety of any fee shared by the
placing broker with the borrower, and that the fees are not used to compensate
the Adviser or any affiliated person of the Trust or an affiliated person of the
Adviser or other affiliated person. The terms of the Funds' loans must meet
applicable tests under the Internal Revenue Code and permit the Funds to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.

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

- 12 -

<PAGE>

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

QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS

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

Moody's Investors Service, Inc.

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

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

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.

- 13 -

<PAGE>

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

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

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

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

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

Standard & Poor's Ratings Group

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

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

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

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.

- 14 -

<PAGE>

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.

- 15 -

<PAGE>

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.

- 16 -

<PAGE>

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.

- 17 -

<PAGE>

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

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

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

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

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

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

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

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

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

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

- 18 -

TRUSTEES AND OFFICERS

The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk.
Estimated Annual
Compensation
NAME AGE POSITION HELD From the Trust
---- --- ------------- --------------

*Harold G. Kotler 53 President/Trustee $ 0
*Benjamin H. Gannett 55 Treasurer/Trustee 0
Arlene Zoe Aponte-Gonzalez 41 Trustee 4,000
Morton S. Grossman 73 Trustee 4,000
Timothy P. Neher 49 Trustee 4,000
+Josiah A. Spaulding, Jr. 45 Trustee 4,000
+Allan Tofias 67 Trustee 4,000
Irwin M. Heller 51 Secretary 0

<FN>
* 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.
</FN>
</TABLE>

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. He was a Principal and the President
of GSD, Inc., the General Partner of the GW&K Equity Fund, L.P. (a limited
partnership investing in equity securities and the predecessor entity to the
GW&K Equity Fund). 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. He previously was a
Principal of GSD, Inc.

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).

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).

- 19 -

<PAGE>

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 his or her duties.

As of May 30, 1997, the Trustees and officers of the Trust as a group
owned of record or beneficially 2.9% of the outstanding shares of the GW&K
Equity Fund and less than 1% of the outstanding shares of the GW&K Government
Securities Fund.

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 employee of the
Trust who is an officer, director or employee of the Adviser are paid by the
Adviser.

- 20 -

<PAGE>

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

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

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

DISTRIBUTION PLAN

As stated in each Fund's Prospectus, the Funds have adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 which permits each Fund to pay for expenses incurred in the
distribution and promotion of the Funds' shares, including but not limited to,
the printing of prospectuses, statements of additional information and reports
used for sales purposes, advertisements, expenses of preparation

- 21 -

<PAGE>

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

- 22 -

<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.

- 23 -

<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 portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne

- 24 -

<PAGE>

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 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

- 25 -

<PAGE>

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 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.

- 26 -

<PAGE>

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 and, with respect to the GW&K Equity Fund, will
include the performance of the Partnership prior to December 10, 1996. With
respect to the GW&K Equity Fund, it should be noted that: (1) the quoted
performance data includes performance for periods before the Fund's registration
statement became effective; (2) the Fund was not registered under the Investment
Company Act of 1940 (the "1940 Act") during such periods and therefore was not
subject to certain investment restrictions imposed by the 1940 Act; and (3) if
the Fund had been registered under the 1940 Act during such periods, performance
may have been adversely affected. 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. The average annual total
returns of the GW&K Equity Fund for the periods ended March 31, 1997 are as
follows:
1 Year 7.93%
5 Years 14.11%
Since Inception 14.25%

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.

- 27 -

<PAGE>

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
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 yields of the GW&K Equity Fund and the
GW&K Government Securities Fund for the 30 day period ended March 31, 1997 were
.38% and 6.86%, respectively.

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:

- 28 -

<PAGE>

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.

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.

COUNTRYWIDE FUND SERVICES, INC.

The Trust's transfer agent, Countrywide Fund Services, Inc. (the
"Transfer Agent"), 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

- 29 -

<PAGE>

performs other shareholder service functions. The Transfer Agent 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.

The Transfer Agent 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 the Transfer Agent to perform its
duties, each Fund pays the Transfer Agent a fee in accordance with the following
schedule:

Average Monthly Net Assets Monthly Fee

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

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

In addition, the Transfer Agent is retained to provide administrative
services to the Funds. In this capacity, the Transfer Agent supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. The Transfer
Agent 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
the Transfer Agent a fee 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 for each Fund.

FINANCIAL STATEMENTS

The Funds' Statements of Assets and Liabilities as of October 17, 1996,
which have been audited by Arthur Andersen LLP, and the Funds' unaudited
financial statements as of March 31, 1997 are attached to this Statement of
Additional Information.

- 30 -

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF

OCTOBER 17, 1996

TOGETHER WITH
AUDITORS' REPORT

- 31 -

<PAGE>

ARTHUR ANDERSEN LLP

Report of Independent Public Accountants

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

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

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

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

/s/ Arthur Andersen LLP
Arthur Andersen LLP

Cincinnati, Ohio
October 25, 1996

- 32 -

THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF OCTOBER 17,1996

GW&K
GW&K GOVERNMENT
EQUITY SECURITIES
FUND FUND

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

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

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

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

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

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

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

</TABLE>

The accompanying notes are an integral part of this statement.

- 33 -

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

AS OF OCTOBER 17, 1996

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

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

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

The accompanying notes are an integral part of this statement.

- 34 -

<PAGE>

THE
GANNETT
WELSH &
KOTLER
FUNDS

GW&K Equity Fund

GW&K Government Securities Fund

Semi-Annual Report
March 31, 1997
(Unaudited)

<PAGE>

LETTER FROM THE PRESIDENT MAY 22, 1997
==============================================================================
Dear Shareholders:

We welcome you to the Gannett Welsh & Kotler Mutual Fund Family. It is with
great pride and a commitment to excellence that our company takes on this new
responsibility. With the experience gained from managing individual accounts, we
have successfully built a firm that currently has assets under management of
$1.7 billion; we clearly understand our responsibilities to you our client.

We welcome your comments and hope to enjoy a long and mutually rewarding
relationship with you.

Best regards,

Harold G. Kotler, CFA
President

<PAGE>

LETTER TO SHAREHOLDERS MAY 22, 1997
==============================================================================

Dear Shareholders,

We are pleased to send you the first semi-annual report for the GW&K Equity Fund
for the period since the initial public offering, December 10, 1996, through
March 31, 1997.

From the $19.1 million in assets transferred from the GW&K Equity Fund L.P.
in December 1996, assets have grown to $23.6 million as of March 31, 1997. From
less than 100, we now have over 200 shareholders. We thank you for your support
and pledge to continue the same investment course that produced the LP's
favorable five-year record.

Our approach emphasizes individual stock selection and a diversified
portfolio. The portfolio holds companies that exhibit both growth and value
characteristics. We also diversify by the size of the companies in which we
invest. Approximately half the portfolio is invested in large capitalization
issues such as Merck & Co. and Sears, Roebuck & Co. We believe these holdings
will provide relatively steady returns. The remainder of the portfolio is
invested in small and medium capitalization companies, such as Cognex Corp.,
DeVry, Inc. and AES Corp. While performance from these stocks may be expected to
be more volatile, we expect the long-term performance to remain distinctly
superior, as it has in the past.

Much has been written recently about the unusually wide difference in
return between the smaller, less well known stocks, as measured by the Russell
2000 Index, and the larger stocks which dominate the Standard & Poor's 500
Index. A recent Wall Street Journal article revealed that for the 12 months
ending April 30, 1997, the Russell 2000 Index gained less than 1% while the S&P
500 Index was up over 25%, a "staggering" difference.

While being able to time such differences would be ideal, any attempt to manage
with a "philosophy of the moment" would only bring added risk and costs with
little chance of success. History provides ample evidence that portfolios as
diversified as the Fund, with well-selected stocks, have the right ingredients
for good results.

Sincerely,

Edward B. White
GW&K Equity Fund
Portfolio Manager

<PAGE>

LETTER TO SHAREHOLDERS MAY 22, 1997
==============================================================================

Dear Shareholders,

We are pleased to report for the first time on the performance and status of the
GW&K Government Securities Fund. Since its initial public offering on December
16, 1996 through March 31, 1997, the end of its first fiscal semi-annual period,
total assets grew to $21.4 million. The total rate of return for the Fund during
this same time period was 3.05%. This performance compares favorably with market
indices. For purposes of comparison, we have calculated performance for the
quarter ended March 31, 1997 below:
Total Return
GW&K Government Securities Fund 1.63%
Lehman Brothers Intermediate Government Index (.02)%
Lipper Analytic Services - Average GNMA Mutual Fund (.26)%

The interest rate backdrop for these performance values was one of rising
rates along the yield curve. Remember that the Federal Reserve Board increased
the Fed Funds target rate by 25 basis points in March. In light of this
weakening bond market, the Fund posted positive performance as a result of the
high-income streams associated with the premium coupon securities within the
Fund and the relative strength of the seasoned premium mortgage-backed sector.

The GW&K Government Securities Fund is invested 100% in government issued
premium mortgage-backed securities. A typical weighted average life for an
individual pool is 4.5 years. The average coupon within the Fund is greater than
10%. Despite the high coupons associated with the securities, prepayment rates
are moderate due to the seasoning of the underlying mortgages.

We will continue to search for value within the seasoned premium mortgage-backed
sector through careful analysis of the pools that we purchase. We will also
closely monitor the spread levels of these securities. This sector of the
mortgage-backed market is sensitive to changes in yield curve volatility. Should
long-term interest rates move over the 7% level for a sustained period of time,
spreads could begin to widen. Based on our view of the economy and interest
rates we do not predict a sustained upward movement and will remain 100%
committed to the sector.

Sincerely,

Jeanne M. Skettino
GW&K Government Fund
Portfolio Manager

THE GANNETT WELSH & KOTLER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1997 (Unaudited)
===========================================================================================================
GW&K
GW&K GOVERNMENT
EQUITY SECURITIES
FUND FUND
- -----------------------------------------------------------------------------------------------------------

ASSETS
Investments in securities:
At amortized cost .................................................... $18,185,964 $21,092,301
=========== ===========

At value (Note 2) .................................................... $23,487,352 $21,094,821
Cash .................................................................... 96,855 78,683
Receivable for principal paydowns ....................................... -- 40,583
Receivable for capital shares sold ...................................... 53,581 83
Dividends and interest receivable ....................................... 34,881 192,055
Organization expenses, net (Note 2) ..................................... 31,267 31,267
Other assets ............................................................ 11,710 10,948
----------- -----------
TOTAL ASSETS ......................................................... 23,715,646 21,448,440
----------- -----------

LIABILITIES
Payable for capital shares redeemed ..................................... 68,000 --
Dividends payable to shareholders ....................................... -- 24,062
Payable to Adviser (Note 4) ............................................. 10,710 8,694
Other accrued expenses and liabilities .................................. 40,941 49,001
----------- -----------
TOTAL LIABILITIES .................................................... 119,651 81,757
----------- -----------

NET ASSETS .............................................................. $23,595,995 $21,366,683
=========== ===========

Net assets consist of:
Paid-in capital ......................................................... $17,989,585 $21,323,840
Undistributed net investment income ..................................... 39,904 --
Accumulated net realized gains from security transactions ............... 265,118 40,323
Net unrealized appreciation on investments (Note 1) ..................... 5,301,388 2,520
----------- -----------
Net assets .............................................................. $23,595,995 $21,366,683
=========== ===========

Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ........................... 2,400,756 2,115,267
=========== ===========

Net asset value, offering price and redemption price per share (Note 2) . $ 9.83 $ 10.10
=========== ===========

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

THE GANNETT WELSH & KOTLER FUNDS
STATEMENTS OF OPERATIONS
For the Period Ended March 31, 1997(A) (Unaudited)
===============================================================================================
GW&K
GW&K GOVERNMENT
EQUITY SECURITIES
FUND FUND
- -----------------------------------------------------------------------------------------------

INVESTMENT INCOME
Dividends ....................................................... $ 107,181 $ --
Interest ........................................................ 17,416 338,874
--------- ---------
TOTAL INVESTMENT INCOME ....................................... 124,597 338,874
--------- ---------

EXPENSES
Investment management fees (Note 4) ............................. 67,755 32,319
Pricing fees .................................................... 398 7,500
Reports to shareholders ......................................... 3,755 3,707
Registration fees ............................................... 3,343 3,292
Accounting services fees (Note 4) ............................... 4,000 2,000
Administrative services fees (Note 4) ........................... 3,992 1,750
Custodian fees .................................................. 2,900 2,500
Postage and supplies ............................................ 2,038 3,303
Trustees' fees and expenses ..................................... 2,279 2,279
Amortization of organization expenses (Note 2) .................. 2,233 2,233
Transfer agent fees (Note 4) .................................... 2,000 1,000
--------- ---------
TOTAL EXPENSES ................................................ 94,693 61,883
Fees waived by the Adviser (Note 4) ............................. (10,000) (23,625)
--------- ---------
NET EXPENSES .................................................. 84,693 38,258
--------- ---------

NET INVESTMENT INCOME .............................................. 39,904 300,616
--------- ---------

REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains from security transactions ................... 265,118 40,323
Net change in unrealized appreciation/depreciation on investments (917,495) 2,520
--------- ---------

NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS ......................................... (652,377) 42,843
--------- ---------

NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ................................................. $(612,473) $ 343,459
========= =========

<FN>
(A) Represents the period from the start of operations (October 17, 1996)
through March 31, 1997.
</FN>

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

THE GANNETT WELSH & KOTLER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended March 31, 1997(A) (Unaudited)
===========================================================================================================
GW&K
GW&K GOVERNMENT
EQUITY SECURITIES
FUND FUND
- -----------------------------------------------------------------------------------------------------------

FROM OPERATIONS:
Net investment income................................................. $ 39,904 $ 300,616
Net realized gains from security transactions......................... 265,118 40,323
Net change in unrealized appreciation/
depreciation on investments...................................... (917,495) 2,520
--------------- ---------------
Net increase (decrease) in net assets from operations.................... (612,473) 343,459
--------------- ---------------

FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income.................................. -- (300,616)
--------------- ---------------
Decrease in net assets from distributions to shareholders................ -- (300,616)
--------------- ---------------

FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold............................................. 24,378,821 21,533,683
Net asset value of shares issued in
reinvestment of distributions to shareholders....................... -- 159,944
Payments for shares redeemed.......................................... (170,353) (369,787)
--------------- ---------------
Net increase in net assets from capital share transactions............... 24,208,468 21,323,840
--------------- ---------------

TOTAL INCREASE IN NET ASSETS ............................................ 23,595,995 21,366,683

NET ASSETS:
Beginning of period................................................... -- --
--------------- ---------------
End of period......................................................... $ 23,595,995 $ 21,366,683
=============== ===============

UNDISTRIBUTED NET INVESTMENT INCOME ..................................... $ 39,904 $ --
=============== ===============

NUMBER OF SHARES:
Sold.................................................................. 2,417,491 2,135,936
Reinvested............................................................ -- 15,795
Redeemed.............................................................. (16,735) (36,464)
--------------- ---------------
Net increase in shares outstanding.................................... 2,400,756 2,115,267
Shares outstanding, beginning of period............................... -- --
--------------- ---------------
Shares outstanding, end of period..................................... 2,400,756 2,115,267
=============== ===============

<FN>
(A) Represents the period from the start of operations (October 17, 1996)
through March 31, 1997.
</FN>

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

THE GANNETT WELSH & KOTLER FUNDS
FINANCIAL HIGHLIGHTS
For the Periods Ended March 31, 1997(A) (Unaudited)
===========================================================================================
GW&K
GW&K GOVERNMENT
EQUITY SECURITIES
FUND FUND
- --------------------------------------------------------------------------------------------

PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:

Net asset value at beginning of period .................... $ 10.00 $ 10.00
------------- ----------

Income from investment operations:
Net investment income ................................... 0.02 0.20
Net realized and unrealized gains (losses) on investments (0.19) 0.10
------------- ----------
Total from investment operations .......................... (0.17) 0.30
------------- ----------

Less distributions:
Dividends from net investment income .................... -- (0.20)
------------- ----------
Total distributions ....................................... -- (0.20)
------------- ----------

Net asset value at end of period .......................... $ 9.83 $ 10.10
============= ==========

RATIOS AND SUPPLEMENTAL DATA:

Total return (not annualized) ............................. (1.70)% 3.05%
============= ==========

Net assets at end of period (000's) ....................... $ 23,596 $ 21,367
============= ==========

Ratio of expenses to average net assets(B) ................ 1.25%(C) 0.88%(C)

Ratio of net investment income to average net assets ...... 0.59%(C) 6.93%(C)

Portfolio turnover rate ................................... 24%(C) 84%(C)

Average commission rate per share ......................... $ 0.0821 $ --

<FN>
(A) Represents the period from the initial public offering of shares (December
10, 1996 for the GW&K Equity Fund and December 16, 1996 for the GW&K
Government Securities Fund) through March 31, 1997.

(B) Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.39%(C) and 1.43%(C) for the GW&K Equity Fund and
the GW&K Government Securities Fund, respectively, for the periods from the
initial public offering of shares through March 31, 1997.

See accompanying notes to financial statements.

</TABLE>
<PAGE>

NOTES TO FINANCIAL STATEMENTS
March 31, 1997 (Unaudited)
==============================================================================

1. ORGANIZATION
The GW&K Equity Fund and the GW&K Government Securities Fund (collectively, the
Funds) are each a diversified series of shares of The Gannett Welsh & Kotler
Funds (the Trust). The Trust is registered under the Investment Company Act of
1940 as an open-end management investment company. The Trust was established as
a Massachusetts business trust under a Declaration of Trust dated April 24,
1996. The Declaration of Trust, as amended, permits the Trustees to issue an
unlimited number of shares of each Fund.

The GW&K Equity Fund seeks long-term total return, from a combination of capital
growth and growth of income, by investing in a diversified portfolio of equity
securities.

The GW&K Government Securities Fund seeks total return, through both income and
capital appreciation. The Fund invests primarily in obligations issued or
guaranteed as to principal and interest by the United States government, its
agencies or instrumentalities.

The Trust commenced operations on October 17, 1996, when shares of each Fund
were issued at $10.00 per share to affiliates of Gannett Welsh & Kotler, Inc.,
the Funds' investment adviser, in order to provide the initial capitalization of
the Trust.

On December 10, 1996, the GW&K Equity Fund, prior to offering shares to the
public, exchanged its shares for portfolio securities of GW&K Equity Fund, L.P.
(the Partnership) as part of a tax-free reorganization of the Partnership. The
GW&K Equity Fund acquired the securities of the Partnership at the Partnership's
cost basis and holding periods, thus resulting in the acquisition of securities
with unrealized appreciation of $6,218,883 as of December 10, 1996. The exchange
transaction may result in adverse tax consequences to shareholders acquiring
Fund shares subsequent to the exchange transaction, since the sale of these
appreciated securities would result in realized capital gains to the Fund which
would be distributed to all shareholders of the Fund during future operating
periods. Subsequent to the exchange transaction, the Fund began the initial
public offering of shares.

The GW&K Government Securities Fund began its initial public offering of shares
on December 16, 1996.

2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:

Security valuation -- The Funds' portfolio securities are valued as of the close
of business of the regular session of the New York Stock Exchange (currently
4:00 p.m., Eastern time). U.S. Government obligations and mortgage-backed
securities are generally valued at their most recent bid price as obtained from
one or more of the major market makers for such securities or are valued based
on estimates of market values obtained from yield data relating to instruments
or securities with similar characteristics. Portfolio securities traded on stock
exchanges and securities traded in the over-the-counter market are valued at the
last sales price as of the close of business on the day the securities are being
valued. Securities not traded on a particular day, or for which the last sale
price is not readily available, are valued at the closing bid price quoted by
brokers that make markets in the securities. Securities 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.

Share valuation -- The net asset value per share of each Fund is calculated
daily by dividing the total value of each Fund's assets, less liabilities, by
the number of shares outstanding. The offering and redemption price per share of
each Fund is equal to the net asset value per share.

Investment income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Discounts and premiums on securities purchased
are amortized in accordance with income tax regulations which approximate
generally accepted accounting principles.

<PAGE>

Distributions to shareholders -- Dividends arising from net investment income
are declared daily and paid on the last business day of each month to
shareholders of the GW&K Government Securities Fund. Dividends arising from net
investment income, if any, are declared and paid annually to shareholders of the
GW&K Equity Fund. With respect to each Fund, net realized short-term capital
gains, if any, may be distributed throughout the year and net realized long-term
capital gains, if any, are distributed at least once each year. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations.

Securities transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.

Securities traded on a to-be-announced basis -- The GW&K Government Securities
Fund frequently trades portfolio securities on a to-be-announced (TBA) basis. In
a TBA transaction, the Fund has committed to purchase securities for which all
specific information is not yet known at the time of the trade, particularly the
face amount in mortgage-backed securities transactions. Securities purchased on
a TBA basis are not settled until they are delivered to the Fund, normally 15 to
45 days later. These transactions are subject to market fluctuations and their
current value is determined in the same manner as for other portfolio
securities. When effecting such transactions, assets of a dollar amount
sufficient to make payment for the portfolio securities to be purchased are
placed in a segregated account on the trade date.

Organizational expenses -- Expenses of organization, net of certain expenses
paid by the Adviser, have been capitalized and are being amortized on a
straight-line basis over five years.

Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes is made.

In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ending October 31) plus undistributed amounts from prior years.

The following information is based upon the federal income tax cost of portfolio
investments as of March 31, 1997:

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

Gross unrealized appreciation.......... $ 6,210,823 $ 92,640
Gross unrealized depreciation.......... (909,435) (90,120)
--------------- ---------------

Net unrealized appreciation............ $ 5,301,388 $ 2,520
=============== ===============

Federal income tax cost................ $ 18,185,964 $ 21,092,301
=============== ===============

</TABLE>
<PAGE>

3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) were as follows for
the period ended March 31, 1997:

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

Purchases of investment securities.............................. $ 7,085,968 $ 24,332,365
=============== ===============

Proceeds from sales and maturities of investment securities..... $ 1,592,357 $ 3,825,136
=============== ===============
- -----------------------------------------------------------------------------------------------------

</TABLE>

4. TRANSACTIONS WITH AFFILIATES
The President and the Treasurer of the Trust are also principals of Gannett
Welsh & Kotler, Inc. (the Adviser), the Trust's investment adviser. Certain
other officers of the Trust are also officers of Countrywide Fund Services, Inc.
(CFS), the Trust's administrative services agent, transfer agent and shareholder
service agent, and accounting services agent.

MANAGEMENT AGREEMENTS
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the terms of the Management Agreement, each Fund
pays the Adviser a fee, which is computed and accrued daily and paid monthly, at
an annual rate of 1.00% of the average daily net assets of the GW&K Equity Fund
and 0.75% of the average daily net assets of the GW&K Government Securities
Fund.

In order to reduce the operating expenses of the GW&K Equity Fund and the GW&K
Government Securities Fund for the period ended March 31, 1997, the Adviser
voluntarily waived advisory fees of $10,000 and $23,625, respectively.

ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement with the Trust, CFS supplies
executive 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. For these services, each Fund pays CFS a fee, payable monthly, 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 for each Fund.

TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with the Trust, CFS maintains the records for each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, CFS receives a monthly fee at an annual
rate of $17.00 per shareholder account from the Equity Fund and $21.00 per
shareholder account from the GW&K Government Securities Fund, subject to a
$1,000 minimum monthly fee for each Fund. In addition, each Fund pays
out-of-pocket expenses including, but not limited to, postage and supplies.

ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement with the Trust, CFS
calculates the daily net asset value per share and maintains the financial books
and records of each Fund. For these services, CFS receives a monthly fee of
$2,000 from each Fund. In addition, each Fund pays certain out-of-pocket
expenses incurred by CFS in obtaining valuations of such Fund's portfolio
securities.

GW&K EQUITY FUND
SCHEDULE OF INVESTMENTS
March 31, 1997 (Unaudited)
============================================================================================================
MARKET
SHARES COMMON STOCK -- 97.5% VALUE
- ------------------------------------------------------------------------------------------------------------

CONSUMER, NON-CYCLICAL -- 18.5%
30,000 CareMatrix Corp.* ............................................................. $ 551,250
27,000 Chiron Corp.* ................................................................. 502,875
15,000 EntreMed, Inc.* ............................................................... 191,250
8,000 General Mills, Inc............................................................. 497,000
12,000 HealthCare COMPARE Corp.* ..................................................... 487,500
16,000 HEALTHSOUTH Corp.*............................................................. 306,000
4,400 Merck & Co., Inc............................................................... 370,700
10,000 Panamerican Beverages, Inc..................................................... 536,250
17,000 PepsiCo, Inc................................................................... 554,625
4,400 Pfizer, Inc.................................................................... 370,150
------------
$ 4,367,600
------------
TECHNOLOGY -- 15.4%
25,000 Bay Networks, Inc.* ........................................................... $ 446,875
40,000 Cognex Corp.* ................................................................. 760,000
7,000 Compaq Computer Corp.* ........................................................ 536,375
30,000 Mastech Corp.* ................................................................ 483,750
12,000 Oracle Corp.* ................................................................. 462,750
25,000 SDL, Inc.* .................................................................... 428,125
9,000 Xerox Corp..................................................................... 511,875
------------
$ 3,629,750
------------
FINANCIAL SERVICES -- 14.1%
15,000 Capital One Financial Corp..................................................... $ 558,750
7,368 Cincinnati Financial Corp...................................................... 517,602
4,000 Citicorp....................................................................... 433,000
32,000 CRIIMI MAE, Inc................................................................ 472,000
3,000 General Re Corp................................................................ 474,000
25,000 Health & Retirement Property Trust............................................. 450,000
4,500 MBIA, Inc...................................................................... 431,437
------------
$ 3,336,789
------------
CONSUMER, CYCLICAL -- 13.0%
36,000 DeVry, Inc.* .................................................................. $ 792,000
27,000 Extended Stay America, Inc.* .................................................. 398,250
8,000 May Department Stores Company* ................................................ 364,000
3,500 Readers Digest Association, Inc. - Class A..................................... 100,625
10,000 Readers Digest Association, Inc. - Class B..................................... 270,000
9,000 Sears, Roebuck & Co............................................................ 452,250
30,000 Staffing Resources, Inc.* ..................................................... 420,000
45,000 Standard-Pacific Corp.......................................................... 281,250
------------
$ 3,078,375
------------

GW&K EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
============================================================================================================
MARKET
SHARES COMMON STOCK -- 97.5% VALUE
- ------------------------------------------------------------------------------------------------------------

INDUSTRIAL -- 11.1%
4,500 Boeing Company................................................................. $ 443,813
20,000 Dames & Moore, Inc............................................................. 260,000
4,500 General Electric Co............................................................ 446,625
9,000 General Motors Corp. - Class H................................................. 488,250
15,000 Republic Industries, Inc.* .................................................... 520,313
25,000 U.S. Rentals, Inc.* ........................................................... 453,125
------------
$ 2,612,126
------------
ENERGY -- 10.6%
18,000 AES China Generating Co. Ltd.* ................................................ $ 297,000
10,266 AES Corp. * ................................................................... 574,896
13,000 Camco International, Inc...................................................... 572,000
15,000 Questar Corp................................................................... 538,125
3,000 Royal Dutch Petroleum Company.................................................. 525,000
------------
$ 2,507,021
------------
UTILITIES -- 9.2%
13,000 AT&T Corp...................................................................... $ 451,750
12,000 Enron Corp..................................................................... 456,000
10,000 GTE Corp....................................................................... 466,250
20,000 Houston Industries, Inc........................................................ 417,500
17,000 WorldCom, Inc.* ............................................................... 374,000
------------
$ 2,165,500
------------
BASIC MATERIALS -- 5.6%
30,000 Huntco, Inc. - Class A......................................................... $ 363,750
10,000 Ionics, Inc.* ................................................................. 463,750
40,000 Universal Forest Products, Inc. ............................................... 490,000
------------
$ 1,317,500
------------

TOTAL COMMON STOCK (COST $17,713,273) ......................................... $23,014,661
------------

=============================================================================================================
MARKET
SHARES CASH EQUIVALENTS -- 2.0% VALUE
- -------------------------------------------------------------------------------------------------------------

472,691 Merrimac Cash Fund - Institutional Class (Cost $472,691)....................... $ 472,691
------------

TOTAL INVESTMENTS AT VALUE-- 99.5% (COST $18,185,964) ........................ $23,487,352

OTHER ASSETS AND LIABILITIES, NET -- 0.5% ..................................... 108,643
------------

NET ASSETS-- 100.0% ........................................................... $ 23,595,995
============

<FN>
* Non-income producing securities.
</FN>

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

GW&K GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997 (Unaudited)
=============================================================================================================
PAR MARKET
VALUE MORTGAGE-BACKED SECURITIES-- 95.8% VALUE
- -------------------------------------------------------------------------------------------------------------

FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 35.5%
$ 107,871 Federal National Mortgage Association, 8.75%, 08/01/17......................... $ 112,051
3,418,874 Federal National Mortgage Association, 9.00%, 09/01/24 thru 03/01/25........... 3,575,192
1,516,725 Federal National Mortgage Association, 10.00%, 11/01/00 thru 10/01/20.......... 1,635,963
178,326 Federal National Mortgage Association, 10.25%, 05/01/09 thru 03/01/16.......... 194,987
1,122,347 Federal National Mortgage Association, 10.50%, 08/01/00 thru 09/01/20.......... 1,224,573
77,432 Federal National Mortgage Association, 10.75%, 09/01/09 thru 03/01/14.......... 86,130
524,928 Federal National Mortgage Association, 11.00%, 08/01/10........................ 580,866
21,432 Federal National Mortgage Association, 11.25%, 10/01/15........................ 24,040
73,835 Federal National Mortgage Association, 12.00%, 03/01/13 thru 07/01/13.......... 84,356
64,224 Federal National Mortgage Association, 12.25%, 05/01/10 thru 07/01/15.......... 72,771
- -------------- ------------
$ 7,105,994 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION ................................... $ 7,590,929
- -------------- ------------
(Amortized Cost $7,626,320)

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 32.9%
$ 1,472,879 Government National Mortgage Assoc., 9.50%, 06/15/09 thru 10/15/09............. $ 1,585,007
19,936 Government National Mortgage Assoc., 9.75%, 12/15/00 thru 01/15/01............. 20,703
1,823,760 Government National Mortgage Assoc., 10.00%, 10/15/00 thru 02/20/21............ 1,980,433
59,298 Government National Mortgage Assoc., 10.25%, 05/15/99 thru 02/15/01............ 62,053
536,762 Government National Mortgage Assoc., 10.50%, 06/20/00 thru 10/20/19............ 583,114
615,262 Government National Mortgage Assoc., 11.00%, 12/15/09 thru 01/15/16............ 688,553
29,594 Government National Mortgage Assoc., 11.25%, 01/15/98 thru 04/15/01............ 30,913
1,289,210 Government National Mortgage Assoc., 11.50%, 06/20/99 thru 08/20/19............ 1,460,407
266,483 Government National Mortgage Assoc., 11.75%, 08/15/13.......................... 299,050
22,089 Government National Mortgage Assoc., 12.00%, 08/15/13 thru 09/15/14............ 25,541
43,629 Government National Mortgage Assoc., 12.25%, 04/15/14.......................... 49,451
203,772 Government National Mortgage Assoc., 13.00%, 01/15/11 thru 01/15/15............ 237,531
11,602 Government National Mortgage Assoc., 14.50%, 10/15/12.......................... 13,674
- -------------- ------------
$ 6,394,276 TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ................................ $ 7,036,430
- -------------- ------------
(Amortized Cost $6,989,007)

FEDERAL HOME LOAN MORTGAGE CORP. -- 27.4%
$ 516,034 Federal Home Loan Mortgage Corp., 7.50%, 02/01/22.............................. $ 516,034
217,694 Federal Home Loan Mortgage Corp., 9.00%, 07/01/08 thru 12/01/16................ 227,819
1,757,445 Federal Home Loan Mortgage Corp., 9.25%, 12/01/08.............................. 1,869,412
272,794 Federal Home Loan Mortgage Corp., 9.75%, 12/01/08 thru 01/01/10................ 291,521
49,525 Federal Home Loan Mortgage Corp., 10.00%, 01/01/01 thru 03/01/03............... 51,524
1,188,338 Federal Home Loan Mortgage Corp., 10.25%, 04/01/09 thru 10/01/09............... 1,272,997
399,448 Federal Home Loan Mortgage Corp., 10.50%, 06/01/00 thru 10/01/19............... 429,393
294,547 Federal Home Loan Mortgage Corp., 11.00%, 12/01/00 thru 01/01/19............... 321,407
72,149 Federal Home Loan Mortgage Corp., 11.25%, 09/01/09 thru 11/01/13............... 79,901
263,635 Federal Home Loan Mortgage Corp., 11.50%, 06/01/11 thru 06/01/19............... 294,849
93,329 Federal Home Loan Mortgage Corp., 11.75%, 02/01/11 thru 07/01/13............... 104,972
69,966 Federal Home Loan Mortgage Corp., 12.00%, 12/01/11 thru 02/01/16............... 79,237
170,646 Federal Home Loan Mortgage Corp., 12.50%, 01/01/10 thru 07/01/15............... 193,287

GW&K GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS (continued)
=============================================================================================================
PAR MARKET
VALUE MORTGAGE-BACKED SECURITIES-- 95.8% VALUE
- -------------------------------------------------------------------------------------------------------------

108,235 Federal Home Loan Mortgage Corp., 13.00%, 01/01/00 thru 12/01/14............... 123,802
- -------------- ------------
$ 5,473,785 TOTAL FEDERAL HOME LOAN MORTGAGE CORP. ........................................ $ 5,856,155
- -------------- ------------
(Amortized Cost $5,865,666)
$ 18,974,055 TOTAL MORTGAGE-BACKED SECURITIES .............................................. $20,483,514
============== ------------

(Amortized Cost $20,480,994)

CASH EQUIVALENTS -- 2.9%
$ 611,307 Merrimac Cash Fund - Institutional Class (Cost $611,307)....................... $ 611,307
- -------------- ------------

TOTAL INVESTMENTS AT VALUE-- 98.7% (Cost $21,092,301)......................... $21,094,821

OTHER ASSETS AND LIABILITIES, NET-- 1.3% ...................................... 271,862
------------

NET ASSETS-- 100% ............................................................. $21,366,683
============

</TABLE>
<PAGE>

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

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

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

TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354

SHAREHOLDER SERVICE
Nationwide: (Toll-Free) 888-GWK-FUND
(888-495-3863)

RATE LINE
Nationwide: (Toll-Free) 800-852-4052

<PAGE>

THE GANNETT WELSH & KOTLER FUNDS

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) (i) Financial Statements included in Part A:

Financial Highlights for the Period Ended March
31, 1997 (unaudited)

(ii) Financial Statements included in Part B:

Statements of Assets and Liabilities, October 17,
1996, Notes to Financial Statements, Report of
Independent Accountants

Statements of Assets & Liabilities, March 31,
1997 (unaudited)

Statements of Operations for the Period Ended
March 31, 1997 (unaudited)

Statements of Changes in Net Assets for the
Period Ended March 31, 1997 (unaudited)

Financial Highlights for the Period Ended March
31, 1997 (unaudited)

Portfolio of Investments, March 31, 1997
(unaudited)

(b) Exhibits

(1) (i) Agreement and Declaration of Trust*

(ii) Amendment No. 1 to Agreement & Declaration
of Trust*

(2) Bylaws*

(3) Inapplicable

(4) Inapplicable

(5) Advisory Agreement with Gannett Welsh &
Kotler, Inc.

(6) Inapplicable

<PAGE>

(7) Inapplicable

(8) Custody Agreement with Investors Bank &
Trust Company

(9) (i) Administration Agreement with Countrywide
Fund Services, Inc.

(ii) Accounting Services Agreement with
Countrywide Fund Services, Inc.

(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with
Countrywide Fund Services, Inc.

(10) Opinion and Consent of Counsel*

(11) Consent of Independent Public Accountants

(12) Inapplicable

(13) (i) Agreement Relating to Initial Capital with
Harold G. Kotler

(ii) Agreement Relating to Initial Capital with
Edward B. White

(14) Gannett Welsh & Kotler Individual Retirement
Account Plan**

(15) Plan of Distribution Pursuant to Rule 12b-1

(16) Inapplicable

(17) (i) Financial Data Schedule for the GW&K Equity
Fund

(ii) Financial Data Schedule for the GW&K
Government Securities Fund

(18) Inapplicable
- --------------------------------------------------

* Incorporated by reference to the Trust's registration statement on
Form N-1A.
** To be filed by Amendment.

Item 25. Persons Controlled by or Under Common Control with
Registrant

None

Item 26. Number of Holders of Securities

Set forth below are the number of record holders, as of March
31, 1997, of the shares of beneficial interest of the
Registrant.

<PAGE>

Number of
Title of Class Record Holders

Gannett Welsh & Kotler
Equity Fund 213

Gannett Welsh & Kotler
Government Securities Fund 206

Item 27. Indemnification

Article VI of the Registrant's Agreement and Declaration of
Trust provides for indemnification of officers and Trustees as
follows:

"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS,
ETC. Subject to and except as otherwise provided in
the Securities Act of 1933, as amended, and the 1940
Act, the Trust shall indemnify each of its Trustees
and officers, including persons who serve at the
Trust's request as directors, officers or trustees of
another organization in which the Trust has any
interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which
such Covered Person may be or may have been involved
as a party or otherwise or with which such person may
be or may have been threatened, while in office or
thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, and except
that no Covered Person shall be indemnified against
any liability to the Trust or its Shareholders to
which such Covered Person would

<PAGE>

otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of
such Covered Person's office (disabling conduct).
Anything herein contained to the contrary
notwithstanding, no Covered Person shall be
indemnified for any liability to the Trust or its
shareholders to which such Covered Person would
otherwise be subject unless (1) a final decision on
the merits is made by a court or other body before
whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of
disabling conduct or, (2) in the absence of such a
decision, a reasonable determination is made, based
upon a review of the facts, that the Covered Person
was not liable by reason of disabling conduct, by (a)
the vote of a majority of a quorum of Trustees who
are neither "interested persons" of the Company as
defined in the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a
written opinion.

Section 6.5 ADVANCES OF EXPENSES. The Trust shall
advance attorneys' fees or other expenses incurred by
a Covered Person in defending a proceeding, upon the
undertaking by or on behalf of the Covered Person to
repay the advance unless it is ultimately determined
that such Covered Person is entitled to
indemnification, so long as one of the following
conditions is met: (i) the Covered Person shall
provide security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of a quorum
of the disinterested non-party Trustees of the Trust,
or an independent legal counsel in a written opinion,
shall determine, based on a review of readily
available facts (as opposed to full trial-type
inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.

Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The
right of indemnification provided by this Article VI
shall not be exclusive of or affect any other rights
to which any such Covered Person may be entitled. As
used in this Article VI, "Covered Person" shall
include such person's heirs,

<PAGE>

executors and administrators; an "interested Covered
Person" is one against whom the action, suit or other
proceeding in question or another action, suit or
other proceeding on the same or similar grounds is
then or has been pending or threatened, and a
"disinterested" person is a person against whom none
of such actions, suits or other proceedings or
another action, suit or other proceeding on the same
or similar grounds is then or has been pending or
threatened. Nothing contained in this article shall
affect any rights to indemnification to which
personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on
behalf of any such person."

Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee,
officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability
policy. The policy will provide coverage to the Registrant,
its Trustees and officers, and Gannett Welsh & Kotler, Inc.
(the "Adviser"). Coverage under the policy will include losses
by reason of any act, error, omission, misstatement,
misleading statement, neglect or breach of duty.

The Advisory Agreement with the Adviser provides that

<PAGE>

the Adviser shall not be liable for any action taken, omitted
or suffered to be taken by it in its reasonable judgment, in
good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by the
Advisory Agreement, or in accordance with (or in the absence
of) specific directions or instructions from the Trust,
provided, however, that such acts or omissions shall not have
resulted from the Adviser's willful misfeasance, bad faith or
gross negligence, a violation of the standard of care
established by and applicable to the Adviser in its actions
under the Advisory Agreement or breach of its duty or of its
obligations under the Advisory Agreement.

Item 28. Business and Other Connections of the Investment
Adviser

(a) The Adviser is an independent investment counsel firm
that has advised individual and institutional clients
since 1974. The Adviser was the investment adviser to
the GW&K Equity Fund, L.P., the predecessor entity to
the GW&K Equity Fund.

(b) The directors and officers of the Adviser and any
other business, profession, vocation or employment of
a substantial nature engaged in at any time during
the past two years:

(i) Harold G. Kotler - A Principal and President
of the Adviser.

President of the Registrant. He was a
Principal and the President of GSD, Inc.,
the General Partner of the GW&K Equity Fund,
L.P., the predecessor entity to the GW&K
Equity Fund.

(ii) Benjamin H. Gannett - A Principal and
Executive Vice President and Treasurer of the
Adviser.

Treasurer of the Registrant. He was a
Principal of GSD, Inc.

(iii) Edward B. White - A Principal and Senior Vice
President of the Adviser.

Formerly, a Principal of GSD, Inc.

<PAGE>

(iv) Nancy G. Angell - A Principal and Senior Vice
President of the Adviser.

(v) Jeanne M. Skettino - A Principal and Senior
Vice President of the Adviser.

(vi) Jackson O. Welsh - Senior Vice President of
the Adviser.

(vii) Thomas F. X. Powers - Senior Vice President
of the Adviser.

(viii) Geoffrey S. Drayson - Vice President of the
Adviser.

(ix) Thomas J. Duff - Vice President of the
Adviser.

(x) John B. Fox - Vice President of the Adviser.

(xi) Gail E. Gaetani - Vice President of the
Adviser.

(xii) Joyce S. Kiritsis - Vice President of the
Adviser.

(xiii) T. Williams Roberts, III - Vice President of
the Adviser.

Item 29. Principal Underwriters

(a) Inapplicable

(b) Inapplicable

Item 30. Location of Accounts and Records

Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be maintained by the
Registrant at its offices located at 222 Berkeley Street,
Boston, Massachusetts 02116 as well as at the offices of the
Registrant's transfer agent located at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202.

Item 31. Management Services Not Discussed in Parts A or B

<PAGE>

Inapplicable

Item 32. Undertakings

(a) Inapplicable

(b) Inapplicable

(c) The Registrant undertakes to furnish each person to
whom a Prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.

(d) The Registrant undertakes to call a meeting of
shareholders, if requested to do so by holders of
at least 10% of the Fund's outstanding shares, for
the purpose of voting upon the question of removal
of a trustee or trustees and to assist in
communications with other shareholders as required
by Section 16(c) of the Investment Company Act of
1940.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston and Commonwealth of Massachusetts, on the
17th day of June, 1997.

THE GANNETT WELSH & KOTLER FUNDS

By:/s/ Harold G. Kotler
Harold G. Kotler
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

Signature Title Date

/s/ Harold G. Kotler President June 17, 1997
Harold G. Kotler and Trustee

/s/ Benjamin H. Gannett Treasurer June 17, 1997
Benjamin H. Gannett and Trustee

Trustee
Arlene Zoe-Aponte Gonzalez*

Trustee By:/s/Tina D. Hosking
Morton S. Grossman* Tina D. Hosking
Attorney-in-Fact*
June 17, 1997
Trustee
Timothy P. Neher*

Trustee
Josiah A. Spaulding, Jr.*

Trustee
Allan Tofias*

INDEX TO EXHIBITS

(1) (i) Agreement and Declaration of Trust*

(ii) Amendment No. 1 to Agreement & Declaration of Trust*

(2) Bylaws*

(3) Inapplicable

(4) Inapplicable

(5) Advisory Agreement

(6) Inapplicable

(7) Inapplicable

(8) Custody Agreement

(9) (i) Administration Agreement

(9) (ii) Accounting Services Agreement

(9) (iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement

(10) Opinion and Consent of Counsel*

(11) Consent of Independent Public Accountants

(12) Inapplicable

(13)(i) Agreement Relating to Initial Capital

(ii) Agreement Relating to Initial Capital

(14) Gannett Welsh & Kotler Individual Retirement Account
Plan**

(15) Plan of Distribution Pursuant to Rule 12b-1

(16) Inapplicable

(17)(i) Financial Data Schedule for the GW&K Equity Fund

(ii) Financial Data Schedule for the GW&K Government
Securities Fund

(18) Inapplicable

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

* Incorporated by reference to the Trust's registration
statement on Form N-1A.
** To be filed by Amendment.

Gannett Welsh & Kotler, Inc.
222 Berkeley Street
Boston, Massachusetts 02116

Re: Advisory Agreement

Ladies and Gentlemen:

The Gannett Welsh & Kotler Funds (the "Trust") is a diversified
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Trust's shares of beneficial interest are divided
into two separate series, the GW&K Equity Fund and the GW&K Government
Securities Fund (the "Funds"). Each such share of a Fund represents an undivided
interest in the assets, subject to the liabilities, allocated to that Fund. Each
Fund has a separate investment objective and separate investment policies.

1. APPOINTMENT AS ADVISER. The Trust being duly
authorized hereby appoints and employs Gannett Welsh & Kotler,
Inc. ("Adviser") as discretionary portfolio manager, on the terms
and conditions set forth herein, of the Funds.

2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE.
Adviser accepts the appointment as discretionary portfolio
manager and agrees to use its best professional judgment to make
timely investment decisions for the Funds in accordance with the
provisions of this Agreement.

<PAGE>

3. PORTFOLIO MANAGEMENT SERVICES OF ADVISER. Adviser is hereby
employed and authorized to select portfolio securities for investment by
the Trust on behalf of the Funds, to purchase and sell securities of the Funds,
and upon making any purchase or sale decision, to place orders for the execution
of such portfolio transactions in accordance with paragraphs 5 and 6 hereof. In
providing portfolio management services to the Funds, Adviser shall be subject
to such investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code of 1986, applicable state securities laws,
the supervision and control of the Trustees of the Trust, such specific
instructions as the Trustees may adopt and communicate to Adviser and the
investment objectives, policies and restrictions of the Trust applicable to the
Funds furnished pursuant to paragraph 4. Adviser is not authorized by the Trust
to take any action, including the purchase or sale of securities for the Funds,
in contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. Adviser shall maintain on behalf
of the Trust the records listed in Schedule A hereto (as amended from time to
time). At the Trust's reasonable request, Adviser will consult with the Trust
with respect to any decision made by it with respect to the investments of the
Funds.

- 2 -

<PAGE>

4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The
Trust will provide Adviser with the statement of investment objectives, policies
and restrictions applicable to the Funds as contained in the Trust's
registration statements under the Act and the Securities Act of 1933, and any
instructions adopted by the Trustees supplemental thereto. The Trust will
provide Adviser with such further information concerning the investment
objectives, policies and restrictions applicable thereto as Adviser may from
time to time reasonably request. The Trust retains the right, on written notice
to Adviser from the Trust, to modify any such objectives, policies or
restrictions in any manner at any time.

5. TRANSACTION PROCEDURES. All transactions will be consummated
by payment to or delivery by Investors Bank & Trust Company or any successor
custodian (the "Custodian"), or such depositories or agents as may be designated
by the Custodian in writing, as custodian for the Trust, of all cash and/or
securities due to or from the Funds, and Adviser shall not have possession or
custody thereof. Adviser shall advise Custodian and confirm in writing to the
Trust and to MGF Service Corp., or any other designated agent of the Trust, all
investment orders for the Funds placed by it with brokers and dealers. Adviser
shall issue to the Custodian such instructions as may be appropriate in
connection with the settlement of any transaction initiated by the Adviser.

- 3 -

<PAGE>

6. ALLOCATION OF BROKERAGE. Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by Adviser and to select the markets on or in which the transactions
will be executed.

In doing so, the Adviser will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this policy,
the Adviser may consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who may effect or
be a party to any such transaction or other transactions to which other clients
of the Adviser may be a party. It is understood that neither the Trust nor the
Adviser has adopted a formula for allocation of the Trust's investment
transaction business. It is also understood that it is desirable for the Trust
that the Adviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Trust than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Funds with such certain brokers, subject
to review by the Trust's Trustees from time to time with respect to the extent
and continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Adviser in connection with its services to
other clients.

- 4 -

<PAGE>

On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Funds as well as other clients, the Adviser,
to the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Trust and to such other clients.

For each fiscal quarter of the Trust, Adviser shall prepare and render
reports to the Trust's Trustees of the total brokerage business placed and the
manner in which the allocation has been accomplished. Such reports shall set
forth at a minimum the information required to be maintained by Rule 31a-1(b)(9)
under the Act.

7. PROXIES. The Trust will vote all proxies solicited by
or with respect to the issuers of securities in which assets of the Funds
may be invested from time to time. At the request of the Trust, Adviser shall
provide the Trust with its recommendations as to the voting of such proxies.

8. REPORTS TO ADVISER. The Trust will provide Adviser with such
periodic reports concerning the status of the Funds as Adviser may
reasonably request.

- 5 -

<PAGE>

9. FEES FOR SERVICES. For all of the services to be rendered and
payments made as provided in this Agreement, the GW&K Equity Fund will pay the
Adviser a fee, computed and accrued daily and paid monthly, at the annual rate
of 1.00% of the Fund's average daily net assets and the GW&K Government
Securities Fund will pay the Adviser a fee, computed and accrued daily and paid
monthly, at the annual rate of .75% of the Fund's average daily net assets.

10. ALLOCATION OF CHARGES AND EXPENSES. Adviser shall employ or
provide and compensate the executive, administrative, secretarial and
clerical personnel necessary to provide the services set forth herein, and shall
bear the expense thereof. Adviser shall compensate all Trustees, officers and
employees of the Trust who are also partners or employees of Adviser. Adviser
will pay all expenses incurred in connection with the sale or distribution of
the Funds' shares to the extent such expenses are not assumed by the Funds under
the Trust's Distribution Expense Plan.

The Funds will be responsible for the payment of all operating expenses
of the Trust, including fees and expenses incurred by the Trust 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, insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, the transfer, shareholder
service and dividend disbursing agent

- 6 -

<PAGE>

and the accounting and pricing agent of the Funds, expenses including clerical
expenses of issue, sale, redemption or repurchase of shares of the Funds, the
fees and expenses of Trustees of the Trust who are not interested persons of the
Trust, the cost of preparing, printing 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 Trust may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto, or any other expense not specifically described above incurred in the
performance of the Trust's obligations. All other expenses not expressly assumed
by Adviser herein incurred in connection with the organization, registration of
shares and operations of the Funds will be borne by the Funds.

11. OTHER INVESTMENT ACTIVITIES OF ADVISER. The Trust
acknowledges that Adviser or one or more of its affiliates may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that Adviser,
its affiliates or any of its or their directors, officers, agents or employees
may buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph 2 hereof, the
Trust agrees that Adviser or its affiliates may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated

- 7 -

<PAGE>

Accounts which may differ from the advice given or the timing or nature of
action taken with respect to the Funds, provided that Adviser acts in good
faith, and provided further, that it is Adviser's policy to allocate, within its
reasonable discretion, investment opportunities to the Funds over a period of
time on a fair and equitable basis relative to the Affiliated Accounts, taking
into account the investment objectives and policies of the Funds and any
specific investment restrictions applicable thereto. The Trust acknowledges that
one or more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Funds may have an interest from time to time, whether in transactions which
involve the Funds or otherwise. Adviser shall have no obligation to acquire for
the Funds a position in any investment which any Affiliated Account may acquire,
and the Trust shall have no first refusal, co- investment or other rights in
respect of any such investment, either for the Funds or otherwise.

12. CERTIFICATE OF AUTHORITY. The Trust and the Adviser shall
furnish to each other from time to time certified copies of the resolutions
of their Trustees or Board of Directors or executive committees, as the case may
be, evidencing the authority of officers and employees who are authorized to act
on behalf of the Trust, the Funds and/or the Adviser.

- 8 -

<PAGE>

13. LIMITATION OF LIABILITY. Adviser shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Trust, provided, however, that such acts or omissions shall not have
resulted from Adviser's willful misfeasance, bad faith or gross negligence, a
violation of the standard of care established by and applicable to Adviser in
its actions under this Agreement or breach of its duty or of its obligations
hereunder. Nothing in this paragraph 13 shall be construed in a manner
inconsistent with Sections 17(h) and (i) of the Act.

14. CONFIDENTIALITY. Subject to the duty of Adviser and the
Trust to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Funds and the actions of Adviser
and the Trust in respect thereof.

15. ASSIGNMENT. No assignment of this Agreement shall be made
by Adviser, and this Agreement shall terminate automatically in the event
of such assignment. Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with Adviser.

- 9 -

<PAGE>

16. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE TRUST.
The Trust represents, warrants and agrees that:

A. Adviser has been duly appointed by the Trustees of
the Trust to provide investment services to the Funds as contemplated hereby.

B. The Trust will deliver to Adviser true and complete copies
of its then current prospectuses and statements of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Funds and such other information as is necessary for
Adviser to carry out its obligations under this Agreement.

C. The Trust is currently in compliance and shall at all
times comply with the requirements imposed upon the Trust by
applicable law and regulations.

17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ADVISER.
Adviser represents, warrants and agrees that:

A. Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940.

B. Adviser will maintain, keep current and preserve on behalf
of the Trust, in the manner and for the time periods required or permitted by
the Act, the records identified in Schedule A. Adviser agrees that such records
(unless otherwise indicated on Schedule A) are the property of the Trust, and
will be surrendered to the Trust promptly upon request.

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<PAGE>

C. Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Funds as the Trust may from time to time
require to ensure compliance with the Act, the Internal Revenue Code of 1986 and
applicable state securities laws.

D. Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the Act and will provide the Trust with a
copy of the code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this Agreement
is in effect, a partner of Adviser shall certify to the Trust that Adviser has
complied with the requirements of Rule 17j-1 during the previous year and that
there has been no violation of the Adviser's code of ethics or, if such a
violation has occurred, that appropriate action was taken in response to such
violation. Upon the written request of the Trust, Adviser shall permit the
Trust, its employees or its agents to examine the reports required to be made to
Adviser by Rule 17j-1(c)(1).

E. Adviser will, promptly after filing with the Securities
and Exchange Commission an amendment to its Form ADV, furnish a copy of such
amendment to the Trust.

F. Upon request of the Trust, Adviser will provide assistance
to the Custodian in the collection of income due or payable to the Funds.

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<PAGE>

G. Adviser will immediately notify the Trust of the occurrence
of any event which would disqualify Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the Act or
otherwise.

18. AMENDMENT. This Agreement may be amended at any time, but
only by written agreement between Adviser and the Trust, which amendment,
other than amendments to Schedule A, is subject to the approval of the Trustees
and the shareholders of the Funds in the manner required by the Act and the
rules thereunder, subject to any applicable exemptive order of the Securities
and Exchange Commission modifying the provisions of the Act with respect to
approval of amendments to this Agreement.

19. EFFECTIVE DATE; TERM. This Agreement shall become
effective on the date of its execution and shall remain in force for a
period of two (2) years from such date, and from year to year thereafter but
only so long as such continuance is specifically approved at least annually by
the vote of a majority of the Trustees who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval, and by a vote of the Board of Trustees or of a majority
of the outstanding voting securities of the Funds. The aforesaid requirement
that this Agreement may be continued "annually" shall be construed in a manner
consistent with the Act and the rules and regulations thereunder.

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<PAGE>

20. TERMINATION. This Agreement may be terminated by either
party hereto, without the payment of any penalty, immediately upon written
notice to the other in the event of a breach of any provision thereof by the
party so notified, or otherwise upon sixty (60) days' written notice to the
other, but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other.

21. LIMITATION OF LIABILITY. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
trustees, shareholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the trust property of the Trust. The execution and
delivery of this Agreement have been authorized by the trustees of the Trust and
signed by an officer of the Trust, acting as such, and neither such
authorization by such trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust.

22. USE OF NAME. 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 without limitation in the name of other investment companies,
corporations or business that it may manage, advise, sponsor or own, or in which
it may have a financial interest. The Trust will discontinue any use of the
names "Gannett Welsh & Kotler" or "GW&K" if the Adviser ceases to be employed as
the Trust's portfolio manager.

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<PAGE>

23. DEFINITIONS. As used in paragraphs 15 and 19 of this
Agreement, the terms "assignment," "interested person" and "vote of a
majority of the outstanding voting securities" shall have the meanings set forth
in the Act and the rules and regulations thereunder.

24. APPLICABLE LAW. To the extent that state law is not
preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the State
of Ohio.

THE GANNETT WELSH & KOTLER FUNDS

By: /s/Harold G. Kotler

Title: President

Date: December 4, 1996

ACCEPTANCE

The foregoing Agreement is hereby accepted.

GANNETT WELSH & KOTLER, INC.

By: /s/ Benjamin H. Gannett

Title: Exec. V.P. and Treas.

Date: December 4, 1996

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<PAGE>

SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER

1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Adviser on behalf of
the Funds for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:

A. The name of the broker;

B. The terms and conditions of the order and of any
modification or cancellation thereof;

C. The time of entry or cancellation;

D. The price at which executed;

E. The time of receipt of a report of execution; and

F. The name of the person who placed the order on behalf
of the Trust.

2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected,
and the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:

A. Shall include the consideration given to:

(i) The sale of shares of the Trust by brokers or
dealers.

(ii) The supplying of services or benefits by brokers
or dealers to:

(a) The Trust;

(b) The Adviser; and,

(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as
such.

B. Shall show the nature of the services or benefits made
available.

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<PAGE>

C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.

D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.

3. (Rule 31a-1(b)(10)) A record in the form of an appropriate
memorandum identifying the person or persons, committees or
groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be
retained as part of this record any memorandum,
recommendation or instruction supporting or authorizing the
purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*

4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Funds.

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

* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendation; i.e., buy, sell, hold)
or any internal reports or portfolio adviser reviews.

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CUSTODY AGREEMENT

This AGREEMENT, dated as of December 4, 1996, by and between THE
GANNETT WELSH & KOTLER FUNDS (the "Trust"), a business trust organized under the
laws of the Commonwealth of Massachusetts, acting with respect to the GW&K
EQUITY FUND and the GW&K GOVERNMENT SECURITIES FUND (individually, a "Fund" and,
collectively, the "Funds"), each of them a series of the Trust and each of them
operated and administered by the Trust and INVESTORS BANK & TRUST COMPANY, a
banking association organized under the laws of the Commonwealth of
Massachusetts (the "Custodian").

W I T N E S S E T H:

WHEREAS, the Trust desires that the Funds' Securities and cash be held
and administered by the Custodian pursuant to this Agreement; and

WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;

NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:

<PAGE>

ARTICLE I
DEFINITIONS

Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Proper Instructions on
behalf of the Funds and named in Exhibit A hereto or in such resolutions of the
Board of Trustees, certified by an Officer, as may be received by the Custodian
from time to time.

1.2 "Board Of Trustees" shall mean the Trustees from time to time
serving under the Trust's Agreement and Declaration of Trust, as from time to
time amended.

1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.

1.4 "Business Day" shall mean any day recognized as a settlement day
by The New York Stock Exchange, Inc. and any other day for which the Trust
computes the net asset value of Shares of any Fund.

1.5 "Fund Custody Account" shall mean any of the accounts in the name
of the Trust, which is provided for in Section 3.2 below.

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<PAGE>

1.6 "NASD" shall mean The National Association of Securities
Dealers, Inc.

1.7 "Officer" shall mean the President, any Vice President, any
Assistant Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer of the Trust.

1.8 "Securities Depository" shall mean The Depository Trust Company and
(provided that Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Funds) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.

1.9 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other instruments
or documents representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.

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<PAGE>

1.10 "Shares" shall mean, with respect to a Fund, the units of
beneficial interest issued by the Trust on account of such Fund.

1.11 "Sub-Custodian" shall mean and include (i) any branch of a
"qualified U.S. bank," as that term is defined in Rule 17f-5 under the 1940 Act,
(ii) any "eligible foreign custodian," as that term is defined in Rule 17f-5
under the 1940 Act, approved by the Board of Trustees and having a contract with
the Custodian which contract has been approved by the Board of Trustees, and
(iii) any securities depository or clearing agency, incorporated or organized
under the laws of a country other than the United States, which operates the
central system for handling of securities or equivalent book-entries in that
country or a transnational system for the central handling of securities or
equivalent book-entries, which securities depository or clearing agency has been
approved by the Board of Trustees; provided, that the Custodian, or a
Sub-Custodian has entered into an agreement with such securities depository or
clearing agency.

1.12 "Proper Instructions" shall mean (i) written communications
actually received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof

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<PAGE>

shall have been approved by resolutions of the Board of Trustees, a copy of
which, certified by an Officer, shall have been delivered to the Custodian.
Proper Instructions may be continuing written instructions when deemed
appropriate by both parties.

ARTICLE II
APPOINTMENT OF CUSTODIAN

2.1 Appointment. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Funds at any time during the period of this Agreement.

2.2 Acceptance. The Custodian hereby accepts appointment
as such custodian and agrees to perform the duties thereof as
hereinafter set forth.

2.3 Documents to be Furnished. The following documents, including
any amendments thereto, will be provided contemporaneously with the execution
of the Agreement to the Custodian by the Trust:

a. A copy of the Declaration of Trust of the Trust
certified by the Secretary;
b. A copy of the Bylaws of the Trust certified by the
Secretary;
c. A copy of the resolution of the Board of Trustees
of the Trust appointing the Custodian, certified
by the Secretary;

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<PAGE>

d. A copy of the then current Prospectus of the
Funds; and
e. A certification of the President and Secretary of
the Trust setting forth the names and signatures
of the current Officers of the Trust and other
Authorized Persons.

2.4 Notice of Appointment of Dividend and Transfer Agent.
The Trust agrees to notify the Custodian in writing of the
appointment, termination or change in appointment of any Dividend
and Transfer Agent of the Funds.

ARTICLE III
CUSTODY OF CASH AND SECURITIES

3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of a Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian
(including the Securities and non-cash property of the other Funds) and shall be
identified as subject to this Agreement.

3.2 Fund Custody Accounts. As to each Fund, the Custodian shall
open and maintain in its trust department a custody account in the name of
the Trust coupled with the name of such Fund, subject only to draft or order of
the Custodian, in which the Custodian shall enter and carry all Securities, cash
and other assets of such Fund which are delivered to it.

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<PAGE>

3.3 Appointment of Agents. In its discretion, the Custodian may
appoint one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Funds and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Fund shall be at the Custodian's expense and shall not relieve the Custodian
of any of its obligations or liabilities under this Agreement.

3.4 Delivery of Assets to Custodian. The Trust shall deliver,
or cause to be delivered, to the Custodian all of the Funds' Securities,
cash and other assets, including (a) all payments of income, payments of
principal and capital distributions received by the Funds with respect to such
Securities, cash or other assets owned by the Funds at any time during the
period of this Agreement, and (b) all cash received by the Funds for the
issuance, at any time during such period, of Shares. The Custodian shall not be
responsible for such Securities, cash or other assets until actually received by
it.

3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Funds in a
Securities Depository or in a Book-Entry System, subject to the following
provisions:

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<PAGE>

(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Trust
shall deliver to the Custodian a resolution of the
Board of Trustees, certified by an Officer, authorizing
and instructing the Custodian on an on-going basis to
deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry
System to the extent possible and practical in
connection with its performance hereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities,
and deliveries and returns of collateral consisting of
Securities.
(b) Securities of the Funds kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book- Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
(c) The records of the Custodian with respect to Securities of a
Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry, identify such Securities as
belonging to such Fund.

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<PAGE>

(d) If Securities purchased by a Fund are to be held in a
Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been
transferred to the Depository Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of
such Fund. If Securities sold by a Fund are held in a
Book-Entry System or Securities Depository, the
Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities Depository that payment for such Securities
has been transferred to the Depository Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of such Fund.
(e) The Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Funds are
kept) on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to a Fund resulting (i) from the use of a Book-Entry
System or Securities

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<PAGE>

Depository by reason of any negligence on the part of
Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from
failure of Custodian or any such Sub- Custodian to enforce
effectively such rights as it may have against a Book-Entry
System or Securities Depository. At its election, the Trust
shall be subrogated to the rights of the Custodian with
respect to any claim against a Book-Entry System or Securities
Depository or any other person from any loss or damage to the
Funds arising from the use of such Book-Entry System or
Securities Depository, if and to the extent that the Funds
have not been made whole for any such loss or damage.

3.6 Disbursement of Moneys from Fund Custody Accounts.
Upon receipt of Proper Instructions, the Custodian shall disburse
moneys from a Fund Custody Account but only in the following
cases:

(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or
any Sub-Custodian appointed pursuant to Section 3.3
above) of such Securities registered as provided in
Section 3.9 below or in proper form for transfer, or if
the purchase of such Securities is effected through a

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<PAGE>

Book-Entry System or Securities Depository, in accordance with
the conditions set forth in Section 3.5 above; (ii) in the
case of options on Securities, against delivery to the
Custodian (or such Sub- Custodian) of such receipts as are
required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and options on
futures contracts, against delivery to the Custodian (or such
Sub-Custodian) of evidence of title thereto in favor of the
Fund or any nominee referred to in Section 3.9 below; and (iv)
in the case of repurchase or reverse repurchase agreements
entered into between the Trust and a bank which is a member of
the Federal Reserve System or between the Trust and a primary
dealer in U.S. Government securities, against delivery of the
purchased Securities either in certificate form or through an
entry crediting the Custodian's account at a Book-Entry System
or Securities Depository with such Securities;

(b) In connection with the conversion, exchange or
surrender, as set forth in Section 3.7(f) below, of
Securities owned by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as
provided in Section 5.1 below;

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<PAGE>

(e) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest; taxes;
administration, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal
fees; and other operating expenses of the Fund; in all
cases, whether or not such expenses are to be in whole
or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or
other arrangements in connection with transactions by
the Fund;
(g) For transfer in accordance with the provision of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund;

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<PAGE>

(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.

3.7 Delivery of Securities from Fund Custody Accounts.
Upon receipt of Proper Instructions, the Custodian shall release
and deliver Securities from a Fund Custody Account but only in
the following cases:

(a) Upon the sale of Securities for the account of the Fund
but only against receipt of payment therefor in cash,
by certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;

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<PAGE>

(d) To the issuer thereof or its agent (i) for transfer
into the name of the Fund, the Custodian or any Sub-
Custodian appointed pursuant to Section 3.3 above, or
of any nominee or nominees of any of the foregoing, or
(ii) for exchange for a different number of
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case,
the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by the Fund;

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<PAGE>

(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Trust, but only
against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or
other arrangements in connection with transactions by
the Fund;

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<PAGE>

(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon
receipt, in addition to Proper Instructions, of a copy
of a resolution of the Board of Trustees, certified by
an Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to
whom delivery of such Securities shall be made.

3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with
respect to all Securities held for a Fund:

(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either
by law or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;

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<PAGE>

(c) Endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the
IRS;
(f) Hold for the Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.

3.9 Registration and Transfer of Securities. All Securities held
for a Fund that are issued or issuable only in bearer form shall be held by
the Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for a Fund may

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<PAGE>

be registered in the name of such Fund, the Custodian, or any Sub- Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of a Fund.

3.10 Records. (a) The Custodian shall maintain, by Fund, complete
and accurate records with respect to Securities, cash or other property
held for the Funds, including (i) journals or other records of original entry
containing an itemized daily record in detail of all receipts and deliveries of
Securities and all receipts and disbursements of cash; (ii) ledgers (or other
records) reflecting (A) Securities in transfer, (B) Securities in physical
possession, (C) monies and Securities borrowed and monies and Securities loaned
(together with a record of the collateral therefor and substitutions of such
collateral), (D) dividends and interest received, and (E) dividends receivable
and interest receivable; and (iii) canceled checks and bank records related
thereto. The Custodian shall keep such other books and records of the Funds as
the Trust shall reasonably request, or as may be required by the 1940 Act,
including, but not limited to, Section 31 of the 1940 Act and Rule 31a-2
promulgated thereunder.

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(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.

3.11 Fund Reports by Custodian. The Custodian shall furnish the
Trust with a daily activity statement by Fund and a summary of all
transfers to or from each Fund Custody Account on the day following such
transfers. At least monthly and from time to time, the Custodian shall furnish
the Trust with a detailed statement, by Fund, of the Securities and moneys held
by the Custodian and the Sub-Custodians for the Funds under this a Agreement.

3.12 Other Reports by Custodian. The Custodian shall provide the
Trust with such reports, as the Trust may reasonably request from time to
time, on the internal accounting controls and procedures for safeguarding
Securities, which are employed by the Custodian or any Sub-Custodian appointed
pursuant to Section 3.3 above.

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<PAGE>

3.13 Proxies and Other Materials. The Custodian shall cause all
proxies relating to Securities which are not registered in the name of a
Fund, to be promptly executed by the registered holder of such Securities,
without indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Trust such proxies, all proxy soliciting materials
and all notices relating to such Securities.

3.14 Information on Corporate Actions. The Custodian shall promptly
deliver to the Trust all information received by the Custodian and pertaining to
Securities being held by the Funds with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights. If the Trust
desires to take action with respect to any tender offer, exchange offer or other
similar transaction, the Trust shall notify the Custodian by no later than the
stated response due date on the published corporate action notice, or any
reasonable time frame therein. The Trust will provide orcause to be provided to
the Custodian all relevant information for any Security which has unique
put/option provisions at least five Business Days prior to the beginning date of
the tender period.

ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUNDS

4.1 Purchase of Securities. Promptly upon each purchase of
Securities for a Fund, Proper Instructions shall be delivered to the
Custodian, specifying (a) the Fund for which the purchase was made, (b) the name
of the issuer or writer of such Securities,

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<PAGE>

and the title or other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any) or other units purchased, (d) the date of
purchase and settlement, (e) the purchase price per unit, (f) the total amount
payable upon such purchase, and (g) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by a
Fund pay out of the moneys held for the account of such Fund the total amount
specified in such Proper Instructions to the person named therein. The Custodian
shall not be under any obligation to pay out moneys to cover the cost of a
purchase of Securities for a Fund, if in the relevant Fund Custody Account there
is insufficient cash available to the Fund for which such purchase was made.

4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of Securities
for a Fund is made by the Custodian in advance of receipt of the Securities
purchased but in the absence of specified Proper Instructions to so pay in
advance, the Custodian shall be liable to the Fund for such Securities to the
same extent as if the Securities had been received by the Custodian.

4.3 Sale of Securities. Promptly upon each sale of Securities by a
Fund, Proper Instructions shall be delivered to the Custodian, specifying (a)
the Fund for which the sale was made, (b) the name of the issuer or writer of
such Securities, and the title or other description thereof, (c) the number of
shares, principal amount (and accrued interest, if any), or other

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<PAGE>

units sold, (d) the date of sale and settlement, (e) the sale price per unit,
(f) the total amount payable upon such sale, and (g) the person to whom such
Securities are to be delivered. Upon receipt of the total amount payable to the
Fund as specified in such Proper Instructions, the Custodian shall deliver such
Securities to the person specified in such Proper Instructions. Subject to the
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in Securities.

4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above
or any other provision of this Agreement, the Custodian, when instructed to
deliver Securities against payment, shall be entitled, if in accordance with
generally accepted market practice, to deliver such Securities prior to actual
receipt of final payment therefor. In any such case, the Fund for which such
Securities were delivered shall bear the risk that final payment for such
Securities may not be made or that such Securities may be returned or otherwise
held or disposed of by or through the person to whom they were delivered, and
the Custodian shall have no liability for any for the foregoing.

4.5 Payment for Securities Sold, etc. In its sole discretion and
from time to time, the Custodian may credit the relevant Fund Custody
Account, prior to actual receipt of final payment thereof, with (i) proceeds
from the sale of Securities which it has been instructed to deliver against
payment, (ii) proceeds from the redemption of Securities or other assets of the

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<PAGE>

Fund, and (iii) income from cash, Securities or other assets of the Fund. Any
such credit shall be conditional upon actual receipt by Custodian of final
payment and may be reversed if final payment is not actually received in full.
The Custodian may, in its sole discretion and from time to time, permit a Fund
to use funds so credited to its Fund Custody Account in anticipation of actual
receipt of final payment. Any such funds shall be repayable immediately upon
demand made by the Custodian at any time prior to the actual receipt of all
final payments in anticipation of which funds were credited to the Fund Custody
Account.

4.6 Advances by Custodian for Settlement. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust to facilitate
the settlement of a Fund's transactions in its Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.

ARTICLE V
REDEMPTION OF FUND SHARES

5.1 Transfer of Funds. From such funds as may be available for the
purpose in the relevant Fund Custody Account, and upon receipt of Proper
Instructions specifying that the funds are required to redeem Shares of a Fund,
the Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Trust may designate with respect to such amount in such
Proper Instructions.

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<PAGE>

5.2 No Duty Regarding Paying Banks. The Custodian shall not be
under any obligation to effect payment or distribution by any bank
designated in Proper Instructions given pursuant to Section 5.1 above of any
amount paid by the Custodian to such bank in accordance with such Proper
Instructions.

ARTICLE VI
SEGREGATED ACCOUNTS

Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,

(a) in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD
(or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Fund,

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<PAGE>

(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by the Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities
made by the Fund,
(d) for purposes of compliance by the Fund with requirements under
the 1940 Act for the maintenance of segregated accounts by
registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.

Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All Proper Instructions
relating to a segregated account shall specify the Fund involved.

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<PAGE>

ARTICLE VII
CONCERNING THE CUSTODIAN

7.1 Standard of Care. The Custodian shall be held to the exercise
of reasonable care in carrying out its obligations under this Agreement,
and shall be without liability to the Trust or any Fund for any loss, damage,
cost, expense (including attorneys' fees and disbursements), liability or claim
unless such loss, damage, cost, expense, liability or claim arises from
negligence or bad faith on its part or on the part of any Sub- Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust or a Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or by-laws, or its investment objectives and policies
as then in effect.

7.2 Actual Collection Required. The Custodian shall not be liable
for, or considered to be the custodian of, any cash belonging to a Fund or
any money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.

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<PAGE>

7.3 No Responsibility for Title, etc. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any property or evidence
of title thereto received or delivered by it pursuant to this Agreement.

7.4 Limitation on Duty to Collect. Custodian shall not be required
to enforce collection, by legal means or otherwise, of any money or
property due and payable with respect to Securities held for a Fund if such
Securities are in default or payment is not made after due demand or
presentation.

7.5 Reliance Upon Documents and Instructions. The Custodian shall
be entitled to rely upon any certificate, notice or other instrument in
writing received by it and reasonably believed by it to be genuine. The
Custodian shall be entitled to rely upon any Proper Instructions actually
received by it pursuant to this Agreement.

7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.

7.7 Co-operation. The Custodian shall cooperate with and supply
necessary information, by Fund, to the entity or entities appointed by the Trust
to keep the books of account of the Funds and/or compute the value of the assets
of the Funds. The Custodian shall take all such reasonable actions as the Trust
may

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<PAGE>

from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's reports on Form N-1A and Form N-SAR and any other reports required by
the Securities and Exchange Commission, and (b) the fulfillment by the Trust of
any other requirements of the Securities and Exchange Commission.

ARTICLE VIII
INDEMNIFICATION

8.1 Indemnification by Trust. The Trust shall indemnify and hold
harmless the Custodian and any Sub-Custodian appointed pursuant to Section 3.3
above, and any nominee of the Custodian or of such Sub-Custodian, from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian or such
Sub-Custodian (i) at the request or direction of or in reliance on the advice of
the Trust, or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-custody agreement
with a Sub-Custodian appointed pursuant to Section 3.3 above, provided that
neither the Custodian nor any

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<PAGE>

such Sub-Custodian shall be indemnified and held harmless from and against any
such loss, damage, cost, expense, liability or claim arising from the
Custodian's or such Sub-Custodian's negligence or bad faith.

8.2 Indemnification by Custodian. The Custodian shall indemnify and
hold harmless the Trust from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability (including without
limitation, liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking laws) or claim
arising from the negligence or bad faith of the Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above, or any nominee of the Custodian or of
such Sub-Custodian.

8.3 Indemnity to be Provided. If the Trust requests the Custodian
to take any action with respect to Securities, which may, in the opinion of
the Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.

8.4 Security. If the Custodian advances cash or Securities to a
Fund for any purpose, either at the Trust's request or as otherwise
contemplated in this Agreement, or in the event that the Custodian or its
nominee incurs, in connection with its performance under this Agreement, any
loss, damage, cost, expense

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<PAGE>

(including attorneys' fees and disbursements), liability or claim (except such
as may arise from its or its nominee's negligence, bad faith or willful
misconduct), then, in any such event, any property at any time held for the
account of such Fund shall be security therefor, and should such Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of such Fund and to dispose of other assets of such Fund
to the extent necessary to obtain reimbursement or indemnification.

ARTICLE IX
FORCE MAJEURE

Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against

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the Funds in favor of any other customer of the Custodian in making computer
time and personnel available to input or process the transactions contemplated
by this Agreement and (ii) shall use its best efforts to ameliorate the effects
of any such failure or delay.

ARTICLE X
EFFECTIVE PERIOD; TERMINATION

10.1 Effective Period. This Agreement shall become effective as
of its execution and shall continue in full force and effect until terminated
as hereinafter provided.

10.2 Termination. Either party hereto may terminate this Agreement
by giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than sixty (60) days after the date of
the giving of such notice. If a successor custodian shall have been appointed by
the Board of Trustees, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of termination (a)
deliver directly to the successor custodian all Securities (other than
Securities held in a Book-Entry System or Securities Depository) and cash then
owned by the Funds and held by the Custodian as custodian, and (b) transfer any
Securities held in a Book-Entry System or Securities Depository to an account of
or for the benefit of the Funds at the successor custodian, provided that the
Trust shall have paid to the Custodian all fees, expenses and other amounts to
the payment or reimbursement of which it shall then be entitled. Upon such

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<PAGE>

delivery and transfer, the Custodian shall be relieved of all obligations under
this Agreement. The Trust may at any time immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for the Custodian
by regulatory authorities or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.

10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 10.1 above, then the Custodian shall
have the right to deliver to a bank or trust company of its own selection, which
(a) is a "bank" as defined in the 1940 Act and (b) has aggregate capital,
surplus and undivided profits as shown on its then most recent published report
of not less than $25 million, all Securities, cash and other property held by
Custodian under this Agreement and to transfer to an account of or for the Funds
at such bank or trust company all Securities of the Funds held in a Book-Entry
System or Securities Depository. Upon such delivery and transfer, such bank or
trust company shall be the successor custodian under this Agreement and the
Custodian shall be relieved of all obligations under this Agreement.

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<PAGE>

ARTICLE XI
COMPENSATION OF CUSTODIAN

The Trust shall compensate the Custodian as agreed upon from time to
time by the parties. The fees and other charges in effect on the date hereof and
applicable to the Funds are set forth in Exhibit B attached hereto.

ARTICLE XII
LIMITATION OF LIABILITY

It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the above-mentioned Agreement and
Declaration of Trust.

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<PAGE>

ARTICLE XIII
NOTICES

Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:

The Gannett Welsh & Kotler Funds
222 Berkeley Street
Boston, Massachusetts 02116
Attn: T. Williams Roberts, III
Telephone: (617) 236-8900
Facsimile: (617) 236-1815

To Custodian:

Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: John Henry
Telephone: (617) 330-6404
Facsimile: (617) 330-6033

or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.

ARTICLE XIV
MISCELLANEOUS

14.1 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.

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14.2 References to Custodian. The Trust shall not circulate any
printed matter which contains any reference to Custodian without the prior
written approval of Custodian, excepting printed matter contained in the
prospectus or statement of additional information for a Fund and such other
printed matter as merely identifies Custodian as custodian for one or more
Funds. The Trust shall submit printed matter requiring approval to Custodian in
draft form, allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.

14.3 No Waiver. No failure by either party hereto to exercise, and
no delay by such party in exercising, any right hereunder shall operate as
a waiver thereof. The exercise by either party hereto of any right hereunder
shall not preclude the exercise of any other right, and the remedies provided
herein are cumulative and not exclusive of any remedies provided at law or in
equity.

14.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.

14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.

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14.6 Severability. If any provision of this Agreement shall be
invalid, illegal or unenforceable in any respect under any applicable law,
the validity, legality and enforceability of the remaining provisions shall not
be affected or impaired thereby.

14.7 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement shall not be
assignable by either party hereto without the written consent of the other party
hereto.

14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.

ATTEST: THE GANNETT WELSH & KOTLER FUNDS

/s/ Irwin Heller By:/s/ Harold G. Kotler
Secretary President

ATTEST: INVESTORS BANK & TRUST COMPANY

______________________________ By:/s/ Martin J. Sullivan
Director

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EXHIBIT A
AUTHORIZED PERSONS

Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Accounts.

Name Signature

Harold G. Kotler /s/ Harold G. Kotler

Benjamin H. Gannett /s/ Benjamin H. Gannett

Robert G. Dorsey /s/ Robert G. Dorsey

Mark J. Seger /s/ Mark J. Seger

M. Kathleen Leugers /s/ M.K. Leugers

Tina D. Hosking /s/ Tina D. Hosking

John F. Splain /s/ John F. Splain

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<PAGE>

EXHIBIT B

MASTER CUSTODY FEE SCHEDULE

ANNUAL MASTER CUSTODY FEES

FOR

THE GW&K GOVERNMENT SECURITIES FUND
THE GW&K EQUITY FUND

Feeswill be assessed quarterly, in arrears based on the average daily net
assets of the Fund during such quarter plus any applicable transaction fees or
unit charges.

MARKET VALUE FEE

.05% OF AVERAGE NET ASSETS

No additional fees would be charged for trade settlement, income
collection, wires or statement rendering. Additional fees would apply for global
custody, overdrafts, foreign wires or trades executed through Investors Bank
(other than through an outside broker). In the event of an unusual level of
activity or service rendered, additional fees may apply, but no such fee will be
charged without written prior approval.

THE GANNETT WELSH & KOTLER FUNDS

BY:/s/ Harold G. Kotler
PRESIDENT

INVESTORS BANK & TRUST COMPANY

BY:/s/ Martin J. Sullivan
DIRECTOR

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ADMINISTRATION AGREEMENT

AGREEMENT dated as of February 28, 1997 between The Gannett Welsh &
Kotler Funds (the "Trust"), a Massachusetts business trust, and Countrywide Fund
Services, Inc. ("Countrywide"), an Ohio corporation.

WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and

WHEREAS, the Trust wishes to employ the services of
Countrywide to serve as its administrative agent; and

WHEREAS, Countrywide wishes to provide such services under
the conditions set forth below;

NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:

1. APPOINTMENT.

The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.

2. DOCUMENTATION.

The Trust will furnish from time to time the following
documents:

A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;

B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;

C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;

D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;

E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;

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<PAGE>

F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;

G. Copies of all Investment Advisory Agreements in effect;
and

H. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which Countrywide is
to act as plan agent.

3. TRUST ADMINISTRATION.

Subject to the direction and control of the Trustees of the
Trust, Countrywide shall supervise the Trust's business affairs not otherwise
supervised by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, Countrywide shall
supply (i) office facilities, (ii) internal auditing and regulatory services,
and (iii) executive and administrative services. Countrywide shall coordinate
the preparation of (i) tax returns, (ii) reports to shareholders of the Trust,
(iii) reports to and filings with the SEC and state securities authorities
including preliminary and definitive proxy materials, post-effective amendments
to the Trust's registration statement, and the Trust's Form N-SAR, and (iv)
necessary materials for Board of Trustees' meetings unless prepared by other
parties under agreement with the Trust. Countrywide shall provide personnel to
serve as officers of the Trust if so elected by the Board of Trustees; provided,
however, that the Trust shall reimburse Countrywide for the reasonable
out-of-pocket expenses incurred by such personnel in attending Board of
Trustees' meetings and shareholders' meetings of the Trust.

4. RECORDKEEPING AND OTHER INFORMATION.

Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, any
person retained by the Trust, or any regulatory agency having authority over the
Trust.

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5. FURTHER ACTIONS.

Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.

6. COMPENSATION.

For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee at the annual rate of .10% of
such series' average daily net assets up to $100 million; .075% of such assets
from $100 to $200 million; and .05% of such assets in excess of $200 million;
provided, however, that the minimum fee shall be $1,000 per month for each
series. Countrywide shall not be required to reimburse the Trust or the Trust's
investment adviser for (or have deducted from its fees) any expenses in excess
of expense limitations imposed by certain state securities commissions having
jurisdiction over the Trust.

7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.

The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.

8. REFERENCES TO COUNTRYWIDE.

The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Dividend Disbursing,
Shareholder Service and Plan Agent and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.

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<PAGE>

9. INDEMNIFICATION OF COUNTRYWIDE.

A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.

B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.

C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.

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<PAGE>

10. TERMINATION

A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.

B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefore. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date of
such termination, and shall likewise reimburse Countrywide for any out-of-pocket
expenses and disbursements reasonably incurred by Countrywide to such date.

C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
providing for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.

11. SERVICES FOR OTHERS.

Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.

12. LIMITATION OF LIABILITY.

It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such

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<PAGE>

Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust.

13. SEVERABILITY.

In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.

14. QUESTIONS OF INTERPRETATION.

This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.

15. NOTICES.

All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:

To the Trust: The Gannett Welsh & Kotler Funds
222 Berkeley Street
Boston, Massachusetts 02116
Attention: T. Williams Roberts III

To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey

or to such other address as any party may designate by notice complying with the
terms of this Section 15. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by

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<PAGE>

telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.

16. AMENDMENT.

This Agreement may not be amended or modified except by a
written agreement executed by both parties.

17. BINDING EFFECT.

Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.

18. COUNTERPARTS.

This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

19. FORCE MAJEURE.

If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.

20. MISCELLANEOUS.

The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

THE GANNETT WELSH & KOTLER FUNDS

By:/s/ Harold G. Kotler

Its: President

COUNTRYWIDE FUND SERVICES, INC.

By:/s/ Robert G. Dorsey

Its: President

- 8 -

ACCOUNTING SERVICES AGREEMENT

AGREEMENT dated as of February 28, 1997 between The Gannett
Welsh & Kotler Funds (the "Trust"), a Massachusetts business
trust, and Countrywide Fund Services, Inc. ("Countrywide"), an
Ohio corporation.

WHEREAS, the Trust is an investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act");
and

WHEREAS, the Trust wishes to employ the services of
Countrywide to provide the Trust with certain accounting and
pricing services; and

WHEREAS, Countrywide wishes to provide such services under
the conditions set forth below;

NOW, THEREFORE, in consideration of the premises and mutual
covenants contained in this Agreement, the Trust and Countrywide
agree as follows:

1. APPOINTMENT.

The Trust hereby appoints and employs Countrywide as
agent to perform those services described in this Agreement for
the Trust. Countrywide shall act under such appointment and
perform the obligations thereof upon the terms and conditions
hereinafter set forth.

2. CALCULATION OF NET ASSET VALUE.

Countrywide will calculate the net asset value of each
series of the Trust and the per share net asset value of each
series of the Trust, in accordance with the current prospectus
and statement of additional information of each series of the
Trust, once daily as of the time selected by the Trust's Board of
Trustees. Countrywide will prepare and maintain a daily
valuation of all securities and other assets of the Trust in
accordance with instructions from a designated officer of the
Trust or its investment adviser and in the manner set forth in
the Trust's current prospectus and statement of additional
information. In valuing securities of the Trust, Countrywide may
contract with, and rely upon market quotations provided by,
outside services.

3. BOOKS AND RECORDS.

Countrywide will maintain and keep current the general
ledger for each series of the Trust, recording all income and
expenses, capital share activity and security transactions of the
Trust. Countrywide will maintain such further books and records
as are necessary to enable it to perform its duties under this
Agreement, and will periodically provide reports to the Trust and

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<PAGE>

its authorized agents regarding share purchases and redemptions
and trial balances of each series of the Trust. Countrywide will
prepare and maintain complete, accurate and current all records
with respect to the Trust required to be maintained by the Trust
under the Internal Revenue Code of 1986, as amended (the "Code"),
and under the rules and regulations of the 1940 Act, and will
preserve said records in the manner and for the periods
prescribed in the Code and the 1940 Act. The retention of such
records shall be at the expense of the Trust.

All of the records prepared and maintained by Countrywide
pursuant to this Section 3 which are required to be maintained by
the Trust under the Code and the 1940 Act will be the property of
the Trust. In the event this Agreement is terminated, all such
records shall be delivered to the Trust at the Trust's expense,
and Countrywide shall be relieved of responsibility for the
preparation and maintenance of any such records delivered to the
Trust.

4. PAYMENT OF TRUST EXPENSES.

Countrywide shall process each request received from
the Trust or its authorized agents for payment of the Trust's
expenses. Upon receipt of written instructions signed by an
officer or other authorized agent of the Trust, Countrywide shall
prepare checks in the appropriate amounts which shall be signed
by an authorized officer of Countrywide and mailed to the
appropriate party.

5. FORM N-SAR.

Countrywide shall maintain such records within its
control and shall be requested by the Trust to assist the Trust
in fulfilling the requirements of Form N-SAR.

6. COOPERATION WITH ACCOUNTANTS.

Countrywide shall cooperate with the Trust's
independent public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement
to assure that the necessary information is made available to
such accountants for the expression of their unqualified opinion
where required for any document for the Trust.

7. FURTHER ACTIONS.

Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.

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<PAGE>

8. FEES.

For the performance of the services under this
Agreement, each series of the Trust shall pay Countrywide a monthly fee in
accordance with the schedule attached hereto as Schedule A. The fees with
respect to any month shall be paid to Countrywide on the last business day of
such month. The Trust shall also promptly reimburse Countrywide for the cost of
external pricing services utilized by Countrywide. Countrywide shall not be
required to reimburse the Trust or the Trust's investment adviser for (or have
deducted from its fees) any expenses in excess of expense limitations imposed by
certain state securities commissions having jurisdiction over the Trust.

9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.

10. REFERENCES TO COUNTRYWIDE.

11. EQUIPMENT FAILURES.

Countrywide shall take all steps necessary to minimize
or avoid service interruptions, and has entered into one or more agreements
making provision for emergency use of electronic data processing equipment.
Countrywide shall have no liability with respect to equipment failures beyond
its control.

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<PAGE>

12. INDEMNIFICATION OF COUNTRYWIDE.

A. Countrywide may rely on information reasonably believed
by it to be accurate and reliable. Except as may otherwise be required by
the 1940 Act and the rules thereunder, neither Countrywide nor its shareholders,
officers, directors, employees, agents, control persons or affiliates of any
thereof shall be subject to any liability for, or any damages, expenses or
losses incurred by the Trust in connection with any error of judgment, mistake
of law, any act or omission connected with or arising out of any services
rendered under or payments made pursuant to this Agreement or any other matter
to which this Agreement relates, except by reason of willful misfeasance, bad
faith or gross negligence on the part of any such persons in the performance of
the duties of Countrywide under this Agreement or by reason of reckless
disregard by any of such persons of the obligations and duties of Countrywide
under this Agreement.

B. Any person, even though also a director, officer,
employee, shareholder, or agent of Countrywide, or any of its affiliates,
who may be or become an officer, trustee, employee or agent of the Trust, shall
be deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering such services to or acting solely as an officer, trustee,
employee or agent of the Trust and not as a director, officer, employee,
shareholder or agent of or one under the control or direction of Countrywide or
any of its affiliates, even though paid by one of those entities.

C. Notwithstanding any other provision of this Agreement,
the Trust shall indemnify and hold harmless Countrywide, its directors,
officers, employees, shareholders, agents, control persons and affiliates from
and against any and all claims, demands, expenses and liabilities (whether with
or without basis in fact or law) of any and every nature which Countrywide may
sustain or incur or which may be asserted against Countrywide by any person by
reason of, or as a result of: (i) any action taken or omitted to be taken by
Countrywide in good faith in reliance upon any certificate, instrument, order or
share certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.

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<PAGE>

13. TERMINATION.

A. The provisions of this Agreement shall be effective on
the date first above written, shall continue in effect for two years from
that date and shall continue in force from year to year thereafter, but only so
long as such continuance is approved (1) by Countrywide, (2) by vote, cast in
person at a meeting called for the purpose, of a majority of the Trust's
trustees who are not parties to this Agreement or interested persons (as defined
in the 1940 Act) of any such party, and (3) by vote of a majority of the Trust's
Board of Trustees or a majority of the Trust's outstanding voting securities.

B. Either party may terminate this Agreement on any date
by giving the other party at least sixty (60) days' prior written notice of
such termination specifying the date fixed therefore. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.

C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or
responsibilities under this Agreement is designated by the Trust by written
notice to Countrywide, Countrywide shall, promptly upon such termination and at
the expense of the Trust, transfer all records maintained by Countrywide under
this Agreement and shall cooperate in the transfer of such duties and
responsibilities, including providing for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.

14. SERVICES FOR OTHERS.

Nothing in this Agreement shall prevent Countrywide or
any affiliated person (as defined in the 1940 Act) of Countrywide from
providing services for any other person, firm or corporation (including other
investment companies); provided, however, that Countrywide expressly represents
that it will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Trust under this Agreement.

15. LIMITATION OF LIABILITY.

It is expressly agreed that the obligations of the
Trust hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust and signed by
an officer of the Trust, acting as such, and neither such authorization by such

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<PAGE>

Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust.

16. SEVERABILITY.

In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect
the remainder of this Agreement, which shall continue to be in force.

17. QUESTIONS OF INTERPRETATION.

This Agreement shall be governed by the laws of the
State of Ohio. Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States Courts or in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission issued
pursuant to said 1940 Act. In addition, where the effect of a requirement of the
1940 Act, reflected in any provision of this Agreement, is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.

18. NOTICES.

All notices, requests, consents and other
communications required or permitted under this Agreement shall be in
writing (including telex and telegraphic communication) and shall be (as elected
by the person giving such notice) hand delivered by messenger or courier
service, telecommunicated, or mailed (airmail if international) by registered or
certified mail (postage prepaid), return receipt requested, addressed to:

To the Trust: The Gannett Welsh & Kotler Funds
222 Berkeley Street
Boston, Massachusetts 02116
Attention: T. Williams Roberts III

To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey

or to such other address as any party may designate by notice complying
with the terms of this Section 18. Each such notice shall be deemed delivered
(a) on the date delivered if by personal delivery; (b) on the date
telecommunicated if by

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<PAGE>

telegraph; (c)on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.

19. AMENDMENT.

This Agreement may not be amended or modified except by
a written agreement executed by both parties.

20. BINDING EFFECT.

Each of the undersigned expressly warrants and
represents that he has the full power and authority to sign this Agreement
on behalf of the party indicated, and that his signature will operate to bind
the party indicated to the foregoing terms.

21. COUNTERPARTS.

This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

22. FORCE MAJEURE.

If Countrywide shall be delayed in its performance of
services or prevented entirely or in part from performing services due to
causes or events beyond its control, including and without limitation, acts of
God, interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.

23. MISCELLANEOUS.

The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.

THE GANNETT WELSH & KOTLER FUNDS

By:/s/ Harold G. Kotler

Its: President

COUNTRYWIDE FUND SERVICES, INC.

By:/s/ Robert G. Dorsey

Its: President

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<PAGE>

Schedule A

COMPENSATION

Each series of the Trust will pay Countrywide a monthly fee,
according to the average net assets of such series during such
month, as follows:

Average Monthly Net Assets Monthly Fee

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

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TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT

WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and

WHEREAS, the Trust wishes to employ the services of Countrywide to
serve as its transfer, dividend disbursing, shareholder service and plan agent;
and

WHEREAS, Countrywide wishes to provide such services under
the conditions set forth below;

NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:

1. APPOINTMENT.

2. DOCUMENTATION.

The Trust will furnish from time to time the following
documents:

A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;

B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;

C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;

D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;

E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;

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<PAGE>

F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;

G. Copies of all Investment Advisory Agreements in effect;
and

H. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which Countrywide is
to act as plan agent.

3. COUNTRYWIDE TO RECORD SHARES.

Countrywide shall record the issuance of shares of the Trust
and maintain pursuant to applicable rules of the SEC a record of the total
number of shares of the Trust which are authorized, issued and outstanding,
based upon data provided to it by the Trust. Countrywide shall also provide the
Trust on a regular basis or upon reasonable request the total number of shares
which are authorized, issued and outstanding, but shall have no obligation when
recording the issuance of the Trust's shares, except as otherwise set forth
herein, to monitor the issuance of such shares or to take cognizance of any laws
relating to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.

4. COUNTRYWIDE TO VALIDATE TRANSFERS.

Upon receipt of a proper request for transfer and upon
surrender to Countrywide of certificates, if any, in proper form for transfer,
Countrywide shall approve such transfer and shall take all necessary steps to
effectuate the transfer as indicated in the transfer request. Upon approval of
the transfer, Countrywide shall notify the Trust in writing of each such
transaction and shall make appropriate entries on the shareholder records
maintained by Countrywide.

5. SHARE CERTIFICATES.

If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, Countrywide will countersign and mail,
by insured first class mail, a share certificate to the investor at his address
as set forth on the transfer books of the Trust, subject to any other
instructions for delivery of certificates representing newly purchased shares
and subject to the limitation that no certificates representing newly purchased
shares shall be mailed to the investor until the cash purchase price of such
shares has been collected and credited to the account of the Trust maintained by
the Custodian. The Trust shall supply Countrywide with a sufficient supply of
blank share certificates and from

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<PAGE>

time to time shall renew such supply upon request of Countrywide. Such blank
share certificates shall be properly signed, manually or, if authorized by the
Trust, by facsimile; and notwithstanding the death, resignation or removal of
any officers of the Trust authorized to sign share certificates, Countrywide may
continue to countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust. In case of the
alleged loss or destruction of any share certificate, no new certificates shall
be issued in lieu thereof, unless there shall first be furnished an appropriate
bond satisfactory to Countrywide and the Trust, and issued by a surety company
satisfactory to Countrywide and the Trust.

6. RECEIPT OF FUNDS.

Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust, Countrywide shall stamp the check or instrument with the date of receipt,
determine the amount thereof due the Trust and shall forthwith process the same
for collection. Upon receipt of notification of receipt of funds eligible for
share purchases in accordance with the Trust's then current prospectus and
statement of additional information, Countrywide shall notify the Trust, at the
close of each business day, in writing of the amount of said funds credited to
the Trust and deposited in its account with the Custodian.

7. PURCHASE ORDERS.

Upon receipt of an order for the purchase of shares of the
Trust, accompanied by sufficient information to enable Countrywide to establish
a shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Trust.

8. RETURNED CHECKS.

In the event that Countrywide is notified by the Trust's
Custodian that any check or other order for the payment of money is returned
unpaid for any reason, Countrywide will:

A. Give prompt notification to the Trust of the non-payment of
said check;

- 3 -

<PAGE>

B. In the absence of other instructions from the Trust, take such steps
as may be necessary to redeem any shares purchased on the basis of such returned
check and cause the proceeds of such redemption plus any dividends declared with
respect to such shares to be credited to the account of the Trust and to request
the Trust's Custodian to forward such returned check to the person who
originally submitted the check; and

C. Notify the Trust of such actions and correct the Trust's records
maintained by Countrywide pursuant to this Agreement.

9. DIVIDENDS AND DISTRIBUTIONS.

The Trust shall furnish Countrywide with appropriate evidence
of Trustee action authorizing the declaration of dividends and other
distributions. Countrywide shall establish procedures in accordance with the
Trust's then current prospectus and statement of additional information and with
other authorized actions of the Trust's Board of Trustees under which it will
have available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so requests, invest the dividends and other distributions in
full and fractional shares in accordance with the Trust's then current
prospectus and statement of additional information. If a shareholder has elected
to receive dividends or other distributions in cash, then Countrywide shall
disburse dividends to shareholders of record in accordance with the Trust's then
current prospectus and statement of additional information. Countrywide shall,
on or before the mailing date of such checks, notify the Trust and the Custodian
of the estimated amount of cash required to pay such dividend or distribution,
and the Trust shall instruct the Custodian to make available sufficient funds
therefor in the appropriate account of the Trust. Countrywide shall mail to the
shareholders periodic statements, as requested by the Trust, showing the number
of full and fractional shares and the net asset value per share of shares so
credited. When requested by the Trust, Countrywide shall prepare and file with
the Internal Revenue Service, and when required, shall address and mail to
shareholders, such returns and information relating to dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations.

10. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.

Countrywide shall, at least annually, furnish in writing to
the Trust the names and addresses, as shown in the shareholder accounts
maintained by Countrywide, of all shareholders for which there are, as of the
end of the calendar year, dividends, distributions or redemption proceeds for
which

- 4 -

<PAGE>

checks or share certificates mailed in payment of distributions have been
returned. Countrywide shall use its best efforts to contact the shareholders
affected and to follow any other written instructions received from the Trust
concerning the disposition of any such unclaimed dividends, distributions or
redemption proceeds.

11. REDEMPTIONS AND EXCHANGES.

A. Countrywide shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by Countrywide. If Countrywide or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, Countrywide shall promptly notify the shareholder indicating
the reason therefor.

B. If shares of the Trust are eligible for exchange with shares of any
other investment company, Countrywide, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.

C. Countrywide shall notify the Trust and the Custodian on each
business day of the amount of cash required to meet payments made pursuant to
the provisions of this Paragraph 11, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefor in the appropriate account of the Trust. Procedures for effecting
redemption orders accepted from shareholders or dealers of record

- 5 -

<PAGE>

by telephone or other methods shall be established by mutual agreement between
Countrywide and the Trust consistent with the Trust's then current prospectus
and statement of additional information.

D. The authority of Countrywide to perform its responsibilities under
Paragraph 7, Paragraph 9, and this Paragraph 11 shall be suspended with respect
to any series of the Trust upon receipt of notification by it of the suspension
of the determination of such series' net asset value.

12. AUTOMATIC WITHDRAWAL PLANS.

Countrywide will process automatic withdrawal orders pursuant
to the provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the Trust.
Payments upon such withdrawal order shall be made by Countrywide from the
appropriate account maintained by the Trust with the Custodian on approximately
the last business day of each month in which a payment has been requested, and
Countrywide will withdraw from a shareholder's account and present for
repurchase or redemption as many shares as shall be sufficient to make such
withdrawal payment pursuant to the provisions of the shareholder's withdrawal
plan and the current prospectus and statement of additional information of the
Trust. From time to time on new automatic withdrawal plans a check for a payment
date already past may be issued upon request by the shareholder.

13. WIRE-ORDER PURCHASES.

Countrywide will send written confirmations to the dealers of
record containing all details of the wire-order purchases placed by each such
dealer by the close of business on the business day following receipt of such
orders by Countrywide. Upon receipt of any check drawn or endorsed to the Trust
(or Countrywide, as agent) or otherwise identified as being payment of an
outstanding wire-order, Countrywide will stamp said check with the date of its
receipt and deposit the amount represented by such check to Countrywide's
deposit accounts maintained with the Custodian. Countrywide will cause the
Custodian to transfer federal funds in an amount equal to the net asset value of
the shares so purchased to the Trust's account with the Custodian and will
notify the Trust before noon of each business day of the total amount deposited
in the Trust's deposit accounts, and in the event that payment for a purchase
order is not received by Countrywide or the Custodian on the tenth business day
following receipt of the order, prepare an NASD "notice of failure of dealer to
make payment."

- 6 -

<PAGE>

14. OTHER PLANS.

Countrywide will process such accumulation plans, group
programs and other plans or programs for investing in shares of the Trust as are
now provided for in the Trust's current prospectus and statement of additional
information and will act as plan agent for shareholders pursuant to the terms of
such plans and programs duly executed by such shareholders.

15. RECORDKEEPING AND OTHER INFORMATION.

16. SHAREHOLDER RECORDS.

Countrywide shall maintain records for each shareholder
account showing the following:

A. Names, addresses and tax identifying numbers;

B. Name of the dealer of record, if any;

C. Number of shares held of each series;

D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;

E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;

F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;

- 7 -

<PAGE>

G. Any correspondence relating to the current maintenance
of a shareholder's account;

H. Certificate numbers and denominations for any
shareholder holding certificates;

I. Any stop or restraining order placed against a
shareholder's account;

J. Information with respect to withholding in the case of
a foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and

K. Any information required in order for Countrywide to
perform the calculations contemplated under this
Agreement.

17. TAX RETURNS AND REPORTS.

Countrywide will prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies and, if required,
mail to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.

18. OTHER INFORMATION TO THE TRUST.

Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.

19. ACCESS TO SHAREHOLDER INFORMATION.

Upon request, Countrywide shall arrange for the Trust's
investment adviser to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.

- 8 -

<PAGE>

20. COOPERATION WITH ACCOUNTANTS.

Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.

21. SHAREHOLDER SERVICE AND CORRESPONDENCE.

Countrywide will provide and maintain adequate personnel,
records and equipment to receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders. Countrywide will answer
written correspondence from shareholders relating to their share accounts and
such other written or oral inquiries as may from time to time be mutually agreed
upon, and Countrywide will notify the Trust of any correspondence or inquiries
which may require an answer from the Trust.

22. PROXIES.

Countrywide shall assist the Trust in the mailing of proxy
cards and other material in connection with shareholder meetings of the Trust,
shall receive, examine and tabulate returned proxies and shall, if requested by
the Trust, provide at least one inspector of election to attend and participate
as required by law in shareholder meetings of the Trust.

23. FURTHER ACTIONS.

Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.

24. COMPENSATION.

For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee in accordance with the
schedule attached hereto as Schedule A. Countrywide shall not be required to
reimburse the Trust or the Trust's investment adviser for (or have deducted from
its fees) any expenses in excess of expense limitations imposed by certain state
securities commissions having jurisdiction over the Trust. The Trust shall
promptly reimburse Countrywide for any out-of-pocket expenses and advances which
are to be paid by the Trust in accordance with Paragraph 25.

- 9 -

<PAGE>

25. EXPENSES.

Countrywide shall furnish, at its expense and without cost to
the Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 25 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside pricing services, use of
outside mailing firms, necessary outside record storage, media for storage of
records (e.g., microfilm, microfiche, computer tapes), printing, confirmations
and any other shareholder correspondence and any and all assessments, taxes or
levies assessed on Countrywide for services provided under this Agreement.
Postage for mailings of dividends, proxies, reports and other mailings to all
shareholders shall be advanced to Countrywide three business days prior to the
mailing date of such materials.

26. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.

27. REFERENCES TO COUNTRYWIDE.

The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.

- 10 -

<PAGE>

28. EQUIPMENT FAILURES.

Countrywide shall take all steps necessary to minimize or
avoid service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.

29. INDEMNIFICATION OF COUNTRYWIDE.

C. The Trust shall indemnify and hold harmless Countrywide, its
directors, officers, employees, shareholders, agents, control persons and
affiliates from and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of any and every
nature which Countrywide may sustain or incur or which may be asserted against
Countrywide by any person by reason of, or as a result of: (i) any action taken
or omitted to be taken by Countrywide in good faith in reliance upon any
certificate, instrument, order or share certificate reasonably believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Trust or upon the opinion of legal counsel for the Trust or its
own counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with

- 11 -

<PAGE>

its appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.

30. TERMINATION

31. SERVICES FOR OTHERS.

- 12 -

<PAGE>

32. LIMITATION OF LIABILITY.

It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.

33. SEVERABILITY.

In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.

34. QUESTIONS OF INTERPRETATION.

35. NOTICES.

To the Trust: The Gannett Welsh & Kotler Funds
222 Berkeley Street
Boston, Massachusetts 02116
Attention: T. Williams Roberts III

- 13 -

<PAGE>

To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey

or to such other address as any party may designate by notice complying with the
terms of this Section 35. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.

36. AMENDMENT.

This Agreement may not be amended or modified except by a
written agreement executed by both parties.

37. BINDING EFFECT.

38. COUNTERPARTS.

This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

39. FORCE MAJEURE.

- 14 -

<PAGE>

40. MISCELLANEOUS.

The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

THE GANNETT WELSH & KOTLER FUNDS

By:/s/ Harold G. Kotler

Its: President

COUNTRYWIDE FUND SERVICES, INC.

By:/s/ Robert G. Dorsey

Its: President

- 15 -

<PAGE>

Schedule A

COMPENSATION

Services FEE
(Per Account)
As Transfer, Dividend Disbursing,
Shareholder Service and Plan Agent:

GW&K Equity Fund Payable monthly at
rate of $17.00/year

GW&K Government Securities Fund Payable monthly at
rate of $21.00/year

Each Fund will be subject to a minimum charge of $1,000 per month.

- 16 -

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use in this
Post-Effective Amendment No. 1 of our report dated October 25, 1996 and to all
references to our Firm included in or made a part of this Post-Effective
Amendment.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Cincinnati, Ohio

June 4, 1997

AGREEMENT RELATING TO INITIAL CAPITAL

October 17, 1996

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

Dear Sir/Madam:

In conjunction with the purchase by Harold G. Kotler (the "Purchaser")
of 4,941.5 shares of beneficial interest of the GW&K Equity Fund and 100 shares
of beneficial interest of the GW&K Government Securities Fund of The Gannett
Welsh & Kotler Funds (the "Shares"), the Purchaser hereby represents that he is
acquiring the Shares for investment with no intention of reselling or otherwise
distributing the Shares. The Purchaser hereby further agrees that any transfer
of any of the Shares or any interest therein shall be subject to the following
conditions:

1. The Purchaser shall furnish you and counsel satisfactory to
you prior to the time of transfer, a written description of
the proposed transfer specifying its nature and consequence
and giving the name of the proposed transferee.

2. You shall have obtained from your counsel a written
opinion stating whether in the opinion of such
counsel the proposed transfer may be effected
without registration under the Securities Act of
1933. If such opinion states that such transfer
may be so effected, the Purchaser shall then be
entitled to transfer the Shares in accordance with
the terms specified in its description of the
transaction to you. If such opinion states that
the proposed transfer may not be so effected, the
Purchaser will not be entitled to transfer the
Shares unless the Shares are registered.

The Purchaser hereby authorizes you to take such action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of the Shares, including the imposition of
a requirement that any transferee of the Shares sign a letter agreement similar
to this one. The Purchaser agrees that in the event the Shares are redeemed by
the Purchaser or his successors or any current holder prior to the complete
amortization of organization expenses by the GW&K Equity Fund or the GW&K
Government Securities Fund, the redemption proceeds payable in respect of the
Shares so redeemed

<PAGE>

shall be reduced by the pro-rata share (based on the proportionate share of the
Shares redeemed to the total number of the Shares outstanding at the time of
redemption) of the then unamortized deferred organization expenses as of the
date of such redemption.

Very truly yours,

/s/ Harold G. Kotler

Harold G. Kotler

- 2 -

AGREEMENT RELATING TO INITIAL CAPITAL

October 17, 1996

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

Dear Sir/Madam:

In conjunction with the purchase by Edward B. White (the "Purchaser")
of 4,941.5 shares of beneficial interest of the GW&K Equity Fund and 100 shares
of beneficial interest of the GW&K Government Securities Fund of The Gannett
Welsh & Kotler Funds (the "Shares"), the Purchaser hereby represents that he is
acquiring the Shares for investment with no intention of reselling or otherwise
distributing the Shares. The Purchaser hereby further agrees that any transfer
of any of the Shares or any interest therein shall be subject to the following
conditions:

<PAGE>

Very truly yours,

/s/ Edward B. White

Edward B. White

- 2 -

PLAN OF DISTRIBUTION
PURSUANT TO RULE 12B-1

WHEREAS, The Gannett Welsh & Kotler Funds (the "Trust"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts, engages in business as an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended
(the "1940 Act"); and

WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest without par value (the "Shares"), which may be divided
into two or more Series of Shares; and

WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
and

WHEREAS, the Plan has been approved by the vote of at least a majority
of the outstanding voting securities (as defined in the 1940 Act) of each Series
of the Trust;

NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the 1940 Act, on the following terms and conditions:

1. Distribution Activities. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Shares, which activities may include, but are not
limited to, the following: (a) payments to securities dealers and others who are
engaged in the sale of Shares and who may be advising shareholders of the Trust
regarding the purchase, sale or retention of Shares; (b) expenses of maintaining
personnel (including personnel of organizations with which the Trust has entered
into agreements related to this Plan) who engage in or support distribution of
Shares or who render shareholder support services not otherwise provided by the
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Trust, processing shareholder transactions, and

- 1 -

<PAGE>

providing such other shareholder services as the Trust may reasonably request;
(c) formulating and implementing of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (d) preparing, printing
and distributing sales literature; (e) preparing, printing and distributing
prospectuses and statements of additional information and reports of the Trust
for recipients other than existing shareholders of the Trust; and (f) obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
related to the distribution of Shares, either directly or through other persons
with which the Trust has entered into agreements related to this Plan.

2. Maximum Expenditures. The expenditures to be made by the Trust
pursuant to this Plan and the basis upon which payment of such expenditures will
be made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed in any fiscal year an amount calculated at the rate of
.25% of the average daily net asset value of any Series of the Trust. Such
payments for distribution activities may be made directly by the Trust or the
Trust's investment adviser may incur such expenses and obtain reimbursement from
the Trust.

3. Term and Termination. (a) This Plan shall become effective on the
date hereof. Unless terminated as herein provided, this Plan shall continue in
effect for one year from the date hereof and shall continue in effect for
successive periods of one year thereafter, but only so long as each such
continuance is specifically approved by votes of a majority of both (i) the
Trustees of the Trust and (ii) the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on such approval.

(b) This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Trust.

4. Amendments. This Plan may not be amended to increase materially the
amount of expenditures provided for in Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of the
Trust (as defined in the 1940 Act), and no material amendment to this Plan shall
be made unless approved in the manner provided for annual renewal of this Plan
in Section 3(a) hereof.

- 2 -

<PAGE>

5. Selection and Nomination of Trustees. While this Plan is in
effect, the selection and nomination of Trustees who are not interested
persons (as defined in the 1940 Act) of the Trust shall be committed to the
discretion of the Trustees who are not interested persons of the Trust.

6. Quarterly Reports. The Treasurer of the Trust shall provide to
the Trustees and the Trustees shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and any related agreement
and the purposes for which such expenditures were made.

7. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.

8. Limitation of Liability. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of the Commonwealth of
Massachusetts and notice is hereby given that this Plan is executed on behalf of
the Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees or shareholders
of the Trust individually but are binding only upon the assets and property of
the Trust.

IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the date set forth below.

Dated: December 4, 1996

Attest:
THE GANNETT WELSH & KOTLER
FUNDS

/s/ Irwin Heller By: /s/ Harold G. Kotler
Secretary President

- 3 -

<ARTICLE> 6
<CIK> 0001012401
<NAME> THE GANNETT WELSH & KOTLER FUNDS
<SERIES>
<NUMBER> 1
<NAME> GW&K EQUITY FUND

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 18,185,964
<INVESTMENTS-AT-VALUE> 23,487,352
<RECEIVABLES> 88,462
<ASSETS-OTHER> 42,977
<OTHER-ITEMS-ASSETS> 96,855
<TOTAL-ASSETS> 23,715,646
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 119,651
<TOTAL-LIABILITIES> 119,651
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,989,585
<SHARES-COMMON-STOCK> 2,400,756
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 39,904
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 265,118
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,301,388
<NET-ASSETS> 23,595,995
<DIVIDEND-INCOME> 107,181
<INTEREST-INCOME> 17,416
<OTHER-INCOME> 0
<EXPENSES-NET> 84,693
<NET-INVESTMENT-INCOME> 39,904
<REALIZED-GAINS-CURRENT> 265,118
<APPREC-INCREASE-CURRENT> (917,495)
<NET-CHANGE-FROM-OPS> (612,473)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,417,491
<NUMBER-OF-SHARES-REDEEMED> 16,735
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 23,595,995
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 67,755
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 94,693
<AVERAGE-NET-ASSETS> 22,331,161
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
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<ARTICLE> 6
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<NAME> THE GANNETT WELSH & KOTLER FUNDS
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<NAME> GW&K GOVERNMENT SECURITIES FUND

<S> <C>
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