GATEWAY TRUST, 485BPOS, 1998-05-01

GATEWAY TRUST
485BPOS, 1998-05-01

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<PAGE> 1
As filed with the Securities and Exchange Commission on April 30, 1998
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. 31 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 29 [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)
[X] on May 1, 1998 pursuant to paragraph (b)
[ ] 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.

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

Title of Securities Being Registered: Shares

<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
Form N-1A Item the Gateway Fund and Small Cap Index Fund Section in the Cincinnati Fund 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 of Fund - Gateway Performance - Performance and Risk Information
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 Section in Cincinnati Fund Statement of
Form N-1A Item Fund and Gateway Small Cap Index Fund 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 and B

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 Services - Investment Advisory and Other 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
</TABLE>

<PAGE> 4

Item 22 - Calculation Of Performance Data - Performance and Risk Information - Performance and Risk Information
- Schedule C - Schedule A

Item 23 - Financial Statements - Independent Public Accountants and - Independent Public Accountants and
Financial Statements Financial Statements

</TABLE>
<PAGE> 5
PROSPECTUS
TRUST PROSPECTUS

May 1, 1998

GATEWAY FUND

The Gateway Fund (previously known as the Gateway 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 SMALL CAP INDEX FUND

The Small Cap Index Fund 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 $775 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 and may also
buy 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 20 through 23 of this
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 (the "SEC") and is
included in the Statement of Additional Information (the "SAI") of The Gateway
Trust dated May 1, 1998. The 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.

<PAGE> 6

<S> <C>
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 ___ Glossary of investment terms.

GATEWAY FUND INFORMATION ___ Graphs and tables showing fund performance, risk/reward and top ten
holdings for the Gateway Fund.

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

PORTFOLIO MANAGER PROFILE ___ Profile 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> 7

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.

Small Cap
Shareholder Transaction Expenses Gateway Index Fund
Fund
Maximum Sales Load on Purchase None None
Maximum Sales Load on
Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee None None
Exchange Fee None None

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.

Gateway Small Cap
Annual Fund Operating Expenses Fund Index Fund
------------------------------ ---- ----------
<S> <C> <C>
Advisory Fees (after waiver) 0.69% 0.34%
12b-1 Fees 0.00 0.00
Other Expenses 0.38 1.16
---- ----
Total Fund Operating Expenses (after 1.07% 1.50%
waiver) ===== =====

(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 Annual 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.

Gateway Small Cap
Fund Index Fund
---- ----------
1 year $11 $15
3 years 34 47
5 years 59 82
10 years 130 179

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 1997 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 an annual rate of
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 a portion of its advisory fees in 1997. The actual advisory fees and
total annual fund operating expenses of the Fund in 1997 were 0.34% and 1.50%,
respectively. Absent the waiver, the advisory fees and total annual fund
operating expenses of the Fund in 1997 would have been 0.90% and 2.06%,
respectively.

<PAGE> 8

FINANCIAL HIGHLIGHTS

The following condensed financial information for the eight years ended
December 31, 1997, 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, 1988 and December 31,
1989. The audit report on the 1997 financial statements should be read in
conjunction with this condensed financial information. The audit report on the
1997 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.

GATEWAY FUND Year Ended December 31,
---------------------------------------------------------------------------------
1997 1996 1995(3) 1994 1993 1992 1991
---------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $18.48 $16.91 $15.48 $15.85 $15.51 $15.24 $13.64
------ ------ ------ ------ ------ ------ ------
Net investment income 0.18 0.21 0.24 0.26 0.26 0.27 0.31
Net gains on securities 2.09 1.56 1.46 0.61 0.88 0.51 2.10
---- ---- ------- ------- ------- ------- -------
Total from investment operations 2.27 1.77 1.70 0.87 1.14 0.78 2.41
---- ---- ------- ------- ------- ------- -------

Dividends from net investment income (0.18) (0.20) (0.24) (0.27) (0.26) (0.28) (0.30)
Distributions from capital gains (1.72) 0.00 0.00 (0.86) (0.47) (0.23) (0.51)
Distributions in excess of realized
capital gains 0.00 0.00 (0.03) (0.11) (0.07) 0.00 0.00
----
Returns of capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---- ---- ------- ------- ------- ------- -------
Total distributions (1.90) (0.20) (0.27) (1.24) (0.80) (0.51) (0.81)
------ ------ -------- -------- -------- -------- --------

Net asset value, end of year $18.85 $18.48 $16.91 $15.48 $15.85 $15.51 $15.24
====== ====== ======= ====== ====== ====== ======

TOTAL RETURN 12.35% 10.53% 11.04% 5.57% 7.40% 5.15% 17.80%

Net assets, end of year (thousands) $255,458 $194,363 $176,220 $164,651 $207,176 $212,947 $81,368

Ratio of expenses to average net assets 1.07% 1.14% 1.19% 1.21% 1.11% 1.11% 1.22%
Ratio of net investment income to average net
assets 0.90% 1.18% 1.51% 1.54% 1.58% 1.96% 2.17%
Portfolio turnover rate 82% 17% 5% 4% 17% 15% 31%
Average commission per share $0.0271 $0.0335 -- (4) -- (4) -- (4) -- (4) -- (4)

<CAPTION>
GATEWAY FUND
-------------------------------------
1990 1989 1988
-------------------------------------

<S> <C> <C> <C>
Net asset value, beginning of year $15.49 $13.67 $11.60
------ ------ ------
Net investment income 0.41 0.33 0.23
Net gains on securities 1.15 2.29 2.05
------- ------- -------
Total from investment operations 1.56 2.62 2.28
------- ------- -------

Dividends from net investment income (0.41) (0.37) (0.21)
Distributions from capital gains (3.00) (0.35) 0.00
Distributions in excess of realized
capital gains 0.00 0.00 0.00

Returns of capital 0.00 (0.08) 0.00
------- -------- -------
Total distributions (3.41) (0.80) (0.21)
-------- -------- --------

Net asset value, end of year $13.64 $15.49 $13.67
====== ====== ======

TOTAL RETURN 10.32% 19.45% 19.76%

Net assets, end of year (thousands) $38,084 $31,509 $27,338

Ratio of expenses to average net assets 1.34% 1.40% 2.08%(2)
Ratio of net investment income to average net
assets 2.59% 2.21% 1.75%(2)
Portfolio turnover rate 79% 30% 10%
Average commission per share -- (4) -- (4) -- (4)
</TABLE>

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Additional information about the performance of each Gateway fund is contained
in 1997 Annual Reports to shareholders of the Gateway funds. Annual Reports
for 1997 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 SMALL CAP INDEX FUND Year Ended Year Ended Year Ended Year Ended From 6/16/93 to
12/31/97 12/31/96 12/31/95(3) 12/31/94 12/31/93
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.06 $11.05 $ 9.63 $10.35 $10.00
------ ------ ------ ------ ------
Net investment income (loss) (0.02) 0.01 0.03 (0.02) 0.04
Net gains or losses on securities 2.51 1.87 2.07 ( 0.60) 0.61
---- ---- ------- --------- -------
Total from investment operations 2.49 1.88 2.10 ( 0.62) 0.65
---- ---- ------- --------- -------

Dividends from net investment income (0.00) (0.01) (0.01) (0.00) (0.04)
Distributions from capital gains (1.07) (0.86) (0.67) (0.10) (0.26)
------ ------ -------- -------- --------
Total distributions (1.07) (0.87) (0.68) (0.10) (0.30)
------ ------ -------- -------- --------
Net asset value, end of period $13.48 $12.06 $11.05 $ 9.63 $10.35
====== ====== ====== ====== ======

TOTAL RETURN 20.64% 17.04% 21.81% (5.99%) 6.50%(1)

Net assets, end of period (thousands) $15,811 $10,921 $9,418 $9,657 $13,002
Ratio of net expenses to average net assets 1.50% 1.50% 1.68% 2.00% 1.92%(2)
Ratio of net investment income (loss) to average net (0.19%) 0.03% 0.09% (0.14%) 0.98%(2)
assets
Portfolio turnover rate 32% 20% 20% 39% 3%(1)
Average commission per share $0.0401 $0.0371 -- (4) -- (4) -- (4)

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

(1) Not annualized
(2) The ratios of net expenses to average net assets would have increased and
the ratio of net investment income to average net assets would have
decreased 0.13% for the Gateway Fund in 1988 and 0.08% for the Small Cap
Index Fund in 1993 had the Adviser not voluntarily waived fees. The 1993
ratios for the Small Cap Index Fund are annualized.
(3) On December 15, 1995, Gateway Investment Advisers, L.P. became investment
adviser to the funds. (4) Disclosure of average commission per share was not
required prior to the year ended December 31, 1996.
</TABLE>

6
<PAGE> 10

HOW TO OPEN A GATEWAY ACCOUNT

GATEWAY FUNDS ARE AVAILABLE TO 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 18.)

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 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. Please call Gateway shareholder services at (800) 354-6339 for
instructions.

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

OPENING A NEW IRA ACCOUNT/TRANSFERRING AN EXISTING IRA

To open a new IRA in a Gateway fund, please call Gateway shareholder
services at (800) 354-6339 to obtain the appropriate IRA Account Application and
IRA Agreement and Disclosure Statement. To transfer an existing IRA from a bank
or other mutual fund to your Gateway IRA, you must complete the appropriate IRA
Transfer Form in addition to the 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. 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.

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. Be sure to include the minor's social security number.

<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 18.)

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 call Gateway shareholder services at
(800) 354-6339 to arrange a purchase by wire. See Page 9 for additional
information about wire transfers and telephone instructions.

BY AUTOMATIC INVESTMENT PROGRAM

Gateway's Automatic Investment Program is a convenient way to make
regularly scheduled purchases in your existing Gateway account. When you use the
program, funds are electronically transferred from your bank account to Gateway
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.
GATEWAY DOES NOT CHARGE ANY FEE FOR USE OF THE AUTOMATIC INVESTMENT PROGRAM.
Please call Gateway shareholder services at (800) 354-6339 for instructions.

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 share 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 18.)

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 between funds. 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 18.)

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 specifying
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.
A check for 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 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 9 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 financial 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) 354-6339. More detailed information about
transfers to and distributions from an IRA is set forth in the IRA Agreement and
Disclosure Statement.

TELEPHONE TRANSACTIONS

The Gateway Trust will not be liable for any damages resulting from
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 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 all transactions, and normally tape recording
any instructions received by telephone.

REDEMPTIONS BY THE TRUST

The Gateway Trust reserves the right to reject any investment at any
time. The Trust also reserves the right to redeem your account(s) under certain
circumstances. You will receive written notice at least 60 days prior to the
redemption of your account(s) by the Trust. The Trust may redeem your account(s)
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.
The Trust will redeem your account(s) 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 the 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

Gateway Gateway Small S&P 500 Wilshire Lehman Gov't/Corp
Fund Cap Index Fund Stock Index Small Cap Bond Index
---- -------------- ----------- --------- ----------
Index
<C> <C> <C> <C> <C> <C>
1997 12.35% 20.64% 33.36% 26.76% 9.75%
1996 10.53 17.04 22.96 19.97 2.91
1995 11.04 21.81 37.58 26.58 19.24
1994 5.57 (5.99) 1.32 (3.09) (3.52)
1993 7.40 6.50* 10.08 12.92 11.02
1992 5.15 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
<FN>

*June 16, 1993 to December 31, 1993
</TABLE>

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

AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
------------------------------------------------ ------------------------------------------------

1 YEAR 3 YEARS 5 YEARS 10 YEAR 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------ ---------- ------------ ----------- ---------- ---------- ------------ -------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gateway Fund 12.35% 11.30% 9.35% 11.82% 12.35% 37.88% 56.33% 205.56%

Gateway Small Cap Index Fund 20.64 19.81 N/A N/A 20.64 72.00 N/A N/A

S&P 100 Index 30.01 31.74 21.14 17.68 30.01 128.66 160.83 409.54

Wilshire Small Cap Index 26.76 24.39 N/A N/A 26.76 92.49 N/A N/A
S&P 500 Index 33.36 31.15 20.27 18.04 33.36 125.60 151.61 425.23
Lehman Gov't/Corp Bond Index 9.75 10.43 7.61 9.15 9.75 34.67 44.30 139.98
Consumer Price Index 2.02 2.63 2.66 3.44 2.02 8.09 14.03 40.22

* For periods ended December 31, 1997
</TABLE>

12
<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 document 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 more fully
described in the SAI.

The S&P 100 Index is an unmanaged index of 100 common stocks with a
market capitalization range of $980 million to $240 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 Wilshire Small Cap Index is an unmanaged index of 250 common stocks
with a market capitalization range of $39 million to $3.2 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, 1997, the average maturity of this index was 10.07 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.

13
<PAGE> 17

GATEWAY FUND INFORMATION

GROWTH OF A $10,000 INVESTMENT

(Insert Chart Here)

Gateway Fund Plot Points - Growth of $10,000 Chart

Gateway Fund S&P 500 Lehman Gov't/Corp U.S. T-Bills
Bond Index

<PAGE> 19

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Oct-96 $26,653.01 $37,357.39 $21,712.81 $15,990.39
Nov-96 $27,107.98 $40,181.24 $22,112.33 $16,055.95
Dec-96 $27,199.06 $39,385.25 $21,866.88 $16,129.81
Jan-97 $27,655.19 $41,846.04 $21,893.12 $16,202.39
Feb-97 $27,684.51 $42,174.11 $21,936.91 $16,265.58
Mar-97 $27,522.55 $40,441.18 $21,675.86 $16,335.52
Apr-97 $28,083.46 $42,855.51 $21,993.19 $16,405.77
May-97 $28,304.76 $45,464.56 $22,197.73 $16,486.15
Jun-97 $28,688.57 $47,501.37 $22,464.10 $16,547.15
Jul-97 $29,206.11 $51,281.05 $23,151.51 $16,618.31
Aug-97 $28,718.08 $48,408.29 $22,892.21 $16,686.44
Sep-97 $29,590.53 $51,059.61 $23,251.62 $16,759.86
Oct-97 $29,131.29 $49,352.18 $23,623.64 $16,830.25
Nov-97 $30,094.37 $51,636.69 $23,748.85 $16,895.89
Dec-97 $30,556.62 $52,523.29 $23,998.21 $16,976.99

December 31, 1987 - December 31, 1997
</TABLE>

16
<PAGE> 20

This chart shows the growth of a $10,000 investment made ten years ago.

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

Gateway Fund
Average Annual Total Returns
As Of December 31, 1997

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

One Year 12.35%
Five Years 9.35%
Ten Years 11.82%

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

Performance data shown throughout this document represents past performance and
assumes the reinvestment of dividends. 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 Gateway Fund is designed for conservative investors whose investment
objective is to maximize total rate of return over the long term.

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

Top Ten Holdings
As Of December 31, 1997
(as a percentage of net assets)

========================================================
General Electric Company 7.18%
The Coca-Cola Company 4.94%
Microsoft Corp. 4.63%
Exxon Corporation 4.52%
Merck & Co., Inc. 3.83%
Intel Corporation 3.42%
International Business Machines Corporation 3.07%
AT&T 2.97%
Bristol-Myers Squibb Company 2.82%
Wal-Mart Stores, Inc. 2.67%
============================================ ===========

17
<PAGE> 21

RISK/REWARD CHARTS

(Insert Risk/Reward Charts Here)
Gateway Fund Plot Points - Risk/Reward Charts

5 Years
12/31/92 - 12/31/97
<TABLE>
<CAPTION>

Risk Return
<S> <C> <C>
U.S. Treasury bills (30 day) 0.31 4.57%
Gateway Fund 4.22 9.35%
S&P 500 10.59 20.27%

10 Years
12/31/87 - 12/31/97
<CAPTION>

Risk Return

<S> <C> <C>
U.S. Treasury bills (30 day) 0.49 5.44%
Gateway Fund 5.06 11.82%
S&P 500 12.01 18.04%
</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 Gateway 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
Gateway 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

19
<PAGE> 23

<PAGE> 24

SMALL CAP INDEX FUND INFORMATION

GROWTH OF A $10,000 INVESTMENT

(Insert Chart Here)

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

Small Cap Wilshire Small US T-bills
Index Fund Cap Index
<S> <C> <C> <C>
$10,000.00 $10,000.00 $10,000.00
Jun-93 $10,100.00 $10,162.00 $10,025.38
Jul-93 $10,179.99 $10,293.09 $10,049.46
Aug-93 $10,539.96 $10,759.37 $10,074.63
Sep-93 $10,639.98 $10,923.99 $10,100.44
Oct-93 $10,579.97 $10,991.71 $10,122.76
Nov-93 $10,449.94 $10,772.98 $10,147.97
Dec-93 $10,649.96 $11,292.24 $10,170.94
Jan-94 $10,927.81 $11,625.36 $10,196.40
Feb-94 $10,866.07 $11,580.02 $10,218.02
Mar-94 $10,361.88 $11,031.13 $10,245.55
Apr-94 $10,310.39 $11,009.06 $10,273.33
May-94 $10,156.04 $10,870.35 $10,305.69
Jun-94 $9,806.16 $10,527.93 $10,337.83
Jul-94 $9,981.11 $10,742.70 $10,366.27
Aug-94 $10,516.19 $11,346.44 $10,404.49
Sep-94 $10,248.66 $11,082.07 $10,442.56
Oct-94 $10,330.96 $11,172.94 $10,482.67
Nov-94 $9,878.21 $10,717.09 $10,521.35
Dec-94 $10,011.97 $10,943.22 $10,567.96
Jan-95 $9,856.02 $10,831.60 $10,611.88
Feb-95 $10,271.88 $11,379.68 $10,654.15
Mar-95 $10,427.83 $11,496.89 $10,703.36
Apr-95 $10,646.16 $11,852.14 $10,750.99
May-95 $10,906.08 $12,117.63 $10,808.56
Jun-95 $11,249.17 $12,579.31 $10,859.52
Jul-95 $11,862.57 $13,302.62 $10,908.62
Aug-95 $12,101.69 $13,600.60 $10,959.51
Sep-95 $12,112.09 $13,703.96 $11,006.73
Oct-95 $11,623.45 $13,120.17 $11,058.61
Nov-95 $11,987.26 $13,621.37 $11,105.07
Dec-95 $12,195.24 $13,851.57 $11,159.29
Jan-96 $12,173.17 $13,829.40 $11,207.02
Feb-96 $12,471.17 $14,187.59 $11,250.82
Mar-96 $12,846.42 $14,648.68 $11,295.18
Apr-96 $13,475.51 $15,458.75 $11,347.14
May-96 $13,861.86 $15,916.33 $11,394.80
Jun-96 $13,254.98 $15,214.42 $11,440.38
Jul-96 $12,316.93 $14,012.48 $11,491.86
Aug-96 $13,001.26 $14,871.45 $11,538.98
Sep-96 $13,520.01 $15,530.25 $11,589.75
Oct-96 $13,442.81 $15,455.71 $11,638.42
Nov-96 $14,093.98 $16,319.68 $11,686.14
Dec-96 $14,273.82 $16,618.33 $11,739.90
Jan-97 $14,640.65 $17,185.02 $11,792.73
Feb-97 $14,593.37 $17,178.14 $11,838.72
Mar-97 $14,013.43 $16,504.76 $11,889.63
</TABLE>

This chart shows the growth of a $10,000 investment at the Fund's inception.
June 16, 1993 (Inception Date) - December 31, 1997

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

Small Cap Index Fund
Average Annual Total Returns
As Of December 31, 1997
============================================
One Year 20.64%
Five Years N/A
Life of Fund 12.69%
============================ ===============

OVERVIEW

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

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

Top Ten Holdings
As Of December 31, 1997
(as a percentage of net assets)
========================================================
Fred Meyer, Inc. 1.45%
First Commerce Corporation 1.15%
People's Bank 1.03%
Catellus Development Corporation 0.97%
Bergen Brunswig Corporation 0.97%
Western National Corporation 0.92%
Citrix Systems, Inc. 0.91%
Intuit Inc. 0.89%
Sovereign Bancorp, Inc. 0.85%
American Bankers Insurance Group, Inc. 0.84%
============================================ ===========

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 34

J. Patrick Rogers, CFA, joined Gateway Investment Advisers, Inc.,
general partner of Gateway Investment Advisers, L.P., in 1989 and has been its
president since 1995. He is the portfolio manager for the Gateway Fund and the
Gateway Small Cap Index Fund, as well as the portfolio manager for the
Cincinnati Fund. In addition, he is the president of The Gateway Trust.

Mr. Rogers currently serves as a board member of the Cincinnati Center
for Developmental Disorders Foundation.

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.

He and his wife, Elizabeth, have three children.

23
<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. Once
your account is opened, you may change the way your distributions are handled by
writing or calling Gateway.

GATEWAY FUND

The Gateway 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 gain distribution at the end of December. The
capital gain distribution is calculated in accordance with tax regulations and
has varied substantially from year to year.

GATEWAY SMALL CAP INDEX FUND

The Small Cap Index Fund 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 gain distributions. The price of a fund, as adjusted for market
activity, generally drops by the amount of the declared dividend and capital
gain distribution. As an example, assume that on December 31 the Gateway 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 Gateway 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 of a Gateway fund in late December.

24
<PAGE> 28

ABOUT THE INVESTMENT ADVISER

INVESTMENT ADVISER
Gateway Investment Advisers, L.P. (the "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 BT Alex. Brown 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, 1997, the Adviser had
approximately $476 million in assets under its management, including
approximately $296 million in assets invested in the funds including the
Cincinnati Fund. The Adviser has entered into an Advisory Referral Agreement
with BT Alex. Brown Incorporated under which the Adviser will pay a referral fee
for those shares of the funds that have been directed to the Adviser by BT Alex.
Brown Incorporated.

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 BT Alex. Brown 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 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 $73,783 for the Small Cap Index
Fund in 1997. 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, 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 each fund's proportionate share of the collective
general expenses of the Trust. 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.

Each fund reimburses the Adviser for printing, mailing, and compliance
expenses. The Adviser provides shareholder, transfer, dividend disbursing,
financial, and administrative services to each fund. Each fund compensates the
Adviser for these services at a fixed rate of $4,000 per month, plus the greater
of $2,500 per month or an annual rate of 0.20% of each fund's average net
assets.

25
<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 (the "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.

26
<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 Agreement and Disclosure Statement
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 advisers concerning the tax
consequences of an investment in a Gateway fund.

27
<PAGE> 31

INVESTMENT PRACTICES

GATEWAY FUND

The investment objective of the Gateway 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 market decline 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.

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 and 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 $775
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 Gateway 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 market value of the
underlying security determine the gain or loss realized by the seller. The
seller's obligation terminates when the

28
<PAGE> 32
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.

Investing 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 Small Cap Index Fund attempts 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 Gateway 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.

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.

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.
29
<PAGE> 33

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.

30
<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 "INVESTMENT PRACTICES, RISKS 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 Gateway
Fund may sell covered call options on securities indexes. The Gateway Fund may
also 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 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.

31
<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 three series: the
Gateway Fund (previously known as the Gateway Index Plus 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, retirement, 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 April 1, 1998, the Adviser held, in a fiduciary
capacity, more than 25% of the outstanding shares of the Small Cap Index Fund.
Thus, the Adviser may be deemed to be a control person of this Fund as of that
date. As of April 1, 1998, BT Alex. Brown Incorporated held more than 25% of the
outstanding shares of the Gateway Fund. Thus, BT Alex. Brown Incorporated may be
deemed to be a control person of this Fund as of that date.

As of December 31, 1997, the shareholders of the Gateway Fund controlled
approximately 86% 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 Gateway 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.

<PAGE> 36
Trust SAI

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, 1998

This Statement is not a prospectus but should be read in conjunction
with the current Prospectus of The Gateway Trust for the Gateway Fund
(previously known as the Gateway Index Plus Fund) and the Gateway Small Cap
Index Fund dated May 1, 1998. 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> 37

TABLE OF CONTENTS
<S> <C>
INTRODUCTION........................................................................................
General Information About The Gateway Trust....................................................

INVESTMENT OBJECTIVES AND PRACTICES.................................................................
Gateway 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 Gateway 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................................................................................
Open Account...................................................................................
Automatic Investment Program...................................................................
IRAs...........................................................................................
Systematic Withdrawal Program..................................................................

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

INVESTMENT ADVISORY AND OTHER SERVICES..............................................................
Gateway Investment Advisers, L.P...............................................................
Investment Advisory Contracts..................................................................
Custodian......................................................................................
</TABLE>

<PAGE> 38
<TABLE>
<S> <C>
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....................................................................
Gateway Fund...................................................................................
Small Cap Index Fund...........................................................................
Shares Held By Adviser.........................................................................

SCHEDULE A..........................................................................................

SCHEDULE B..........................................................................................

SCHEDULE C..........................................................................................
</TABLE>

<PAGE> 39

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 the Second Amended Agreement and Declaration of Trust dated as
of December 29, 1992, as amended, and by the Trust's bylaws, as amended.

At present, there are three series of the Trust:

- --------------------------------------------- --------------------------
NAME OF FUND DATE ORGANIZED
- --------------------------------------------- --------------------------

Gateway Fund 1977

Gateway Small Cap Index Fund April 1993

Cincinnati Fund November 1994

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

Gateway Fund was known as the Gateway Index Plus Fund until April 30,
1998; as Gateway Option Index Fund until March 1990; as Gateway Option Income
Fund until February 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 Fund and the Gateway Small Cap Index Fund are offered in
one combined prospectus (the "Combined Prospectus"). The Cincinnati Fund(R) is
offered in a separate prospectus and has a separate Statement of Additional
Information. Gateway Investment Advisers, L.P. (the "Adviser") acts as the
funds' investment adviser.

3
<PAGE> 40

INVESTMENT OBJECTIVES AND PRACTICES

GATEWAY FUND

The investment objective of the Gateway Fund (previously known as the
Gateway Index Plus Fund) 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 Gateway 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" attached 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 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 "B" attached to this Statement. Because the 250 Index is

<PAGE> 41

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 the 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 may also purchase 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.

5
<PAGE> 42

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 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 Gateway 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 "COVERED INDEX
CALL OPTIONS SOLD BY THE GATEWAY 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.

<PAGE> 43

The Gateway 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.

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 Gateway 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 GATEWAY FUND

The Gateway 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

<PAGE> 44

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 SEC"). 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 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 Gateway 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.

8
<PAGE> 45

INVESTMENT PRACTICES, RISKS, AND RESTRICTIONS

OTHER INVESTMENT PRACTICES

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

Repurchase agreements are instruments under which a 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 ("S&P") obtains information for inclusion in or for
use in the calculation of the S&P 100 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 OR OWNERS OF THE GATEWAY
FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 100 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 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 OR 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.

<PAGE> 46

Other risks related to the investment practices and strategies of each
fund are described 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 Gateway 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 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. 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 a 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 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
such 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

<PAGE> 47

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.

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 1/2 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 or 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 any 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

<PAGE> 48

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. 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 Gateway 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 Gateway 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 Small Cap Index Fund 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.

In addition to these fundamental policies, each fund will limit its
investment in warrants to no more than 5% of such fund's assets. The Adviser has
no current intention of causing any fund to invest in warrants in the coming
year.

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 have been
employed by any fund since January 1, 1983. The Adviser has no current intention
of causing any fund to employ any such practice in the coming year.

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 gain distributions, and any change
in a fund's net asset value per share (the "NAV") over the period.

12
<PAGE> 49

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:

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 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
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 SEC. 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.

HISTORICAL RESULTS

The following table shows each fund's average annual and cumulative
total returns for the period ended December 31, 1997:

- -------------------------------------------- --------------- ---------------- --------------- ---------------------
AVERAGE ANNUAL TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND
- -------------------------------------------- --------------- ---------------- --------------- ---------------------

<S> <C> <C> <C> <C>
Gateway Fund 12.35% 9.35% 11.82% 10.43%
Gateway Small Cap Index Fund 20.64 N/A N/A 12.69
- -------------------------------------------- --------------- ---------------- --------------- ---------------------

</TABLE>
<TABLE>
<CAPTION>

- -------------------------------------------- --------------- --------------- ---------------- ---------------------
CUMULATIVE TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND
- -------------------------------------------- --------------- --------------- ---------------- ---------------------

<S> <C> <C> <C> <C>
Gateway Fund 12.35% 56.33% 205.56% 632.83%
Gateway Small Cap Index Fund 20.64 N/A N/A 72.20
- -------------------------------------------- --------------- --------------- ---------------- ---------------------
</TABLE>

13
<PAGE> 50

The table below shows the redeemable value on December 31, 1997, 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.

- --------------------------------------------- --------------- -------------- ---------------- ---------------------
ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND
- --------------------------------------------- --------------- -------------- ---------------- ---------------------

<S> <C> <C> <C> <C>
Gateway Fund $11,235 $15,633 $30,556 $73,283
Gateway Small Cap Index Fund $12,064 N/A N/A $17,220

- --------------------------------------------- --------------- -------------- ---------------- ---------------------
</TABLE>

RISK INFORMATION

In evaluating the performance of any investment including 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 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.

The Gateway Trust offers three 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 Gateway Fund and the Small Cap Index
Fund may be compared to various broadly recognized indexes such as the S&P 500
Index or 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.

14
<PAGE> 51

For example, as of December 31, 1997, the annual standard deviation for
the Gateway Fund over the past three years was 3.78% while the standard
deviation for the S&P 500 Index was 11.14%. Thus, the S&P 500 Index was
approximately three times as volatile as the Gateway 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 Gateway Fund was 0.32 for the five-year
period ended December 31, 1997. The Gateway Fund would be expected to perform
approximately 1/3 as well as the market (as defined by S&P 500 Index) in up
markets and 1/3 as poorly as the market in down markets. Beta is the slope of
the "least square line" which compares the fund with an index.

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 a circulation 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

Each 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. Gateway does not charge for the
automatic reinvestment of dividends and distributions.

The Servicing Agent maintains a record of the investor's purchases,
redemptions, and share balances 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.

15
<PAGE> 52

Upon opening an account, the investor may elect either 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. No annual maintenance fees are charged by
the Trust on any Open 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 PROGRAM

Investors can arrange to use our Automatic Investment Program by either
making the election on the New Account Application or by contacting Shareholder
Services at (800) 354-6339 for the appropriate forms. With this service,
investors purchase additional shares by having a predetermined amount of $100 or
more automatically transferred from a bank account to the Trust on a monthly or
quarterly basis. Changes to an Automatic Investment Program, including
discontinuing participation, must be in writing and sent to The Gateway Trust,
Shareholder Services, P. O. Box 5211, Cincinnati, OH 45201-5211. All changes to
the Program must be received by Gateway at least five business days prior to the
next scheduled transfer.

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 traditional IRA (the "Gateway Traditional
IRA") and a Roth IRA (the "Gateway Roth IRA") (or jointly as a "Gateway IRA"). A
Gateway IRA can be adopted by an investor and is specifically designed to permit
the investor to invest in shares of any Gateway fund selected by the investor.
The custodian of the Gateway IRA is Star Bank. Investors can obtain forms to
establish a Gateway IRA 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 a Gateway IRA, please refer to the
Agreement and Disclosure Statement for the appropriate Gateway IRA. Agreements
and Disclosure Statements can be obtained by calling Shareholder Services at
(800) 354-6339.

An investor 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 a 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. Call Shareholder Services at (800) 354-6339 to obtain the
appropriate transfer form.

A Gateway Traditional 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 Traditional IRA. The distribution should be
wired to:

The Gateway Trust c/o Star Bank, N.A.
ABA #042-0000-13
Cincinnati, OH

<PAGE> 53

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

An investor can also make a direct rollover to a Gateway Traditional
IRA 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 investor name)," and sending that check to Gateway. The check
can also be delivered in person to Gateway, or mailed to:

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

An investor can make a 60-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 a Gateway Traditional IRA. The deposit must be
delivered in person to Gateway, or mailed to The Gateway Trust at the above
address within 60 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 60-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 IRA, an investor should contact
Shareholder Services at (800) 354-6339.

The rules for contributing to, investing under, and distributing from
IRAs are complex, and any investor should consult with his or her own tax
adviser 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 for any account,
including IRAs, SEP-IRAs, retirement, and pension or profit-sharing plans,
including 401(k) plans. The Trust reserves the right to charge annual fees in
the future. Shareholders will be notified of any change in the annual fee
arrangement.

SYSTEMATIC WITHDRAWAL PROGRAM

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 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.

17
<PAGE> 54

If a shareholder participates in the Systematic Withdrawal Program, 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 Program should
not, therefore, be considered a yield on investment. A shareholder can make
arrangements to use the Systematic Withdrawal Program (or discontinue
participation) by contacting Shareholder Services at (800) 354-6339.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Basic information concerning the purchase and redemption of shares is
set forth under the captions "HOW TO PURCHASE ADDITIONAL SHARES" and "HOW TO
REDEEM 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 on or 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 IRAs). The minimum
additional investment is $100, subject to certain exceptions such as investments
by the Adviser's employees, by participants in an SEP-IRA program, and by
participants in the Automatic Investment Program. 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 redeem a shareholder's
account(s) under certain circumstances. The shareholder will receive at least 60
days' written notice prior to the redemption of the account(s).

The Trust may redeem a shareholder's account(s) in any fund when the
aggregate value of the shareholder's account(s) falls below $800 (other than as
a result of market action.). 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 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. The shareholder may prevent such redemption
by providing the requested information within the 60-day period.

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.

18
<PAGE> 55

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
involved in the exchange.

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 a fund normally utilizes is restricted as determined by the
SEC; (c) if any emergency exists as defined by the SEC so that disposal of
investments or determination of a fund's net asset value is not reasonably
practicable; or (d) for such other periods as the SEC 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. 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 stock and options exchanges are open for trading. These exchanges are closed
on Saturdays and Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. 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., (the "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
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

19
<PAGE> 56

Incorporated ("ABII") is the sole limited partner with a 24% ownership interest.
ABII is an affiliate of BT Alex. Brown Incorporated, a nationally known
investment banking 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 and President 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 V. Preston who is employed by BT Alex. Brown Incorporated as a
Managing Director.

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. The Adviser Contracts for the Gateway
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 (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 funds; (ii) expenses of printing and distributing
prospectuses and related documents to prospective shareholders; and (iii)
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 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 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) 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 govern- mental agencies;

- expenses of shareholder meetings and proxy solicitations;

- insurance expenses;

20
<PAGE> 57

- 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
under the Adviser Contracts, the Gateway Fund and the Small Cap Index Fund each
pays the Adviser an advisory fee (the "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 above described) 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 Fee. The applicable expense limitation percentage for
each fund are: 1.50% of the Gateway Fund's average daily net asset value and
2.00% of the Small Cap Index Fund's average daily net asset value. Each month
the 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 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 for
providing services to the funds. It also shows the amount of the fees waived by
the Adviser for the years ended December 31, 1997, 1996, and 1995.

- --------------------- -------------------------- -----------------------------
FEE AND WAIVER GATEWAY FUND SMALL CAP INDEX FUND
- --------------------- -------------------------- -----------------------------

<S> <C> <C>
1997 Fee Earned $1,530,637 $118,875
1997 Fee Waived 0 73,783
---------- -------
1997 Fee Paid $1,530,637 $45,092
========== =======
- -------------------------------------------------------------------------

1996 Fee Earned $1,272,990 $91,823
1996 Fee Waived 0 91,823
---------- -------
1996 Fee Paid $1,272,990 $ 0
========== =======
- --------------------------------------------------------------------------

1995 Fee Earned $1,246,576 $85,502
1995 Fee Waived 0 85,502
---------- -------
1995 Fee Paid $1,246,576 $ 0
========== =======
- --------------------------------------------------------------------------------
</TABLE>

The Adviser Contracts further provide 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 Adviser Contracts
contemplate that the Adviser may act as an investment manager or adviser for
others.

21
<PAGE> 58

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 Contracts, 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, 1998, 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 Adviser
Contracts or "interested persons" of any party to the Adviser Contracts (other
than as Trustees of the Trust) by votes cast in person at a meeting specifically
called for such purposes.

CUSTODIAN

Star Bank, 425 Walnut Street, Cincinnati, OH 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, OH 45150. As Transfer Agent for the
Trust, the Servicing Agent's general duties include transferring shares,
processing applications for new accounts, 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 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 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

22
<PAGE> 59

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 Program, the Servicing Agent will process such Systematic
Withdrawal Program 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
funds' current prospectuses.

Each fund reimburses the Servicing Agent for printing, mailing, and
compliance expenses. Each fund compensates the Servicing Agent for these
services at a fixed rate of $4,000 per month, plus the greater of $2,500 per
month or an annual rate of 0.20% of each fund's average net assets. For the year
ended December 31, 1997, the Adviser earned $726,747 in its capacity as
Servicing Agent to the four funds of the Trust then in effect.

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 a 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 best execution, the Adviser, in each fund's best interest, 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 BT Alex. Brown
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

23
<PAGE> 60

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.

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 a 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.

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 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 Advisory Fee. 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 Adviser 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 in exchange for research
services provided to the Adviser. For the fiscal year ended December 31, 1997,
the Trust paid brokerage commissions to Bridge of $291,064 for effecting
brokerage transactions totaling $483,366,912. The Adviser may from time to time
enter into similar agreements with other brokers.

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

24
<PAGE> 61

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.

The following table shows the brokerage commissions paid by the funds
in the years ended December 31, 1997, 1996, and 1995.

- --------------------------- -------------------------- -------------------------- ---------------------------
NAME OF FUND 1997 COMMISSIONS 1996 COMMISSIONS 1995 COMMISSIONS
- --------------------------- -------------------------- -------------------------- ---------------------------

<S> <C> <C> <C>
Gateway Fund $570,068 $274,816 $128,373
Small Cap Index Fund $ 24,496 $ 9,766 $ 12,492

- --------------------------- -------------------------- -------------------------- ---------------------------
</TABLE>

The increased levels of commissions paid by the Gateway 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. The increased level paid by the Gateway Fund and the Small Cap Index
Fund from 1996 to 1997 is attributable to an overall increase in total assets
during the 1997 fiscal year.

The Gateway Fund paid a total of $1,750 of brokerage commissions to BT
Alex. Brown Incorporated for the year ended December 31, 1997 or 0.30% of the
entire amount of commissions paid to all brokers for this Fund. The aggregate
amount of transactions involving the payment of these commissions is $1,339,775,
or 0.21% of the entire amount of transactions effected through all brokers
combined for this Fund.

ADDITIONAL TAX MATTERS
----------------------

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

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.

25
<PAGE> 62

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
shareholders, 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, one of the principal tests which each fund
must meet in each fiscal year in order to qualify as a regulated investment
company is the "90% 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.

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.

Long-term capital gain 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 or her 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.

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 or her own tax adviser.
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 several state and local taxing authorities vary with
respect to taxation, and each prospective investor is advised to consult his or
her own tax adviser as to the status of his or her 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.

26
<PAGE> 63

*WALTER GENE SALL, 400 TechneCenter Drive, Suite 220, Milford, OH
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 53.

*J. PATRICK ROGERS, 400 TechneCenter Drive, Suite 220, Milford, OH
45150; President of the Trust since 1997; President of the Adviser since 1995;
portfolio manager of the funds since 1997; co-portfolio manager of the funds
from 1995 to 1997; various senior management positions and offices held with the
Trust and the Adviser since 1989. Age 34.

JAMES M. ANDERSON, Children's Hospital Medical Center, 3333 Burnet
Avenue, Cincinnati, OH 45229; Trustee of the Trust since April 1997; Children's
Hospital Medical Center, President and Chief Executive Officer since November
1996, Chairman of the Board of Trustees from 1992 through 1996, and Trustee
since 1979; Taft Stettinius & Hollister, Partner from 1992 to November 1996;
Access Corporation, Secretary from 1985 to 1996, and Consultant since 1996;
Cincinnati Stock Exchange, Trustee since 1978; Command System Incorporated,
Director and Secretary since 1988; River City Insurance Limited, Director since
1991. Age 57.

STEFEN F. BRUECKNER, Anthem Companies, Inc., 120 Monument Circle, Mail
Location #M4C, Indianapolis, IN 46204; Trustee of the Trust since October 1992;
Director, President, and Chief Executive 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 48.

KENNETH A. DRUCKER, Sequa Corp., 200 Park Avenue, New York, NY 10166;
Director of the Company from January 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 52.

BEVERLY J. FERTIG, 8591 Woodbrier Drive, Sarasota, FL 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 67.

R. S. (DICK) HARRISON, 4040 Mt. Carmel Road, Cincinnati, OH 45244;
Director of the Company from 1977 to 1982; Trustee of the Trust since April
1996; 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, OH. Director of Sencorp and Anderson Bank of Cincinnati, OH
and Trustee of Kenyon College. Age 66.

WILLIAM HARDING SCHNEEBECK, 251 Indian Harbor Road, Vero Beach, FL
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 69.

*GEOFFREY KEENAN, 400 TechneCenter Drive, Suite 220, Milford, OH 45150;
Vice President of the Trust since April 1996; Chief Operating Officer, Gateway
Investment Advisers, L.P. since December 1995; Executive Vice President and
Chief Operating Officer, Gateway Investment Advisers, Inc. since 1995; Vice
President, Gateway Investment Advisers, Inc. from 1991 to 1995. Age 39.

27
<PAGE> 64

*PAUL R. STEWART, 400 TechneCenter Drive, Suite 220, Milford, OH 45150;
Treasurer of the Trust since October 1995; Chief Financial Officer of the
Adviser since 1996, Controller of the Adviser from October 1995 to December
1996; Audit Manager and Senior, Price Waterhouse from September 1992 to 1995 and
from August 1988 to August 1991. Age 32.

*DONNA M. SQUERI, 400 TechneCenter Drive, Suite 220, Milford, OH 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 38.

*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 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, 1997.

- ---------------------- ----------------------------------------------
TOTAL COMPENSATION
NAME OF TRUSTEE FROM TRUST
- ---------------------- ----------------------------------------------

<S> <C>
James M. Anderson $ 3,300
Stefen F. Brueckner $ 6,600
Kenneth A. Drucker $ 12,200
Beverly J. Fertig $ 6,600
R. S. Harrison $ 7,400
Walter G. Sall $ 0
William H. Schneebeck $ 8,100
</TABLE>

INDEPENDENT PUBLIC ACCOUNTANTS AND FINANCIAL STATEMENTS
-------------------------------------------------------

Arthur Andersen LLP, 425 Walnut Street, Cincinnati, OH 45202, serves as
independent public accountants of the Trust. Arthur Andersen LLP performs an
annual audit of each fund's financial statements, reviews 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, 1997.

<PAGE> 65

PRINCIPAL HOLDERS OF FUND SHARES
--------------------------------

GATEWAY FUND

As of March 19, 1998, the Gateway Fund had 15,451,533.258 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.

---------------------------------------------------------- ------------------------- ----------------------------
NUMBER OF SHARES
NAME AND ADDRESS PERCENT OF CLASS
---------------------------------------------------------- ------------------------- ----------------------------

<S> <C> <C>
BT Alex. Brown Inc. Mutual Funds Dept. 5,608,155.372 36.30%
P. O. Box 1346
Baltimore, MD 21203

Charles Schwab and Company, Inc. 1,960,844.899 12.69%
Reinvest Account Special Custody Account for
Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104

Trustees and officers of the Trust as a group 187,573.353 1.21%

Adviser officers and directors as a group 105,534.508 Less than 1%

---------------------------------------------------------- ------------------------- ----------------------------
</TABLE>

<PAGE> 66

SMALL CAP INDEX FUND

As of March 19, 1998, the Small Cap Index Fund had 1,204,706.275
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.

----------------------------------------------------------- -------------------------- --------------------------
NAME AND ADDRESS OF OWNER NUMBER OF SHARES PERCENT OF CLASS
----------------------------------------------------------- -------------------------- --------------------------

<S> <C> <C>
Andrew Wyeth 162,833.621 13.52%
Chadds Ford, PA 19317

Up East, Inc. 113,854.405 9.45%
c/o Betsy J. Wyeth
P.O. Box 48
Chadds Ford, PA 19317

Betsy Wyeth 105,846.998 8.79%
Chadds Ford, PA 19317

BT Alex. Brown Inc. Mutual Funds Dept. 104,401.659 8.67%
P.O. Box 1346
Baltimore, MD 21203

Betsy Wyeth Growth 79,793.168 6.62%
Chadds Ford, PA 19317

Trustees and officers of the Trust as a group 26,111.810 2.17%

Adviser officers and directors as a group 19,311.903 1.60%

----------------------------------------------------------- -------------------------- --------------------------
</TABLE>

The SEC 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 with 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 March 19, 1998, 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.

- ------------------------------------ ------------------------------------ --------------------------------------
NAME OF FUND NUMBER OF SHARES PERCENTAGE OF SHARES
- ------------------------------------ ------------------------------------ --------------------------------------

<S> <C> <C>
Gateway Fund 472,398 3.06%
Small Cap Index Fund 497,372 41.29%

- ------------------------------------ ------------------------------------ --------------------------------------
</TABLE>

<PAGE> 67

SCHEDULE A
(STOCKS INCLUDED IN THE S&P 100 INDEX)

<S> <C> <C>
Allegheny Teledyne Incorporated Entergy Corporation NationsBank Corporation
Aluminum Company of America Exxon Cororation Norfolk Southern Corporation
American Electric Power Co., Inc. Federal Express Corporation Northern Telecom Limited
American Express Company First Chicago NBD Corporation Occidental Petroleum Corporation
American General Corp. Fluor Corporation Oracle Corporation
American International Group, Inc. Ford Motor Company PepsiCo, Inc.
Ameritech Corporation General Dynamics Corporation Pharmacia & Upjohn
Amoco Corporation General Electric Company Polaroid Corporation
AMP, Incorporated General Motors Corporation Ralston Purina Co.
AT&T Halliburton Company Raytheon Co Class A Stock
Atlantic Richfield Co. Harrah's Entertainment, Inc. Rockwell International Corporation
Avon Products, Inc. Harris Corporation Schlumberger Limited
Baker Hughes, Inc. Heinz (H. J.) Company Sears, Roebuck and Co.
BankAmerica Corporation Hewlett Packard Company Southern Company
Baxter International Inc. Homestake Mining Company Tandy Corporation
Bell Atlantic Corporation Honeywell Inc. Tektronix, Inc.
Bethlehem Steel Corporation Intel Corporation Texas Instruments, Incorporated
Boise Cascade Corporation International Business The Black & Decker Corporation
Bristol-Myers Squibb Company Machines Corporation The Boeing Company
Brunswick Corporation International Flavors & The Coastal Corporation
Burlington Northern Santa Fe Corp. Fragrances Inc. The Coca-Cola Company
Ceridian Corporation International Paper Company The Dow Chemical Company
Champion International Corporation Johnson & Johnson The Hartford Financial
Chrysler Corporation Kmart Corporation Services Group, Inc.
CIGNA Corporation Mallinckrodt Inc. The Limited, Inc.
Cisco Systems, Inc. McDonald's Corporation The May Department Stores Co.
Citicorp MCI Communications Corporation The Williams Companies, Inc.
Colgate-Palmolive Company Merck & Co., Inc. Toys "R" Us, Inc.
Columbia/HCA Healthcare Corporation Merrill Lynch & Co., Inc. Unicom Corporation
Computer Sciences Corporation Microsoft Corp. Unisys Corporation
Delta Air Lines, Inc. Minnesota Mining United Technologies Corporation
Digital Equipment Corporation and Manufacturing Wal-Mart Stores, Inc.
DuPont (E. I.) de Nemours and Co. Mobil Corporation Walt Disney Productions
Eastman Kodak Company Monsanto Company Weyerhaeuser Company
National Semiconductor Corp. Xerox Corporation
</TABLE>

<PAGE> 68

SCHEDULE B
(STOCKS INCLUDED IN THE WILSHIRE SMALL CAP INDEX)

<S> <C> <C>
20th Century Industries Catellus Development Corporation Geotek Communications, Inc.
ACC Corp. Centex Corporation Gerber Scientific, Inc.
Acuson Corporation Central Hudson Gas & Gibson Greetings, Inc.
ACX Technologies, Inc. Electric Corporation Gilead Sciences, Inc.
Advanced Tissue Sciences Inc. Cephalon, Inc. Glenayre Technologies
ADVANTA Cerner Corporation Golden Books Family
Agouron Pharmaceuticals, Inc. Charming Shoppes, Inc. Entertainment, Inc.
Airborne Freight Corporation Chemed Corporation Golden State Bancorp Inc.
AK Steel Holding Corporation Chesapeake Corporation Grand Casinos Inc. *
Alaska Air Group, Inc. Chiquita Brands International Gymboree Corp
Albany International Corp. Chris-Craft Industries, Inc. Haemonetics Corporation
Alliance Pharmaceutical Corp. CILCORP Inc. Harken Energy Corporation
American Bankers Insurance Cincinnati Milacron Inc. Hecla Mining Company *
Group, Inc. Cirrus Logic, Inc. Herbalife International Inc
American Management Citrix Systems Inc Class A Stock
Systems Inc City National Corporation HON INDUSTRIES, Inc.
Americredit Corp. Clarcor Inc. Houghton Mifflin Company
AMRESCO, Inc. Coast Savings Financial, Inc. Hunt (J. B.) Transport
APAC TeleServices Inc Coeur d'Alene Mines Corporation Services, Inc.
Arcadia Financial Ltd. Computervision Corporation Hutchinson Technology Inc
Arnold Industries, Inc. Coventry Corporation Hyperion Software Corp
Arvin Industries, Inc. Credence Systems Corporation ICN Pharmaceuticals Inc.
Aspect Telecommunications Corp Credit Acceptance Corporation Imperial Credit Industries, Inc.
Astoria Financial Corporation Data General Corporation Information Resources, Inc.
ATL Ultrasound Inc. Dentsply International Inc. Integrated Device Technology, Inc.
Avid Technology, Inc. Diagnostic Products Corporation Integrated Health Services, Inc.
Aztar Corporation Donaldson Company, Inc. International Dairy Queen, Inc.
B/E Aerospace, Inc. Dreyer's Grand Ice Cream, Inc. International Multifoods Corp.
Baldor Electric Company DSP Communications Inc Intuit Inc
Ballard Medical Products Eagle Hardware & Garden, Inc. John Alden Financial Corporation
Bank United Corp Eastern Utilities Associates Kaman Corporation
Banta Corporation Echo Bay Mines Ltd. Kaufman and Broad
Barrett Resources Corp Envoy Corp Home Corporation
Bassett Furniture Industries, Inc. ESS Technology Inc. Kellwood Company
Beckman Instruments, Inc. Exabyte Corporation Kemet Corporation *
Benton Oil and Gas Co. Extended Stay America Inc. Kennametal Inc.
Bergen Brunswig Corporation Federal-Mogul Corporation Kimball International, Inc.
Best Buy Co., Inc. First Commerce Corporation Lam Research Corporation
Birmingham Steel Corporation Fleming Companies, Inc. Lands' End, Inc.
Block Drug Company Inc. Flowers Industries, Inc. Lattice Semiconductor Corporation
Brightpoint, Inc. Forcenergy Inc. Lawson Products, Inc.
Broderbund Software Inc Foremost Corporation of America Lawter International, Inc.
Brown Group, Inc. FPA Medical Management Inc La-Z-Boy Incorporated
Brush Wellman Inc. Fred Meyer, Inc. Lennar Corporation
Calgon Carbon Corporation Fuller (H. B.) Company Life Re Corporation
Carlisle Companies Incorporated Gaylord Container Corp. Lincare Holdings Inc.
Carpenter Technology Corporation GenCorp Inc. Lomak Petroleum, Inc.
</TABLE>

32
<PAGE> 69

<TABLE>
<S> <C> <C>
Lone Star Steakhouse & Pride International Inc. Superior Industries
Saloon, Inc. PSINet Inc. International, Inc.
Long Island Bancorp, Inc. Public Service Company Swift Energy Company
Luby's Cafeterias, Inc. of New Mexico Sybase Inc
Mac Frugal's Bargainso Pulitzer Publishing Co. Symantec Corporation
Close-outs Inc. Pulte Corporation Symbol Technologies, Inc.
Macromedia, Inc. Quaker State Corporation TCA Cable TV, Inc.
Magna Group, Inc. Quick and Reilly Group Inc. Teleflex Incorporated
Marine Drilling Companies, Inc. Ralcorp Holdings Inc. Tesoro Petroleum Corporation
MAXXAM Inc. Rational Software Corporation The Dress Barn, Inc.
MDU Resources Group, Inc. Regal Cinemas Inc. The Liberty Corporation
Mercury Finance Co Reliance Group Holdings, Inc. The Liposome Company Inc.
Micro Warehouse, Inc. Riggs National Corporation The Profit Recovery Group
Mid Atlantic Medical Services Rollins Truck Leasing Corp. International, Inc.
Mobile Telecommunication Rollins, Inc. The Standard Products Co.
Tech Corp. Roslyn Bancorp Inc The Standard Register Company
Mohawk Industries Inc. Ross Stores, Inc. The West Company, Incorporated
Money Store Inc. Ruby Tuesday, Inc. Thiokol Corporation
NAC Re Corporation Russ Berrie and Company, Inc. Tucson Electric Power Company
NACCO Industries, Inc. S3 Incorporated UGI Corporation
National Semiconductor Corp. Sbarro, Inc. United Companies Financial Corp.
NCH Corporation Seagull Energy Corporation Valley National Bancorp
Networks Associates Inc. Sequent Computer Systems, Inc. Vanguard Cellular Systems, Inc.
New England Business Shared Medical Systems Corp. Varco International, Inc.
Service, Inc. Shiva Corp Vitesse Semiconductor Corp
Northeast Utilities Shorewood Packaging Corporation Vivus Inc
NTL Inc. Showboat, Inc. VLSI Technology, Inc.
Oak Technology, Inc. Sierra Pacific Resources Wallace Computer Services, Inc.
OMI Corp. Silicon Valley Group, Inc. Washington Federal Inc.
ONBANCorp, Inc. Sotheby's Holdings, Inc. Wausau Mosinee Paper Corp.
ONEOK Inc. Southdown Inc. Western National Corporation
Orange and Rockland Utilities, Inc. Southern Indiana Gas & Westpoint Stevens Inc.
Overseas Shipholding Group, Inc. Electric Co. World Color Press, Inc.
Paging Network Inc Southwest Gas Corporation Xircom Inc.
Papa John's International Southwestern Energy Company Xylan Corp
Pegasus Gold Inc. Sovereign Bancorp, Inc. Yellow Corporation
Pentair, Inc. St. Paul Bancorp Inc. Zenith National Insurance Corp.
Peoples Bank Stanhome Inc. Zoltek Companies, Inc.
Perrigo Company Station Casinos, Inc. Zurn Industries, Inc.
Pittston Brink's Group Stride Rite Corp.
Pixar Animation Studios Structural Dynamics
Playtex Products Inc Research Corporation
Pogo Producing Company Sunglass Hut International Inc
</TABLE>

<PAGE> 70

SCHEDULE C
----------

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 = n(SIGMA)xy - ((SIGMA)x)((SIGMA)y)
n(SIGMA)x2 - ((SIGMA)x)2

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

<PAGE> 71

PROSPECTUS

May 1, 1998

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 (the "Fund") is a series of The Gateway Trust (the
"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 (the "SEC") and is included in the Statement of Additional
Information (the "SAI") of the Fund dated May 1, 1998. The 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.

<PAGE> 72

<TABLE>
<CAPTION>
Table Of Contents

<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 And
Explanation Of Terms............................. Total return information and glossary of investment terms.

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 on Form 1099.

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

General Information About
The Gateway Trust................................ Additional information on The Gateway Trust and its Trustees.

</TABLE>

<PAGE> 73

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.

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchase None
Maximum Sales Load on
Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None

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 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. 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%. The Fund's actual expense ratio for 1997 was 1.69%.
Absent the waiver, the advisory fees and operating expenses of the Fund in 1997
would have been 0.50% and 1.70%, respectively. The numbers in the following
table are calculated as a percentage of average net assets.

ANNUAL FUND OPERATING EXPENSES

Advisory Fees (after waiver) 0.49%
12b-1 Fees 0.00%
Other Expenses 1.20%
-----
Total Fund Operating Expenses (after waiver) 1.69%
(The Fund's Expense Ratio) =====

<PAGE> 74

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 Annual 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 $ 17
Three Years $ 53
Five Years $ 92
Ten Years $200

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.

<PAGE> 75

Financial Highlights

The following condensed financial information has been audited by
Arthur Andersen LLP, independent public accountants. The audit report on the
1997 financial statements should be read in conjunction with this condensed
financial information. The audit report on the 1997 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>
For the Period from
Year Ended Year Ended Year Ended November 7, 1994
December 31, 1997 December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- ----------------- -----------------
(3)

<S> <C> <C> <C> <C>
Net asset value, beginning of period $15.40 $13.12 $ 9.91 $10.00
------ ------ ------ ------
Net investment income 0.07 0.02 0.04 0.03
Net gains (losses) on securities 4.39 2.60 3.46 (0.12)
---- ---- ------ ------
Total from investment operations 4.46 2.62 3.50 (0.09)
---- ---- ------ ------

Dividends from net investment income (0.07) (0.02) (0.07) 0.00
Distributions from capital gains (0.81) (0.32) (0.22) 0.00
------ ------ ------ ------
Total distributions (0.88) (0.34) (0.29) 0.00
------ ------ ------ ------

Net asset value, end of period $18.98 $15.40 $13.12 $ 9.91
====== ====== ====== ======

TOTAL RETURN 28.98% 19.98% 35.31% (0.90%) (2)

Net assets, end of period (thousands) $17,527 $8,984 $5,877 $3,225
Ratio of net expenses to average net assets (1) 1.69% 2.00% 1.98%) 1.96%
Ratio of net investment income to average net 0.50% (1) 0.13% 0.46% 2.24%
assets (1)
Portfolio turnover rate 17% 10% 9% 0% (2)
Average commission per share $0.0393 $0.0389 -- (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 0.01% in 1997, 0.02% in 1995 and 0.04% in 1994 had the
Adviser not voluntarily waived fees or reimbursed expenses. Ratios are
annualized in periods less than one
year.
(2) Not annualized.
(3) On December 15, 1995, Gateway Investment Advisers, L.P. became
investment adviser to the Fund.
(4) Disclosure of average commission per share was not required prior to the
year ended December 31, 1996.

Additional information about the performance of the Fund is contained
in the 1997 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> 76

How To Open An Account

The Cincinnati Fund is available to 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.
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 13.)

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

BY MAIL

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 9 for additional information about wire transfers and
telephone instructions.

OPENING A NEW IRA ACCOUNT/TRANSFERRING AN EXISTING IRA

To open a new IRA in the Fund, please call Gateway shareholder services
at (800) 354-5525 to obtain the appropriate IRA Account Application and IRA
Agreement and Disclosure Statement. To transfer an existing IRA from a bank or
other mutual fund to your Gateway/Cincinnati Fund IRA, you must complete the
appropriate IRA Transfer Form in addition to the 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. 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.

OPENING A UNIFORM GIFT TO MINORS ACT ACCOUNT

<PAGE> 77

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. 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 13.)

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 call Gateway shareholder services at
(800) 354-5525 to arrange a purchase by wire. See Page 9 for additional
information about wire transfers and telephone instructions.

BY AUTOMATIC INVESTMENT 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. Your exchange
will be based on the closing share prices of 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 13.)

<PAGE> 78

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. Your redemption 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 13.)

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
specifying 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. A
check for 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 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 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.

<PAGE> 79

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 financial 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 IRA Agreement and
Disclosure Statement.

TELEPHONE TRANSACTIONS

The Gateway Trust will not be liable for any damages resulting from
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 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 all transactions, and normally tape recording any
instructions received by telephone.

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.

<PAGE> 80

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.

YEAR-BY-YEAR TOTAL RETURNS SINCE INCEPTION

<TABLE>
<CAPTION>
Cincinnati Fund S&P 500 Stock Index Wilshire Small Cap Index
<S> <C> <C> <C>
1997 28.98% 33.36% 26.76%
1996 19.98 22.96 19.97
1995 35.31 37.58 26.58
1994 (0.90)* 1.32 3.09
</TABLE>

* November 7, 1994 to December 31, 1994

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.

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> 81

Performance Information (Continued)

Growth of a $10,000 Investment

This chart shows the growth of a $10,000 investment made at the Fund's
inception.
(Insert Chart Here)
Cincinnati Fund Plot Points - Growth of $10,000 Chart

<TABLE>
<CAPTION>
Cincinnati S&P 500 Wilshire Small
Fund Cap Index
<S> <C> <C> <C>
$10,000.00 $10,000.00 $10,000.00
Nov-94 $9,780.00 $9,635.80 $9,592.00
Dec-94 $9,910.00 $9,778.70 $9,794.39
Jan-95 $10,070.00 $10,032.26 $9,694.49
Feb-95 $10,350.00 $10,423.22 $10,185.03
Mar-95 $10,620.00 $10,730.81 $10,289.94
Apr-95 $10,930.00 $11,046.83 $10,607.89
May-95 $11,340.00 $11,488.37 $10,845.51
Jun-95 $11,650.00 $11,755.25 $11,258.73
Jul-95 $12,150.00 $12,145.05 $11,906.10
Aug-95 $12,310.00 $12,175.53 $12,172.80
Sep-95 $12,739.62 $12,689.34 $12,265.31
Oct-95 $12,689.62 $12,644.04 $11,742.81
Nov-95 $13,169.28 $13,199.11 $12,191.38
Dec-95 $13,409.62 $13,453.33 $12,397.42
Jan-96 $13,460.73 $13,911.28 $12,377.58
Feb-96 $13,920.68 $14,040.24 $12,698.16
Mar-96 $14,544.05 $14,175.45 $13,110.85
Apr-96 $14,554.23 $14,384.39 $13,835.88
May-96 $14,922.16 $14,755.36 $14,245.43
Jun-96 $14,768.91 $14,811.58 $13,617.20
Jul-96 $13,930.77 $14,157.21 $12,541.44
Aug-96 $14,544.01 $14,455.78 $13,310.23
Sep-96 $15,157.18 $15,269.35 $13,899.88
Oct-96 $14,871.01 $15,690.48 $13,833.16
Nov-96 $15,923.73 $16,876.53 $14,606.43
Dec-96 $16,088.22 $16,542.20 $14,873.73
Jan-97 $16,453.91 $17,575.76 $15,380.92
Feb-97 $16,621.08 $17,713.55 $15,374.77
Mar-97 $16,276.36 $16,985.70 $14,772.08
Apr-97 $16,516.60 $17,999.75 $14,956.73
May-97 $17,185.19 $19,095.57 $16,371.64
Jun-97 $17,822.42 $19,951.06 $16,911.90
Jul-97 $18,731.36 $21,538.56 $18,382.90
Aug-97 $18,302.98 $20,331.97 $18,721.14
Sep-97 $19,316.41 $21,445.55 $19,866.88
Oct-97 $19,159.75 $20,728.41 $18,901.35
Nov-97 $19.891.08 $21,687.93 $18,774.71
Dec-97 $20,750.78 $22,060.31 $18,853.56
11-7-94 (Inception Date) - 12/31/97
</TABLE>

<PAGE> 82

<TABLE>
<CAPTION>
============================================

Cincinnati Fund
Average Annual Total Returns
As Of December 31, 1997
============================================
<S> <C>
One Year 28.98%
Five Years N/A
Life of Fund 26.10%
======================== ===================
</TABLE>

<PAGE> 83

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. 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 gain distributions. The price of the Fund, as adjusted for market
activity, generally drops by the amount of the declared dividend and capital
gain 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
of the Fund in late December.

<PAGE> 84

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 (the "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 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> 85

PORTFOLIO MANAGER PROFILE
J. Patrick Rogers, CFA
Portfolio Manager of the Fund Since Inception
MBA Xavier University 1994
BBA University of Notre Dame 1986
Age 34

J. Patrick Rogers, CFA, portfolio manager of the Cincinnati Fund,
joined Gateway Investment Advisers, Inc., general partner of Gateway Investment
Advisers, L.P., in 1989. He is currently president of both Gateway Investment
Advisers, Inc. and The Gateway Trust, as well as portfolio manager for the
Gateway Fund and the Gateway Small Cap Index Fund.

Mr. Rogers currently serves as a board member of the Cincinnati Center
for Developmental Disorders Foundation.

He and his wife, Elizabeth, have three children.

<PAGE> 86

About The Investment Adviser

INVESTMENT ADVISER

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 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 BT Alex. Brown 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, 1997, the Adviser had
approximately $476 million in assets under its management, including
approximately $296 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, 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 of the Trust. 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 Fund reimburses the Adviser for printing, mailing, and compliance
expenses. The Adviser provides shareholder, transfer, dividend disbursing,
financial, and administrative services to the Fund. The Fund compensates the
Adviser for these services at a fixed rate of $4,000 per month, plus the greater
of $2,500 per month or an annual rate of 0.20% of the Fund's average net assets.

<PAGE> 87

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

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 Agreement and Disclosure Statement
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 advisers concerning the tax
consequences of an investment in the Fund.

<PAGE> 88

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 (the "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.

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.

<PAGE> 89

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 PRACTICES AND
RESTRICTIONS" 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 "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.

<PAGE> 90

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 three series: the
Cincinnati Fund, the Gateway Fund (previously known as the Gateway Index Plus
Fund), and the Gateway Small Cap Index Fund. Shares of the Cincinnati Fund are
offered by this prospectus. The Gateway Fund and the Gateway Small Cap Index
Fund are offered by a separate prospectus.

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.

As of December 31, 1997, the shareholders of the Gateway Fund
controlled approximately 86% 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 Gateway
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.

<PAGE> 91

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

THE GATEWAY TRUST

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

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

CINCINNATI FUND(R)

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998

This Statement is not a prospectus but should be read in conjunction
with the current Prospectus of the Cincinnati Fund dated May 1, 1998. 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> 92

<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..............................................................
Historical Results.....................................................................

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

Rankings And Comparative Performance Information...........................................

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

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

Automatic Investment Program...............................................................

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

Systematic Withdrawal Program..............................................................

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> 93

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, as amended.

At present, there are three series of the Trust:

<TABLE>
<CAPTION>
---------------------------------------- ----------------------- ---------------------------------------------
NAME OF FUND DATE ORGANIZED FORMER NAMES
---------------------------------------- ----------------------- ---------------------------------------------

<S> <C> <C>
Gateway Fund 1977 Gateway Index Plus Fund until April 30,
1998; Gateway Option Index Fund until
March 1990; Gateway Option Income Fund
until February 1988; Gateway Option
Income Fund, Inc. until May 1986

Gateway Small Cap Index Fund April 1993 None

Cincinnati Fund(R) 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 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 two funds
have a combined Statement of Additional Information.

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

3
<PAGE> 94

INVESTMENT PRACTICES AND RESTRICTIONS

GENERAL

The Cincinnati Fund, (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 may hold
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.

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 the Fund's total assets may be invested
in repurchase agreements which have a maturity longer than seven days.

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.

4
<PAGE> 95

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.

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.

7. 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 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 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. 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.

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.

5
<PAGE> 96

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.

Although the practices described in paragraphs 4, 5, and 6 above could
involve more than 5% of the Fund's assets, none of those practices have been
employed by the Fund. 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.

6
<PAGE> 97

TOTAL RETURN CALCULATIONS

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 it commenced operations will be substituted for
the periods stated.

Average annual total return is calculated as required by applicable
regulations promulgated by the Securities and Exchange Commission (the "SEC").
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.

HISTORICAL RESULTS

The following table shows the Fund's average annual and cumulative
total returns for the period ended December 31, 1997:

<TABLE>
<CAPTION>
- --------------------------------------- ---------------- ----------------- ---------------------
ONE YEAR FIVE YEARS LIFE OF FUND
- --------------------------------------- ---------------- ----------------- ---------------------
<S> <C> <C> <C>
Average Annual Total Return 28.98% n/a 26.10%
- --------------------------------------- ---------------- ----------------- ---------------------
Cumulative Total Return 28.98% n/a 107.50%
- --------------------------------------- ---------------- ----------------- ---------------------
</TABLE>

The table below shows the redeemable value on December 31, 1997, for an
initial investment of $10,000 in the Fund that was made at the beginning on the
one- and five-year periods, and the commencement of the Fund's operations. The
table assumes all dividends and distributions have been reinvested in additional
shares.

<TABLE>
<CAPTION>
- ------------------ ---------------- ---------------------
ONE YEAR FIVE YEARS LIFE OF FUND
- ------------------ ---------------- ---------------------
<S> <C> <C>
$12,898 n/a $20,750
- ------------------ ---------------- ---------------------
</TABLE>

7
<PAGE> 98

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.

COMPARATIVE INDEXES

The performance and risk of the Fund may be compared to various broadly
recognized indexes such as the S&P 500 Index or 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. The 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 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.

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 a circulation of 10,000 readers
or more.

8
<PAGE> 99

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

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. Gateway does not charge for the
automatic reinvestment of dividends and distributions.

AUTOMATIC INVESTMENT PROGRAM

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 traditional IRA (the "Gateway Traditional IRA") and a
Roth IRA (the "Gateway Roth IRA") or jointly as a "Gateway

9
<PAGE> 100

IRA"). A Gateway IRA can be adopted by an investor and is specifically designed
to permit the investor to invest in shares of any Gateway fund selected by the
investor. The custodian of the Gateway IRA is Star Bank. Investors can obtain
forms to establish a Gateway IRA by calling Shareholder Services at (800)
354-5525.

An investor 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. Call Shareholder Services at (800) 354-5525 to obtain the
appropriate transfer form.

A Gateway Traditional 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 a Gateway Traditional IRA. The distribution should be
wired to:

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

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

10
<PAGE> 101

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

SYSTEMATIC WITHDRAWAL PROGRAM

If a shareholder participates in the Systematic Withdrawal Program, 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 Program should
not, therefore, be considered a yield on investment. A shareholder can make
arrangements to use the Systematic Withdrawal Program (or discontinue
participation) by contacting Shareholder Services at (800) 354-5525.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Basic information concerning the purchase and redemption of shares is
set forth under the captions "How To Purchase Additional Shares" and "How To
Redeem 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 on or 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.

11
<PAGE> 102

There is no minimum or maximum applicable to redemption of shares of
the Fund. The Trust, however, reserves the right to redeem a shareholder's
account(s) under certain circumstances. The shareholder will receive at least 60
days' written notice prior to the redemption of the account(s).

The Trust may redeem a shareholder's account(s) in the Fund when the
aggregate value of the shareholder's account(s) falls below $800 (other than as
a result of market action). 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 also reserves the right to terminate or modify the exchange
privilege or to refuse an exchange if the exchange would adversely affect a fund
involved in the exchange.

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 SEC; (c) if any emergency exists as defined by the SEC 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 SEC 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. To
date, all redemptions have been made in cash.

12
<PAGE> 103

The Trust reserves the right to modify or terminate any purchase,
redemption, or other shareholder service procedure upon written 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, Martin Luther
King, Jr. 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. (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
BT Alex. Brown Incorporated, a nationally known investment banking 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 and President 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 V. Preston
who is employed by BT Alex. Brown 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, subject to the policies and control of
the Trust's Board of Trustees. 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 Adviser Contract, the Adviser, at its sole expense,
provides the Fund with (i) investment recommendations regarding the 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 the Fund's
prospectus and related documents to prospective shareholders; and (iii)
association membership dues (other than for the Investment Company Institute).
The Adviser 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 Adviser 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:

13
<PAGE> 104

- - 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) 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 govern- mental agencies;
- - 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 Contract of the Fund, voting
separately, shall determine which expenses shall be characterized as
"extraordinary expenses."

In return for the services and facilities furnished by the Adviser
under the Adviser Contract, the Fund pays the Adviser an advisory fee ("the
Advisory 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 2.00% of
the Fund's average daily net asset value for such year, the Adviser Contract
requires the Adviser to bear all such excess expenses up to the amount of the
Advisory Fee. Each month the 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 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 Adviser 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 Adviser Contract
contemplates that the Adviser may act as an investment manager or adviser for
others.

The Adviser 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 Adviser Contract, and by vote of the shareholders of the
Fund.

The Adviser Contract 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 Fund; or (iii) by the Adviser. The Adviser Contract terminates

14
<PAGE> 105

automatically in the event of its assignment (as that term is defined in the
Investment Company Act of 1940) by the Adviser.

The Adviser Contract continues in effect until December 31, 1998, 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 Adviser Contract
or "interested persons" of any party to the Adviser 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 Advisory 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, 1997, 1996, and 1995.

<TABLE>
<CAPTION>
- ------------------------- ------------------------
FEE AND WAIVER CINCINNATI FUND
- ------------------------- ------------------------

<S> <C>
1997 Fee Earned $65,378
1997 Fee Waived 1,281
---------
1997 Fee Paid $64,097

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 $ 0
===========
- ------------------------- ------------------------
</TABLE>

CUSTODIAN

Star Bank, 425 Walnut Street, Cincinnati, OH 45202, acts as custodian
of the Trust's assets (the "Custodian"). The Custodian has no part in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the 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, OH 45150. As Transfer Agent for the
Trust, the Servicing Agent's general duties include transferring shares,
processing applications for new accounts, 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 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 redemption
request does not comply with such standards, the Servicing Agent will promptly
notify the shareholder of the reasons for rejecting the redemption request.

15
<PAGE> 106

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 Program, the Servicing Agent will process such Systematic
Withdrawal Program 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
Fund's current prospectus.

The Fund reimburses the Servicing Agent for printing, mailing, and
compliance expenses. The Fund compensates the Servicing Agent for these
services, at a fixed rate of $4,000 per month, plus the greater of $2,500 per
month, or an annual rate of 0.20% of the Fund's average net assets. For the year
ended December 31, 1997, the Servicing Agent earned $726,747 in its capacity as
Servicing Agent to the four funds of the Trust then in effect.

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
interest, 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.

16
<PAGE> 107

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 the Fund as a factor in the selection of broker-dealers to execute securities
transactions for the Fund.

The Adviser 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:

- 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.

For the years ended December 31, 1997, 1996, and 1995, the Fund paid
$10,885.00, $3,470.28 and $3,534.20, respectively, in brokerage commissions.
Total commissions paid in 1997 had increased relative to previous years due to
the increase in total net assets of the Fund. Principal transactions with a
total value of $102,987 also took place in 1997.

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.

17
<PAGE> 108

FEDERAL TAX MATTERS

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

The Fund has met and 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 shareholders, 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, one of the
principal tests which the Fund must meet in each fiscal year in order to qualify
as a regulated investment company is the "90% 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.

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 or her own tax adviser.
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

TRUSTEES AND OFFICERS OF THE TRUST

18
<PAGE> 109

*PAUL R. STEWART, 400 TechneCenter Drive, Suite 220, Milford, OH 45150;
Treasurer of the Trust since October 1995; Chief Financial Officer of the
Adviser since 1996; Controller of the Adviser from October 1995 to December
1996; Audit Manager and Senior, Price Waterhouse from September 1992 to 1995 and
from August 1988 to August 1991.

19
<PAGE> 110

Age 32.

*DONNA M. SQUERI, 400 TechneCenter Drive, Suite 220 Milford, OH 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 38.

*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 person" 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 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 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, 1997.

<TABLE>
<CAPTION>
- ------------------------------------- ----------------------------------
TOTAL COMPENSATION
NAME OF TRUSTEE FROM TRUST
- ------------------------------------- ----------------------------------

<S> <C>
James M. Anderson $ 3,300
Stefen F. Brueckner $ 6,600
Kenneth A. Drucker $ 12,200
Beverly J. Fertig $ 6,600
R. S. Harrison $ 7,400
Walter G. Sall $ 0
William H. Schneebeck $ 8,100

- ------------------------------------- ----------------------------------
</TABLE>

INDEPENDENT PUBLIC ACCOUNTANTS AND FINANCIAL STATEMENTS

Arthur Andersen LLP, 425 Walnut Street, Cincinnati, OH 45202, will
serve as independent public accountants of the Trust. Arthur Andersen LLP
performs an annual audit of the Fund's financial statements, reviews the 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 Fund's
Annual Report to Shareholders for the fiscal year ended December 31, 1997.

20
<PAGE> 111

PRINCIPAL HOLDERS OF CINCINNATI FUND SHARES

As of March 19, 1998, the Fund had 1,132,931.859 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 indicated amounts of the
Fund's outstanding shares.

<TABLE>
<CAPTION>
----------------------------------------------------------------- ----------------------------- -------------------------
NAME AND ADDRESS OF OWNER NUMBER OF SHARES PERCENT OF CLASS
----------------------------------------------------------------- ----------------------------- -------------------------

<S> <C> <C>
Firstcinco, a common trust fund of Star Bank 200,000.000 17.65%
Attention: Joyce Lucht
P. O. Box 640229
Cincinnati, OH 45264

Up East, Inc. 87,621.797 7.73%
c/o Betsy J. Wyeth
P.O. Box 48
Chadds Ford, PA 19317

Trustees and officers of the Trust as a group 64,568.919 5.70%

Adviser officers & directors as a group 35,967.166 3.17%

----------------------------------------------------------------- ----------------------------- -------------------------
</TABLE>

As of March 19, 1998, the Adviser held in a fiduciary capacity 80,281
(7.09%) of the outstanding shares of the Fund. The Adviser has investment and
voting power over all shares held by it in a fiduciary capacity.

21
<PAGE> 112

SCHEDULE A

The beta measurements that may be used in the Cincinnati 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 = n(SIGMA)xy - ((SIGMA)x)((SIGMA)y)
-------------------------------------------------------
n(SIGMA)x to the 2nd power - ((SIGMA)x)to the 2nd power

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

22
<PAGE> 113

PART C: OTHER INFORMATION

24. Financial Statements and Exhibits
---------------------------------

(a) Financial Statements:

(1) Financial Highlights for the Gateway Fund, 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 1997 Annual Report to
Shareholders of the Gateway Fund.

- Report of Independent Public Accountants
- Portfolios of Investments, December 31, 1997
- Statements of Assets and Liabilities, December
31, 1997
- Statements of Operations for the Year Ended
December 31, 1997
- Statements of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements, December 31,
1997

(3) The following documents are incorporated by reference
to The Gateway Trust's 1997 Annual Report to
Shareholders of the Gateway Small Cap Index Fund.

- Report of Independent Public Accountants
- Portfolio of Investments, December 31, 1997
- Statement of Assets and Liabilities, December
31, 1997
- Statement of Operations for the Year Ended
December 31, 1997
- Statements of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements, December 31,
1997

(4) The following documents are incorporated by reference
to The Gateway Trust's 1997 Annual Report to
Shareholders of the Cincinnati Fund.

- Report of Independent Public Accountants
- Portfolio of Investments, December 31, 1997
- Statement of Assets and Liabilities, December
31, 1997
- Statement of Operations for the year ended
December 31, 1997
- Statements of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements, December 31,
1997

<PAGE> 114

(b) Exhibits:

(1)(a) Registrant's Second Amended Agreement and Declaration
of Trust dated December 29, 1992 is attached hereto.

(1)(b) Amendment No. 1 to Registrant's Second Amended
Agreement and Declaration of Trust is attached hereto.

(1)(c) Amendment No. 2 to Registrant's Second Amended
Agreement and Declaration of Trust is attached hereto.

(1)(d) Amendment No. 3 to Registrant's Second Amended
Agreement and Declaration of Trust is attached hereto.

(1)(e) Amendment No. 4 to Registrant's Second Amended
Agreement and Declaration of Trust is attached hereto.

(1)(f) Amendment No. 5 to Registrant's Second Amended
Agreement and Declaration of Trust is attached hereto.

(1)(g) Amendment No. 6 to Registrant's Second Amended
Agreement and Declaration of Trust is attached hereto.

(1)(h) Amendment No. 7 to Registrant's Second Amended
Agreement and Declaration of Trust is attached hereto.

(2) Registrant's By-Laws as restated dated October 29, 1996
are incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 30
(Investment Company Act No. 28) to Registration
Statement No. 2-59895 filed with the Securities and
Exchange Commission on February 28, 1997.

(3) None.

(4) None.

(5)(a) Investment Advisory Contract between the Gateway Fund
(previously known as 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 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

<PAGE> 115

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 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 Fund) is attached hereto.

(8)(b) Custodian Contract between Registrant and Star Bank
with respect to the Gateway Small Cap Index Fund is
attached hereto

(8)(c) Custodian Contract between Registrant and Star Bank
with respect to the Gateway Cincinnati Fund is attached
hereto.

(9)(a) Services Agreement dated January 1, 1998 between
Registrant and Gateway Investment Advisers, L.P. with
respect to the Gateway Fund, the Gateway Small Cap
Index Fund, and the Cincinnati Fund is attached hereto.

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

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

(12) None.

(13) None.

(14)(a) None

(15) None.

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

(17) None.

<PAGE> 116

(18) None.

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

None

ITEM 26. Number of Holders of Securities (as of April 1, 1998)
- -------- -----------------------------------------------------

<TABLE>
<CAPTION>
Title of Class # of Accounts
-------------- -------------

<S> <C>
Gateway Fund 6,688
Gateway Small Cap Index Fund 855
Cincinnati Fund 2,935
</TABLE>

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 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

<PAGE> 117

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 BT 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 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.

<PAGE> 118

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 30th day of April, 1998.

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: April 30, 1998 /s/ Walter G. Sall
---------------------------------
Walter G. Sall, Chairman

Dated: April 30, 1998 /s/ Paul R. Stewart
---------------------------------
Paul R. Stewart, Treasurer and
Principal Accounting Officer

James M. Anderson, Trustee
Stefen F. Brueckner, Trustee
Kenneth A. Drucker, Trustee By: /s/ Walter G. Sall
Beverly J. Fertig, Trustee ---------------------------------
Robert S. Harrison, Trustee Walter G. Sall, Attorney-in-Fact
Walter G. Sall, Trustee, Chairman and Dated: April 30, 1998
Principal Executive Officer
William H. Schneebeck, Trustee

<PAGE> 119

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. 31

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Post-Effective Amendment No. 29

THE GATEWAY TRUST

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

EXHIBITS

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

<PAGE> 120

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT EXHIBIT TAG

<S> <C> <C>
1(b)1(a) Second Amended Agreement and Declaration of Trust Ex-99.B1

1(b)1(b) Amendment No. 1 to Second Amended Agreement and Declaration of Ex-99.B1.1
Trust

1(b)1(c) Amendment No. 2 to Second Amended Agreement and Declaration of Ex-99B1.2
Trust

1(b)1(d) Amendment No. 3 to Second Amended Agreement and Declaration of Ex-99B1.3
Trust

1(b)1(e) Amendment No. 4 to Second Amended Agreement and Declaration of Ex-99B1.4
Trust

1(b)1(f) Amendment No. 5 to Second Amended Agreement and Declaration of Ex-99B1.5
Trust

1(b)1(g) Amendment No. 6 to Second Amended Agreement and Declaration of Ex-99B1.6
Trust

1(b)1(h) Amendment No. 7 to Second Amended Agreement and Declaration of Ex-99B1.7
Trust

8(a) Custodian Contract between Registrant and The First National Bank Ex-99.B8.1
(now Star Bank) with respect to the Gateway Option Index Fund
(now the Gateway Fund)

8(b) Custodian Contract between Registrant and Star Bank with respect Ex-99.B8.2
to the Gateway Small Cap Index Fund

8(c) Custodian Contract between Registrant and Star Bank with respect Ex-99.B8.3
to the Cincinnati Fund

9 Services Agreement Ex-99.B9

11 Consent of Arthur Andersen LLP Ex-99.B11

99 Powers of Attorney Ex-99.POA
</TABLE>

<PAGE> 1
Exhibit 1(b)1(a)

THE GATEWAY TRUST
-----------------

SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST
----------------------------------

dated as of
December 29 1992
----------------

<PAGE> 2

EXHIBIT TO REPORT OF OPERATION

OF BUSINESS TRUST

AGREEMENT AND DECLARATION OF TRUST

THE GATEWAY TRUST
(A BUSINESS TRUST TO BE OPERATED
PURSUANT TO CHAPTER 1746, OHIO REVISED CODE

THIS AGREEMENT AND DECLARATION OF TRUST made at Cincinnati, Ohio, as of
the 29th day of December, 1992, by the trustees hereunder, and by the holders of
shares of beneficial interest to be issued hereunder as hereinafter provided,
does hereby witnesseth that:

WHEREAS, this Trust is being formed to carry on the business of an
investment company; and

WHEREAS, the trustees hereunder agree to manage all property coming into
their hands as trustees of an Ohio business trust with transferable Shares in
accordance with the statute and the provisions hereinafter set forth;

NOW, THEREFOR, the trustees hereby certify and declare that they will
hold all cash, securities and other assets, which they may from time to time
acquire in any manner as trustees hereunder IN TRUST to manage and dispose of
the same upon the following terms and conditions for the pro rata benefit of the
holders from time to time of Shares in this Trust, all as hereinafter set forth:

ARTICLE I

NAME, PLACE OF BUSINESS AND DEFINITIONS

1.1 NAME. This Trust shall be known as "The Gateway Trust" and the
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine.

1.2 PLACE OF BUSINESS. The place where the principal office of the Trust
is to be located is Milford, Clermont County, Ohio.

1.3 DEFINITIONS. Whenever used herein, unless otherwise required by the
context or specifically provided:

<PAGE> 3

(a) The "Trust Act" means Chapter 1746, Ohio Revised Code, as
amended from time to time, governing the formation and operation of
business trusts.

(b) The "Trust" refers to the Ohio business trust established by
this Agreement and Declaration of Trust, as amended from time to time;

(d) "Shares" mean the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided
from time to time or, if more than one series of Shares is authorized by
the Trustees, the equal proportionate units into which each series of
Shares shall be divided from time to time;

(e) "Shareholder" means a record owner of Shares;

(f) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to
time;

(g) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person" and "Principal Underwriter" shall have the meanings
given them in the 1940 Act, and the terms "Majority Shareholder Vote"
shall mean the vote prescribed by the third sentence of Section 2 (a)
(42) of the 1940 Act;

(h) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time; and

(i) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time.

ARTICLE II
----------

PURPOSE
-------

The purpose of the Trust is to operate as an open-end investment company
of the management type providing investors a managed investment primarily in
securities, commodities and debt instruments, and to engage in any lawful act or
activity for which business trusts may be formed under the Trust Act.

ARTICLE III
-----------

SHARES
------

3.1 AUTHORIZED SHARES. The number of Shares which the Trust is authorized
to issue is unlimited, all of which shall be non-assessable. The Shares shall be
issued in one

<PAGE> 4

or more series, with or without par value and bearing designation as set forth
in Schedule A to this Declaration of Trust. Each such series shall likewise be
unlimited in number.

3.2 TERMS OF SERIES. Each series of Shares shall be preferred over all
other series in respect of the assets allocated to that series. The beneficial
interest in each series shall at all times be divided into Shares, each of which
shall represent an equal proportionate interest in the series with each other
Share of the same series, none having priority or preference over another. The
Shares of any series may be represented in part by fractional shares. The
Trustees may from time to time divide or combine the Shares of any series into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the series.

3.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on the
books of the Trust or its transfer or similar agent. No certificates certifying
the ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent of the Trust, as the case may be, shall be conclusive
as to who are the Shareholders of each series and as to the number of Shares of
each series held from time to time by each Shareholder.

3.4 INVESTMENTS IN THE TRUST; ASSETS OF THE SERIES. The Trustees shall
accept investments in the Trust from such persons and on such terms and, subject
to any requirements of law, for such consideration, which may consist of cash or
intangible property or a combination thereof, as they from time to time
authorize.

All consideration received by the Trust for the issue or sale of Shares
of each series, together with all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to the
series of Shares with respect to which the same were received by the Trust for
all purposes, subject only to the rights of creditors, and shall be so handled
upon the books of account of the Trust and are herein referred to as "assets of"
such series.

3.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or other
right to receive, purchase or subscribe for any additional Shares or other
securities issued by the Trust.

3.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares shall
be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the same nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle the Shareholder
to any

<PAGE> 5

title in or to the whole or any part of the Trust property or right to call for
a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the Trust shall have any
power to bind personally any Shareholder, nor except as specifically provided
herein to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.

ARTICLE IV
----------

THE TRUSTEES
------------

4.1 ELECTION. The number of Trustees shall be prescribed in the By-Laws,
except that, subsequent to any sale of Shares pursuant to a public offering,
there shall be not less than three nor more than twenty-one Trustees. Any
vacancies occurring in the Board of Trustees may be filled by the Trustees if,
immediately after filling any such vacancy, at least two-thirds of the Trustees
then holding office shall have been elected to such office by the Shareholders.
If at any time less than a majority of the Trustees then holding office were
elected to such office by the Shareholder, the Trustees shall call a meeting of
Shareholders for the purpose of electing Trustees. Each Trustee elected by the
Shareholders or by the Trustees shall serve until the next meeting of
Shareholders and until the election and qualification of his or her successor,
or until he or she sooner dies, resigns or is removed. A Trustee may be removed
with or without cause, (i) by vote of a majority of the outstanding Shares at
any meeting called for such purpose, or (ii) by vote of a majority of the
Trustees then in office. The initial Trustees, each of whom shall serve until
the first meeting of shareholders at which Trustees are elected and until his or
her successor is elected and qualified, or until he or she sooner dies, resigns
or is removed, shall be Walter G. Sall and Peter W. Thayer.

4.2 EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The death,
declination, resignation, retirement, removal, or incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.

4.3 POWERS. Subject to the Trust Act and the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with the Trust Act or this Declaration of Trust
providing for the conduct of the business of the Trust and may amend and repeal
them to the extent that such By-Laws do not reserve that right to the
Shareholders; they may fill vacancies in their number, including vacancies
resulting from increases in their number, and may elect and remove such officers
and appoint and terminate such agents as they consider appropriate; they may
appoint from their own number, and terminate, any one or more committees
consisting of two or more Trustees, including an executive committee which may,
when the Trustees are not in session, exercise some or all of the power and
authority of the Trustees as the Trustees may

<PAGE> 6

determine; they may appoint an advisory board, the members of which shall not be
Trustees and need not be Shareholders; they may employ one or more custodians of
the assets of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a system or
systems for the central handling of securities, retain a transfer agent or a
Shareholder services agent, or both, provide for the distribution of Shares by
the Trust, through one or more principal underwriters or otherwise, set record
dates for the determination of Shareholders with respect to various matters, and
in general delegate such authority as they consider desirable to any officer of
the Trust, to any committee of the Trustees and to any agent or employee of the
Trust or to any such custodian or underwriter.

Without limiting the foregoing, the Trustees shall have power and
authority granted by Section 1746-09 of the Trust Act and, to the extent not
inconsistent with such act, the power and authority:

(a) to invest and reinvest cash, and to hold cash uninvested;

(b) to sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;

(c) to vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustee
shall deem proper;

(d) to exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;

(e) to hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in
the name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or otherwise;

(f) to allocate assets, liabilities and expenses of the Trust to a
particular series of Shares or to apportion the same among two or more
series, provided that any liabilities or expenses incurred by a
particular series of Shares shall be payable solely out of the assets of
that series;

(g) to consent or to participate in any plan for or the
reorganization, consolidation or merger of any corporation or issuer, any
security of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect to
any security held in the Trust;

<PAGE> 7

(h) to join with other security holders in acting through a
committee, depository, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security to, any
such committee, depository or trustee, and to delegate to them such power
and authority with relation to any security (whether or not so deposited
or transferred) as the Trustees shall deem proper, and to agree to pay,
and to pay, such portion of the expenses and compensation of such
committee, depository or trustee as the Trustees shall deem proper;

(i) to compromise, arbitrate or otherwise adjust claims in favor
of or against the Trust on any matter in controversy,. including but not
limited to claims for taxes;

(j) to enter into joint ventures, general or limited partnerships
and any other combinations or associations;

(k) to borrow funds;

(l) to endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and
pledge the Trust property or any part thereof to secure any of or all of
such obligations;

(m) to purchase and pay for or entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including without limitation, insurance policies insuring
the assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers or managers,
principal underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature arising
by reason of holding, being or having held any such office or position,
or by reason of any action alleged to have been taken or omitted by any
such person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor ,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and

(n) to pay pensions for faithful service, as deemed appropriate by
the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including
the purchasing of life insurance and annuity contracts as a means of
providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.

The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by trustees. Except as otherwise
provided herein or from time to time in the By-Laws, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
the Trustees (a quorum being present),

<PAGE> 8

within or without Ohio, including any meeting held by means of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office.

4.4 PAYMENT OF EXPENSES BY TRUST. The Trustees are authorized to pay or
to cause to be paid out of the principal or income of the Trust, or partly out
of principal and partly out of income, as they deem fair, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with the Trust,
or in connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser or manager, principal
underwriter, auditor, counsel, custodian, transfer agent, Shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur, PROVIDED
HOWEVER, that all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with a particular series of Shares, as determined by the
Trustees, shall be payable solely out of the assets of that series.

4.5 OWNERSHIP OF ASSETS OF THE TRUST. The Trust may take, hold and
dispose of any estate or interest in real or personal property in its business
name, or in the name of one or more of its Trustees or in the name of one or
more of its nominees. The business name of the Trust shall include the name
under which it is formed and, as to property which pursuant to Section 3.4
belongs to any series of Shares, the name under which such separate series
engages in business.

4.6 ADVISORY, MANAGEMENT AND DISTRIBUTION. Subject to a favorable
Majority Shareholder Vote, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or management services with
Gateway Investment Advisers, Inc., an Ohio corporation, or any other
corporation, trust, association or other organization (the "Adviser"), every
such contract to comply with such requirements and restrictions as may be set
forth in the By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and restrictions as the
Trustees may determine, including, without limitation, authority to determine
from time to time what investments shall be purchased, held, sold or exchanged
and what portion, if any, of the assets of the Trust shall be held uninvested
and to make changes in the Trust's investments. The Trustees may also, at any
time and from time to time, contract with the Adviser or any other corporation,
trust, association or other organization, appointing it exclusive or
nonexclusive distributor or principal underwriter for the Shares, every such
contract to comply, with such requirements and restrictions as may be set forth
in the By-Laws; and any such contract may contain such other terms interpretive
of or in addition to said requirements and restrictions as the Trustees may
determine.

The fact that:

<PAGE> 9

(i) any of the Shareholders, Trustees or officers of the Trust is
a shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, or distributor or agent of or for any
corporation, trust association, or other organization, or of or for any
parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder services or other agency contract may
have been or may hereafter be made, or that any organization, or any
parent or affiliate thereof, is a Shareholder or has an interest in the
Trust, or that

(ii) any corporation, trust, association or other organization
with which an advisory or management contract or principal underwriter's
or distributor's contract, or transfer, Shareholder services or other
agency contract may have been or may hereafter be made also has an
advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder services or other agency
contract with one or more other corporations, trusts, associations, or
other organizations, or has other business or interests.

shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.

4.7 INFORMAL ACTION. Any action which might be authorized or taken by the
Trustees in a meeting may be taken without a meeting if a consent to such action
in writing, signed by all Trustees entitled to vote at a meeting called to take
such action, is filed with the Secretary of the Trust.

ARTICLE V
---------

SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------

5.1 VOTING POWERS. The Shareholders shall have power to vote only (i) for
or the election or removal of Trustees as provided in Section 4. 1, (ii) with
respect to any Adviser as provided in Section 4.6, (iii) with respect to any
termination of this Trust or any series to the extent and as provided in Section
9.4, (iv) with respect to any amendment of this Declaration of Trust to the
extent and as provided in Section 9.7, (v) to the same extent as the
shareholders of an Ohio business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (vi) with respect to such additional matters relating to the Trust as may be
required by the Trust Act or other law, this Declaration of Trust, the By-Laws
or any registration of the Trust with the Securities and Exchange commission (or
any successor agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of Shareholders, all
Shares of the Trust then entitled to vote shall be voted by individual series;
except (1) when required by the 1940

<PAGE> 10

Act, Shares shall be voted in the aggregate and not by individual series; and
(2) when the Trustees have determined that the matter affects only the interests
of one or more series, then only Shareholders of such series shall be entitled
to vote thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy with respect to
Shares held in the name of two or more persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by the Trust Act or
other law, this Declaration of Trust or the By-Laws to be taken by Shareholders.

5.2 VOTING POWER AND MEETINGS. Meetings of Shareholders of the Trust or
of any series may be called by the other person or persons as may be specified
in the By-Laws and held from time to time for the purpose of taking action upon
any matter requiring the vote or the authority of the Shareholders of the Trust
or any series as herein provided or upon any other matter deemed by the Trustees
to be necessary or desirable. Meetings of Shareholders of the Trust or of any
series shall be called by the Trustees or such other person or persons as may be
specified in the By-Laws upon written application by Shareholders holding at
least 10% of the outstanding Shares of the Trust, if Shareholders of all series
are required hereunder to vote in the aggregate and not by individual series at
such meeting, or of any series, if Shareholders of such series are entitled
hereunder to vote by individual series at such meeting, requesting that a
meeting be called for a purpose requiring action by the Shareholders as provided
herein or in the By-Laws. The Shareholders shall be entitled to at least seven
days' written notice of any meeting of the Shareholders.

5.3 QUORUM AND REQUIRED VOTE. Thirty-three percent (33%) of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of this
Declaration of Trust permits or requires that holders of any series shall vote
as a series, then thirty-three percent (33%) of the aggregate number of Shares
of that series entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that series. Any lesser number, however, shall be
sufficient for adjournments. Any adjourned session or sessions may be held
within a reasonable time after the date set for the original meeting without the
necessity of further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws, when a quorum is present
the vote of a majority of the Shares present shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of law or of
this Declaration of Trust permits or requires that the holders of any series
shall vote as a series on a matter, then, a quorum of such series being present,
the vote of a majority of the Shares of that series present shall decide that
matter insofar as that series is concerned.

5.4 ADDITIONAL PROVISIONS. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters.

<PAGE> 11

ARTICLE VI
----------

DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES,
-------------------------------------------
AND DETERMINATION OF NET ASSET VALUE
------------------------------------

6.1 DISTRIBUTIONS. The Trustees may, but need not, each year distribute
to the Shareholders of each series such income and gains, accrued or realized,
as the Trustees may determine, after providing for actual and accrued expenses
and liabilities (including such reserves as the Trustees may establish)
determined in accordance with good accounting practices. The Trustees shall have
full discretion to determine which items shall be treated as income and which
items as capital and their determination shall be binding upon the Shareholders.
Distributions of each year's income of each series, if any be made, may be made
in one or more payments, which shall be in Shares, in cash or otherwise and on a
date or dates and as of a record date or dates determined by the Trustees. At
any time and from time to time in their discretion, the Trustees may distribute
to the Shareholders of any one or more series as of a record date or dates
determined by the Trustees, in Shares, in cash or otherwise, all or part of any
gains realized on the sale or disposition of property of the series or
otherwise, or all or part of any other principal of the Trust attributable to
the series. Each distribution pursuant to this Section 1 shall be made ratably
according to the number of Shares of the series held by the several shareholders
thereof on the applicable record date, provided that no distribution need be
made on Shares purchased pursuant to orders received, or for which payment is
made, after such time or times as the Trustees may determine. Any such
distribution paid in Shares will be paid at the net asset value as determined in
accordance with Section 6.7 of this Article.

6.2 REDEMPTIONS AND REPURCHASES. Any holder of Shares of the Trust may by
presentation of a written request, together with his certificates, if any, for
such Shares, in proper form for transfer, at the office of the Trust or at a
principal office of a transfer agent appointed by the Trust, redeem his Shares
for the net asset value thereof determined and computed in accordance with the
provisions of this Section 6.2 and the provisions of Section 6.7 of this
Declaration of Trust.

Upon receipt by the Trust or its transfer agent of such written request
for redemption of Shares, such Shares shall be redeemed at the net asset value
per share of the appropriate series next determined after such Shares are
tendered in proper order for transfer to the Trust or determined as of such
other time fixed by the Trustees as may be permitted or required by the 1940
Act, provided that no such tender shall be required in the case of Shares for
which a certificate or certificates have not been issued, and in such case such
Shares shall be redeemed at the net asset value per share of the appropriate
series next determined after such demand has been received or determined at such
other time fixed by the Trustees as may be permitted or required by the 1940
Act.

The obligation of the Trust to redeem its Shares of each series as set
forth above in this Section 6.2 shall be subject to the conditions that during
any time of emergency, as hereinafter defined, such obligation may be suspended
by the Trust by or under authority

<PAGE> 12

of the Trustees for such period or periods during such time of emergency as
shall be determined by or under authority of the Trustees. If there is such a
suspension, any Shareholder may withdraw any demand for redemption and any
tender of Shares which has been received by the Trust during any such period,
the applicable net asset value of which would but for such suspension be
calculated as of a time during such period. Upon such withdrawal, the Trust
shall return to the Shareholder the certificates therefor, if any. For the
purposes of any such suspension, "time of emergency" shall mean, either with
respect to all Shares or any series of Shares., any period during which:

(a) the New York Stock Exchange is closed other than for customary
weekend and holiday closings; or

(b) the Trustees or authorized officers of the Trust shall have
determined, in compliance with any applicable rules and regulations of
the Securities and Exchange Commission, either that trading on the New
York Stock Exchange is restricted, or that an emergency exists as a
result of which (i) disposal by the Trust of securities owned by it is
not reasonably practicable or (ii) it is not reasonably practicable for
the Trust fairly to determine the current value of its net assets; or

The Trust may also purchase, repurchase or redeem Shares in accordance
with such other methods, upon such other terms and subject to such other
conditions as the Trustees may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.

6.3 PAYMENT IN KIND. Subject to any generally applicable limitation
imposed by the Trustees, any payment on redemption of Shares may, if authorized
by the Trustees, be made wholly or partly in kind, instead of in cash. Such
payment in kind shall be made by distributing securities or other property,
constituting, in the opinion of the Trustees, a fair representation of the
various types of securities and other property then held by the series of Shares
being redeemed (but not necessarily involving a portion of each of the series'
holdings) and taken at their value used in determining the net asset value of
the Shares in respect of which payment is made.

6.4 REDEMPTION AT THE OPTION OF THE TRUST. The Trust shall have the right
at its option and at any time to redeem Shares of any Shareholder at the net
asset value thereof as determined in accordance with Section 6.7 of this
Declaration of Trust: (i) if at such time such Shareholder owns fewer Shares
than, or Shares having an aggregate net asset value of less than, an amount
determined from time to time by the Trustees; or (ii) to the extent that such
Shareholder owns Shares of a particular series of Shares equal to or in excess
of a percentage of the outstanding Shares of that series determined from time to
time by the Trustees or (iii) to the extent that such Shareholder owns Shares of
the Trust representing a percentage equal to or in excess of such percentage of
he aggregate number of outstanding

<PAGE> 13

Shares of the Trust or the aggregate net asset value of the Trust determined
from time to time by the Trustees.

6.5 DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES. No dividend or
distribution (including, without limitation, any distribution paid upon
termination of the Trust or of any series) with respect to, nor any redemption
or repurchase of, the Shares of any series shall be effected by the Trust other
than from the assets of such series.

6.6 ADDITIONAL PROVISIONS RELATING TO REDEMPTIONS AND REPURCHASES. The
completion of redemption of Shares shall constitute a full discharge of the
Trust and the Trustees with respect to such Shares, and the Trustees may require
that any certificate or certificates issued by the Trust to evidence ownership
of such Shares shall be surrendered to the Trustees for cancellation or
notation.

6.7 DETERMINATION OF NET ASSET VALUE. The term `net asset value' of the
Shares of each series shall mean: (i) the value of all the assets of such
series; (ii) less total liabilities of such series; (iii) divided by the number
of Shares of such series outstanding, in each case at the time of each
determination. The "number of Shares of such series outstanding" for the
purposes of such computation shall be exclusive of any Shares of such series to
be redeemed and not then redeemed as to which the redemption price has been
determined, but shall include Shares of such series presented for repurchase and
not then repurchased and Shares of such series to be redeemed and not then
redeemed as to which the redemption price has not been determined and Shares of
such series the sale of which has not been confirmed. Any fractions involved in
the computation of net asset value per share shall be adjusted to the nearer
cent unless the Trustees shall determine to adjust such fractions to a fraction
of a cent.

The Trustees, or any officer or officers or agent of this Trust
designated for the purpose by the Trustees, shall determine the net asset value
of the Shares of each series, and the Trustees shall fix the times as of which
the net asset value of the Shares of each series shall be determined and shall
fix the periods during which any such net asset value shall be effective as to
sales, redemptions and repurchases of, and other transactions in, the Shares of
such series, except as such times and periods for any such transaction may be
fixed by other provisions of this Declaration of Trust or by the By-Laws.

In valuing the portfolio investments of any series for determination of
net asset value per share of such series, (i) securities for which market
quotations are readily available shall be valued at prices which, in the opinion
of the Trustees or any officer, or officers or agent of the Trust designated for
the purpose by the Trustees, most nearly represent the market value of such
securities (which may, but need not, be the most recent bid price obtained from
one or more of the market makers for such securities); and (ii) other securities
and assets shall be valued at fair value as determined by or pursuant to the
direction of the Trustees. Notwithstanding the foregoing, short-term debt
obligations, commercial paper, and repurchase agreements may be, but need not
be, valued on the basis of quoted yields for securities of comparable maturity,
quality and type, or on the basis of amortized costs. In any determination of
net asset value of any series, dividends receivable

<PAGE> 14

and accounts receivable for investments sold and for Shares sold shall be stated
at the amounts to be received therefor; and income receivable accrued daily on
bonds and notes owned shall be stated at the amount to be received. Any other
assets shall be stated at fair value as determined by the Trustees or such
officer, officers or agent pursuant to the Trustees' authority, except that no
value shall be assigned to good will, furniture, lists, reports, statistics or
other noncurrent assets other than real estate. Liabilities of any series for
accounts payable for investments purchased and for Shares tendered for
redemption and not then redeemed as to which the redemption price has been
determined shall be stated at the amounts payable therefor. In determining net
asset value of any series, the person or persons making such determination on
behalf of the Trust may include in liabilities such reserves, estimated accrued
expenses and contingencies as such person or persons (may in its, his or their
best judgment deem fair and reasonable under the circumstances. Any income
dividends and gains distributions payable by the Trust shall be deducted as of
such time or times on the record date therefor as the Trustees shall determine.

The manner of determining the net assets of any series or of determining
the net asset value of the Shares of any series may from time to time be altered
as necessary or desirable in the judgment of the Trustees to conform to any
other method prescribed or permitted by any applicable law or regulation.

Determinations under this Section 6.7 made in good faith and in
accordance with the provisions. of the 1940 Act shall be binding on all parties
concerned.

ARTICLE VII
-----------

COMPENSATION AND LIMITATION
---------------------------
OF LIABILITY OF TRUSTEES
------------------------

7.1 COMPENSATION. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking or other services
and payment for the same by the Trust.

7.2 LIMITATION OF LIABILITY. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer, agent,
employee, Adviser or principal underwriter of the Trust, nor shall any Trustee
be responsible for the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.

<PAGE> 15

ARTICLE VIII
------------

INDEMNIFICATION
---------------

8.1 INDEMNIFICATION - GENERAL. Subject to Sections 8.4 and 8.9, the Trust
shall indemnify or agree to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
other than an action by or in the right of the Trust, by reason of the fact that
such person is or was a trustee, officer, employee or agent of the Trust, or is
or was serving at the request of the Trust as a director, trustee, officer,
employee, or agent of another trust, a corporation, domestic or foreign,
nonprofit or for profit, a partnership, joint venture or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Trust, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful; PROVIDED,
HOWEVER, that no such person shall be indemnified against any liability to the
Trust or its Shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless,
disregard of the duties involved in the conduct of such person's office. The
termination of any action, suit, or proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the Trust and, with respect to any criminal action or proceeding,
such person had reasonable cause to believe that his or her conduct was
unlawful.

8.2 INDEMNIFICATION - DERIVATIVE ACTIONS. Subject to Sections 8.4 and
8.9, the Trust shall indemnify or agree to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was a trustee,
officer, employee or agent of the Trust, or is or was serving at the request of
the Trust as a director, trustee, officer employee or agent of another trust, a
corporation, domestic or foreign, nonprofit or for profit, a partnership, joint
venture or other enterprise, against expenses, including attorneys' fees,
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Trust, except that no indemnification shall be made in respect
of any of the following:

(a) any liability of such person, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such office by such person; or

<PAGE> 16
(b) any claim, issue or matter as to which such person is adjudged
to be liable for negligence or misconduct in the performance of his or
her duty to the Trust unless and only to the extent that the Court of
Common Pleas or the court in which such action or suit has been brought
determines upon application that, despite the adjudication of liability,
but in view of all the circumstance of the case, such person is fairly
and reasonably entitled to indemnity for such expenses as the Court of
Common Pleas or such other court shall deem proper; or

(c) any action or suit in which the only liability asserted
against a Trustee would, if it were asserted against a director of an
Ohio corporation, subject such director to liability under Section
1701.95 of the Ohio Revised Code.

8.3 INDEMNIFICATION OF PREVAILING PARTY. To the extent that a trustee,
director, officer, employee or agent has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in Sections
8.1 and 8.2, or in defense of any claim, issue or matter therein, that person
shall be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by such person in connection with the action, suit, or
proceeding or, if applicable, the claim, issue or matter therein in respect of
which such person has been successful.

8.4 PROCEDURES. Any indemnification under Sections 8.1 and 8.2, unless
ordered by a court, shall be made by the Trust only as authorized in the
specific case upon a determination that indemnification of the trustee,
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in Sections 8.1 and
8.2. Such determination shall be made as follows:

(a) by a majority vote of a quorum consisting of Trustees of the
Trust who were not and are not parties to or threatened with any such
action, suit, or proceeding, or

(b) if the quorum described in Section 8.4(a) is not obtainable or
if a majority vote of a quorum of disinterested Trustees so directs, in a
written opinion by independent legal counsel other than an attorney, or a
firm having associated with it an attorney, who has been retained by or
who has performed services for the Trust or any person to be indemnified
within the past five years., or

(d) by the court of common pleas or the court in which such
action, suit, or proceeding was brought.

Any determination made by the disinterested Trustees under clause (a) of
this Section 8.4 or by independent legal counsel under clause (b) of this
Section 8.4 shall be promptly communicated to the person who threatened or
brought the action or suit by or in the right of the Trust under Section 8.2
hereof, and within ten days after receipt of such notification,

<PAGE> 17

such person shall have the right to petition the Court of Common Pleas or the
court in which such action or suit was brought to review the reasonableness of
such determination.

8.5 ADVANCES. (a) Unless the only liability asserted against a Trustee in
an action, suit, or proceeding referred to in Section 8.1 or 8.2 of this section
is one which, if asserted against the director of an Ohio corporation, would
subject such director to liability pursuant to Section 1701.95 of the Ohio
Revised Code, expenses, including attorney's fees, incurred by a Trustee in
defending the action, suit, or proceeding shall be paid by the corporation as
they are incurred, in advance of the final disposition of the action, suit, or
proceeding upon receipt of an undertaking in writing by or on behalf of the
Trustee in which the Trustee agrees to do both of the following:

(i) repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Trustee's action
or failure to act involved an act or omission undertaken with deliberate
intent to cause injury to the Trust or undertaken with reckless disregard
for the best interests of the Trust, and

(ii) reasonably cooperate with the Trust concerning the action,
suit, or proceeding.

(b) Expenses, including attorneys' fees, incurred by a trustee, director,
officer, employee, or agent in defending any action, suit or proceeding referred
to in Sections 8.1 and 8.2 may be paid by the Trust as they are incurred, in
advance of the final disposition of such action, suit or proceeding as
authorized by the Trustees in the specific case upon receipt of an undertaking
by or on behalf of the trustee, director, officer, employee or agent to repay
such amount if it ultimately is determined that the Trustee is not entitled to
be indemnified by the Trust as authorized in this section.

(c) Unless a majority of a quorum of the disinterested Trustees, or
independent legal counsel (other than an attorney, or a firm having associated
with it an attorney, who within the past five years has been retained by or has
performed services for the Trust or any person to be indemnified) in a written
opinion, shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry) , that there is good reason to believe
that such person will be entitled to indemnification, (i) the person receiving
such advance payments shall provide security for such undertaking to repay, or
(ii) the Trust shall be insured against losses arising by reason of such
person's failure to fulfill such undertaking.

8.6 NOT EXCLUSIVE. The indemnification authorized by this section shall
not be exclusive of, and shall be in addition to, any other rights granted to
those seeking indemnification under this Declaration of Trust or the By-Laws or
any agreement, vote of shareholders or disinterested Trustees, or otherwise,
both as to action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a trustee, director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.

<PAGE> 18

8.7 INSURANCE. The Trust may purchase and maintain insurance or furnish
similar protection, including but not limited to trust funds, letters of credit,
or self-insurance on behalf of any person who is or was a trustee, officer,
employee, or agent of the Trust, or is or was serving at the request of the
Trust as a Trustee, director, officer, employee, or agent of another trust, a
corporation, domestic or foreign, nonprofit or for profit, a partnership, joint
venture, or other enterprise against any liability asserted against such person
and incurred by such person in any such capacity, or arising out of his or her
status as such, whether or not the Trust would have the power to indemnify such
person against such liability under this Article VIII. Insurance may be
purchased from or maintained with a person in which the Trust has a financial
interest.

8.8 NOT LIMITED. The authority of the Trust to indemnify persons pursuant
to Sections 8.1 and 8.2 does not limit the payment of expenses as they are
incurred, indemnification, insurance, or other protection that may be provided
pursuant to Sections 8.5, 8.6, and 8.7. Sections 8.1 and 8.2 do not create any
obligation to repay or return payments made by or on behalf of the Trust
pursuant to Sections 8.5, 8.6, and 8.7.

8.9 LIMITATION ON INDEMNIFICATION AND INSURANCE. Nothing herein contained
shall be construed to permit indemnification of any trustee, director, officer,
employee or agent or to purchase insurance in violation of the 194 0 Act,
particularly. Sections 17 (h) and 17(i) thereof any rules, regulations, releases
or interpretations issued or promulgated thereunder.

ARTICLE IX
----------

MISCELLANEOUS
-------------

9.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE NOTICE. All
Persons extending credit to, contracting with or having any claim against the
Trust or a particular Series of shares shall look only to the assets of the
Trust or the assets of that particular series of Shares for payment under such
credit, contract or claim; and, neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which such Trustee
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee.

9.2 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The

<PAGE> 19

Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.

9.3 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEE. No person dealing
with the Trustees shall be bound to make any inquiry concerning the validity of
any transaction made or to be made by the Trustees or to see to the application
of any payments made or property transferred to the Trust or upon its Order.

9.4 DURATION AND TERMINATION OF TRUST. Unless terminated as provided
herein, the Trust shall continue without limitation of time. The Trust may be
terminated at any time by vote of Shareholders holding at least a majority of
the Shares of each series entitled to vote or by the Trustees by written notice
to the Shareholders. Any series of Shares may be terminated at any time by vote
of Shareholders holding at least a majority of the Shares of such series
entitled to vote or by the Trustees by written notice to the Shareholders of
such series.

Upon termination of the Trust or of any one or more series of Shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets to distributable form in cash
or shares or other securities, or any combination thereof, and distribute the
proceeds to the Shareholders of the series involved, ratably according to the
number of Shares of such series held by the several Shareholders of such series
on the date of termination.

9.5 FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of
this instrument and of each amendment hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each amendment hereto shall be filed by the Trust with the Secretary of
State of Ohio, as well as any other governmental office where such filing may
from time to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such amendments
have been made and as to any matters in connection with the Trust hereunder;
and, with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment, references to
this instrument, and all expressions like "herein", "hereof", and "hereunder",
shall be deemed to refer to this instrument as amended or affected by any such
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts, each of which shall be deemed an original.

9.6 APPLICABLE LAW. This Declaration of Trust is made in the State of
Ohio and it is created under and is to be governed by and construed and
administered according to the laws of such state, including but not limited to,
the Trust Act. The Trust shall be of the type commonly called a business trust,
and without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.

<PAGE> 20

9.7 AMENDMENTS. This Declaration of Trust may be amended at any time by
an instrument in writing signed by a majority of the then Trustees when
authorized so to do by a vote of Shareholders holding a majority of the Shares
of each series entitled to vote, except that an amendment which shall affect the
holders of one or more series of Shares but not the holders of all outstanding
series shall be authorized by vote of the Shareholders holding a majority of the
Shares entitled to vote of each series affected and no vote of Shareholders of a
series not affected shall be required. Amendments having the purpose of (i)
changing the name of the Trust, (ii) adding or terminating any series of Shares,
or fixing or eliminating the par value or changing the designation thereof, or
(iii) supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision contained herein, shall
not require authorization by Shareholder vote.

IN WITNESS WHEREOF, the undersigned have hereunto subscribed their names,
for themselves and their assigns, as of the day and year first above written.

STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )

/s/ Walter G. Sall

/s/ Peter W. Thayer

Before me, a notary public in and for the State of Ohio, personally
appeared the above-named Walter G. Sall and Peter W. Thayer and acknowledged the
execution of the foregoing instrument to be their free act and deed.

In testimony whereof I have hereunto signed my name and affixed my notarial seal
this 30th day of December 1992.

/s/ Jenny D.Baron
Notary Public, State of Ohio
My Commission Expires March 3, 1997

<PAGE> 1
Exhibit 1(b)1(b)

THE GATEWAY TRUST

AMENDMENT NO. 1 TO
SECOND AMENDED AGREEMENT AND DECLARATION OF TRUST
DATED AS OF DECEMBER 29, 1992

THIS AGREEMENT of Amendment made as of this 25th day of January, 1993,
by the Trustees acting under and pursuant to that certain Second Amended
Agreement and Declaration of Trust dated as of December 29, 1993, does hereby

WITNESSETH THAT

WHEREAS, the Trustees have determined that it is advisable to add an
additional series designated the Gateway Small Cap Index Series, without par
value,

NOW, THEREFORE, the undersigned Trustees, representing a majority of
the presently acting Trustees, acting under and pursuant to the authority of
Section 9.7 of the Declaration of Trust, do hereby agree and take action as
follows:

1. ADDITION OF SERIES. Effective as of the date on which
Post-Effective Amendment No. 22 to the Registration Statement of the
Gateway Trust (Registration No. 2-59895) shall become effective (the
"Effective Date"), there is hereby added as an additional series of
shares of beneficial interests to be offered by the Trust, and pursuant
to all of the terms of the Declaration of Trust, the Gateway Small Cap
Index Series, without par value.

2. AMENDMENT OF SCHEDULE A. At the Effective Date, Schedule A
to the Declaration of Trust shall be, for the purpose of giving effect
to paragraph 1, above, amended to read as set forth on the Schedule A
which is amended hereto and by this reference made a part hereof.

This Amendment may be executed in counterparts.

IN WITNESS WHEREOF, the undersigned Trustee has subscribed his or her
name and executed Amendment as of the day and year first above written.

/s/ Stefen F. Brueckner /s/ Walter L. Lingle, Jr.

/s/ Kenneth A. Drucker /s/ Walter G. Sall

/s/ Beverly S. Gordon /s/ William H. Schneebeck

/s/ John F. Lebor /s/ Peter W. Thayer

<PAGE> 2

SCHEDULE A
TO
THE GATEWAY TRUST AMENDED
AGREEMENT AND DECLARATION 0F TRUST
(AS AMENDED THROUGH DECEMBER 29, 1992)

DESIGNATION OF SHARES

1. Gateway Index Plus Series, without par value

2. SWRW Growth Plus Series, without par value

4. Gateway Capital Series, without par value

3. Gateway Government Bond Plus Series, without par value

<PAGE> 1
Exhbit 1(b)1(c)

THE GATEWAY TRUST

AMENDMENT NO. 2 TO
SECOND AMENDED AGREEMENT AND DECLARATION OF TRUST
DATED AS OF DECEMBER 29, 1992

THIS AGREEMENT of Amendment, made as of the 20th day of December, 1993,
by the Trustees acting under and pursuant to that certain Second Amended
Agreement and Declaration of Trust dated as of December 29, 1992 (the
"Declaration of Trust"), does hereby witnesseth that:

WHEREAS, the Trustees have determined that it is advisable to change
the name of the shares of beneficial interest of the SWRW Growth Plus Series,
without par value, and the name of the shares of beneficial interest of the
Gateway Capital Series, without par value,

1. Change of Names. The name of the shares of beneficial interest
heretofore designated as the SWRW Growth Plus Series, without par value, is
hereby changed, effective January 1, 1994, to be the MATRIX Growth Series,
without par value; and the name of the shares of beneficial interest heretofore
designated as the Gateway Capital Series, without par value, is hereby changed
to the Gateway Mid Cap Index Series, without par value, effective December 20,
1993.

2. AMENDMENT OF SCHEDULE A. Schedule A to the Declaration of Trust is,
for the purpose of giving effect to paragraph I above, amended to read as set
forth on the Schedule A which is annexed hereto and by this reference made a
part hereof

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

IN WITNESS WHEREOF, the undersigned Trustees have subscribed their
names and executed this Amendment as of the day and year first above written.

/s/ Stefen F. Brueckner /s/ Walter L. Lingle, Jr.

/s/ Kenneth A. Drucker /s/ Walter G. Sall

/s/ Beverly S. Gordon /s/ William H. Schneebeck

/s/ John F. Lebor /s/ Peter W. Thayer

<PAGE> 2

SCHEDULE A

THE GATEWAY TRUST SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST

DESIGNATION OF SHARES

1. Gateway Index Plus Series, without par value

2. MATRIX Growth Series, without par value

3. Gateway Government Bond Plus Series, without par value

4. Gateway Mid Cap Index Series, without par value

5. Gateway Small Cap Index Series, without par value

Revised: December 20, 1993

<PAGE> 1
Exhibit 1(b)1(d)

THE GATEWAY TRUST

AMENDMENT NO. 3 TO
SECOND AMENDED AGREEMENT AND DECLARATION OF TRUST
DATED AS OF DECEMBER 29, 1992

THIS AGREEMENT of Amendment made as of the 25th day of August, 1994, by
the Trustees acting under and pursuant to that certain Second Amended Agreement
and Declaration of Trust dated as of December 29, 1992, (the "Declaration of
Trust"), does hereby

WITNESSETH THAT

WHEREAS, the Trustees have determined that it is advisable to add an
additional designated the Cincinnati Series without par value,

1. ADDITION OF NEW SERIES. Effective as of the date on which
Post-Effective Amendment No. 26 to the Registration Statement
of The Gateway Trust (Registration No. 2-59895) is filed with
the Securities and Exchange Commission (the "Effective Date"),
there is hereby added as an additional series of shares of
beneficial interests to be offered by the Trust, and pursuant
to all of the terms of the Declaration of Trust, the
Cincinnati Series, without par value.

2. AMENDMENT OF SCHEDULE A. At the Effective Date, Schedule A to
the Declaration of Trust shall be, for the purpose of giving
effect to paragraph 1 above, amended to read as set forth on
the Schedule A which is amended hereto and by this reference
made a part hereof

This Amendment may be executed in counterparts.

IN WITNESS WHEREOF, the undersigned Trustee has subscribed his or her
name and executed this Amendment as of the day and year first above written.

/s/ Stefen F. Brueckner /s/ Walter G. Sall

/s/ Kenneth A. Drucker /s/ Peter W. Thayer

/s/ John F. Lebor

<PAGE> 2

SCHEDULE A

THE GATEWAY TRUST SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST

DESIGNATION OF SHARES

1. Gateway Index Plus Series, without par value

2. MATRIX Growth Series, without par value

3. Gateway Government Bond Plus Series, without par value

4. Gateway Mid Cap Index Series, without par value

5. Gateway Small Cap Index Series, without par value

6. Cincinnati Series, without par value

<PAGE> 1
Exhibit 1(b)1(e)

AMENDMENT NO. 4

SCHEDULE A

THE GATEWAY TRUST SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST

DESIGNATION OF SHARES

1. Gateway Index Plus Series, without par value

2. MATRIX Growth Series, without par value

3. Gateway Mid Cap Index Series, without par value

4. Gateway Small Cap Index Series, without par value

5. Cincinnati Series, without par value

<PAGE> 1
Exhibit 1(b)1(f)

AMENDMENT NO. 5

SCHEDULE A

THE GATEWAY TRUST SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST

DESIGNATION OF SHARES

1. Gateway Index Plus Series, without par value

2. Gateway Mid Cap Index Series, without par value

3. Gateway Small Cap Index Series, without par value

4. Cincinnati Series, without par value

<PAGE> 1
Exhibit 1(b)1(g)

AMENDMENT NO. 6

THE GATEWAY TRUST SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST

1. Pursuant to Sections 9.4 and 9.7 of the Second Amended Agreement and
Declaration of Trust of The Gateway Trust and effective upon execution of
this document, the undersigned, being a majority of the Trustees of The
Gateway Trust, hereby terminate the Gateway Mid Cap Index Fund, a series
of The Gateway Trust.

2. This document shall have the status of an amendment to said Second
Amended Agreement and Declaration of Trust, and may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

Dated: January 27, 1998 /s/ Walter G. Sall
--------------------------------

/s/ James M. Anderson
--------------------------------

/s/ Stefen L. Brueckner
--------------------------------

/s/ Kenneth A. Drucker
--------------------------------

/s/ Beverly J. Fertig
--------------------------------

/s/ R. S. Harrison
--------------------------------

/s/ William Harding Schneebeck
--------------------------------

<PAGE> 2

SCHEDULE A

THE GATEWAY TRUST SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST

Gateway Index Plus Fund
Gateway Small Cap Index Fund
Cincinnati Fund

<PAGE> 1
Exhibit 1(b)1(h)

AMENDMENT NO. 7

THE GATEWAY TRUST
SECOND AMENDED AGREEMENT AND
DECLARATION OF TRUST

1. Pursuant to Section 9.7 of the Second Amended Agreement and Declaration of
Trust of the Gateway Trust and effective on May 1, 1998, the undersigned,
being a majority of the Trustees of the Gateway Trust, hereby change the
name of the Gateway Index Plus Fund series to Gateway Fund.

2. This document shall have the status of an amendment to said Second Amended
Agreement and Declaration of Trust, and may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

Dated: March 3, 1998

/s/ James M. Anderson
--------------------------------------

/s/ Stefen F. Brueckner
--------------------------------------

/s/ Kenneth A. Drucker
--------------------------------------

/s/ Beverly J. Fertig
--------------------------------------

/s/ R. S. Harrison
--------------------------------------

/s/ William H. Schneebeck
--------------------------------------

/s/ Walter G. Sall
--------------------------------------

<PAGE> 2

SCHEDULE A

THE GATEWAY TRUST
SECOND AMENDED
AGREEMENT AND DECLARATION OF TRUST

Gateway Fund
Gateway Small Cap Index Fund
Cincinnati Fund

<PAGE> 1
Exhibit 8(b)

CUSTODY AGREEMENT
-----------------

Agreement made as of the 29th day of April 1993, between The Gateway
Trust, (the "Trust"), a business trust organized under and pursuant to Chapter
1746 of the Ohio Revised Code and having its office at Building 400, Park 50
TechneCenter, Milford, Ohio 45150 acting for and on behalf of The Gateway Small
Cap Index Fund (the "Fund"), which is operated and maintained by the Trust for
the benefit of the holders of shares of its Gateway Small Cap Index Fund and
Star Bank, N.A. (the "Custodian"), a national banking association having its
principal office and place of business at Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202, which Agreement provides for the furnishing of custodian
services to the Fund.

WITNESSETH:

that for and in consideration of the mutual promises hereinafter set
forth the Trust, on behalf of the Fund, and the Custodian agree as follows:

ARTICLE I

DEFINITIONS
-----------

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

1. "Authorized Person" shall be deemed to include the Chairman,
President, Treasurer, Secretary and Assistant Treasurer and Assistant Secretary
or any other person, whether or not any such person is an officer or employee of
the Trust, duly authorized by the Board of Trustees of the Trust to give Oral
Instructions and Written Instructions on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time, subject in each case to any
limitations on the authority of such person as set forth in Appendix A or any
such Certificate

2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees, provided the Custodian has received a
certified copy of a resolution of Board of Trustees of the Corporation
specifically approving deposits in the Book-Entry System.

3. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is signed on behalf of the Fund by an officer of the Trust and
is actually received by the Custodian.

4. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person or clearing agency authorized to act
as a depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, provided that the Custodian has received
a certified copy of a resolution of the Board of Trustees of the Trust
specifically approving such other person or clearing agency as a depository.

<PAGE> 2

5. "Dividend and Transfer Agent" shall mean the dividend and transfer
agent active, from time to time, in such capacity pursuant to a written
agreement with the Fund, changes in which the Trust shall immediately report to
the Custodian in writing.

6. "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to principal and/or
interest by the government of the United States or agencies or instrumentalities
thereof, commercial paper, obligations (including certificates of deposit,
bankers' acceptances, repurchase and reverse repurchase agreements with respect
to the same) and bank time deposits of domestic banks that are members of
Federal Deposit Insurance Corporation, and short-term corporate obligations
where the purchase and sale of such securities normally require settlement in
federal funds or their equivalent on the same day as such purchase or sale.

7. "Officers" shall be deemed to include the Chairman, the President, the
Secretary, the Treasurer, the Assistant Treasurer, and Assistant Secretary of
the Trust listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time.

8. "Oral Instructions" shall mean oral instructions actually received by
the Custodian from an Authorized Person (or from a person which the .Custodian
reasonably believes in good faith to be an Authorized Person) and confirmed by
Written Instructions from Authorized Persons in such manner so that such Written
Instructions are received by the Custodian on the next business day.

9. "Prospectus" shall mean the Fund's currently effective prospectus and
statement of additional information, as filed with and declared effective by the
Securities and Exchange Commission.

10. "Security or Securities" shall mean Money Market Securities, common
or preferred stocks, options, bonds, debentures, corporate debt securities,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or subscribe for
the same, or evidencing or representing any other rights or interest therein or
any property or assets.

11. "Written Instructions" shall mean communication actually received by
the Custodian from one Authorized Person or from one person which the Custodian
reasonably believes in good faith to be an Authorized Person in writing or by
telex or any other such system whereby the receiver of such communication is
able to verify by codes or otherwise with a reasonable degree of certainty the
authenticity of the senders of such communication.

<PAGE> 3

ARTICLE II

APPOINTMENT OF CUSTODIAN
------------------------

1. The Trust, acting for and on behalf of the Fund, hereby constitutes
and appoints the Custodian as custodian of all the Securities and monies at any
time owned by the Fund during the period of this Agreement (the "Fund Assets").

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

ARTICLE III

DOCUMENTS TO BE FURNISHED BY THE TRUST
--------------------------------------

The Trust hereby agrees to furnish to the Custodian the following
documents:

1. A copy of its Agreement and Declaration of Trust (the "Declaration of
Trust") certified by its Secretary.

2. A copy of its By-Laws certified by its Secretary.

3. A copy of the resolution of its Board of Trustees appointing the
Custodian certified by its Secretary.

4. A copy of the most recent Prospectus of the Trust.

5. A Certificate of the President and Secretary set g forth the names and
signatures of the present officers of the Trust.

ARTICLE IV

CUSTODY OF CASH AND SECURITIES
------------------------------

1. The Trust will deliver or cause to be delivered to the Custodian all
Fund Assets, including cash received for the issuance of its shares, at any time
during the period of this Agreement. The Custodian will not be responsible for
such Fund Assets until actually received by it. Upon such receipt, the
Custodians hold in safekeeping and physically segregate at all times from the
property of any other persons, firms or corporations all Fund Assets received by
it from or for the account of the Fund. The Custodian will be entitled to
reverse any credits made on the Fund's behalf where such credits have been
previously made and monies are not finally collected within 90 days of the
making of such credits. The Custodian is hereby authorized by the Trust, acting
on behalf of the Fund, to actually deposit any Fund Assets in the Book-Entry
System or in a Depository, provided, however, that the Custodian shall always be
accountable to the Trust for the Fund Assets so deposited. Fund Assets deposited
in the Book-Entry System or the Depository will be represented in accounts which
include only assets held by the Custodian

<PAGE> 4

for customers, including but not limited to accounts in which the Custodian acts
in a fiduciary or representative capacity.

2. The Custodian shall credit to a separate account or accounts in the
name of the Fund all monies received by it for the account of the Fund, and
shall disburse the same only:

(a) In payment for Securities purchased for the account of the
Fund, as provided in Article V;

(b) In payment of dividends or distributions, as provided in
Article VI hereof;

(d) In payment for shares of the Fund redeemed by it, as provided
in Article VII hereof;

(e) Pursuant to Certificates (i) directing payment and setting
forth the name and address of the person to whom the payment is to be made, the
amount of such payment and the purpose for which payment is to be made (the
Custodian not being required to question such direction) or (ii) if reserve
requirements are established for the Fund by law or by valid regulation,
directing the Custodian to deposit a specified amount of collected funds in the
form of U.S. dollars at a specified Federal Reserve Bank and stating the purpose
of such deposit; or

(f) In reimbursement of the expenses and liabilities of the
Custodian, as provided in paragraph 10 of Article IX hereof.

3. Promptly after the close of business on each day the fund is open and
valuing its portfolio. The Custodian shall furnish the Trust with a detailed
statement of monies held for the Fund under this Agreement and with
confirmations and a summary of all transfers to or from the account of the Fund
during said day. Where Securities are transferred to the account of the Fund
without physical delivery, the Custodian shall also identify as belonging to the
Fund a quantity of Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the Custodian's account on
the books of the Book-Entry System or the Depository. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement of
the Securities held for the Fund under this Agreement.

4. All Securities held for the Fund, which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Custodian in that form; all other Securities held for the Fund
may be registered in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to time
determine, or in the name of the Book-Entry System or the Depository or their
successor or successors, or their nominee or nominees. The Trust agrees to
furnish to the Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository,
any Securities which it may hold for the account of the Fund and which may from
time to time be registered in the name of the Fund. The Custodian shall hold all
such Securities which are not held in the Book-Entry System by the Depository or
a Sub-Custodian in a separate

<PAGE> 5

account or accounts in the name of the Fund segregated at all times from those
of any other fund maintained and operated by the Trust and from those of any
other person or persons.

5. Unless otherwise instructed to the contrary by a Certificate, the
Custodian shall with respect to all Securities held for the Fund in accordance
with this Agreement:

(a) Collect all income due or payable to the Fund with respect to
the Fund Assets;

(b) Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, or retired, or otherwise
become payable;

(d) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority, including any foreign taxing
authority, now or hereafter in effect; and

(e) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of the
Fund all rights and similar securities issued with respect to any Securities
held by the Custodian hereunder.

6. Upon receipt of a Certificate and not otherwise, the Custodian
directly or through the use of the Book-Entry System or the Depository shall:

(a) Execute and deliver to such persons as may be designated in
such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities may be exercised;

(b) Deliver any Securities held for the Fund in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;

(c) Deliver any Securities held for the account of the Fund to any
protective committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery; and

(d) Make such transfers or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund.

7. The Custodian shall promptly deliver to the Trust all notices, proxy
material and executed but unvoted proxies pertaining to shareholder meetings of
Securities held by the Fund. The Custodian shall not vote or authorize the
voting of any Securities or give any consent, waiver or approval with respect
thereto unless so directed by a Certificate or Written Instruction.

<PAGE> 6

8. The Custodian shall promptly deliver to the Trust all material
received by the Custodian and pertaining to Securities held by the Fund with
respect to tender or exchange offers, calls for redemption or purchase,
expiration of rights, name changes, stock splits and stock dividends, or any
other activity involving ownership rights in such Securities.

ARTICLE V

PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------

1. Promptly after each purchase of Securities by the Fund, the Trust
shall deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, a Certificate or Written Instructions,
and (ii) with respect to each purchase of Money Market Securities, Written
Instructions, a Certificate or Oral Instructions, specifying with respect to
each such purchase: (a) the name of the issuer and the title of the Securities,
(b) the principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person from whom or the
broker through whom the purchase was made. The Custodian shall upon receipt of
Securities purchased by or for the Fund, pay out of the monies held for the
account of the Fund the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Certificate, Written Instructions
or Oral Instructions.

2. Promptly after each sale of Securities by the Trust for the account of
the Fund, the Corporation shall deliver to the Custodian (i) with respect to
each sale of Securities which are not Money Market Securities, a Certificate or
Written Instructions, and (ii) with respect to each sale of Money Market
Securities, Written Instructions, a Certificate or Oral Instructions, specifying
with respect to each such sale: (a) the name of the issuer and the title of the
Security, (b) the principal amount sold, and accrued interest, if any, (c) the
date of sale, (d) the sale price per unit, (e) the total amount payable to the
Fund upon such sale and (f ) the name of the broker through whom or the person
to whom the sale was made. The Custodian shall deliver the Securities upon
receipt of the total amount payable to the Fund upon such sale, provided that
the same conforms to the total amount payable as set forth in such Certificate,
Written Instructions or Oral Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.

3. Promptly after the time as of which the Trust, on behalf of the Fund,
either -

(a) writes an option on Securities or writes a covered put option
in respect of a Security, or

(b) notifies the Custodian that its obligations in respect of any
put or call option, as described in the Trust's Prospectus, require that the
Fund deposit Securities or additional Securities with the Custodian, specifying
the type and value of Securities required to be so deposited, or

<PAGE> 7

(c) notifies the Custodian that its obligations in respect of any
other Security, as described in the Fund's Prospectus, require that the Fund
deposit Securities or additional Securities with the Custodian, specifying the
type and value of Securities required to be so deposited, the Custodian will
cause to be segregated or identified as deposited, pursuant to the Fund's
obligations as set forth in the Prospectus, Securities of such kinds and having
such aggregate values as are required to meet the Fund's obligations in respect
thereof.

The Trust will provide to the Custodian as of the end of each trading
day, the market value of the Fund's option liability and the market value of its
portfolio of common stocks.

4. On contractual settlement date, the account of the Fund win be charged
for all purchases settling on that day, regardless of whether or not delivery is
made. On contractual settlement date, sale proceeds will likewise be credited to
the account of the Fund irrespective of delivery.

In the case of "sale fails", the Custodian may request the assistance of
the Fund in making delivery of the failed Security.

ARTICLE VI

PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
-------------------------------------

1. The Trust shall furnish to the Custodian a copy of the resolution of
the Board of Trustees, certified by the Secretary, either (i) setting forth the
date of the declaration of any dividend or distribution in respect of shares of
the Fund, the date of payment thereof, the record date as of which Fund
shareholders entitled to payment shall be determined, the amount payable per
share to Fund shareholders of record as of that date and the total amount to be
paid by the Dividend and Transfer Agent of the Fund on the payment date, or (ii)
authorizing the declaration of dividends and distributions in respect of shares
of the Fund on a daily basis and authorizing the Custodian to rely on Written
Instructions or a Certificate setting forth the date of the declaration of any
such dividend or distribution, the date of payment thereof, the record date as
of which Fund shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date and the total
amount to be paid by the Dividend and Transfer Agent on the payment date.

2. Upon the payment date specified in such resolution, Written
Instructions or Certificate, as the case maybe, the Custodian shall arrange for
such payments to be made by the Dividend and Transfer Agent out of monies held
for the account of the Fund.

ARTICLE VII

SALE AND REDEMPTION OF SHARES OF THE FUND
-----------------------------------------

1. The Custodian shall receive and credit to the account of the Fund such
payments for shares of the Fund issued or sold from time to time as are received
from the distributor for the Fund's shares, from the Dividend and Transfer Agent
of the Fund, or from the Trust.

<PAGE> 8

2. Upon receipt of Written Instructions, the Custodian shall arrange for
payment of redemption proceeds to be made by the Dividend and Transfer Agent out
of the monies held for the account of the Fund in the total amount specified in
the Written Instructions.

3. Notwithstanding the above provisions regarding the redemption of any
shares of the Fund, whenever shares of the Fund are redeemed pursuant to any
check redemption privilege which may from time to time be offered by the Fund,
the Custodian, unless otherwise subsequently instructed by Written Instructions
shall, upon receipt of any Written Instructions setting forth that the
redemption is in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of such check redemption
privilege out of the money held in the account of the Fund for such purposes.

ARTICLE VIII

INDEBTEDNESS
------------

In connection with any borrowings, the Trust, on behalf of the Fund, will
cause to be delivered to the Custodian by a bank or broker (including the
Custodian, if the borrowing is from the Custodian), requiring Securities as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank or broker setting forth the amount which such bank or
broker will loan to the Fund a against delivery of a stated amount of
collateral. The Trust shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the name of the bank or
broker, (b) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Trust, acting on behalf of the Fund, or other loan agreement, (c) the date and
time, if known, on which the loan is to be entered into, (d) the date on which
the loan becomes due and payable, (e) the total amount payable to the Fund on
the borrowing date, (f) the market value of Securities collateralizing the loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities and (g) a statement that such loan
is in conformance with the Investment Company Act of 1940 and the Fund's then
current Prospectus. The Custodian shall deliver on the borrowing date specified
in a Certificate the specified collateral and the executed promissory note, if
any, against delivery by the lending bank or broker of the total amount of the
loan payable provided that the same conforms to the total amount payable as set
forth in the Certificate. The Custodian may, at the option of the lending bank
or broker, keep such collateral in its possession, but such collateral shall be
subject to all rights therein given the lending bank or broker, by virtue of any
promissory note or loan agreement. The Custodian shall deliver in the manner
directed by the Trust from time to time such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Trust shall cause all Securities released from
collateral status to be returned directly to the Custodian and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Trust fails to specify in a Certificate or Written
Instructions the name of the issuer, the title and number of shares or the
principal amount of any particular Securities to be delivered as collateral by
the Custodian, the Custodian shall not be under any obligation to deliver any
Securities. The Custodian may require such reasonable conditions with respect to
such collateral and its dealings with third-party lenders as it may deem
appropriate.

<PAGE> 9

ARTICLE IX

CONCERNING THE CUSTODIAN
------------------------

1. Except as otherwise provided herein, the Custodian shall not be liable
for any loss or damage, including counsel fees, resulting from its action or
omission to act or otherwise, except for any such loss or damage arising out of
its own negligence or willful misconduct. The Trust, on behalf of the Fund and
only from Fund Assets (or insurance purchased by the Trust with respect to its
liabilities on behalf of the Fund hereunder), shall defend, indemnify and hold
harmless the Custodian and its directors, officers, employees and agents with
respect to any loss, claim, liability or cost (including reasonable attorneys'
fees) arising or alleged to arise from or relating to the Trust's duties with
respect to the Fund hereunder or any other action or inaction of the Trust or
its Directors, officers, employees or agents as to the Fund, except such as may
arise from the negligent action, omission or willful misconduct of the
Custodian, its directors, officers, employees or agents. The Custodian shall
defend, indemnify and hold harmless the Trust and its Trustees, officers,
employees or agents with respect to any loss, claim, liability or cost
(including reasonable attorneys' fees) arising or alleged to arise from or
relating to the Custodian's duties with respect to the Fund hereunder or any
other action or inaction of the Custodian or its directors, officers, employees,
agents, nominees or Sub-Custodians as to the Fund, except such as may arise from
the negligent action, omission or willful misconduct of the Trust, its Trustees,
officers, employees or agents. The Custodian may, with respect to questions of
law apply for and obtain the advice and opinion of counsel to the Trust at the
expense of the Fund, or of its own counsel at its own expense, and shall be
fully protected with respect to anything done or omitted by it in good faith
conformity with the advice or opinion of counsel to the Trust, and shall be
similarly protected with respect to anything done or omitted by it in good faith
in conformity with advice or opinion of its counsel, unless counsel to the Fund
shall, within a reasonable time after being notified of legal advice received by
the Custodian, have a differing interpretation of such question of law. The
Custodian shall be liable to the Trust for any proximate loss or damage
resulting from the use of the Book-Entry System or any Depository arising by
reason of any negligence, misfeasance or misconduct on the part of the Custodian
or any of its employees, agents, nominees, or Sub-Custodian but not for any
special, incidental, consequential, or punitive damages; provided, however, that
nothing contained herein shall preclude recovery by the Trust, on behalf of the
Fund, of principal and of interest to the date of recovery on, Securities
incorrectly omitted from the Fund's account or penalties imposed on the Trust,
in connection with the Fund, for any failures to deliver Securities.

In any case in which one party hereto may be asked to indemnify the other
or hold the other harmless, the party from whom indemnification is sought (the
"Indemnifying Party") shall be advised of all pertinent facts concerning the
situation in question, and the party claiming a right to indemnification (the
"Indemnified Party") will use reasonable care to identify and notify the
Indemnifying Party promptly concerning any situation which presents or appears
to present a claim for indemnification against the Indemnifying Party. The
Indemnifying Party shall have the option to defend the Indemnified Party against
any claim which may be the subject of the indemnification, and in the event the
Indemnifying Party so elects, such defense shall be conducted by counsel chosen
by the Indemnifying Party and satisfactory to the Indemnified Party and the
Indemnifying Party will so notify the Indemnified Party and thereupon such
Indemnifying Party shall take over the complete defense of the claim and the
Indemnifying Party

<PAGE> 10

shall sustain no further legal or other expenses in such situation for which
indemnification has been sought under this paragraph, except the expenses of any
additional counsel retained by the Indemnified Party. In no case shall any party
claiming the right to indemnification confess any claim or make any compromise
in any case in which the other party has been asked to indemnify such party
(unless such confession or compromise is made with such other party's prior
written consent).

The obligations of the parties hereto under this paragraph shall survive
the termination of this Agreement.

2. Without limiting the generality of the foregoing, the Custodian,
acting in the capacity of Custodian hereunder, shall be under no obligation to
inquire into, and shall not be liable for:

(a) The validity of the issue of any Securities purchased by or
for the account of the Fund, the legality of the purchase thereof, or the
propriety of the amount paid therefor;

(b) The legality of the sale of any Securities by or for the
account of the Fund, or the propriety of the amount for which the same are sold;

(c) The legality of the issue or sale of any shares of the Fund,
or the sufficiency of the amount to be received therefor;

(d) The legality of the redemption of any shares of the Fund, or
the propriety of the amount to be paid therefor;

(e) The legality of the declaration or payment of any dividend by
the Trust in respect of shares of the Fund;

(f) The legality of any borrowing by the Trust, on behalf of the
Fund, using Securities as collateral;

(g) The sufficiency of any deposit made pursuant to a Certificate
described in clause (ii) of paragraph 2(e) of Article IV hereof,

3. The Custodian shall not be liable for any money or collected funds in
U.S. dollars deposited in a Federal Reserve Bank in accordance with a
Certificate described in clause (ii) of paragraph 2(e) of Article IV hereof, nor
be liable for or considered to be the Custodian of any money, whether or not
represented by any check, draft, or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or Depository.

4. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Dividend and
Transfer Agent of the Fund nor to take any action to effect payment or
distribution by the Dividend and Transfer Agent of the Fund of any amount paid
by the Custodian to the Dividend and Transfer Agent of the Fund in accordance
with this Agreement.

<PAGE> 11

5. Income due or payable to the Fund with respect to Fund Assets will be
credited to the account of the Fund as follows:

(a) Dividends will be credited on the first business day following
payable date irrespective of collection.

(b) Interest on fixed rate municipal bonds and debt securities
issued or guaranteed as to principal and/or interest by the government of the
United States or agencies or instrumentalities thereof (excluding securities
issued by the Government National Mortgage Association) will be credited on
payable date irrespective of collection.

(c) Interest on fixed rate corporate debt securities will be
credited on the first business day following payable date irrespective of
collection.

(d) Interest on variable and floating rate debt securities and
debt securities issued by the Government National Mortgage Association will be
credited upon the Custodian's receipt of funds.

(e) Proceeds from options will be credited upon the Custodian's
receipt of funds.

6. Notwithstanding paragraph 5 of this Article IX, the Custodian shall
not be under any duty or obligation to take action to effect collection of any
amount, if the Securities upon which such amount is payable are in default, or
if payment is refused after due demand or presentation, unless and until (i) it
shall be directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and expenses in
connection with any such action or, at the Custodian's option, prepayment.

7. The Custodian may appoint one or more financial or banking
institutions, as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, but not limited to, banking institutions located in
foreign countries, of Securities and monies at any time owned by the Fund, upon
terms and conditions approved in a Certificate. Current Depository(s) and
Sub-Custodian (s) are noted in Appendix B. The Custodian shall not be relieved
of any obligation or liability under this Agreement in connection with the
appointment or activities of such Depositories or Sub-Custodians.

8. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account of
the Fund are such as properly may be held by the Fund under the provisions of
the Articles of Incorporation and the Trust's By-Laws.

9. The Custodian shall treat all records and other information relating
to the Trust, the Fund and the Fund Assets as confidential and shall not
disclose any such records or information to any other person unless (a) the
Trust shall have consented thereto in writing or (b) such disclosure is
compelled by law.

10. The Custodian shall be entitled to receive and the Trust agrees to
pay to the Custodian, for the Fund's account from Fund Assets only, such
compensation as shall be

<PAGE> 12

determined pursuant to Appendix C attached hereto, or as shall be determined
pursuant to amendments to such Appendix approved by the Custodian and the Trust,
on behalf of the Fund. The Custodian shall be entitled to charge against any
money held by it for the account of the Fund the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement as determined by agreement
of the Custodian and the Trust or by the final order of any court or arbitrator
having jurisdiction and as to which all rights of appeal shall have expired. The
expenses which the Custodian may charge against the account of the Fund include,
but are not limited to, the expenses of Sub-Custodians incurred in settling
transactions involving the purchase and sale of Securities of the Fund.

11. The Custodian shall be entitled to rely upon any Certificate. The
Custodian shall be entitled to rely upon any Oral Instructions and any Written
Instructions actually received by the Custodian pursuant to Article IV or V
hereof. The Trust agrees to forward to the Custodian Written Instructions from
Authorized Persons confirming Oral Instructions in such manner so that such
Written Instructions are received by the Custodian, whether by hand delivery,
telex or otherwise, on the first business day following the day on which such
Oral Instructions are given to the Custodian. The Trust agrees that the fact
that such confirming instructions are not received by the Custodian shall in no
way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Trust. The Trust agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions.

12. The Custodian will (a) set up and maintain proper books of account
and complete records of all transactions in the accounts maintained by the
Custodian hereunder in such manner as will meet the obligations of the Fund
under the Investment Company Act of 1940, with particular attention to Section
31 thereof and Rules 31 a-1 and 31 a-2 thereunder, and (b) preserve for the
periods prescribed by applicable Federal statute or regulation an records
required to be so preserved. The books and records of the Custodian shall be
open to inspection and audit at reasonable times and with prior notice by
Officers and auditors employed by the Trust.

13. The Custodian and its Sub-Custodians shall promptly send to the
Trust, for the account of the Fund, any report received on the systems of
internal accounting control of the Book-Entry System or the Depository and with
such reports on their own systems of internal accounting control as the Trust
may reasonably request from time to time.

14. The Custodian performs only the services of a custodian and shall
have no responsibility for the management, investment or reinvestment of the
Securities from time to time owned by the Fund. The Custodian is not a selling
agent for shares of the Fund and performance of its duties as a custodial agent
shall not be deemed to be a recommendation to the Custodian's depositors or
others of shares of the Fund as an investment.

<PAGE> 13

ARTICLE X

TERMINATION
-----------

1. Either of the parties hereto may terminate this Agreement for any
reason by giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than ninety (90) days after the date
of giving of such notice. If such notice is given by the Trust, on behalf of the
Fund, it shall be accompanied by a copy of a resolution of the Board of Trustees
of the Trust, certified by the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In the event such notice is
given by the Custodian, the Trust shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of its Board of Trustees,
certified by the Secretary, designating a successor custodian or custodians to
act on behalf of the Fund. In the absence of such designation by the Trust, the
Custodian may designate a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus, and
undivided profits. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian, provided that it has received a notice of
acceptance by the successor custodian, shall deliver, on that date, directly to
the successor custodian all Securities and monies then owned by the Fund and
held by it as Custodian. Upon termination of this Agreement, the Trust shall pay
to the Custodian on behalf of the Fund such compensation as may be due as of the
date of such termination. The Trust agrees on behalf of the Fund that the
Custodian shall be reimbursed for its reasonable costs in connection with the
termination of this Agreement.

2. If a successor custodian is not designated by the Trust, on behalf of
the Fund, or by the Custodian in accordance with the preceding paragraph, or the
designated successor cannot or will not serve, the Trust shall upon the delivery
by the Custodian to the Trust of all Securities (other than Securities held in
the Book-Entry System which cannot be delivered to the Trust) and monies then
owned by the Fund, other than monies deposited with a Federal Reserve Bank
pursuant to a Certificate described in clause (ii) of paragraph 2(e) of Article
IV, be deemed to be the custodian for the Fund, and the Custodian shall thereby
be relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book-Entry System which
cannot be delivered to the Trust to hold such Securities hereunder in accordance
with this Agreement.

ARTICLE XI

MISCELLANEOUS
-------------

1. Appendix A sets forth the names and the signatures of all Authorized
Persons. The Trust agrees to furnish to the Custodian, on behalf of the Fund, a
new Appendix A in form similar to the attached Appendix A, if any present
Authorized Person ceases to be an Authorized Person or if any other or
additional Authorized Persons are elected or appointed. Until such new Appendix
A shall be received, the Custodian shall be fully protected in acting under the

<PAGE> 14

provisions of this Agreement upon Oral Instructions or signatures of the present
Authorized Persons as set forth in the last delivered Appendix A.

2. No recourse under any obligation of this Agreement or for any claim
based thereon shall be had against any organizer, shareholder, Officer, Trustee,
past, present or future as such, of the Trust or of any predecessor or
successor, either directly or through the Trust or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law or
equity, or by the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that this Agreement and the obligations
thereunder are enforceable solely against Fund Assets, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, Officers, Trustees of the Trust or of any predecessor
or successor, or any of them as such, because of the obligations contained in
this Agreement or implied therefrom and that any and all such liability is
hereby expressly waived and released by the Custodian as a condition of, and as
a consideration for, the execution of this Agreement.

3. The obligations set forth in this Agreement as having been made by the
Trust have been made by the Trustees of the Trust, acting as such Trustees for
and on behalf of the Fund, pursuant to the authority vested in them under the
laws of the State of Ohio, the Declaration of Trust and the By-Laws of the
Trust. This Agreement has been executed by Officers of the Trust as officers,
and not individually, and the obligations contained herein are not binding upon
any of the Trustees, Officers, agents or holders of shares, personally, but bind
only the Trust and then only to the extent of Fund Assets.

4. Such provisions of the Prospectus of the Fund and any other documents
(including advertising material) specifically mentioning the Custodian (other
than merely by name and address) shall be reviewed with the Custodian by the
Trust.

5. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at Star
Bank Center, 425 Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention
Trust Custody Services Department, or at such other place as the Custodian may
from time to time designate in writing.

6. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Trust shall be sufficiently given when
delivered to the Trust or on the second business day following the time such
notice is deposited in the U.S. mail postage prepaid and addressed to the Trust
at its office at Building 400, Park 50 TechneCenter, Milford, Ohio 45150, or at
such other place as the Trust may from time to time designate in writing.

7. This Agreement with the exception of Appendices A & B may not be
amended or modified in any manner except by a written agreement executed by both
parties with the same formality as this Agreement, and authorized and approved
by a resolution of the Board of Trustees of the Trust.

8. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable

<PAGE> 15

by the Trust or by the Custodian, and no attempted assignment by the Trust or
the Custodian shall be effective without the written consent of the other party
hereto.

9. This Agreement shall be construed in accordance with the laws of the
State of Ohio

10. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts together,
constitute only one instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of the day
and year first above written.

ATTEST: The Gateway Trust, on behalf of
The Gateway Small Cap Index Fund
/s/ Karen M. McLaughlin By: /s/ Walter G. Sall

ATTEST: Star Bank, N.A.
/s/ Nancy V. Kelly By: /s/ Lynnette C. Gibson
Vice President & Trust Officer

<PAGE> 16

APPENDIX A

<TABLE>
<CAPTION>
Authorized Persons Specimen Signatures
------------------ -------------------

<S> <C> <C>
Chairman: Walter G. Sall /s/ Walter G. Sall

President: Peter W. Thayer /s/ Peter W. Thayer

Secretary/ reasurer: Peter W. Thayer /s/ Peter W. Thayer

Adviser Employees: *Lynn Harkness /s/ Lynn Harkness
</TABLE>

*Authority restricted; does not include: (i) authority to sign checks on Fund
accounts or make other withdrawals or distributions of Fund monies or (ii) such
other authority as may be withheld or limited by a Certificate or Written
Instructions signed by an Officer of the Trust and delivered to the Custodian.

<PAGE> 17

APPENDIX B

The following Depository(s) and Sub-Custodian (s) are employed currently
by Star Bank, N.A. for securities processing and control...

The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004

The Federal Reserve Bank
Cincinnati and Cleveland Branches

Bankers Trust Company
16 Wall Street
New York, NY 10005

<PAGE> 18

APPENDIX C

STAR BANK, N.A.

CUSTODY COMPENSATION SCHEDULE FOR
THE GATEWAY TRUST

Star Bank, N.A., as Custodian, will receive annual compensation for services
according to the terms of the following schedule:

<TABLE>
<S> <C> <C> <C>
1) Monthly Base Fee: $400.00 Per Fund

2) Portfolio Transaction Fees:

a) For each repurchase agreement transaction $ 7.00

b) For each portfolio transaction processed
through DTC or Federal Reserve 10.00

c) For each portfolio transaction processed
through PTC or our New York Custodian 20.00

d) For each foreign security transaction 50.00

e) For each option/future contract written,
exercised or expired 35.00

f) For each disbursement (Fund Expenses) 5.00
</TABLE>

A transaction is a purchase/sale of a security, free
receipt/free delivery (excludes initial conversion), maturity,
tender or exchange.

3) Out-of-Pocket Expenses

The Custodian is to be reimbursed for all out-of-pocket expenses
including, but not limited to, postage, insurance, and long
distance telephone charges.

All Compensation is payable monthly.

<PAGE> 1
Exhibit 8(c)

CUSTODY AGREEMENT
-----------------

Agreement made as of the 14th day of October, 1994, between The Gateway
Trust (the "Trust"), a business trust organized under and pursuant to Chapter
1746 of the Ohio Revised Code and having its office at Building 400, Park 50
TechneCenter, Milford, Ohio 45150 acting for and on behalf of The Gateway
Cincinnati Fund (the "Fund"), which is operated and maintained by the Trust for
the benefit of the holders of shares of its Gateway Cincinnati Fund and Star
Bank, N.A. (the "Custodian"), a national banking association having its
principal office and place of business at Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202, which Agreement provides for the furnishing of custodian
services to the Fund.

WITNESSETH:

that for and in consideration of the mutual promises hereinafter set forth the
Trust, on behalf of the Fund, and the Custodian agree as follows:

ARTICLE I

DEFINITIONS
-----------

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

1. "Authorized Person" shall be deemed to include the Chairman,
President, Secretary/Treasurer. or any other person, whether or not any such
person is an officer or employee of the Trust, duly authorized by the Board of
Trustees of the Trust to give Oral Instructions and Written Instructions on
behalf of the Fund and listed in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the Custodian from time to time,
subject in each case to any limitations on the authority of such person as set
forth in Appendix A or any such Certificate

2. "Book-Entry system" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees provided the Custodian has received a
certified copy of a resolution of Board of Trustees of the Corporation
specifically approving deposits in the Book-Entry System.

4. "Depository" shall mean The Depository Trust Company ("DTC") a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person or clearing agency authorized to act
as a depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, provided that the Custodian has received
a certified copy of a resolution of the Board of Trustees of the Trust
specifically approving such other person or clearing agency as a depository.

<PAGE> 2

6. "Money Market Security" shall be deemed to include, without limitation
debt obligations issued or guaranteed as to principal and/or interest by the
government of the United States or agencies or instrumentalities thereof,
commercial paper, obligations (including certificates of deposit. bankers'
acceptances, repurchase and reverse repurchase agreements with respect to the
same) and bank time deposits of domestic banks that are members of Federal
Deposit Insurance Corporation, and short-term corporate obligations where the
purchase and sale of such securities normally require settlement in federal
funds or their equivalent on the same day as such purchase or sale.

7. "Officers" shall be deemed to include the Chairman, the President, the
Secretary, the Treasurer, the Controller, and Senior Vice President of the Trust
listed in the Certificate annexed hereto as Appendix A or such other Certificate
as may be received by the Custodian from time to time.

8. "Oral Instructions" shall mean oral instructions actually received by
the Custodian from an Authorized Person (or from a person which the Custodian
reasonability believes in good faith to be an Authorized Person) and confirmed
by Written Instructions from Authorized Persons in such manner so that such
Written Instructions are received by the Custodian on the next business day.

9. "Prospectus" shall mean the Fund's currently effective prospectus and
statement of additional information, as filed with and declared effective by the
Securities and Exchange Commission

10. "Security or Securities" shall mean Money Market Securities, common
or preferred stocks, options, bonds, debentures, corporate debt securities,
notes mortgages or other obligations, and any certificates receipts, warrants or
other instruments representing rights to receive, purchase or subscribe for the
same or evidencing or representing any other rights or interest therein, or any
property or assets.

<PAGE> 3

ARTICLE II

APPOINTMENT OF CUSTODIAN
------------------------

1. The Trust, acting for and on behalf of the Fund, hereby constitutes
and appoints the Custodian as of all the Securities and monies at any time owned
by the Fund during the period of this Agreement (the "Fund Assets")

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

ARTICLE III

DOCUMENTS TO BE FURNISHED BY THE TRUST
--------------------------------------

The Trust hereby agrees to furnish to the Custodian the following
documents:

1. A copy of its Agreement and "Declaration. of Trust" certified by its
Secretary.

2. A copy of its By-Laws certified by its Secretary

3. A copy of the resolution of its Board of Trustees appointing the
Custodian certified by its Secretary

4. A copy of the most recent Prospectus of the Trust

5. A Certificate of the President and Secretary setting forth the names
and signatures of the present Officers of the Trust

ARTICLE IV

CUSTODY OF CASH AND SECURITIES
------------------------------

1. The Trust will deliver or cause. to be delivered to the Custodian all
Fund Assets, including cash received for the issuance of its shares, at any time
during the period of this Agreement. The Custodian will not be responsible for
such Fund Assets until actually received by it. Upon such receipt, the Custodian
shall hold in safekeeping and physically segregate at all times from the
property of any other persons, firms or corporations all Fund Assets received by
it from or for the account of the Fund. The Custodian will be entitled to
reverse any credits made on the Funds behalf where such credits have been
previously made and monies are not finally collected within 90 days of the
making of such credits. The Custodian is hereby authorized by the Trust, acting
on behalf of the Fund, to actually deposit any Fund Assets in the Book-Entry
System or in a Depository, provided, however, that the Custodian shall always be
accountable to the Trust for the Fund Assets so deposited. Fund Assets deposited
in the Book-Entry System or the Depository will be represented in accounts which
include only assets held by the Custodian for customers, including but not
limited to accounts in which the Custodian acts in a fiduciary or representative
capacity.

<PAGE> 4

2. The Custodian shall credit to a separate account or accounts in the
name of the Fund all monies received by it for the account of the Fund, and
shall disburse the same only:

(a) In payment for Securities purchased for the account of the
Fund, as provided in Article V;

(b) In payment of dividends or distributions as provided in
Article VI hereof;

(d) In payment for shares of the Fund redeemed by it, as provided
in Article VII hereof;

(f) In reimbursement of the expenses and liabilities of the
Custodian as provided in paragraph 10 of Article IX hereof.

3. Promptly after the close of business an each day the fund is open and
valuing its portfolio. The Custodian shall furnish the Trust with a detailed
statement of monies held for the Fund under this Agreement and with
confirmations and a summary of all transfers to or from the account of the Fund
during said day. When Securities are transferred to the account of the Fund
without physical delivery, the Custodian shall also identify as belonging to the
Fund a quantity of Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the Custodian's account on
the books of the Book-Entry System or the Depository. At least monthly and from
time to time the Custodian shall furnish the Trust with a detailed statement of
the Securities held for the Fund under this Agreement.

4. All Securities held for the Fund, which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Custodian in that form; all other Securities held for the Fund
may be registered in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to time
determine, or in the name of the Book-Entry System or the Depository or their
successor or successors, or their nominee or nominees. The Trust agrees to
furnish to the Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository,
any Securities which it may hold for the account of the Fund and which may from
time to time be registered in the name of the Fund. The Custodian shall hold all
such Securities which are not held in the Book-Entry System by the Depository or
a Sub-Custodian in a separate account or accounts in the name of the Fund
segregated at all times from those of any other fund maintained. and operated by
the Trust and from those of any other person or persons.

<PAGE> 5

5. Unless otherwise instructed to the contrary by a Certificate the
Custodian shall with respect to all Securities held for the Fund in accordance
with this Agreement:

(a) Collect all income due or payable to the Fund with respect to
the Fund Assets;

(b) Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, or retired, or otherwise
become payable;

(d) Execute, as Custodian any necessary declarations or
certificates of ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority, including any foreign taxing
authority, now or hereafter in effect; and

6. Upon receipt of a Certificate and not otherwise, the Custodian
directly or through the use of the Book-Entry System or the Depository shall:

(b) Deliver any Securities held for the Fund in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing. merger. consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;

8. The Custodian shall promptly deliver to the Trust all material
received by the Custodian and pertaining to Securities held by the Fund with
respect to tender or exchange

<PAGE> 6

offers, calls for redemption or purchase, expiration of rights, name changes,
stock splits and stock dividends, or any other activity involving ownership
rights in such Securities.

ARTICLE V

PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------

1. Promptly after each purchase of Securities by the Fund, the Trust
shall deliver to the Custodian (i) with respect to each purchase of Securities
which we not Money Market Securities, a Certificate or Written Instructions, and
(ii) with respect to each purchase of Money Market Securities, Written
Instructions, a Certificate or Oral Instructions, specifying with respect to
each such purchase: (a) the name of the issuer and the title of the Securities,
(b) the principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person, from whom or the
broker through whom the purchase was made. The Custodian shall upon receipt of
Securities purchase by or for the Fund, pay out of the monies held for the
account of the Fund the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Certificate, Written Instructions
or Oral Instructions.

2. Promptly after each sale of Securities by the Trust for the account of
the Fund, the Corporation shall deliver to the Custodian (i) with respect to
each sale of Securities which are not Money Market Securities, a Certificate or
Written Instructions, and (ii) with respect to each sale of Money Market
Securities, Written Instructions, a Certificate or Oral Instruction, specifying
with respect to each such sale: (a) the name of the issuer and the title of the
Security, (b) the principal amount sold, and accrued interest, if any, (c) the
of date of sale, (d) the sale price per unit, (e) the total amount payable to
the Fund upon such sale and (f) the name of the broker through whom or the
person to whom the sale was made. The Custodian shall deliver the Securities
upon receipt of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such
Certificate, Written. Instructions or Oral Instructions. Subject to the
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for Payment in
accordance with the customs prevailing among dealers in Securities.

3. Promptly after the time as of which the Trust, on behalf of the Fund.
either--

(a) writes an option on Securities or writes a covered put option
in respect of a Security, or

(b) notifies the Custodian that its obligations in respect of any
put or call option, as described in the Trust's Prospectus, require that the
Fund deposit, Securities or additional Securities with the Custodian, specifying
the type and value of Securities required to be so deposited, or

(c) notifies the Custodian that its obligations in respect of any
other Security, as described in the Fund's Prospectus, require that the Fund
deposit Securities or additional

<PAGE> 7

Securities with the Custodian, specifying the type and value of Securities
required to be so deposited,

the Custodian will cause to be segregated or identified as deposited, pursuant
to the Fund's obligations as set forth in the Prospectus, Securities of such
kinds and having such aggregate values as are required to meet the Fund's
obligations in respect thereof.

The Trust will provide to the Custodian, as of the end of each trading
day, the market value of the Fund's option liability and the market value of its
portfolio of common stocks.

4. On contractual settlement date, the account of the Fund will be
charged for all purchases settling on that day, regardless of whether or not
delivery is made. On contractual settlement date, sale proceeds will likewise be
credited to the account of the Fund irrespective of delivery.

In the case of "sale fails", the Custodian may request the assistance of
the Fund in making delivery of the failed Security.

ARTICLE VI

PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
-------------------------------------

1. The Trust shall furnish to the Custodian a copy of the resolution of the
Board of Trustees, certified by the secretary, either (i) setting forth the date
of the declaration of any dividend or distribution in respect of shares of the
Fund, the date of payment thereof, the record date as of which Fund shareholders
entitled to payment shall be determined. the amount payable per share to Fund
shareholders of record as of that date and the total amount to be paid by the
Dividend and Transfer Agent of the Fund on the payment date, or (ii) authorizing
the declaration of dividends and distributions in respect of shares of the Fund
on a daily basis and authorizing the Custodian to rely on Written Instructions
or a Certificate setting forth the date of the declaration of any such dividend
or distribution, the date of payment thereof, the record date as of which Fund
shareholders entitled to payment shall be determined, the amount payable per
share to Fund shareholders of record as of that date and the total amount to be
paid by the Dividend and Transfer Agent on the payment date.

2. Upon the payment date specified in such resolution, Written
Instructions or Certificate, as the case may be, the Custodian shall arrange for
such payments to be made by the Dividend and Transfer Agent out of monies held
for the account of the Fund.

<PAGE> 8

ARTICLE VII

SALE AND REDEMPTION OF SHARES OF THE FUND
-----------------------------------------

1. The Custodian shall receive and credit to the account of the Fund such
payments for share of the Fund issued or sold from time to time as are received
from the distributor for the Fund's shares, from the Dividend and Transfer Agent
of the Fund, or from the Trust.

ARTICLE VIII

INDEBTEDNESS
------------

In connection with any borrowings, the Trust, on behalf of the Fund, will
cause to be delivered to the Custodian by a bank or broker (including the
Custodian, if the borrowing is from the Custodian),. requiring Securities as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank or broker setting forth the amount which such bank or
broker will loan to the Fund against delivery of a stated amount of collateral.
The Trust shall promptly deliver to the Custodian a Certificate specifying with
respect to each such borrowing: (a) the name of the bank or broker, (b) the
amount and term of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Trust, acting on
behalf of the Fund, or other loan agreement, (c) the date and time, if known, on
which the loan is to be entered into, (d) the date on which the loan becomes due
and payable, (e) the total amount payable to the Fund on the borrowing date, (f)
the market value of Securities collateralizing the loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities and (g) a statement that such loan is in conformance with
the Investment Company Act of 1940 and the Fund's then current Prospectus. The
Custodian shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank or broker of the total amount of the loan payable provided
that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank or broker,
keep such collateral in its possession, but such collateral shall be subject to
all rights therein given the lending bank or broker, by virtue of any promissory
note or loan agreement. The Custodian shall deliver in the manner directed by
the Trust from time to time such Securities as additional collateral as may be
specified in a Certificate, to collateralize further any transaction described
in this paragraph. The Trust shall cause all Securities released from collateral
status, to be returned

<PAGE> 9

directly to the Custodian and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the Trust fails
to specify in a Certificate or Written Instructions the name of the issuer, the
title and number of shares or the principal amount of any particular Securities
to be delivered as collateral by the Custodian, the Custodian shall not be under
any obligation to deliver any Securities. The Custodian may require such
reasonable conditions with respect to such collateral and in its dealings with
third-party lenders as it may deem appropriate.

ARTICLE IX

CONCERNING THE CUSTODIAN
------------------------

1. Except as otherwise provided herein, the Custodian shall not be liable
for any loss or damage, including counsel fees, resulting from its action or
omission to act or otherwise, except for any such loss or damage arising out of
its, own negligence or willful misconduct. The Trust, on behalf of the Fund and
only from Fund Assets (or insurance purchased by the Trust with respect to its
liabilities on behalf of the Fund hereunder), shall defend. indemnify and hold
harmless the Custodian and its directors, officers, employees and agents with
respect to any loss, claim, liability or cost (including reasonable attorneys'
fees) arising or alleged to arise from or relating to the Trust's duties with
respect to the Fund hereunder or any other action or inaction of the Trust or
its Directors, officers, employees or agents as to the Fund, except such as may
arise from the negligent action, omission or willful misconduct of the
Custodian, its directors, officers, employees or agents. The Custodian shall
defend, indemnify and hold harmless the Trust and its Trustees, officers,
employees or agents with respect to any loss, claim, liability or cost
(including reasonable attorneys' fees) arising or alleged to arise from or
relating to the Custodian's duties with respect to the Fund hereunder or any
other action or inaction of the Custodian or its directors, officers, employees,
agents, nominees or Sub-Custodians as to the Fund, except such as may arise from
the negligent action, omission or willful misconduct of the Trust, its Trustees,
officers, employees or agents. The Custodian may, with respect to questions of
law apply for and obtain the advice and opinion of counsel to the Trust at the
expense of the Fund, or of its own counsel at its own expense, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with the advice or opinion of counsel to the Trust, and shall be
similarly protected with respect to anything done or omitted by it in good faith
in conformity with advice or opinion of its counsel, unless counsel to the Fund
shall, within a reasonable time after being notified of legal advice received by
the Custodian, have a differing interpretation of such question of law. The
Custodian shall be liable to the Trust for any proximate loss or damage
resulting from the use of the Book-Entry System or any Depository arising by
reason of any negligence, misfeasance or misconduct on the part of the Custodian
or any of its employees, agents, nominees or Sub-Custodians but not for any
special, incidental, consequential, or punitive damages; provided, however, that
nothing contained herein shall preclude recovery by the Trust, on behalf of the
Fund, of principal and of interest to the date of recovery on, Securities
incorrectly omitted from the Fund's account or penalties imposed on the Trust,
in connection with the Fund, for any failures to deliver Securities.

<PAGE> 10

to indemnification (the "Indemnified Party") will use reasonable care to
identify and notify the Indemnifying Party promptly concerning any situation
which presents or appears to present a claim for indemnification against the
Indemnifying Party. The Indemnifying Party shall have the option to defend the
Indemnified Party against any claim which may be the subject of the
indemnification, and in the event the Indemnifying Party so elects, such defense
shall be conducted by counsel chosen by the Indemnifying Party and satisfactory
to the Indemnified Party and the Indemnifying Party will so notify the
Indemnified Party and thereupon such Indemnifying Party shall take over the
complete defense of the claim and the Indemnifying Party shall sustain no
further legal or other expenses in such situation for which indemnification has
been sought under this paragraph., except the expenses of any additional counsel
retained by the Indemnified Party. In no means shall any party claiming the
right to indemnification confess any claim or make any compromise in any case in
which the other party has been asked to indemnify such party (unless such
confession or compromise is made with such other party's prior written consent).

The obligations of the parties hereto under this paragraph shall survive
the termination of this Agreement.

2. Without limiting the generality of the foregoing, the Custodian,
acting in the capacity of Custodian hereunder, shall be under no obligation to
inquire into, and shall not be liable for:

(a) The validity of the issue of any Securities purchased by or
for the account of the Fund, the legality of the purchase thereof, or the
propriety of the amount paid therefor;

(b) The legality of the sale of any Securities by or for the
account of the Fund, or the propriety of the amount for which the same are sold;

(c) The legality of the issue or sale of any shares of the Fund,
or the sufficiency of the amount to be received therefor,

(d) The legality of the redemption of any shares of the Fund, or
the propriety of the amount to be paid therefor;

(e) The legality of the declaration or payment of any dividend by
the Trust in respect of shares of the Fund;

(f) The legality of any borrowing by the Trust, on behalf of the
Fund, using Securities as collateral;

(g) The sufficiency of any deposit made pursuant to a Certificate
described in clause (ii) of paragraph 2(e) of Article IV hereof,

3. The Custodian shall not be liable for any money or collected funds in
U.S. dollars deposited in a Federal Reserve Bank in accordance with a
Certificate described in clause (ii) of paragraph 2(e) of Article IV hereof, nor
be up liable for or considered to be the Custodian of any money, whether or not
represented by any check, draft, or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actually receives and
collects

<PAGE> 11

such money directly or by the final crediting of the account representing the
Fund's interest at the Book-Entry System or Depository.

5. Income due or payable to the Fund with respect to Fund Assets will be
credited to the Fund as follows:

(a) Dividends will be credited an the first business day following
payable date irrespective of collection.

(c) Interest on fixed rate corporate debt securities will be
credited on the first business day following payable date irrespective of
collection.

(d) Interest on variable and floating rate debt securities and
debt securities issued by the Government National Mortgage Association will be
credited upon the Custodian's receipt of funds.

(e) Proceeds from options will be credited upon the Custodian's
receipt of funds

7. The Custodian may appoint one or more financial or banking
institutions, as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, not limited to, banking, institutions located in
foreign countries, of Securities and monies at any time owned by the Fund, upon
terms and conditions approved in a Certificate. Current Depository(s) and
Sub-Custodian(s) are noted in Appendix B. The Custodian shall not be relieved of
my obligation or liability under this Agreement in connection with the
appointment or activities of such Depositories or Sub-Custodians.

<PAGE> 12

10. The Custodian shall be entitled to receive and the Trust agrees to
pay to the Custodian. for the Fund's account from Fund Assets only, such
compensation as shall be determined pursuant to Appendix C attached hereto, or
as shall be determined pursuant to amendments to such Appendix approved by the
Custodian and the Trust, on behalf of the Fund. The Custodian shall be entitled
to charge against any money held by it for the account of the Fund the amount of
any loss, damage, liability or expense, including counsel fees, for which it
shall be entitled to reimbursement under the provisions of this Agreement as
determined by agreement of the Custodian and the Trust or by the final order of
any court or arbitrator having jurisdiction and as to which all rights of appeal
shall have expired. The expenses which the Custodian may charge against the
account of the Fund include, but are not limited to, the expenses of
Sub-Custodians incurred in settling transactions involving the purchase and sale
of Securities of the Fund.

11. The Custodian shall be entitled to rely upon any Certificate. The
Custodian shall be entitled to rely upon any Oral Instructions and any Written
instructions actually received by the Custodian pursuant to Article IV or V
hereof. The Trust agrees to forward to the Custodian Written Instructions from
Authorized Persons confirming Oral Instructions in such manner so that such
Written Instructions an received by the Custodian, whether by hand delivery,
telex or otherwise, on the first business day following the day on which such
Oral Instructions are given to the Custodian. The Trust agrees that the fact
that such confirming instructions are not received by the Custodian shall in no
way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Trust. The Trust agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions.

12. The Custodian will (a) set up and maintain proper books of account
and complete records of all transactions in the accounts maintained by the
Custodian hereunder in such manner as will meet the obligations of the Fund
under the Investment Company Act of 1940, with particular attention to Section
31 thereof and Rules 31 a-1 and 31 a-2 thereunder, and (b) preserve for the
periods prescribed by applicable Federal statute or regulation all records
required to be so preserved. The books and records of the Custodian shall be
open to inspection and audit at reasonable times and with prior notice by
Officers and auditors employed by the Trust.

13. The Custodian and its Sub-Custodians shall promptly send to the
Trust, for the account of the Fund, any report received on the systems of
internal accounting control of the Book-Entry System or The Depository and with
such reports on their own systems of internal accounting control as the Trust
may reasonably request from time to time.

<PAGE> 13

performance of its duties as a custodial agent shall not be deemed to be a
recommendation to the Custodian's depositors or others of share of the Fund as
an investment.

ARTICLE X

TERMINATION
-----------

1. Either of the parties hereto may terminate this Agreement for any
reason by giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than ninety (90) days after the date
of giving of such notice. If such notice is given by the Trust, on behalf of the
Fund, it shall be accompanied by a copy of a resolution of the Board of Trustees
of the Trust, certified by the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus, and undivided profits. In the event such notice is
given by the Custodian, the Trust shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of its Board of Trustees
certified by the Secretary, designating a successor custodian or custodians to
act an behalf of the Fund. In the absence of such designation by the Trust, the
Custodian may designate a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus, and
undivided profits. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian, provided that it has received a notice of
acceptance by the successor custodian, shall deliver, on that date directly to
the successor custodian all Securities and monies then owned by the Fund and
held by it as Custodian. Upon termination of this Agreement, the Trust shall pay
to the Custodian on behalf of the Fund such compensation as may be due as of the
date of such termination. The Trust agrees on behalf of the Fund that the
Custodian shall be. reimbursed for its reasonable costs in connection with the
termination of this Agreement.

ARTICLE XI

MISCELLANEOUS
-------------

1. Appendix A sets forth the names and the signatures of all, Authorized
Persons. The Trust agrees to furnish to the Custodian, on behalf of the Fund, a
new Appendix A in form similar to the attached Appendix A, if any present
Authorized Person ceases to be an Authorized Person or if any other or
additional Authorized Persons are elected or appointed. Until such new

<PAGE> 14

Appendix A shall be received the Custodian shall be fully protected in acting
under the provisions of this agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered Appendix A.

2. No recourse under my obligation of this Agreement or for any claim
based thereon shall be had against any organizer, shareholder, Officer, Trustee,
past, present or future as such, of the Trust or of any predecessor or
successor, either directly or through the Trust or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law or
equity, or by the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that this Agreement and the obligations
thereunder am enforceable solely against Fund Assets and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, Officers, Trustees of the Trust or of any predecessor,
or successor, or any of them as such, because of the obligations contained in
this Agreement or implied therefrom and that any and all such liability is
hereby expressly waived and released by the Custodian as a condition of, and as
a consideration for, the execution of this Agreement.

8. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable

<PAGE> 15

by the Trust or by the Custodian, and no attempted assignment by the Trust or
the Custodian shall be effective without the written consent of the other party
hereto.

9. This Agreement shall be construed in accordance with the laws of the
State of Ohio.

10. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duty authorized as of the day
and year first above written.

ATTEST: The Gateway Trust on behalf of
The Gateway Cincinnati Fund
/s/ Karen M. McLaughlin By: /s/ Walter G. Sall

ATTEST: Star Bank, N.A.
/s/ Lynnette C. Gibson By: /s/ W.G. Keller

<PAGE> 1
Exhibit 9
SERVICES AGREEMENT
------------------

This agreement is made as of January 1, 1998 by and between The Gateway
Trust, an Ohio business trust (the "Trust"), and Gateway Investment Advisers,
L.P., a Delaware limited partnership (the "Adviser").

RECITALS

The Trust is engaged in the business of a diversified, open-end
management investment company. The Board of Trustees of the Trust has selected
the Adviser to act (i) as Transfer, Dividend and Plan Agent with respect to
shares of beneficial interest ("Shares") of the mutual funds set forth on
Schedule A to this Agreement (collectively the "Funds" and individually a
"Fund") and (ii) as Shareholder Servicing Agent for the Funds. The Adviser has
also been engaged to perform certain financial, administrative and compliance
services for the Funds, as hereinafter described. The Adviser is willing to act
in such capacities and perform the respective duties and functions thereof in
the manner and on the conditions hereinafter set forth. This Agreement
constitutes the entire agreement between the parties and supersedes all prior
shareholder servicing, transfer, dividend disbursing, and financial servicing
agent agreements.

AGREEMENT TERMS

The Trust, on behalf of each Fund, and the Adviser hereby agree as
follows:

I. SHAREHOLDER ORDERS. Upon receipt by Adviser of purchase,
exchange and/or redemption instructions in accordance with the
procedures set out in the Fund's then current prospectus
("Prospectus") and statement of additional information (such
instructions collectively referred to herein as "Orders"), the
Adviser will provide the following services in accordance with
procedures established from time to time by the Trust and the
Adviser:

a. in the case of a new shareholder of a Fund
("Shareholder"), establish a Shareholder account
("Account");

b. compute the number of Shares purchased, exchanged or
redeemed by the Shareholder based on the closing
price of the Fund as next determined;

c. process all Orders on behalf of the Funds and post
the transactions to the Shareholder's Account;

d. deliver instructions for payment and/or appropriate
documentation of all Orders to the Trust's custodian
("Custodian");

e. send a confirmation of the Order to the Shareholder,
indicating the amount of full and fractional shares
purchased, redeemed and/or exchanged;

f. in the case of a request to establish an accumulation
plan, group program,

-1-
<PAGE> 2

withdrawal plan, automatic investment plan or other
plan or program being offered by the Prospectus, open
and maintain such plan or program, and act as plan
agent, for the Shareholder in accordance with the
terms thereof;

g. if any check or other order for payment for any Order
is returned unpaid for any reason, the Adviser will
give prompt notification to the affected Fund of such
non-payment, and take such other steps, including
redepositing such check for collection or
redelivering such check to the Shareholder or new
investor and placing a stop transfer order against
the Account, as the Trust, on behalf of the affected
Fund, may instruct; and

h. notify each Fund as soon as practicable each business
day of the Orders for redemption, purchase and/or
exchange which were received by the Adviser in proper
form on the previous business day.

2. RECORD MAINTENANCE. The Adviser will maintain records, which
at all times will be the property of each Fund and available
for inspection by such Fund, showing for each Account the
following:

a. name, address, and tax identification number;

b. number of Shares held;

c. historical information regarding the Account,
including dividends and distributions paid and the
date and price for all transactions on an Account;

d. any stop or restraining order placed against the
Account; and

e. any instructions as to withdrawal plans, and any
correspondence or instructions relating to the
maintenance or termination of the Account.

In addition, the Adviser will maintain and preserve such other
records necessary to carry out its duties under this Agreement
and applicable law.

3. DIVIDENDS AND DISTRIBUTIONS. The Trust, on behalf of each
Fund, will promptly notify the Adviser of the declaration of
any dividend or distribution with respect to such Fund's
Shares. The Adviser will notify the Trust, on behalf of such
Fund, of the total number of Shares issued and outstanding as
of the record date, for such dividend or distribution and the
amount of cash required to pay such dividend or distribution.
The Trust, on behalf of the Fund, will instruct the Custodian
to make sufficient funds available in the dividend and
distribution account maintained by the Fund with the Custodian
to pay such dividend or distribution. The Adviser will prepare
and distribute to Shareholders of such Fund any checks to
which they are entitled by reason of any dividend or

-2-
<PAGE> 3

distribution. In the case of each Shareholder entitled to
receive additional Shares by reason of any such dividend or
distribution, the Adviser will make appropriate credits to
such Shareholder's account. Each such shareholder shall be
notified of any dividends or distributions, including the
amount of any Shares purchased by reason of any such dividends
or distributions.

4. ADMINISTRATIVE SERVICES. The Adviser will provide such
administrative services as may be required by the Trust, including the
following:

a. answer Shareholder inquiries and assist Shareholders
in changing dividend options, account designations
and addresses;

b. negotiate and administer third party contracts,
including but not limited to custodian, printers,
auditors, insurers, brokers and distribution channels
and monitor the services provided thereunder;

c. coordinate agendas for Board of Trustees and
committee meetings and prepare meeting materials,
including selected management reports for performance
and compliance analyses and selected financial data,
as agreed upon by the Trust and the Adviser;

d. attend management and board of trustee meetings as
requested;

e. coordinate the Trust's SEC and annual independent
audits;

f. coordinate the printing of all shareholder materials,
including the Prospectus and annual and semi-annual
reports;

g. address and mail all communications by the Trust, on
behalf of each Fund, to the Fund's shareholders,
including financial reports to shareholders, proxy
material for meetings of shareholders and periodic
communications to shareholders;

h. receive and examine return proxy cards for meetings
of shareholders and tabulate and certify the vote to
the Trust, on behalf of each Fund; and

i. furnish the Trust or its designees with such
information as the Trust or the designee shall
reasonably request.

5. FINANCIAL SERVICES. The Adviser will provide such financial
services as may be required by the Trust, including the
following:

a. those services ordinarily entrusted to and performed
by a treasurer, including without limitation (i)
monthly communication with Trustees; (ii) preparation
and filing of tax and financial reports; (iii)
preparation of documents required by the auditors;
and

-3-
<PAGE> 4

(iv) liaison between the Trustees, the auditors, and
the Trust's legal counsel;

b. prepare and maintain the Trust's operating expense
budget to determine proper expense accruals to be
charged to the Funds in order to calculate NAV;

c. determine income and capital gains available for
distribution and calculate distributions required to
meet regulatory, income, and excise tax requirements,
and recommend such distribution amounts to the Board
of Trustees;

d. prepare daily basic reports including Statement of
Assets and Liabilities, Statement of Operations and
Statement of Changes in Net Assets;

e. prepare monthly basic reports including Detailed
Trial Balance, Tax Report for Dividends and Portfolio
Turnover Ratio;

f. perform daily pricing and determine net asset value;
and

g. prepare, file with the Internal Revenue Service and
with any State as directed by the Trust and, if
required, mail to shareholders such returns for
reporting dividends and distributions paid by each
Fund as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations; and
direct the Custodian to withhold such sums as are
required to be withheld under applicable Federal and
State income tax law, rules and regulations.

6. COMPLIANCE SERVICES. The Adviser will provide all services
ordinarily and entrusted to and performed by a compliance
officer including the following:

a. direct periodic revisions to the Trust's registration
statement;

b. prepare and file federal and state registrations and
notices, including Form N1-A;

c. prepare and file federal and state reports including
Form 24F-2 and Form N-SAR; and

d. develop and monitor compliance systems and procedures
including those related to blue sky registrations.

7. FACILITIES AND PERSONNEL; REGISTRATION AS TRANSFER AGENT. The
Adviser will provide such office space, equipment and
personnel (which may be all or any part of the space,
equipment and personnel used by the Adviser for other
purposes) as is necessary or beneficial for the provision of
services as required by this

-4-
<PAGE> 5

Agreement. In addition, the Adviser will maintain its
registration with the SEC as a transfer agent.

8. Information Furnished.
----------------------

a. The Trust will furnish the Adviser promptly with
copies of any Registration Statements now in effect
or hereafter filed by it with the Securities and
Exchange Commission ("SEC") under the Securities Act
of 1933, as amended, or the Investment Company Act of
1940, as amended, together with any financial
statements and exhibits included therein, and all
amendments or supplements thereto hereafter filed.

b. The Adviser will furnish to each Fund such other
information, including shareholder lists and
statistical information, as may be agreed upon from
time to time between the Adviser and the Trust, on
behalf of the Fund. The Adviser shall notify each
Fund of any request or demand to inspect the share
records of the Fund and will act upon the
instructions of the Trust as to permitting or
refusing such inspection.

9. Compensation.
-------------

a. For the performance of all duties and
responsibilities of the Adviser hereunder, the
Adviser will receive from the Trust (i) a monthly fee
per Fund of $4,000 and (ii) an additional fee per
Fund, payable monthly, at an annual rate equal to
0.20% of the average value of the daily net assets of
the Fund, subject to a minimum monthly fee per Fund
of $2,500.

b. The Adviser will also be reimbursed by the Trust for
any out-of-pocket expenses or disbursements which the
Adviser may reasonably incur in excess of its basic
overhead expenses incurred in performing such duties
and responsibilities, including without limitation
the performance of the printing, mailing, reporting
and proxy services described in Schedule B hereto.
The Adviser must obtain the approval of the Board of
Trustees of the Trust for any reimbursement of
expenses or disbursements not described in Schedule
B. In addition, the Adviser will be reimbursed by the
Trust for the portion of the salary and related
employment expenses of the Adviser's general counsel
allocated to the Trust in such manner as shall be
determined by the Board of Trustees of the Trust.

10. USE OF ADVISER'S NAME. The Adviser consents to all uses of the
Adviser's name, in any prospectus, sales literature or other
material relating to the Trust or any Fund, which merely refer
in accurate terms to its appointment hereunder or which are
required by the SEC or a state securities commission. All
other uses require the Adviser's prior written consent, which
will not be unreasonably withheld.

11. ACTIVITIES OF THE ADVISER.The services of the Adviser under
this Agreement

-5-
<PAGE> 6

are not to be deemed exclusive, and the Adviser is free to
render similar services to others so long as the provision of
services hereunder are not impaired thereby. The Trust
acknowledges and hereby authorizes the Adviser to delegate its
duties hereunder to any competent and reliable third party,
provided (i) the Adviser supervises such delegee and remains
primarily liable to the Trust and (ii) for purposes of the
indemnification provisions of this Agreement, all actions
taken on behalf of the Adviser by the delegee shall be deemed
taken by the Adviser.

12. Duty of Care and Indemnification.
---------------------------------

a. The Adviser will at all times act in good faith and
with due care in the performance of its duties
hereunder. The Adviser will indemnify and hold
harmless the Trust and each Fund from any losses,
claims, damages, liabilities and expenses (including
reasonable counsel fees and expenses) arising from
any claim, demand, action or suit which results from
the Adviser's lack of good faith, absence of due care
or negligence, or from any willful misconduct or
gross negligence on the Adviser's part; provided,
however, that:

i. the Adviser shall not be liable to the Trust
or any Fund or to any third party for
consequential, indirect or special damages,
such as loss of profits, loss of business or
loss of opportunity, unless such damages are
the result of the Adviser's gross negligence
or willful misconduct; and

ii. the Adviser shall not be liable or
responsible for errors or delays caused by
circumstances beyond its control, including
acts of civil or military authority,
national emergencies, strikes or similar
labor disputes, fire, mechanical breakdown
beyond the Adviser's control, flood or
catastrophe, acts of God, insurrection, war,
riots or failure beyond the Adviser's
control of transportation, communication or
power supply.

b. The Trust, on behalf of each Fund, but only from the
assets of each such Fund and not from other assets of
the Trust or any other fund of the Trust, will
indemnify the Adviser against and hold the Adviser
harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel
fees and expenses) arising from any claim, demand,
action or suit which results from the Adviser acting
in accordance with:

i. any instructions given, in writing by any
person duly authorized by the Trust, on
behalf of the Fund, to give such
instructions,

ii. any written or oral advice given, or
reasonably believed by the Trust to have
been given, by counsel for the Trust, or

-6-
<PAGE> 7

iii. the instructions contained in any instrument
or stock certificate reasonably believed by
the Adviser to have been genuine and signed,
countersigned or executed by any person or
persons authorized by the Trust, on behalf
of the Fund, to sign, countersign or execute
the same on the Fund's behalf;

but in any such case only to the extent approved by a
majority of the disinterested Trustees of the Trust.

c. In any case in which one party (the Adviser or the
Trust, on behalf of any Fund) hereto may be asked to
indemnify the other or hold the other harmless, the
party from whom indemnification is sought (the
"Indemnifying Party") shall be advised of all
pertinent facts concerning the situation in question,
and the party claiming a right to indemnification
(the "Indemnified Party") will use reasonable care to
identify and notify the Indemnifying Party promptly
concerning any situation which presents or appears to
present a claim for indemnification against the
Indemnifying Party. The Indemnifying Party shall have
the option to defend the Indemnified Party against
any claim which may be the subject of the
indemnification. If Indemnifying Party so elects,
such defense shall be conducted by counsel chosen by
the Indemnifying Party that is satisfactory to the
Indemnified Party; and the Indemnifying Party will so
notify the Indemnified Party. Thereupon such
Indemnifying Party shall take over the complete
defense of the claim, and the other party shall
sustain no further legal or other expenses in such
situation for which indemnification has been sought
under this paragraph, except the expenses of any
additional counsel retained by such Indemnified
Party. In no case shall any party claiming the right
to indemnification confess any claim or make any
compromise in any case in which the other party has
been asked to indemnify such party (unless such
confession or compromise is made with such other
party's prior written consent).

d. The obligations of the parties hereto under this
paragraph shall survive the termination of this
Agreement for acts occurring while the agreement was
in force.

13. NOTICE. All notices, requests or other communications under
this Agreement shall be in writing and shall be deemed to have
been duly given on the date of service if personally served
(or by telex or telecopy) on the party to whom notice is to be
given or on the third day after mailing if mailed to the party
to whom notice is to be given by first class mail, postage
prepaid, at the following addresses:

if to the Adviser: Gateway Investment Advisers, L.P.
400 TechneCenter Drive, Suite 220
Milford, Ohio 45150

-7-
<PAGE> 8

Fax: (513)248-2699

if to the Trust The Gateway Trust
on behalf of any 400 TechneCenter Drive, Suite 220
Fund: Milford, Ohio 45150
Fax: (513)248-2699

The above addresses may be changed at any time by an
instrument in writing executed by the party giving same and
given to the other party in accordance with the procedures set
forth above.

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

15. TERMINATION, ETC. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing which shall make
specific reference to this Agreement and which shall be signed
by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Agreement may be
terminated by the Trust, on behalf of any or all of the Funds,
or by the Adviser in each case on not less than 60 days'
written notice to the other party. Upon termination hereof,
the Trust shall cause each Fund to pay to the Adviser such
compensation as may be due to the Adviser as of the date of
such termination. If in connection with termination a
successor to any of the Adviser's duties or responsibilities
hereunder is designated by the Trust, on behalf of any Fund,
by written notice to the Adviser, the Adviser shall promptly
upon such termination and at the expense of such Fund,
transfer to such successor a certified list of the
shareholders of the Fund (with name, address and tax
identification or Social Security number), a record of the
account of such shareholder and the status thereof, and all
other relevant books, records and other data established or
maintained by the Adviser under this Agreement and shall
cooperate in the transfer of such duties and responsibilities,
including provision for assistance from appropriate personnel
of the Adviser relating to the establishment of books, records
and other data (financial and otherwise), to such successor.

16. NO COMMINGLING; SEPARATE ACCOUNTS. The Adviser, in its several
capacities as agent for the Fund under this Agreement, shall
at all times keep all funds, securities and other assets of
any kind which are the property of, or in any way held for the
benefit of, each Fund entirely separate and apart from all
other funds, securities and other assets of any kind of the
Trust or of any other Fund maintained by the Trust.

17. EFFECTIVE DATE. This Agreement shall be effective as of
January 1, 1998 and shall continue in effect until terminated
by either party pursuant to Section 15 hereof.

-8-
<PAGE> 9

18. MISCELLANEOUS. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of
Ohio. The captions in this Agreement are included for
convenience of reference only and in no way define or limit
any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.

THE GATEWAY TRUST, for and on behalf of the Funds

By /s/ Walter G. Sall
------------------------------
Title Chairman
------------------------------
Date October 29, 1997
------------------------------

GATEWAY INVESTMENT ADVISERS, L.P.

By /s/ Walter G. Sall
------------------------------
Title Chairman
------------------------------
Date October 29, 1997
------------------------------

-9-
<PAGE> 10

SCHEDULE A
FUNDS

1. Gateway Fund

2. Gateway Small Cap Index Fund

3. Cincinnati Fund

SCHEDULE B

* Printing services including printing of envelopes, checks, stationery,
year-end forms, and statements

* Mailing services including postage, shipping, certified mail, overnight
delivery and insurance charges

* Preparation of ad hoc reports

* Proxy tabulation and processing

<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in this Post-Effective Amendment No. 31 of our audit
reports on the financial statements of the Gateway Fund (formerly known as the
Gateway Index Plus Fund, Gateway Mid Cap Index Fund, Gateway Small Cap Index
Fund and Cincinnati Fund of The Gateway Trust, dated January 20 1997, and to all
references to our Firm included in or made a part of this Post-Effective
Amendment No. 31.

/s/ Arthur Andersen LLP
-----------------------------
ARTHUR ANDERSEN LLP

Cincinnati, Ohio,
April 27, 1998

<PAGE> 1
Exhibit 99
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, 1998.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 27th
day of January, 1998.

/s/ James M. Anderson
--------------------------
James M. Anderson, Trustee

State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared James M. Anderson, 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 27th day of January, 1998.

/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 27th
day of January, 1998.

/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 27th day of January, 1998.

/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 27th
day of January, 1998.

/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 27th day of January, 1998.

/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 27th
day of January, 1998.

/s/ Beverly J. Fertig
---------------------------
Beverly J. Fertig, Trustee

State of Ohio
County of Clermont

Before me, a Notary Public, in and for said county and state,
personally appeared Beverly J. Fertig, 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 27th day of January, 1998.

/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 27th
day of January, 1998.

/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 27th day of January, 1998.

/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 27th
day of January, 1998.

/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 27th day of January, 1998.

/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 27th
day of January, 1998.

/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 27th day of January, 1998.

/s/ Donna M. Squeri
--------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration

<PAGE> 8

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 27th
day of January, 1998.

/s/ Paul R. Stewart
--------------------------------
Paul R. Stewart, Treasurer

State of Ohio
County of Clermont

WITNESS my hand and official seal this 27th day of January, 1998.

/s/ Donna M. Squeri
--------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration