In the first quarter of 2012, the KEELEY Small Cap Value Fund (KSCVX
) climbed 12.05 percent compared to a 12.44 percent increase for the Russell 2000 Index and an 11.59 percent rise in the Russell 2000 Value Index. Over the trailing six month period, the Fund rose 27.85 percent compared to a 29.83 percent increase for the Russell 2000 Index. The Fund was well positioned for the sharp recovery that took place in October 2011 due to a cyclical bias in the portfolio. Although the Fund benefited from overweight positions in industrials, materials, and consumer discretionary, stock selection in financials and health care had a negative impact on the portfolio's relative returns over the past six months. More recently, stock selection in the financial sector had a positive impact on the portfolio in the first quarter of 2012, producing two of the Fund's top five contributors. Wintrust Financial Corp. (WTFC
) climbed over 27 percent and added 26 basis points of return, while Federated Investors (FII
) rose over 47 percent and also contributed 26 basis points of return during the quarter. Both banks and asset managers climbed steadily throughout the quarter on improving economic data. The top performing position in the quarter was the portfolio's largest holding, Colfax Corp. (CFX
), which rose over 23 percent and added 30 basis points of performance to the portfolio. The pump and valve maker announced a $2.3 billion acquisition of Charter International during the quarter, which we anticipate will give the company exposure to fast growing emerging markets. Greenbrier Cos. (GBX
) was the Fund's largest detractor during the first quarter, falling over 18 percent and costing the portfolio 17 basis points of return. The railcar producer has been volatile as of late, and after rising over 100 percent in the 4th quarter of 2011, a slight pullback after such a substantial climb was not entirely surprising. Twin Disc Inc. (TWIN
) was another disappointment during the first quarter of 2012, falling over 28 percent and detracting 13 basis points of performance from the portfolio. The maker of power transmission equipment fell sharply in January after posting revenue that was short of expectations. Although we remain committed to our overweight position in the industrial sector, we continue to take advantage of strength in the sector to trim positions with higher valuations.
John L. Keeley, Jr.
President and CIO
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Average annual total return measures annualized change, while total return measures aggregate change.