GATEWAY TRUST, 485APOS, 1997-02-28

GATEWAY TRUST
485APOS, 1997-02-28

Previous: GATEWAY TRUST, 24F-2NT, 1997-02-28

Next: KEYSTONE TAX FREE FUND, NSAR-B, 1997-02-28

<PAGE> 1

As filed with the Securities and Exchange Commission on February 28, 1997
Securities Act Of 1933 Registration No. 2-59895
Investment Company Act of 1940 Registration No. 811-02773

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 30 [ X ]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 28 [ X ]

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

THE GATEWAY TRUST
400 TechneCenter Drive, Suite 220
Milford, Ohio 45150
Telephone Number (513) 248-2700

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

Agent for Service: Copy to:
WALTER G. SALL Donald S. Mendelsohn, Esq..
400 TechneCenter Drive, Suite 220 Brown, Cummins & Brown Co. L.P.A.
Milford, Ohio 45150 441 Vine Street
Cincinnati, Ohio 45202

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

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

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

The Gateway Trust has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2. The Form 24F-2 for the fiscal
year of the Registrant ended December 31, 1996 was filed on February 28, 1997.

<PAGE> 2

THE GATEWAY TRUST
Registration No. 2-59859
Registration Statement on Form N-1A
Cross Reference Sheet

<TABLE>
<CAPTION>
Section in the Combined
Prospectus of the Gateway Index
Plus, Mid Cap Index and Small Section in the Cincinnati Fund
Form N-1A Item Cap Index Funds Prospectus
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 1 - Cover Page - Cover Page - Cover Page

Item 2 - Synopsis - Fees and Expenses - Fees and Expenses
- Table of Contents - Table of Contents

Item 3 - Condensed Financial Information - Financial Highlights - Financial Highlights
- Gateway Performance - Performance and Risk Information

Item 4 - General Description - General Information about Gateway - General Information about Gateway
- Cover Page - Cover Page
- Investment Practices - Investment Practices
- Investment Restrictions - Investment Restrictions

Item 5 - Management of the Fund - General Information about Gateway - General Information about Gateway
- About the Investment Manager - About the Investment Manager

Item 5A - Management's Discussion - Gateway Performance - Performance and Risk Information
of Fund Performance

Item 6 - Capital Stock - General Information about Gateway - General Information about Gateway
- Cover Page - Cover Page
- Dividends and Distribution - Dividends and Distribution
- Taxes - Taxes

Item 7 - Purchase of Securities - How to Open a Gateway Account - How to Open a Gateway Account
- How to Buy Additional Shares - How to Buy Additional Shares
- Additional Shareholder Information - Additional Shareholder Information
- How Fund Shares are Priced - How Fund Shares are Priced

Item 8 - Redemption - How to Sell Shares - How to Sell Shares
- Additional Shareholder Information - Additional Shareholder Information

Item 9 - Pending Legal Proceedings - Not Applicable - Not Applicable
</TABLE>

<PAGE> 3

Section in Combined Statement of
Additional Information of the Gateway
Index Plus, Gateway Mid Cap Index and Section in Cincinnati Fund Statement of
Form N-1A Item Gateway Small Cap Index Funds Additional Information
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 10 - Cover Page - Cover Page - Cover Page

Item 11 - Table of Contents - Table of Contents - Table of Contents

Item 12 - General Information and History - Introduction - Introduction

Item 13 - Investment Objectives and Policies - Investment Objectives and Practices - Information about Investment Practices
- Option Transactions and Restrictions
- Investment Practices, Risks and - Schedule A
Restrictions
- Schedules A, B, and C

Item 14 - Management of the Fund - Trustees and Officers of the Trust - Trustees and Officers of the Trust

Item 15 - Control Persons and Principal - Trustees and Officers of the Trust - Trustees and Officers of the Trust
Holders of Securities - Principal Holders of Fund Shares - Principal Holders of Fund Shares

Item 16 - Investment Advisory and Other - Investment Advisory and Other - Investment Advisory and Other
Services Services Services
- Independent Public Accountants and - Independent Public Accountants and
Financial Statements Financial Statements

Item 17 - Brokerage Allocation and Other - Brokerage - Brokerage
Practices

Item 18 - Capital Stock and Other Securities - Not Applicable - Not Applicable

Item 19 - Purchase, Redemption, and Pricing - Shareholder Services - Shareholder Services
of Securities - Additional Purchase and Redemption - Additional Purchase and Redemption
Information Information

Item 20 - Tax Status - Additional Tax Matters - Additional Tax Matters

Item 21 - Underwriters - Not Applicable - Not Applicable

Item 22 - Calculation Of Performance Data - Performance and Risk Information - Performance and Risk Information
- Schedule D

Item 23 - Financial Statements - Independent Public Accountants and - Independent Public Accountants and
Financial Statements Financial Statements
</TABLE>

<PAGE> 4
PROSPECTUS

May 1, 1997

GATEWAY INDEX PLUS FUND

The Index Plus Fund seeks a high total return at a reduced level of
risk. The Fund is designed for conservative investors whose investment
objective is to maximize total rate of return over the long term.

The Fund invests in the 100 stocks included in the S&P 100 Stock Index.
The Fund's portfolio duplicates the composition of the S&P 100 Index. The Fund
also sells call options on the S&P 100 Index and, as the seller, receives cash
from the purchasers of the options. By selling index options, the Fund attempts
to earn a greater total return over the long term than it would earn by
investing only in the stocks in the S&P 100 Index. Selling call options reduces
the risk of owning stocks, but limits the opportunity to profit from an
increase in the market value of stocks. The Fund occasionally buys index put
options in an attempt to protect the Fund from a significant market decline in
a short period of time. The value of a put option generally increases as stock
prices decrease.

GATEWAY MID CAP INDEX FUND

The Mid Cap Index Fund, designed for a more aggressive investor, seeks
long-term growth of capital with a secondary objective of conserving principal.
The Fund invests in the 400 stocks included in the S&P MidCap 400 Index. The
Fund's portfolio generally parallels the composition of the S&P MidCap 400
Index. The S&P MidCap 400 Index consists of the common stock of 400 companies
with a median market capitalization of approximately $1.9 billion, selected to
reflect the stock price performance of companies in the middle capitalization
range. At times, the Fund may purchase index put options to reduce the risk of
principal loss. The Fund occasionally buys index call options to increase the
potential for gain.

GATEWAY SMALL CAP INDEX FUND

The Small Cap Index Fund, also designed for a more aggressive investor,
seeks long-term growth of capital. The Fund invests in the 250 stocks included
in the Wilshire Small Cap Index. The Fund's portfolio generally parallels the
composition of the Wilshire Small Cap Index. The Wilshire Small Cap Index
consists of the common stock of 250 companies with a median market
capitalization of approximately $676 million, selected to reflect the general
characteristics and performance profile of small companies. At times, the Fund
may purchase index put options to reduce the risk of principal loss. The Fund
occasionally buys index call options to increase the potential for gain.

RISK FACTORS RELATED TO INDEX OPTION TRANSACTIONS

Option transactions on securities indexes involve risks not generally
associated with investments in stocks. The sale of call options limits a fund's
opportunity to profit from an increase in the market value of the underlying
index. The purchase of options involves the risk of loss of all or part of the
cash paid for the options. The use of options to protect a fund's portfolio
will not fully protect the fund against declines in the value of its portfolio.
A fund could experience a loss on both its portfolio securities and the options
used to hedge these securities. Unusual market conditions, the lack of a ready
market for any particular option at a specific time, or restrictions imposed by
regulatory agencies may adversely affect a fund's hedging strategy. Additional
information about various risk factors and each fund's investment practices,
strategies and restrictions is located on pages XX through XX of the
Prospectus.

THE GATEWAY FAMILY OF MUTUAL FUNDS

Each fund is a series of The Gateway Trust ("Trust)". This Prospectus
sets forth concisely the information about the funds that you should know
before investing. You should keep it for future reference. Additional
information has been filed with the Securities and Exchange Commission ("SEC")
and is included in the Statement of Additional Information of The Gateway Trust
dated May 1, 1997. The Statement of Additional Information ("SAI") is
incorporated herein by reference. You can obtain more information about the
funds or free copies of the SAI by writing or calling: THE GATEWAY TRUST, P. O.
BOX 5211, CINCINNATI, OH 45201-5211, (800) 354-6339. The SEC maintains a Web
Site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC.

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

1
<PAGE> 5
TABLE OF CONTENTS

FEES AND EXPENSES ___ All Gateway funds are 100% no-load. There are no sales charges, 12b-1
fees, redemption fees, or annual account charges when you invest in a
Gateway fund.

FINANCIAL HIGHLIGHTS ___ Tables displaying financial information for each fund.

HOW TO OPEN A GATEWAY ACCOUNT ___ New investors can open an account by mail or by telephone.

HOW TO PURCHASE ADDITIONAL SHARES ___ Shares may be purchased by check, by wire transfer, or by automatic
withdrawals from your bank account.

HOW TO REDEEM SHARES ___ Redemption requests can be made by mail or by telephone.

ADDITIONAL SHAREHOLDER INFORMATION ___ Additional information about buying and selling shares.

GATEWAY PERFORMANCE ___ Total return information.

EXPLANATION OF INVESTMENT TERMS ___ Dictionary of investment terms.

INDEX PLUS FUND INFORMATION ___ Graphs and tables showing fund performance, risk/reward and top ten
holdings for the Index Plus Fund.

MID CAP INDEX FUND INFORMATION ___ Graph and tables showing fund performance and top ten holdings for the
Mid Cap Index Fund.

SMALL CAP INDEX FUND INFORMATION ___ Graph and tables showing fund performance and top ten holdings for the
Small Cap Index Fund.

PORTFOLIO MANAGER PROFILE ___ Profiles of the portfolio manager.

DIVIDENDS AND DISTRIBUTIONS ___ Investors may reinvest their dividends and distributions at no charge.

ABOUT THE INVESTMENT ADVISER ___ Gateway Investment Advisers, L.P. provides investment advisory services
to each fund.

HOW FUND SHARES ARE PRICED ___ Fund share prices are available 24 hours a day by calling (800) 354-6339.

TAXES ___ Tax information will be reported to you on Form 1099.

INVESTMENT PRACTICES ___ An explanation of the investment practices, risk factors and strategies
employed by each fund.

INVESTMENT RESTRICTIONS ___ Each fund has adopted certain investment restrictions.

GENERAL INFORMATION/THE GATEWAY TRUST ___ Additional information on The Gateway Trust and its Trustees.
</TABLE>

<PAGE> 6
FEES AND EXPENSES

THE GATEWAY FAMILY OF MUTUAL FUNDS IS 100% NO-LOAD. YOU DO NOT PAY ANY SALES
CHARGES WHEN YOU INVEST IN A GATEWAY FUND.

SHAREHOLDER TRANSACTION EXPENSES

The Gateway family of funds does not charge a fee for purchases,
exchanges, or redemptions. All Gateway funds are 100% no-load.

<TABLE>
<CAPTION>
Index Mid Cap Small Cap
Shareholder Transaction Expenses Plus Fund Index Fund Index Fund
-------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
Maximum Sales Load on Purchase None None None
Maximum Sales Load on
Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
</TABLE>

The custodian for the Gateway funds charges $10 for each wire transfer.

FUND OPERATING EXPENSES

Annual fund operating expenses are paid from a fund's assets. Each fund
pays an advisory fee to Gateway Investment Advisers, L.P. (the "Adviser"). Each
fund also pays other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and fund reports. A fund's
expenses are factored into its share price each day and are not charged
directly to shareholder accounts. The numbers in the following table are
calculated as percentages of average net assets.

Index Mid Cap Small Cap
Annual Fund Operating Expenses Plus Fund Index Fund Index Fund
------------------------------ --------- ---------- ----------
<S> <C> <C> <C>
Advisory Fees (after waiver) .71% .00% .00%
12b-1 Fees .00 .00 .00
Other Expenses (after reimbursements) .43% 2.00% 1.50%
Total Fund Operating Expenses (after 1.14% 2.00% 1.50%
waiver and reimbursements)
(The Fund's Expense Ratio)
</TABLE>

EXAMPLE

Assume that each fund's annual return is 5% and its operating expenses
are exactly as previously described in the Fund Operating Expenses table. For
every $1,000 you invested, the table below shows the amount of expenses you
would incur if you sold your shares after the number of years indicated. THIS
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

Index Plus Mid Cap Small Cap
Fund Index Fund Index Fund
---- ---------- ----------
<S> <C> <C> <C>
1 year $12 $20 $15
3 years 37 63 47
5 years 64 108 82
10 years 140 233 179
</TABLE>

The purpose of these tables is to assist you in understanding the direct
and indirect costs and expenses you will bear as a fund shareholder.

Waiver of 1996 Advisory Fee and Expense Reimbursements for Mid Cap Index Fund.
The investment advisory contract requires the Adviser to waive some or all of
its advisory fees as necessary to limit the Mid Cap Index Fund's expense ratio
to 1.50% of its average daily net assets. Any contractual waiver will not
exceed the aggregate advisory fee payable by the Fund for the applicable year.
In addition, the Adviser has voluntarily agreed to reimburse expenses to the
extent required (after giving full effect to the fee waiver) to maintain the
Fund's expense ratio at 2.00%. The Fund's actual expense ratio for 1996 was
2.00. Absent the waiver and voluntary reimbursements, the advisory fees and
operating expenses of the Fund in 1996 would have been 0.90% and 3.19%,
respectively.

<PAGE> 7

Waiver of 1996 Advisory Fee for Small Cap Index Fund. The investment advisory
contract requires the Adviser to waive some or all of its advisory fees as
necessary to limit the Small Cap Index Fund's expense ratio to 2.00% of its
average daily net assets. Any contractual or voluntary waiver will not exceed
the aggregate advisory fee payable by the Fund for the applicable year. In
addition, the Adviser has voluntarily agreed to waive any remaining advisory
fees to the extent the Fund's expense ratio exceeds 1.50%. The Adviser waived
all of its advisory fees in 1996. The actual advisory fees and total fund
operating expenses of the Fund in 1996 were 0.00% and 1.50%, respectively.
Absent the waiver, the advisory fees and total fund operating expenses of the
Fund in 1996 would have been 0.90% and 2.40%, respectively.

<PAGE> 8
FINANCIAL HIGHLIGHTS

The following condensed financial information for the seven years ended
December 31, 1996 has been audited by Arthur Andersen LLP, independent public
accountants. Other independent public accountants audited the condensed
financial information for the years ended December 31, 1987 through December
31, 1989. The audit report on the 1996 financial statements should be read in
conjunction with this condensed financial information. The audit report on the
1996 financial statements is incorporated by reference in the SAI and is
available from the Trust. The presentation is for a share outstanding
throughout each period.

<TABLE>
<CAPTION>
GATEWAY INDEX PLUS FUND Year Ended December 31,
------------------------------------------------------------------------------------------------
1996 1995(3) 1994 1993 1992 1991 1990 1989 1988 1987
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $16.91 $15.48 $15.85 $15.51 $15.24 $13.64 $15.49 $13.67 $11.60 $14.63
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income 0.21 0.24 0.26 0.26 0.27 0.31 0.41 0.33 0.23 0.27
Net gains (losses) on
securities 1.56 1.46 0.61 0.88 0.51 2.10 1.15 2.29 2.05 (1.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 1.77 1.70 0.87 1.14 0.78 2.41 1.56 2.62 2.28 (0.78)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Dividends from net investment
income (0.20) (0.24) (0.27) (0.26) (0.28) (0.30) (0.41) (0.37) (0.21) (0.33)
Distributions from capital
gains 0.00 0.00 (0.86) (0.47) (0.23) (0.51) (3.00) (0.35) 0.00 (0.28)
Distributions in excess of
realized capital gains 0.00 (0.03) (0.11) (0.07) 0.00 0.00 0.00 0.00 0.00 0.00
Returns of capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.08) 0.00 (1.64)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.20) (0.27) (1.24) (0.80) (0.51) (0.81) (3.41) (0.80) (0.21) (2.25)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Net asset value, end of period $18.48 $16.91 $15.48 $15.85 $15.51 $15.24 $13.64 $15.49 $13.67 $11.60
====== ====== ====== ====== ====== ====== ====== ====== ====== ======

TOTAL RETURN 10.53% 11.04% 5.57% 7.40% 5.15% 17.80% 10.32% 19.45% 19.76% (5.65%)

Net assets, end of period
(millions) $194.36 $176.22 $164.65 $207.18 $212.95 $81.37 $38.08 $31.51 $27.33 $27.35
Ratio of expenses to average
net assets (1) 1.14% 1.19% 1.21% 1.11% 1.11% 1.22% 1.34% 1.40% 2.08% 1.48%
Ratio of net investment income
to average net assets (1) 1.18% 1.51% 1.54% 1.58% 1.96% 2.17% 2.59% 2.21% 1.75% 1.83%
Portfolio turnover rate 17% 5% 4% 17% 15% 31% 79% 30% 10% 175%
Average commission per share $0.0335 -- (4) -- (4) -- (4) -- (4) -- (4) -- (4) -- (4) -- (4) -- (4)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Additional information about the performance of each Gateway fund is
contained in 1996 Annual Reports to shareholders of the Gateway funds.
Annual Reports for 1996 may be obtained without charge by writing THE
GATEWAY TRUST, P. O. BOX 5211, CINCINNATI, OH 45201-5211 or by calling
(800) 354-6339.

5
<PAGE> 9

<TABLE>
<CAPTION>
GATEWAY MID CAP INDEX FUND Year Ended Year Ended Year Ended Year Ended From 9/30/92 to
12/31/96 12/31/95 (3) 12/31/94 12/31/93 12/31/92 (2)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.61 $ 9.58 $10.16 $10.04 $10.00
------ ------ ------ ------ ------
Net investment income (0.02) 0.03 0.08 0.11 0.03
Net gains (losses) on securities 1.80 2.43 (0.60) 0.41 0.04
------ ------ ------ ------ ------
Total from investment operations 1.78 2.46 (0.52) 0.52 0.07
------ ------ ------ ------ ------

Dividends from net investment income 0.00 (0.06) (0.05) (0.11) (0.03)
Distributions from capital gains (0.61) (0.37) (0.01) (0.29) 0.00
------ ------ ------ ------ ------
Total distributions (0.61) (0.43) (0.06) (0.40) (0.03)
------ ------ ------ ------ ------
Net asset value, end of period $12.78 $11.61 $ 9.58 $10.16 $10.04
------ ------ ------ ------ ------

TOTAL RETURN 15.33% 25.68% (5.12%) 5.18% 0.70%(2)

Net assets, end of period (millions) $ 6.29 $ 5.69 $ 6.59 $10.46 $10.69
Ratio of net expenses to average net assets (1) 2.00% 1.98% 1.50% 1.50% 1.50%
Ratio of net investment income to average
net assets (1) (0.25%) 0.05% 0.59% 1.06% 1.39%

Portfolio turnover rate 14% 18% 8% 105% 0%(2)
Average commission per share $0.0355 -- (4) -- (4) -- (4) -- (4)
==================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
GATEWAY SMALL CAP INDEX FUND Year Ended Year Ended Year Ended From 6/16/93 to
12/31/96 12/31/95(3) 12/31/94 12/31/93 (2)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.05 $ 9.63 $10.35 $10.00
------ ------ ------ ------
Net investment income (loss) 0.01 0.03 (0.02) 0.04
Net gains (losses) on securities 1.87 2.07 ( 0.60) 0.61
------ ------ ------ ------
Total from investment operations 1.88 2.10 ( 0.62) 0.65
------ ------ ------ ------

Dividends from net investment income (0.01) (0.01) (0.00) (0.04)
Distributions from capital gains (0.86) (0.67) (0.10) (0.26)
------ ------ ------ ------
Total distributions (0.87) (0.68) (0.10) (0.30)
------ ------ ------ ------
Net asset value, end of period $12.06 $11.05 $ 9.63 $10.35
------ ------ ------ ------

TOTAL RETURN 17.04% 21.81% (5.99%) 6.50%(2)

Net assets, end of period (millions) $10.92 $9.42 $ 9.66 $13.00
Ratio of net expenses to average net assets (1) 1.50% 1.68% 2.00% 1.92%
Ratio of net investment income (loss) to
average net assets (1) 0.03% 0.09% (0.14%) 0.98%
Portfolio turnover rate 20% 20% 39% 3%(2)
Average commission per share $0.0371 -- (4) -- (4) -- (4)
===============================================================================================================================
</TABLE>

(1) The ratios of expenses to average net assets would have increased and net
investment income (loss) to average net assets would have decreased
(increased) by the following amounts had the Adviser not voluntarily
reimbursed expenses: 0.13% for the Index Plus Fund in 1988; 0.02% for the
Mid Cap Index Fund in 1995; and 0.08% for the Small Cap Index Fund in
1993.

(2) Operations of the Mid Cap Index Fund and Small Cap Index Fund commenced on
September 30, 1992 and June 16, 1993, respectively. The expense and net
income ratios and portfolio turnover rates in those initial years have
been annualized. The total returns in those initial years have not been
annualized.

(3) On December 15, 1995, Gateway Investment Advisers, L.P. became investment
adviser of the funds.

(4) Disclosure of average commission per share was not required prior to the
year ended December 31, 1996.

<PAGE> 10
HOW TO OPEN A GATEWAY ACCOUNT

GATEWAY FUNDS ARE AVAILABLE FOR INDIVIDUALS, IRAS, TRUSTS, AND PENSION PLANS.

OPENING A NEW ACCOUNT

You may open an account by mail or by telephone. Generally, the minimum
initial investment is $1,000 (or $500 for an IRA account) in any fund. At its
discretion, the Trust may waive these minimums for investments made by
employer-sponsored qualified retirement plans or through automatic investment
programs. No sales commission is charged by the Gateway funds for purchases or
redemptions of fund shares. Your purchase will be based on the closing share
price of the fund as next determined after your request has been received in
good order. (See "How Fund Shares Are Priced" on page x.)

After your purchase you will receive a confirmation statement showing
the value of your account. Certificates are not issued for fund shares.

BY MAIL

To open your account by mail, please complete and sign the New Account
Application Form which accompanies this Prospectus. The application has
instructions to assist you. Please indicate the amount of your investment in
each Gateway fund. When you have completed the application, please mail it to:
THE GATEWAY TRUST, SHAREHOLDER SERVICES, P. O. BOX 5211, CINCINNATI, OH
45201-5211.

Please include your check or money order payable to THE GATEWAY TRUST
with your application.

BY TELEPHONE

To open your account by telephone, you must wire your investment to
The Gateway Trust. See Page X for additional information about wire transfers
and telephone instructions. Please call Gateway shareholder services at (800)
354-6339 for instructions.

OPENING A NEW IRA ACCOUNT/TRANSFER OF EXISTING IRA

To open a new IRA in a Gateway fund, please call Gateway shareholder
services at (800) 354-6339 to obtain an IRA Account Application and an IRA
Investment Kit. To transfer an existing IRA from a bank or other mutual fund to
your Gateway IRA, you must complete an IRA Transfer Form which is included in
the IRA Investment Kit, in addition to an IRA Account Application. To transfer
or roll over funds from an employer-sponsored plan such as a 401(k) plan,
please call Gateway shareholder services at (800) 354-6339 for instructions.
GATEWAY IRAS ARE FREE OF ANY ANNUAL CHARGES OR TRANSACTION FEES.

OPENING A TRUST/PENSION PLAN ACCOUNT

To open a trust account in a Gateway fund, please complete the New
Account Application Form. In the registration section, give the full legal name
of the trust. Pension plans may invest in a Gateway fund by completing the New
Account Application Form.

OPENING A UNIFORM GIFT TO MINORS ACT ACCOUNT

To open a Gateway account for a minor (typically used for educational
savings plans), please complete the UGMA/UTMA section of the New Account
Application Form. Be sure to include the minor's social security number.

7
<PAGE> 11
HOW TO PURCHASE ADDITIONAL SHARES

THE MINIMUM AMOUNT FOR AN ADDITIONAL INVESTMENT IS $100.

You may add to your Gateway account at any time by choosing one of the
following purchase options. The minimum amount for an additional investment in
any fund is $100. Your purchase will be based on the closing share price of the
fund as next determined after your request has been received in good order.
(See "How Fund Shares Are Priced" on page x.)

After each purchase you will receive a confirmation statement showing
the value of your account. Certificates are not issued for fund shares.

BY MAIL

The most common way of purchasing additional shares in a Gateway fund is
by mail. Please send your check or money order and an Additional Investment
Form in a prepaid envelope. Additional Investment Forms and prepaid envelopes
are included with each confirmation statement, quarterly report and periodic
newsletter sent to you. Please make all checks or money orders payable to THE
GATEWAY TRUST and mail to: THE GATEWAY TRUST, SHAREHOLDER SERVICES, P. O. BOX
5211, CINCINNATI, OH 45201-5211.

BY TELEPHONE

To avoid any mail delay, you may purchase additional shares by wire.
Please call Gateway shareholder services at (800) 354-6339 to arrange a
purchase by wire. You must then instruct your financial institution to wire
funds to:

THE GATEWAY TRUST, C/O STAR BANK, N.A.
ABA #042-0000-13
CINCINNATI, OHIO
YOUR NAME
YOUR GATEWAY ACCOUNT NO. XXXXX
THE GATEWAY FUND(S) IN WHICH YOU WISH TO INVEST.

See Page X for additional information about wire transfers and telephone
instructions.

BY AUTOMATIC INVESTMENT PROGRAM

Gateway's Automatic Investment Program is a way to add systematically to
your existing Gateway account. When you use the program, funds are
electronically transferred from your bank account into your Gateway account and
additional shares are then purchased for your account. This service is
available on a monthly or quarterly basis with a minimum of $100 per transfer.
THE AUTOMATIC INVESTMENT PROGRAM IS FREE OF CHARGE. Please call Gateway
shareholder services at (800) 354-6339 to make arrangements to use this
program.

BY EXCHANGE FROM ANOTHER GATEWAY FUND

To purchase shares by exchanging from another Gateway fund, please call
Gateway shareholder services at (800) 354-6339 for instructions. The exchange
will be based on the closing prices for the funds involved in the exchange as
next determined after your request has been received in good order. (See "How
Fund Shares Are Priced" on page x.)

The Trust does not charge any fee for exchanges between Gateway funds.
Generally, an exchange between funds is a taxable event. State securities laws
may restrict your ability to make exchanges. The Trust reserves the right to
temporarily or permanently terminate the exchange privilege for any shareholder
who makes an excessive number of exchanges. You will receive advance written
notice that the Trust intends to limit your use of the exchange privilege. The
Trust also reserves the right to terminate or modify the exchange privilege or
to refuse an exchange if the exchange would adversely affect any Gateway fund
involved in the exchange.

8
<PAGE> 12
HOW TO REDEEM SHARES

INVESTORS MAY REDEEM SHARES BY WRITING OR CALLING GATEWAY.

You may redeem shares from your Gateway account at any time by choosing
one of the following options. Your redemption will be based on the closing
share price of the fund as next determined after your request is received in
good order. (See "How Fund Shares Are Priced" on page x.)

The proceeds from your redemption will be mailed or wired, depending on
the method of redemption and your instructions. Normally the proceeds will be
sent on the following business day. Payments to shareholders who have purchased
shares by check will not be made until the purchase check has cleared, which
could take up to fifteen days.

BY MAIL

Redemption requests made in writing should be sent to: THE GATEWAY
TRUST, SHAREHOLDER SERVICES, P. O. BOX 5211, CINCINNATI, OH 45201-5211.

Each redemption request should include a letter of instruction, specify
the fund and the number of fund shares or dollar amount to be redeemed, and
should be signed by all owners of the shares exactly as their names appear on
the account. In certain cases, other supporting legal documents may be
required. The redemption proceeds will be mailed to the address shown on your
account.

A signature guarantee is not usually required. However, a signature
guarantee is required under certain circumstances, including redemptions
involving payment to persons other than the record owner(s) of the shares. A
signature guarantee will be accepted from banks, brokers, dealers, municipal
securities dealers or brokers, government securities dealers or brokers, credit
unions (if authorized by state law), national securities exchanges, registered
securities associations, clearing agencies, and savings associations. Notary
publics cannot guarantee your signature.

BY TELEPHONE

Unless you have declined telephone exchange and/or redemption
privileges, you may redeem your shares by calling Gateway shareholder services
at (800) 354-6339. If you redeem your shares by telephone, the redemption
proceeds will be paid by check to the owner(s) of the shares shown on Gateway's
records and mailed to the address shown on Gateway's records for your account.
Redemption proceeds can be sent by wire if you completed the wire transfer
instructions in your original New Account Application Form or you have sent
separate wire transfer instructions to Gateway. Separate wire transfer
instructions must be signed by all owners of the shares exactly as their names
appear on the account, and the signatures must be guaranteed. The telephone
redemption procedure is not available for IRAs.

SYSTEMATIC WITHDRAWAL PROGRAM

If the value of your account is at least $5,000, you can arrange for
systematic quarterly or monthly withdrawals in the amount of $100 or more.
Please call Gateway shareholder services at (800) 354-6339 to make arrangements
to use this program.

See Page X for additional information about redemptions and telephone
instructions.

9
<PAGE> 13
ADDITIONAL SHAREHOLDER INFORMATION

FEES CHARGED BY YOUR BROKER OR BANK

If you buy or sell shares of a Gateway fund through a broker, the broker
may charge you additional fees and expenses. If you buy shares through a wire
transfer, The Gateway Trust will not charge you for the wire. Your financial
institution may charge you for this service or for transfers from your bank
account to a Gateway fund through the Automatic Investment Program. If you
redeem shares through a wire transfer, the Trust's custodian will assess a wire
charge of $10. Your institution may charge you for receiving a wire transfer of
redemption proceeds.

ADDITIONAL IRA INFORMATION

For information about redeeming shares from an IRA, please call Gateway
shareholder services at (800) 354-6339. More detailed information about
transfers to and distributions from an IRA is set forth in the SAI.

TELEPHONE TRANSACTIONS

The Gateway Trust will not be liable for following instructions received
by telephone that it reasonably believes to be genuine. The Trust will employ
reasonable procedures to confirm that telephone instructions are genuine. All
shareholders of the Gateway funds have telephone redemption and exchange
privileges unless the shareholder has specifically declined these privileges.
If you do not wish to have telephone privileges for your account, you must mark
the appropriate section on the New Account Application Form or notify the Trust
in writing. To protect shareholders who have telephone privileges, the Trust
follows certain procedures, including requiring a form of personal
identification before acting upon telephone instructions, making redemption
checks requested by telephone payable only to the owner(s) of the account shown
on the Trust's records, mailing such redemption checks only to the account
address shown on the Trust's records, directing wire redemptions requested by
telephone only to the bank account shown on the Trust's records, providing
written confirmation of any transaction requested by telephone, and normally
tape recording any instructions received by telephone.

AUTOMATIC REDEMPTIONS BY THE TRUST

The Gateway Trust reserves the right to reject any investment at any
time. The Trust also reserves the right to automatically redeem your account(s)
under certain circumstances. You will receive written notice at least 60 days
prior to the automatic redemption of your account(s) by the Trust. Your
account(s) may be automatically redeemed when the aggregate value of your
account(s) falls below $800 (other than as a result of market action) unless
you purchase additional shares to increase the value of your account(s) to at
least $1,000 before the end of the 60-day period. Your account(s) may also be
automatically redeemed if you do not provide a valid U. S. social security
number or taxpayer identification number or other requested documents before
the end of the 60-day period. The Trustees of The Gateway Trust can terminate
any series of the Trust upon written notification to the shareholders of the
applicable series.

ADDITIONAL REDEMPTION INFORMATION

Redemption proceeds will be sent to you no later than five business days
after your request is received in good order. The right of redemption may be
suspended in certain circumstances, such as the closing of the New York Stock
Exchange for a period other than weekends or normal holidays.

10
<PAGE> 14
GATEWAY PERFORMANCE

GATEWAY HAS BECOME AN INDUSTRY LEADER IN PROVIDING PROSPECTIVE INVESTORS AND
EXISTING SHAREHOLDERS WITH COMPLETE INFORMATION ON ITS NO-LOAD FUNDS.

It is important for you to understand completely the risks as well as
the potential rewards of each Gateway fund before investing. The tables and
graphs appearing in this section of this Prospectus are designed to help you
understand these risks and rewards and should be studied carefully. A brief
description of each table and graph, as well as its significance, is included
on the following pages. For a more complete explanation see the SAI.

YEAR-BY-YEAR TOTAL RETURNS SINCE INCEPTION

<TABLE>
<CAPTION>
Index Mid Cap Index Small Cap Index S&P 500 Lehman Gov't/Corp
Plus Fund Fund Fund Stock Index Bond Index
--------- ---- ---- ----------- ----------
<S> <C> <C> <C> <C> <C>
1996 10.53% 15.33% 17.04% 22.96% 2.91%
1995 11.04 25.68 21.81 37.58 19.24
1994 5.57 (5.12) (5.99) 1.32 (3.52)
1993 7.40 5.18 6.50** 10.08 11.02
1992 5.15 0.70* 7.62 7.58
1991 17.80 30.47 16.13
1990 10.32 (3.11) 8.28
1989 19.45 31.69 14.23
1988 19.76 16.52 7.58
1987 (5.65) 5.05 2.29
1986 12.69 18.51 15.62
1985 15.89 31.57 21.30
1984 4.04 6.10 15.02
1983 14.80 22.47 8.00
1982 9.46 21.40 31.09
1981 4.59 (5.05) 7.26
1980 16.50 32.33 3.06
1979 15.37 18.20 2.30
1978 5.90 6.40 1.19
</TABLE>

*September 30, 1992 to December 31,1992
**June 16, 1993 to December 31, 1993

COMPARATIVE PERFORMANCE INFORMATION

Each Gateway fund may compare its performance to various indexes, such
as the S&P 500 Index. Each Gateway fund may also compare its performance to
that of other mutual funds or categories of mutual funds as reported by
independent services, such as Morningstar, Inc. and Value Line Mutual Fund
Survey, or by other financial publications.

11
<PAGE> 15

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
--------------------------------------------------- ----------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gateway Index Plus 10.53% 9.02% 7.91% 9.88% 10.53% 29.56% 46.32% 156.63%
Gateway Mid Cap Index 15.33 11.21 N/A N/A 15.33 37.53 N/A N/A
Gateway Small Cap Index 17.04 10.25 N/A N/A 17.04 34.03 N/A N/A

S&P 100 Index 25.54 21.75 16.26 15.35 25.54 80.46 112.41 317.06
S&P MidCap 400 Index 19.20 14.59 N/A N/A 19.20 50.49 N/A N/A
Wilshire Small Cap Index 19.97 N/A N/A N/A 19.97 N/A N/A N/A
S&P 500 Index 22.96 19.67 15.22 15.26 22.96 71.40 103.05 313.76
Lehman Gov't/Corp Bond Index 2.91 5.79 7.18 8.38 2.91 18.39 41.44 123.71
Consumer Price Index 3.59 2.93 2.89 3.70 3.59 9.06 15.30 43.86
</TABLE>

* For periods ended December 31, 1996

<PAGE> 16

EXPLANATION OF INVESTMENT TERMS

Total return is the change in the value of an investment in a fund over a given
period, assuming reinvestment of distributions. A cumulative total return
reflects actual performance over a stated period of time.

An average annual total return is a rate of return that, if achieved
consistently throughout a given period, would produce a cumulative total return
equal to that actually achieved by the fund over the same period. Average
annual total returns smooth out variations in performance; they are not the
same as actual year-by-year results.

Standard deviation is a statistical measure of volatility. It measures the
expected change in the value of a fund or a market index such as the S&P 500
Index. A fund with an expected return of 10% and a standard deviation of 15%
would be expected to show returns of -5% to +25% in two out of every three
years. Volatility is often used as a measure of risk. A lower standard
deviation implies lower volatility.

Beta is a measure of a fund's volatility relative to an appropriate index. It
measures how much the value of a fund fluctuates compared to the index. As an
example, the S&P 500 Index has a beta of 1.0. Any stock mutual fund with a beta
greater than 1.0 is more volatile than the stock market, and any fund with a
beta lower than 1.0 is less volatile than the stock market as represented by
the S&P 500 Index.

Risk of an investment is very important for investors to understand. The
Trustees of The Gateway Trust are concerned that some investors may purchase
mutual funds without an appreciation for the risk they have assumed. The tables
and charts presented in this prospectus measure risk in four ways: beta,
standard deviation, number of negative periods experienced by the fund, and the
worst total return in one of those periods. Each measure of risk is described
more fully in the SAI.

The S&P 100 Index is an unmanaged index of 100 common stocks with a market
capitalization range of $949 million to $170 billion.

The performance of this index assumes reinvestment of all dividends paid on the
stocks in the index.

The S&P 500 Index is a widely recognized measure of performance for the stock
market. The S&P 500 figures represent the prices of an unmanaged index of 500
common stocks and assume reinvestment of all dividends paid on the stocks in
the index.

The S&P MidCap 400 Index is an unmanaged index of 400 common stocks with a
market capitalization range of $143 million to $7.1 billion. The performance of
this index assumes reinvestment of all dividends paid on the stocks in the
index.

The Wilshire Small Cap Index is an unmanaged index of 250 common stocks with a
market capitalization range of $51 million to $3 billion. The performance of
this index assumes reinvestment of all dividends paid on the stocks in the
index.

The Lehman Government/Corporate Bond Index is a widely recognized measure of
performance for the bond market representing an unmanaged index of selected
government and corporate bonds. The Lehman Index figures assume reinvestment of
all distributions paid on the bonds in the index. As of December 31, 1996, the
average maturity of this index was 9.5 years.

The Consumer Price Index is a widely recognized measure of inflation calculated
by the U. S. government.

U. S. Treasury bills are negotiable debt obligations of the U. S. government.
Since they are secured by the full faith and credit of the government, they are
regarded as risk-free investments. Treasury bills are short-term securities
with maturities of one year or less.

<PAGE> 17
INDEX PLUS FUND INFORMATION

GROWTH OF $10,000 CHART

(Insert Chart Here)

Index Plus Fund Plot Points - Growth of $10,000 Chart

<TABLE>
<CAPTION>
Index Plus S&P 500 30-day T-bills
---------- ------- --------------
<S> <C> <C> <C>
$10,000.00 $10,000.00 $10,000.00
Jan-87 $10,307.59 $11,330.00 $10,040.00
Feb-87 $10,369.37 $11,788.87 $10,085.18
Mar-87 $10,480.80 $12,130.74 $10,130.56
Apr-87 $10,585.88 $12,015.50 $10,174.12
May-87 $10,845.10 $12,135.66 $10,214.82
Jun-87 $11,076.58 $12,742.44 $10,260.79
Jul-87 $11,259.67 $13,373.19 $10,306.96
Aug-87 $11,287.83 $13,888.06 $10,353.34
Sep-87 $11,288.41 $13,575.57 $10,399.93
Oct-87 $9,402.30 $10,629.68 $10,455.05
Nov-87 $9,034.97 $9,763.36 $10,491.65
Dec-87 $9,434.84 $10,505.37 $10,526.27
Jan-88 $9,784.58 $10,946.60 $10,557.24
Feb-88 $10,044.85 $11,455.61 $10,605.33
Mar-88 $10,012.21 $11,106.22 $10,652.07
Apr-88 $10,191.88 $11,222.83 $10,701.24
May-88 $10,379.71 $11,312.62 $10,755.32
Jun-88 $10,567.60 $11,833.00 $10,807.51
Jul-88 $10,690.58 $11,791.58 $10,862.33
Aug-88 $10,616.79 $11,396.56 $10,926.83
Sep-88 $10,961.43 $11,886.61 $10,994.21
Oct-88 $11,126.02 $12,207.55 $11,061.29
Nov-88 $11,191.85 $12,030.54 $11,123.92
Dec-88 $11,299.05 $12,241.08 $11,194.45
Jan-89 $11,604.88 $13,137.13 $11,256.18
Feb-89 $11,629.68 $12,810.01 $11,325.19
Mar-89 $11,646.83 $13,108.48 $11,401.14
Apr-89 $11,921.16 $13,788.81 $11,478.07
May-89 $12,054.17 $14,347.26 $11,568.44
Jun-89 $12,103.96 $14,265.48 $11,650.50
Jul-89 $12,471.76 $15,553.66 $11,731.53
Aug-89 $12,664.02 $15,858.51 $11,818.24
Sep-89 $12,773.00 $15,794.12 $11,895.60
Oct-89 $12,907.45 $15,427.38 $11,976.07
Nov-89 $13,218.37 $15,742.10 $12,058.30
Dec-89 $13,496.26 $16,119.91 $12,131.48
Jan-90 $13,025.76 $15,037.62 $12,200.26
Feb-90 $13,330.71 $15,231.30 $12,269.55
Mar-90 $13,766.46 $15,634.93 $12,348.58
Apr-90 $13,827.80 $15,244.30 $12,433.45
May-90 $14,257.18 $16,730.46 $12,517.64
</TABLE>

14
<PAGE> 18

15
<PAGE> 19

16
<PAGE> 20
This chart shows the growth of a $10,000 investment made ten years ago. It
assumes all distributions were reinvested in additional shares.

<TABLE>
<CAPTION>
==============================================
Index Plus Fund
Average Annual Total Returns
As Of December 31, 1996
- ----------------------------------------------
<S> <C>
One Year 10.53%
Five Years 7.91%
Ten Years 9.88%
==============================================
</TABLE>

Performance data represents past performance and your investment return and
principal value of an investment will fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost.

OVERVIEW

The Index Plus Fund is designed for conservative investors whose investment
objective is to maximize total rate of return over the long term.

<TABLE>
<CAPTION>
========================================================
Top Ten Holdings
As Of December 31, 1996
(as a percentage of portfolio)
- --------------------------------------------------------
<S> <C>
General Electric Company 6.61%
Coca-Cola Co. 5.30%
Exxon Corp. 4.92%
Intel Corporation 4.35%
Merck & Company 3.90%
International Business Machines Corp. 3.23%
AT&T Corporation 2.83%
Johnson & Johnson 2.68%
Bristol-Myers Squibb Company 2.20%
DuPont E.I. de Nemours 2.14%
- --------------------------------------------------------
</TABLE>

17
<PAGE> 21
RISK/REWARD CHARTS

(Insert Risk/Reward Charts Here)

Index Plus Fund Plot Points - Risk/Reward Charts

5 Years
12/31/91 - 12/31/96

<TABLE>
<CAPTION>
Risk Return
---- ------
<S> <C> <C>
U.S. Treasury bills
(30 day) 0.31 4.22%
Index Plus 3.59 7.91%
S&P 500 8.60 15.22%
</TABLE>

10 Years
12/31/86 - 12/31/96

<TABLE>
<CAPTION>
Risk Return
---- ------
<S> <C> <C>
U.S. Treasury bills
(30 day) 0.49 5.44%
Index Plus 7.63 9.88%
S&P 500 14.35 15.26%
</TABLE>

These charts show that, in general, more risk must be taken to earn higher
total returns. Any investment can be shown on the graph by plotting its risk
(standard deviation) and its reward (average annual total return). The charts
show three points. One point shows 30-day U. S. Treasury bills, one point shows
the S&P 500 Index, and the third point shows the Index Plus Fund. The line
connecting Treasury bills and the S&P 500 Index shows all the possible outcomes
if an investment had been allocated between these two choices in varying
proportions. When the Index Plus Fund point appears above the line, it shows
that the Fund earned a higher-than-expected return during the period covered by
the chart, considering the amount of risk it took to earn that return. When the
point appears below the line, it shows the reverse. The next ten years may be
quite different in terms of risk and reward for all three investments shown on
the charts.

18
<PAGE> 22
MID CAP INDEX FUND INFORMATION

GROWTH OF $10,000 CHART

(Insert Chart Here)

Mid Cap Index Fund Plot Points - Growth of $10,000 Chart

<TABLE>
<CAPTION>
Mid Cap S&P 500 30-day T-bills
------- ------- --------------
<S> <C> <C> <C>
Sep-92 $10,000.00 $10,000.00 $10,000.00
Oct-92 $9,920.00 $10,034.50 $10,023.46
Nov-92 $10,049.95 $10,376.17 $10,051.75
Dec-92 $10,069.75 $10,503.49 $10,075.22
Jan-93 $10,139.94 $10,591.30 $10,097.48
Feb-93 $10,280.37 $10,735.66 $10,123.11
Mar-93 $10,340.51 $10,962.18 $10,147.11
Apr-93 $10,170.00 $10,697.23 $10,169.11
May-93 $10,320.41 $10,983.38 $10,194.92
Jun-93 $10,230.11 $11,015.56 $10,219.41
Jul-93 $10,169.96 $10,971.27 $10,245.00
Aug-93 $10,470.89 $11,387.53 $10,271.25
Sep-93 $10,310.37 $11,300.18 $10,293.95
Oct-93 $10,410.69 $11,533.98 $10,319.59
Nov-93 $10,360.51 $11,424.06 $10,342.95
Dec-93 $10,591.24 $11,562.18 $10,368.84
Jan-94 $10,820.54 $11,955.30 $10,390.82
Feb-94 $10,674.57 $11,630.71 $10,418.82
Mar-94 $10,174.25 $11,123.61 $10,447.07
Apr-94 $10,215.97 $11,266.22 $10,479.97
May-94 $10,143.02 $11,451.09 $10,512.65
Jun-94 $9,767.73 $11,170.43 $10,541.57
Jul-94 $10,122.20 $11,537.26 $10,580.45
Aug-94 $10,612.12 $12,010.29 $10,619.16
Sep-94 $10,403.59 $11,716.64 $10,659.94
Oct-94 $10,518.24 $11,979.91 $10,699.28
Nov-94 $10,049.12 $11,543.61 $10,746.68
Dec-94 $10,049.12 $11,714.80 $10,791.34
Jan-95 $10,175.00 $12,018.56 $10,834.32
Feb-95 $10,636.55 $12,486.92 $10,884.36
Mar-95 $10,825.36 $12,855.41 $10,932.80
Apr-95 $10,951.24 $13,234.01 $10,991.35
May-95 $11,255.44 $13,762.97 $11,043.17
Jun-95 $11,633.07 $14,082.68 $11,093.10
Jul-95 $12,147.06 $14,549.66 $11,144.84
Aug-95 $12,335.87 $14,586.18 $11,192.87
Sep-95 $12,598.63 $15,201.72 $11,245.63
Oct-95 $12,283.93 $15,147.45 $11,292.87
Nov-95 $12,713.86 $15,812.42 $11,348.01
Dec-95 $12,629.95 $16,116.97 $11,396.55
Jan-96 $12,814.86 $16,665.59 $11,441.09
Feb-96 $13,206.48 $16,820.08 $11,486.20
</TABLE>

19
<PAGE> 23

This chart shows the growth of a $10,000 investment at the Fund's inception. It
assumes all distributions were reinvested in additional shares.

<TABLE>
<CAPTION>
============================================
Mid Cap Index Fund
Average Annual Total Returns
As Of December 31, 1996
- --------------------------------------------
<S> <C>
One Year 15.33%
Five Years N/A
Life of Fund 9.25%
============================================
</TABLE>

OVERVIEW

The Mid Cap Index Fund is designed for an aggressive investor who seeks
long-term growth of capital and a secondary objective of conserving principal.

<TABLE>
<CAPTION>
========================================================
Top Ten Holdings
As Of December 31, 1996
(as a percentage of portfolio)
- --------------------------------------------------------
<S> <C>
U.S. Robotics 0.92%
Parametric Technology Corporation 0.90%
Thermon Electron Corporation 0.87%
Coca-Cola Enterprises Inc. 0.85%
HEALTHSOUTH Rehabilitation Corp. 0.84%
Cardinal Health, Inc. 0.83%
AFLAC Incorporated 0.82%
Charles Schwab Corporation 0.81%
Franklin Resources, Inc. 0.76%
State Street Boston Corporation 0.72%
========================================================
</TABLE>

<PAGE> 24
SMALL CAP INDEX FUND INFORMATION

GROWTH OF $10,000 CHART

(Insert Chart Here)

Small Cap Plot Points - Growth of $10,000 Chart

<TABLE>
<CAPTION>
Small Cap S&P 500 30-day T-bills
--------- ------- --------------
<S> <C> <C> <C>
$10,000.00 $10,000.00 $10,000.00
Jun-93 $10,100.00 $10,029.30 $10,025.38
Jul-93 $10,179.99 $9,988.98 $10,049.46
Aug-93 $10,539.96 $10,367.96 $10,074.63
Sep-93 $10,639.98 $10,288.44 $10,100.44
Oct-93 $10,579.97 $10,501.31 $10,122.76
Nov-93 $10,449.94 $10,401.23 $10,147.97
Dec-93 $10,649.96 $10,526.98 $10,170.94
Jan-94 $10,927.81 $10,884.90 $10,196.40
Feb-94 $10,866.07 $10,589.38 $10,218.02
Mar-94 $10,361.88 $10,127.68 $10,245.55
Apr-94 $10,310.39 $10,257.52 $10,273.33
May-94 $10,156.04 $10,425.84 $10,305.69
Jun-94 $9,806.16 $10,170.30 $10,337.83
Jul-94 $9,981.11 $10,504.30 $10,366.27
Aug-94 $10,516.19 $10,934.97 $10,404.49
Sep-94 $10,248.66 $10,667.61 $10,442.56
Oct-94 $10,330.96 $10,907.31 $10,482.67
Nov-94 $9,878.21 $10,510.07 $10,521.35
Dec-94 $10,011.97 $10,665.93 $10,567.96
Jan-95 $9,856.02 $10,942.50 $10,611.88
Feb-95 $10,271.88 $11,368.93 $10,654.15
Mar-95 $10,427.83 $11,704.43 $10,703.36
Apr-95 $10,646.16 $12,049.12 $10,750.99
May-95 $10,906.08 $12,530.73 $10,808.56
Jun-95 $11,249.17 $12,821.82 $10,859.52
Jul-95 $11,862.57 $13,246.99 $10,908.62
Aug-95 $12,101.69 $13,280.24 $10,959.51
Sep-95 $12,112.09 $13,840.66 $11,006.73
Oct-95 $11,623.45 $13,791.25 $11,058.61
Nov-95 $11,987.26 $14,396.69 $11,105.07
Dec-95 $12,195.24 $14,673.97 $11,159.29
Jan-96 $12,173.17 $15,173.47 $11,207.02
Feb-96 $12,471.17 $15,314.13 $11,250.82
Mar-96 $12,846.42 $15,461.60 $11,295.18
Apr-96 $13,475.51 $15,689.51 $11,347.14
May-96 $13,861.86 $16,094.14 $11,394.80
Jun-96 $13,254.98 $16,155.46 $11,440.38
Jul-96 $12,316.93 $15,441.71 $11,491.86
Aug-96 $13,001.26 $15,767.38 $11,538.98
Sep-96 $13,520.01 $16,654.76 $11,589.75
Oct-96 $13,442.81 $17,114.10 $11,638.42
</TABLE>

21
<PAGE> 25

This chart shows the growth of a $10,000 investment at the Fund's inception. It
assumes all distributions were reinvested in additional shares.

<TABLE>
<CAPTION>
============================================
Small Cap Index Fund
Average Annual Total Returns
As Of December 31, 1996
- --------------------------------------------
<S> <C>
One Year 17.04%
Five Years N/A
Life of Fund 10.57%
- --------------------------------------------
</TABLE>

OVERVIEW

The Small Cap Index Fund is designed for an aggressive investor who seeks
long-term growth of capital.

<TABLE>
<CAPTION>
========================================================
Top Ten Holdings
As Of December 31, 1996
(as a percentage of portfolio)
- --------------------------------------------------------
<S> <C>
Western Digital Corp. 1.40%
Rowan Companies, Inc. 1.10%
Jones Apparel Group Inc. 1.09%
Noram Energy Corp. 1.08%
Standard Federal Bank 1.04%
Interstate Bakeries Corporation 1.04%
BJ Services Company 1.03%
Smith International, Inc. 1.02%
First American Corp. of Tennessee 1.00%
Nabors Industries, Inc. 0.95%
- --------------------------------------------------------
</TABLE>

22
<PAGE> 26

PORTFOLIO MANAGER PROFILE

J. PATRICK ROGERS, CFA

Portfolio Manager from 1997

Co-Portfolio Manager from 1994
MBA Xavier University 1994
BBA University of Notre Dame 1986
Age 33

J. Patrick Rogers, CFA, joined Gateway Investment Advisers, Inc. in 1989
and has been its president since 1995. He is the portfolio manager for the
Index Plus Fund, the Mid Cap Index Fund, the Small Cap Index Fund, and the
Cincinnati Fund.

He was awarded the Martin B. Friedman Award at Xavier University which
is given annually to the most outstanding MBA student. Mr. Rogers is a frequent
speaker at various individual investor groups, including AAII, and is active in
many industry associations, including the 100% No-Load Mutual Fund Council.

He and his wife, Elizabeth, have two children.

<PAGE> 27

DIVIDENDS AND DISTRIBUTIONS

GATEWAY INVESTORS MAY REINVEST THEIR DIVIDENDS AND DISTRIBUTIONS AT NO CHARGE.

Shareholders of each Gateway fund may elect to receive distributions
either in cash or in additional shares of a fund. To receive your distributions
in cash, please mark the appropriate box on the New Account Application Form.
Once your account is opened, you may change the way your distributions are
handled by writing or calling Gateway.

GATEWAY INDEX PLUS FUND

The Index Plus Fund normally declares dividends at the end of March,
June, September, and December. The amount of the quarterly dividend is based on
interest earned plus common stock dividends received by the Fund, minus
expenses.

If the Fund has net capital gains from stock or option transactions, it
normally declares a capital gains distribution at the end of December. The
capital gains distribution is calculated in accordance with tax regulations and
has varied substantially from year to year.

GATEWAY MID CAP INDEX FUND AND SMALL CAP INDEX FUND

The Mid Cap Index Fund and the Small Cap Index Fund each declares
dividends and net capital gains, if any, at the end of December.

FUND PRICING WHEN DIVIDENDS ARE DECLARED

The price of a Gateway fund is affected by its declaration of
dividends and capital gains distributions. The price of a fund, as adjusted for
market activity, generally drops by the amount of the declared dividend and
capital gains distribution. As an example, assume that on December 31, the
Gateway Index Plus Fund declares a dividend in the amount of $0.50 per share.
If the Fund's price per share was $16.50 on December 30, and if there was no
change in the value of the Fund's investments due to market activity, the
Fund's price on December 31 would be $16.00. The decline of $0.50 per share
would be the result of the declaration of the $0.50 dividend.

TAX CONSEQUENCES OF BUYING A DIVIDEND

If you buy fund shares just before the fund declares a dividend, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution. In the example above, if you bought shares of
the Gateway Index Plus Fund on December 30, you would pay $16.50 per share. On
December 31, the Fund would pay you $0.50 per share as a dividend and your
shares would be worth $16.00 per share. The dividend paid to you would
generally be included in your gross income for tax purposes, whether or not you
reinvested the dividend. For this reason, you should carefully consider the tax
consequences of buying shares in a Gateway fund in late December.

<PAGE> 28

ABOUT THE INVESTMENT ADVISER

INVESTMENT ADVISER

Gateway Investment Advisers, L.P. ("Adviser"), a Delaware limited
partnership, has acted as the investment adviser for the funds since December
15, 1995. Gateway Investment Advisers, Inc. ("GIA") provided investment
advisory services to the funds from their formation until December 15, 1995.
The Adviser is the successor in interest to the assets, business, and personnel
of GIA. The Adviser is a limited partnership in which GIA is the general
partner with a 76% partnership interest. The sole limited partner of the
Adviser is Alex. Brown Investments Incorporated, an affiliate of Alex. Brown &
Sons Incorporated, a nationally known investment banking firm and registered
broker/dealer located in Baltimore, Maryland. The principal and controlling
shareholders of GIA are Walter G. Sall and J. Patrick Rogers. As of December
31, 1995, the Adviser had approximately $3850 million in assets under its
management, including approximately $221 million in assets invested in the
funds including the Cincinnati Fund. The Adviser has entered into an Advisory
Referral Agreement with Alex. Brown & Sons Incorporated under which the Adviser
will pay a referral fee for those shares of the funds that have been directed
to the Adviser by Alex. Brown & Sons Incorporated.

The Small Cap Index Fund's portfolio holds stock of Alex. Brown & Sons
Incorporated, an affiliate of Alex. Brown Investments Incorporated, because
this security is a part of the Wilshire Small Cap Index. This stock is owned in
proportion to its representation in the Index.

ADVISORY SERVICES

The Adviser provides each fund with investment research and advice. The
Adviser also places with brokers each fund's buy and sell orders for portfolio
securities. When the Adviser places these orders, it uses its best efforts to
obtain the most favorable price and execution available for the fund, except to
the extent that the fund may be permitted to pay higher commissions for
brokerage and research services pursuant to Section 28(e) of the Securities
Exchange Act of 1934. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., the Adviser may consider
sales of fund shares as a factor in the selection of brokers to execute fund
portfolio transactions. Because the Board of Trustees believes that in certain
circumstances it is advantageous to the Trust to execute portfolio transactions
through Alex. Brown & Sons Incorporated, each fund may pay brokerage
commissions to that broker.

ADVISORY FEES

Each fund pays the Adviser an advisory fee calculated at an annual rate
of 0.90% of the first $50 million of the average daily net asset value of the
fund, 0.70% of the average daily net asset value of the fund in excess of $50
million but less than $100 million, and 0.60% on the average daily net asset
value of the fund in excess of $100 million. The advisory contracts require the
Adviser to waive fees as necessary to limit the Mid Cap Index Fund's expense
ratio to 1.50% of its average daily net assets and the Small Cap Index Fund's
expense ratio to 2.00% of its average daily net assets. The Adviser waived
advisory fees in accordance with the advisory contracts of $54,410 for the Mid
Cap Index Fund and $91,823 for the Small Cap Index Fund in 1996. Any
contractual waiver will not exceed the aggregate advisory fee payable by any
fund for the applicable year.

FUND EXPENSES

Each fund pays all of its ordinary business expenses, other than
advertising and marketing expenses which are paid by the Adviser. Ordinary
business expenses include the advisory fees of the Adviser, custodial fees,
brokerage commissions, fees paid to the Adviser for providing shareholder
services, expenses incurred in the registration of the fund shares with federal
and state securities agencies, and expenses of printing and distributing a
fund's prospectus and shareholder reports. Expenses applicable to more than one
fund are either allocated on the basis of the number of shareholders or the net
assets in each fund, including the Cincinnati Fund. These collective expenses
include, but are not limited to, certain printing and mailing costs,
professional fees, and insurance costs.

The Adviser provides shareholder, transfer, and dividend disbursing
services to each fund. The Adviser charges each fund a monthly minimum fee of
$2,500 for these shareholder services. Each fund reimburses the Adviser for
printing, mailing, compliance, and processing expenses associated with
providing shareholder services. The portion of the reimbursement related to
processing expenses cannot exceed 0.20% of the fund's average net assets. Each
fund pays the Adviser a monthly fee of $4,000 for financial and administrative
services provided by the Adviser.

<PAGE> 29

HOW FUND SHARES ARE PRICED

The net asset value (closing share price) of a fund ordinarily is
determined as of the close of the New York Stock Exchange (NYSE) (normally 4:00
P.M. Eastern Time) on each day during which the NYSE is open for trading. Under
unusual circumstances, the net asset value may be determined at other times as
authorized by the Board of Trustees. Net asset value is determined by deducting
the liabilities of a fund from the market or fair value of its assets.

The funds normally value stocks and options at the average of the
closing bid and asked quotations. Under normal circumstances, closing option
quotations are considered to be reflective of the option contract values as of
the stock market close and will be used to value the option contracts.
Securities for which market quotations are not readily available, securities in
which trading has been suspended during the day, and all other assets are
valued at fair value. Furthermore, if the Adviser determines that closing
options quotations do not reflect option contract values as of the close of the
NYSE, options are valued at fair value. Fair value is determined in good faith
under procedures adopted by the Board of Trustees.

<PAGE> 30

TAXES

DIVIDENDS AND DISTRIBUTIONS

Each Gateway fund intends to distribute to its shareholders
substantially all of its net investment income and net capital gains, as
determined in accordance with appropriate tax regulations.

TAXES ON DIVIDENDS AND DISTRIBUTIONS

Each January you will receive a Form 1099-DIV from Gateway. It will show
the amount and federal income tax treatment of all distributions paid to you
during the year. Distributions of any net investment income and net realized
short-term capital gains are taxable to you as ordinary income, whether or not
you reinvest. Distributions of net long-term capital gains are taxable as
long-term capital gains, whether or not you reinvest and regardless of how long
you held your fund shares.

TAXES ON REDEMPTIONS AND EXCHANGES

Redemptions, including exchanges between Gateway funds, will be reported
to you on Form 1099-B.

TAXES ON IRAS

Contributions, investments, and distributions with respect to IRAs are
subject to specific IRS rules. The IRA Investment Kit contains additional
information about these rules.

ADDITIONAL INFORMATION

The tax discussion set forth above and in the SAI is included for
general information only. You must determine the applicability of federal,
state, and local taxes to dividends and distributions received on your shares
of the fund and to proceeds received from redemptions or exchanges of fund
shares. Prospective investors should consult their own tax advisors concerning
the tax consequences of an investment in a Gateway fund.

<PAGE> 31

INVESTMENT PRACTICES

GATEWAY INDEX PLUS FUND

The investment objective of the Index Plus Fund is to achieve a high
total return at a reduced level of risk. The Fund is designed for conservative
investors who want to maximize total rate of return over the long term.

Investment Practices: The Fund attempts to achieve its investment
objective primarily by investing in the 100 stocks included in the S&P 100
Stock Index (the "100 Index") and by selling call options on the 100 Index. The
proportion of the Fund's assets invested in each stock held in the Fund's
portfolio is substantially similar to the proportion of the 100 Index
represented by the stock. For example, if a stock represents 2% of the value of
the 100 Index, the Fund invests approximately 2% of its assets in the stock.
The Adviser seeks to maintain a correlation of at least 99% between the
composition of the 100 Index and the Fund's portfolio. The Adviser monitors the
composition of the 100 Index on a daily basis and makes adjustments to the
Fund's portfolio, as needed.

When the Fund sells call options on the 100 Index, it receives cash from
the purchasers of the options. By selling options, the Fund attempts to earn a
greater total return over the long term than it would have earned by investing
only in the stocks in the 100 Index. Selling index call options reduces the
risk of owning stocks, but limits the opportunity to profit from an increase in
the market value of stocks. The Fund occasionally buys index put options in an
attempt to protect the Fund from a significant decline in the market in a short
period of time. The value of a put option generally increases as stock prices
decrease.

The Fund is not affiliated with or sponsored by Standard and Poor's
Corporation.

GATEWAY MID CAP INDEX FUND

The Mid Cap Index Fund's primary investment objective is long-term
growth of capital with a secondary objective of conserving principal.

Investment Practices: The Fund attempts to achieve its investment
objectives primarily by investing in the 400 stocks included in the S&P MidCap
400 Index (the "400 Index") and by purchasing put or call options on an index
as market conditions warrant. The Adviser seeks to maintain a correlation of at
least 90% between the composition of the 400 Index and the Fund's portfolio.
The Adviser monitors the composition of the 400 Index on a daily basis and
makes adjustments to the Fund's portfolio, as needed.

At times, the Fund may purchase index put options to reduce the risk of
principal loss. The Fund may also buy index call options to increase the
potential for gain.

The 400 Index consists of common stock of 400 companies with a median
market capitalization of $1.9 billion, selected to reflect the stock price
performance of companies in the middle capitalization range. The 400 Index was
developed by Standard & Poor's Corporation in 1991.

The Fund is not affiliated with or sponsored by Standard and Poor's
Corporation.

GATEWAY SMALL CAP INDEX FUND

The investment objective of the Small Cap Index Fund is to achieve
long-term growth of capital.

Investment Practices: The Fund attempts to achieve its investment
objective primarily by investing in the 250 stocks included in the Wilshire
Small Cap Index (the "250 Index") and by purchasing put or call options on an
index as market conditions warrant. The Adviser seeks to maintain a correlation
of at least 90% between the composition of the 250 Index and the Fund's
portfolio. The Adviser monitors the composition of the 250 Index on a daily
basis and makes adjustments to the Fund's portfolio, as needed.

At times, the Fund may purchase index put options to reduce the risk of
principal loss. The Fund may also buy index call options to increase the
potential for gain.

The 250 Index focuses on capturing the performance profile of the small
capitalization sector of the United States equity market. The 250 Index
consists of common stock of 250 companies with a median market capitalization
of $676 million and is designed to accurately reflect the general
characteristics of small capitalization companies. The 250 Index was developed
in 1993 by Wilshire Associates, Inc. in conjunction with the Pacific Stock
Exchange.

The Fund is not affiliated with or sponsored by Wilshire Associates,
Inc. or the Pacific Stock Exchange.

SELLING INDEX CALL OPTIONS

The Index Plus Fund regularly sells call options on the 100 Index. If
you are a shareholder in the Fund, it is important for you to understand some
basic information about this investment strategy and the risks involved in
option transactions.

It is easier to understand how index options work if you know some basic
concepts about a call option on an individual stock. A covered call option on
an individual stock is an option sold (written) on an individual stock owned by
the seller. The seller receives cash (a premium) from the purchaser. If the
option is not exercised by the purchaser, the seller realizes a gain equal to
the premium. This gain may be offset by a decline in the market value of the
underlying security. If the option is exercised by the purchaser, the purchaser
pays the seller the exercise price and the seller delivers the underlying
security. The premium, the exercise price, and the

<PAGE> 32

market value of the underlying security determine the gain or loss realized by
the seller. The seller's obligation terminates when the option expires or when
the seller enters into a closing purchase transaction. The cost of entering
into a closing transaction reduces any gain realized by the seller.

A covered call option on a securities index is similar to an option on
an individual stock. However, the seller does not deliver the underlying
securities if the option is exercised. Index option transactions are settled in
cash. The seller pays the purchaser an amount equal to the difference between
the closing price of the index and the exercise price of the option. The
premium and the settlement amount determine the gain or loss realized by the
seller.

RISK FACTORS

There are risks inherent in all securities investments. Thus, there can
be no assurance that a fund will be able to achieve its investment
objective(s). Because each fund has long-term investment objectives, none may
be an appropriate investment for persons intending to hold fund shares for less
than six months.

Investment in Smaller Companies: Investments in companies with smaller
capitalization are generally more speculative than investments in companies
with larger capitalization. However, stocks of smaller companies tend to have
more growth potential. The Mid Cap Index Fund and the Small Cap Index Fund
attempt to provide shareholders with the opportunity to participate in the
potential long-term growth of smaller companies.

Selling Index Call Options: Option transactions involve risks not
generally associated with investments in stocks. The sale of index call options
by the Index Plus Fund limits the Fund's opportunity to profit from an increase
in the market value of the underlying index. If the Fund sells exchange-traded
call options to hedge its portfolio, the purchaser usually has the right to
exercise the options at any time prior to the expiration date. The purchaser
normally exercises the options when it is to the purchaser's advantage rather
than the Fund's advantage. In addition, the Fund generally does not receive
notice of the exercise until the next business day. As a result, the Fund's
portfolio is not fully hedged between the time the options are exercised and
the time the Fund sells new call options on the next business day.

Purchasing Index Options: The purchase of index options involves a risk
of loss of all or part of the cash paid for the options.

Closing Option Transactions: There can be no assurance that a ready
market will exist for any particular option at a specific time. Closing
transactions for over-the-counter options generally must be negotiated with the
other party. These factors could limit the Adviser's ability to close a
particular option transaction at a fair price or in a timely manner or to carry
out a particular investment or hedging strategy. A Gateway fund will enter into
an option transaction only if there appears to be a ready market for such
option or the fund can effectively close its position by entering into an
offsetting position.

Hedging Strategies: The use of index options to protect or hedge a
Gateway fund's portfolio will not fully protect the fund against declines in
the market value of the securities held in the fund's portfolio. The Adviser
may choose not to use all of the available hedging strategies to protect a
fund's portfolio. The Adviser may also hedge a fund's portfolio at an
inappropriate time or incorrectly anticipate market conditions. In addition, a
fund could experience a loss on both its portfolio securities and the options
used to hedge these securities. Under unusual market conditions, such as an
interruption in trading in an index or certain stocks in the index, the Adviser
may be unable to hedge a fund's portfolio effectively. Restrictions imposed by
regulatory agencies may also adversely affect a fund's hedging strategy.

Regulatory Issues: Due to the option strategies employed by the Adviser
in managing the portfolios of each Gateway fund, it may be more difficult for
the fund to qualify as a regulated investment company. Failure to qualify as a
regulated investment company could subject the fund to certain tax liabilities
and could affect the ability of the fund to meet the regulatory requirements of
certain states. In this case, the Adviser might employ investment techniques
different from those usually employed by the fund in order to reduce the
potential tax liability and to resolve the regulatory issues.

OTHER INVESTMENT STRATEGIES

Each Gateway fund may hold cash for purposes of liquidity or for
temporary defensive purposes. Cash is normally invested in repurchase
agreements. Cash may be also invested in securities of the U. S. government or
any of its agencies, bankers acceptances, commercial paper, or certificates of
deposit. For temporary defensive purposes, a fund may hold up to 100% of its
assets in such instruments.

Repurchase Agreements: In a repurchase agreement, a fund acquires
securities suitable for investments in accordance with its policies and the
seller (usually a bank) agrees at the time of sale to repurchase such
securities at an agreed-upon date, price, and interest rate. Investments in
repurchase agreements are subject to the risk that the selling bank may default
in its repurchase obligation. Investments in repurchase agreements are also
subject to the risk that the selling bank may become financially insolvent
which could prevent or delay the fund's disposition of the collateral held as
security for these transactions. Each Gateway fund's repurchase agreements are
fully collateralized and the fund takes possession of such collateral, thus
reducing the risk of default. The collateral is subject to continuing market
fluctuations and its value could be more or less than the repurchase price.

<PAGE> 33

ADDITIONAL INFORMATION

For further information concerning the investment practices described
above and certain risks associated with them, see "Investment Objectives and
Practices" in the SAI.

FUNDAMENTAL POLICIES

The investment objectives and investment restrictions applicable to each
Gateway fund are designated as fundamental policies of the fund. Such
fundamental policies may not be changed without approval of the holders of a
majority of the fund's outstanding shares.

The investment practices and strategies of a fund, as described above,
are not fundamental policies and may be changed without shareholder approval.

<PAGE> 34

INVESTMENT RESTRICTIONS

Certain investment restrictions applicable to the Gateway funds are
described below. The complete text of these restrictions is set forth in the
SAI under the caption "Other Information about Investment Practices and
Restrictions." Additional investment restrictions pertaining to the funds are
set forth in the SAI under the same caption.

Options on Securities Indexes: No Gateway fund may purchase or sell put
options, call options or combinations thereof except in accordance with its
investment objectives and practices and the following restrictions. The Index
Plus Fund may sell covered call options on securities indexes. The Index Plus
Fund may purchase exchange-traded put options on securities indexes, provided
that after any such purchase not more than 5% of the fund's net assets would be
invested in premiums on the purchase of such options. The Mid Cap Index Fund
and the Small Cap Index Fund may purchase exchange-traded call and put options
on securities indexes, provided that after any such purchase not more than 5%
of the fund's net assets would be invested in premiums on the purchase of such
options. Each Gateway fund may enter into closing transactions with respect to
options.

Repurchase Agreements: No Gateway fund may invest more than 5% of its
total assets in repurchase agreements with a maturity longer than seven days.

<PAGE> 35

GENERAL INFORMATION ABOUT THE GATEWAY TRUST

THE TRUST AND THE BOARD OF TRUSTEES

The Gateway Trust is an open-end management investment company
established as an Ohio business trust in 1986. From 1977 to 1986, the Trust's
predecessor operated as a Maryland corporation. The Trust has four series: the
Gateway Index Plus Fund, the Gateway Mid Cap Index Fund (formerly the Gateway
Capital Fund), the Gateway Small Cap Index Fund, and the Cincinnati Fund. The
Cincinnati Fund is offered by a separate prospectus.

The Board of Trustees is generally responsible for management of the
business and affairs of the Trust. The Trustees formulate the general policies
of the Trust, approve contracts, and authorize the Trust officers to carry out
the decisions of the Board.

Under the Trust's Second Amended Agreement and Declaration of Trust, no
annual or regular meetings of shareholders are required. As a result, the
Trustees will continue in office until resignation, death, or removal. Trustee
vacancies normally are filled by vote of the remaining Trustees. If at any time
less than a majority of the Trustees in office has been elected by the
shareholders, the Trustees must call a shareholder meeting for the purpose of
electing Trustees.

SHAREHOLDER MEETINGS AND VOTING

A meeting of shareholders must be called if shareholders holding at
least 10% of the Trust's shares (or shareholders holding at least 10% of any
fund's shares as to any matter affecting only such fund) file a written request
for a meeting.

On any matter submitted to a vote of shareholders, shares are voted by
fund, unless an aggregate vote is required by the Investment Company Act of
1940. Shares are voted by fund with respect to the approval or amendment of
such fund's advisory contract. As of February 1, 1997, the Adviser held, in a
fiduciary capacity, more than 25% of the outstanding shares of the Mid Cap
Index Fund and the Small Cap Index Fund. Thus, the Adviser may be deemed to be
a control person of each of those funds as of that date. As of x, 1997, Alex.
Brown & Sons Incorporated held more than 25% of the outstanding shares of the
Index Plus Fund. Thus, it may be deemed to be a control person of this fund as
of that date.

As of December 31, 1996, the shareholders of the Index Plus Fund
controlled approximately 84% of the outstanding shares of the Trust. Therefore,
in the foreseeable future, when the shareholders of the Trust elect the
Trustees or vote in the aggregate on any other issue, the shareholders of the
Index Plus Fund will be able to elect the Trustees or to decide the issue.
Shareholders do not have cumulative voting rights as to the election of
Trustees. As a result, if a shareholder meeting is called to elect Trustees, a
majority of the shares voting at the meeting can elect all of the Trustees.

32
<PAGE> 36
PROSPECTUS

May 1, 1997

CINCINNATI FUND

The Cincinnati Fund seeks capital appreciation through investment in
the common stock of companies with an important presence in the Greater
Cincinnati Area. Through the use of a proprietary model, portfolio stocks are
selected on the basis of level of employment and nature of operations in the
Greater Cincinnati Area. Certain industry diversification, liquidity, market
capitalization, and listing requirements are also included in the model.

THE GATEWAY FAMILY OF MUTUAL FUNDS

The Cincinnati Fund ("Fund") is a series of The Gateway Trust
("Trust"). This Prospectus sets forth concisely the information about the Fund
that you should know before investing. You should keep it for future reference.
Additional information has been filed with the Securities and Exchange
Commission ("SEC") and is included in the Statement of Additional Information
of the Fund dated May 1, 1997. The Statement of Additional Information ("SAI")
is incorporated herein by reference. You can obtain more information about the
Fund or free copies of the SAI by writing or calling: THE GATEWAY TRUST, P. O.
BOX 5211, CINCINNATI, OH 45201-5211, (800) 354-5525. The SEC maintains a Web
Site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC.

1
<PAGE> 37

Table Of Contents

<TABLE>
<S> <C>
Fees And Expenses................................ The Cincinnati Fund is 100 % no-load. There are no sales charges, 12b-1 fees,
redemption fees, or annual account charges when you invest in the Fund.

Financial Highlights............................. This table displays financial information for the Cincinnati Fund.

How To Open An Account........................... New investors can open an account by mail or by telephone.

How To Purchase Additional Shares................ Shares may be purchased by check, by wire transfer, or by automatic
withdrawals from your bank account.

How To Redeem Shares............................. Redemption requests can be made by mail or by telephone.

Additional Shareholder Information............... Additional information about buying and selling shares.

Performance Information &
Explanation of Terms............................. Performance information on the Fund.

Dividends And Distributions...................... Investors may reinvest their dividends and distributions at no charge.

How Fund Shares Are Priced....................... The Fund's share price is available 24 hours a day by calling (800) 354-5525.

Portfolio Manager Profile........................ Profile of the portfolio manager.

About The Investment Adviser..................... Gateway Investment Advisers, L.P. provides investment advisory services to
the Fund.

Taxes............................................ Tax information will be reported to you Form 1099.

Investment Practices And Restrictions............ Investment management practices follow specific guidelines. The Fund has
adopted certain investment restrictions.

General Information/The Gateway Trust............ Additional information on The Gateway Trust and its Trustees.
</TABLE>

2
<PAGE> 38

Fees And Expenses

The Cincinnati Fund is 100% no-load. You do not pay any sales charges when you
invest in the Cincinnati Fund.

SHAREHOLDER TRANSACTION EXPENSES

The Cincinnati Fund does not charge a fee for purchases, exchanges, or
redemptions. The Fund is 100% no-load.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load on Purchase None
Maximum Sales Load on
Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
</TABLE>

The custodian for the Fund charges $10 for each wire transfer.

FUND OPERATING EXPENSES

Annual fund operating expenses are paid from the Fund's assets. The
Fund pays an advisory fee to Gateway Investment Advisers, L.P. (the "Adviser").
The Fund also pays other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and Fund reports. The Fund's
expenses are factored into its share price each day and are not charged
directly to shareholder accounts. The investment advisory contract for the Fund
provides for an advisory fee computed at an annual rate of 0.50% of its average
daily net assets. The investment advisory contract requires the Adviser to
waive some or all of its advisory fees as necessary to limit the Fund's ratio
to 2.00% of its average daily net assets. Any contractual waiver will not
exceed the aggregate advisory fee payable by the Fund for the applicable year.
The table presents the advisory fees for the Fund net of the contractual fee
waiver. In addition, the Adviser has voluntarily agreed to reimburse expenses
to the extent required (after giving full effect to the fee waiver) to maintain
the Fund's expense ratio at 2.00%, and the table reflects such reimbursements.
The Fund's actual expense ratio for 1996 was 2.00%. Absent the waiver and
voluntary reimbursements, the advisory fees and operating expenses of the Fund
would have been 0.50% and 2.35%, respectively. The numbers in the following
table are calculated as a percentage of average net assets.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Advisory Fees (after waiver) .15%
12b-1 Fees 0.00%
Other Expenses (after reimbursements) 1.85%
Total Fund Operating Expenses (after waiver and
reimbursements) 2.00%
(The Fund's Expense Ratio)
</TABLE>

3
<PAGE> 39

Fees and Expenses (Continued)

EXAMPLE

Assume that the Fund's annual return is 5% and that its operating
expenses are exactly as previously described in the Fund Operating Expenses
table. For every $1,000 you invested, the table below shows the amount of
expenses you would incur if you sold your shares after the number of years
indicated. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

CINCINNATI FUND

One Year $ 20
Three Years $ 63
Five Years $ 108
Ten Years $ 233

The purpose of this table is to assist you in understanding the direct and
indirect costs and expenses you will bear as a Fund shareholder.

4
<PAGE> 40

Financial Highlights

The following condensed financial information has been audited by Arthur
Andersen LLP, independent public accountants. The audit report on the 1996
financial statements should be read in conjunction with this condensed
financial information. The audit report on the 1996 financial statements is
incorporated by reference in the Statement of Additional Information and is
available from the Trust. The presentation is for a share outstanding
throughout each period.

<TABLE>
<CAPTION>
For the Period from
Year Ended Year Ended November 7, 1994 to
December 31, 1996 December 31, 1995 (3) December 31, 1994
----------------- --------------------- -----------------

<S> <C> <C> <C>
Net asset value, beginning of period $13.12 $ 9.91 $10.00
------ ------ ------
Net investment income 0.02 0.04 0.03
Net gains (losses) on securities 2.60 3.46 (0.12)
------ ------ ------
Total from investment operations 2.62 3.50 (0.09)
------ ------ ------

Dividends from net investment income (0.02) (0.07) 0.00
Distributions from capital gains (0.32) (0.22) 0.00
------ ------ ------
Total distributions (0.34) (0.29) 0.00
------ ------ ------

Net asset value, end of period $15.40 $13.12 $ 9.91
====== ====== ======

TOTAL RETURN 19.98% 35.31% (0.90%)(2)

Net assets, end of period (millions) $8.98 $5.88 $3.23
Ratio of net expenses to average net assets (1) 2.00% 1.98% 1.96%
Ratio of net investment income to average net 0.13% 0.46% 2.24%
assets (1)
Portfolio turnover rate 10% 9% 0% (2)
Average commission per share $0.0381 -- (4) -- (4)
</TABLE>

(1) The ratio of net expenses to average net assets would have increased
and the ratio of net investment income to average net assets would have
decreased by 0.02% in 1995 and 0.04% in 1994 had the Adviser not
voluntarily reimbursed expenses. Ratios are annualized in periods less
than a year.

(2) Not annualized.

(3) On December 15, 1995, Gateway Investment Advisers, L.P. became
investment adviser of the Fund.

(4) Disclosure of average commission per share was not required prior to
the year ended 1996.

Additional information about the performance of the Fund is contained in the
1996 Annual Report to shareholders. An Annual Report may be obtained without
charge by writing THE GATEWAY TRUST, P. O. BOX 5211, CINCINNATI, OH 45201-5211
or by calling (800) 354-5525.

<PAGE> 41

How To Open An Account

The Cincinnati Fund is available for individuals, IRAs, trusts, and pension
plans.

OPENING A NEW ACCOUNT

You may open an account by mail or by telephone. Generally, the
minimum initial investment is $1,000 (or $500 for an IRA account). At its
discretion, the Trust may waive these minimums for investments made by
employer-sponsored qualified retirement plans or through automatic investment
programs. No sales commission is charged by the Fund for purchases or
redemptions of its shares. If your purchase request is received in good order
by 4:00 p.m. Eastern Time, your purchase will be based on that day's closing
price for the Fund.

After your purchase, you will receive a confirmation statement showing the
value of your account. Certificates are not issued for Fund share.

BY MAIL

To open your account by mail, please complete and sign the New Account
Application Form which accompanies this Prospectus. The application has
instructions to assist you. Please indicate the amount of your investment in
the Fund. When you have completed the application, please mail it to: THE
GATEWAY TRUST, SHAREHOLDER SERVICES, P. O. BOX 5211, CINCINNATI, OH 45201-5211.

Please include your check or money order payable to THE GATEWAY TRUST
with your application.

BY TELEPHONE

To open your account by telephone, you must wire your investment to
The Gateway Trust. Please call Gateway shareholder services at (800) 354-5525
for instructions. See Page x for additional information about wire transfers
and telephone instructions.

OPENING A NEW IRA ACCOUNT/TRANSFER OF EXISTING IRA

To open a new IRA in the Fund, please call Gateway shareholder
services at (800) 354-5525 to obtain an IRA Account Application and an IRA
Investment Kit. To transfer an existing IRA from a bank or other mutual fund to
your Gateway/Cincinnati Fund IRA, you must complete an IRA Transfer Form which
is included in the IRA Investment Kit, in addition to an IRA Account
Application. To transfer or roll over funds from an employer-sponsored plan
such as a 401(k) plan, please call Gateway shareholder services at (800)
354-5525 for instructions. GATEWAY IRAS ARE FREE OF ANY ANNUAL CHARGES OR
TRANSACTION FEES.

OPENING A TRUST/PENSION PLAN ACCOUNT

To open a trust account in the Fund, please complete the New Account
Application Form. In the registration section, give the full legal name of the
trust. Pension plans may invest in the Fund by completing the New Account
Application Form.

OPENING A UNIFORM GIFT TO MINORS ACT ACCOUNT

6
<PAGE> 42

How To Purchase Additional Shares

The minimum amount for an additional investment is $100.

You may add to your Gateway account at any time by choosing one of the
following purchase options. The minimum amount for an additional investment is
$100. If your purchase request is received in good order by 4:00 P.M. Eastern
Time, your purchase will be based on that day's closing price for the Fund.

After each purchase you will receive a confirmation statement showing
the value of your account. Certificates are not issued for Fund shares.

BY MAIL

The most common way of purchasing additional shares in the Fund is by
mail. Please send your check or money order and an Additional Investment Form
in a prepaid envelope. Additional Investment Forms and prepaid envelopes are
included with each confirmation statement, quarterly report, and periodic
newsletter sent to you. Please make all checks or money orders payable to THE
GATEWAY TRUST and mail to: THE GATEWAY TRUST, SHAREHOLDER SERVICES, P. O. BOX
5211, CINCINNATI, OH 45201-5211.

BY TELEPHONE

To avoid any mail delay, you may purchase additional shares by wire.
Please call Gateway shareholder services at (800) 354-5525 to arrange a
purchase by wire. You must then instruct your financial institution to wire
funds to: THE GATEWAY TRUST, C/O STAR BANK, N.A., ABA #042-0000-13, CINCINNATI,
OH, YOUR NAME, YOUR GATEWAY ACCOUNT NO. XXXXX, AND THE GATEWAY FUND(S) IN WHICH
YOU WISH TO INVEST.

See Page 9 for additional information about wire transfers and
telephone instructions.

BY AUTOMATIC INVESTMENT PROGRAM

Gateway's Automatic Investment Program is a way to add systematically
to your existing Gateway account. When you use the program, funds are
electronically transferred from your bank account into your Gateway account and
additional shares are then purchased for your account. This service is
available on a monthly or quarterly basis with a minimum of $100 per transfer.
THE AUTOMATIC INVESTMENT PROGRAM IS FREE OF CHARGE. Please call Gateway
shareholder services at (800) 354-5525 to make arrangements to use this
program.

BY EXCHANGE FROM ANOTHER GATEWAY FUND

To purchase shares by exchanging from another Gateway fund, please
call Gateway shareholder services at (800) 354-5525 for instructions. If your
exchange request is received by 4:00 P.M. Eastern Time, the exchange will be
based on that day's closing prices for the funds involved in the exchange.

7
<PAGE> 43

How To Redeem Shares

Investors may redeem shares by writing or calling Gateway.

You may redeem shares from your Gateway account at any time by
choosing one of the following redemption options. If your redemption request is
received in good order by 4:00 P.M. Eastern Time, your redemption will be based
on that day's closing price for the Fund.

The proceeds from your redemption will be mailed or wired, depending
on the method of redemption and your instructions. Normally the proceeds will
be sent on the following business day. Payments to shareholders who have
purchased shares by check will not be made until the purchase check has
cleared, which could take up to fifteen days.

BY MAIL

Redemption requests made in writing should be sent to: THE GATEWAY
TRUST, SHAREHOLDER SERVICES, P. O. BOX 5211, CINCINNATI, OH 45201-5211.

Each redemption request should include a letter of instruction,
specify the number of Fund shares or dollar amount to be redeemed, and should
be signed by all owners of the shares exactly as their names appear on the
account. In certain cases, other supporting legal documents may be required.
The redemption proceeds will be mailed to the address shown on your account.

BY TELEPHONE

Unless you have declined the telephone exchange and/or redemption
privileges, you may redeem your Fund shares by calling Gateway shareholder
services at (800) 354-5525. If you redeem your shares by telephone, the
redemption proceeds will be paid by check to the owner(s) of the shares shown
on Gateway's records and mailed to the address shown on Gateway's records for
your account. Redemption proceeds can be sent by wire if you completed the wire
transfer instructions in your original New Account Application Form or you have
sent separate wire transfer instructions to Gateway. Separate wire transfer
instructions must be signed by all owners of the shares exactly as their names
appear on the account, and the signatures must be guaranteed. The telephone
redemption procedure is not available for IRAs.

SYSTEMATIC WITHDRAWAL PROGRAM

See Page 9 for additional information about redemptions and telephone
instructions.

8
<PAGE> 44

Additional Shareholder Information

FEES CHARGED BY YOUR BROKER OR BANK

If you buy or sell shares of the Fund through a broker, the broker may
charge you additional fees and expenses. If you buy shares through a wire
transfer, The Gateway Trust will not charge you for the wire. Your financial
institution may charge you for this service or for transfers from your bank
account to the Fund through the Automatic Investment Program. If you redeem
shares through a wire transfer, the Trust's custodian will assess a wire charge
of $10. Your institution may also charge you for receiving a wire transfer of
redemption proceeds.

ADDITIONAL IRA INFORMATION

For information about redeeming shares from an IRA, please call
Gateway shareholder services at (800) 354-5525. More detailed information about
transfers to and distributions from an IRA is set forth in the SAI.

TELEPHONE TRANSACTIONS

The Gateway Trust will not be liable for following instructions
received by telephone that it reasonably believes to be genuine. The Trust will
employ reasonable procedures to confirm that telephone instructions are
genuine. All shareholders of the Fund have telephone redemption and exchange
privileges unless the shareholder has specifically declined these privileges.
If you do not wish to have telephone privileges for your account, you must mark
the appropriate section on the New Account Application Form or notify the Trust
in writing. To protect shareholders who have telephone privileges, the Trust
follows certain procedures, including requiring a form of personal
identification before acting upon telephone instructions, making redemption
checks requested by telephone payable only to the owner(s) of the account shown
on the Trust's records, mailing such redemption checks only to the account
address shown on the Trust's records, directing wire redemptions requested by
telephone only to the bank account shown on the Trust's records, providing
written confirmation of any transaction requested by telephone, and normally
tape recording any instructions received by telephone.

AUTOMATIC REDEMPTIONS BY THE TRUST

ADDITIONAL REDEMPTION INFORMATION

Redemption proceeds will be sent to you no later than five business
days after your request is received in good order. The right of redemption may
be suspended in certain circumstances, such as the closing of the New York
Stock Exchange for a period other than weekends or normal holidays.

9
<PAGE> 45

Performance Information & Explanation of Terms

Gateway has become an industry leader in providing prospective investors and
existing shareholders with the most complete information on its no-load funds.

COMPARATIVE PERFORMANCE INFORMATION

The Fund may compare its performance to various indexes, such as the
S&P 500 Index. The Fund may also compare its performance to that of other
mutual funds or categories of mutual funds as reported by independent services,
such as Morningstar, Inc. and Value Line Mutual Fund Survey, or by other
financial publications.

EXPLANATION OF TERMS

Total return is the change in the value of an investment in a fund
over a given period, assuming reinvestment of distributions.

An average annual total return is a rate of return that, if
achieved consistently throughout a given period, would produce a cumulative
total return equal to that actually achieved by the fund over the same period.
Average annual total returns smooth out variations in performance; they are not
the same as actual year-by-year results.

The S&P 500 Index is a widely recognized measure of performance for
the stock market. The S&P 500 figures represent the prices of an unmanaged
index of 500 common stocks and assume reinvestment of all dividends paid on the
stocks in the index.

U. S. Treasury bills are negotiable debt obligations of the United
States government. Since they are secured by the full faith and credit of the
government, they are regarded as risk-free investments. Treasury bills are
short-term securities with maturities of one year or less.

<PAGE> 46

Performance Information (Continued)

Growth of $10,000 Chart

(Insert Chart Here)

<TABLE>
<CAPTION>
Cincinnati Fund Plot Points - Growth of $10,000 Chart

Cincinnati S&P 500 30-day T-bills
Fund
<S> <C> <C> <C>
$10,000.00 $10,000.00 $10,000.00
Nov-94 $9,780.00 $9,635.80 $10,036.91
Dec-94 $9,910.00 $9,778.70 $10,081.37
Jan-95 $10,070.00 $10,032.26 $10,123.26
Feb-95 $10,350.00 $10,423.22 $10,163.58
Mar-95 $10,620.00 $10,730.81 $10,210.53
Apr-95 $10,930.00 $11,046.83 $10,255.96
May-95 $11,340.00 $11,488.37 $10,310.89
Jun-95 $11,650.00 $11,755.25 $10,359.50
Jul-95 $12,150.00 $12,145.05 $10,406.34
Aug-95 $12,310.00 $12,175.53 $10,454.88
Sep-95 $12,739.62 $12,689.34 $10,499.93
Oct-95 $12,689.62 $12,644.04 $10,549.43
Nov-95 $13,169.28 $13,199.11 $10,593.74
Dec-95 $13,409.62 $13,453.33 $10,645.47
Jan-96 $13,460.73 $13,911.28 $10,691.00
Feb-96 $13,920.68 $14,040.24 $10,732.79
Mar-96 $14,544.05 $14,175.45 $10,775.10
Apr-96 $14,554.23 $14,384.39 $10,824.67
May-96 $14,922.16 $14,755.36 $10,870.13
Jun-96 $14,768.91 $14,811.58 $10,913.61
Jul-96 $13,930.77 $14,157.21 $10,962.72
Aug-96 $14,544.01 $14,455.78 $11,007.67
Sep-96 $15,157.18 $15,269.35 $11,056.11
Oct-96 $14,871.01 $15,690.48 $11,102.54
Nov-96 $15,923.73 $16,876.53 $11,148.06
Dec-96 $16,088.22 $16,542.20 $11,199.34
</TABLE>

This chart shows the growth of a $10,000 investment made at the Fund's
inception. It assumes all distributions were reinvested in additional shares.

============================================
Cincinnati Fund
Average Annual Total Returns
As Of December 31, 1996
============================================
One Year 19.98%
Five Years N/A
Life of Fund 24.74%
============================================

11
<PAGE> 47

Dividends And Distributions

Fund shareholders may reinvest their dividends and distributions at no charge.

Shareholders of the Fund may elect to receive distributions either in
cash or in additional shares of the Fund. To receive your distributions in
cash, please mark the appropriate box on the New Account Application Form. Once
your account is opened, you may change the way your distributions are handled
by writing or calling Gateway.

The Fund normally declares dividends and net capital gains, if any, at
the end of December.

FUND PRICING WHEN DIVIDENDS ARE DECLARED

The price of the Fund is affected by its declaration of dividends and
capital gains distributions. The price of the Fund, as adjusted for market
activity, generally drops by the amount of the declared dividend and capital
gains distribution. As an example, assume that on December 31, the Fund
declares a dividend in the amount of $0.50 per share. If the Fund's price per
share was $16.50 on December 30,and there was no change in the value of the
Fund's investments due to market activity, the Fund's price on December 31
would be $16.00. The decline of $0.50 per share would be the result of the
declaration of the $0.50 dividend.

TAX CONSEQUENCES OF BUYING A DIVIDEND

If you buy Fund shares just before the Fund declares a dividend, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution. In the example above, if you bought shares of
the Fund on December 30, you would pay $16.50 per share. On December 31, the
Fund would pay you $0.50 per share as a dividend and your shares would be worth
$16.00 per share. The dividend paid to you would generally be included in your
gross income for tax purposes, whether or not you reinvested the dividend. For
this reason, you should carefully consider the tax consequences of buying
shares in the Fund in late December.

12
<PAGE> 48

How Fund Shares Are Priced

The net asset value (closing share price) of the Fund ordinarily is
determined as of the close of the New York Stock Exchange, normally 4:00 P.M.
Eastern Time on each day during which the Exchange is open for trading. Under
unusual circumstances, the net asset value may be determined at other times as
authorized by the Board of Trustees. Net asset value is determined by deducting
the liabilities of the Fund from the market or fair value of its assets.

The Fund normally values stocks at the average of the closing bid and
asked quotations. Securities for which market quotations are not readily
available, securities in which trading has been suspended during the day, and
all other assets are valued at fair value. Fair value is determined in good
faith under procedures adopted by the Board of Trustees.

<PAGE> 49

PORTFOLIO MANAGER PROFILE

J. Patrick Rogers, CFA
MBA Xavier University 1994
BBA University of Notre Dame 1986

Age 32

J. Patrick Rogers, CFA, portfolio manager of the Cincinnati Fund,
joined Gateway Investment Advisers, Inc. in 1989. He is currently president of
Gateway Investment Advisers, Inc. and portfolio manager for the Index Plus
Fund, the Mid Cap Index Fund, and the Small Cap Index Fund.

He and his wife, Elizabeth, have two children.

14
<PAGE> 50

About The Investment Adviser

INVESTMENT ADVISER

Gateway Investment Advisers, L.P. ("Adviser"), a Delaware limited
partnership, has acted as the investment adviser for the Fund since December
15, 1995. Gateway Investment Advisers, Inc. ("GIA") provided investment
advisory services to the Fund from its formation until December 15, 1995. The
Adviser is the successor in interest to the assets, business, and personnel of
GIA. The Adviser is a limited partnership in which GIA is the general partner
with a 76% partnership interest. The sole limited partner of the Adviser is
Alex. Brown Investments Incorporated, an affiliate of Alex. Brown & Sons
Incorporated, a nationally known investment banking firm and registered
broker/dealer located in Baltimore, Maryland. The principal and controlling
shareholders of GIA are Walter G. Sall and J. Patrick Rogers. As of December
31, 1996, the Adviser had approximately $385 million in assets under its
management, including approximately $221 million in assets invested in the
Gateway funds.

ADVISORY SERVICES

The Adviser provides the Fund with investment research and advice. The
Adviser also places with brokers the Fund's buy and sell orders for portfolio
securities. When the Adviser places these orders, it uses its best efforts to
obtain the most favorable price and execution available for the Fund, except to
the extent that the Fund may be permitted to pay higher commissions for
brokerage and research services pursuant to Section 28(e) of the Securities
Exchange Act of 1934. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., the Adviser may consider
sales of Fund shares as a factor in the selection of brokers to execute Fund
portfolio transactions.

ADVISORY FEES

The Fund pays the Adviser an advisory fee calculated at an annual rate
of 0.50% of the average daily net asset value of the Fund. The advisory
contract requires the Adviser to waive some or all of its advisory fees as
necessary to limit the Fund's expense ratio to 2.00% of its average daily net
assets. Any contractual waiver will not exceed the aggregate advisory fee
payable by the Fund for the applicable year.

FUND EXPENSES

The Fund pays all of its ordinary business expenses, other than
advertising and marketing expenses which are paid by the Adviser. Ordinary
business expenses include the advisory fees of the Adviser, custodial fees,
brokerage commissions, fees paid to the Adviser for providing shareholder
services, expenses incurred in the registration of the Fund shares with federal
and state securities agencies, and the Fund's proportionate share of the
collective general expenses, such as expenses of printing and distributing
shareholder reports. Expenses applicable to more than one of the Gateway funds
are either allocated on the basis of the number of shareholders or net assets
in each fund. These collective expenses include, but are not limited to,
certain printing and mailing costs, professional fees, and insurance costs.

The Adviser provides shareholder, transfer, and dividend disbursing
services to the Fund. The Adviser charges a monthly minimum fee of $2,500 for
these shareholder services. The Fund reimburses the Adviser for printing,
mailing, compliance, and processing expenses associated with providing
shareholder services. The portion of the reimbursement related to processing
expenses cannot exceed 0.20% of the Fund's average net assets. The Fund pays
the Adviser a monthly fee of $4,000 for financial and administrative services
provided by the Adviser

15
<PAGE> 51

Taxes

DIVIDENDS AND DISTRIBUTIONS

The Fund intends to distribute to its shareholders substantially all of
its net investment income and net capital gains, as determined in accordance
with appropriate tax regulations.

TAXES ON DIVIDENDS AND DISTRIBUTIONS

TAXES ON REDEMPTIONS AND EXCHANGES

Redemptions, including exchanges between Gateway funds, will be reported
to you on Form 1099-B.

TAXES ON IRAS

Contributions, investments, and distributions with respect to IRAs are
subject to specific IRS rules. The IRA Investment Kit contains additional
information about these rules.

ADDITIONAL INFORMATION

The tax discussion set forth above and in the SAI is included for
general information only. You must determine the applicability of federal,
state, and local taxes to dividends and distributions received on your shares
of the Fund and to proceeds received from redemptions or exchanges of Fund
shares. Prospective investors should consult their own tax advisors concerning
the tax consequences of an investment in the Fund.

16
<PAGE> 52

Investment Practices And Restrictions

CINCINNATI FUND

The investment objective of the Cincinnati Fund is to achieve capital
appreciation through investment in the common stock of companies with an
important presence in the Greater Cincinnati Area ("Cincinnati Companies").

Investment Practices: The Fund attempts to achieve its objective by
investing in the common stocks of Cincinnati Companies that meet certain
criteria included in a proprietary model developed by the Adviser. These
criteria include level of employment and nature of operations in the Greater
Cincinnati Area. The Adviser has also incorporated certain industry
diversification, liquidity, market capitalization, and listing criteria into
the model. The Adviser uses the proprietary model to select the Fund's
portfolio of stocks and to determine the proportion of the Fund's assets that
are invested in each stock.

To be eligible for inclusion in the Fund's portfolio, a stock
currently must meet the following model criteria: (1) the stock must be issued
either by a company that employs at least fifty persons in the Greater
Cincinnati Area or by a company that maintains its corporate headquarters in
the Greater Cincinnati Area, (2) the stock must be issued by a company with a
market capitalization of $5 million or more; and, (3) the stock must be listed
on a national securities exchange, such as the New York Stock Exchange, the
American Stock Exchange or the National Market System of the NASDAQ. The
Greater Cincinnati Area, for purposes of the model, is defined as the
Cincinnati and Hamilton-Middletown Consolidated Metropolitan Statistical Area
("CMSA"). The CMSA includes Hamilton, Clermont, Warren, and Butler counties in
Ohio; Boone, Campbell, and Kenton counties in Kentucky; and Dearborn county in
Indiana.

The Adviser rebalances the portfolio and makes appropriate adjustments
in the portfolio to reflect changes in the underlying corporate data. In
addition, the Adviser may modify the proprietary model, or the selection
criteria incorporated in the model, in response to market and economic
developments. Such modifications could result in changes to the composition of
the Fund's portfolio.

RISK FACTORS

There are risks inherent in all securities investments. Thus, there
can be no assurance that the Fund will be able to achieve its investment
objective. Changes and developments in the economic environment of the Greater
Cincinnati Area may have a disproportionate effect on the Fund's portfolio.
Because the composition of the Fund's portfolio is determined by the model's
criteria, the Adviser generally will not consider other factors, such as
favorable or unfavorable developments regarding a particular Cincinnati Company
or its stock, in managing the portfolio.

The portfolio of the Fund contains some small capitalization stocks.
Investments in companies with smaller capitalization are generally more
volatile and may be less liquid than investments in companies with larger
capitalization.

As the Fund has a long-term investment objective, it may not be an
appropriate investment for persons intending to hold Fund shares for less than
six months.

17
<PAGE> 53

Investment Practices And Restrictions (Continued)

OTHER INVESTMENT STRATEGIES

Under normal conditions, the Adviser invests at least 65% of the
Fund's total assets in securities from two sources: (1) those issued by
companies that maintain their headquarters in the Greater Cincinnati Area; and,
(2) those issued by companies that are headquartered elsewhere who rank among
the 25 largest publicly held employers in the Greater Cincinnati Area. The Fund
may hold cash for purposes of liquidity or for temporary defensive purposes.
Cash is normally invested in repurchase agreements. Cash may also be invested
in securities of the U. S. government or any of its agencies, bankers
acceptances, commercial paper, or certificates of deposit. For temporary
defensive purposes, the Fund may hold up to 100% of its assets in cash
instruments. Under normal conditions, the Adviser does not intend to invest
more than 5% of the Fund's net assets in any cash instrument other than
repurchase agreements.

In a repurchase agreement, the Fund acquires securities suitable for
investments in accordance with its policies and the seller (usually a bank)
agrees at the time of sale to repurchase such securities at an agreed-upon
date, price, and interest rate. Investments in repurchase agreements are
subject to the risk that the selling bank may default in its repurchase
obligation. Investments in repurchase agreements are also subject to the risk
that the selling bank may become financially insolvent which could prevent or
delay the Fund's disposition of the collateral held as security for these
transactions. Such repurchase agreements are fully collateralized and the Fund
takes possession of such collateral, thus reducing the risk of default. The
collateral is subject to continuing market fluctuations and its value could be
more or less than the repurchase price.

ADDITIONAL INFORMATION

For further information concerning the investment practices described
above and certain risks associated with them, see "Investment Objectives and
Practices" in the SAI.

FUNDAMENTAL POLICIES

The investment objective and investment restrictions of the Fund are
designated as fundamental policies. Such fundamental policies may not be
changed without approval of the holders of a majority of the Fund's outstanding
shares.

The investment practices of the Fund as described above are not
fundamental policies and may be changed without shareholder approval.

INVESTMENT RESTRICTIONS

Certain investment restrictions applicable to the Fund are described
below. The complete text of these restrictions is set forth in the SAI under
the caption "Other Information about Investment Practices and Restrictions."
Additional investment restrictions pertaining to the Fund are set forth in the
SAI under the same caption.

Investments in One Issuer: The Fund may not purchase any security if,
as a result, the Fund would then hold more than 10% of the common stock of the
issuer.
Investments in Start-Up Companies: The Fund may not purchase any
security if, as a result, the Fund would then have more than 5% of its total
assets invested in securities of companies less than three years old.

Investments in Repurchase Agreements: The Fund may not invest more
than 5% of its total assets in repurchase agreements with a maturity longer
than seven days.

18
<PAGE> 54

General Information About The Gateway Trust

THE TRUST AND THE BOARD OF TRUSTEES

The Gateway Trust is an open-end management investment company
established as an Ohio business trust in 1986. From 1977 to 1986, the Trust's
predecessor operated as a Maryland corporation. The Trust has four series: the
Cincinnati Fund, the Gateway Index Plus Fund, the Gateway Mid Cap Index Fund
(formerly the Gateway Capital Fund), and the Gateway Small Cap Index Fund.
Shares of the Cincinnati Fund are offered by this prospectus. The Gateway Index
Plus Fund, the Gateway Mid Cap Index Fund and the Small Cap Index Fund are
offered by a separate prospectus.

Under the Trust's Second Amended Agreement and Declaration of Trust,
no annual or regular meetings of shareholders are required. As a result, the
Trustees will continue in office until resignation, death, or removal. Trustee
vacancies normally are filled by vote of the remaining Trustees. If at any time
less than a majority of the Trustees in office has been elected by the
shareholders, the Trustees must call a shareholder meeting for the purpose of
electing Trustees.

SHAREHOLDER MEETINGS AND VOTING

<PAGE> 55

<PAGE> 56

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

The Gateway Trust

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

Registration Statement
Securities Act of 1933 Registration No. 2-59895
Investment Company Act of 1940 Registration No. 811-02773

Statement of Additional Information
Dated May 1, 1997

This Statement is not a prospectus but should be read in conjunction
with the current Prospectus of The Gateway Trust (the "Trust") for the
Gateway Index Plus, Mid Cap Index, and Small Cap Index Funds dated May 1,
1997. A copy of the Prospectus may be obtained from the Trust, by written or
telephone request, directed to the Trust at the address or the telephone
number shown below.

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

P. O. Box 5211
Cincinnati, Ohio 45201-5211
(800) 354-6339

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

<PAGE> 57
Table of Contents

<TABLE>
<S> <C>
Table of Contents.......................................................
Introduction............................................................
General Information about Gateway Trust............................
Investment Objectives and Practices.....................................
Gateway Index Plus Fund............................................
Gateway Mid Cap Index Fund.........................................
Gateway Small Cap Index Fund.......................................
Option Transactions.....................................................
Selling Covered Call Options.......................................
Selling Covered Put Options........................................
Purchase of Put and Call Options...................................
Options on Securities Indexes......................................
Covered Index Call Options Sold by the Index Plus Fund.............
Investment Practices, Risks and Restrictions............................
Other Investment Practices.........................................
Certain Risks......................................................
Investment Restrictions............................................
Performance and Risk Information........................................
Performance Information............................................
Total Return Calculations..........................................
Historical Results.................................................
Risk Information...................................................
Comparative Indexes................................................
Standard Deviation.................................................
Beta...............................................................
Rankings and Comparative Performance Information...................
Shareholder Services....................................................
Shareholder Account................................................
</TABLE>

<PAGE> 58

<TABLE>
<S> <C>
Automatic Investment Plan...............................................
Systematic Withdrawal Plan..............................................
IRAs....................................................................
Qualified Pension and Profit Sharing Plans..............................
Additional Purchase and Redemption Information...............................
Investment Advisory and Other Services.......................................
Gateway Investment Advisers, L.P........................................
Investment Advisory Contracts...........................................
Custodian...............................................................
Shareholder Servicing, Transfer, Dividend Disbursing
and Financial Servicing Agent...........................................
Brokerage....................................................................
Additional Tax Matters.......................................................
Federal Tax Matters.......................................................
State and Local Tax Aspects.............................................
Trustees and Officers of the Trust...........................................
Independent public Accountants and Financial Statements......................
Principal Holders of Fund Shares.............................................
Index Plus Fund.........................................................
Mid Cap Index Fund......................................................
Small Cap Index Fund....................................................
Shares Held By Adviser..................................................
Schedule A...................................................................
Schedule B...................................................................
Schedule C...................................................................
Schedule D...................................................................
</TABLE>

<PAGE> 59

INTRODUCTION

GENERAL INFORMATION ABOUT GATEWAY TRUST

<TABLE>
<CAPTION>
- --------------------------------------------- --------------------------
Name of Fund Date Organized
- --------------------------------------------- --------------------------
<S> <C>
Gateway Index Plus Fund 1977

Gateway Mid Cap Index Fund July 1992

Gateway Small Cap Index Fund April 1993

Cincinnati Fund November 1994
- --------------------------------------------- --------------------------
</TABLE>

Gateway Index Plus Fund was known as Gateway Option Index Fund
until March, 1990; as Gateway Option Income Fund until February, 1988; and
as Gateway Option Income Fund, Inc. until May, 1986. Gateway Mid Cap Index
Fund was known as Gateway Capital Fund until December, 1993.

Gateway Option Income Fund, Inc., the predecessor to the Trust,
was organized in 1977 as a Maryland corporation. It was reorganized to become
the Trust effective as of May 2, 1986, with the Gateway Option Income Fund as
its sole initial fund. As a result of the transaction, shareholders of the
corporation on May 2, 1986, became shareholders of the Option Income Fund.

Each fund has its own investment policies, restrictions, practices,
assets, and liabilities. Each fund is represented by a separate series of
shares of beneficial interest in the Trust ("Shares"). The Trust's
operation is governed by Chapter 1746 of the Ohio Revised Code, by the Second
Amended Agreement and Declaration of Trust dated as of December 29, 1992, as
amended, and by the Trust's By-laws, as amended.

<PAGE> 60

INVESTMENT OBJECTIVES AND PRACTICES

GATEWAY INDEX PLUS FUND

The Index Plus Fund's investment objective is to achieve a high
total return at a reduced level of risk. Descriptions of the Fund's current
investment practices and strategies and certain risk factors applicable to the
Fund are set forth under the caption "Investment Practices" in the Combined
Prospectus.

The Index Plus Fund primarily invests in a portfolio of common stocks
which parallels the composition of the Standard & Poor's 100 Stock Index (the
"100 Index"). A list of the companies whose stocks are included in the 100
Index is set forth in Schedule "A" to this Statement. The Fund sells call
options on the 100 Index and, when appropriate, the Fund enters into closing
purchase transactions with respect to such options. The Fund occasionally
purchases put options on securities indexes.

In addition, the Fund has authority to, and when deemed appropriate
may, invest in the stocks of other securities indexes, sell put options on
securities indexes and, purchase call options on securities indexes;
however, the Fund does not intend to enter into these types of transactions in
the coming year.

GATEWAY MID CAP INDEX FUND

The Mid Cap Index Fund's primary investment objective is long-term
growth of capital with a secondary objective of conserving principal.
Descriptions of the Fund's current investment practices and strategies and
certain risk factors applicable to the Fund are set forth under the
caption "Investment Practices" in the Combined Prospectus.

The Mid Cap Index Fund primarily invests in a portfolio of common
stocks which parallels the composition of the S&P MidCap 400 Index (the "400
Index"). A list of the companies whose stocks are included in the 400
Index is set forth in Schedule "B" to this Statement. Because the 400 Index
is composed of four hundred equity securities and the Fund purchases such
securities in round lots, the portfolio does not correlate perfectly with the
400 Index. Although Gateway Investment Advisers, L.P., the Adviser to the
Funds ("Adviser") monitors the Mid Cap Index Fund portfolio so that the
percentage of assets invested in each stock in the Mid Cap Index Fund
substantially corresponds to the composition of 400 Index, the Fund
bears the risk that the price of its portfolio will not increase as much as
(or will decrease more than) the 400 Index.

The Mid Cap Index Fund occasionally engages in the purchase of
put and call options on securities indexes, such as the S&P 500 Index, the
400 Index and similar middle capitalization securities indexes. The Mid Cap
Index Fund limits its aggregate investment in premiums on put and call
options to an amount not exceeding 5% of the Fund's net assets.

<PAGE> 61

GATEWAY SMALL CAP INDEX FUND

The investment objective of the Small Cap Index Fund is to
achieve long-term growth of capital. Descriptions of the Fund's current
investment practices and strategies and certain risk factors applicable to the
Fund are set forth under the caption "Investment Practices" in the Combined
Prospectus.

The Small Cap Index Fund primarily invests in a portfolio of
common stocks which parallels the composition of the Wilshire Small Cap
Index (the "250 Index"). A list of the companies whose stocks are included in
the 250 Index is set forth in Schedule "C" to this Statement. Because the
250 Index is comprised of 250 equity securities and the Fund purchases
such securities in round lots, the portfolio does not correlate
perfectly with the 250 Index. Although the Adviser monitors the Small
Cap Index Fund portfolio so that the percentage of assets invested in
each stock in the Small Cap Index Fund substantially corresponds to the
composition of 250 Index, the Fund bears the risk that the price of its
portfolio will not increase as much as (or will decrease more than) the 250
Index.

The Small Cap Index Fund occasionally engages in the purchase of
put and call options on securities indexes, such as the S&P 500 Index, the
250 Index, the Russell 2000 Index, and comparable small capitalization
securities indexes. The Small Cap Index Fund limits its aggregate investment
in premiums on put and call options to an amount not exceeding 5% of the Fund's
net assets. Options on the 250 Index are a relatively new investment vehicle
and the secondary market for any particular option on this index at a specific
time may be limited.

OPTION TRANSACTIONS

This section contains a brief general description of various types
of options, certain option trading strategies and some of the risks of
option trading. It is included to help a shareholder understand the
investment practices of the funds. It is easier to understand index
options if you understand options on individual stocks. For this reason,
the first three parts of this section discuss individual stock options.

SELLING COVERED CALL OPTIONS

A covered call option is an option sold on a security owned by the
seller of the option. If the option is exercised by the purchaser during the
option period, the seller is required to deliver the underlying security
against payment of the exercise price. The seller's obligation terminates
upon expiration of the option period or when the seller executes a closing
purchase transaction with respect to such option.

The seller of a covered call option gives up, in return for the
premium, the opportunity to profit from an increase in the value of the
underlying security above the exercise price. At the same time, the
seller retains the risk of loss from a decline in the value of the
underlying security during the option period. Although the seller may
terminate its obligation by executing a closing purchase transaction,
the cost of effecting such a transaction may be greater than the premium
received upon its sale, resulting in a loss to the seller. If such an option
expires unexercised, the

<PAGE> 62

seller realizes a gain equal to the premium received. Such a gain may be offset
or exceeded by a decline in the market value of the underlying security during
the option period. If an option is exercised, the exercise price, the premium
received and the market value of the underlying security determine the gain or
loss realized by the seller.

The Index Plus Fund is the only Gateway fund authorized to sell
covered call options. A more complete description of the details and
risks involved in selling covered call options is set forth below under
the caption "Sale of Covered Call Index Options by the Index Plus Fund."

SELLING COVERED PUT OPTIONS

The seller of a covered put option has the obligation to buy, and the
purchaser the right to sell, the underlying security at the exercise price
during the option period. To cover a put option, a seller usually deposits
U. S. government securities (or other high grade debt obligations) in a
segregated account at the seller's custodian. The value of the deposited
securities is equal to or greater than the exercise price of the underlying
security. The value of the deposited securities is marked to market
daily and, if necessary, additional assets are placed in the segregated
account to maintain a value equal to or greater than the exercise price. The
seller maintains the segregated account so long as it is obligated as the
seller. The obligation of the seller is terminated when the purchaser
exercises the put option, when the option expires, or when a closing purchase
transaction is effected by the seller.

The seller's gain on the sale of a put option is limited to the
premium received plus interest earned on its segregated account. The
seller's potential loss on a put option is determined by taking into
consideration the exercise price of the option, the market price of the
underlying security when the put is exercised, the premium received, and
the interest earned on its segregated account. Although a seller risks a
substantial loss if the price of the stock on which it has sold a put option
drops suddenly, the seller can protect itself against serious loss by
entering into a closing purchase transaction. The degree of loss will
depend upon the seller's ability to detect the movement in the stock's price
and to execute a closing transaction at the appropriate time.

The Index Plus Fund is the only Gateway fund authorized to sell
covered put options. To comply with state securities requirements, the Fund
will not sell any covered put option if, as a result, the Fund would have to
invest more than 50% of its total assets (taken at current value) to meet its
obligation upon the exercise of put options.

PURCHASE OF PUT AND CALL OPTIONS

Put options can be employed to protect against declines in the
market value of portfolio securities or to attempt to retain unrealized gains in
the value of portfolio securities. Put options might also be purchased to
facilitate the sale of portfolio securities. Call options can be purchased as a
temporary substitute for the purchase of individual stocks, which then could be
purchased in orderly fashion. Upon the purchase of the stocks, the purchaser
would normally terminate the call position.

<PAGE> 63

The purchase of both put and call options involves the risk of loss
of all or part of the premium paid. If the price of the underlying stock
does not rise (in the case of a call) or drop (in the case of a put) by an
amount at least equal to the premium paid for the option contract, the
purchaser will experience a loss on the option contract equal to the
deficiency.

The Index Plus Fund, the Mid Cap Index Fund and the Small Cap Index
Fund each are authorized to purchase index put and call options. Each fund
limits its aggregate investment in premiums on put and call options to an
amount not exceeding 5% of its net assets.

OPTIONS ON SECURITIES INDEXES

An option on a securities index is generally similar to an option on
an individual stock, but an option on a securities index is settled only in
cash. The exercising holder of an index option, instead of receiving a
security, receives the difference between the closing price of the securities
index and the exercise price of the index option times a specified multiple
($100 in the case of the S&P 100 Stock Index). The seller of index options
may realize a gain or loss according to movement in the level of
securities prices in that index and in the securities markets generally.

COVERED INDEX CALL OPTIONS SOLD BY THE INDEX PLUS FUND

The Index Plus Fund sells call options on the 100 Index in an
attempt to earn a greater total return over the long term than it would earn
by investing only in the stocks in the 100 Index.

Frequently the Fund executes a closing purchase transaction with
respect to the option it has sold and sells another option (with either a
different exercise price or expiration date or both) on the 100 Index. The
Fund's objective in entering into such closing transactions is to increase
option premium income, to limit losses, or to protect anticipated gains in
underlying stocks. The cost of a closing transaction, while reducing the
premium income realized from the sale of the option, should be offset, at
least in part, by appreciation in the value of the underlying index, and by
the opportunity to realize additional premium income from selling a new
option.

When the Fund sells a call option on the 100 Index, it does not
deliver the underlying stocks or cash to the broker through whom the
transaction is effected. In the case of an exchange-traded option, the
Fund establishes an escrow account. The Trust's Custodian (or a securities
depository acting for the Custodian) acts as the Trust's escrow agent. The
escrow agent enters into documents known as escrow receipts with respect to
the stocks included in the 100 Index (or escrow receipts with respect to
other acceptable securities). The escrow agent releases the stocks from the
escrow account when the call option expires or the Fund enters into a closing
purchase transaction. Until such release, the underlying stocks cannot be
sold by the Fund. The Fund may enter into similar collateral arrangements with
the counterparty when it sells over-the-counter index call options.

When the Fund sells a call option on the 100 Index, it is also
required to "cover" the option pursuant to requirements enunciated by the
staff of the Securities and Exchange Commission. The staff has indicated that
a mutual fund may "cover" an index call option by (1) owning and
holding for the term of the option the securities against which the call
option is

<PAGE> 64

written, (2) purchasing an American-style call option on the same index with an
exercise price no greater than the exercise price of the written option, or (3)
establishing and maintaining for the term of the option a segregated account
consisting of cash, U.S. government securities or other high-grade debt
securities, equal in value to the aggregate contract price of the call option
(the current index value times the specific multiple). The Fund generally
"covers" the index options it has sold by owning and holding the stocks included
in the 100 Index. As an alternative method of "covering" the option, the Fund
may purchase an appropriate offsetting option on the 100 Index.

The purchaser of an index call option sold by the Fund may exercise the
option at a price fixed as of the closing level of the 100 Index on the date of
exercise. Unless the Fund has liquid assets sufficient to satisfy the exercise
of the index call option, the Fund would be required to liquidate portfolio
securities to satisfy the exercise. The market value of such securities may
decline between the time the option is exercised and the time the Fund is able
to sell the securities. If the Fund fails to anticipate an exercise, it may have
to borrow from a bank (in amounts not exceeding 5% of the Fund's total assets)
pending settlement of the sale of the portfolio securities and thereby incur
interest charges. If trading is interrupted on the 100 Index, the Fund would not
be able to close out its option positions.

The Index Plus Fund has the authority to sell covered call options
on indexes other than the 100 Index. If the Fund did so, considerations similar
to those described above would be applicable to such options.

Additional information about the Fund's investment practices and
strategies with respect to option transactions, and certain risks related to
such transactions, is set forth under the caption "Investment Practices" in the
Combined Prospectus.

INVESTMENT PRACTICES, RISKS AND RESTRICTIONS

OTHER INVESTMENT PRACTICES

Each fund generally will hold cash reserves for the purpose of
paying expenses and share redemptions. In addition, each fund may hold
cash received from the sale of its shares which it has not yet invested.
The Adviser may determine, from time to time, that one or more funds should
temporarily reduce (and in periods of unusual market conditions reduce
substantially or liquidate entirely) its investment in common stocks. Cash
held by a fund, for whatever reason, may be invested in securities of the
U. S. government or any of its agencies, bankers' acceptances, commercial
paper or certificates of deposit (collectively "cash equivalents") or
repurchase agreements.

Commercial paper investments will be limited to investment grade
issues rated A-1 or A-2 by Standard & Poor's Corporation or Prime-1 or Prime-2
by Moody's Investors Service, Inc. Certificates of deposit investments
will be limited to obligations of domestic banks with assets of $1 billion or
more.

<PAGE> 65

Repurchase agreements are instruments under which the fund buys
securities suitable for investment under its policies and obtains the concurrent
agreement of the seller (usually a bank) to repurchase such securities at an
agreed-upon date, price and interest rate. Investments in repurchase agreements
are subject to the risk that the selling bank may default in its repurchase
obligation. However, not more than 5% of any fund's total assets may be invested
in repurchase agreements which have a maturity longer than seven days.

CERTAIN RISKS

The success of each fund's option strategy depends upon the
ability of the Adviser to identify an appropriate index in which to invest and
the Adviser's ability to enter into transactions involving index options at
appropriate times in the stock market cycle. In pursuing this course, the
Adviser is subject to the risks of change in general economic conditions,
adverse developments in specific industries and factors affecting the
performance of individual stocks.

Standard and Poor's Corporation ("S&P") obtains information for
inclusion in or for use in the calculation of the S&P 100 Index and the S&P
MidCap 400 Index from sources which S&P considers reliable. S&P HAS ADVISED THE
TRUST THAT IT MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE TRUST, OWNERS OF THE INDEX PLUS FUND OR THE MID CAP INDEX FUND,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 100 INDEX, THE S&P MIDCAP
400 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, FOR USE WITH RESPECT TO THE
S&P 100 INDEX, THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN.

Wilshire Associates, Inc. ("Wilshire") obtains information for
inclusion in or for use in the calculation of the Wilshire Small Cap
Index from sources which Wilshire considers reliable. WILSHIRE HAS ADVISED
THE TRUST THAT IT MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE TRUST, OWNERS OF THE SMALL CAP INDEX FUND, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE WILSHIRE SMALL CAP INDEX OR ANY DATA
INCLUDED THEREIN. WILSHIRE MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, FOR USE WITH RESPECT TO THE WILSHIRE SMALL
CAP INDEX OR ANY DATA INCLUDED THEREIN.

Other risks related to the investment practices and strategies of
each fund are described in the under the caption "Investment Practices" in the
Combined Prospectus.

INVESTMENT RESTRICTIONS

The Trust has adopted certain fundamental policies with respect
to each of the funds that may not be changed without a vote of shareholders
of that fund. Under these policies, the Index Plus Fund, the Mid Cap Index
Fund, and the Small Cap Index Fund each are subject to the following
restrictions:

1. A fund may not purchase any security if, as a result, the
fund (or the funds together) would then hold more than 10% of
any class of securities of an issuer (taking all common stock
issues of an issuer as a single class, all

<PAGE> 66
preferred stock issues as a single class, and all debt issues
as a single class) or more than 10% of the outstanding voting
securities of an issuer.

2. A fund may not purchase any security if, as a result, the
fund would then have more than 5% of its total assets (taken
at current value) invested in securities of companies
(including predecessors) less than three years old and in
equity securities for which market quotations are not
readily available.

3. A fund may not purchase securities on margin (but the fund
may obtain such short-term credits as may be necessary for
the clearance of purchase and sales of securities).

4. A fund may not make short sales of securities or maintain a
short position, (a) unless, at all times when a short position
is open, the fund owns an equal amount of such securities or
securities convertible into or exchangeable (without payment of
any further consideration) for securities of the same issue as,
and equal in amount to, the securities sold short, and (b)
unless not more than 10% of such fund's net assets (taken at
current value) are held as collateral for such sales at any one
time. It is the present intention of management to make such
sales only for the purpose of deferring realization of gain or
loss for Federal income tax purposes. It is the present
intention of management that short sales of securities subject
to outstanding options will not be made.

5. A fund may not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only from banks and
only in amounts not in excess of 5% of the fund's total assets
(except to meet redemption requests as discussed below), taken
at the lower of cost or market. In order to meet redemption
requests without immediately selling any portfolio securities, a
fund may borrow in an amount up to one-quarter of the value of
its total assets including the amount borrowed. If due to market
fluctuations or other reasons the value of such fund's assets
falls below 400% ofits borrowing, the fund will reduce its
borrowing which may result in the fund being required to sell
securities at a time when it may otherwise be disadvantageous to
do so. This borrowing is not for investment leverage, but solely
to facilitate management of the portfolio by enabling the fund
to meet redemption requests where the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous.
However, the fund might be deemed to be engaged in leveraging in
that any such borrowing will enable the fund to continue to earn
money on investments which otherwise may have been sold in order
to meet redemption requests.

6. A fund may not pledge more than 10% of its total assets, taken
at market value. (The deposit in escrow of underlying securities
in connection with the writing of call options is not deemed to
be a pledge.)

<PAGE> 67

7. A fund may not purchase or retain securities of any company if,
to the knowledge of the Trust, officers and trustees of the
Trust or of the Adviser who individually own more than one-half
of 1% of the securities of that company, together own
beneficially more than 5% of such securities.

8. A fund may not buy or sell commodities or commodities futures
or options contracts, or real estate or interests in real
estate, although it may purchase and sell (a) securities which
are secured by real estate and (b) securities of companies which
invest or deal in real estate.

9. A fund may not act as underwriter except to the extent
that, in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under
certain provisions of the Federal securities laws.

10. A fund may not make investments for the purpose of exercising
control or management.

11. A fund may not participate on a joint basis, or a joint and
several basis, in any trading account in securities.

12. A fund may not purchase any security restricted as to
disposition under the Federal securities laws.

13. A fund may not invest in securities of other investment
companies, except as part of a merger, consolidation or other
acquisition.

14. A fund may not invest in interests in oil, gas or other mineral
exploration or development programs, although it may invest in
the common stocks of companies which invest in or sponsor such
programs.

15. A fund may not make loans, except through the purchase of bonds,
debentures, commercial paper, corporate notes and similar
evidences of indebtedness of a type commonly sold privately to
financial institutions (subject to the limitation in paragraph
12 above), and except through repurchase agreements. No more
than 5% of the fund's assets will be invested in repurchase
agreements which have a maturity longer than seven days.In
addition, the fund will not enter into repurchase agreements
with a securities dealer if such transactions constitute the
purchase of an interest in such dealer under the Investment
Company Act of 1940. The purchase of a portion of an issue of
such securities distributed publicly, whether or not such
purchase is made on the original issuance, is not considered the
making of a loan.

16. A fund may not purchase any security (other than U. S.
Government obligations) if, as a result thereof, less than 75%
of the value of the fund's total assets is represented by cash
and cash items (including receivables),

<PAGE> 68

Government securities and other securities which, for purposes
of this calculation, are limited in respect of any one issuer to
an amount not greater in value than 5% of the value of the
fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer. (All of the Trust's funds
taken as a group also must satisfy this 10% test.)

17. A fund may not concentrate the investments of the fund in a
single industry nor invest more than 25% of the current value
of its total assets in a single industry.

18. A fund may not sell call or put options, or purchase call or put
options, except that (a) the Index Plus Fund may (i) sell
covered call options with respect to all of its portfolio
securities or with respect to securities indexes, (ii) purchase
exchange-traded put and call options, provided that after any
such purchase not more than 5% of the Fund's net assets would be
invested in premiums on the purchase of put and call options or
combinations thereof, (iii) sell covered put options, provided
that after any such sale the Index Plus Fund would not have more
than 50% of its total assets taken at current value) subject to
being invested on the exercise of put options, and (iv) enter
into closing purchase transactions with respect to such options,
and (b) the Mid Cap Index Fund and the Small Cap Index Fund each
may purchase exchange-traded puts and calls, provided that after
any such purchase not more than 5% of the Fund's assets would be
invested in premiums on the purchase of such options.

The Trust has no fundamental policy with respect to the issuance of
senior securities by any fund; however, the Investment Company Act of 1940
prohibits the Trust's issuance of any such securities.

Although the practices described in paragraphs 4, 5 and 6 above could
involve more than 5% of a fund's assets, none of those practices has been
employed by any fund (or the Index Plus Fund's predecessor, Gateway Option
Income Fund, Inc.) since January'1, 1983. The Adviser has no current intention
of causing any fund to employ any such practice in the coming year.

<PAGE> 69

PERFORMANCE AND RISK INFORMATION

PERFORMANCE INFORMATION

The funds may quote performance in various ways. All performance
information supplied by the funds is based upon historical results and is not
intended to indicate future performance. Total returns and other performance
information may be shown numerically or in a table, graph or similar
illustration.A fund's share prices and total returns fluctuate in response to
market conditions, interest rates and other factors.

TOTAL RETURN CALCULATIONS

Total returns reflect all aspects of a fund's return, including the
effect of reinvesting dividends and capital gains distributions, and any
change in a fund's net asset value per share (NAV) over the period.

Average annual total returns are calculated by determining the average
annual compounded rates of return over one-, five- and ten-year periods that
would equate an initial hypothetical investment to the ending redeemable value
according to the following formula.

<TABLE>
<S> <C> <C> <C>
P (1 + T)n = ERV where T equals: Average annual total return
n equals: Number of years and portion of a year
ERV equals: Ending redeemable value (of an initial
hypothetical $1,000 investment) at the end
of the period
P equals: $1,000 (the hypothetical initial investment)
</TABLE>

If a fund has been in existence for less than one, five or ten years,
the time period since the date it commenced operations will be substituted for
the periods stated.

As a hypothetical example, a cumulative return of 100% growth on a
compounded basis in ten years would produce an average annual total return of
7.18%, which is the annual rate that would equal 100% growth on a compounded
basis in ten years. While average annual total returns are convenient means of
ompcaring investment alternatives, shareholders should realize that a fund's
performance is not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.

Average annual total return is calculated as required by applicable
regulations promulgated by the Securities and Exchange Commission. In addition
to average annual total returns, a fund may quote year-by-year total returns and
cumulative total returns reflecting the simple change in value of any investment
over a stated period. Average annual, year-by-year and cumulative total returns
may be quoted as a percentage or as a dollar amount.

<PAGE> 70

HISTORICAL RESULTS

The following chart shows each fund's average annual and cumulative
total returns for the period ended December 31, 1996:

<TABLE>
<CAPTION>
- --------------------------------------------- --------------- --------------- --------------- ---------------------
Average Annual Total Return One Year Five Year Ten Years Life of Fund
- --------------------------------------------- --------------- --------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Index Plus Fund 10.53% 7.91% 9.88% 10.33%
Mid Cap Index Fund 15.33 N/A N/A 9.25
Small Cap Index Fund 17.04 N/A N/A 10.57
- --------------------------------------------- --------------- --------------- --------------- ---------------------
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------- --------------- -------------- ---------------- ---------------------
Cumulative Total Return One Year Five Year Ten Years Life of Fund
- --------------------------------------------- --------------- -------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Index Plus Fund 10.53% 46.32% 156.63% 552.30%
Mid Cap Index Fund 15.33 N/A N/A 45.66
Small Cap Index Fund 17.04 N/A N/A 42.74
- --------------------------------------------- --------------- -------------- ---------------- ---------------------
</TABLE>

The table below shows the redeemable value on December 31, 1996 for an
initial investment of $10,000 in the fund that was made at the beginning of the
one-, five-, and ten-year periods (or at the commencement of the fund's
operations). The table assumes all dividends and distributions have been
reinvested in additional fund shares.

<TABLE>
<CAPTION>
- --------------------------------------------- --------------- -------------- ---------------- ---------------------
One Year Five Years Ten Years Life of Fund
- --------------------------------------------- --------------- -------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Index Plus Fund $11,053 $14,632 $25,562 $65,230
Mid Cap Index Fund $11,153 N/A N/A $14,566
Small Cap Index Fund $11,704 N/A N/A $14,274
- --------------------------------------------- --------------- -------------- ---------------- ---------------------
</TABLE>

RISK INFORMATION

In evaluating the performance of any investment, including an
investment in a Gateway Fund, it is important to understand the risks involved
in the investment.Information regarding the performance of an investment, while
valuable in itself, is more meaningful when it is related to the level of risk
associated with that investment. Thus, two different mutual funds that produce
similar average annual total returns may present markedly different investment
opportunities if the risk of loss associated with one mutual fund is greater
than that of the other mutual fund.

For example, an investment in a mutual fund that invests in stocks
generally will present greater potential for variation in the share price of the
mutual fund, and hence a greater risk of gain or loss, than an investment in a
mutual fund that invests in U. S. government securities. Because the potential
for greater gain typically carries with it a greater degree of risk, the
advisability of an investment in a particular mutual fund for a given
shareholder will depend not only on historical performance of the fund but also
on the potential for gain and loss associated with that mutual fund.

<PAGE> 71

The Gateway Trust offers four different funds that produce different
total returns and present different risk potentials. The difference in risk
potential can be demonstrated by various statistical concepts. The following
statistical concepts can be used to measure some of the risks associated with an
investment in each fund.

COMPARATIVE INDEXES

The performance and risk of the Index Plus Fund, the Mid Cap Index
Fund, and the Small Cap Index Fund is compared to the performance and risk of
the S&P 500 Index and the Lehman Government/Corporate Bond Index. These
comparative indexes are used because they are the standard benchmarks of the
stock market and bond market respectively. A fund's performance and risk may
also be compared to other appropriate indexes.

STANDARD DEVIATION

Standard deviation measures the volatility of the total return of a
fund. Standard deviation is one method of comparing the total return of a fund
to the average monthly total return of the fund. In general, a fund that has a
greater standard deviation is a fund that has displayed a greater tendency to
vary from its own average monthly total return. Standard deviation can also be
used to compare the total return of a fund to the total return of an index or
another mutual fund. By comparing the magnitude of the standard deviation of
each investment, an analyst is able to determine the relative volatility of each
investment.

For example, as of December 31, 1996, the annual standard deviation for
the Index Plus Fund over the past three years was 4.31% while the standard
deviation for the S&P 500 Index was 9.58% Thus, the S&P 500 Index was almost
twice as volatile as the Index Plus Fund. An investment with an expected return
of 10% and a standard deviation of 15% would be expected to earn a total return
ranging from -5% to +25% about 68% of the time, a total return ranging from -20%
to +40% about 95% of the time and a total return ranging from -35% to +55% about
97% of the time.

BETA

Beta analyzes the market risk of a fund by showing how responsive the
fund is to the market as defined by an index. Beta is a comparative measure of a
fund's volatility in relation to an appropriate index. Generally, higher betas
represent riskier investments. By definition, the beta of the market is 1.00.
Thus, a fund with a beta higher than 1.00 is expected to perform better than the
market in up markets and worse than the market in down markets.

For example, the beta of the Index Plus Fund was 0.32 for the five year
period ended December 31, 1996. The Index Plus Fund would be expected to
perform approximately one third as well as the market (as defined by S&P 500
Index) in up markets and one third as poorly as the market in down markets.
Beta is the slope of the "least square line" which compares the fund with an
index.

<PAGE> 72

RANKINGS AND COMPARATIVE PERFORMANCE INFORMATION

Each fund may compare its performance to that of other mutual funds or
categories of mutual funds as reported by independent services, such as
Morningstar, Inc., Lipper Analytical Services, Inc. and Value Line Mutual Fund
Survey, or by other financial publications with circulations of 10,000 readers
or more. Performance comparisons may be expressed as ratings (such as the
proprietary ratings published by Morningstar, Inc.) or rankings (such as the
rankings of funds in various categories published by Lipper Analytical
Services, Inc.). Performance comparisons may also be expressed as designations
(such as a certain number of "stars") or descriptions (such as "best fund")
assigned by such services or publications.

SHAREHOLDER SERVICES

Gateway Investment Advisers, L.P. serves as the Trust's shareholder
servicing, transfer, dividend, disbursing and financial servicing agent (the
"Servicing Agent"). In this capacity, it performs various shareholder services
on behalf of the Trust.

SHAREHOLDER ACCOUNT

Each fund maintains a shareholder account for investors who purchase
its shares. The shareholder account facilitates regular purchases of fund shares
over a period of years and provides the option of receiving dividends and
distributions either in cash or in fund shares. There is no charge for the
automatic reinvestment of dividends and distributions.

The Servicing Agent maintains a record of purchases, redemptions, and
share balances for each shareholder. Shortly after each purchase, the Servicing
Agent will mail a confirmation to the shareholder showing the shares purchased,
the exact price paid for the shares and the total number of shares owned. Share
certificates will not be issued.

Upon opening an account, a shareholder may elect any of the following
options: (1) reinvestment at net asset value of all distributions or (2) payment
in cash of all distributions. If no election is made, all distributions will be
einrvested at net asset value. An election may be changed by a letter or
telephone call to the Servicing Agent. No annual maintenance fees are charged by
the Trust on any shareholder account. The Trust reserves the right to charge
annual fees in the future. Shareholders will be notified of any change in the
annual fee arrangement.

AUTOMATIC INVESTMENT PLAN

For established accounts, shares of any of the funds may be purchased
on a monthly or quarterly basis in amounts of $100 or more per purchase.
Shareholder Services can arrange to have such money transferred automatically
from a shareholder's bank account to the Trust for purchase of shares. A
shareholder can make arrangements to use the Automatic Investment Plan (or
discontinue use of the Plan) by contacting Shareholder Services at (800)
354-6339.

<PAGE> 73

SYSTEMATIC WITHDRAWAL PLAN

If the value of a shareholder's account is at least $5,000, the
shareholder can request withdrawals on either a monthly or a quarterly basis in
the minimum amount of $100. The Trust makes no recommendation as to the minimum
amount that ought to be periodically withdrawn by a shareholder. A sufficient
number of shares in the shareholder's account will be sold periodically
(normally one business day prior to each withdrawal payment date) to meet the
requested withdrawal payments.

If a shareholder establishes an account in the Systematic Withdrawal
Plan, all dividends and distributions on shares held in the account will be
reinvested in additional shares at net asset value. Since the withdrawal
payments represent the proceeds from sales of the fund shares, there will be a
reduction, and there could even be an eventual depletion, of the amount invested
in the funds to the extent that withdrawal payments exceed the dividends and
distributions paid and reinvested in shares. Withdrawals under the Systematic
Withdrawal Plan should not, therefore, be considered a yield on investment. A
shareholder can make arrangements to use the Systematic Withdrawal Plan (or
is contidnue use of the Plan) by contacting Shareholder Services at
(800) 354-6339.

IRAS

Investors may purchase shares of any Gateway fund through Individual
Retirement Accounts ("IRAs") which are permitted to invest in shares of a
mutual fund. The Trust itself sponsors a form of IRA (the "Gateway IRA")
which can be adopted by an investor and which is specifically designed to
permit the shareholder to invest in shares of the Gateway funds selected
by the shareholder. The custodian of the Gateway IRAs is Star Bank.
Investors can obtain forms to establish Gateway IRAs by calling Shareholder
Services at (800) 354-6339.

An IRA is a special program with certain tax benefits that
generally permits an investor to establish and contribute to his or her own
retirement plan. For detailed information about IRA's, please refer to your
IRA Investment Kit which you can receive by calling the phone number above.

<PAGE> 74

A shareholder may make a direct transfer of assets from one IRA
to a Gateway IRA by directing the existing IRA custodian or trustee to
transfer directly to the Gateway IRA the amount held in that prior IRA,
without directly receiving those funds or being taxed on the transfer.
There is no minimum holding period for a direct transfer of IRA assets from
one custodian or trustee to another. The Adviser has forms, available upon
request, that a shareholder can use to make direct IRA transfers.

<PAGE> 75

A shareholder can make a direct rollover by instructing the employer's
plan to wire the distribution to Star Bank as custodian for the Gateway IRA. The
distribution should be wired to:

The Gateway Trust c/o Star Bank, N.A.
ABA #042-0000-13
Cincinnati, Ohio
Name (insert shareholder name)
Gateway Account No. (insert shareholder account number)
Name of Gateway fund(s) in which you wish to invest

A shareholder can also make a direct rollover by instructing the
employer's plan to prepare a check for the amount to be rolled over payable to
"Star Bank, N.A., as Custodian of Individual Retirement Account of
(insert shareholder name)," and delivering that check to Gateway. The check
can be delivered in person or mailed to:

The Gateway Trust
Shareholder Services
P. O. Box 5211
Cincinnati, Ohio 45201-5211

A shareholder can make a sixty-day rollover of a distribution
from a qualified employer plan by instructing the employer's plan to
prepare a check payable to the shareholder and by endorsing or cashing the
check and depositing some or all of the proceeds in his or her Gateway IRA.
The deposit must be delivered in person or mailed to The Gateway Trust at the
above address within sixty days of receiving the distribution. The
employer's plan must withhold 20% of the taxable amount for Federal
income tax if a shareholder chooses a sixty-day rollover for the
distribution.

Some portions of distributions from other IRAs or from
tax-qualified profit sharing, stock bonus, pension, or annuity plans are
not eligible for regular or direct rollovers. For instance, distributions
of nontaxable after-tax employee contributions or required minimum payments
made after an individual reaches age 70 cannot be rolled over.

To make a withdrawal from a Gateway IRA, a shareholder should contact
Shareholder Services at (800) 354-6339.

<PAGE> 76

The rules for contributing to, investing under, and distributing from
IRAs are complex, and any investor should consult with his or her own tax
advisor if he or she has any questions with respect to IRAs and to
determine if there have been any recent changes to the rules. At the time an
IRA is established, the custodian or trustee of the IRA is required by
law to provide a disclosure statement to the individual setting forth
important information concerning IRAs.

Further information concerning IRAs can be obtained from any
district office of the Internal Revenue Service. In particular, Publication
590 of the Internal Revenue Service provides general information as to IRAs.

No annual maintenance fees are charged by the Trust on any IRA,
SEP-IRA, retirement, pension or profit-sharing plan, including a 401(k)
plan. The Trust reserves the right to charge annual fees in the future.
Shareholders will be notified of any change in the annual fee arrangement.

QUALIFIED PENSION AND PROFIT SHARING PLANS

Employers with existing retirement, pension or profit sharing plans
may purchase shares of any fund by completing the New Account Application
Form which accompanies the Prospectus. The possible use, at no additional
charge, of the Systematic Withdrawal Plan provides an optional method
for employees to receive retirement benefits on a regular basis.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Basic information concerning the purchase and redemption of shares
is set forth under the captions "How To Buy Shares" and "How To Sell Shares"
in the Combined Prospectus. Shares of all funds are purchased and
redeemed at their net asset value as next determined following receipt of
the purchase order or redemption notice. Redemptions under the Systematic
Withdrawal Program and installment distributions from IRAs are effected at the
net asset value next determined after the date designated for the redemption
or distribution. Information as to the method of calculating the net asset
value of shares of any fund is included in the Combined Prospectus under the
caption "How Fund Shares Are Priced."

CERTIFICATES FOR SHARES OF ANY FUND WILL NOT BE ISSUED.

The minimum initial investment is $1,000 ($500 for IRA's) and the
minimum additional investment is $100, subject to certain exceptions such
as investments by the Adviser's employees and by participants in SEP
programs. The Trust reserves the right to accept or reject any purchase order
of any fund.

There is no minimum or maximum applicable to redemption of
shares of any fund. The Trust, however, reserves the right to
automatically redeem a shareholder's account(s) under certain
circumstances. The shareholder will receive written notice prior to the
redemption of the account(s). Generally the Trust will send the shareholder a
letter 60 days prior to redeeming the shareholder's account(s).

<PAGE> 77

The Trust may automatically redeem a shareholder's account(s) in any
fund when the aggregate value of the shareholder's account(s) (taken at current
value) falls below $800. The shareholder may prevent such redemption by
increasing the value of the account(s) to $1,000 or more within the 60-day
period. The Trust will not automatically redeem a shareholder's account(s) if
market action caused the aggregate value of the account(s) to fall below $800 or
if shares of the funds are not available for purchase at the time the aggregate
value of the account(s) falls below $800.

The Trust also will automatically redeem a shareholder's account if the
shareholder does not provide a valid U. S. social security number or taxpayer
identification number or other requested documents such as corporate
resolutions. The shareholder may prevent such redemption by providing the
requested information within the 60-day period.

The Trust may institute additional mandatory redemption policies as
approved by the Board of Trustees.

The Trust reserves the right to terminate temporarily or
permanently the exchange privilege for any shareholder who makes an
excessive number of exchanges between funds. The shareholder will receive
written notice that the Trust intends to limit the shareholder's use of the
exchange privilege. Generally the Trust limits a shareholder to twelve
exchange transactions per calendar year. Accounts under common ownership
or control, including accounts with the same taxpayer identification number,
normally will be counted as one account for purposes of the exchange limit.

The Trust also reserves the right to terminate or modify the exchange
privilege or to refuse an exchange if the exchange would adversely affect a
fund.

Signature guarantees are required for all redemptions, (on the date of
receipt by the Servicing Agent of all necessary documents)regardless of the
amount involved, when the proceeds are to be paid to someone other than the
registered owner(s). The signature guarantee requirement may be waived by the
Trust in certain instances. The Trust also reserves the right to require a
signature guarantee on any instructions or redemptions given to the Trust for
any reason. The purpose of signature guarantees is to prevent fraudulent
redemptions which could result in losses to the Trust, the Servicing Agent or
shareholders. A signature guarantee will be accepted from banks, brokers,
dealers, municipal securities dealers or brokers, government securities dealers
or brokers, credit unions (if authorized by state law), national securities
exchanges, registered securities associations, clearing agencies, and savings
associations. Notary publics are unacceptable guarantors. The signature
guarantees must appear either (1) on the written request for redemption, (2) on
a stock power which should specify the total number of shares to be redeemed, or
(3) on all stock certificates tendered for redemption.

The right of redemption may be suspended or the date of payment
postponed (1) for any periods during which the New York Stock Exchange is
closed (other than for customary weekend and holiday closings), (2) when
trading in any of the markets which a fund normally

<PAGE> 78

utilizes is restricted as determined by the Securities and Exchange Commission
(the "Commission"), (3) if any emergency exists as defined by the Commission so
that disposal of investments or determination of a fund's net asset value is not
reasonably practicable, or (4) for such other periods as the Commission by order
may permit for protection of the Trust's shareholders.

The Trust has elected to be governed by Rule18f-1 of the Investment
Company Act, which obligates each fund to redeem shares in cash, with respect to
any one shareholder during any 90-day period, up to the lesser of $250,000 or 1%
of the assets of the fund. Although payment for redeemed shares generally will
be made in cash, under abnormal circumstances the Board of Trustees of the Trust
may determine to make payment in securities owned by the fund whose shares are
being redeemed. In such event, the securities will be selected in such manner as
the Board of Trustees deems fair and equitable, in which case brokerage and
other costs may be incurred by such redeeming shareholders in the sale or
disposition of their securities. To date, all redemptions have been made in
cash.

The Trust reserves the right to modify or terminate any purchase,
redemption or other shareholder service procedure upon notice to shareholders.

Purchases and redemptions generally may be effected only on days when
the options exchanges are open for trading. These exchanges are closed on
Saturdays and Sundays and the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas Day.

INVESTMENT ADVISORY AND OTHER SERVICES

GATEWAY INVESTMENT ADVISERS, L.P.

Gateway Investment Advisers, L.P., a Delaware limited partnership, has
acted as the investment adviser for the funds since December 15, 1995. Gateway
Investment Advisers Inc. ("GIA") provided investment advisory services to the
funds from their formation until December 15, 1995. Gateway Investment Advisers,
L.P. (the "Adviser") became the successor in interest to the assets, business
and personnel of GIA which was organized in June 1977. GIA is the general
partner of the Adviser with a 76% ownership interest, while Alex. Brown
Investments Incorporated (ABII) is the sole limited partner with a 24% ownership
interest. ABII is an affiliate of Alex. Brown & Sons Incorporated, a nationally
known investment management firm and registered broker/dealer located in
Baltimore, Maryland. Walter G. Sall, Chairman and a Trustee of the Trust, and J.
Patrick Rogers, the portfolio manager of the funds of the Trust, together own of
record and beneficially 99.85% of the outstanding shares of GIA and thereby
control the Adviser. Mr. Sall is the Chairman and a director of GIA and Mr.
Rogers is its President and a director. The third director of GIA is
Margaret-Mary V. Preston who is employed by Alex. Brown & Sons Incorporated as a
Managing Director.

<PAGE> 79

INVESTMENT ADVISORY CONTRACTS

The Trust has retained the Adviser under investment advisory contracts
("Adviser Contracts") to act as investment manager and in such capacity
supervise the investments of the Gateway funds, subject to the policies and
control of the Trust's Board of Trustees. Contracts for the Index Plus Fund, Mid
Cap Index Fund and Small Cap Index Fund became effective December 15, 1995.
Services were provided by GIA under substantially identical contracts prior to
this date.

Pursuant to the Adviser Contracts, the Adviser, at its sole expense,
provides each fund with (1) investment recommendations regarding such fund's
investments, (2) office space, telephones, and other office equipment, and (3)
clerical and secretarial staff and the services, without additional
compensation, of all officers of the Trust. In addition, the Adviser has agreed
to bear (1) advertising and other marketing expenses in connection with the sale
of the shares of the funds, (2) expenses of printing and distributing
prospectuses and related documents to prospective stockholders, and (3)
association membership dues (other than for the Investment Company Institute).
The Adviser Contracts further provide that under certain circumstances the
Adviser may cause each fund to pay brokerage commissions in order to enable the
Adviser to obtain brokerage and research services for its use in advising such
fund and the Adviser's other clients, provided that the amount of commission is
determined by the Adviser, in good faith and in the best interests of the fund,
to be reasonable in relation to the value of the brokerage and research services
provided.

The Adviser Contracts provide that all expenses not specifically
assumed by the Adviser which may be incurred in the operation of the Trust
and the offering of its shares will be borne by the Trust. Such expenses will
be allocated between the funds by direction of the Board of Trustees,
most frequently on the basis of expenses incurred by each fund, but where
that is not practicable on such basis as the Trustees determine to be
appropriate. Expenses to be borne by the Trust include:

* fees and expenses of Trustees not employed by the Adviser.

* expenses of printing and distributing prospectuses to current
shareholders of the Trust.

* expenses pertaining to registering or qualifying the Trust or its
shares under various federal and state laws and maintaining and
updating such registrations and qualifications.

* interest expense, taxes, fees and commissions (including brokerage
commissions).

* expenses related to repurchases and redemptions of shares.

* charges and expenses of custodians, transfer agents, dividend
disbursing agents and other service providers.

* expenses of valuing shares of each fund.

* printing and mailing costs other than those expressly assumed
by the Adviser.

* auditing, accounting and legal expenses.

* expenses incurred in connection with the preparation of reports
to shareholders and governmental agencies.

<PAGE> 80

* expenses of shareholder meetings and proxy solicitations.

* insurance expenses.

* all "extraordinary expenses" which may arise, including all losses and
liabilities incurred in connection with litigation proceedings and
claims, and the legal obligations of the Trust to indemnify its
officers, trustees and agents with respect thereto.

A majority of the Board of Trustees of the Trust and a majority of the Trustees
who are not "interested persons" (as defined in the Investment Company Act of
1940) of any party to the Adviser Contracts, voting separately, shall determine
which expenses shall be characterized as "extraordinary expenses."

In return for the services and facilities furnished by the Adviser, the
Index Plus Fund, the Mid Cap Index Fund and the Small Cap Index Fund each pays
the Adviser an advisory fee computed at an annual rate of 0.90% of the first $50
million of the average daily net asset value of such fund, 0.70% of such asset
value in excess of $50 million and less than $100 million, and 0.60% of such
asset value in excess of $100 million. The rate of such advisory fee is higher
than that paid by many other funds for advisory services.

If total expenses of any fund for any fiscal year (including the
Adviser's compensation, but exclusive of taxes, interest, brokerage commissions
and any "extraordinary expenses" determined as described above) exceed the
specified percentage of such fund's average daily net asset value for such year,
the Adviser Contracts require the Adviser to bear all such excess expenses up to
the amount of the advisory fees. The applicable expense limitation percentage
for each fund are: 1.5% of the Index Plus Fund's average daily net asset value,
1.5% of the Mid Cap Index Fund's average daily net asset value, and 2.0% of the
Small Cap Index Fund's average daily net asset value. Each month the investment
advisory fee is determined and each fund's expenses are projected. If such
fund's projected expenses are in excess of the above-stated expense limitations,
the investment advisory fee paid to the Adviser will be reduced by the amount of
the excess expenses, subject to an annual adjustment; provided, however, that
the aggregate annual reduction from the Adviser to each fund shall not exceed
the aggregate advisory fee paid by such fund to the Adviser for such year.

The following table shows the advisory fees earned by the Adviser and
the amount of the fees waived by the Adviser in the years ended December 31,
1996, 1995, and 1994.

<PAGE> 81

- --------------------- ------------------------- ----------------------------- ---------------------------------
Fee and Waiver Index Plus Fund Mid Cap Index Fund Small Cap Index Fund
- --------------------- ------------------------- ----------------------------- ---------------------------------
<S> <C> <C> <C>
1996 Fee Earned $1,272,990 $54,410 $ 91,823
1996 Fee Waived 0 $54,410 $ 91,823
1996 Fee Paid $1,272,990 0 0

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

1995 Fee Earned $1,246,576 $50,766 $ 85,502
1995 Fee Waived 0 $50,766 $ 85,502
1995 Fee Paid $1,246,576 0 0

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

1994 Fee Earned $1,273,842 $84,778 $ 114,449
1994 Fee Waived 0 $81,284 $ 15,135
1994 Fee Paid $1,273,842 $ 3,494 $ 99,314
- --------------------- ------------------------- ----------------------------- ---------------------------------
</TABLE>

The Adviser Contracts further provide that the Adviser is not liable to
the Trust or any of its shareholders for any act or omission by the Adviser in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties or obligations thereunder. The Advisory Contracts
contemplate that the Adviser may act as an investment manager or adviser for
others.

The Adviser Contracts may be amended at any time by the mutual consent
of the parties thereto, provided that such consent on the part of the Trust
shall have been approved by the vote of a majority of the Trust's Board of
Trustees, including the vote cast in person by a majority of the Trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of any party to the Adviser Contract, and by vote of the shareholders of the
applicable fund.

The Adviser Contracts may be terminated, upon 60-days written notice
(which notice may be waived), at any time without penalty, (i) by the Board of
Trustees of the Trust, (ii) by the vote of a majority of the outstanding voting
securities of the applicable fund or (iii) by the Adviser. Each Adviser Contract
terminates automatically in the event of its assignment (as that term is defined
in the Investment Company Act of 1940) by the Adviser.

The Adviser Contracts continue in effect until December 31, 1997; and
thereafter, provided that its continuance for the funds for each renewal year is
specifically approved in advance (i) by the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the Funds, and (ii)
by vote of a majority of the Trustees who are not parties to the advisory
contract or "interested persons" (as defined in The Investment Company Act of
1940) by votes cast in person at a meeting specifically called for such
purposes.

CUSTODIAN

Star Bank, 425 Walnut Street, Cincinnati, Ohio 45202, acts as custodian
of the Trust's assets (the "Custodian"). The Custodian has no part in
determining the investment policies of any fund or which securities are to be
purchased or sold by any fund.

<PAGE> 82

SHAREHOLDER SERVICING, TRANSFER, DIVIDEND DISBURSING AND FINANCIAL
SERVICING AGENT

The Adviser is the Trust's Shareholder Servicing, Transfer, Dividend
Disbursing and Financial Servicing Agent (the "Servicing Agent"). The Adviser's
mailing address for its activities as Servicing Agent is The Gateway Trust, 400
TechneCenter Drive, Suite 220, Milford, Ohio 45150. As Transfer Agent for the
Trust, the Servicing Agent's general duties include transferring shares,
processing applications for new accounts and depositing the payments for the
purchase of fund shares with the Custodian, and notifying the Trust and
Custodian of such deposits. The Servicing Agent opens and maintains an account
for each shareholder as set forth in the subscription application, maintains
records of each shareholder account, and sends confirmation of shares purchased
to each shareholder. The Servicing Agent also receives and processes requests by
shareholders for redemption of shares. If the shareholder request complies with
the redemption standards of the Trust, the Servicing Agent will direct the
Custodian to pay the appropriate redemption price. If the redemption request
does not comply with such standards, the Servicing Agent will promptly notify
the shareholder of the reasons for rejecting the redemption request.

As the Dividend Disbursing Agent for the Trust, the Servicing Agent,
upon notification of the declaration of a dividend or distribution, will
determine the total number of shares issued and outstanding as of the record
date for the dividend or distribution and the amount of cash required to satisfy
such dividend or distribution. The Servicing Agent will prepare and mail to
shareholders dividend checks in the amounts to which they are entitled. In the
case of shareholders participating in the dividend reinvestment plan, the
Servicing Agent will make appropriate credits to their bookshare accounts.
Shareholders will be notified by the Servicing Agent of any dividends or
distributions to which they are entitled, including any amount of additional
shares purchased with their dividends. In addition, the Servicing Agent will
prepare and file with the Internal Revenue Service and with any state, as
directed by the Trust, returns for reporting dividends and distributions paid by
such fund.

The Servicing Agent, as the Shareholder Servicing Agent, will open and
maintain any plan or program for shareholders in accordance with the terms of
such plans or programs (see "Shareholder Services" herein). With regard to the
systematic withdrawal plans, the Servicing Agent will process such systematic
withdrawal plan orders as are duly executed by shareholders and will direct
appropriate payment to be made by the Custodian to the shareholder. In addition,
the Servicing Agent will process such accumulation plans, group programs and
other plans or programs for investing shares as provided in the Trust's current
prospectuses

Each fund pays the Servicing Agent a monthly minimum fee of $2,500 for
its services. Each fund also reimburses the Servicing Agent for printing,
mailing, compliance, and processing expenses associated with providing its
services. The portion of the reimbursement related to processing expenses cannot
exceed 0.2% of the fund's average net assets. In addition, each fund pays the
Servicing Agent a monthly fee of $4,000 for the financial and administrative
services it provides. For the year ended December 31, 1996, the Adviser earned
$636,835 in its capacity as Servicing Agent to all four funds of the Trust.

<PAGE> 83

BROKERAGE

Transactions on stock and option exchanges involve the payment of
negotiated brokerage commissions. In the case of securities traded in the
over-the-counter market, there is generally no stated commission but the price
usually includes an undisclosed commission or mark-up.

In effecting portfolio transactions for each fund, the Adviser is
obligated to seek best execution, which is to execute the Fund's transactions
where the most favorable combination of price and execution services are
available ("best execution"), except to the extent that it may be permitted to
pay higher brokerage commissions for brokerage and research services as
described below. In seeking best execution, the Adviser, in each fund's best
interests, considers all relevant factors, including:

* price.

* the size of the transaction, the nature of the market for the
security.

* the amount of commission.

* the timing of the transaction taking into account market prices
and trends.

* the reputation, experience and financial stability of the
broker-dealer involved.

* the quality of service rendered by the broker-dealer in other
transactions.

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking best execution and such other
factors as the Trustees may determine, the Adviser may consider sales of shares
of a fund as a factor in the selection of broker-dealers to execute securities
transactions for such fund. Closing option transactions are usually effected
through the same broker-dealer that executed the opening transaction.

The Trust has no obligation to deal with any broker or dealer in
the execution of its transactions. However, it is contemplated that Alex.
Brown & Sons Incorporated, or any of its affiliates ("Alex. Brown"), in its
capacity as a registered broker-dealer, will effect securities transactions
which are executed on a national securities exchange and over-the-counter
transactions conducted on an agency basis. Such transactions will be
executed at competitive commission rates.

Transactions in the over-the-counter market can be placed directly with
market makers who act as principals for their own account and include mark-ups
in the prices charged for over-the-counter securities. Transactions in the
over-the-counter market can also be placed with broker-dealers who act as agents
and charge brokerage commissions for effecting over-the-counter transactions.
The Trust may place its over-the-counter transactions either directly with
principal market makers, or with broker-dealers if that is consistent with the
Adviser's obligation to obtain best qualitative execution. Under the Investment
Company Act of 1940, persons affiliated with an affiliate of the Adviser (such
as Alex. Brown) may be prohibited from dealing with the Trust as a principal in
the purchase and sale of securities. Therefore, Alex. Brown will not serve as
the Trust's dealer in connection with over-the-counter transactions. However,
Alex. Brown may serve as the Trust's broker in over-the counter transactions
conducted on an agency basis and will receive brokerage commissions in
connection with such transactions.

<PAGE> 84

The Trust will not effect any brokerage transactions in its portfolio
securities with Alex. Brown if such transactions would be unfair or unreasonable
to the Trust's shareholders, and the commissions will be paid solely for the
execution of trades and not for any other services. In determining the
commissions to be paid to Alex. Brown, it is the policy of the Trust that such
commissions will, in the judgment of the Trust's Board of Trustees, be (a) at
least as favorable to the Trust as those which would be charged by other
qualified brokers having comparable execution capability and (b) at least as
favorable to the Trust as commissions contemporaneously charged by Alex. Brown
on comparable transactions for its most favored unaffiliated customers, except
for customers of Alex. Brown considered by a majority of the Trust's
disinterested Trustees not to be comparable to the Trust. The disinterested
Trustees from time to time review, among other things, information relating to
the commissions charged by Alex. Brown to the Fund and its other customers, and
other information concerning the commissions charged by other qualified brokers.
It is not contemplated that brokerage transactions will be effected exclusively
through Alex. Brown. The Adviser may from time to time use other brokers,
including brokers that provide research services as discussed below.

The Adviser Contracts provide that, subject to such policies as the
Trustees may determine, the Adviser may cause a fund to pay a broker-dealer who
provides brokerage and research services to the Adviser an amount of commission
for effecting a securities transaction for such fund in excess of the amount of
commission which another broker-dealer would have charged for effecting that
transaction. As provided in Section 28(e) of the Securities Exchange Act of
1934, 'brokerage and research services include:

* advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities.

* furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and
performance of accounts.

* effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).

* services that provide lawful and appropriate assistance to the
Adviser in the performance of its investment decision-making
responsibilities.

While the Adviser does not intend to limit the placement of orders to
any particular broker or dealer, the Adviser generally gives preference to those
brokers or dealers who are believed to give best execution and who also provide
research, statistical or other services to the Adviser and/or the Trust.
Commissions charged by brokers who provide these services may be higher than
commissions charged by those who do not provide them. Higher commissions are
paid only if the Adviser determines that they are reasonable in relation to the
value of the services provided, and it has reported to the Board of Trustees of
the Trust on a periodic basis to that effect. The availability of such services
was taken into account in establishing the investment advisory fees. Specific
research services furnished by brokers through whom the Trust effects securities
transactions may be used by the Adviser in servicing all of its accounts.
Similarly, specific research services furnished by brokers who execute
transactions for other of the Adviser's clients may be used by the Adviser for
the benefit of the Trust.

The Adviser has an agreement with Bridge Information Systems, Inc.
("Bridge") to direct brokerage transactions to Bridge because of research
services provided to the Adviser. For the

<PAGE> 85

fiscal year ended December 31, 1996, the Trust paid brokerage commissions of
$192,607 for effecting brokerage transactions totaling $95,794,373. The Adviser
may from time to time enter into similar agreements with other brokers.

The following table shows the brokerage commissions paid by the funds
in the years ended December 31, 1996, 1995, and 1994.

<TABLE>
<CAPTION>
- --------------------------- -------------------------- -------------------------- ---------------------------
Name of Fund 1996 Commissions 1995 Commissions 1994 Commissions
- --------------------------- -------------------------- -------------------------- ---------------------------
<S> <C> <C> <C>
Index Plus Fund $274,816 $128,373 $76,077
Mid Cap Index Fund 3,909 $ 6,982 $ 9,121
Small Cap Index Fund 9,766 12,492 $24,677
- --------------------------- -------------------------- -------------------------- ---------------------------
</TABLE>

The increased levels of commissions paid by the Index Plus Fund from
1994 to 1995 are attributable primarily to the resumption of the use of
exchange-traded options by the fund in 1995. During 1994, the fund used
primarily over-the-counter option contracts which are traded on a principal
basis with no direct commission charges.

The increased levels of commissions paid by the Index Fund from 1995 to
1996 are attributable to: increased levels of shareholder activity resulting in
higher portfolio turnover; and to increased use of put options to hedge the
portfolio.

ADDITIONAL TAX MATTERS

The tax discussion set forth below and in the Prospectuses is included
for general information only. Prospective investors should consult their own tax
advisors concerning the tax consequences of an investment in the Trust.

<PAGE> 86

FEDERAL TAX MATTERS

Each of the funds is treated as a separate association taxable as a
corporation. The following information, therefore, applies to each fund
separately unless otherwise specifically stated.

Except as noted below, each fund has met, and each of the funds in the
future intends to meet, the requirements of the Internal Revenue Code,
applicable to regulated investment companies so as to qualify for the special
tax treatment afforded to such companies. Under Subchapter M of the Code, a
regulated investment company is not subject to federal income tax on the portion
of its net investment income and net realized capital gains which it distributes
currently to its stockholders, provided that certain distribution requirements
are met, including the requirement that at least 90% of the sum of its net
investment income and net short-term capital gains in any fiscal year is so
distributed. In addition to this distribution requirement, two of the principal
tests which each fund must meet in each fiscal year in order to qualify as a
regulated investment company are the "90% Test" and the "30% Test." The 90% Test
requires that at least 90% of a fund's gross income must be derived from
dividends, interest and gains from the sale or other disposition of securities,
including gains from options. The 30% Test that requires no more than 30% of a
fund's gross income be derived from the sale or other disposition of securities
held less than three months. The 30% Test limits each fund's ability to deal
with investments held, or options outstanding, less than three months. In 1987,
the Index Plus Fund failed to satisfy the 30% Test as a result of an unusual
volume of short-term gains realized by the fund following the stock market drop
in October 1987. As a consequence, the Fund failed to qualify under Subchapter M
and became subject to federal income tax and state franchise tax for 1987. The
Index Plus Fund has qualified under Subchapter M each year since 1987.

Gains realized from transactions on put and call options (other than
options on securities indexes) generally will be long term or short term,
depending on the nature of the option transaction and on the length of time the
option is owned by the fund.

The tax status of distributions made by each fund during the fiscal
year will be sent to shareholders shortly after the end of such year. Each
prospective investor is advised to consult his own tax advisor. Distributions of
net investment income are taxable as ordinary income subject to allowable
exclusions and deductions. Distributions of capital gains are taxable at either
ordinary or long-term capital gains rates, as appropriate, except that all such
gains are normally taxable as ordinary income to the extent they are offset by
capital-loss carryforwards.

Long-term capital gains distributions (i.e., the excess of any net
long-term capital gains over net short-term capital losses), after utilization
of available capital-loss carryforwards, are taxable as long-term capital gains
whether received in cash or additional shares, regardless of how long the
shareholder has held his shares, and are not eligible for the dividends received
deduction for corporations. Distributions of long-term capital gains which are
offset by available loss carryforwards, however, may be taxable as ordinary
income.

Distributions on shares of any fund received shortly after their
purchase, although substantially in effect a return of capital, are subject to
federal income taxes.

<PAGE> 87

STATE AND LOCAL TAX ASPECTS

The laws of the several states and local taxing authorities vary with
respect to taxation, and each prospective investor is advised to consult his own
tax advisor as to the status of his shares and distributions in respect of those
shares under state and local tax laws.

TRUSTEES AND OFFICERS OF THE TRUST

The Trustees and Officers of the Trust, together with information as to
their positions with the Trust and its predecessor, Gateway Option Income Fund,
Inc. (the "Company") and their principal occupations during at least the past
five years, are listed below.

*Walter Gene Sall, 400 TechneCenter Drive, Suite 220, Milford, Ohio,
45150; Chairman and Trustee of the Trust; Chairman of the Adviser; various
senior management positions and offices held with the Trust, the Company and the
Adviser since 1977. Age 52.

*J. Patrick Rogers, 400 TechneCenter Drive, Suite 220, Milford, Ohio,
45150; President of the Trust since 1997; President of the Company since
1995;portfolio manager of the funds; co-portfolio manager of the funds prior to
1997; various senior management positions and offices held with the Trust, the
Company, and the Adviser since 1989. Age 33.

Stefen F. Brueckner, Anthem Companies, Inc., 120 Monument Circle, Mail
Location M4C, Indianapolis, Indiana 46204; Trustee of the Trust since October
1992; Director, Chief Executive Officer, and President, Anthem Companies, Inc.
since 1995. Prior thereto, Director, and President of Community Mutual Insurance
Company (health insurer) since 1991 and various management positions since 1986.
Director of Anthem Health and Life Insurance Company, Anthem Life Insurance
Company, and various other affiliates and subsidiaries. Age 47.

Kenneth A. Drucker, Sequa Corp., 200 Park Avenue, New York, New York,
10166; Director of the Company from January 20, 1984 to May 1986; Trustee of the
Trust since April 1986; Vice President and Treasurer, Sequa Corporation (gas
turbine and industrial equipment) since November 1987. Prior thereto, Senior
Vice-President and Treasurer, JWT Group, Inc. (advertising, public update
relations and market research). Age 51.

Beverly S. Gordon, 8591 Woodbrier Drive, Sarasota, Florida, 34238;
Trustee of the Trust since September 1988; arbitrator, National Association of
Securities Dealers, Inc., since January 1992; Vice President, Marketing and
Communications, Coffee, Sugar and Cocoa Exchange from January 1989 to December
1991; Executive Director, National Institutional Options and Futures Society,
March 1988 to December 1988; prior thereto, Vice President, Institutional
Marketing, Chicago Board Options Exchange. Age 66.

R.S. (Dick) Harrison, 4040 Mt. Carmel Road, Cincinnati, Ohio 45244;
Trustee of the Trust since April 1996 and from 1977 through 1982;
Director/Chairman of the Board, Baldwin Piano & Organ Company from 1994 to
1997; Chairman of the Board/CEO, Baldwin Piano & Organ Company from 1983 to
1994. Prior thereto, various management positions with Baldwin Piano & Organ
Company, Cincinnati,

<PAGE> 88

Ohio. Director of Sencorp and Anderson Bank of Cincinnati, Ohio and Trustee of
Kenyon College. Age 65.

William Harding Schneebeck, 251 Indian Harbor Road, Vero Beach,
Florida, 32963; Director of the Company from September 1977 to May 1986; Trustee
of the Trust since April 1986; retired, formerly Chairman of Midwestern Fidelity
Corp. Age 68.

*Geoffrey Keenan, 400 TechneCenter Drive, Suite 220, Milford, Ohio
45150; Vice President of the Trust since April 1996; Chief Operations Officer,
Gateway Investment Advisers, L.P. since 1995; Executive Vice President and Chief
Operations Officer, Gateway Investment Advisers, Inc. since 1995; Vice
President, Gateway Investment Advisers, Inc. from 1991 to 1995. Age 38.

*Paul R. Stewart, 400 TechneCenter Drive, Suite 220, Milford, Ohio,
45150; Treasurer of the Trust since October, 1995; Chief Financial Officer of
the Adviser since 1996, Comptroller of the Adviser from October, 1995 to
December 1996, Audit Manager and Senior Manager, Price Waterhouse from
September, 1992 to 1995 and from August 1988 to August 1991; accountant for
Lexmark International from August 1991 to September 1992. Age 31.

*Donna M. Squeri, 400 TechneCenter Drive, Suite 220, Milford, Ohio
45150; Secretary of the Trust since October, 1995; Secretary and General Counsel
of the Adviser since September, 1995; in house counsel of Bartlett & Co., a
registered investment adviser, from October, 1984 to September, 1993. Age 37.

*Messrs. Sall, Rogers, Keenan, and Stewart and Ms. Squeri are
affiliated persons of the Trust and the Adviser as defined by the Investment
Company Act of 1940. Mr. Sall is an "interested person" of the Trust as defined
by the Investment Company Act of 1940.

Messrs. Sall, Rogers, Keenan and Stewart and Ms. Squeri, each of whom
is employed by the Adviser, receive no remuneration from the Trust. Each Trustee
of the Trust other than Mr. Sall receives fees as follows: (a) an annual fee of
$3,000, payable in equal quarterly installments for services during each fiscal
quarter, (b) a $500 base fee plus $100 per fund for each regular or special
meeting of the Board of Trustees attended, and (c) $200 per fund ($1,000 per
fund for the Chairman) for each Audit and Contract Review Committee meeting
attended. The Trust also reimburses each Trustee for any reasonable and
necessary travel expenses incurred in connection with attendance at such
meetings. In addition, Trustees may receive attendance fees for service on other
committees.

<PAGE> 89

The following table provides information about the compensation
received by each Trustee from the Trust for the year ended December 31, 1996.

<TABLE>
<CAPTION>
- ---------------------- ----------------------------------------------
Total Compensation
Name of Trustee From Trust
- ---------------------- ----------------------------------------------
<S> <C>
Stefen F. Brueckner $ 8,200.00
Kenneth A. Drucker $ 9,800.00
Beverly S. Gordon $ 6,600.00
R. S. Harrison $ 3,300.00
Walter G. Sall $ 0.00
William H. Schneebeck $ 9,800.00
- ---------------------- ----------------------------------------------
</TABLE>

INDEPENDENT PUBLIC ACCOUNTANTS AND FINANCIAL STATEMENTS

Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio 45202, serves
as independent public accountants of the Trust. Arthur Andersen LLP performs an
annual audit of each fund's financial statements, prepares each fund's tax
returns and provides financial, tax and accounting consulting services as
requested.

The financial statements and independent auditor's report required to
be included in this SAI are incorporated herein by this reference to the Trust's
Annual Report to Shareholders for the fiscal year ended December 31, 1996.

PRINCIPAL HOLDERS OF FUND SHARES

INDEX PLUS FUND

As of XXX, the Index Plus Fund had XXX shares outstanding. As of such
date, each of the following persons or groups was known by Trust management to
be the record and/or beneficial owner (as defined below) of the indicated
amounts of the Fund's outstanding shares.

<TABLE>
<CAPTION>
- ------------------------------------------------------------- ------------------------- ----------------------------
Name and Address Number of Shares Percent of Class
- ------------------------------------------------------------- ------------------------- ----------------------------
<S> <C>
Charles Schwab and Company
101 Montgomery Street
San Francisco, California 94104

Trustees and Officers of the Trust as a group

Officers and Directors of the Adviser as a group
- ------------------------------------------------------------- ------------------------- ----------------------------
</TABLE>

<PAGE> 90

MID CAP INDEX FUND

As of XXX, the Mid Cap Index Fund had XXX shares outstanding. As of
such date, each of the following persons or groups was known by Trust
management to be the record and/or beneficial owner (as defined below) of the
indicated amounts of the Fund's outstanding shares.

<TABLE>
<CAPTION>
- -------------------------------------------------------------- -------------------------- --------------------------
Name and Address of Owner Number of Shares Percent of Class
- -------------------------------------------------------------- -------------------------- --------------------------

<S> <C> <C>
Trustees and Officers of the Trust as a group

Officer and Directors of the Adviser as a group
- -------------------------------------------------------------- -------------------------- --------------------------
</TABLE>

<PAGE> 91

SMALL CAP INDEX FUND

As of XXX, the Small Cap Index Fund had XXX shares outstanding. As of
such date, each of the following persons or groups was known by Trust management
to be the record and/or beneficial owner (as defined below) of the indicated
amounts of the Fund's outstanding shares.

Trustees and Officers of the Trust as a group

Officers and Directors of the Adviser as a group Less than 1%
- -------------------------------------------------------------- -------------------------- --------------------------
</TABLE>

The Securities and Exchange Commission has defined "beneficial owner"
of a security to include any person who has voting power or investment power
with respect to any such security, any person who shares voting power or
investment power within respect to any such security. or any person who has the
right to acquire beneficial ownership of any such security within 60 days.

SHARES HELD BY ADVISER

As of February 4, 1997, the Adviser held in a fiduciary capacity the
indicated amounts of the outstanding shares of each fund. The Adviser has
investment and voting power over all shares held by it in a fiduciary capacity.

<TABLE>
<CAPTION>
- ------------------------------------ ------------------------------------ --------------------------------------
Name of Fund Number of Shares Percentage of Shares
- ------------------------------------ ------------------------------------ --------------------------------------
<S> <C> <C>
Index Plus Fund 509,624 4.65%
Mid Cap Index Fund 282,539 58.55%
Small Cap Index Fund 449,580 50.21%
- ------------------------------------ ------------------------------------ --------------------------------------
</TABLE>

<PAGE> 92

SCHEDULE A

(STOCKS INCLUDED IN THE S&P 100 INDEX)

<TABLE>
<CAPTION>
<S> <C> <C>
Aluminum Company Of America Digital Equipment Corp. May Department Stores Company
American Electric Power Disney, Walt Company McDonalds Corporation
Company Inc. Dow Chemical Company MCI Communications Corporation
American Express Company Du Pont Company Merck and Company Inc.
American General Corporation Eastman Kodak Company Merrill Lynch and Company
American International Group Inc. Entergy Corporation Minnesota Mining and
Ameritech Exxon Corporation Manufacturing
Amoco Corporation Federal Express Corporation Mobil Corporation
AMP Incorporated First Chicago Corporation Monsanto Company
AT & T Corp First Fidelity Bancorp National Semiconductor
Atlantic Richfield Company First Interstate Bancorp. Corporation
Avon Products Inc. Fluor Corporation Norfolk Southern Corporation
Baker Hughes Incorporated Ford Motor Company Northern Telecom Limited
Bankamerica Corporation General Dynamics Corporation Nynex Corporation
Baxter International Inc. General Electric Company Occidental Petroleum Corporation
Bell Atlantic Corporation General Motors Corporation Pepsico Inc.
Bethlehem Steel Corporation Great Western Financial Pharmacia & Upjohn
Black and Decker Corporation Corporation Polaroid Corporation
Boeing Company H.J. Heinz Company Ralston Purina Company
Boise Cascade Corporation Halliburton Company Raytheon Company
Bristol Myers Squibb Company Harrah's Entertainment, Inc. Rockwell International Corporation
Brunswick Corporation Harris Corporation Schlumberger Limited
Burlington Northern Santa Fe Hewlett Packard Company Sears Roebuck and Company
Corp New Homestake Mining Company Southern Company
Capital Cities ABC Inc. Honeywell Inc. Tandy Corporation
Ceridian Corporation Intel Corporation Tektronix Inc.
Champion International International Business Teledyne Inc.
Corporation Machines Corp Texas Instruments Incorporated
Chrysler Corporation International Flavors and Toys R Us Inc.
CIGNA Corporation Fragrances UNICOM Corp.
Citicorp International Paper Company Unisys Corporation
Coastal Corporation ITT Corporation United Technologies Corporation
Coca Cola Company Johnson and Johnson Wal Mart Stores Inc.
Colgate Palmolive Company K Mart Corporation Weyerhaeuser Company
Computer Sciences Corporation Limited Inc. Williams Companies
Delta Air Lines Inc. Mallinkrodt Group Inc. Xerox Corporation
</TABLE>

<PAGE> 93

SCHEDULE B

(STOCKS INCLUDED IN THE S&P MIDCAP 400 INDEX)

<TABLE>
<CAPTION>
<S> <C> <C>
A. Schulman Inc. Best Buy Company Inc. Conner Peripherals Inc.
A.G. Edwards Inc. Betz Laboraties Consolidated Papers Inc.
A.H. Belo Corporation Class A Biogen Inc. Convex Computer Corporation
A.T. Cross Company BJ Services Company Coram Healthcare Corp.
Acuson Corporation Black Hills Corporation Cordis Corporation
ADC Telecommunications Inc. BMC Software Inc. CPI Corporation
Adobe Sysems Bob Evans Farms Inc Cracker Barrel Old Country
Advanced Technology Borland International Inc. Store Inc
Laboratories Inc Bowater Incorporated Crestar Financial Corp.
AES Corporation Brinker International Inc. Crompton and Knowles
Aflac Inc. Brooklyn Union Gas Company Corporation
Air and Water Technologies Corp. Brush Wellman Inc. Cypress Semiconductor
Airborne Freight Corporation Buffets Inc. Corporation
Alaska Air Goup Inc. Burlington Industries Incorporated Danaher Corporation
Albany International Corp. Cl. A Cabot Corporation Datascope Corporation
Albemarle Corp Cadence Design Systems Inc. Dauphin Deposit Corporation
Alexander and Baldwin Company Calgon Carbon Corp. Dean Foods Company
Allegheny Ludlum Corporation California Energy Company Dell Computer Corporation
Allegheny Power System Inc. Callaway Golf Company Delmarva Power and
Altera Corporation Calmat Company Light Company
Alumax Inc. Cardinal Health Inc. Dentsply International Inc.
American Financial Group Inc. Carlisle Companies Inc. Dexter Corporation
American Power Conversion Corp. Holding Co. Diagnostic Products Corporation
American President Carpenter Technology Corporation Diamond Shamrock Inc.
Companies Ltd. Carter Wallace Inc. Diebold Incorporated
Ametek Inc CBI Industries Inc. Dole Food Company Inc.
Anadarko Petroleum Corp. Centocor Inc. Dollar General Corporation
Analog Devices Inc Central Fidelity Banks Inc. Donaldson Company Inc.
Angelica Corporation Central Louisiana Electric Co Inc Dreyers Grand Ice Cream Inc.
Ann Taylor Stores, Inc. Central Maine Power Company Duriron Company
Aon Corporation Century Telephone Enterprises Duty Free International Inc.
Apache Corporation Charles Schwab Corporation El Paso Natural Gas Company
Applied Bioscience Chesapeake Corporation Electronic Arts Inc
International Inc Chiron Corporation EMC Corporation
Apria Healthcare Group Inc. Chris Craft Industries Inc. Ennis Business Forms Inc.
Arnold Industries Inc. Church & Dwight Co. Inc. Equifax Inc.
Arrow Electronics Inc. Cintas Corporation Ethyl Corporation
Arvin Industries Inc. Circus Circus Enterprises Inc. Exabyte Corporation
AST Research Inc. Cirrus Logic Inc. Family Dollar Stores
Atlanta Gas Light Company City National Corporation Federal Mogul Corporation
Atlantic Energy Inc. Claires Stores Inc. Federal Signal Corporation
Atlantic Southeast Airlines Inc. Clayton Homes Incorporated Ferro Corporation
Atmel Corp Cleveland Cliffs Inc FHP International Corp.
Avnet Inc Holding Company Fifth Third Bancorp
Bancorp Hawaii Inc CML Group Inc. Fingerhut Companies Inc.
Banta Corp. CMS Energy Corporation First Brands Corp.
Battle Mountain Gold Company Coca Cola Enterprises Inc. First of America Bank Corporation
Bay Networks Inc Comdisco Inc. First Security Corporation
Bear Stearns Companies Inc. Comerica Incorporated First Tennessee National Corp.
Beckman Instruments Inc. Compuware Corp First Virginia Banks Inc.
Bergen Brunswig Corporation Comsat Corporation Fiserv Inc.
</TABLE>

<PAGE> 94

<TABLE>
<CAPTION>
<S> <C> <C>
Flightsafety International Inc. IVAX Corporation Minnesota Power and
Florida Progress Corporation J. M. Smucker Company Light Company
Flower Industries Inc. J.B. Hunt Transport Services Inc. Mirage Resorts Incorporated
Forest Laboratories Inc. Jacobs Engineering Group Inc Modine Manufacturing Company
Foundation Health Corporation Jones Apparel Group Inc. Molex Incorporated
Franklin Resources Inc. Kansas City Power & Light Montana Power Company
Fred Meyer Inc. Kansas City Southern Industries Morrison Restaurants Inc.
Frontier Corporation Kaydon Corporation Murphy Oil Corporation
GATX Corporation Kelly Services Inc. Mylan Laboratories Inc.
Gencorp Inc. Kemper Corporation Nabors Industries Inc.
Genzyme Corporation Kennametal Inc National Fuel Gas Company
Georgia Gulf Corp. Keysone International Inc. National Presto Industries Inc.
Gibson Greetings Inc. Kohls Corp. NCH Corporation
Glatfelter, P. H. Company Laboratory Corp of America Nellcor Incorporated
Global Marine Inc. Lancaster Colony Corporation Nevada Power Company
Goulds Pumps Incorporated Lance Inc New England Electric System
Granite Construction Incorporated Lands End Inc. New York State Electric and Gas
Green Tree Acceptance Inc. Lawson Products Inc Nextel Communications Inc.
H.B. Fuller Company Lawter International Inc. Nine West
Hancock Fabrics Inc. Lee Enterprises Incorporated Nipsco Industries Inc.
Hanna, M. A. Company Leggett and Platt Inc Noble Affiliates Inc.
Hannaford Brothers Company LG and E Energy Corp. Nordson Corporation
Harley Davidson Inc. Lincoln Telecommunications Northeast Utilities
Harsco Corporation Company Northern Trust Corporation
Hartford Steam Boiler Linear Technology Corporation Novacare Inc.
Inspec and Ins Litton Industries Inc. Octel Communications Corp.
Hawaiian Electric Industries Inc. Loctite Corporation OEA Inc.
Health Care & Retirement Longview Fibre Company Office Depot Inc.
Healthcare Compare Corp. LSI Logic Corporation Oklahoma Gas and
Healthsource Inc Lubrizol Corporation Electric Company
Healthsouth Rehabilitation Corp Lukens Inc. Delaware Olin Corporation
Heilig Meyers Company Holdings Co. Olsten Corporation
Herman Miller Inc. Lyondell Petrochemical Company Omnicom Group Inc.
Hibernia Corp MacFrugals Bargains Close Oregon Steel Mills Inc.
Home Shopping Network Inc. Outs Inc. Outback Steakhouse
Hon Industries Inc Magnetek Inc. Overseas Shipholding Group Inc.
Horizon CMS Healthcare Corp Manpower Inc. Pacific Healthcare Systems
Hospitality Franchise Systems, Inc Mapco Inc. Paine Webber Group Inc.
Houghton Mifflin Company Mark IV Industries Inc. Parametric Technology
Hubbell Incorporated Marshall and Ilsley Corporation Corporation
IBP Inc. Maxxam Inc. Parker and Parsley
Idaho Power Company McCormick and Company Petroleum Company
Illinois Central Corporation Incorporated Parker Drilling Company
Illinova Corporation Holding C McKesson Corporation Paychex Inc.
IMC Global Inc. MCN Corporation Pentair Inc.
Indiana Energy Inc. Measurex Corporation Perrigo Company
Information Resources Inc. Media General Inc. PHH Group Inc.
Informix Corporation Mentor Graphics Corporation Pinnacle West Capital Corporation
Integrated Device Technology Inc. Mercantile Bancorporation Inc. Policy Management Systems Corp.
Intelligent Electronics Inc. Mercantile Bankshares Corporation Portland General Corp.
International Dairy Queen Inc Meridian Bancorp Inc. Holding Co.
International Game Technology Michael Foods Inc. Potomac Electric Power Company
International Multifoods Microwarehouse Inc Precision Castparts Corporation
Corporation Mid American Engergy Company Progressive Corporation
Ipalco Enterprises Inc. Promus Hotel Corporation
</TABLE>

<PAGE> 95

<TABLE>
<CAPTION>
<S> <C> <C>
Provident Life and Accident Solectron Corp Topps Company Inc.
Ins CL B Sonoco Products Tosco Corporation
Public Service Company Sotheby's Holdings, Inc. (Class A) Transatlantic Holdings Inc.
of Colorado Southdown Incorporated Trinity Industries Inc.
Public Service Company of Southern New England Tyson Foods Inc
New Mexico Telecommun Corp. U.S. Robotics
Puget Sound Power and Light Co. Southtrust Corporation UJB Financial Corp.
Quaker State Corporation Southwestern Public Unifi Incorporated
Quantum Corporation Service Company Universal Corporation Holding Co.
Questar Corp Holding Co Standard Register Company Universal Foods Corporation
Ranger Oil Limited Stanhome Incorporated Utilicorp United Inc.
Rayonier Inc. Staples Inc. Valero Energy Corporation
Regions Financial Corp State Street Boston Corp. Value Health Inc.
Revco DS Inc. Sterling Chemicals Vanguard Cellular Systems Inc.
Reynolds and Reynolds Company Stewart and Stevenson Varco International Inc.
Rohr Industries Inc. Services Inc. Varian Associates Inc.
Rollins Environmental Storage Technology Corporation Verifone Inc.
Services Inc. Stratus Computer Inc. Vishay Intertechnology
Rollins Inc. Structural Dynamics Vons Companies Inc.
RP Scherer Corp Research Corp. Vulcan Materials Company
RPM Incorporated Stryker Corporation Waban Inc.
Ruddick Corporation Sunamerica Inc. Wallace Computer Services Inc.
Savannah Food Inc. Sundstrand Corporation Washington Gas Light Company
Sbarro Incorporated Superior Industries International Washington Post Company
Scana Corporation Surgical Care Affiliates Inc. Watts Industries Inc.
Holding Company Symantec Corporation Wausau Paper Mills Company
Scholastic Corp Symbol Technologies Inc. Weatherford International Inc
Seagull Energy Corporation Tambrands Inc. Wellman Inc.
Sealed Air Corporation TCA Cable TV Incorporated West One Bancorp.
Segate Technology Inc. Teco Energy Inc. Western Publishing Group Inc.
Sensormatic Electronics Tecumseh Products Co. Wilmington Trust Corporation
Corporation Teleflex Incorporated Wisconsin Energy Corp.
Sequa Corporation, Class A Telephone and Data Systems Inc. Holding Co.
Sequent Computer Systems Inc. Teradyne Inc. Witco Corporation
Service Merchandise Company Inc. Thermo Electron Corporation Worldcom Inc.
Shaw Industries Inc. Thiokol Corporation WPL Holdings Inc.
Sizzler International Inc. Tidewater Inc. Xilinx Inc.
Smith International Inc. Tiffany and Company York International Corporation
</TABLE>

<PAGE> 96

SCHEDULE C

(STOCKS INCLUDED IN THE WILSHIRE SMALL CAP INDEX)

<TABLE>
<CAPTION>
<S> <C> <C>
20th Century Inds Cal Carpenter Technology Corporation Gaylord Cont ClA
A.T. Cross Company Catellus Development Corporation Gencorp Inc.
Acclaim Entertainment Cato Corporation Geotek Communications Inc.
Acuson Corporation Centex Corporation Gerber Scientific Inc.
ACX Technologies Inc. Centocor Inc. Gibson Greetings Inc.
Advanced Technology Central Hudson Gas and Giddings and Lewis Inc. Dep Shrs
Laboratories Inc Electric Corp Glendale Federal Bank
Advanced Tissue Sciences Inc. Charming Shoppes Inc. Global Marine Inc.
Air and Water Technologies Corp. Chemed Corporation Global Village Communications
Airborne Freight Corporation Chesapeake Corporation Goulds Pumps Incorporated
AK Steel Holding Corp Cheyenne Software Inc. Grand Casinos Inc.
Alaska Air Group Inc. Chiquita Brands Intl Inc Great Financial Corp.
Albany International Corp. Cl. A Chris Craft Industries Inc. H.B. Fuller Company
Alex Brown Incorporated Cilcorp Inc Holding Company Haemonetics Corporation
Allwaste Inc. Cincinnati Milacron Inc. Handleman Company
American Bankers Insurance City National Corporation Handy and Harman
Group Inc Clarcor Inc. HECLA Mining Company
Ametek Inc Cobra Golf Herbalife Int'l Inc.
Amsco International Inc. Collective Bancorp, Inc. Home Financial Corp Del H
Angelica Corporation Comdisco Inc. Home Shopping Network Inc.
Argosy Gaming Company Compass Bancshares HON Industries Inc
Arnold Industries Inc. CompUSA Inc. Houghton Mifflin Company
Arvin Industries Inc. Cone Mills Corp. IES Industries Inc.
AST Research Inc. Cordis Corporation Information Resources Inc.
Astoria Financial Corp Credence Systems Corp Integon Corporation
Aura Systems Inc. Cyrix Corp Integrated Health Services
Avid Technology Inc. Data General Corporation Intelligent Electronics Inc.
Baldor Electric Company Dauphin Deposit Corporation International CableTel
Ballard Medical Products Diagnostic Products Corporation International Dairy Queen Inc
Banta Corp. Donaldson Company Inc. International Multifoods
Bassett Furniture Industries Inc Dress Barn Inc. Corporation
Beckman Instruments Inc. Dreyers Grand Ice Cream Inc. Interstate Bakeries Corporation
Bed Bath & Beyond Duty Free International Inc. J.B. Hunt Transport Services Inc.
Bell Bancorp Eagle Hardware and Garden Inc. John Alden Financial Corp
Bergen Brunswig Corporation Eastern Utilities Associates Jones Apparel Group Inc.
Bic Corporation Electronics for Imaging Kaman Corporation
Birmingham Steel Corporation Exabyte Corporation Kaufman and Broad Home Corp.
BJ Services Company Federal Mogul Corporation Kellwood Company
Blair Corporation First American Corp. of Tennessee Kennametal Inc
Block Drug Company First Commerce Corp of Kimball International Inc
Brown Group Inc. New Orleans LA Z Boy Chair Company
Brush Wellman Inc. Flower Industries Inc. Lands End Inc.
BWIP Holding Inc. Cl A Fore Systems Inc. Lattice Semiconductor
Calgon Carbon Corp. Foremost Corporation of America Lawson Products Inc
California Federal Savings Fourth Financial Corporation Lawter International Inc.
Bank Cl A Foxmeyer Health Corp LCI International Inc.
Carlisle Companies Inc. Fred Meyer Inc. Lennar Corporation
Holding Co. FTP Software Inc. Liberty Corporation
</TABLE>

<PAGE> 97

<TABLE>
<CAPTION>
<S> <C> <C>
Life Partners Group Inc. Pogo Producing Company Standard Products Company
Life Re Corporation Premier Bancorp Inc. Standard Register Company
Life USA Holding, Inc. Presstek Inc Stanhome Incorporated
Long Island Bancorp Public Service Company of Starbucks Corporation
Lubys Cafeterias Inc. New Mexico Sterling Chemicals
MacFrugals Bargains Close Pulitzer Publishing Co. Structural Dynamics
Outs Inc. Pulte Corporation Research Corp.
Macromedia Inc. Pyxis Corporation Summit Bancorporation
Maxxam Inc. Quaker State Corporation Summit Technology Inc.
MDU Resources Group Inc. Quantum Corporation Sunshine Mining Company
Measurex Corporation Ralcorp Holdings Inc. Superior Industries International
Medic Computer System Inc. Reliance Group Holdings Inc. Surgical Care Affiliates Inc.
Merisel, Inc. Rigs National Corp Washington Symbol Technologies Inc.
Michael Foods Inc. Rollins Inc. T. Rowe Price Associates Inc.
Mid Atlantic Medical Services Rollins Truck Leasing Corp. TCA Cable TV Incorporated
Midwest Grain Products Inc. Roosevelt Financial Group Teleflex Incorporated
Morrison Knudsen Corporation Ross Stores Inc. Thiokol Corporation
Morrison Restaurants Inc. Rowan Companies Inc. Tucson Electric Power Company
Nabors Industries Inc. Russ Berrie and Company Inc. Tultex Corporation
NAC Re Corp S3 Inc. UGI Corporation
Nacco Industries Inc Holding Savannah Food Inc. United COS Financial Corp
Co Cl A Sbarro Incorporated US Long Distance Corp
NCH Corporation Seafield Capital Corp. Valley National Bancopr
Netmanage Inc. Seagull Energy Corporation Vanguard Cellular Systems Inc.
Network General Sequent Computer Systems Inc. Ventritex Inc.
New England Business Service Inc. Shared Medical Systems Verifone Inc.
Noram Energy Corp. Corporation VLSI Technology, Inc.
Octel Communications Corp. Shorewood Packaging Corp. Wallace Computer Services Inc.
OMI Corporation Sierra Pacific Resources Washington Energy Company
Onbancorp Holding Co. Washington National Corporation
Oneok Inc. Silicon Valley Group Inc. Wausau Paper Mills Company
Orange and Rockland Utilities Inc. Sizzler International Inc. West Company Incorporated
Oshkosh B Gosh Inc. Smith International Inc. Western Digital, Corp
Overseas Shipholding Group Inc. Sotheby's Holdings, Inc. (Class A) Western National Corp.
Pegasus Gold Inc. Southdown Incorporated Western Publishing Group Inc.
Pentair Inc. Southern Indiana Gas and Westpoint Stevens Inc.
Peoples Bk Bridgeport Electric Co Yellow Freight System Inc
Perrigo Company Southwest Gas Corporation Zenith National Insurance Corp
Petrolite Corporation Southwestern Energy Company Zurn Industries Inc.
PHH Group Inc. Standard Federal Bancorporation
Pittston Services Group Inc. Holding Co.
</TABLE>

<PAGE> 98

SCHEDULE D

The beta measurements used in the Combined Prospectus were calculated by using
MicroSoft Excel spreadsheets and the statistical function slope available in
MicroSoft Excel. The SLOPE function returns the slope of the linear regression
line through data points in known y's and known x's. The slope is the vertical
distance divided by the horizontal distance between any two points on the line,
which is the rate of change along the regression line.

The equation for beta (slope) is shown below.

Beta equals n(SIGMA)xy - ((SIGMA)x)((SIGMA)y)
---------------------------------
n(SIGMA)x2 - ((SIGMA)x)2

Where
y equals= the Fund's monthly total returns in the period
x equals= the Index's monthly total returns in the period

<PAGE> 99
- -------------------------------------------------------------------------------

THE GATEWAY TRUST

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

Registration Statement
Securities Act of 1933 Registration No. 2-59895
Investment Company Act of 1940 Registration No. 811-02773

CINCINNATI FUND

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1997

This Statement is not a prospectus but should be read in conjunction
with the current Prospectus of the Cincinnati Fund dated May 1, 1997, A copy of
the Prospectus may be obtained from the Fund by written or telephone request
directed to the Fund at the address or the telephone number shown below.

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

P. O. BOX 5211
CINCINNATI, OHIO 45201-5211
(800) 354-5525

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

<PAGE> 100

<TABLE>
<CAPTION>
TABLE OF CONTENTS

<S> <C>
INTRODUCTION......................................................

General Information About The Gateway Trust.....................

INVESTMENT PRACTICES AND RESTRICTIONS.............................

General.........................................................

Investment Restrictions.........................................

PERFORMANCE AND RISK INFORMATION..................................

Performance Information.........................................
Total Return Calculations...................................

Risk Information................................................
Comparative Indexes.........................................
Standard Deviation..........................................
Beta........................................................

Rankings and Comparative Performance Information................

SHAREHOLDER SERVICES..............................................

Open Account....................................................

Systematic Withdrawal Plan......................................

Automatic Investment Plan.......................................

IRAs............................................................

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION....................

INVESTMENT ADVISORY AND OTHER SERVICES............................

Gateway Investment Advisers, L.P................................

Investment Advisory Contract....................................

Custodian.......................................................

Shareholder Servicing, Transfer, Dividend
Disbursing and Financial Servicing Agent......................

Brokerage.......................................................

ADDITIONAL TAX MATTERS............................................

Federal Tax Matters.............................................

State and Local Tax Aspects.....................................

TRUSTEES AND OFFICERS OF THE TRUST................................

INDEPENDENT PUBLIC ACCOUNTANTS AND FINANCIAL STATEMENTS...........

PRINCIPAL HOLDERS OF CINCINNATI FUND SHARES.......................

SCHEDULE A........................................................
</TABLE>

<PAGE> 101

INTRODUCTION

GENERAL INFORMATION ABOUT THE GATEWAY TRUST

The Gateway Trust (the "Trust") is an Ohio business trust which is
authorized to establish and operate one or more separate series of mutual funds
(herein referred to as "funds" or individually as a "fund"). Each fund has its
own investment policies, restrictions, practices, assets, and liabilities. Each
fund is represented by a separate series of shares of beneficial interest in
the Trust ("Shares"). The Trust's operation is governed by Chapter 1746 of the
Ohio Revised Code, by a Second Amended Agreement and Declaration of Trust dated
as of December 29, 1992, as amended, and by the Trust's Bylaws.

At present, there are four series of the Trust:

<TABLE>
<CAPTION>
---------------------------------------- ----------------------- ---------------------------------------------
NAME OF FUND DATE ORGANIZED FORMER NAMES
---------------------------------------- ----------------------- ---------------------------------------------
<S> <C> <C>
Gateway Index Plus Fund 1977 Gateway Option Index Fund until March,
1990; Gateway Option Income Fund until
February, 1988; Gateway Option Income
Fund, Inc. until May, 1986

Gateway Mid Cap Index Fund July 1992 Gateway Capital Fund until December, 1993

Gateway Small Cap Index Fund April 1993 None

Cincinnati Fund November 1994 None
---------------------------------------- ----------------------- ---------------------------------------------
</TABLE>

Gateway Option Income Fund, Inc., the predecessor to the Trust, was
organized in 1977 as a Maryland corporation. It was reorganized to become the
Trust effective as of May 2, 1986, with the Gateway Option Income Fund as its
sole initial fund. As a result of the transaction, shareholders of the
corporation on May 2, 1986, became shareholders of the Option Income Fund.

The Gateway Index Plus Fund, the Gateway Mid Cap Index Fund, and the
Gateway Small Cap Index Fund are offered in one combined prospectus (the
"Combined Prospectus"). The Cincinnati Fund is offered in a separate prospectus
(the "Cincinnati Prospectus"). The Cincinnati Fund has a separate Statement of
Additional Information. The other three funds have a combined Statement of
Additional Information.

Gateway Investment Advisers, L.P. (the "Adviser") acts as the Fund's
investment adviser.

3
<PAGE> 102

INVESTMENT PRACTICES AND RESTRICTIONS

GENERAL

The Fund may hold cash for purposes of liquidity or for temporary
defensive purposes. The Fund generally will hold cash reserves for the purpose
of paying expenses and share redemptions and, in addition, cash received from
the sale of the Fund's shares which has not yet been invested. In addition, the
Adviser may determine from time to time that, for temporary defensive purposes,
the Fund should reduce (and in periods of unusual market conditions reduce
substantially or liquidate entirely) its investment in common stock. For
temporary defensive purposes, the Fund may hold up to 100% of its assets in
cash.

Cash is normally invested in repurchase agreements. Cash may also be
invested in securities of the U. S. government or any of its agencies, bankers
acceptances, commercial paper or certificates of deposit (collectively "cash
instruments"). Commercial paper investments will be limited to investment grade
issues rated A-1 or A-2 by Standard & Poor's Corporation or Prime-1 or Prime-2
by Moody's Investors Service, Inc. Certificates of deposit investments will be
limited to obligations of domestic banks with assets of $1 billion or more.
Under normal conditions, the Adviser does not intend to invest more than 5% of
the Fund's net assets in any cash instrument other than repurchase agreements.

INVESTMENT RESTRICTIONS

The Trust has adopted certain fundamental policies with respect to the
Fund that may not be changed without a vote of shareholders of the Fund. Under
these policies, the Fund may not:

1. purchase any security if as a result the Fund (or the funds in
the Trust together) would then hold more than 10% of any class
of securities of an issuer (taking all common stock issues of
an issuer as a single class, all preferred stock issues as a
single class, and all debt issues as a single class) or more
than 10% of the outstanding voting securities of an issuer.

2. purchase any security if as a result the Fund would then have
more than 5% of its total assets (taken at current value)
invested in securities of companies (including predecessors)
less than three years old and in equity securities for which
market quotations are not readily available.

3. purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of
purchase and sales of securities).

4. make short sales of securities or maintain a short position,
(a) unless, at all times when a short position is open, the
Fund owns an equal amount of such securities or securities
convertible into or exchangeable (without payment of any
further consideration) for securities of the same issue as, and
equal in amount to, the securities sold short, and (b) unless
not more than 10% of the Fund's net assets (taken at current
value) are held as collateral for such sales at any one time.

It is the present intention of management to make such sales
only for the purpose of deferring realization of gain or loss
for federal income tax purposes. It is the present

4
<PAGE> 103

intention of management that short sales of securities subject
to outstanding options will not be made.

5. borrow money except as a temporary measure for extraordinary or
emergency purposes and then only from banks and only in amounts
not in excess of 5% of the Fund's total assets (except to meet
redemption requests as discussed below), taken at the lower of
cost or market.

It is the present intention of management that the Fund will
not purchase additional portfolio securities at any time when
its borrowing exceeds 5% of its total assets. In order to meet
redemption requests without immediately selling any portfolio
securities, the Fund may borrow an amount up to 25% of the
value of its total assets including the amount borrowed. If,
due to market fluctuations or other reasons, the value of the
Fund's assets falls below 400% of its borrowing, the Fund will
reduce its borrowing which may result in the Fund being
required to sell securities at a time when it may otherwise be
disadvantageous to do so. This borrowing is not for investment
leverage but solely to facilitate management of the portfolio
by enabling the Fund to meet redemption requests where the
liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. However, the Fund might be
deemed to be engaged in leveraging in that any such borrowing
will enable the Fund to continue to earn money on investments
which otherwise may have been sold in order to meet redemption
requests.

6. pledge more than 10% of its total assets, taken at market
value. The deposit in escrow of underlying securities in
connection with the writing of call options is not deemed to be
a pledge.

7. purchase or retain securities of any company if officers and
trustees of the Trust or of the Adviser who individually own
more than 1/2 of 1% of the securities of that company together
own beneficially more than 5% of such securities.

8. buy or sell commodities or commodity contracts, or real estate
or interests in real estate, although it may purchase and sell
(a) securities which are secured by real estate, and (b)
securities of companies which invest or deal in real estate.

9. act as underwriter except to the extent that, in connection
with the disposition of portfolio securities, it may be deemed
to be an underwriter under certain provisions of the Federal
securities laws.

10. make investments for the purpose of exercising control or
management.

11. participate on a joint or joint and several basis in any
trading account in securities.

12. purchase any security restricted as to disposition under the
Federal securities laws.

5
<PAGE> 104

13. invest in securities of other investment companies, except
as part of a merger, consolidation or other acquisition.

14. invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the common
stocks of companies which invest in or sponsor such programs.

15. make loans, except through the purchase of bonds, debentures,
commercial paper, corporate notes and similar evidences of
indebtedness of a type commonly sold privately to financial
institutions (subject to the limitation in paragraph 12 above),
and except through repurchase agreements.

No more than 5% of the Fund's assets will be invested in
repurchase agreements which have a maturity longer than seven
days. In addition, the Fund will not enter into repurchase
agreements with a securities dealer if such transactions
constitute the purchase of an interest in such dealer under the
Investment Company Act of 1940. The purchase of a portion of an
issue of such securities distributed publicly, whether or not
such purchase is made on the original issuance, is not
considered the making of a loan.

16. purchase any security (other than U. S. government
obligations) if, as a result thereof, less than 75% of the
value of the Fund's total assets is represented by cash and
cash items (including receivables), government securities
and other securities which for purposes of this calculation
are limited in respect of any one issuer to an amount not
greater in value than 5% of the value of the Fund's total
assets and to not more than 10% of the outstanding voting
securities of such issuer.

All of the funds in the Trust taken as a group also must
satisfy this 10% test.

17. concentrate the investments of the Fund in a single industry.

18. write, purchase or sell puts, calls or combinations thereof.

19. buy or sell commodities, commodities futures contracts or
commodities options contracts.

The Trust has no fundamental policy with respect to the issuance of
senior securities by the Fund; however, the Investment Company Act of 1940
prohibits the Trust's issuance of any such securities.

In addition to these fundamental policies, the Fund may not invest
more than 15% of the Fund's net assets in "illiquid assets."

6
<PAGE> 105

Although the practices described in paragraphs 4, 5 and 6, above,
could involve more than 5% of a Fund's assets, the Adviser has no current
intention of causing the Fund to employ any such practice in the coming year.

PERFORMANCE AND RISK INFORMATION

PERFORMANCE INFORMATION

The Fund may quote performance in various ways. All performance
information supplied by the Fund is based upon historical results and is not
intended to indicate future performance. Total returns and other performance
information may be shown numerically or in a table, graph or similar
illustration. The Fund's share prices and total returns fluctuate in response
to market conditions, interest rates and other factors.

TOTAL RETURN CALCULATIONS

Total returns reflect all aspects of a fund's return, including the
effect of reinvesting dividends and capital gains distributions, and any change
in a fund's net asset value per share (NAV) over the period.

P (1 + T)n = ERV where: T = Average annual total return
n = Number of years and portion of a year
ERV = Ending redeemable value (of an initial
hypothetical $1,000 investment) at the
end of the period
P = $1,000 (the hypothetical initial
investment)

If a fund has been in existence for less than one, five or ten years,
the time period since the date of the initial public offering will be
substituted for the periods stated.

As a hypothetical example, a cumulative return of 100% growth on a
compounded basis in ten years would produce an average annual total return of
7.18%, which is the annual rate that would equal 100% growth on a compounded
basis in ten years. While average annual total returns are convenient means of
comparing investment alternatives, investors should realize that a fund's
performance is not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to the
actual year-to-year performance of the Fund.

Average annual total return is calculated as required by applicable
regulations promulgated by the Securities and Exchange Commission. In addition
to average annual total returns, the Fund may quote year-by-year total returns
and cumulative total returns reflecting the simple change in value of any
investment over a stated period. Average annual, year-by-year, and cumulative
total returns may be quoted as a percentage or as a dollar amount.

7
<PAGE> 106

RISK INFORMATION

In evaluating the performance of any investment including the Fund, it
is important to understand the risks involved in the investment. Information
regarding the performance of an investment, while valuable in itself, is more
meaningful when it is related to the level of risk associated with that
investment. Thus, two different mutual funds that produce similar average
annual total returns may present markedly different investment opportunities if
the risk of loss associated with one mutual fund is greater than that of the
other mutual fund.

For example, an investment in a mutual fund that invests in stocks
generally will present greater potential for variation in the share price of
the mutual fund, and hence a greater risk of gain or loss than an investment in
a mutual fund that invests in short-term U. S. government securities. Because
the potential for greater gain typically carries with it a greater degree of
risk, the advisability of an investment in a particular mutual fund for a given
investor will depend not only on historical performance of the fund but also on
the potential for gain and loss associated with that mutual fund.

COMPARATIVE INDEXES

The performance and risk of the Fund may be compared to the
performance and risk of the S&P 500 Index and the Lehman Government/Corporate
Bond Index. These comparative indexes are used because they are the standard
benchmarks of the stock market and bond market respectively.

STANDARD DEVIATION

Standard deviation measures the volatility of the total return of the
Fund. Standard deviation is one method of comparing the total return of a fund
to the average monthly total return of the Fund. In general, a fund that has a
greater standard deviation is a fund that has displayed a greater tendency to
vary from its own average monthly total return. Standard deviation can also be
used to compare the total return of a fund to the total return of an index or
another mutual fund. By comparing the magnitude of the standard deviation of
each investment, an analyst is able to determine the relative volatility of
each investment. An investment with an expected return of 10% and a standard
deviation of 15% would be expected to earn a total return ranging from -5% to
+25% about 68% of the time, a total return ranging from -20% to +40% about 95%
of the time, and a total return ranging from -35% to +55% about 97% of the
time.

BETA

Beta analyzes the market risk of the Fund by showing how responsive
the Fund is to the market as defined by an index. Beta is a comparative measure
of the Fund's volatility in relation to an appropriate index. Generally, higher
betas represent riskier investments. By definition, the beta of the market is
1.00. Thus, a fund with a beta higher than 1.00 is expected to perform better
than the market in up markets and worse than the market in down markets. Beta
is the slope of the "least square line" which compares the Fund with an index.

8
<PAGE> 107

RANKINGS AND COMPARATIVE PERFORMANCE INFORMATION

The Fund may compare its performance to that of other mutual funds or
categories of mutual funds as reported by independent services, such as
Morningstar, Inc., Lipper Analytical Services, Inc. and Value Line Mutual Fund
Survey, or by other financial publications with circulations of 10,000 readers
or more. Performance comparisons may be expressed as ratings, such as the
proprietary ratings published by Morningstar, Inc., or rankings, such as the
rankings of funds in various categories published by Lipper Analytical
Services. Inc. Performance comparisons may also be expressed as designations
(such as a certain number of "stars") or descriptions (such as "best fund")
assigned by such services or publications.

SHAREHOLDER SERVICES

Gateway Investment Advisers, L.P. serves as the Trust's shareholder
servicing, transfer, dividend disbursing and financial servicing agent (the
"Servicing Agent"). In this capacity, it performs various shareholder services
on behalf of the Trust.

OPEN ACCOUNT

The Fund's regular account for investors who purchase its shares is
the Open Account. The Open Account facilitates regular purchases of Fund shares
over a period of years and provides the option of receiving dividends and
distributions either in cash or in Fund shares. There is no charge for the
automatic reinvestment of dividends and distributions.

The Servicing Agent maintains a record of the investor's purchases,
redemption, and share balance in the investor's open account. Shortly after
each purchase, the Servicing Agent will mail a confirmation to the investor
showing the shares purchased, the exact price paid for the shares and the total
number of shares owned. Share certificates will not be issued to an investor.

Upon opening an account, the investor may elect any of the following
options: (1) reinvestment at net asset value of all distributions, or (2)
payment in cash of all distributions. If no election is made, all distributions
will be reinvested at net asset value. An election may be changed by a letter
or telephone call to the Servicing Agent. The Fund presently bears all expenses
of its Open Accounts but reserves the right upon notice to establish a
maintenance charge in the future.

SYSTEMATIC WITHDRAWAL PLAN

If the value of an investor's account is at least $5,000, an investor
can request withdrawals on either a monthly or a quarterly basis in the minimum
amount of $100. The Trust makes no recommendation as to the minimum amount that
ought to be periodically withdrawn by an investor. A sufficient number of
shares in the investor's account will be sold periodically (normally one
business day prior to each withdrawal payment date) to meet the requested
withdrawal payments.

9
<PAGE> 108

If an investor establishes an account in the Systematic Withdrawal
Plan, all dividends and distributions on shares held in the account will be
reinvested in additional shares at net asset value. Since the withdrawal
payments represent the proceeds from sales of Fund shares, there will be a
reduction, and there could even be an eventual depletion, of the amount
invested in the Fund to the extent that withdrawal payments exceed the
dividends and distributions paid and reinvested in shares. Withdrawals under
the Systematic Withdrawal Plan should not, therefore, be considered a yield on
investment. An investor can make arrangements to use the Systematic Withdrawal
Plan (or discontinue use of the Plan) by contacting Shareholder Services at
(800) 354-5525.

AUTOMATIC INVESTMENT PLAN

For established accounts, shares of the Fund may be purchased on a
regular monthly or quarterly basis in amounts of $100 or more per purchase.
Shareholder Services can arrange to have such funds transferred automatically
from an investor's checking account to the Trust for purchase of shares. An
investor can make arrangements to use the Automatic Investment Plan (or
discontinue use of the Plan) by contacting Shareholder Services at (800)
354-5525.

IRAS

Investors may purchase shares of the Fund through Individual
Retirement Accounts ("IRAs") which are permitted to invest in shares of a
mutual fund. The Trust itself sponsors a form of IRA which can be adopted by an
investor and which is specifically designed to permit the investor to invest in
shares of any Gateway fund selected by the investor. The custodian of such
Gateway-sponsored IRAs is Star Bank. Investors can obtain forms to establish
IRAs by calling Shareholder Services at (800) 354-5525.

An IRA is a special program with certain tax benefits that generally
permits an investor to establish and contribute to his or her own retirement
plan. For detailed information about IRA's, please refer to your IRA Investment
Kit which you can receive by calling the phone number above.

10
<PAGE> 109

An investor may make a direct transfer of assets from one IRA to
another by directing the existing IRA custodian or trustee to transfer directly
to a new IRA investing in Gateway fund shares the amount held in that prior
IRA, without directly receiving those funds or being taxed on the transfer.
There is no minimum holding period for a direct transfer of IRA assets from one
custodian or trustee to another. The Adviser has forms, available upon request,
that an investor can use to make direct IRA transfers.

A Gateway-sponsored IRA is eligible to receive direct rollovers of
distributions from a qualified employer plan. An investor can make a direct
rollover by instructing the employer's plan to wire the distribution to Star
Bank as custodian for the Gateway-sponsored IRA. The distribution should be
wired to:

The Gateway Trust c/o Star Bank, N.A.

ABA #042-0000-13
Cincinnati, Ohio

11
<PAGE> 110

Name (insert shareholder name)
Gateway Account No. (insert shareholder account number)
Name of Gateway fund(s) in which you wish to invest

An investor can also make a direct rollover by instructing the
employer's plan to prepare a check for the amount to be rolled over payable to
"Star Bank, N.A., as Custodian of Individual Retirement Account of (insert
shareholder name)," and delivering that check to Gateway. The check can be
delivered in person or mailed to:

The Gateway Trust
Shareholder Services
P. O. Box 5211
Cincinnati, Ohio 45201-5211

An investor can make a sixty-day rollover of a distribution from a
qualified employer plan by instructing the employer's plan to prepare a check
payable to the investor and by endorsing or cashing the check and depositing
some or all of the proceeds in an IRA. The deposit must be delivered in person
or mailed to Gateway at the above address within sixty days of when the
investor receives the distribution. The employer's plan must withhold 20% of
the taxable amount for federal income tax if the investor chooses a sixty-day
rollover for the distribution.

Some portions of distributions from other IRAs or from tax-qualified
profit sharing, stock bonus, pension, or annuity plans are not eligible for
regular or direct rollovers. For instance, distributions of nontaxable
after-tax employee contributions or required minimum payments made after an
individual reaches age 70 1/2 cannot be rolled over.

To make a withdrawal from a Gateway-sponsored IRA, an investor should
contact Shareholder Services at (800) 354-5525.

The rules for contributing to, investing under, and distributing from
IRAs are complex, and any investor should consult with his or her own tax
advisor if he or she has any questions with respect to IRAs and to determine if
there have been any recent changes to the rules. At the time an IRA is
established, the custodian or trustee of the IRA is required by law to provide
a disclosure statement to the individual setting forth important information
concerning IRAs.

12
<PAGE> 111

Further information concerning IRAs can be obtained from any district
office of the Internal Revenue Service. In particular, Publication 590 of the
Internal Revenue Service provides general information as to IRAs.

No annual maintenance fees are charged by the Trust to IRAs, SEP-IRAs,
retirement, pension or profit-sharing plans, including 401(k) plans.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Basic information concerning the purchase and redemption of shares is
set forth under the captions "How To Buy Additional Shares" and "How To Sell
Shares" in the Cincinnati Prospectus. Shares of the Fund are purchased and
redeemed at their net asset value as next determined following receipt of the
purchase order or redemption notice. Redemptions under the Systematic
Withdrawal Program and installment distributions from IRAs are effected at the
net asset value next determined after the date designated for the redemption or
distribution. Information as to the method of calculating the net asset value
of shares of the Fund is included in the Cincinnati Prospectus under the
caption "How Fund Shares Are Priced."

Certificates for shares of the Fund will not be issued.

The minimum initial investment is $1,000 ($500 for IRA's) and the
minimum additional investment is $100, subject to certain exceptions such as
investments by the Adviser's employees and by participants in SEP programs. The
Trust reserves the right to reject any purchase order of the Fund.

There is no minimum or maximum applicable to redemption of shares of
the Fund. The Trust, however, reserves the right to automatically redeem a
shareholder's account(s) under certain circumstances. The shareholder will
receive written notice prior to the redemption of the account(s). Generally the
Trust will send the shareholder a letter sixty days prior to redeeming the
shareholder's account(s).

The Trust may automatically redeem a shareholder's account(s) in the
Fund when the aggregate value of the shareholder's account(s) (taken at current
value) falls below $800. The shareholder may prevent such redemption by
increasing the value of the account(s) to $1,000 or more within the sixty-day
period. The Trust will not automatically redeem a shareholder's account(s) if
market action caused the aggregate value of the account(s) to fall below $800
or if shares of the Fund are not available for purchase at the time the
aggregate value of the account(s) falls below $800.

The Trust also will automatically redeem a shareholder's account if
the shareholder does not provide a valid U. S. social security number or
taxpayer identification number or other requested documents such as corporate
resolutions. The shareholder may prevent such redemption by providing the
requested information within the sixty-day period.

The Trust may institute additional mandatory redemption policies as
approved by the Board of Trustees.

13
<PAGE> 112

notice that the Trust intends to limit the shareholder's use of the exchange
privilege. Generally the Trust limits a shareholder to twelve exchange
transactions per calendar year. Accounts under common ownership or control,
including accounts with the same taxpayer identification number, normally will
be counted as one account for purposes of the exchange limit.

The Trust also reserves the right to terminate or modify the exchange
privilege or to refuse an exchange if the exchange would adversely affect a
fund.

Signature guarantees are required for all redemptions (on the date of
receipt by the Servicing Agent of all necessary documents), regardless of the
amount involved, when the proceeds are to be paid to someone other than the
registered owner(s). The signature guarantee requirement may be waived by the
Trust in certain instances. The Trust also reserves the right to require a
signature guarantee on any instructions or redemptions given to the Trust for
any reason. The purpose of signature guarantees is to prevent fraudulent
redemptions which could result in losses to the Trust, the Servicing Agent or
shareholders. A signature guarantee will be accepted from banks, brokers,
dealers, municipal securities dealers or brokers, government securities dealers
or brokers, credit unions (if authorized by state law), national securities
exchanges, registered securities associations, clearing agencies, and savings
associations. Notary publics are unacceptable guarantors. The signature
guarantees must appear either: (a) on the written request for redemption, (b)
on a stock power which should specify the total number of shares to be
redeemed, or (c) on all stock certificates tendered for redemption.

The right of redemption may be suspended or the date of payment
postponed (a) for any periods during which the New York Stock Exchange is
closed (other than for customary weekend and holiday closings), (b) when
trading in any of the markets which the Fund normally utilizes is restricted as
determined by the Securities and Exchange Commission (the "Commission"), (c) if
any emergency exists as defined by the Commission so that disposal of
investments or determination of the Fund's net asset value is not reasonably
practicable, or (d) for such other periods as the Commission by order may
permit for protection of the Trust's shareholders.

The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act., which obligates the Fund to redeem shares in cash, with respect
to any one shareholder during any 90 day period, up to the lesser of $250,000
or 1% of the assets of the fund. Although payment for redeemed shares generally
will be made in cash, under abnormal circumstances the Board of Trustees of the
Trust may determine to make payment in securities owned by the Fund. In such
event, the securities will be selected in such manner as the Board of Trustees
deems fair and equitable, in which case brokerage and other costs may be
incurred by such redeeming shareholders in the sale or disposition of their
securities.

The Trust reserves the right to modify or terminate any purchase,
redemption or other shareholder service procedure upon notice to shareholders.

Purchases and redemptions generally may be effected only on days when
the stock exchanges are open for trading. These exchanges are closed on
Saturdays and Sundays and the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas.

14
<PAGE> 113

INVESTMENT ADVISORY AND OTHER SERVICES

GATEWAY INVESTMENT ADVISERS, L.P.

Gateway Investment Advisers, L.P. (the "Adviser"), a Delaware limited
partnership, has acted as the investment adviser for the Fund since December
15, 1995. Gateway Investment Advisers, Inc. ("GIA") provided investment
advisory services to the Fund from its formation until December 15, 1995. The
Adviser became the successor in interest to the assets, business and personnel
of GIA which was organized in June 1977. GIA is the general partner of the
Adviser with a 76% ownership interest, while Alex Brown Investments
Incorporated ("ABII") is the sole limited partner with a 24% ownership
interest. ABII is an affiliate of Alex. Brown & Sons Incorporated, a nationally
known investment management firm and registered broker/dealer located in
Baltimore, Maryland. Walter G. Sall, Chairman and a Trustee of the Trust, and
J. Patrick Rogers, portfolio manager of the funds of the Trust, together own of
record and beneficially 99.85% of the outstanding shares of GIA and thereby
control the Adviser. Mr. Sall is Chairman and a director of GIA and Mr. Rogers
is its President and a director. The third director of GIA is Margaret-Mary
Preston who is employed by Alex. Brown & Sons Incorporated as a Managing
Director.

INVESTMENT ADVISORY CONTRACT

The Trust has retained the Adviser under an investment advisory
contract ("Adviser Contract") to act as investment manager and in such capacity
supervise the investments of the Fund. The Adviser Contract for the Fund became
effective on December 15, 1995. Services were provided by GIA under a
substantially identical contract prior to this date.

Pursuant to the Fund's advisory contract, the Adviser, at its sole
expense, provides the Fund with (i) investment recommendations regarding such
fund's investments, (ii) office space, telephones, and other office equipment,
and (iii) clerical and secretarial staff and the services, without additional
compensation, of all officers of the Trust. In addition, the Adviser has agreed
to bear (i) advertising and other marketing expenses in connection with the
sale of the shares of the Fund, (ii) expenses of printing and distributing all
of the Fund prospectuses and related documents to prospective stockholders, and
(iii) association membership dues (other than for the Investment Company
Institute). The advisory contract further provides that under certain
circumstances the Adviser may cause the Fund to pay brokerage commissions in
order to enable the Adviser to obtain brokerage and research services for its
use in advising the Fund and the Adviser's other clients, provided that the
amount of commission is determined by the Adviser, in good faith and in the
best interests of the Fund, to be reasonable in relation to the value of the
brokerage and research services provided.

The Fund's advisory contract provides that all expenses not
specifically assumed by the Adviser which may be incurred in the operation of
the Trust and the offering of its shares will be borne by the Trust. Such
expenses will be allocated among the funds in the Trust by direction of the
Board of Trustees, most frequently on the basis of expenses incurred by each
fund, but where that is not practicable on such basis as the Trustees determine
to be appropriate. Expenses to be borne by the Trust include fees and expenses
of trustees not employed by the Adviser; expenses of printing and distributing
all of the Trust's prospectuses to current

15
<PAGE> 114

shareholders of the Trust; expenses pertaining to registering or qualifying the
Trust or its shares under various federal and state laws, and maintaining and
updating such registrations and qualifications; interest expense, taxes, fees
and commissions (including brokerage commissions) of every kind; expenses
related to repurchases and redemptions of shares; charges and expenses of
custodians, transfer agents, dividend disbursing agents and registrars; expenses
of valuing shares of each fund; printing and mailing costs other than those
expressly assumed by the Adviser; auditing, accounting and legal expenses;
expenses incurred in connection with the preparation of reports to shareholders
and governmental agencies; expenses of shareholder meetings and proxy
solicitations; insurance expenses; and all "extraordinary expenses" which may
arise, including all losses and liabilities incurred in connection with
litigation proceedings and claims, and the legal obligations of the Trust to
indemnify its officers, trustees and agents with respect thereto. A majority of
the Board of Trustees of the Trust and a majority of the trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of any
party to the advisory contracts of the funds, voting separately, shall determine
which expenses shall be characterized as "extraordinary expenses."

In return for the services and facilities furnished by the Adviser,
the Fund pays the Adviser a management fee computed at an annual rate of 0.50%
of the average daily net asset value of the Fund.

If total expenses of the Fund for any fiscal year (including the
Adviser's compensation, but exclusive of taxes, interest, brokerage commissions
and any "extraordinary expenses" determined as described above) exceed 2.0% of
the Fund's average daily net asset value for such year, the advisory contract
requires the Adviser to bear all such excess expenses up to the amount of the
advisory fees. Each month the investment advisory fee is determined and the
Fund's expenses are projected. If the Fund's projected expenses are in excess
of the above-stated expense limitation, the investment advisory fee paid to the
Adviser will be reduced by the amount of the excess expenses, subject to an
annual adjustment; provided, however, that the aggregate annual reduction from
the Adviser to the Fund shall not exceed the aggregate advisory fee paid by the
Fund to the Adviser for such year.

The Fund's advisory contract further provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties or obligations thereunder, the Adviser is not liable to the Trust or any
of its shareholders for any act or omission by the Adviser. The advisory
contract contemplates that the Adviser may act as an investment manager or
adviser for others.

The Fund's advisory contract may be amended at any time by the mutual
consent of the parties thereto, provided that such consent on the part of the
Trust shall have been approved by the vote of a majority of the Trust's Board
of Trustees, including the vote cast in person by a majority of the Trustees
who are not "interested persons" (as defined in the Investment Company Act of
1940) of any party to the advisory contract, and by vote of the shareholders of
the Fund.

The Fund's advisory contract may be terminated, upon sixty-days'
written notice (which notice may be waived), at any time without penalty, (i)
by the Board of Trustees of the Trust, (ii) by the vote of a majority of the
outstanding voting securities of the Fund or (iii) by the Adviser. The advisory
contract terminates automatically in the event of its assignment (as that term
is defined in the Investment Company Act of 1940) by the Adviser.

16
<PAGE> 115

The Fund's advisory contract provides that it will continue in effect
until December 31, 1997, and thereafter, provided that its continuance for the
Fund for each renewal year is specifically approved, in advance, (i) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, and (ii) by vote of a majority of the trustees
who are not parties to the advisory contract or interested persons of a party
to the advisory contract (other than as Trustees of the Trust), by votes cast
in person at a meeting specifically called for such purpose.

The following table shows the management fees earned by the Adviser
for providing services to the Cincinnati Fund. It also shows the amount of the
fees waived by the Adviser for the year ended December 31, 1996, 1995 and for
the period from November 7, 1994 through December 31, 1994.

<TABLE>
<CAPTION>
- ------------------------- ------------------------
FEE AND WAIVER CINCINNATI FUND
- ------------------------- ------------------------
<S> <C>
1996 Fee Earned $37,585
1996 Fee Waived $26,264
-------
1996 Fee Paid $11,321
1995 Fee Earned $23,429
1995 Fee Waived $23,429
-------
1995 Fee Paid 00

1994 Fee Earned $2,191
1994 Fee Waived 2,191
-----
1994 Fee Paid 00
- ------------------------- ------------------------
</TABLE>

CUSTODIAN

Star Bank, 425 Walnut Street, Cincinnati, Ohio 45202, acts as
custodian of the Trust's assets (the "Custodian"). The Custodian has no part in
determining the investment policies of any fund or which securities are to be
purchased or sold by any fund.

SHAREHOLDER SERVICING, TRANSFER, DIVIDEND DISBURSING AND FINANCIAL SERVICING
AGENT

The Adviser is the Trust's Shareholder Servicing, Transfer, Dividend

Disbursing and Financial Servicing Agent (the "Servicing Agent"). The Adviser's
mailing address for its activities as Servicing Agent is The Gateway Trust, 400
TechneCenter Drive, Suite 220, Milford, Ohio 45150. As Transfer Agent for the
Trust, the Servicing Agent's general duties include transferring shares,
processing applications for new accounts and depositing the payments for the
purchase of Fund's shares with the Custodian, and notifying the Trust and
Custodian of such deposits. The Servicing Agent opens and maintains a bookshare
account for each shareholder as set forth in the subscription application,
maintains records of each shareholder account, and sends confirmation of shares
purchased to each shareholder. The Servicing Agent also receives and processes
requests by shareholders for redemption of shares. If the shareholder request
complies with the redemption standards of the Trust, the Servicing Agent will
direct the Custodian to pay the appropriate redemption price. If the

17
<PAGE> 116

redemption request does not comply with such standards, the Servicing Agent will
promptly notify the shareholder of the reasons for rejecting the redemption
request.

As the Dividend Disbursing Agent for the Trust, the Servicing Agent,
upon notification of the declaration of a dividend or distribution, will
determine the total number of shares issued and outstanding as of the record
date for the dividend or distribution and the amount of cash required to
satisfy such dividend or distribution. The Servicing Agent will prepare and
mail to shareholders dividend checks in the amounts to which they are entitled.
In the case of shareholders participating in the dividend reinvestment plan,
the Servicing Agent will make appropriate credits to their bookshare accounts.
Shareholders will be notified by the Servicing Agent of any dividends or
distributions to which they are entitled, including any amount of additional
shares purchased with their dividends. In addition, the Servicing Agent will
prepare and file with the Internal Revenue Service and with any state, as
directed by the Trust, returns for reporting dividends and distributions paid
by such fund.

The Servicing Agent, as the Shareholder Servicing Agent, will open and
maintain any plan or program for shareholders in accordance with the terms of
such plans or programs (see "SHAREHOLDER SERVICES" herein). With regard to the
systematic withdrawal plans, the Servicing Agent will process such systematic
withdrawal plan orders as are duly executed by shareholders and will direct
appropriate payments to be made by the Custodian to the shareholder. In
addition, the Servicing Agent will process such accumulation plans, group
programs and other plans or programs for investing shares as provided in the
Trust's current prospectuses.

The Fund pays the Servicing Agent a monthly minimum fee of $2,500 for
its services. The Fund also reimburses the Servicing Agent for printing,
mailing, compliance, and processing expenses associated with providing its
services. The processing expenses cannot exceed 0.2% of the Fund's average net
assets. In addition, the Fund pays the Servicing Agent a monthly fee of $4,000
for the financial and administrative services it provides. For the year ended
December 31, 1996, the Adviser earned $636,835 in its capacity as Servicing
Agent to all four funds of the Trust.

BROKERAGE

Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. In the case of securities traded in the over-the-counter
market, there is generally no stated commission but the price usually includes
an undisclosed commission or mark-up.

In effecting portfolio transactions for the Fund, the Adviser is
obligated to seek best execution, which is to execute the Fund's transaction
where the most favorable combination of price and execution services are
available ("best execution"), , except to the extent that it may be permitted
to pay higher brokerage commissions for brokerage and research services as
described below. In seeking the best execution, the Adviser, in the Fund's best
interests, considers all relevant factors, including price, the size of the
transaction, the nature of the market for the security, the amount of
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker-dealer
involved, and the quality of service rendered by the broker-dealer in other
transactions. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking best execution
and such other factors as

18
<PAGE> 117

the Trustees may determine, the Adviser may consider sales of shares of a fund
as a factor in the selection of broker-dealers to execute securities
transactions for such fund.

While the Adviser does not intend to limit the placement of orders to
any particular broker or dealer, the Adviser generally gives preference to
those brokers or dealers who are believed to give best execution at the most
favorable prices and who also provide research, statistical or other services
to the Adviser and/or the Trust. Commissions charged by brokers who provide
these services have been higher than commissions charged by those who do not
provide them. Higher commissions are paid only if the Adviser determines that
they are reasonable in relation to the value of the services provided, and it
has reported to the Board of Trustees of the Trust on a periodic basis to that
effect. The availability of such services was taken into account in
establishing the investment advisory fees. Specific research services furnished
by brokers through whom the Trust effects securities transactions may be used
by the Adviser in servicing all of its accounts. Similarly, specific research
services furnished by brokers who execute transactions for other of the
Adviser's clients may be used by the Adviser for the benefit of the Trust.

The advisory contract provides that, subject to such policies as the
Trustees may determine, the Adviser may cause the Fund to pay a broker-dealer
who provides brokerage and research services to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of the
amount of commission which another broker-dealer would have charged for
effecting that transaction. As provided in Section 28(e) of the Securities
Exchange Act of 1934, "brokerage and research services" include (1) advice as
to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or sellers
of securities; (2) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
performance of accounts; (3) effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and (4)
services that provide lawful and appropriate assistance to the Adviser in the
performance of its investment decision-making responsibilities.

For the years ended December 31, 1996, 1995, and 1994, the Fund paid
$3,470.28, $3,534.20 and $4,332, respectively, in brokerage commissions.

ADDITIONAL TAX MATTERS

The tax discussion set forth below and in the Cincinnati Prospectus is
included for general information only. Prospective investors should consult
their own tax advisers concerning the tax consequences of an investment in the
Fund.

FEDERAL TAX MATTERS

The Fund is treated as a separate association taxable as a
corporation.

The Fund intends to meet the requirements of the Internal Revenue
Code, applicable to regulated investment companies so as to qualify for the
special tax treatment afforded to such companies. Under Subchapter M of the
Code, a regulated investment company is not subject to federal income tax on
the portion

19
<PAGE> 118

of its net investment income and net realized capital gains which it distributes
currently to its stockholders, provided that certain distribution requirements
are met, including the requirement that at least 90% of the sum of its net
investment income and net short-term capital gains in any fiscal year is so
distributed. In addition to this distribution requirement, two of the principal
tests which the Fund must meet in each fiscal year in order to qualify as a
regulated investment company are the "90% Test" and the "30% Test." The 90% Test
requires that at least 90% of a fund's gross income must be derived from
dividends, interest and gains from the sale or other disposition of securities,
including gains from options. The 30% Test requires that no more than 30% of a
fund's gross income be derived from the sale or other disposition of securities
held less than three months. The 30% Test limits a fund's ability to deal with
investments held less than three months.

Long-term capital gains distributions (i.e., the excess of any net
long-term capital gains over net short-term capital losses), after utilization
of available capital loss carryforwards, are taxable as long-term capital gains
whether received in cash or additional shares, regardless of how long the
shareholder has held his shares, and are not eligible for the dividends
received deduction for corporations. Distributions of long-term capital gains
which are offset by available loss carryforwards, however, may be taxable as
ordinary income.

Distributions on shares of the Fund received shortly after their
purchase, although substantially in effect a return of capital, are subject to
federal income taxes.

The tax status of distributions made by the Fund during the fiscal
year will be sent to shareholders shortly after the end of such year. Each
prospective investor is advised to consult his own tax advisor. Distributions
of net investment income are taxable as ordinary income subject to allowable
exclusions and deductions. Distributions of capital gains are taxable at either
ordinary or long-term capital gains rates, as appropriate, except that all such
gains are normally taxable as ordinary income to the extent they are offset by
capital loss carryforwards.

STATE AND LOCAL TAX ASPECTS

The laws of the several states and local taxing authorities vary with
respect to taxation, and each prospective investor is advised to consult his
own tax advisor as to the status of his shares and distributions in respect of
those shares under state and local tax laws.

TRUSTEES AND OFFICERS OF THE TRUST

The trustees and officers of the Trust, together with information as
to their positions with the Trust and its predecessor, Gateway Option Income
Fund, Inc. (the "Company") and their principal occupations during at least the
past five years, are listed below.

*Walter Gene Sall, 400 TechneCenter Drive, Suite 220, Milford, Ohio
45150; Chairman and Trustee of the Trust; Chairman of the Adviser; various
senior management positions and offices held with the Trust, the Company and
the Adviser since 1977. Age 52.

20
<PAGE> 119

*J. Patrick Rogers, 400 TechneCenter Drive, Suite 220, Milford, Ohio
45150; President of the Trust since 1997; President of the Company since 1995;
portfolio manager of the funds; co-manager of the funds prior to 1997; various
senior management positions and offices held with the Trust, the Company and
the Adviser since 1989. Age 33.

21
<PAGE> 120

Stefen F. Brueckner, Anthem Companies, Inc., 120 Monument Circle, Mail
Location #M4C, Indianapolis, Indiana 46204; Trustee of the Trust since October
1992; Director, President and Chief Operating Officer, Anthem Companies, Inc.
since 1995. Prior thereto, Director and President of Community Mutual Insurance
Company (health insurer) since 1991; and various management positions since
1986. Director of Anthem Health and Life Insurance Company, Anthem Life
Insurance Company, and various other affiliates and subsidiaries. Age 47.

Kenneth A. Drucker, Sequa Corp., 200 Park Avenue, New York, New York
10166; Director of the Company from January 20, 1984 to May 1986; Trustee of
the Trust since April 1986; Vice President and Treasurer, Sequa Corporation
(gas turbine and industrial equipment) since November 1987. Prior thereto,
Senior Vice-President and Treasurer, JWT Group, Inc. (advertising, public
update relations and market research). Age 51.

Beverly S. Gordon, 8591 Woodbrier Drive, Sarasota, Florida 34238;
Trustee of the Trust since September 1988; arbitrator, National Association of
Securities Dealers, Inc., since January 1992; Vice President, Marketing and
Communications, Coffee, Sugar and Cocoa Exchange from January 1989 to December
1991; Executive Director, National Institutional Options and Futures Society,
March 1988 to December 1988; prior thereto, Vice President, Institutional
Marketing, Chicago Board Options Exchange. Age 66.

R.S. (Dick) Harrison, 4040 Mt. Carmel Road, Cincinnati, Ohio 45144;
Trustee of the Trust since April 1996 and from 1977 through 1982;
Director/Chairman of the Board, Baldwin Piano & Organ Company from 1994 to
1997; Chairman of the Board/CEO, Baldwin Piano & Organ Company from 1983 to
1994. Prior thereto, various management positions with Baldwin Piano & Organ
Company, Cincinnati, Ohio. Director of Sencorp and Anderson Bank of Cincinnati,
Ohio and Trustee of Kenyon College. Age 65.

William Harding Schneebeck, 251 Indian Harbor Road, Vero Beach,
Florida 32963; Director of the Company from September 1977 to May 1986; Trustee
of the Trust since April 1986; retired, formerly Chairman of Midwestern
Fidelity Corp. Age 68.

*Geoffrey Keenan, 400 TechneCenter Drive, Suite 220, Milford, Ohio
45150; Vice President of the Trust since April 1996; Chief Operations Officer,
Gateway Investment Advisers, L.P. since December 1995; Executive Vice President
and Chief Operations Officer, Gateway Investment Advisers, Inc. since 1995;
Vice President, Gateway Investment Advisers, Inc. from 1991 to 1995. Age 38.

*Paul R. Stewart, 400 TechneCenter Drive, Suite 220, Milford, Ohio
45150; Treasurer of the Trust since October, 1995; Chief Financial Officer of
the Adviser since 1996; Comptroller of the Adviser from October 1995 to
December 1996; Audit Manager and Senior Manager, Price Waterhouse from
September,

22
<PAGE> 121

1992 to 1995 and from August 1988 to August 1991; accountant for
Lexmark International from August 1991 to September 1991. Age 31.

*Donna M. Squeri, 400 TechneCenter Drive, Suite 220 Milford, Ohio
45150; Secretary of the Trust since October, 1995; Secretary and General
Counsel of the Adviser since September, 1995; in house counsel of Bartlett &
Co., a registered investment advisor, from October, 1984 to September, 1993.
Age 37.

*Messrs. Sall, Rogers, Keenan, Stewart and Ms. Squeri are
affiliated persons of the Trust and the Adviser as defined by the Investment
Company Act of 1940. Mr. Sall is an "interested persons" of the Trust as
defined by the Investment Company Act of 1940.

Messrs. Sall, Rogers, Keenan, Stewart and Ms. Squeri each of whom is
employed by the Adviser, receive no remuneration from the Trust. Each Trustee
of the Trust other than Mr. Sall receives fees as follows: (a) an annual fee of
$3,000, payable in equal quarterly installments for service during each fiscal
quarter, (b) a $500 base fee plus $100 per fund for each regular or special
meeting of the Board of Trustees attended, and (c) $200 per fund ($1,000 per
fund for the Chairman) for each Audit and Contract Review Committee meeting
attended. The Trust also reimburses each Trustee for any reasonable and
necessary travel expenses incurred in connection with attendance at such
meetings. In addition, Trustees may receive attendance fees for service on
other committees.

The following table provides information about the compensation
received by each Trustee from the Trust for the year ended December 31, 1996.

<TABLE>
<CAPTION>
- ----------------------------------------------
Total Compensation
Name of Trustee from Trust
- ----------------------------------------------
<S> <C>
Stefen F. Brueckner $ 8,200.00

Kenneth A. Drucker $ 9,800.00

Beverly S. Gordon $ 6,600.00

R. S. Harrison $ 3,300.00

Walter G. Sall $ 0.00

William H. Schneebeck $ 9,800.00
- ----------------------------------------------
</TABLE>

INDEPENDENT PUBLIC ACCOUNTANTS AND FINANCIAL STATEMENTS

Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio 45202, will
serve as independent public accountants of the Trust. Arthur Andersen LLP will
perform an annual audit of the funds' financial statements, prepares the funds'
tax returns and provides financial, tax and accounting consulting servicess
requested. The financial statement and notes thereto of the Fund, together with
the report thereon of Arthur Andersen LPP dated January 17, 1997 are
incorporated herein by this reference to the Trust's Annual Report to
Shareholders for the fiscal year ended December 31, 1996.

23
<PAGE> 122

PRINCIPAL HOLDERS OF CINCINNATI FUND SHARES

As of x, the Cincinnati Fund had x of its shares outstanding, out of
an unlimited number of authorized shares. As of such date, each of the
following persons or groups was known by Trust management to be the record
and/or beneficial owner (as defined below) of the approximate amounts of the
Cincinnati Fund's outstanding shares indicated below.

<TABLE>
<CAPTION>
----------------------------------------------------------------- ----------------------------- -------------------------
NAME AND ADDRESS OF OWNER NUMBER OF SHARES PERCENT OF CLASS
----------------------------------------------------------------- ----------------------------- -------------------------
<S> <C> <C>
Trustees and officers of the Trust as a group

Adviser Officers & Directors as a group
----------------------------------------------------------------- ----------------------------- -------------------------
</TABLE>

As of February 4, 1997, the Adviser held in a fiduciary capacity 76,781
(12.38%)of the outstanding shares of the Cincinnati Fund. The Adviser has
investment and voting power over all shares held by it in a fiduciary capacity.

24
<PAGE> 123

SCHEDULE A

The beta measurements that may be used in the Cincinnati Prospectus will be
calculated by using MicroSoft Excel spreadsheets and the statistical function
slope available in MicroSoft Excel. The SLOPE function returns the slope of the
linear regression line through data points in known y's and known x's. The
slope is the vertical distance divided by the horizontal distance between any
two points on the line, which is the rate of change along the regression line.

The equation for beta (slope) is shown below.

[GRAPHIC OMITTED]

Where y = the Fund's monthly total returns in the period
x = the benchmark index's monthly total returns in the period

25
<PAGE> 124

PART C: OTHER INFORMATION

24. Financial Statements and Exhibits

(a) Financial Statements:

(1) Financial Highlights for the Gateway Index Plus Fund,
the Gateway Mid Cap Index Fund, and the Gateway Small
Cap Index Fund and the Cincinnati Fund are included in
Part A.

(2) The following documents are incorporated by reference
to The Gateway Trust's 1996 Annual Report to
Shareholders of the Gateway Index Plus Fund.

* Report of Independent Public Accountants

* Portfolios of Investments, December 31, 1996

* Statements of Assets and Liabilities,
December 31, 1996

* Statements of Operations for the Year Ended
December 31, 1996

* Statements of Changes in Net Assets

* Financial Highlights

* Notes to Financial Statements,
December 31, 1996

(3) The following documents are incorporated by reference
to The Gateway Trust's 1996 Annual Report to
Shareholders of the Gateway Mid Cap Index Fund and the
Gateway Small Cap Index Fund.

* Report of Independent Public Accountants

* Portfolio of Investments, December 31, 1996

* Statement of Assets and Liabilities,
December 31, 1996

* Statement of Operations for the Year
Ended December 31, 1996

* Statements of Changes in Net Assets

* Financial Highlights

* Notes to Financial Statements,
December 31, 1996

(4) The following documents are incorporated by reference
to The Gateway Trust's 1996 Annual Report to
Shareholders of the Cincinnati Fund.

* Report of Independent Public Accountants

* Portfolio of Investments, December 31, 1996

* Statement of Assets and Liabilities,
December 31, 1996

* Statement of Operations for the year
ended December 31, 1996

* Statements of Changes in Net Assets

* Financial Highlights

* Notes to Financial Statements,
December 31, 1996

- 1 -
<PAGE> 125

(b) Exhibits:

(1)(a) Registrant's Second Amended Agreement and Declaration
of Trust is incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 22
(Investment Company Act No. 20) to Registration
Statement No. 2-59895 filed with the Securities and
Exchange Commission on February 26, 1993.

(1)(b) Amendment No. 1 to Registrant's Second Amended
Agreement and Declaration of Trust is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 23 (Investment Company Act No. 20) to
Registration Statement No. 2-59895 filed with the
Securities and Exchange Commission on June 29, 1993.

(1)(c) Amendment No. 2 to Registrant's Second Amended
Agreement and Declaration of Trust is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 25 (Investment Company Act No. 23) to
Registration No. Statement 2-59895 filed with the
Securities and Exchange Commission on March 2, 1994.

(1)(d) Amendment No. 3 to Registrant's Second Amended
Agreement and Declaration of Trust is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 27 (Investment Company Act No. 25) to
Registration No. Statement 2-59895 filed with the
Securities and Exchange Commission on March 2, 1995.

(1)(e) Amendment No. 4 to Registrant's Second Amended
Agreement and Declaration of Trust is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 27 (Investment Company Act No. 25) to
Registration No. Statement 2-59895 filed with the
Securities and Exchange Commission on March 2, 1995.

(1)(f) Amendment No. 5 to Registrant's Second Amended
Agreement and Declaration of Trust is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 27 (Investment Company Act No. 25) to
Registration No. Statement 2-59895 filed with the
Securities and Exchange Commission on March 2, 1995.

(2) Registrant's By-Laws as restated dated October 29,
1996 are attached hereto.

- 2 -
<PAGE> 126

(3) None.

(4) None.

(5)(a) Investment Advisory Contract between the Gateway Index
Plus Fund and Gateway Investment Advisers, L.P. is
incorporated by reference to Exhibits to Registrant's
Post-Effective Amendment No. 29 (Investment Company
Act No. 27) to Registration Statement No. 2-59895
filed with the Securities and Exchange Commission on
February 29, 1996.

(5)(b) Investment Advisory Contract between the Gateway Mid
Cap Index Fund and Gateway Investment Advisers, L.P.
is incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 29
(Investment Company Act No. 27) to Registration
Statement No. 2-59895 filed with the Securities and
Exchange Commission on February 29,

1996.

(5)(c) Investment Advisory Contract between the Gateway Small
Cap Index Fund and Gateway Investment Advisers, L.P.
is incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 29
(Investment Company Act No. 27) to Registration
Statement No. 2-59895 filed with the Securities and
Exchange Commission on February 29, 1996.

(5)(d) Investment Advisory Contract between the Cincinnati
Fund and Gateway Investment Advisers, L.P. is
incorporated by reference to Exhibits to Registrant's
Post-Effective Amendment No. 29 (Investment Company
Act No. 27) to Registration Statement No. 2-59895
filed with the Securities and Exchange Commission on
February 29, 1996.

(6) None.

(7) None.

(8)(a) Custodian Contract between Registrant and The First
National Bank of Cincinnati, N.A. (now Star Bank)
with respect to the Gateway Option Index Fund (now the
Gateway Index Plus Fund) is incorporated by reference
to Exhibits to Registrant's Post-Effective Amendment
No. 13 (Investment

- 3 -
<PAGE> 127

Company Act No. 11) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 16, 1986.

(8)(b) Custodian Contract between Registrant and Star Bank
with respect to the Gateway Capital Fund (now the
Gateway Mid Cap Index Fund) is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 22 (Investment Company Act No. 20) to
Registration Statement No. 2-59895 filed with the
Securities and Exchange Commission on

February 26, 1993.

(8)(c) Custodian Contract between Registrant and Star Bank
with respect to the Gateway Small Cap Index Fund is
incorporated by reference to Exhibits to Registrant's
Post-Effective Amendment No. 23 (Investment Company
Act No. 20) to Registration No. Statement 2-59895
filed with the Securities and Exchange Commission on
June 29, 1993.

(8)(d) Custodian Contract between Registrant and Star Bank
with respect to the Gateway Cincinnati Fund is
incorporated by reference to Exhibits to Registrant's
Post-Effective Amendment No. 27 (Investment Company
Act No. 25) to Registration No. Statement 2-59895
filed with the Securities and Exchange Commission on
March 2, 1995.

(9)(a) Shareholder Servicing, Transfer, Dividend Disbursing
and Financial Servicing Agent Contract between
Registrant and Gateway Investment Advisers, Inc. with
respect to the Gateway Index Plus Fund, the Gateway
Mid Cap Index Fund, and the Gateway Small Cap Index
Fund, effective January 1, 1994, is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 25 (Investment Company Act No. 23) to
Registration No. Statement 2-59895 filed with the
Securities and Exchange Commission on March 2, 1994.

(9)(b) Amendment to Shareholder Servicing, Transfer, Dividend
Disbursing and Financial Servicing Agent Contract with
respect to the Cincinnati Fund and dated October 14,
1994, is incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 27
(Investment Company Act No. 25) to Registration No.
Statement 2-59895 filed with the Securities and
Exchange Commission on March 2, 1995.

(10) Opinion and Consent of Brown, Cummins & Brown Co.,
L.P.A. which is filed with Registrant's Form 24F-2 for
the year ending December 31, 1996 is hereby
incorporated by reference.

(11) Consent of Arthur Andersen LLP is filed herewith.

- 4 -
<PAGE> 128

(12) None.

(13) None.

(14)(a) Registrant's Model Individual Retirement Account Plan
is incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 23
(Investment Company Act No. 20) to Registration
Statement No. 2-59895 filed with the Securities and
Exchange Commission

on June 29, 1993.

(15) None.

(16) Included in Statement of Additional Information filed
herewith.

(17) None.

(18) None.

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

None

ITEM 26. Number of Holders of Securities (as of February 1, 1997)

Title of Class # of Accounts
-------------- -------------
Gateway Index Plus 7,540
Gateway Mid Cap Index 315
Gateway Small Cap Index 825
Cincinnati Fund 1,336

ITEM 27. Indemnification

The Second Amended Agreement and Declaration of Trust of the
Registrant dated as of December 29, 1992 (the "Declaration of
Trust"), provides for the indemnification of the trustees,
officers, employees and agents of the Registrant. Such
indemnification is mandatory to the extent that such trustee,
officer, employee or agent is successful on the merits or
otherwise in defense of any claim, issue or matter arising out
of any action, suit or proceeding. In all other cases,
trustees, directors, officers, employees and agents of the
Registrant may be indemnified by

- 5 -
<PAGE> 129

the Registrant provided that the requirements for such
indemnification set forth in the Declaration of Trust are
fulfilled. These indemnification provisions, which were amended
by vote of the shareholders in October 1990 and became effective
on January 30, 1991, generally follow the indemnification
provisions authorized by Ohio law for Ohio corporations as of
May 1986, but include supplemental provisions designed to comply
with requirements of the Investment Company Act of 1940.

The Registrant will not indemnify any person if such
indemnification would be unlawful under the Securities Act of
1933 or the Investment Company Act of 1940.

Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, directors,
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, director, officer or controlling person
of the Registrant in the successful defense of any action, suit
or proceeding) is asserted by such trustee, director, 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 issues.

ITEM 28. Business and Other Connections of Investment Adviser

Gateway Investment Advisers, L.P. (the "Adviser") the general
partner of which is Gateway Investment Advisers, Inc. (the
"GIA") is the investment adviser to the Trust and to other
individually managed accounts as well. The limited partner of
the Adviser, Alex. Brown Investments Incorporated ("ABII") is a
wholly-owned subsidiary of Alex. Brown Incorporated. ABII's
primary function is to acquire investment interests in various
entities for investment purposes only.

ITEM 29. Principal Underwriters

None.

ITEM 30. Location of Accounts and Records

Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are

- 6 -
<PAGE> 130

maintained by Gateway Investment Advisers, L.P., located at 400
TechneCenter Drive, Suite 220, Milford, Ohio 45150.

ITEM 31. Management Services

None.

ITEM 32. Undertakings

The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest Annual Report to shareholders, upon request and without
charge.

- 7 -
<PAGE> 131

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registrant's Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City
of Milford and the State of Ohio on the 28th day of February, 1997.

THE GATEWAY TRUST

By: /s/ Walter G. Sall
-----------------------------
Walter G. Sall, Chairman

Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registrant's Registration Statement has
been signed below by the following persons in the capacities and on the date
indicated.

Dated: February 28, 1997 /s/ Walter G. Sall
-----------------------------
Walter G. Sall, Chairman

Dated: February 28, 1997 /s/ Paul R. Stewart
-----------------------------
Paul R. Stewart,
Treasurer and Principal
Accounting Officer

Robert S. Harrison, Trustee
Stefen F. Brueckner, Trustee
Kenneth A. Drucker, Trustee
Beverly S. Gordon, Trustee By: /s/ Walter G. Sall
-----------------------------
Walter G. Sall,
Attorney in Fact
William H. Schneebeck, Trustee Dated: February 28, 1997
Walter G. Sall, Trustee, Chairman
and Principal Executive Officer

<PAGE> 132

Securities Act of 1933 Registration No. 2-59895
Investment Company Act of 1940 Registration No. 811-02773

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 30

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Post-Effective Amendment No. 28

THE GATEWAY TRUST

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

EXHIBITS

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

<PAGE> 133

EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION OF EXHIBIT EXHIBIT TAG

2 Restated Bylaws Ex-99.B2

11 Consent of Arthur Andersen LLP Ex-99.B11

99 Powers of Attorney Ex-99.POA

<PAGE> 1
Exhibit 99.b2

BY-LAWS

THE GATEWAY TRUST

(restated July 30, 1996 and
amended October 29, 1996)

Section 1. Agreement and Declaration of
Trust and Principal Office

1.1 Agreement and Declaration of Trust. These Bylaws shall be subject to the
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of The Gateway Trust, an Ohio business trust
established by the Declaration of Trust (the "Trust").

1.2 Principal Office of the Trust. The principal office of the Trust shall be
located in or outside Ohio. Unless the Trustees otherwise determine, the
principal office of the Trust shall be located in Milford, Ohio.

Section 2. Shareholders

2.1 Shareholder Meetings. A meeting of the shareholders of the Trust or of any
one or more series of shares may be called at any time by the Trustees or by
the chairman or president. A meeting of shareholders shall be called by the
Trustees or by the chairman or president as required pursuant to Section 5.2 of
the Declaration of Trust. If the meeting is a meeting of the shareholders of
one or more series of shares, but not a meeting of all shareholders of the
Trust, then only the shareholders of such one or more series shall be entitled
to notice of and to vote at the meeting. Each call of a meeting shall state the
place, date, hour and purposes of the meeting.

2.2 Place of Meetings. All meetings of the shareholders shall be held at the
principal office of the Trust, or, to the extent permitted by the Declaration
of Trust, at such other place within the United States as shall be designated
by the Trustees or the chairman or president of the Trust.

2.3 Notice of Meetings. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be
given at least twenty days before the meeting to each shareholder entitled to
vote by leaving such notice at each shareholder's residence or usual place of
business or by mailing it, postage prepaid, and addressed to such shareholder
at the address as it appears in the records of the Trust. If notice is given by
mail, the notice shall be deemed to have been given when deposited in the mail.
Such notice shall be given by the secretary or an assistant secretary or by an
officer designated by the Trustees. No notice of any meeting of shareholders
need be given to a shareholder if a written waiver of notice, executed before
or after the meeting by such shareholder or his or her attorney thereunto duly
authorized, is filed with the records of the meeting.

<PAGE> 2

2.4 Ballots. No ballot shall be required for any election unless requested by
a shareholder present or represented at the meeting and entitled to vote in
the election.

2.5 Proxies. Shareholders entitled to vote may vote either in person or by
proxy in writing dated not more than six months before the meeting. The proxies
shall be filed with the secretary or other person responsible to record the
proceedings of the meeting before being voted. Unless otherwise specifically
limited by their terms, such proxies shall entitle the holders to vote at any
adjournment of such meeting but shall not be valid after the final adjournment
of such meeting.

Section 3. Trustees

3.1 Number of Trustees. The number of Trustees shall be no less than five but
no more than eleven as designated by a majority of the Trustees then in office
from time to time.

3.2 Committees. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number any committees as the Trustees shall
determine to be advisable. The Trustees may delegate to such committees some or
all of their powers except those which by law, by the Declaration of Trust, or
by these By-Laws may not be delegated. Except as the Trustees may otherwise
determine, any such committee may make rules for conduct of its business. All
members of such committees shall serve at the pleasure of the Board of
Trustees. The Trustees may abolish any such committee at any time. Any
committee to which the Trustees delegate any of their powers or duties shall
keep records of its meetings and shall report its action to the Trustees. The
Trustees shall have power to rescind any action of any committee. No committee
can rescind any action of the Board of Trustees or shall fill vacancies in the
Board of Trustees or committees.

3.3 Regular Meetings. Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.

3.4 Special Meetings. Special meetings of the Trustees may be held at any time
and at any place designated in the call of the meeting. Special meetings of the
Trustees may be called by the chairman, president or the treasurer or by two or
more Trustees with notice thereof being given to each Trustee by the secretary
or an assistant secretary or by the officer or one of the Trustees calling the
meeting.

3.5 Notice. Trustees shall be given at least seven days notice of all special
meetings provided, however, that notice of a meeting need not be given to any
Trustee if a written waiver of notice, executed by him or her before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him or her. Notice of a special meeting or a waiver of a
notice shall specify the purposes of the meeting.

<PAGE> 3

3.6 Quorum. At any meeting of the Trustees, a majority of the Trustees then in
office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present.

3.7 Participation by Telephone. One or more of the Trustees or of any committee
of the Trustees may participate in a meeting thereof by means of a telephone
conference or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting except as
otherwise provided by the Investment Company Act of 1940.

3.8 Action by Consent. Any action required or permitted to be taken at any
meeting of the Trustees or any committee thereof may be taken without a
meeting, if a written consent of such action is unanimously signed by the
Trustees then in office or unanimously by the members of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Trustees or such committee.

Section 4. Officers and Agents

4.1 Enumeration; Qualification. The officers of the Trust shall be a chairman,
a president, a treasurer, a secretary and such other officers, if any, as the
Trustees from time to time may in their discretion elect or appoint. The Trust
may also have such agents, if any, as the Trustees from time to time may in
their discretion appoint. Any officer may be, but none need be, a Trustee or
shareholder. Any two or more offices may be held by the same person.

4.2 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to his or
her office as if the Trust were organized as an Ohio business corporation and
such other duties and powers as the Trustees may from time to time designate.

4.3 Election. The chairman, the president, the treasurer and the secretary
shall be elected annually by the Trustees. Other officers, if any, may be
elected or appointed by the Trustees at said meeting or at any other time.

4.4 Tenure. The chairman, the president, the treasurer and the secretary shall
hold office until their respective successors are chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office at the pleasure of the
Trustees. Each agent shall retain his or her authority at the pleasure of the
Trustees.

4.5 Chairman. The chairman shall be the chief executive officer of the Trust.
Unless the Trustees otherwise provide, the chairman, or in the absence of the
chairman, the president , or any Trustee chosen by the Trustees, shall preside
at all meetings of the shareholders and of the Trustees.

<PAGE> 4

4.6 President and Vice Presidents. The president and any vice president shall
have such duties and powers as shall be designated from time to time by
the Trustees and these By-laws.

4.7 Treasurer and Assistant Treasurer. The treasurer shall be the chief
financial officer of the Trust and, as such, shall be responsible for
preparation of financial statements of the Trust and shall have such other
duties and powers as may be designated from time to time by the Trustees or the
chairman or president. In addition, subject to any arrangement made by the
Trustees with a bank or trust company or other organization as custodian or
transfer or shareholder services agent, the Treasurer shall be in charge of the
Trust's valuable papers. Any assistant treasurer shall have such duties and
powers as shall be designated from time to time by the Trustees.

4.8 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept therefor,
which books shall be kept at the principal office of the Trust. In the absence
of the secretary from any meeting of shareholders or Trustees, an assistant
secretary, or if there be none or he or she is absent, a temporary secretary
chosen at the meeting shall record the proceedings thereof in the aforesaid
books.

Section 5. Resignations, Removals and Retirement

Any Trustee or officer may resign at any time by delivering his or her
resignation in writing to the chairman, the president, or the secretary or to a
meeting of the Trustees. The Trustees may remove any officer elected by them
with or without cause by the vote of a majority of the Trustees then in office.
Any Trustee who reaches the age of 75 can no longer serve as a Trustee for the
Trust and is considered retired effective upon reaching such age. Trustees who
have reached or surpassed the age of 75 on October 29, 1996 are exempt from any
form of mandatory retirement. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee or officer resigning, no officer
removed, and no Trustee retired, shall have any right to any compensation for
any period following his or her resignation, removal or retirement or any right
to damages on account of such removal.

Section 6. Vacancies

A vacancy in any office may be filled at any time. Each successor
shall hold office for the unexpired term, and in the case of the chairman, the
president, the treasurer and the secretary, until his or her successor is
chosen and qualified, or in each case until he or she sooner dies, resigns, is
removed or becomes disqualified.

Section 7. Shares of Beneficial Interest

7.1 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders
of certificates for such shares as if they had accepted such certificates and
shall be held to have expressly assented and agreed to the terms hereof.

<PAGE> 5

The Trustees may at any time authorize the issuance of share
certificates. In that event, such certificates shall be signed by the president
or a vice president and by the treasurer or an assistant treasurer. Such
signatures may be facsimiles if the certificate is signed by a transfer agent
or by a registrar, other than a Trustee, officer or employee of the Trust. In
case any officer who has signed or whose facsimile signature has been placed on
such certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Trust with the same effect as if he or she
were such officer at the time of its issue.

7.2 Loss of Certificates. In the case of the alleged loss or destruction or the
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees may prescribe.

7.3 Discontinuance of Issuance of Certificates. The Trustees may at any time
discontinue the issuance of share certificates and may, by written notice to
each shareholder, require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect the ownership of
shares in the Trust.

Section 8. Record Date and

Closing Transfer Books

The Trustees may fix in advance a time, which shall not be more than
sixty days before the date of any meeting of shareholders or the date for the
payment of any dividend or making of any other distribution to shareholders, as
the record date for determining the shareholders having the right to notice and
to vote at such meeting and any adjournment thereof or the right to receive
such dividend or distribution, and in such case only shareholders of record on
such record date shall have such right, notwithstanding any transfer of shares
on the books of the Trust after the record date; or without fixing such record
date the Trustees may for any of such purposes close the transfer books for all
or any part of such period.

Section 9. Execution of Papers

Except as the Trustees may generally or in particular cases authorize
the execution thereof in some other manner, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts and other obligations made, accepted or
endorsed by the Trust shall be signed, and all transfers of securities standing
in the name of the Trust shall be executed, by the chairman, the president or
by one of the vice presidents or by the treasurer or by whomsoever else shall
be designated for that purpose by the vote of the Trustees and need not bear
the seal of the Trust.

Section 10. Fiscal Year

Except as from time to time otherwise provided by the Trustees, the
fiscal year of the Trust shall end on December 31 in each year.

<PAGE> 6
Section 11. Seal

Unless otherwise required by the Trustees, the seal of the Trust shall
not be necessary to be placed on, and its absence shall not impair the validity
of, any document, instrument or other paper executed and delivered by or on
behalf of the Trust.

Section 12. Amendments

These By-Laws may be amended or repealed, in whole or in part, by a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority.

<PAGE> 1

Exhibit 99.B11

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in this Post-Effective Amendment No. 30 of our audit
reports on the financial statements of the Gateway Index Plus Fund, Gateway Mid
Cap Index Fund, Gateway Small Cap Index Fund and Cincinnati Fund of The Gateway
Trust, dated January 17, 1997, and to all references to our Firm included in or
made a part of this Post-Effective Amendment No. 30.

/s/ Arthur Anderson LLP
-----------------------
ARTHUR ANDERSON LLP

Cincinnati, Ohio
February 24, 1997

<PAGE> 1

EXHIBIT 99.POA

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, THE GATEWAY TRUST, an Ohio business trust (the "Trust"),
proposes to file with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations thereunder, and the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder, a post-effective amendment to
Registration Statement No. 2-59895 amending such Registration Statement and the
included prospectuses and statements of additional information for the Trust;
and

WHEREAS, the undersigned is a trustee of the Trust;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Walter
G. Sall and J. Patrick Rogers, each of them individually, his attorney-in-fact,
for him and in his name, place and stead and in his office and capacity with
the Trust, to execute and file such post-effective amendment, including
prospectuses, statements of additional information and exhibits, and thereafter
to execute and file any additional amended registration statement or
statements, amended prospectus or prospectuses and amended statement or
statements of additional information, or any supplements to any of the
foregoing, hereby giving and granting to said attorney full power and authority
to do and perform each and every act and thing whatsoever requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do or cause to be done by virtue hereof.

This authority hereby granted is limited to the execution and delivery
of such post-effective amendment and included documents and, unless earlier
revoked by me or expressly extended by me in writing, shall remain in force and
effect only until such post-effective amendment shall have been declared
effective by the Securities and Exchange Commission and in any event not later
than May 15, 1997.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of January, 1997.

/s/ Kenneth A. Drucker
------------------------------
Kenneth A. Drucker, Trustee
State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared Kenneth A. Drucker , known to me to be the person described
in and who executed the foregoing instrument, and who acknowledged to me that
he executed and delivered the same for the purpose therein expressed.

WITNESS my hand and official seal this 28th day of January, 1997.

/s/ Donna M. Squeri
---------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration

<PAGE> 2

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of January, 1997.

/s/ Robert S. Harrison
--------------------------------
Robert S. Harrison, Trustee

State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared Robert S. Harrison, known to me to be the person described
in and who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purpose therein expressed.

WITNESS my hand and official seal this 28th day of January, 1997.

/s/ Donna M. Squeri
-------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration

<PAGE> 3

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of January, 1997.

/s/ Stefen F. Brueckner
--------------------------------
Stefen F. Brueckner, Trustee

State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared Stefen F. Brueckner, known to me to be the person described
in and who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purpose therein expressed.

WITNESS my hand and official seal this 28th day of January, 1997.

/s/ Donna M. Squeri
------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration

<PAGE> 4

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of January, 1997.

/s/ Beverly S. Gordon
------------------------------
Beverly S. Gordon, Trustee

State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared Beverly S. Gordon, known to me to be the person described in
and who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purpose therein expressed.

WITNESS my hand and official seal this 28th day of January, 1997.

/s/ Donna M. Squeri
----------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration

<PAGE> 5

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of January, 1997.

/s/ Walter G. Sall
---------------------------
Walter G. Sall, Trustee

State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared Walter G. Sall, known to me to be the person described in
and who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purpose therein expressed.

WITNESS my hand and official seal this 28th day of January, 1997.

/s/ Donna M. Squeri
----------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration

<PAGE> 6

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of January, 1997.

/s/ William H. Schneebeck
----------------------------------
William H. Schneebeck, Trustee

State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared William H. Schneebeck, known to me to be the person
described in and who executed the foregoing instrument, and who acknowledged to
me that he executed and delivered the same for the purpose therein expressed.

WITNESS my hand and official seal this 28th day of January, 1997.

/s/ Donna M. Squeri
----------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration

<PAGE> 7

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a trustee of the Trust;

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of January, 1997.

/s/ Paul R. Stewart
------------------------------
Paul R. Stewart, Treasurer

State of Ohio
County of Clermont

WITNESS my hand and official seal this 28th day of January, 1997.

/s/ Donna M. Squeri
--------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration