<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1998
SECURITIES ACT REGISTRATION NO. 33-63562
INVESTMENT COMPANY ACT FILE NO. 811-7760
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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. 6 (X)
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
AMENDMENT NO. 8
KEELEY SMALL CAP VALUE FUND, INC.
(Exact Name of Registrant as Specified in Charter)
401 South LaSalle Street
Suite 1201
Chicago, Illinois 60605
(Address of Principal Executive Offices)
Registrant's Telephone Number including Area Code: (312) 786-5050
--------------------------
Copy to
John L. Keeley, Jr. Stephen E. Goodman
Keeley Asset Management Corp. Schwartz & Freeman
401 South LaSalle Street 401 North Michigan Avenue
Suite 1201 Suite 1900
Chicago, Illinois 60605 Chicago, Illinois 60611
(Name and Address of Agents for Service)
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It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on January 29, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Pursuant to Rule 24f-2 of the Investment Company Act of 1940 and Securities Act
of 1933 Registrant has elected to register an indefinite number of shares.
Registrant intends to file the notice required by Rule 24f-2 with respect to its
fiscal year ending September 30, 1998 on or before December 30, 1998 with the
Securities and Exchange Commission.
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<PAGE> 2
KEELEY SMALL CAP VALUE FUND, INC.
Cross reference sheet pursuant to Rule 495(a) of Regulation C
Item Location or Caption
- - -------------------------------------------------------------------------
PART A (PROSPECTUS)
- - -------------------------------------------------------------------------
1 Front cover; Back cover
- - -------------------------------------------------------------------------
2 The Fund - Investment Objective, Investment
Strategy and Policies, Performance
- - -------------------------------------------------------------------------
3 The Fund - Expenses
- - -------------------------------------------------------------------------
4 The Fund - Investment Objective, Investment
Strategy and Policies, Main Risks
- - -------------------------------------------------------------------------
5 Contained in Annual Report to Shareholders
- - -------------------------------------------------------------------------
6 The Fund - Management
- - -------------------------------------------------------------------------
7 Your Investment - How Shares are Priced,
How to Buy, sell and exchange shares,
Distributions and taxes,
- - -------------------------------------------------------------------------
8 Your Investment - How Shares are Priced,
How to Buy, sell and exchange shares,
Distributions and taxes
- - -------------------------------------------------------------------------
9 Financial Highlights
- - -------------------------------------------------------------------------
PART B - STATEMENT OF ADDITIONAL
INFORMATION
- - -------------------------------------------------------------------------
10 Cover Page; Table of Contents
- - -------------------------------------------------------------------------
11 General Information and History
- - -------------------------------------------------------------------------
12 General Information and History; Investment
Objective, Policy and Risks; Investment
Restrictions
- - -------------------------------------------------------------------------
13 Management of the Fund
- - -------------------------------------------------------------------------
14 Control Persons and Principal Holder of
Securities
- - -------------------------------------------------------------------------
15 Investment Adviser; Administrative Services;
Custodian, Transfer Agent and Dividend
Disbursing Agent
- - -------------------------------------------------------------------------
16 Portfolio Transactions and Brokerage
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17 General Information and History
- - -------------------------------------------------------------------------
18 Net Asset Value, Purchaser and Redemptions
of Shares
- - -------------------------------------------------------------------------
19 Taxation
- - -------------------------------------------------------------------------
20 Distribution of Shares
- - -------------------------------------------------------------------------
21 Performance Information
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22 Financial Statements and Reports
- - -------------------------------------------------------------------------
PART C - OTHER INFORMATION
- - -------------------------------------------------------------------------
23 Exhibits
- - -------------------------------------------------------------------------
24 Persons Controlled by or Under Common
- - -------------------------------------------------------------------------
Control with the Fund
- - -------------------------------------------------------------------------
25 Indemnification
- - -------------------------------------------------------------------------
26 Business and other connections of the
Investment Adviser
- - -------------------------------------------------------------------------
27 Principal Underwriters
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28 Location of Accounts and Records
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29 Management Services
- - -------------------------------------------------------------------------
30 Undertakings
<PAGE> 3
KEELEY SMALL CAP VALUE FUND, INC.
A mutual fund investing in small market cap companies
for capital appreciation
Prospectus
January 29, 1999
As with all mutual funds, the Securities and Exchange
Commission hasn't judged this Fund's investment merit
and has not determined that this prospectus is
accurate or complete. Any representation to the
contrary is a criminal offense.
TO LEARN MORE ABOUT THE FUND
Ask for a free copy of the following:
STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI
gives you more details on other aspects of the Fund.
It's filed with the Securities and Exchange
Commission (SEC) and by this reference is
incorporated in this prospectus.
ANNUAL/SEMI-ANNUAL REPORT. These reports describe the
Fund's performance, list its holdings, and discuss
market conditions, economic trends and Fund
strategies.
Here's how you can get this information without
charge.
BY TELEPHONE
Call Toll Free 1-888-933-5391.
BY MAIL
Write to: KEELEY Small Cap Value Fund, Inc.
401 South LaSalle Street, Suite 1201
Chicago, IL 60605
BY E-MAIL
Send your request to [email protected]
ON THE INTERNET
View online or download Fund prospectus and
application at
KEELEY Website: www.keeleyfunds.com
SEC's Website: www.sec.gov
You can also get copies at the SEC Public Reference
Room in Washington, D.C. Call 1-800-SEC-0330 for
details. Or send your request and a duplicating fee
to the SEC's Public Reference Section, Washington,
D.C. 20549-6009.
SEC file number 811-7760
CONTENTS
THE FUND
Investment objective..............................
Investment strategy and policies..................
Main risks........................................
Performance.......................................
Expenses..........................................
Financial highlights..............................
Management........................................
YOUR INVESTMENT
How shares are priced.............................
How to buy, sell, and exchange shares.............
Distributions and taxes...........................
Shareholder privileges
Right of Accumulation......................
Letter of Intent ..........................
Automatic Investment Plan..................
Individual Retirement Accounts ...................
TO LEARN MORE ABOUT THE FUND..............Back cover
THE FUND
KEELEY SMALL CAP VALUE FUND
INVESTMENT OBJECTIVE
This Fund seeks capital appreciation by investing at
least 65% of its total assets in companies with small
market capitalization (less than $1 billion at the
time of initial investment). Current dividend or
interest income is not a factor when choosing
securities.
The Fund may be suitable for the more aggressive
section of an investor's portfolio. It's designed for
people who want to grow their capital over the long
term and who are comfortable with possible frequent
short-term changes in the value of their investment.
An investment in the Fund should not be considered a
complete investment program.
INVESTMENT STRATEGY AND POLICIES
While many mutual funds look for undervalued stocks,
the Fund takes a unique approach: we concentrate on
companies going through major changes, including:
- corporate spin-offs (a tax-free distribution of a
parent company's division to shareholders)
- financial restructuring, including acquisitions,
recapitalizations and companies emerging from
bankruptcy
- companies selling below actual or perceived book
value.
We don't concentrate on any sector or industry. Each
stock is judged on its potential for above-average
capital appreciation, using a value approach that
emphasizes:
- equities with positive cash flow
- low market capitalization-to-revenue ratio
- desirable EBITDA (earnings before interest,
taxes, depreciation, and amortization)
- motivated management
- little attention from Wall Street
Research sources include company documents,
subscription research services, select
broker/dealers, and direct company contact.
It is our initial intention to typically hold
securities for more than two years to allow the
corporate restructuring process to yield results. But
we may sell securities when a more attractive
opportunity emerges; when a company becomes
overweighted in the portfolio; or when operating
difficulties or other circumstances make selling
desirable.
The Fund will invest at least 65% of its total assets
in common stocks and other equity type securities
(including preferred stock, convertible debt
securities, and warrants). However, in times of
adverse equity markets, we may take temporary
defensive positions in U.S. Treasury Bills and
commercial paper of major U.S. corporations. This
could reduce the benefit from an upswing in the
market.
The investment strategy and policies are not
fundamental; they may be changed without shareholder
approval. You'll get advance notice if we change that
policy. For more about the Fund's investment
policies, see the SAI.
MAIN RISKS
The Fund is subject to the typical risks of equity
investing, including the effects of interest rate
fluctuations, investor psychology, and other factors.
The value of your investment will increase or
decrease so your shares may be worth more or less
money than your original investment.
In addition, small cap investing presents more risk
than investing in large cap or more established
company securities. Small cap companies often have
more limited resources and greater variation in
operating results, leading to greater price
volatility. Trading volumes may be lower, making such
securities less liquid. The focus on corporate
restructures means these securities are more likely
than others to remain undervalued.
Other than company-specific problems, the factor most
likely to hurt Fund performance would be a sharp
increase in interest rates, which generally causes
equity prices to fall.
<PAGE> 4
PERFORMANCE
The first chart below shows annual total returns for the Fund. The second
compares Fund performance with that of both the Russell 2000 Index, an unmanaged
index made up of smaller capitalization issues and the S&P 500 Index, a broad
market-weighted index dominated by blue-chip stocks. While these two charts give
you some idea of the risks involved in investing in the Fund, please remember
that past performance doesn't guarantee future results.
Chart/Table Information
Year-by-year total return as of 12/31 each year (%)
<TABLE>
<S> <C>
1993: 4.50%
1994: (8.71)%
1995: 32.47%
1996: 25.99%
1997: 41.01%
</TABLE>
Best Quarter: Q3 '97: 21.56%
Worst Quarter: Q4 '94: (7.02)%
Average annual total return as of 12/31/97
<TABLE>
<CAPTION>
1 Year 3 Years Inception (10/1/93)
<S> <C> <C> <C>
Fund 34.67% 30.99% 19.65%
Russell 2000 22.36% 22.34% 15.49%
S&P 500 33.36% 31.15% 22.12%
</TABLE>
The Fund's year-to-date total return as of 9/30/98 was (10.94)%.
EXPENSES
The table below shows what fees and expenses you could face as a Fund
shareholder. Keep in mind that future expenses may be higher or lower than those
shown.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases (as a percentage of offering price)(a) 4.50%
Maximum Sales Load on Reinvested Dividends (as a percentage of offering price) None
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds as applicable) None
Redemption Fees (as a percentage of amount redeemed, as applicable)(b) None
Exchange Fees(b) None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00%
12b-1 Fees(c) 0.25%
Other Expenses 0.77%
----
Total Fund Operating Expenses(d) 2.02%
====
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $10,000 investment,
assuming (1) 5% annual return and
(2) redemption at the end of each
time period: $646 $1,055 $1,489 $2,692
</TABLE>
- - ---------------------------------
(a) Sales charges are reduced for purchases of $50,000 or more. See "How shares
are priced."
(b) The Fund's Transfer Agent charges a fee of $12 for each wire redemption and
$5 for each telephone exchange. At the discretion of the adviser or transfer
agent these fees may be waived.
(c) The Rule 12b-1 Fee is an annual fee paid by the Fund (and indirectly by
shareholders). See "How Shares are Priced." Over time, long-term
shareholders may pay more in distribution-related charges through the
imposition of the Rule 12b-1 Fee than the economic equivalent of the maximum
front-end sales charge applicable to mutual funds sold by members of the
National Association of Securities Dealers, Inc. (the "NASD").
(d) The Adviser has agreed to waive a portion of its fee to the extent that
total ordinary operating expenses during the current fiscal year as a
percentage of average net assets exceed 2.50%.
The Management Fee to be paid by the Fund is higher than that paid by many
other investment companies. The Board of Directors believes that the Fund's
Management Fee is appropriate in light of the Fund's investment objective
and policies.
<PAGE> 5
FINANCIAL HIGHLIGHTS
The financial information for a Fund share outstanding during the periods
specified in the following table has been derived from the financial records of
the Fund which have been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report thereon was unqualified. The table should be read in
conjunction with the financial statements and related notes included in the
Fund's Annual Report to Shareholders. In addition to financial statements, the
Annual Report to Shareholders contains further information about performance of
the Fund.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------ ------------------
PER SHARE DATA (1)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.48 $ 14.52 $ 12.52
------------- ----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.16) (0.25) (0.19)
Net realized and unrealized gains (losses) on investments (2.00) 7.77 2.22
------------- ----------- ----------
TOTAL FROM INVESTMENT OPERATIONS (2.16) 7.52 2.03
------------- ----------- ----------
LESS DISTRIBUTIONS:
Net realized gains (1.01) (0.56) (0.03)
------------- ----------- ----------
NET ASSET VALUE, END OF PERIOD $ 18.31 $ 21.48 $ 14.52
============= =========== ==========
TOTAL RETURN (3) (10.50)% 53.51% 16.23%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in 000's) $ 39,747 $ 20,824 $ 10,815
Ratio of expenses to average net assets 2.02% 2.45% 2.50%
Ratio of net investment loss to average net assets (1.17)% (1.66)% (1.61)%
Ratio of expenses to average net assets (4) 2.02% 2.45% 2.94%
Ratio of net investment loss to average net assets (4) (1.17)% (1.66)% (2.05)%
Portfolio turnover rate 33.40% 36.40% 52.43%
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 (2)
PER SHARE DATA (1)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.13) (0.06)
Net realized and unrealized gains (losses) on investments 2.39 0.32
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 2.26 0.26
LESS DISTRIBUTIONS:
Net realized gains - -
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 12.52 $ 10.26
========== ==========
TOTAL RETURN (3) 22.03% 2.60%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in 000's) $ 7,616 $ 4,503
Ratio of expenses to average net assets 2.50% 2.49%
Ratio of net investment loss to average net assets (1.46)% (0.96)%
Ratio of expenses to average net assets (4) 3.94% 5.98%
Ratio of net investment loss to average net assets (4) (2.90)% (4.45)%
Portfolio turnover rate 70.59% 63.20%
</TABLE>
(1) Per share data is for a share outstanding throughout the period.
(2) The Fund commenced operations on October 1, 1993.
(3) The total return calculation does not reflect the 4.50% sales load imposed
on the purchase of shares.
(4) During the period, certain fees were waived. If such fee waivers had not
occurred, the ratios would have been as indicated.
<PAGE> 6
MANAGEMENT
Investment Adviser. The Fund's investment adviser is
Keeley Asset Management Corp., 401 South LaSalle
Street, Suite 1201, Chicago, IL 60605. The adviser
supervises, administers and continuously reviews the
Fund's investment program, following policies set by
the Board of Directors. As of September 30, 1998, the
adviser had more than $412 million in assets under
management.
John L. Keeley, Jr., president and director of the
Fund, is the adviser's sole shareholder. He has been
president and primary investment manager for the
adviser since its incorporation in 1981. He has also
been primarily responsible for day-to-day management
of the Fund's portfolio since its incorporation in
1993.
The Fund pays the adviser a monthly fee at an annual
rate of 1.00% of average daily net assets. While this
rate is higher than what most mutual funds pay, the
directors consider it appropriate in light of the
Fund's investment objectives and policies. The
adviser will waive part of its fee or reimburse the
Fund if its annual operating expenses exceed 2.50% of
net assets. This limitation excludes taxes, interest
charges, litigation and other extraordinary expenses,
and brokerage commissions and other charges from
buying and selling Fund securities.
Other service providers.
Administrator. Sunstone Financial Group, Inc.
oversees the Fund's custodian and transfer agent;
handles required tax returns and various filings;
monitors Fund expenses and compliance issues; and
generally administers the Fund.
Distributor. Keeley Investment Corp. is general
distributor of the Fund's shares.
Custodian, transfer agent, and accounting services.
Firstar Bank Milwaukee, N.A. provides for the
safekeeping of the Fund's assets. Firstar Mutual Fund
Services, LLC maintains shareholder records and
disburses dividends and other distributions.
YOUR INVESTMENT
<PAGE> 7
HOW SHARES ARE PRICED
The public offering price of Fund shares is the NET
ASSET VALUE (the value of one share in the Fund) plus
a SALES CHARGE based on the amount of your purchase.
Net asset value. Net asset value (NAV) is calculated
by dividing the Fund's total assets, minus any
liabilities, by the number of shares outstanding.
It's determined daily Monday through Friday at 4 p.m.
Eastern Time, except on these holidays:
New Year's Day Independence Day
Martin Luther King Jr. Day Labor Day
Presidents' Day Thanksgiving Day
Good Friday Christmas Day
Memorial Day
The Fund isn't required to calculate NAV if none of
its shares have been traded. The day's NAV will be
used for all buy or sell orders received since the
preceding computation.
Here's how the value of Fund assets is determined:
- A security listed on an exchange or quoted on a
national market system is valued at the last
sales price or, if it wasn't traded during the
day, at the most recent bid price.
- Securities traded only on over-the-counter
markets are valued at the last sales price on
days when the security is traded; otherwise,
they're valued at closing over-the-counter bid
prices.
- If a security is traded on more than one
exchange, it's valued at the last sales price on
the exchange where it's principally traded.
- Debt securities (other than short-term
obligations) in normal institutional-size trading
units are valued by a service that uses
electronic data processing methods, avoiding
exclusive reliance on exchange or
over-the-counter prices.
- Short-term obligations (debt securities purchased
within 60 days of their stated maturity date) are
valued at amortized cost, which approximates
current value.
- Securities for which market quotes aren't readily
available, and
<PAGE> 8
other Fund assets, are valued at their fair value
as determined by the Board of Directors.
Sales charge. The chart below shows how the sales
charge varies with the amount of your purchase.
<TABLE>
<CAPTION>
Sales Charge Dealer Reallowance
as a Percentage of as a Percentage of
Single Transaction Amount Offering Price Net Amount Invested Offering Price
------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
$50,000 - less than $100,000 4.00% 4.17% 3.50%
$100,000 - less than $250,000 3.00% 3.09% 2.50%
$250,000 - less than $500,000 2.50% 2.56% 2.00%
$500,000 and over 2.00% 2.04% 1.50%
</TABLE>
Various individuals and organizations who meet Fund
requirements may buy shares at NAV - that is, without
the sales charge. For a list of those who may qualify
for fee waivers, plus a description of the
requirements, see the SAI.
The Fund has adopted a plan under Rule 12b-1 that
allows the Fund to pay distribution and other fees
for the sale and distribution of its shares and for
services provided to shareholders. Under this Plan,
the fee is 0.25% per year of the Fund's Net Asset
Value (calculated on a daily basis). Because these
fees are paid out of the Fund's assets on an ongoing
basis, over time these fees will increase the cost of
your investment and may cost you more than paying
other types of sales charges.
See also "Right of Accumulation" and "Letter of
Intent" under "Shareholder Privileges."
HOW TO BUY, SELL AND EXCHANGE SHARES
Buying shares. You can buy Fund shares directly from
the distributor, Keeley Investment Corp., or from
selected broker/dealers. To make direct purchases,
see the chart below. If you invest through a third
party, policies and fees may differ from those
described here.
The minimum initial investment is $1,000 ($250 for
IRAs and Automatic Investment Plan accounts), and the
minimum for additional investments is $50 and is
subject to change at any time.
Your order will be priced at the next NAV calculated
after the Fund accepts your order. All purchases must
be made in U.S. dollars and checks drawn on U.S.
banks. We don't accept cash. If
<PAGE> 9
your check is returned for insufficient funds, you'll
be charged a $25 fee as well as for any loss to the
Fund.
While we don't issue stock certificates for shares
purchased, you will receive a statement confirming
your purchase.
WE RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER IF
WE BELIEVE IT'S IN THE FUND'S BEST INTEREST TO DO SO.
By wire transfer
Opening an account
- Call the Fund's transfer agent at 1-888-933-5391
to get a Fund account number.
- Have your bank wire the amount you want to invest
to:
Firstar Bank Milwaukee, N.A.
ABA routing number 075000022
Credit Firstar Mutual Fund Services, LLC,
account 112952137 further credit KEELEY Small
Cap Value Fund, Inc.
Be sure to include your name, address, account
number, and taxpayer ID or Social Security number.
Your bank may charge a wire transfer fee.
- As soon as possible, mail a completed purchase
application (included with this prospectus) to
KEELEY Small Cap Value Fund, Inc., c/o Firstar
Mutual Fund Services, LLC, P.O. Box 701,
Milwaukee, WI 53201-0701.
Adding to your account
You can add to your account anytime in investments of
$50 or more. Have your bank wire the amount as
described above.
By mail
Opening an account
- Write a check or money order for the amount you
want to invest, payable to KEELEY Small Cap Value
Fund, Inc.
- Mail your payment with a completed purchase
application (included with this prospectus) to
the Fund's transfer agent:
KEELEY Small Cap Value Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701.
<PAGE> 10
For overnight delivery, use this address:
KEELEY Small Cap Value Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
If your check is returned by the bank for any reason,
your account will be charged a $25 processing fee.
Adding to your account
You can add to your account anytime in investments of
$50 or more. Mail your order as described above,
including your name, address, and account number.
Automatically
Opening an account
Complete the Automatic Investment Plan section on the
purchase application, or, after your account is
established, complete an AIP application (available
from the Fund).
Adding to your account
Each month the amount you specify is automatically
withdrawn from your bank account and used to purchase
Fund shares.
The Fund charges no service fee for the AIP. If the
designated amount isn't available in your account,
however, you'll be charged $25.
See also "Automatic Investment Plan" under
"Shareholder Privileges."
Selling shares. You can redeem your shares in the
Fund anytime at no charge, by mail or telephone.
If your account is with the distributor or a selected
broker/dealer, you can give your request to that
firm. If shares are held in a broker's street name,
the redemption must be made through the broker. The
broker/dealer is responsible for placing your request
and may charge you a fee.
Otherwise, here's how to sell your shares:
By mail
Send the transfer agent a written redemption request
in proper order, including:
<PAGE> 11
- your account name and number
- the number of shares or dollar amount to be
redeemed
- the signature of each registered owner, exactly
as the shares are registered
- documentation required from corporations,
executors, administrators, trustees, guardians,
agents, and attorneys-in-fact
Mail to:
KEELEY Small Cap Value Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
For overnight delivery, use this address:
KEELEY Small Cap Value Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
Signature guarantees. If you request a direct
redemption of more than $25,000, or you want the
proceeds sent to a location other than the address of
record, or the request comes within 15 days of an
address change, we require signature guarantees.
These guarantees may seem inconvenient, but they're
intended to protect you against fraud. The guarantor
pledges your signature is genuine and, unlike a
notary public, is financially responsible if it's
not.
Eligible guarantors include qualified
- Banks, credit unions and savings associations
- Broker/dealers
- National securities exchanges
- Registered securities associations
- Clearing agencies
A notary public is not acceptable.
By phone
To redeem shares by phone, call the transfer agent at
1-888-933-5391. The Fund follows procedures to
confirm that telephone instructions are genuine and
sends payment only to the address of record or the
designated bank account. We aren't liable for
following telephone instructions reasonably believed
to be genuine.
If you don't want telephone transaction privileges,
check the box
<PAGE> 12
on the purchase application.
Payment. When you sell your shares, the amount of
money you receive is based on the NAV next calculated
after your request is received. This amount may be
more or less than what you paid for the shares.
We'll mail payment within five days of the transfer
agent's receiving your redemption request in proper
order. You can also ask to have redemption proceeds
wired to you. The transfer agent charges a $12 wire
fee.
The Fund won't send redemption proceeds until checks
for the purchase of the shares have cleared - up to
15 days.
We may suspend redemptions if the New York Stock
Exchange closes or for other emergencies. See the SAI
for details.
Small accounts. If the value of your account falls
below $250, we reserve the right to redeem your
shares and send you the proceeds. Currently, however,
the Fund's practice is to maintain small accounts
instead of closing them out. If we change that
policy, you'll get advance notice.
Exchanging shares
You can exchange some or all of your Fund shares for
Firstar Money Market Fund shares. The minimum
exchange amount is $250, and there's a maximum of
four exchanges over twelve months. The exchange must
be between identically registered accounts.
Fund shares will be redeemed at the next determined
NAV after your request is received, and Firstar Money
Market shares will be purchased at the per share NAV
next determined at or after redemption.
You can also move your exchanged shares, plus any
Firstar Money Market Fund shares purchased with
reinvested dividends, back into the Fund with no
sales charge (as long as your investment remained
continuously in the Firstar Money Market Fund between
withdrawal and reinvestment).
Your exchange is subject to the terms of the Firstar
Money Market Fund. Ask us for a copy of their
prospectus, and read it carefully before investing.
<PAGE> 13
Exchanges can be requested by mail or telephone
(unless you refuse telephone transaction privileges
on your purchase application). There is a $5 fee for
telephone exchanges. The Fund follows procedures to
confirm that telephone instructions are genuine. We
aren't liable for following telephone instructions
reasonably believed to be genuine.
We reserve the right to change or eliminate the
exchange privilege. If we change that privilege,
you'll get advance notice.
An exchange is a taxable event for federal tax
purposes; you may realize a capital gain or loss. Be
sure to check with your tax adviser before making an
exchange.
DISTRIBUTIONS AND TAXES
The Fund distributes its net investment income and
realized capital gains, if any, to shareholders at
least once a year. Your dividends and capital gains
will be invested in additional Fund shares unless you
write the transfer agent to request otherwise.
There's no sales charge on reinvestments.
If your mailed distribution check can't be delivered
by the U.S. Postal Service, or it remains outstanding
for at least six months, we reserve the right to
reinvest the distribution amount at the current NAV
until you give us other instructions.
Dividends and distributions, in the form of cash or
additional shares, are generally taxable. You'll
receive an annual statement showing which of your
Fund distributions are taxable as ordinary income and
which are capital gains. It's important you consult
with your tax adviser on federal, state and local tax
consequences.
SHAREHOLDER PRIVILEGES
Right of Accumulation (ROA). Once you've purchased
shares in the Fund, you can qualify for a discount on
the sales charge. When you purchase additional shares
at the public offering price, you'll pay the sales
charge corresponding to the total of your current
purchase plus either the value of shares you already
own, or their original cost--whichever is greater.
(Remember, sales charges go down as the amount of the
transaction increases.) To receive this discount, you
must notify the Fund in writing of your purchases
when you make your current purchase. For this
purpose, you and your husband or wife can combine
your purchases.
Letter of Intent (LOI). If you buy more than $50,000
in shares at
<PAGE> 14
one time, your sales charge is lower than 4 1/2%.
There is a table on page XX which shows the
reductions. If you expect to purchase $50,000 or more
of Fund shares over a period of time (up to 13
months), you can get the same reduced sales charge as
you would if you bought all the shares at once. You
do this by signing an LOI. In the LOI, you fill in
the dollar amount of the shares you will buy in the
next 13 months, and the sales charge is based on that
amount. Some of your shares are held by the transfer
agent. If you don't buy all the shares in the LOI,
and your sales charge should have been higher based
on what you actually bought, some of the shares held
by the transfer agent will be redeemed to pay the
difference in the sales charge. If you are interested
in signing an LOI, ask Firstar Mutual Fund Services
or the Fund for the forms.
Automatic Investment Plan. Buy shares automatically
each month, by having $50 or more withdrawn from your
bank account and invested in the Fund. The minimum to
open an AIP account is $250. There's no service fee
for this account. If the designated amount is not
available in your bank account, however, there is a
$25 fee. To establish the AIP, complete the
appropriate section of the purchase application or,
if your account is established, ask us for an AIP
application.
THE FUND RESERVES THE RIGHT TO MODIFY OR ELIMINATE
THESE PRIVILEGES WITH AT LEAST 30 DAYS NOTICE.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund offers a variety of retirement plans that
may help you shelter part of your income from taxes.
For complete information, including applications,
call 1-888-933-5391.
<PAGE> 15
This page intentionally left blank.
<PAGE> 16
STATEMENT OF ADDITIONAL INFORMATION
January 29, 1999
KEELEY SMALL CAP VALUE FUND, INC. 401 SOUTH LASALLE STREET
SUITE 1201
CHICAGO, ILLINOIS 60605
312-786-5050
888-933-5391
This Statement of Additional Information is not a prospectus, but
provides expanded and supplemental information contained in the current
prospectus of KEELEY Small Cap Value Fund, Inc. (the "Fund") dated January 29,
1999 and should be read in conjunction with the Fund's Prospectus and any
additional supplements to the Prospectus and the Fund's financial statements.
Investors should note, however, that a Statement of Additional Information is
not itself a prospectus and should be read carefully in conjunction with the
Fund's Prospectus and retained for future reference. A copy of the Prospectus
and Annual/Semi-Annual Report to Shareholders may be obtained free of charge
from the Fund at the address and telephone number listed above.
1
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Introduction 3
General Information and History 3
Investment Objective, Policies, and Risk Considerations 3
Investment Objective 3
Investment Policies and Risk Considerations 4
Investment Restrictions 6
Performance Information 6
Portfolio Turnover 8
Cumulative Total Return 9
Average Annual Total Return 9
Management of the Fund 10
General 10
Directors and Officers 10
Control Persons and Principal Holders of Securities 12
Investment Adviser 12
Administrative Services 13
Custodian, Transfer Agent and Dividend Disbursing Agent 14
Custodian 14
Transfer Agent and Dividend Disbursing Agent 14
Net Asset Value 15
Purchases and Redemptions of Shares 15
Sales at Net Asset Value 15
Exchange Privilege 16
Taxation 16
Distribution of Shares 17
Rule 12b-1 Distribution Plan 17
Portfolio Transactions and Brokerage 19
Portfolio Transactions 19
Brokerage 19
Additional Information 21
Shareholder Meetings 21
Removal of Directors by Shareholders 21
Independent Accountants 22
Financial Statements and Reports 22
Appendix A: Description of Bond Ratings Appendix A
</TABLE>
2
<PAGE> 18
INTRODUCTION
This Statement of Additional Information is designed to elaborate upon
the discussion of certain securities and investment techniques which are
described in the Prospectus. The more detailed information contained in this
document is intended solely for investors who have read the Prospectus and are
interested in a more detailed explanation of certain aspects of the Fund's
securities and investment techniques. Captions and defined terms in the
Statement of Additional Information generally correspond to like captions and
terms in the Prospectus.
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information or the Prospectus dated January 29, 1999, and, if given or made,
such information or representations may not be relied upon as having been
authorized by the Fund. This Statement of Additional Information does not
constitute an offer to sell securities in any state or jurisdiction in which
such offering may not lawfully be made. The delivery of the Statement of
Additional Information at any time shall not imply that there has been no change
in the affairs of the Fund since the date hereof.
GENERAL INFORMATION AND HISTORY
The Fund is an open-end diversified management investment company, as
defined under the Investment Company Act of 1940. It was incorporated in
Maryland on May 17, 1993, registered under the Investment Company Act of 1940
(the "1940 Act") on July 27, 1993 and commenced operations on October 1, 1993.
The Fund has an authorized capital of 10,000,000 shares of $0.01 par value
common stock. There is no other class of securities authorized or outstanding.
All shares have equal voting and liquidation rights, and each share is entitled
to one vote on any matters which are presented to shareholders.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek capital appreciation by
following a strategy of investing in securities which the Adviser believes to
have above-average potential for capital appreciation. The Adviser does not
consider current dividend or interest income as a factor in the selection of
Fund portfolio securities. The Fund's investment objective may not be changed by
the Board of Directors without shareholder approval.
The Fund seeks to achieve this objective by investing primarily in
companies which have a relatively small market capitalization, less that $1
billion at time of initial investment. Under normal market conditions, the Fund
will have at least 65% of its total assets invested in common stocks and other
equity-type securities of such companies. Other equity-type securities include
preferred stock, convertible debt securities and warrants. Within this group of
companies, the Fund will emphasize two basic categories. The first category is
companies involved in various types of corporate reorganizations, such as
spin-offs, recapitalizations, and companies emerging from bankruptcy. From time
to time, the Fund may invest a significant portion of its net assets in this
first category. The second category is companies that are trading at prices at
or below actual or perceived book value and companies that are undergoing
substantial changes, such as significant changes in markets or technologies,
management and
3
<PAGE> 19
financial structure. The Adviser believes that this strategy allows the Fund to
purchase equity shares at relatively favorable market prices.
INVESTMENT POLICIES AND RISK CONSIDERATIONS
DEBT SECURITIES
The Fund may invest in debt securities, including debt securities that
are not rated or are rated below investment grade, commonly referred to as "junk
bonds" by the recognized rating agencies (i.e., Baa or higher by Moody's
Investor Services, Inc. ("Moody's") or BBB or higher by Standard & Poor's
Corporation ("S&P"). However, the Fund will not invest in or hold more than 5%
of its net assets in debt securities other than U.S. Treasury bills and notes,
short-term corporate fixed income securities, including master demand notes
(rated Aa or higher by Moody's or AA or higher by S&P, or unrated but determined
by the Adviser to be of comparable quality).
Securities rated Baa or BBB are considered to be medium grade and to
have speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than
higher-quality instruments and generally are more sensitive to adverse economic
changes or individual corporate developments. During a period of adverse
economic changes, including a period of rising interest rates, issuers of such
bonds may experience difficulty in servicing their principal and interest
payment obligations.
To the extent the Fund invests in lower-rated debt securities,
achievement by the Fund of its investment objective will be more dependent on
the Adviser's credit analysis than would be the case if the Fund were investing
in higher-quality debt securities. Since the ratings of rating services (which
evaluate the safety of principal and interest payments, not market risks) are
used only as preliminary indicators of investment quality, the Adviser employs
its own credit research and analysis. These analyses may take into consideration
such quantitative factors as an issuer's present and potential liquidity,
profitability, internal capability to generate funds, debt/equity ratio and debt
servicing capability, and such qualitative factors as an assessment of
management, industry characteristics, accounting methodology, and foreign
business exposure.
Medium-and lower-quality debt securities tend to be less marketable
than higher-quality debt securities because the market for them is less broad.
The market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly, and the Fund may have greater difficulty selling this
type of security. The market value of these securities and their liquidity may
be affected by adverse publicity and investor perceptions.
A description of the ratings used by Moody's and S&P is included as
Appendix A to this Statement of Additional Information.
4
<PAGE> 20
FOREIGN SECURITIES
The Fund may invest in foreign securities, which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, tax
provisions, or expropriation of assets) than does investment in securities of
domestic issuers.
To the extent positions in portfolio securities are denominated in
foreign currencies, the Fund's investment performance is affected by the
strength or weakness of the U.S. dollar against these currencies. For example,
if the dollar falls in value relative to the Japanese yen, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall.
Investors should understand and consider carefully the risks involved
in foreign investing. Investing in foreign securities, which are generally
denominated in foreign currencies, and utilization of forward foreign currency
exchange contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S. securities. These
considerations include: fluctuations in exchange rates of foreign currencies;
possible imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States; less public
information with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing, and financial reporting standards; lack of uniform
settlement periods and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the United States; possible
imposition of foreign taxes; possible investment in securities of companies in
developing as well as developed countries; and sometimes less advantageous
legal, operational, and financial protection applicable to foreign subcustodial
arrangements.
Although the Fund intends to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations.
UNSEASONED ISSUERS
The Fund may invest up to 5% of its net assets in the securities of
unseasoned issuers, that is, issuers that, together with predecessors, have been
in operation less than three years. The Adviser believes that investment in
securities of unseasoned issuers may provide opportunities for long-term capital
growth, although the risks of investing in such securities are greater than with
common stock of more established companies because unseasoned issuers have only
a brief operating history and may have more limited markets and financial
resources.
ILLIQUID SECURITIES
The Fund may invest up to 5% of its net assets in securities for which
there is no ready market ("illiquid securities"), including any securities that
are not readily marketable either because they are restricted securities or for
other reasons. Restricted securities are securities that have not been
registered under the Securities Act of 1933 and are thus subject to
5
<PAGE> 21
restrictions on resale. Under the supervision of the Board of Directors, the
Adviser determines the liquidity of the Fund's investments. Securities that may
be sold pursuant to Rule 144A under the Securities Act may be considered liquid
by the Adviser. A position in restricted securities might adversely affect the
liquidity and marketability of a portion of the Fund's portfolio, and the Fund
might not be able to dispose of its holdings in such securities promptly or at
reasonable prices. In those instances where the Fund is required to have
restricted securities held by it registered prior to sale by the Fund and the
Fund does not have a contractual commitment from the issuer or seller to pay the
costs of such registration, the gross proceeds from the sale of securities would
be reduced by the registration costs and underwriting discounts.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions. Unless otherwise
noted, whenever an investment restriction states a maximum percentage of the
Fund's assets that may be invested in any security or other asset, such
percentage restriction will be determined immediately after and as a result of
the Fund's acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, total assets, or other circumstances
will not be considered when determining whether the investment complies with the
Fund's investment limitations.
The Fund has adopted the following fundamental investment restrictions,
which cannot be changed without the approval of the holders of the lesser of (i)
67% of the Fund's shares present or represented at a shareholders' meeting at
which the holders of more than 50% of such shares are present or represented; or
(ii) more than 50% of the outstanding shares of the Fund:
1. With respect to 75% of the Fund's net assets, the Fund will not
invest more than 5% of such net assets (valued at the time of investment) in
securities of any one issuer, except in U.S. government obligations.
2. With respect to 75% of the Fund's net assets, the Fund will not
acquire securities of any one issuer which at the time of investment represent
more than 10% of the voting securities of the issuer.
3. The Fund will not act as an underwriter or distributor of
securities other than its own capital stock, except insofar as it may be deemed
an underwriter for purposes of the Securities Act of 1933 on disposition of
securities acquired subject to legal or contractual restrictions on resale.
4. The Fund will not lend money, but this restriction shall not
prevent the Fund from investing in (i) a portion of an issue of debt securities
or (ii) repurchase agreements.
5. The Fund will not purchase or sell real estate, interests in real
estate or real estate limited partnerships, although it may invest in marketable
securities of issuers that invest in real estate or interests in real estate.
6. The Fund will not pledge any of its assets, except to secure
indebtedness permitted by the Fund's investment restrictions.
6
<PAGE> 22
7. The Fund will not concentrate its investments by investing 25% or
more of the value of the Fund's total assets taken at market value at the time
of the investment (other than U. S. Government securities) in companies of any
one industry.
8. The Fund will not purchase and sell commodities or commodity
contracts except that it may enter into forward contracts to hedge securities
transactions made in foreign currencies. This limitation does not apply to
financial instrument futures and options on such futures.
9. The Fund will not borrow, except that the Fund may borrow from
banks as a temporary measure amounts up to 10% of its total assets, provided (i)
that the total of reverse repurchase agreements and such borrowings will not
exceed 10% of the Fund's total assets and (ii) the Fund will not purchase
securities when its borrowings (including reverse repurchase agreements) exceed
5% of total assets. The Fund does not currently intend to enter into reverse
repurchase agreements.
10. The Fund will not issue senior securities, except for reverse
repurchase agreements and borrowings as permitted by the Fund's other investment
restrictions.
In addition to the fundamental restrictions listed above, the Fund has
adopted the following restrictions that may be changed by the Board of Directors
without shareholder approval:
1. The Fund will not invest in interests in oil, gas or other
mineral exploration or development programs or leases, although it may invest in
marketable securities of issuers engaged in oil, gas or mineral exploration.
2. The Fund will not purchase or hold securities of an issuer if all
of the officers and Directors of the Fund and its Adviser who individually own
beneficially more than one-half of 1% of the securities of such issuer
collectively own beneficially more than 5% of such securities.
3. The Fund will not invest more than 5% of its net assets (valued
at the time of investment) in securities of issuers with less than three years'
operation (including predecessors).
4. The Fund will not invest more than 5% of its net assets in
securities for which there is no ready market (including restricted securities
and repurchase agreements maturing in more than seven days).
5. The Fund will not participate in a joint trading account,
purchase securities on margin (other than short-term credits as necessary for
the clearance of purchases and sales of securities) or sell securities short
(unless the Fund owns an equal amount of such securities, or owns securities
that are convertible or exchangeable without payment of further consideration
into an equal amount of such securities). The Fund does not currently intend to
sell securities short even under the conditions described in Investment
Restrictions.
6. The Fund will not invest for the purpose of exercising control or
management of any company.
7
<PAGE> 23
7. The Fund will not invest more than 2% of its net assets (valued
at the time of investment) in warrants not listed on the New York or American
stock exchanges, nor more than 5% of its net assets in warrants. Warrants
acquired by the Fund in units or attached to securities are not subject to this
restriction.
8. The Fund will not acquire securities of other investment
companies except (i) by purchase in the open market, where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission and (ii) where the acquisition results from a
dividend or a merger, consolidation or other reorganization. In addition to this
investment restriction, the 1940 Act provides that the Fund may neither purchase
more than 3% of the voting securities of any one investment company nor invest
more than 10% of the Fund's assets (valued at time of investment) in all
investment company securities purchased by the Fund.
9. The Fund will not invest in, or write, options, puts, calls,
straddles or spreads.
10. The Fund will not invest more than 5% of its net assets in
foreign securities.
11. The Fund will not invest more than 5% of its net assets in
forward contracts, financial instrument futures and options on such futures.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of shares of the Fund in certain states.
Should the Fund determine that a commitment is no longer in the best interest of
the Fund and its shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of Fund shares in the state involved.
PERFORMANCE INFORMATION
PORTFOLIO TURNOVER
The Fund calculates portfolio turnover rate by dividing the value of
the lesser of purchases or sales of portfolio securities for the fiscal year by
the monthly average of the value of portfolio securities owned by the Fund
during the fiscal year. A 100% portfolio turnover rate would occur, for example,
if all of the portfolio securities (other than short term securities) were
replaced once during the fiscal year. The portfolio turnover rate will vary from
year to year, depending on market conditions. Increased portfolio turnover may
result in greater brokerage commissions. For the fiscal year ending September
30, 1998, the Fund's portfolio turnover rate was 33.40%.
8
<PAGE> 24
CUMULATIVE TOTAL RETURN
Cumulative Total Return is computed by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
CTR = ERV - P
---------- * 100
P
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period; and,
P = initial payment of $1,000.
This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
The cumulative total return for the year ended September 30, 1998 was
(14.51)%.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is the average annual compounded rate of
change in value represented by the total return for the period.
Average annual total return is computed as follows:
1/N
ERV
T = (--------) -1
P
Where: P = the amount of an assumed initial investment in Fund shares
T = average annual total return
N = number of years from initial investment to the end of the
period
ERV = ending redeemable value of shares held at the end of the
period
The Fund imposes a maximum 4.50% sales charge and pays distribution
expenses equal to 0.25% of net assets. Income taxes payable by shareholders are
not taken into account. The Fund's performance is a result of conditions in the
securities market, portfolio management, and operating expenses. Although
information such as that described above may be useful in reviewing the Fund's
past performance and in providing some basis for comparison with other
investment alternatives, it is not necessarily indicative of future performance
and should not be used for comparison with other investments using different
reinvestment assumptions or time periods.
9
<PAGE> 25
After deduction of initial sales charge, the Fund's average annual
total return for the one year ended September 30, 1998 was (14.51)%. Because the
Fund commenced operations on October 1, 1993, no ten-year period average annual
total return figures are reported. As of September 30, 1998, the life of the
Fund average annual total return and the five year average annual total return
cover the same period. For the five years ended September 30, 1998, the average
annual return was 13.81%.
COMPARATIVE PERFORMANCE INFORMATION
The Fund may from time to time include figures indicating the Fund's
cumulative total return or average annual total return in advertisements or
reports to shareholders or prospective investors. Average annual total return
and cumulative total return figures represent the increase (or decrease) in the
value of an investment in the Fund over a specified period. Both calculations
assume that all income dividends and capital gain distributions during the
period are reinvested at net asset value in additional Fund shares. Quotations
of the average annual total return may reflect the deduction of the maximum
sales charge and a proportional share of Fund expenses on an annual basis. The
results, which are annualized, represent an average annual compounded rate of
return on a hypothetical investment in the Fund over a period of one, five, or
ten years ending on the most recent calendar quarter (but not for a period
greater than the life of the Fund). Quotations of cumulative total return,
which are not annualized, represent historical earnings and asset value
fluctuations. Cumulative total return figures used in advertisements or sales
literature will not usually reflect the deduction of the maximum sales charges
which, if deducted, would reduce the Fund's total return. Average annual total
returns and cumulative total returns are based on past performance which is not
a guarantee of future results. Performance information for the Fund may be
compared in reports and promotional literature to: (a) the S&P 500, the
Russell 2000, the Value Line Index, the Dow Jones Industrial Average, New York
Stock Exchange Composite Index, the Nasdaq Composite Index or other appropriate
unmanaged indices of performance of various types of investments, so that
investors may compare the Fund's results with those of indices widely regarded
by investors as representative of securities markets in general; (b) other
groups of mutual funds tracked by Lipper Analytical Services, Inc.,
Morningstar, Inc., Value Line Publishing, Inc., Micropal Data, Inc. or CDA
Investment Technologies, Inc.; and (c) the Consumer Price Index (measure of
inflation) to assess the real rate of return from an investment in the Fund.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, the types and quality of
the Fund's portfolio investments, market conditions during the particular time
period and operating expenses. Such information should not be considered as a
representation of the Fund's future performance.
MANAGEMENT OF THE FUND
GENERAL
The Fund's Board of Directors oversees and reviews the Fund's
management, administrator and other companies who provide services to the Fund
to ensure compliance with investment policies. Fund officers and the
administrator are responsible for day-to-day operations. The Adviser is
responsible for investment management under the Investment Advisory Agreement.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund and their principal business
activities during the past five years are:
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name and Address with Fund And Other Affiliations
- - ---------------- --------- ----------------------
<S> <C> <C>
John L. Keeley, Jr.(1) Director and President Director, President and Treasurer of
401 South LaSalle Street Keeley Asset Management Corp. and of
Suite 1201 Keeley Investment Corp.
Chicago, Illinois 60605
Michael J. O'Brien(3) Director President, O'Brien Bros. Trading Co.
875 N. Dearborn #22A (Commodities Trading), Registered
Chicago, Illinois 60610 Commodity Trading Advisor and Commodity
Pool Operator
John F. Lesch(2)(3) Director Attorney, Nisen & Elliott, a partnership
200 West Adams Street
Suite 2500
Chicago, Illinois 60606
John G. Kyle(3) Director Owner and operator, Shell Oil Service
10 Skokie Highway Stations and Gasoline Distributor
Highland Park, Illinois 60035
Elwood P. Walmsley(3) Director Director of Sales, Miles Laboratories
166 East Hillside Road
Barrington, Illinois 60010
</TABLE>
10
<PAGE> 26
<TABLE>
<S> <C> <C>
Mark Zahorik Vice President Vice President, Keeley Asset Management
401 South LaSalle Street Corp. and Keeley Investment Corp.
Suite 1201
Chicago, Illinois 60605
Mary A. Ferrari Secretary Corporate Secretary, Keeley Asset
401 South LaSalle Street Management Corp. and Keeley Investment
Suite 1201 Corp. since 1992
Chicago, Illinois 60605
Emily Viehweg Treasurer Assistant Treasurer, Keeley Asset
401 South LaSalle Street Management Corp. and Keeley Investment Corp. since 1994;
Suite 1201 Prior thereto, Portfolio Assistant at
Chicago, Illinois 60605 Lincoln Capital Management Corp. of Chicago
</TABLE>
- - --------------------------
(1) John L. Keeley, Jr., is an "interested person" of the Fund as defined
in the 1940 Act.
(2) Mr. Lesch has performed legal services (principally related
to Federal income tax matters) for Mr. Keeley on an individual basis,
unrelated to the business of Keeley Asset Management Corp. or Keeley
Investment Corp. Fees paid by Mr. Keeley to Mr. Lesch were
approximately $10,700 for the last three years.
(3) Mr. O'Brien, Mr. Lesch, Mr. Kyle and Mr. Walmsley maintain brokerage
accounts with Keeley Investment Corp., the Fund's principal
underwriter.
At September 30, 1998, the Directors and officers owned 284,496
shares, representing 13.11% of the outstanding shares of the Fund.
The officers are "interested persons" of the Fund and are also officers
of Keeley Asset Management Corp., Keeley Investment Corp. or its Affiliates, and
receive compensation from those companies. They do not receive any compensation
from the Fund. Each "non-interested" Fund Director receives $500 for each
meeting which he attends. Regular Board meetings are held quarterly. For the
fiscal year ended September 30, 1998, the Fund paid Directors' fees of $7,500.
11
<PAGE> 27
The table below shows the compensation which the Fund paid to each of
its Directors for the fiscal year ended September 30, 1998:
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Annual Total Compensation
Name of Person, Compensation Benefits Accrued As Part Benefits Upon From Fund Paid to
Position From Fund of Fund Expenses Retirement Directors
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John L. Keeley, Jr., $0 $0 $0 $0
Director
Michael J. O'Brien, $1,500 $0 $0 $1,500
Director
John F. Lesch, $2,000 $0 $0 $2,000
Director
John G. Kyle, $2,000 $0 $0 $2,000
Director
Elwood P. Walmsley, $2,000 $0 $0 $2,000
Director
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For this purpose "control" means: (i) the beneficial ownership, either
directly or through one or more controlled companies, of more than 25% of the
voting securities of a company; (ii) the acknowledgment or assertion by either
the controlled or controlling party of the existence of control; or (iii) an
adjudication under the terms and conditions of the Investment Company Act of
1940 ("the Act"), which has become final, that control exists.
No one person beneficially owned more than 25% of the Fund's
outstanding shares at September 30, 1998. On that date, Mr. John L. Keeley, Jr.
owned 257,319 shares, and his ownership represented 11.85% of the issued and
outstanding shares of common stock of the Fund.
INVESTMENT ADVISER
Keeley Asset Management Corp., organized in the State of Illinois
on December 28, 1981, is the Fund's investment adviser (the "Adviser").
John L. Keeley, Jr. owns all of the stock of the Adviser. Under the Investment
Advisory Agreement between the Adviser and the Fund, the Adviser is responsible
for administering the Fund's affairs and supervising its investment program and
must do so in accordance with applicable laws and regulations. The Adviser also
furnishes the Fund's Board of Directors with periodic reports on the Fund's
investment performance.
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<PAGE> 28
The Investment Advisory Agreement was re-approved by the Board of
Directors, including a majority of the Directors who are not parties to the
Agreement, or interested persons of such parties, at a meeting held on November
10, 1998. The Agreement will continue in effect indefinitely, provided such
continuance is approved annually by (i) the holders of a majority of the
outstanding voting securities of the Fund or by the Board, and (ii) a majority
of the Directors who are not parties to such Advisory Agreement or "interested
persons" (as defined in the Investment Company Act of 1940) of any such party.
The Agreement may be terminated upon sixty days written notice by either party
to the Agreement and will terminate automatically if assigned.
For its services, the Adviser receives a monthly fee at an annual rate
of 1% of the average daily net assets of the Fund. The Investment Advisory
Agreement provides that the Adviser will waive a portion of its management fee,
or reimburse the Fund, to the extent that its total annual operating expenses
exceed 2.50%, exclusive of (i) taxes, (ii) interest charges, (iii) litigation
and other extraordinary expenses, and (iv) brokers' commissions and other
charges relating to the purchase and sale of the Fund's portfolio securities.
The Investment Advisory Agreement also provides that the Adviser shall not be
liable to the Fund or its shareholders from or as a consequence of any act or
omission of the Adviser, or of any of the directors, officers, employees or
agents of the Adviser, in connection with or pursuant to this Agreement, except
by willful misfeasance, bad faith or gross negligence on the part of the Adviser
in the performance of its duties or by reason of reckless disregard by the
Adviser of its obligations and duties under this Agreement. For the last three
fiscal year periods (October 1 through September 30) the Adviser earned the
following fees: 1998 - $308,025; 1997 - $142,919; 1996 - $50,569 (net of fee
waivers of $40,643).
ADMINISTRATIVE SERVICES
Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202, is the Fund's administrator. The Administrator
oversees the Fund's Custodian, Transfer Agent and insurance relationships,
prepares and files the Fund's Federal and state tax returns and required tax
filings (other than those required to be made by the Fund's Custodian or
Transfer Agent), participates in the preparation of the Fund's registration
statement, proxy statements and reports, prepares state securities law
compliance filings, compiles data for and prepares notices to the Securities and
Exchange Commission, prepares annual and semi-annual reports to the Securities
and Exchange Commission and current shareholders, monitors the Fund's expense
accounts, the Fund's status as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"), the Fund's
arrangements with respect to services provided pursuant to the Fund's
Distribution Plan, compliance with the Fund's investment policies and
restrictions and generally assists in the Fund's administrative operations.
The Administrator, at its own expense and without reimbursement from
the Fund, furnishes office space and all necessary office facilities, equipment,
supplies and clerical and executive personnel for performing the services
required to be performed by it under the Administration Agreement. For its
services the Administrator receives a fee based upon the average daily net
assets of the Fund. The fee is computed at the annual rate of 0.15% on the
first $50 million of the Fund's average daily net assets, and 0.05% on the
Fund's average daily net assets in excess of $50 million. The fee is computed
daily and paid monthly. The minimum
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<PAGE> 29
fee is $38,500 per year. Sunstone received fees of $45,896 from the Fund for the
year ended September 30, 1998.
The Administrator provides services to the Fund under an Administration
Agreement which is renewable from year to year if the Fund's Board of Directors
(including a majority of the Fund's disinterested Directors) approves the
renewal. Either Sunstone or the Fund may terminate the Administrative Agreement
on sixty (60) days written notice to either party. Amendments to the
Administrative Agreement require the approval of the Fund's Board of Directors
(including a majority of the Fund's disinterested Directors). The Administration
Agreement cannot be assigned by the Fund or Sunstone without consent of the
other party.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
CUSTODIAN
Firstar Bank Milwaukee, N.A.,(the "Custodian") 615 East Michigan
Avenue, Milwaukee, Wisconsin 53201-0701, is the custodian for the Fund. As
Custodian to the Fund it is responsible for holding all securities and cash of
the Fund, receiving and paying for securities purchased, delivering against
payment for securities sold, receiving and collecting income from investments,
making all payments covering expenses of the Fund, and performing other
administrative duties, all as directed by authorized persons of the Fund. The
Custodian does not exercise any supervisory function in such matters as purchase
and sale of portfolio securities, payment of dividends, or payment of expenses
of the Fund. The Fund has authorized the Custodian to deposit certain portfolio
securities in central depository systems as permitted under federal law. The
Fund may invest in obligations of the Custodian and may purchase or sell
securities from or to the Custodian.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC ("Firstar") acts as the Transfer and
Dividend Disbursing Agent for the Fund. Firstar's principal business address is
615 East Michigan Avenue, Milwaukee, WI, 53201-0701. Firstar services include
printing, postage, forms, stationary, record retention, mailing, insertion,
programming, labels, shareholder lists, and proxy expenses. These fees and
reimbursable expenses may be changed from time to time subject to mutual written
agreement between Firstar and the Fund and with the approval of the Board of
Directors.
Under this Agreement, Firstar receives orders for the purchase of
shares; processes purchase orders and issues the appropriate number of
uncertificated shares; processes redemption requests; pays money
in accordance with the instructions of redeeming shareholders; transfers shares;
processes exchanges between funds within the same family of funds; transmits
payments for dividends and distributions; maintains current shareholder records;
files U.S. Treasury Department Form 1099s and other appropriate information
required with respect to dividends and distributions for all shareholders;
provides shareholder account information upon request; mails confirmations and
statements of account to shareholders for all purchases, redemptions and other
confirmable transactions as agreed upon with the Fund; and, monitors the total
number of shares sold in each state.
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<PAGE> 30
NET ASSET VALUE
For purposes of computing the net asset value of a share of the Fund,
securities listed on an exchange, or quoted on a national market system are
valued at the last sales price at the time of valuation or lacking any reported
sales on that day, at the most recent bid quotations. Securities traded on only
the over-the-counter markets are valued on the basis of the closing
over-the-counter bid prices when there is no last sale price available.
Securities for which quotations are not available and any other assets are
valued at a fair value as determined in good faith by the Board of Directors.
Money market instruments having a maturity of 60 days or less from the valuation
date are valued on an amortized cost basis.
The Fund's net asset value will not be determined on any day on which
the New York Stock Exchange is not open for trading. That Exchange is regularly
closed on Saturdays and Sundays and on New Year's Day, the third Monday in
January, the third Monday in February, Good Friday, the last Monday in May,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. If one of these
holidays falls on a Saturday or Sunday, the Exchange will be closed on the
preceding Friday or the following Monday, respectively.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act.
As a result of this election, the Fund must redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Fund during any 90
day period for any one shareholder. Redemptions in excess of those above amounts
will normally be paid in cash, but may be paid wholly or partly by a
distribution of Fund portfolio securities.
Investments by corporations must include a certified copy of corporate
resolutions indicating which officers are authorized to act on behalf of the
account. Investments by trustees must include a copy of the title and signature
page of the trust agreement and pages indicating who is authorized to act.
On September 30, 1998, the net asset value per share of the Fund was
calculated as follows:
Net Assets $39,746,837
--------------- = $18.31 Net Asset Value Per Share
Shares Outstanding 2,170,884
PURCHASES AND REDEMPTION OF SHARES
For information on purchase and redemption of shares, see "How to buy,
sell and exchange shares" in the Fund's Prospectus. The Fund may suspend the
right of redemption of shares of the Fund for any period: (i) during which the
New York Stock Exchange is closed other than customary weekend and holiday
closing or during which trading on the New York Stock Exchange is restricted;
(ii) when the Securities and Exchange Commission determines that a state of
emergency exists which may make payment or transfer not reasonably practicable;
(iii) as the Securities and Exchange Commission may, by order, permit for the
protection of the security holder of the Fund; or (iv) at any other time when
the Fund may, under applicable laws and regulations, suspend payment on the
redemption of its shares.
Sales at Net Asset Value
Purchases of the Fund's shares at net asset value may be made by the
following persons: (a) nondealer assisted (or assisted only by the Distributer)
tax-exempt entities (including pension and profit sharing plans) whose minimum
initial investment is $25,000 or more, (b) nondealer assisted (or assisted only
by the Distributor) purchases by a bank or trust company in a single account
where such bank or trust company is named as trustee and the minimum initial
investment is over $25,000, (c) nondealer assisted (or assisted only by the
Distributor) purchases by banks, insurance companies, insurance company separate
accounts and other institutional purchasers, (d) a registered investment adviser
purchasing shares on behalf of a client or on his or her own behalf through an
intermediary service institution offering a separate and established program for
registered investment advisers and notifying the Fund and its Distributor of
such arrangement, (e) any current or retired Officer, Director or employee, or
any member of the immediate family of such person, of the Fund, Adviser,
Distributor or any affiliated company thereof, (f) the Fund's Adviser,
Distributor (g) any employee benefit plan established for employees of the
Adviser, Distributor, or its affiliates, (h) advisory clients of the Adviser,
(i) registered representatives and their spouses and minor children and
employees of Selected Dealers, (j) for-fee clients of investment advisers
registered under the Investment Advisers Act of 1940, who have for-fee clients
with at least $25,000 of net asset value of shares in the Fund after giving
effect to the purchase, and who have directed their for-fee clients to the Fund,
(k) shareholders of the Fund, solely with respect to their reinvestment of
dividends and distributions from the Fund, (l) shares exchanged in accordance
with the Fund's exchange privilege on which a sales charge has been paid in
connection with the previous purchase of shares of the Fund (see "Exchange
Privilege"), (m) employees, pension, profit sharing and retirement plans of the
Administrator of the Fund, (n) consultants to the Adviser of the Fund, their
employees and pension, profit sharing and retirement plans for those employees,
(o) pension, profit sharing and retirement plans for employees of Directors and
employees of business entities owned and controlled by Directors of the Fund and
(p) sales to broker-dealers who conduct their business with their customers
principally through the Internet and who do not have registered representatives
who actively solicit those customers to purchase securities, including shares of
the Fund; and (q) sales through a broker-dealer to its customer under an
arrangement in which the customer pays the broker-dealer a fee based on the
value of the account, in lieu of transaction based brokerage fees. In the
opinion of the Fund's management, these sales will result in less selling effort
and expense. In order to qualify for these waivers, sufficient information must
be submitted at the time of purchase with the application to determine whether
the account is entitled to the waiver of the sales charge.
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<PAGE> 31
EXCHANGE PRIVILEGE
Investors may exchange shares of the Fund having a value of $250 or
more for shares of the Firstar Money Market Fund (the "Money Market Fund") at
their net asset value and at a later date exchange such shares and shares
purchased with reinvested dividends for shares of the Fund at net asset value.
An Investor is limited to 4 exchanges in each 12 month period. Investors who are
interested in exercising the exchange privilege should first contact the Fund to
obtain instructions and any necessary forms. The exchange privilege does not in
any way constitute an offering or recommendation on the part of the Fund or
the Adviser of an investment in the Money Market Fund. Any investor who
considers making such an investment through the exchange privilege should obtain
and review the prospectus of the Money Market Fund before exercising the
exchange privilege.
The exchange privilege will not be available if (i) the proceeds from a
redemption of shares are paid directly to the investor or at his or her
discretion to any persons other than the Money Market Fund or (ii) the proceeds
from redemption of the shares of the Money Market Fund are not immediately
reinvested in shares of the Fund. The exchange privilege may be terminated by
the Fund at any time.
For federal income tax purposes, a redemption of shares pursuant to the
exchange privilege will result in a capital gain if the proceeds received exceed
the investor's tax-cost basis of the shares redeemed. Such a redemption may also
be taxed under state and local tax laws, which may differ from the Code.
TAXATION
The Fund intends to qualify annually and elects to be treated as a
regulated investment company under the Internal Revenue Code of 1986 (the
"Code").
To qualify as a regulated investment company, the Fund must, among
other things: (i) derive in each taxable year at least ninety percent (90%) of
its gross income from dividends, interest, payments with respect to securities
loan, and gains from the sale or other disposition of stock, securities or
foreign currencies or other income derived with respect to its business of
investing in such stock, securities or currencies; (ii) diversify its holdings
so that, at the end of each quarter of the taxable year, (a) at least fifty
percent (50%) of the market value of the Fund's assets are represented by cash,
U.S. Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than five
percent (5%) of the value of the Fund's total assets and 10 percent (10%) of the
outstanding voting securities of such issuer, and (b) not more than twenty-five
percent (25%) of the value of its total assets is invested in the securities of
any one issuer (other than U.S. Government securities of the securities of other
regulated investment companies); and (iii) distribute at least ninety percent
(90%) of its net investment income (which includes dividends, interest, and net
short-term capital gains in excess of and net long-term capital losses) each
taxable year.
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<PAGE> 32
As a regulated investment company, the Fund will not be subject to U.S.
federal income tax on its net investment income and net capital gains (any net
long-term capital gains in excess of the sum of net short-term capital losses
and capital loss carryovers from prior years), if any, that it distributes to
shareholders. The Fund intends to distribute to its shareholders, at least
annually, substantially all of its net investment income and any net capital
gains. In addition, amounts not distributed by the Fund on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible four percent (4%) excise tax. To avoid the tax, the Fund must
distribute during each calendar year, (i) at least ninety-eight percent (98%) of
its ordinary income (not taking into account any capital gains or losses) for
the calendar year, (ii) at least ninety-eight percent (98%) of its capital gains
in excess of its capital losses for the twelve-month period ending October 31 of
the calendar year, and (iii) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, the Fund intends to make these distributions in accordance with the
calendar year distribution requirement. A distribution will be treated as paid
during the calendar year if it is declared by the Fund before December 31 of the
year and paid by the Fund by January 31 of the following year. Such distribution
will be taxable to shareholders in the year the distributions are declared,
rather than the year in which the distributions are received.
If the Fund fails to qualify as a regulated investment company under
the Internal Revenue Code, its income will be subject to federal income tax,
and dividends paid to shareholders will also be subject to federal income tax.
DISTRIBUTION OF SHARES
Keeley Investment Corp., acts as the principal underwriter for the Fund
under an Underwriting Agreement between it and the Fund. Keeley Investment Corp.
is a registered broker-dealer under the Securities Act of 1934, member of the
National Association of Securities Dealers, Inc. (NASD), the Securities Investor
Protection Corporation (SIPC), and an affiliate of the Adviser.
The Underwriting Agreement provides that the Distributor will use its
best efforts to distribute the shares of the Fund on a continuous basis and will
receive commissions on such sales as described in the Prospectus under "How
Shares are Purchased." The Distributor bears the costs of advertising and any
other costs attributable to the distribution of the shares of the Fund. (A
portion of these costs may be reimbursed by the Fund pursuant to the Fund's
Distribution Plan (the "Plan") described below. The Distributor may receive
brokerage commissions for executing portfolio transactions for the Fund. The
Distributor may enter into sales agreements with other entities to assist in the
distribution effort. Any compensation to these other entities will be paid by
the Distributor from the proceeds of the sales charge. The Distributor may also
compensate these entities out of the distribution fee received from the Fund.
For the years ended September 30, 1998, 1997, and 1996 the Distributor received
$565,499, $78,493, and $52,077 respectively, in front-end sales commissions and
paid $358,754,$21,622 and $20,311, respectively, of such proceeds to dealers as
sales concessions as described in the Prospectus.
RULE 12b-1 DISTRIBUTION PLAN
The Fund adopted a Plan of Distribution pursuant to Rule 12b-1 of the
Investment Company Act of 1940 (the "Plan"). The Plan was adopted in
anticipation that the Fund will
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<PAGE> 33
benefit from the Plan through increased sales of shares of the Fund thereby
reducing the Fund's expense ratio and providing an asset size that allows the
Adviser greater flexibility in management. The Plan may be terminated at any
time by a vote of the Directors of the Fund who are not interested persons of
the Fund and who have no direct or indirect financial interest in the Plan or
any agreement related thereto (the "Rule 12b-1 Directors") or by a vote of a
majority of the outstanding shares of the Fund. Any change in the Plan that
would materially increase the distribution expenses of the Fund provided for in
the Plan requires the approval of the shareholders and the Board of Directors,
including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of Directors
who are not interested persons of the Fund will be committed to the discretion
of the Directors of the Fund who are not interested persons of the Fund. The
Board of Directors of the Fund must review the amount and purposes of
expenditures pursuant to the Plan quarterly as reported to it by the Adviser.
The Plan will continue in effect for as long as its continuance is specifically
approved at least annually by a majority of the Directors, including the Rule
12b-1 Directors.
For the years ended September 30, 1998, 1997 and 1996 the Distributor
received $49,520, $25,674 and $18,354, respectively, under the Plan. During
the same periods, the Fund paid an additional $27,486, $10,056 and $3,780,
respectively, pursuant to the Plan, all of which represented compensation to
dealers.
Amounts paid under the Plan (which may not exceed a maximum monthly
percentage of 1/12 of 0.25% (0.25% per annum) of the Fund's average daily net
assets) are paid to the Distributor in connection with its services as
distributor. Payments, if any, are made monthly and are based on reports
submitted by the Distributor to the Fund which sets forth all amounts expended
by the Distributor pursuant to the Plan. Under no circumstances will the Fund
pay a fee, pursuant to the Plan, the effect of which would be to exceed the
National Association of Securities Dealers' ("NASD") limitations on asset based
compensation described below.
The NASD has rules which may limit the extent to which the Fund may
make payments under the Plan. Although the NASD's rules do not apply to the Fund
directly, the rules apply to members of the NASD such as the Distributor and
prohibit them from offering or selling shares of the Fund if the sale charges
(including 12b-1 fees) imposed on such shares exceed the NASD's limitations.
The rules impose two related limits on 12b-1 fees paid by investors: an
annual limit and a rolling cap. The annual limit is 0.75% of assets (with an
additional 0.25% permitted as a service fee). The rolling cap on the total of
all sales charges (including front end charges, contingent deferred sales
charges and asset based charges such as 12b-1 payments) is 6.25% of new sales
(excluding sales resulting from the reinvestment of dividends and distributions)
for funds that charge a service fee and 7.25% of new sales for funds that do not
assess a service fee.
Whether the rolling applicable maximum sales charge has been exceeded
requires periodic calculations of the Fund's so-called "remaining amount." The
remaining amount is the amount to which the Fund's total sales charges are
subject for purposes of ensuring compliance with the NASD limits. The Fund's
remaining amount is generally calculated by multiplying the Fund's new sales by
its appropriate NASD maximum sales charge (6.25% or 7.25%). From this amount is
subtracted the Fund's sales charges on the new sales and the 12b-1 payments
accrued or paid over the period. The Fund's remaining amount increases with new
sales of the Fund
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<PAGE> 34
(because the Fund's front-end sales charge is less than the applicable NASD
maximum) and decreases as the 12b-1 charges are accrued. The NASD rules permit
the remaining amount to be credited periodically with interest based on the
rolling balance of the remaining amount. If the Fund's remaining amount reaches
zero, it must stop accruing its 12b-1 charges until it has new sales that
increase the remaining amount. The Fund's remaining amount may be depleted as a
result of the payment of 12b-1 fees if, for example, the Fund experiences an
extended period of time during which no new sales are made or during which new
sales are made but in an amount insufficient to generate increases in the
remaining amount to offset the accruing 12b-1 charges.
PORTFOLIO TRANSACTIONS AND BROKERAGE
PORTFOLIO TRANSACTIONS
The Adviser has discretion to select brokers and dealers to execute
portfolio transactions initiated by the Adviser and to select the markets in
which such transactions are to be executed. The primary responsibility regarding
portfolio transactions is to select the best combination of net price and
execution for the Fund. When executing transactions for the Fund, the Adviser
will consider all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission. The Adviser will select the Distributor from time to time to execute
portfolio transactions, subject to best price and execution. In any such
transaction, the Distributor will charge commissions at a substantial discount
from retail rates, regardless of the size of the transaction. Portfolio
transactions executed by the Distributor will comply with all applicable
provisions of Section 17(e) of the 1940 Act. Transactions of the Fund in the
over-the-counter market may be executed with primary market makers acting as
principal except where the Adviser believes that better prices and execution may
be obtained elsewhere.
BROKERAGE
In selecting brokers or dealers to execute particular transactions and
in evaluating the best net price and execution available, the Adviser is
authorized to consider "brokerage and research services" (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934), statistical
quotations, specifically the quotations necessary to determine the Fund's asset
value, and other information provided to the Fund or the Adviser. The Adviser is
also authorized to cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. The Adviser must
determine in good faith, however, that such commission was reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms of that particular transaction or in terms of all the accounts over which
the Adviser exercises investment discretion. It is possible that certain of the
services received by the Adviser attributable to a particular transaction will
benefit one or more other accounts for which the Adviser has investment
discretion. The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under management of the Adviser to save
brokerage costs or average prices among them is not deemed to result in a
securities trading account.
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<PAGE> 35
In valuing research services, the Adviser makes a judgment of the
usefulness of research and other information provided by a broker to the Adviser
in managing the Fund's investment portfolio. In some cases, the information,
(e.g., data or recommendations concerning particular securities) relates to the
specific transaction placed with the broker but for greater part the research
consists of a wide variety of information concerning companies, industries,
investment strategy and economic, financial and political conditions and
prospects, useful to the Adviser in advising the Fund.
The Adviser is the principal source of information and advice to the
Fund and is responsible for making and initiating the execution of investment
decisions by the Fund. However, the Board of Directors of the Fund recognizes
that it is important for the Adviser, in performing its responsibilities to the
Fund, to continue to receive the broad spectrum of economic and financial
information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Fund to take into account the value
of the information received for use in advising the Fund. The extent, if any, to
which the obtaining of such information may reduce the expenses of the Adviser
in providing management services to the Fund is not determinable. In addition,
the Board of Directors understands that other clients of the Adviser might also
benefit from the information obtained for the Fund, in the same manner that the
Fund might also benefit from the information obtained by the Adviser in
performing services for others.
Although investment decisions for the Fund are made independently from
those for other investment advisory clients of the Adviser, the same investment
decision may be made for both the Fund and one or more other advisory clients.
If both the Fund and other clients purchase or sell the same class of securities
on the same day, the transactions will be allocated as to amount and price in a
manner considered equitable to each.
For the years ended September 30, 1998 and 1996, the Fund paid to
brokers, other than the Distributor, brokerage commissions totaling $2,210 and
$860, respectively, on transactions having a total market value of $690,750 and
$275,750, respectively. All of such brokers provided research services. No such
fees were paid by the Fund for the year ended September 30, 1997. For the years
ended September 30, 1998, 1997 and 1996 the Fund paid the Distributor brokerage
commissions of $92,801, $29,580 and $25,755, respectively, on transactions
involving the payment of commissions having a total market value of
$29,236,359, $9,278,125 and $8,491,525, respectively. Of the brokerage
commissions paid by the Fund for the years ended September 30, 1998, 1997 and
1996, 98%, 100% and 97%, respectively, were paid to the Distributor and such
commissions paid to the Distributor were paid in connection with transactions
involving securities having a market value equal to 98%, 100% and 97%,
respectively, of the total market value of securities on which the Fund paid
commissions. The above does not include principal transactions when the Fund
purchases securities directly from NASD marketmakers on a principal basis.
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<PAGE> 36
ADDITIONAL INFORMATION
SHAREHOLDER MEETINGS
The Articles of Incorporation do not require that the Fund hold annual
or regular shareholder meetings. Meetings of the shareholders may be called by
the Board of Directors and held at such times the Directors, from time to time
determine, for the purpose of the election of Directors or such other purposes
as may be specified by the Directors.
REMOVAL OF DIRECTORS BY SHAREHOLDERS
The Fund's By-Laws contain procedures for the removal of Directors by
its shareholders. At any meeting of shareholders, duly called and at which a
quorum is present, the shareholders may, by the affirmative vote of the holders
of a majority of the votes then entitled to vote at an election of Directors,
remove any Director or Directors from office and may elect a successor or
successors to fill any resulting vacancies for the unexpired terms of removed
Directors.
Upon the written request of the holders of shares entitled to not less
than ten percent (10%) of all of the votes entitled to be cast at such meeting,
the Secretary of the Fund shall promptly call a special meeting of shareholders
for the purpose of voting upon the question of removal of any Director. Whenever
ten or more shareholders of record who have been such for at least six months
preceding the date of application, and who hold in the aggregate either shares
having a net asset value of at least $25,000 or at least one percent (1%) of the
total outstanding shares, whichever is less, shall apply to the Fund's Secretary
in writing, stating that they wish to communicate with other shareholders with a
view to obtaining signatures to a request for a meeting as described above and
accompanied by a form of communication and request which they wish to transmit,
the Secretary shall within five business days after such application either; (i)
afford to such applicants access to a list of the names and addresses of all
shareholders as recorded on the books of the Fund; or (ii) inform such
applicants as to the approximate number of shareholders of record and the
approximate cost of mailing to them the proposed communication and form of
request.
If the Secretary elects to follow the course specified in clause (ii)
of the last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable promptness,
mail such material to all shareholders of record at their addresses as recorded
on the books unless within five business days after such tender the Secretary
shall mail to such applicants and file with the Securities and Exchange
Commission (the "SEC"), together with a copy of the material to be mailed, a
written statement signed by at least a majority of the Board of Directors to the
effect that in their opinion either such material contains untrue statements of
fact or omits to state facts necessary to make the statements contained therein
not misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the SEC may, and if demanded by the Board of
Directors or by such applicants shall, enter an order either sustaining one or
more of such objections or refusing to sustain any of them. If the SEC shall
enter an order refusing to sustain any of such objections, or if, after the
entry of
21
<PAGE> 37
an order sustaining one or more of such objections, the SEC shall find, after
notice and opportunity for hearing, that all objections so sustained have been
met, and shall enter an order so declaring, the Secretary shall mail copies of
such material to all shareholders with reasonable promptness after the entry of
such order and the renewal of such tender.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, Milwaukee, Wisconsin, audits and reports
on the Fund's annual financial statements, reviews certain regulatory reports,
reviews the Fund's income tax returns, and performs other professional
accounting, auditing, tax and advisory services when engaged to do so by the
Fund.
FINANCIAL STATEMENTS AND REPORTS
The audited Financial Statements and accompanying Report of Independent
Accountants, PricewaterhouseCoopers LLP, Milwaukee, Wisconsin, as of the
fiscal year ended September 30, 1998, are incorporated herein by reference to
the Funds's Annual Report to Shareholders filed with the U.S. Securities and
Exchange Commission on November 23, 1998. No other portion of the Annual Report
is so incorporated. Please call 1-888-933-5391 to obtain a copy of the most
recent Annual Report of the Fund at no charge.
22
<PAGE> 38
APPENDIX A
DESCRIPTION OF BOND RATINGS
Ratings of a rating service represent the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Adviser believes that the quality of debt securities
in which the Fund invests should be continuously reviewed and that individual
analysts give different weightings to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell or hold a security.
It does not take into account market value or suitability for a particular
investor. When a security has received a rating from more than one service, each
rating should be evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the ratings services from
other sources which they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
The following is a description of the rating characteristics used by Moody's
Investors Services, Inc. ("Moody's") and Standard and Poor's Ratings Group
("Standard and Poors").
RATINGS BY MOODY'S
Aaa - Bonds rated Aaa are judged to be 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. Although 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 bonds.
Aa - Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group they compose 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 bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risk appear somewhat larger than in Aaa bonds.
A - Bonds 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 rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds 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
23
<PAGE> 39
and thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds 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 rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such bonds are often in default or have other marked shortcomings.
RATINGS BY STANDARD AND POORS
AAA - Bonds rated AAA have the highest rating. Capacity to pay principal and
interest is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay principal and interest
and differ from AAA bonds only in a small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, 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
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation among such bonds and CC the highest degree of
speculation. Although such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
24
<PAGE> 40
PART C
OTHER INFORMATION
ITEM 22. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) FINANCIAL STATEMENTS:
--------------------
Contained in Part A:
Financial Highlights for each year since commencement of operations of
the Fund on October 1, 1993 through the period ending September 30,
1998.
Contained in Part B:
The financial statements are incorporated by reference into Part B
from Registrants Annual Report to Shareholders filed November 23,
1998.
ITEM 23. EXHIBITS
--------
(a) Articles of Incorporation of KEELEY Small Cap Value Fund, Inc.
dated May 14, 1993, filed as an exhibit to Post-Effective
Amendment No. 4 to Form N-1A on January 28, 1997, File No.
33-63562, and incorporated herein by reference.
(b) Amended Bylaws of KEELEY Small Cap Value Fund, Inc., dated
December 2, 1996, filed as an Exhibit to Post-Effective Amendment
No. 4 to form N-1A on January 28, 1997, File No. 33-63562, and
incorporated herein by reference.
(d) Investment Advisory Agreement by and between KEELEY Small Cap
Value Fund, Inc. and Keeley Asset Management Corp., dated June 8,
1993, filed as an Exhibit to Post-Effective Amendment No. 4 to
Form N-1A on January 28, 1997, File No. 33-63562, and
incorporated herein by reference.
(e)-1 Underwriting Agreement by and between KEELEY Small Cap Value
Fund, Inc. and Keeley Investment Corp., dated September 8, 1993,
filed as an Exhibit to Post-Effective Amendment No. 4 to Form
N-1A, on January 28, 1997, File No. 33-63562, and incorporated
herein by reference.
(e)-2 Form of Broker/Dealer Agreement by and between Keeley Asset
Management Corp. and selected Broker/Dealers, filed as an Exhibit
to Post-Effective Amendment No. 4 to Form N-1A on January 28,
<PAGE> 41
1997, file No. 33-63562, and incorporated herein by reference.
(g)-1 Custodian Agreement by and between KEELEY Small Cap Value Fund,
Inc. and First Wisconsin Trust Company, dated September 8, 1993,
filed as an Exhibit to Post Effective Amendment No.4 to Form
N-1A, on January 28, 1997, File No. 33-63562, and incorporated
herein by reference.
(g)-2 Amended Custodian Agreement by and between KEELEY Small Cap Value
Fund, Inc. and Firstar Trust Company (f/k/a first Wisconsin Trust
Company), amended as of November 14, 1997, filed as an Exhibit to
Post-Effective Amendment No. 5 to Form N-1A, on January 28, 1998,
File No. 33-63562, and incorporated herein by reference.
(g)-3 Addendum to Amended Custodian Agreement by and between KEELEY
Small Cap Value Fund, Inc. and Firstar Bank Milwaukee, N.A.
(f/k/a Firstar Trust Company), dated September 30, 1998, filed as
an Exhibit hereto.
(h)-1 Fund Accounting Servicing Agreement by and between KEELEY Small
Cap Value Fund, Inc. and Firstar Trust Company, dated September
8, 1993, filed as an Exhibit to Post-Effective Amendment No. 4 to
Form N-1A, on January 28, 1997, file No. 33-63562, and
incorporated herein by reference.
(h)-2 Transfer Agent Agreement by and between KEELEY Small Cap Value
Fund, Inc. and Firstar Trust Company dated September 8, 1993,
filed as an exhibit to Post-Effective Amendment No. 4 to Form
N-1A, on January 28, 1997, File No. 33-63562, and incorporated
herein by reference.
(h)-2 Administration Agreement by and between KEELEY Small Cap Value
Fund and Sunstone Financial Group, Inc. dated September 8, 1993,
filed as an Exhibit to Post-Effective Amendment No. 4 to Form
N-1A, on January 28, 1997, file No. 33-63562, and incorporated
herein by reference.
(h)-3 Amended and Restated Administration Agreement by and between
KEELEY Small Cap Value Fund and Sunstone Financial Group,
Inc. dated August 12, 1997, filed as an Exhibit to Post-Effective
Amendment No. 5 to Form N-1A, on January 28, 1998, File
No. 33-63562, and incorporated herein by reference.
(h)-4 Distribution and Servicing Agreement by and between KEELEY Small
Cap Value Fund and Portico Funds, Inc. dated October 1, 1993,
Filed as an Exhibit to Post-Effective Amendment No. 5 to Form
N-1A, on January 28, 1998, File No. 33-63562, and incorporated
herein by reference.
<PAGE> 42
(h)-5 Addendum to Fund Accounting Servicing Agreement by and between
KEELEY Small Cap Value Fund, Inc. and Firstar Mutual Fund
Services, LLC (f/k/a Firstar Trust Company), dated September 30,
1998, filed as an Exhibit hereto.
(h)-6 Addendum to Transfer Agent Agreement by and between KEELEY Small
Cap Value Fund, Inc. and Firstar Mutual Fund Services, LLC (f/k/a
Firstar Trust Company), dated September 30, 1998, filed as an
Exhibit hereto.
(i) Opinion and Consent of Schwartz & Freeman, filed as an Exhibit
to Post-Effective Amendment No. 4, to Form N-1A, on January 28,
1997, File No. 33-63562, and incorporated herein by reference.
(j) Consent of PricewaterhouseCoopers LLP dated November 25, 1998,
filed as an Exhibit hereto.
(l) Subscription Agreement by and between John L. Keeley, Jr. and
KEELEY Small Cap Value Fund, Inc., dated August 31, 1993, filed
as an Exhibit to Post-Effective Amendment No. 4, to Form N-1A,
on January 28, 1997, File No. 33-63562, and incorporated herein
by reference.
(m)-1 Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940 by and between KEELEY Small Cap Value Fund, Inc. and Keeley
Investment Corp., adopted on September 8, 1993, filed as an
Exhibit to Post-Effective Amendment No. 4 to Form N-1A, on
January 28, 1997, and incorporated herein by reference.
(m)-2 Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 by and between Keeley Asset
Management and Portico Funds, Inc. adopted on October 1, 1993,
filed as an Exhibit hereto.
(p)-1 Power of Attorney dated December 8, 1997, filed as an Exhibit to
Post-Effective Amendment No. 5 to Form N-1A, on January 28, 1998,
File No. 33-63562, and incorporated herein by reference.
(p)-2 Power of Attorney, dated December 24, 1997, filed as an Exhibit
to Post-Effective Amendment No. 5 to Form N-1A, on January 28,
1998, File No. 33-63562, and incorporated herein by reference.
(p)-3 Power of Attorney dated January 15, 1998, filed as an Exhibit to
Post-Effective Amendment No. 5 to Form N-1A, on January 28, 1998,
File No. 33-63562, and incorporated herein by reference.
(n) Financial Data Schedules of KEELEY Small Cap Value Fund, Inc.,
<PAGE> 43
filed hereto electronically as Exhibit 27 pursuant to Rule 401
of Regulation S-T.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
None
ITEM 25. INDEMNIFICATION
---------------
Section 2-418 of the General Corporation Law of Maryland authorizes
the registrant to indemnify its directors and officers under specified
circumstances. Article Tenth of the Charter of the registrant provides in effect
that the registrant shall provide certain indemnification of its directors and
officers. In accordance with section 17(h) of the Investment Company Act, this
provision of the charter shall not protect any person against any liability to
the registrant or its stockholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities 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.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- - ----------------------------------------------------
(a) The directors and officers of the Adviser, Keeley Asset Management Corp.,
and their business and other connections during the past two years are as
follows:
Name of Individual Business and Other Connections
John L. Keeley, Jr. Director, President and Vice President/Treasurer of
Keeley Asset Management Corp.; Director, President
and Treasurer of Keeley Investment Corp.
<PAGE> 44
Barbara G. Keeley Vice President/Assistant Secretary of Keeley Asset
Management Corp.; Director and Assistant Secretary
of Keeley Investment Corp.
Mark E. Zahorik Vice President of Keeley Asset Management Corp. and
Keeley Investment Corp.
Mary A. Ferrari Secretary of Keeley Asset Management Corp. and
Keeley Investment Corp.
Emily Viehweg Assistant Treasurer of Keeley Asset Management Corp.
and Keeley Investment Corp.
ITEM 27. PRINCIPAL UNDERWRITERS
----------------------
(a) Keeley Investment Corp. serves as the Fund's Distributor.
(b) The Directors and Officers of Keeley Investment Corp. are as
follows:
Name Position and Offices with Keeley Investment Corp.
Position and Offices with
Fund
<TABLE>
<S> <C> <C>
John L. Keeley, Jr. Director, President and Treasurer Director and President
Barbara G. Keeley Director and Assistant Secretary None
Mark E. Zahorik Vice President Same
W. Terry Long Vice President None
Christopher L. Keeley Assistant Vice President None
Mary A. Ferrari Secretary Same
Emily Viehweg Assistant Treasurer Treasurer
</TABLE>
The principal address of each of the foregoing Directors and Officers
is: 401 South LaSalle Street, Suite 1201, Chicago, Illinois 60605.
(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
The account books and other documents required to be maintained by
Registrant pursuant to Investment Company Act of 1940, Section 31(a),
et seq., and Rules thereunder will be maintained by Registrant at 401
South LaSalle Street, Suite 1201, Chicago, Illinois 60605;
Registrant's Custodian, Transfer Agent, and Accounting Services Agent,
Firstar Trust Company, 615 East Michigan Avenue, Milwaukee, Wisconsin,
53201-0701; and Registrant's Administrator, Sunstone Financial Group,
Inc., 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin, 53202.
ITEM 29. MANAGEMENT SERVICES
-------------------
<PAGE> 45
None
ITEM 32. UNDERTAKINGS - Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Chicago, and State of Illinois on the 25th day of
November, 1998.
KEELEY SMALL CAP VALUE FUND, INC.
By: /s/ JOHN L. KEELEY, JR.
----------------------------
John L. Keeley, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
Name Date Title
/s/Michael D. O'Brien Director
- - ----------------------------- -----------------
Michael D. O'Brien(1)
/s/John F. Lesch Director
- - ----------------------------- -----------------
John F. Lesch(2)
/s/John G. Kyle Director
- - ----------------------------- -----------------
John G. Kyle(3)
/s/Elwood P. Walmsley Director
- - ----------------------------- -----------------
Elwood P. Walmsley(3)
/s/John L. Keeley, Jr. Director, President
- - ----------------------------- ----------------- (principal executive
John L. Keeley, Jr. and financial officer)
(1) Pursuant to Power of Attorney Executed on January 15, 1998
(2) Pursuant to Power of Attorney Executed on December 24, 1997
(3) Pursuant to Power of Attorney Dated December 8, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000906333
<NAME> KEELEY SMALL CAP VALUE FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 39,037,334
<INVESTMENTS-AT-VALUE> 40,134,356
<RECEIVABLES> 144,477
<ASSETS-OTHER> 12,113
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40,290,946
<PAYABLE-FOR-SECURITIES> 433,894
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 110,215
<TOTAL-LIABILITIES> 544,109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,822,906
<SHARES-COMMON-STOCK> 2,170,884
<SHARES-COMMON-PRIOR> 969,643
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 826,909
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,097,022
<NET-ASSETS> 3,746,837
<DIVIDEND-INCOME> 189,802
<INTEREST-INCOME> 72,891
<OTHER-INCOME> 0
<EXPENSES-NET> (622,361)
<NET-INVESTMENT-INCOME> (359,668)
<REALIZED-GAINS-CURRENT> 1,250,693
<APPREC-INCREASE-CURRENT> (7,451,002)
<NET-CHANGE-FROM-OPS> (6,559,977)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,025,487)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,382,316
<NUMBER-OF-SHARES-REDEEMED> (231,423)
<SHARES-REINVESTED> 50,348
<NET-CHANGE-IN-ASSETS> 18,922,726
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 633,632
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 308,025
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 622,361
<AVERAGE-NET-ASSETS> 30,811,807
<PER-SHARE-NAV-BEGIN> 21.48
<PER-SHARE-NII> (0.16)
<PER-SHARE-GAIN-APPREC> (2.00)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.31
<EXPENSE-RATIO> 2.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 99(g)-3
ADDENDUM TO AMENDED CUSTODIAN AGREEMENT
This Addendum to the Amended Custodian Agreement dated November 12,
1997 is entered into by and between Firstar Bank Milwaukee, N.A. and KEELEY
Small Cap Value Fund, Inc. on this 30th day of September, 1998.
WHEREAS, the entity known as Firstar Trust Company ceased operations on
September 30, 1998; and
WHEREAS, Firstar Bank Milwaukee, N.A. represents that it has the
necessary trust and custodial powers to enter into this Agreement;
NOW, THEREFORE, Firstar Bank Milwaukee, N.A. will be the successor
responsible party to the Agreement referenced above and will assume all
responsibility for any acts or omissions during the time Firstar Trust Company
was the named service provider under this same Agreement.
Firstar Bank Milwaukee, N.A. KEELEY Small Cap Value Fund, Inc.
By: /s/Michael R. McVoy By: /s/John L. Keeley, Jr.
-------------------- -----------------------
Attest: /s/Gail M. Zess Attest: /s/Mary A. Ferrari
---------------- -------------------
<PAGE> 1
EXHIBIT 99(h)-5
ADDENDUM TO FUND ACCOUNTING SERVICING AGREEMENT
This Addendum to the Fund Accounting Servicing Agreement, dated
September 8, 1993, is entered into by and between Firstar Mutual Fund Services,
LLC and the KEELEY Small Cap Value Fund, Inc. on this 30th day of September,
1998.
WHEREAS, the mutual funds servicing division of Firstar Trust Company
became a limited liability company and separate subsidiary of Firstar Bank,
Milwaukee on September 30, 1998; and
WHEREAS, the entity known as Firstar Trust Company ceased operations on
September 30, 1998;
NOW, THEREFORE, Firstar Mutual Fund Services, LLC will be the successor
responsible party to the Agreement referenced above and will assume all
responsibility for any acts or omissions during the time Firstar Trust Company
was the named service provider under this same Agreement.
Firstar Mutual Fund Services, LLC KEELEY Small Cap Value Fund, Inc.
By:\s\Michael R. McVoy By: \s\John L. Keeley, Jr.
------------------- -----------------------
Attest:\s\Gail M. Zess Attest: \s\Mary A. Ferrari
---------------- -------------------
<PAGE> 1
EXHIBIT 99(h)-6
ADDENDUM TO TRANSFER AGENT AGREEMENT
This Addendum to the Transfer Agent Agreement, dated September 8, 1993,
is entered into by and between Firstar Mutual Fund Services, LLC and the KEELEY
Small Cap Value Fund, Inc. on this 30th day of September, 1998.
WHEREAS, the mutual funds servicing division of Firstar Trust Company
became a limited liability company and separate subsidiary of Firstar Bank,
Milwaukee on September 30, 1998; and
WHEREAS, the entity known as Firstar Trust Company ceased operations on
September 30, 1998;
NOW, THEREFORE, Firstar Mutual Fund Services, LLC will be the successor
responsible party to the Agreement referenced above and will assume all
responsibility for any acts or omissions during the time Firstar Trust Company
was the named service provider under this same Agreement.
Firstar Mutual Fund Services, LLC KEELEY Small Cap Value Fund, Inc.
By:\s\Michael R. McVoy By: /s/John L. Keeley, Jr.
------------------- -----------------------
Attest:\s\Gail M. Zess Attest: /s/Mary A. Ferrari
--------------- -------------------
<PAGE> 1
EXHIBIT 99(j)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
KEELEY Small Cap Value Fund, Inc.
We consent to the inclusion in Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A of KEELEY Small Cap Value Fund, Inc. of our
report dated October 16, 1998 on our audit of the financial statements and
financial highlights of the Fund, which report is included in the Annual Report
to Shareholders for the year ended September 30, 1998 which is also included in
the Registration Statement. We also consent to the reference to our Firm under
the caption "INDEPENDENT ACCOUNTANTS" in the Statement of Additional Information
and under the caption "FINANCIAL HIGHLIGHTS" in the Prospectus.
/S/ PRICEWATERHOUSECOOPERS LLP
Milwaukee, WI
November 25, 1998
