GATEWAY TRUST, 485BPOS, 1999-04-30

GATEWAY TRUST
485BPOS, 1999-04-30

Previous: CERES GROUP INC, 10-K/A, 1999-04-30

Next: SBL FUND, 485BPOS, 1999-04-30

<PAGE> 1

As filed with the Securities and Exchange Commission on November 2, 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. 34 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 32 [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, 1999 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.

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

<PAGE> 2

FRONT COVER

The Gateway Fund

PROSPECTUS May 1, 1999

As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, nor
has it judged this Fund for investment merit. It is a criminal offense to state
otherwise.

Fund Logo

<PAGE> 3

TABLE OF CONTENTS

<S> <C>
Gateway Fund Investment Objective and Strategies.............................................3
Main Risks...................................................................................3
Past Performance.............................................................................4
Expenses.....................................................................................5
Annual Fund Operating Expenses..........................................................5
Example.................................................................................5
Management Fees....................................................................5
Distribution (12b-1) Fees..........................................................5
Other Expenses.....................................................................5
More Information about Investment Strategies and Related Risks...............................6
Investment Strategies...................................................................6
Purchasing Stocks..................................................................6
Selling Index Call Options.........................................................6
Purchasing Index Put Options.......................................................6
Other Investments..................................................................6
Related Risks...........................................................................6
Purchasing Stocks..................................................................6
Selling Index Call Options.........................................................6
Purchasing Index Put Options.......................................................7
Closing Option Transactions........................................................7
About the Investment Adviser.................................................................7
Year 2000...............................................................................7
Portfolio Manager Profile...............................................................7
Other Information............................................................................7
How Fund Shares Are Priced..............................................................7
Dividends and Distributions.............................................................8
Tax Issues..............................................................................8
Financial Highlights.........................................................................9
Investing Through a Financial Professional..................................................10
Investing Directly..........................................................................10
Opening Your Account...................................................................10
Opening a Regular (Non-IRA) Account...............................................10
Opening an IRA Account............................................................10
By Mail...........................................................................10
By Telephone......................................................................10
Additional Investments.................................................................10
By Mail...........................................................................11
By Telephone......................................................................11
By Automatic Investment Program...................................................11
By Exchange from Another Gateway Fund.............................................11
How To Redeem Your Shares..............................................................11
By Mail...........................................................................11
By Telephone......................................................................12
Systematic Withdrawal Program.....................................................12
Additional Information about Purchasing and Redeeming Shares...........................12

2
</TABLE>

<PAGE> 4

GATEWAY FUND INVESTMENT OBJECTIVE AND STRATEGIES

The Gateway Fund seeks to capture the majority of the higher returns associated
with equity market investments, while exposing investors to significantly less
risk than other equity investments. Historically, investments in equities have
produced higher rates of return than fixed income investments. In addition to
providing higher returns, however, equity investments tend toward greater
fluctuations in value over time, thus being significantly more volatile than
fixed income. The Fund undertakes active measures to reduce equity volatility
while maintaining almost all of its assets invested in equities.

The Gateway Fund is designed for you if you are a conservative investor whose
investment objective is to earn consistently higher rates of return than fixed
income investments over the long term. The Fund owns the 100 common stocks that
are included in the S&P 100 Index, and sells index call options on its indexed
portfolio. Selling index call options reduces the Fund's volatility, provides a
steady cash flow, and is the Fund's primary source of return. The Fund also buys
index put options that can protect the Fund from a significant market decline
over a short period of time, since the value of a put option generally increases
as stock prices decrease. The combination of the indexed equity portfolio, the
steady cash flow from sale of index call options, and the downside protection
from index put options is designed to provide the Fund with consistent returns
over a wide range of fixed income and equity market environments.

The Fund is designed to seek not only consistent returns, but also returns in
excess of those available from other investments comparable in volatility. Two
types of investments have volatility comparable to the Fund -intermediate term
fixed income investments (approximately five year maturities) and hybrid
investments containing a blend of short term fixed income and equity
investments. With its core investment in equities, the Fund is significantly
less vulnerable to fluctuations in value caused by interest rate volatility, a
risk factor present in both fixed income and hybrid investments. The objective
of the risk management strategy using index options is to limit the volatility
inherent in equities while sacrificing less of the higher equity returns than
hybrid investments. Thus, the Fund seeks to provide an efficient trade-off
between risk and reward where risk is characterized by volatility or
fluctuations in value over time.

MAIN RISKS

The Fund's stock portfolio is subject to market risk. Stock prices may decline
over short or even extended periods of time. The Fund's option strategies may
not fully protect it against declines in the value of its stock portfolio. The
Fund could experience a loss in both the stock and option portions of its
portfolio.

When it sells index call options, the Fund receives cash but limits its
opportunity to profit from an increase in the market value of its stock
portfolio. When the Fund purchases index put options, it risks the loss of the
cash paid for the options. Under certain circumstances the Fund may not own any
put options, resulting in increased risk during a market decline. The Fund's use
of option strategies may not fully protect it against declines in the value of
its stock portfolio.

The value of your investment in the Fund may go up and down which means that you
could lose money. Furthermore, because the Fund has a long term investment
objective it is not appropriate for short term investments.

<PAGE> 5

PAST PERFORMANCE

The bar chart and table below show the Gateway Fund's annual returns and its
long-term performance. The total return table compares the Fund's performance
over time to that of the S&P 500 Index, the Lehman Government / Corporate Bond
Index, and the Russell 2000 index. The S&P 500 and Russell 2000 indices are
popular indicators of the performance of the large and small capitalization
sectors, respectively, of the U.S. stock market. These indices were chosen for
comparison because they reflect the broad spectrum of U.S. equity markets. The
Lehman Government / Corporate Bond Index reflects the performance of the U.S.
bond market, and was chosen for comparison because its risk characteristics are
similar to those of the Fund. Both the chart and the table assume reinvestment
of dividends and distributions. As with all mutual funds, historical results do
not necessarily indicate how the Fund will perform in the future.
<TABLE>
<CAPTION>

(Insert Bar Chart)

(Plot Points for Bar Chart)
Gateway Fund
Annual Total Returns
1989 through 1998

<S> <C>
1989 19.45%
1990 10.32%
1991 17.80%
1992 5.15%
1993 7.40%
1994 5.57%
1995 11.04%
1996 10.53%
1997 12.53%
1998 12.26%

QUARTERLY RETURNS 1989 THROUGH 1998
- --------------------------------------------------------
BEST QUARTER - FOURTH QUARTER 1990 9.01%
WORST QUARTER - THIRD QUARTER 1990 -4.61%

AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1998*
-----------------------------------------
1 YEAR 5 YEARS 10 YEARS
------------- ------------- -------------
<S> <C> <C> <C>
Gateway Fund 12.26% 10.32% 11.10%
Lehman Gov't/Corp Bond Index 9.47 7.30 9.33
S&P 500 Index 28.58 24.06 19.21
Russell 2000 Index -2.55 11.86 12.92
</TABLE>

4
<PAGE> 6

EXPENSES

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)

Management Fees 0.66%
Distribution (12b-1) Fees 0.26
Other Expenses 0.10
----
Total Annual Fund Operating Expenses* 1.02%

* Expenses have been restated to reflect current fee structure, which became
effective January 1, 1999.

EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

1 Year 3 Years 5 Years 10 Years
- ---------------- -------------- -------------- ---------------
$104 $325 $563 $1,248

Management Fees

The Fund paid the Adviser a fee of 0.65% of its average net assets for the 1998
fiscal year. For the 1999 fiscal year, the fee will change to reflect a new
Management Agreement under which the Adviser will be paid 0.925% of the average
value of the daily net assets of the fund minus the amount of the Fund's
expenses incurred pursuant to its Distribution Plan. Also under the new
Management Agreement, the Adviser receives no separate fee for its transfer
agency, fund accounting and other services to the Fund, and the Adviser pays the
Fund's expenses of reporting to shareholders.

Distribution (12b-1) Fees

The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act that
allows it to pay for the sale and distribution of its shares. The Trustees of
the Gateway Trust review and approve expenses under the plan. In any year,
distribution expenses cannot exceed 0.50% of the average daily net asset value
of the Fund. If the plan had been in effect during 1998, estimated expenses
under the plan would have amounted to 0.26% of the average daily net asset value
of the Fund. The Management Fees paid to the Adviser are reduced dollar for
dollar by the Fund's distribution expenses, so the distribution expenses do not
increase the cost of your investment in the Fund.

Other Expenses

The Fund pays all of its normal operating expenses, including: custodial fees,
registration of Fund shares with federal and state securities agencies, and the
Fund's share of general expenses of the Gateway Trust. The Fund also reimburses
the Adviser for compliance expenses. The Adviser pays certain expenses of the
Fund including: printing and distributing all Fund prospectuses and reports to
current shareholders, printing and transmitting registration statements and
reports to governmental agencies, and printing and mailing costs.

<PAGE> 7

MORE INFORMATION ABOUT INVESTMENT STRATEGIES AND RELATED RISKS

INVESTMENT STRATEGIES

Purchasing Stocks

The Gateway Fund invests in the 100 stocks included in the S&P 100 Index. Each
stock is held in approximately the same proportion as in the S&P 100. For
example, if a stock represents 2% of the value of the S&P 100, the Fund invests
approximately 2% of its assets in the stock. The Adviser monitors the
composition of the S&P 100 and makes adjustments to the Fund's portfolio as
needed. The Fund is not affiliated with or sponsored by Standard & Poor's.

Selling Index Call Options

The Fund continuously sells index call options on the full value of its indexed
stock portfolio. As the seller of the index call option, the Fund receives cash
(the "premium") from the purchaser. The purchaser of an index call option has
the right to any appreciation in the value of the index over a fixed price (the
"exercise price") any time up to a certain date in the future (the "expiration
date"). If the purchaser does not exercise the option, the Fund retains the
premium. If the purchaser exercises the option, the Fund pays the purchaser the
difference between the price of the index and the exercise price of the option.
The premium, the exercise price, and the market value of the index determine the
gain or loss realized by the Fund as the seller of the index call option. The
Fund can also repurchase the call option prior to the expiration date, ending
its obligation. In this case, the cost of repurchasing the option will determine
the gain or loss realized by the Fund.

Purchasing Index Put Options

The Fund 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 an index put
option generally increases as stock prices decrease. The Fund may not spend more
than 5% of its assets to purchase index put options.

Other Investments

The Fund may hold cash for temporary defensive purposes, or under normal
circumstances for purposes of liquidity. Cash is normally invested in repurchase
agreements. In a repurchase agreement, the Fund buys securities and the seller
(usually a bank) agrees at the time of sale to repurchase the securities at an
agreed-upon date, price, and interest rate. The Fund may not invest more than 5%
of its assets in repurchase agreements with a maturity longer than seven days.
For temporary defensive purposes, the Fund may hold up to 100% of its assets in
cash. To the extent that it is invested in cash for temporary defensive
purposes, the Fund would not achieve its investment objective as described
above.

RELATED RISKS

Selling Index Call Options

Selling call options reduces the risk of owning stocks, but it limits the
opportunity to profit from an increase in the market value of stocks in exchange
for up front cash at the time of selling the call option. The Fund generally
sells "American style" call options, which give the purchaser the right to
exercise the options at any time prior to the expiration date. 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 covered between the time the
options are exercised and the time the Fund sells new call options on the next
business day.

6
<PAGE> 8

Purchasing Index Put Options

The Fund risks losing all or part of the cash paid for purchasing index put
options.

Closing Option Transactions

Unusual market conditions or the lack of a ready market for any particular
option at a specific time may reduce the effectiveness of the Fund's option
strategies.

Year 2000

Like all other mutual funds and financial services operations worldwide, the
Fund could be adversely affected by computer system problems associated with the
Year 2000. The Adviser has evaluated its internal systems, and has not
identified any problems that could affect the operations of the Fund. The
Adviser is also working with third party suppliers to obtain satisfactory
assurances regarding their state of preparedness for the Year 2000. At this time
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund.

ABOUT THE INVESTMENT ADVISER

Gateway Investment Advisers, L.P. (the "Adviser") has acted as the investment
adviser for the Gateway Fund since December 15, 1995. It is located at 400
TechneCenter Dr., Milford, Ohio 45150. The predecessor to the Adviser was
Gateway Investment Advisers, Inc., which provided the same services to the Fund
prior to December 15, 1995. As of December 31, 1998, the Adviser had
approximately $800 million in assets under management, including approximately
$500 million in assets invested in all of the Gateway Trust's mutual fund
series. The Adviser provides the Fund with investment research and advice, as
well as administration, accounting, transfer agency, and shareholder services.
The fees paid to the Adviser are shown in the Expense Table on page X.

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 35

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

OTHER INFORMATION

HOW FUND SHARES ARE PRICED

Your price for Fund shares is the Fund's net asset value per share (NAV), which
is ordinarily determined as of the close of the New York Stock Exchange (the
"NYSE"), normally 4:00 P.M. Eastern Time, on each day the NYSE is open. The NYSE
is not open on national holidays. Your order will be priced at the next NAV
calculated after your request has been received in good order.

7
<PAGE> 9

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.

DIVIDENDS AND DISTRIBUTIONS

The Fund normally declares dividends at the end of March, June, September, and
December. Shareholders may receive distributions either in cash or in additional
shares of the Fund at no charge. If the Fund has net capital gains, it normally
declares a capital gain distribution at the end of December. The capital gain
distribution has varied considerably from year to year.

TAX ISSUES

The Fund distributes substantially all of its income and realized capital gains
and these distributions may be taxable to you. In addition, gains on any sale of
Fund shares including exchanges into other funds may be taxable to you.

If you buy Fund shares just before a distribution is declared, you will pay the
full price for the shares and then receive a portion of the price back as a
taxable distribution. The distribution paid to you would generally be included
in your gross income for tax purposes, whether or not you reinvested it. For
this reason, you should carefully consider the tax consequences of buying shares
of the Fund immediately before distributions are made, especially in late
December.

8
<PAGE> 10

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
performance for the past 5 years. Certain information reflects results for a
single Fund share. The total returns in the table represent the rate an investor
would have earned on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Arthur
Andersen LLP, whose report, along with the Fund's financial statements are
included in the Fund's annual report, which is available on request.

YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 (1) 1994
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.85 $ 18.48 $ 16.91 $ 15.48 $ 15.85
----------- ----------- ----------- ----------- -----------
Net investment income 0.12 0.18 0.21 0.24 0.26
Net gains or losses on securities 2.18 2.09 1.56 1.46 0.61
----------- ----------- ----------- ----------- -----------
Total from investment operations 2.30 2.27 1.77 1.70 0.87

Dividends from net investment income (0.12) (0.18) (0.20) (0.24) (0.27)
Distributions from capital gains (0.01) (1.72) 0.00 0.00 (0.86)
Distributions in excess of realized 0.00 0.00 0.00 (0.03) (0.11)
capital gains
----------- ----------- ----------- ----------- -----------
Total distributions (0.13) (1.90) (0.20) (0.27) (1.24)
----------- ----------- ----------- ----------- -----------

Net asset value, end of period $ 21.02 $ 18.85 $ 18.48 $ 16.91 $ 15.48
=========== =========== =========== =========== ===========

TOTAL RETURN 12.26% 12.35% 10.53% 11.04% 5.57%

Net assets, end of period (thousands) $ 464,200 $ 255,458 $ 194,363 $ 176,220 $ 164,651
Ratio of expenses to average net assets 0.99% 1.07% 1.14% 1.19% 1.21%
Ratio of net investment income to
average net assets 0.66% 0.90% 1.18% 1.51% 1.54%
Portfolio turnover rate 12% 82% 17% 5% 4%

<FN>
(1) On December 15, 1995, Gateway Investment Advisers, L.P. became investment adviser to the Fund.
</TABLE>

<PAGE> 11

INVESTING THROUGH A FINANCIAL PROFESSIONAL

If you buy the Fund through a financial professional, they will assist you with
account setup, additional investments, selling Fund shares, and any other
questions you may have about your investment. Your financial professional may
charge fees for transactions or other fees related to your investment in the
Fund. You should ask about any fees related to your investment in the Fund that
are not described in this Prospectus.

INVESTING DIRECTLY

Gateway customer service representatives are available to assist you from Monday
through Friday, 9:00 AM to 5:00 PM Eastern Time, toll free at (800) 354-6339.

OPENING YOUR ACCOUNT

Gateway Fund is available for purchase by individuals in both taxable and IRA
accounts, as well as by corporations, trusts, and pension plans. After your
initial purchase and any subsequent transaction, you will receive a confirmation
statement showing the resulting value of your account.

Opening a Regular (Non-IRA) Account

To open a regular account in the Fund, please complete and sign a New Account
Application, which accompanies this Prospectus. The minimum investment is
$1,000.

Opening an IRA Account

To open an IRA account, please complete and sign an IRA Account Application. The
minimum investment for an IRA is $500. If you have not received an IRA Account
Application and an IRA Agreement and Disclosure Statement, please call Gateway
customer service. To transfer an existing IRA to Gateway, you need to complete
an IRA Transfer Form in addition to an IRA Account Application. To transfer or
roll over funds from an employer-sponsored plan such as a 401(k), please call
Gateway customer service at (800) 354-6339. You will find more detailed
information about transfers to and distributions from IRAs in the IRA Agreement
and Disclosure Statement.

By Mail

Please mail your Application (and IRA forms if needed), and a check for your
initial investment, payable to The Gateway Trust, to:
The Gateway Trust
Shareholder Services
P.O. Box 5211
Cincinnati, OH 45201-5211

By Telephone

If you prefer to open your account by telephone, you must wire your initial
investment to The Gateway Trust. If you buy shares through a wire transfer,
Gateway will not charge you for the wire. Your financial institution may charge
you for this service.
Please call Gateway customer service at (800) 354-6339 for further instructions.

ADDITIONAL INVESTMENTS

You may add to your Gateway Fund investment at any time. The minimum amount of
an additional investment is $100.

10
<PAGE> 12

By Mail

Please mail your check and an Additional Investment Form. Business reply
envelopes and Additional Investment Forms are included with most mailings you
receive from the Fund. All checks should be payable to The Gateway Trust.

By Telephone

To invest by telephone, you will need to wire your investment to the Fund.
Please call Gateway customer service at (800) 354-6339 for further information
or to place a purchase order. If money is wired without a purchase order, it
will be returned uninvested.

By Automatic Investment Program

Gateway's Automatic Investment Program is a convenient way to make regularly
scheduled investments in the Gateway Fund. 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. Your financial
institution may charge you for transfers from your bank account to a Gateway
fund through the Automatic Investment Program.
Please call Gateway customer service at (800) 354-6339 for further instructions.

By Exchange from Another Gateway Fund

You may purchase shares by exchanging from another Gateway Trust mutual fund.
Please call Gateway customer service at (800) 354-6339 for further instructions.

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
terminate the exchange privilege for any shareholder that makes an excessive
number of exchanges between funds. 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.

HOW TO REDEEM YOUR SHARES

You may redeem your Gateway Fund shares by choosing one of the following
options. The proceeds will be mailed or wired. Normally the proceeds will be
sent on the next 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. For information about redeeming shares from an
IRA, please call Gateway customer service at (800) 354-6339.

By Mail

You may send a written request to redeem shares to:
The Gateway Trust
Shareholder Services
P.O. Box 5211
Cincinnati, OH 45201-5211
Your written request should specify the number of Fund shares or the dollar
amount to be redeemed. All owners must sign the request exactly as their names
appear on the account. In certain cases, other supporting legal documents may be
required. A check for the proceeds will be mailed to the address of record for
your account.

A signature guarantee is not usually required. However, a signature guarantee
may be required under certain circumstances. A signature guarantee is always
required if proceeds are to be paid to persons other than the record owner(s) of
the shares, or if the proceeds are to be sent to any address other than the
address of record for

11
<PAGE> 13

the account. An acceptable signature guarantee may be obtained from banks,
brokers, and certain other financial institutions. 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 customer service. Telephone
redemptions are not available for IRA accounts. If you redeem your shares by
telephone, the redemption proceeds can only 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; or

- 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. All owners must sign the request to
establish wire transfer instructions exactly as their names appear on
the account and the signatures must be guaranteed. 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.

The Gateway Trust will not be liable for any damages resulting from following
instructions received by telephone that it reasonably believes to be genuine.

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 customer service at (800) 354-6339 to make arrangements to use this
program.

ADDITIONAL INFORMATION ABOUT PURCHASING AND REDEEMING SHARES

- - The Gateway Trust reserves the right to reject any investment at any time.

- - The Trust also reserves the right to redeem your shares under certain
circumstances. You will receive written notice at least 60 days prior to
the redemption of your shares by the Trust.

- The Trust may redeem your shares when the aggregate value of your
account falls below $800 (other than as a result of market action)
unless you purchase additional shares to increase the value of your
account to at least $1,000 before the end of the 60-day period.

- The Trust will redeem your shares 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.

- Trustees of The Gateway Trust can terminate any series of the Trust
upon written notification to the shareholders of the applicable
series.

- - The Trust also reserves the right to make a "redemption in kind" - payment
in portfolio securities rather than cash- if the amount you are redeeming
is large enough to affect fund operations.

- - 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.

12
<PAGE> 14

BACK COVER PAGE OF PROSPECTUS

More information on the Gateway Fund is available free upon request, including
the following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The Statement of Additional Information provides more details about the Gateway
Fund and its policies. A current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (i.e. it is legally considered
a part of this prospectus).

ANNUAL/SEMIANNUAL REPORT
The Annual and Semiannual Reports describe the Gateway Fund's performance, list
portfolio holdings and contain a letter from the Fund's portfolio manager
discussing recent market conditions, economic trends and fund strategies that
significantly affected the Fund's performance during the last fiscal year.

TO OBTAIN INFORMATION:

By Telephone - call (800) 354-6339

By Mail - write to: The Gateway Trust
Shareholder Services
P.O. Box 5211
Cincinnati, OH 45201-5211

On the Internet - text only versions of the Gateway Fund documents can be viewed
online or downloaded from: SEC at http://www.sec.gov

You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, D.C. (phone 1-800-SEC-0330) or by sending your request and a
duplication fee to the SEC's Public Reference Section, Washington, D.C.
20549-6009.

The Gateway Fund is a series of The Gateway Trust, SEC file number: 811-02773.

13
<PAGE> 15

FRONT COVER

The Gateway Small Cap Index Fund

PROSPECTUS May 1, 1999

Fund Logo

<PAGE> 16

TABLE OF CONTENTS

<S> <C>
Gateway Small Cap Index Fund Investment Objective and Strategies................................3
Main Risks......................................................................................3
Past Performance................................................................................4
Expenses........................................................................................5
Annual Fund Operating Expenses.............................................................5
Example....................................................................................5
Management Fees.......................................................................5
Other Expenses........................................................................5
More Information about Investment Strategies and Related Risks..................................6
Investment Strategies......................................................................6
Purchasing Stocks.....................................................................6
Purchasing Index Put Options..........................................................6
Purchasing Index Call Options.........................................................6
Other Investments.....................................................................6
Related Risks..............................................................................6
Purchasing Stocks.....................................................................6
Purchasing Index Options..............................................................6
About the Investment Adviser....................................................................7
Year 2000..................................................................................7
Portfolio Manager Profile..................................................................7
Other Information...............................................................................7
How Fund Shares Are Priced.................................................................7
Dividends and Distributions................................................................8
Tax Issues.................................................................................8
Financial Highlights............................................................................9
Investing Through a Financial Professional.....................................................10
Investing Directly.............................................................................10
Opening Your Account......................................................................10
Opening a Regular (Non-IRA) Account..................................................10
Opening an IRA Account...............................................................10
By Mail..............................................................................10
By Telephone.........................................................................10
Additional Investments....................................................................10
By Mail..............................................................................11
By Telephone.........................................................................11
By Automatic Investment Program......................................................11
By Exchange from Another Gateway Fund................................................11
How To Redeem Your Shares.................................................................11
By Mail..............................................................................11
By Telephone.........................................................................12
Systematic Withdrawal Program........................................................12
Additional Information about Purchasing and Redeeming Shares..............................12
Annual/Semiannual Report.......................................................................13
</TABLE>

2
<PAGE> 17

GATEWAY SMALL CAP INDEX FUND INVESTMENT OBJECTIVE AND STRATEGIES

The Gateway Small Cap Index Fund seeks long-term growth of capital. The Fund
invests in the 250 stocks included in the Wilshire Small Cap Index. At times,
the Fund may purchase index put options to reduce the risk of principal loss or
it may buy index call options to increase the potential for gain. The Wilshire
Small Cap Index consists of the common stock of 250 companies with a median
market capitalization of approximately $658 million, selected by Wilshire
Associates to reflect the general characteristics and performance profile of
small companies.

The Gateway Small Cap Index Fund is designed for you if you are an aggressive
investor whose investment objective is long term growth of capital.

MAIN RISKS

The Fund's stock portfolio is subject to market risk. Stock prices may decline
over short or even extended periods of time. In addition, the portfolio of the
Fund consists entirely of small capitalization stocks. Investments in companies
with smaller capitalization are generally more volatile and less liquid than
investments in companies with larger capitalization.

When the Fund purchases index put or call options, it risks the loss of the cash
paid for the options. The Fund's use of option strategies may not increase its
returns or fully protect it against declines in the value of its stock
portfolio. Furthermore, the use of option strategies may cause the Fund's
performance to fail to track the results of the underlying Wilshire Small Cap
Index.

3
<PAGE> 18

PAST PERFORMANCE

The bar chart and table below show the Gateway Small Cap Index Fund's annual
returns and its long-term performance. The total return table compares the
Fund's performance over time to that of the Wilshire Small Cap Index and the
Russell 2000 Index. The Wilshire Small Cap and Russell 2000 indices were chosen
for comparison as representative of the small capitalization sector of the U.S.
stock market. In addition, the Fund's portfolio is based on the Wilshire Small
Cap Index. Both the chart and the table assume reinvestment of dividends and
distributions. As with all mutual funds, historical results do not necessarily
indicate how the Fund will perform in the future.

(Insert Bar Chart

(Plot Points for Bar Chart)

Gateway Small Cap Index Fund
Total Returns 1993 through 1998

QUARTERLY RETURNS 1993 THROUGH 1998
- ------------------------------------------------------
<S> <C>
BEST QUARTER - 4TH QUARTER 1998 17.10%
WORST QUARTER - 3RD QUARTER 1998 -21.91%

AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1998*
-----------------------------------------
1 YEAR 5 YEARS
---------------------- ------------------
<S> <C> <C>
Gateway Small Cap Index Fund -3.40% 9.33%
Wilshire Small Cap Index -0.43% 13.18%
Russell 2000 Index -2.55% 11.86%
</TABLE>

<PAGE> 19

EXPENSES

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)

Management Fees 0.90%
Distribution (12b-1) Fees N/A
Other Expenses 1.01
Total Annual Fund Operating Expenses * 1.91%

* Actual expense ratio for 1998 was 1.50%, net of fee waivers of 0.41%. This
waiver is expected to continue at least through 1999.

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
- ---------------- -------------- -------------- ---------------
$194 $600 $1,032 $2,233

Management Fees

The Adviser is paid a fee for managing the Fund's investment portfolio. For the
1998 fiscal year, the Fund paid the Adviser a net fee of 0.49% (after fee
waivers of 0.41%) of its average net assets.

Other Expenses

The Fund pays all of its normal operating expenses, including: custodial fees,
registration of Fund shares with federal and state securities agencies, and the
Fund's share of general expenses of the Gateway Trust. Also included in this
category are fees paid to the Adviser for its transfer agency, fund accounting
and other services to the Fund. The Fund also reimburses the Adviser for
compliance expenses.

5
<PAGE> 20

MORE INFORMATION ABOUT INVESTMENT STRATEGIES AND RELATED RISKS

INVESTMENT STRATEGIES

Purchasing Stocks

The Gateway Small Cap Index Fund invests in the 250 stocks included in the
Wilshire Small Cap Index. Each stock is held in approximately the same
proportion as in the Wilshire Small Cap Index. For example, if a stock
represents 1% of the value of the Wilshire Small Cap Index, the Fund invests
approximately 1% of its assets in the stock. The Adviser monitors the
composition of the Wilshire Small Cap Index and makes adjustments to the Fund's
portfolio as needed. The Fund is not affiliated with or sponsored by Wilshire
Associates.

Purchasing Index Put Options

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 may not spend more
than 5% of its assets to purchase index put options.

Purchasing Index Call Options

The Fund occasionally buys index call options, in an attempt to increase the
Fund's participation in short term upward market movements. The value of a call
option generally increases as stock prices increase. The Fund may not spend more
than 5% of its assets to purchase index call options.

Other Investments

RELATED RISKS

Purchasing Stocks

Historically, stocks produce greater returns than other investment alternatives,
however returns on stocks also tend to be more volatile. The Fund's option
strategies may not fully protect it against declines in the value of its stock
portfolio. The Fund could experience a loss in both the stock and option
portions of its portfolio.

Purchasing Index Options

The Fund risks losing all or part of the cash paid for purchasing index options.

Year 2000

6
<PAGE> 21

ABOUT THE INVESTMENT ADVISER

Gateway Investment Advisers, L.P. (the "Adviser") has acted as the investment
adviser for the Gateway Small Cap Index Fund since December 15, 1995. It is
located at 400 TechneCenter Dr., Milford, Ohio 45150. The predecessor to the
Adviser was Gateway Investment Advisers, Inc., which provided the same services
to the Fund prior to December 15, 1995. As of December 31, 1998, the Adviser had
approximately $800 million in assets under management, including approximately
$500 million in assets invested in all of the Gateway Trust's mutual fund
series. The Adviser provides the Fund with investment research and advice, as
well as administration, accounting, transfer agency, and shareholder services.
The fees paid to the Adviser are shown in the Expense Table on page X.

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 35

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

OTHER INFORMATION

HOW FUND SHARES ARE PRICED

The Fund normally values stocks and options at the average of the closing bid
and asked quotations. Under normal circumstances, closing option quotations are
considered to reflect 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.

DIVIDENDS AND DISTRIBUTIONS

The Fund normally declares dividends and distributions of net capital gains at
the end of December. The capital gain distribution has varied considerably from
year to year. Shareholders may receive distributions either in cash or in
additional shares of the Fund at no charge.

TAX ISSUES

<PAGE> 22

If you buy Fund shares just before a dividend is declared, you will pay the full
price for the shares and then receive a portion of the price back as a taxable
distribution. The distribution paid to you would generally be included in your
gross income for tax purposes, whether or not you reinvested it. For this
reason, you should carefully consider the tax consequences of buying shares of
the Fund in late December.

8
<PAGE> 23

FINANCIAL HIGHLIGHTS

YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1998 1997 1996 1995(1) 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.48 $ 12.06 $ 11.05 $ 9.63 $ 10.35
------------- ------------- ------------- ------------- -------------

Net investment (loss) income (0.05) (0.02) 0.01 0.03 (0.02)

Net gains or losses on securities (0.41) 2.51 1.87 2.07 (0.60)
------------- ------------- ------------- ------------- -------------

Total from investment operations (0.46) 2.49 1.88 2.10 (0.62)
------------- ------------- ------------- ------------- -------------

Dividends from net investment income 0.00 0.00 (0.01) (0.01) 0.00
Distributions from capital gains (1.45) (1.07) (0.86) (0.67) (0.10)
Distributions in excess of realized gains (0.04) 0.00 0.00 0.00 0.00
------------- ------------- ------------- ------------- -------------
Total distributions (1.49) (1.07) (0.87) (0.68) (0.10)
------------- ------------- ------------- ------------- -------------

Net asset value, end of period $ 11.53 $ 13.48 $ 12.06 $ 11.05 $ 9.63
============= ============= ============= ============= =============

TOTAL RETURN (3.40%) 20.64% 17.04% 21.81% (5.99%)

Net assets, end of period (thousands) $ 14,049 $ 15,811 $ 10,921 $ 9,418 $ 9,657
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.68% 2.00%
Ratio of net investment income (loss)
to average net assets (0.42%) (0.19%) 0.03% 0.09% (0.14%)
Portfolio turnover rate 30% 32% 20% 20% 39%
<FN>

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

</TABLE>

9
<PAGE> 24

INVESTING THROUGH A FINANCIAL PROFESSIONAL

INVESTING DIRECTLY

Gateway customer service representatives are available to assist you from Monday
through Friday, 9:00 AM to 5:00 PM Eastern Time, toll free at (800) 354-6339.

OPENING YOUR ACCOUNT

Gateway Small Cap Index Fund is available for purchase by individuals in both
taxable and IRA accounts, as well as by corporations, trusts, and pension plans.
After your initial purchase and any subsequent transaction, you will receive a
confirmation statement showing the resulting value of your account.

Opening a Regular (Non-IRA) Account

To open a regular account in the Fund, please complete and sign a New Account
Application, which accompanies this Prospectus. The minimum investment is
$1,000.

Opening an IRA Account

By Mail

By Telephone

ADDITIONAL INVESTMENTS

You may add to your Gateway Small Cap Index Fund investment at any time. The
minimum amount of an additional investment is $100.

10
<PAGE> 25

By Mail

By Telephone

By Automatic Investment Program

Gateway's Automatic Investment Program is a convenient way to make regularly
scheduled investments in the Gateway Small Cap Index Fund. 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.
Your financial institution may charge you for transfers from your bank account
to a Gateway fund through the Automatic Investment Program. Please call Gateway
customer service at (800) 354-6339 for further instructions.

By Exchange from Another Gateway Fund

You may purchase shares by exchanging from another Gateway Trust mutual fund.
Please call Gateway customer service at (800) 354-6339 for further instructions.

HOW TO REDEEM YOUR SHARES

You may redeem your Gateway Small Cap Index Fund shares by choosing one of the
following options. The proceeds will be mailed or wired. Normally the proceeds
will be sent on the next 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. For information about redeeming shares from
an IRA, please call Gateway customer service at (800) 354-6339.

By Mail

You may send a written request to redeem shares to:
The Gateway Trust
Shareholder Services
P.O. Box 5211
Cincinnati, OH 45201-5211

Your written request should specify the number of Fund shares or the dollar
amount to be redeemed. All owners must sign the request exactly as their names
appear on the account. In certain cases, other supporting legal documents may be
required. A check for the proceeds will be mailed to the address of record for
your account.

<PAGE> 26

the account. An acceptable signature guarantee may be obtained from banks,
brokers, and certain other financial institutions. Notary publics cannot
guarantee your signature.

By Telephone

- - 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; or

- - 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. All owners must sign the request to establish wire
transfer instructions exactly as their names appear on the account and the
signatures must be guaranteed. 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.

The Gateway Trust will not be liable for any damages resulting from following
instructions received by telephone that it reasonably believes to be genuine.

Systematic Withdrawal Program

ADDITIONAL INFORMATION ABOUT PURCHASING AND REDEEMING SHARES

- - The Gateway Trust reserves the right to reject any investment at any time.

- - The Trust also reserves the right to redeem your shares under certain
circumstances. You will receive written notice at least 60 days prior to
the redemption of your shares by the Trust.

- The Trust will redeem your shares 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.

- Trustees of The Gateway Trust can terminate any series of the Trust
upon written notification to the shareholders of the applicable
series.

- - The Trust also reserves the right to make a "redemption in kind" - payment
in portfolio securities rather than cash- if the amount you are redeeming
is large enough to affect fund operations.

- - 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.

12
<PAGE> 27

BACK COVER PAGE OF PROSPECTUS

More information on the Gateway Small Cap Index Fund is available free upon
request, including the following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The Statement of Additional Information provides more details about the Gateway
Small Cap Index Fund and its policies. A current SAI is on file with the
Securities and Exchange Commission (SEC) and is incorporated by reference (i.e.
it is legally considered a part of this prospectus).

ANNUAL/SEMIANNUAL REPORT

Describes the Gateway Small Cap Index Fund's performance, lists portfolio
holdings and contains a letter from the Fund's portfolio manager discussing
recent market conditions, economic trends and fund strategies that significantly
affected the Fund's performance during the last fiscal year.

TO OBTAIN INFORMATION:

By Telephone - call (800) 354-6339

By Mail - write to: The Gateway Trust
Shareholder Services
P.O. Box 5211
Cincinnati, OH 45201-5211

On the Internet - text only versions of the Gateway Small Cap Index Fund
documents can be viewed online or downloaded from: SEC at http://www.sec.gov.

The Gateway Small Cap Index Fund is a series of The Gateway Trust, SEC file
number: 811-02773.

13
<PAGE> 28
FRONT COVER

Cincinnati Fund

PROSPECTUS May 1, 1999

Fund Logo

TABLE OF CONTENTS

<S> <C>
Cincinnati Fund Investment Objective and Strategies..............................3
Main Risks.......................................................................3
Past Performance.................................................................4
Expenses.........................................................................5
Annual Fund Operating Expenses..............................................5
Example.....................................................................5
Management Fees........................................................5
Other Expenses.........................................................5
More Information about Investment Strategies.....................................5
Other Investments......................................................6
About the Investment Adviser.....................................................6
Year 2000...................................................................6
Portfolio Manager Profile...................................................6
Other Information................................................................7
How Fund Shares Are Priced..................................................7
Dividends and Distributions.................................................7
Tax Issues..................................................................7
Financial Highlights.............................................................8
Investing Through a Financial Professional.......................................9
Investing Directly...............................................................9
Opening Your Account........................................................9
Opening a Regular (Non-IRA) Account....................................9
Opening an IRA Account.................................................9
By Mail................................................................9
By Telephone...........................................................9
Additional Investments......................................................9
By Mail...............................................................10
By Telephone..........................................................10
By Automatic Investment Program.......................................10
By Exchange from Another Gateway Fund.................................10
How To Redeem Your Shares..................................................10
By Mail...............................................................10
By Telephone..........................................................11
Systematic Withdrawal Program.........................................11
Additional Information about Purchasing and Redeeming Shares...............11

</TABLE>

<PAGE> 30

CINCINNATI FUND INVESTMENT OBJECTIVE AND STRATEGIES

The Cincinnati Fund seeks capital appreciation by investing in the stock of
companies with an important business presence in the Greater Cincinnati Area.
The Adviser uses a 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. Stocks of companies that do business in the Greater Cincinnati Area are
weighted on the basis of level of employment and nature of their operations in
the region. Industry diversification, liquidity, market capitalization, and
listing requirements are also included in the model.

MAIN RISKS

The industry diversification of the Fund's portfolio is, by definition, limited
by the diversity of the Greater Cincinnati Area. Consequently, significant
industry groups may be over- or under-weighted, or unrepresented in the Fund's
portfolio. Changes and developments in the economic environment of the Greater
Cincinnati Area may have a disproportionate effect on the Fund's portfolio.

The Fund's stock portfolio is subject to market risk. Stock prices may decline
over short or even extended periods of time. Historically, stocks produce
greater returns than other investment alternatives, however returns on stocks
also tend to be more volatile. In addition, 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.

3
<PAGE> 31

PAST PERFORMANCE

The bar chart and table below show the Cincinnati Fund's annual returns and its
long-term performance. The total return table compares the Fund's performance
over time to that of the S&P 500 Index and the Russell 2000 Index. The S&P 500
and Russell 2000 indices are popular indicators of the performance of the large
and small capitalization sectors, respectively, of the U.S. stock market. These
indices were chosen for comparison because they reflect the broad spectrum of
U.S. equity markets. Both the chart and the table assume reinvestment of
dividends and distributions. As with all mutual funds, historical results do not
necessarily indicate how the Fund will perform in the future.
<TABLE>
<CAPTION>

(Insert Bar Chart)

(Plot Points for Bar Chart)
Cincinnati Fund
Total Returns by Calendar Year
1994 through 1998
1994 * -0.90%
1995 35.31%
1996 19.98%
1997 28.98%
1998 11.89%

QUARTERLY RETURNS 1994 THROUGH 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
BEST QUARTER FOURTH QUARTER 1998 19.91%
WORST QUARTER THIRD QUARTER 1998 -13.86%

AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1998
---------------------------------------------
1 YEAR LIFE OF THE FUND
--------------------- -----------------------
<S> <C> <C>
Cincinnati Fund 11.89% 22.81%
S&P 500 Index 28.58% 28.43%
Russell 2000 Index -2.55% 14.50%

</TABLE>

<PAGE> 32

EXPENSES

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)

Management Fees 0.50%
Distribution (12b-1) Fees N/A
Other Expenses 0.87
Total Annual Fund Operating Expenses 1.37%

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
- ---------------- -------------- -------------- ---------------
$139 $434 $750 $1,646

Management Fees

The Adviser is paid a fee for managing the Fund's investment portfolio. For the
1998 fiscal year, the Fund paid the Adviser a fee of 0.50% of its average net
assets.

Other Expenses

The Fund pays all of its normal operating expenses, including: custodial fees,
registration of Fund shares with federal and state securities agencies, and the
Fund's share of general expenses of the Gateway Trust. Also included in this
category are fees paid to the Adviser for its transfer agency, fund accounting
and other services to the Fund. The Fund also reimburses the Adviser for
compliance expenses.

MORE INFORMATION ABOUT INVESTMENT STRATEGIES

Under normal conditions, at least 65% of the Fund's assets are invested in
stocks from two sources: (1) those issued by companies with their headquarters
in the Greater Cincinnati Area; and (2) those issued by companies headquartered
elsewhere who rank among the 25 largest publicly held employers in the Greater
Cincinnati Area.

Stocks meeting the above criteria are weighted based on a proprietary model
developed by the Adviser. The model considers each company's level of employment
and the nature of their operations in the Greater Cincinnati Area. The model
incorporates other criteria such as liquidity, market capitalization, exchange
listing of each stock, and also considers the industry diversification of the
overall portfolio. The Adviser uses the 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 company must be a going
concern that meets the following model criteria: (1) the stock must be issued
either by a company that employs at least fifty persons in the

5
<PAGE> 33

Greater Cincinnati Area or by a company that maintains its corporate
headquarters in the Greater Cincinnati Area; and, (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 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.

Other Investments

ABOUT THE INVESTMENT ADVISER

Gateway Investment Advisers, L.P. (the "Adviser") has acted as the investment
adviser for the Cincinnati Fund since December 15, 1995. It is located at 400
TechneCenter Dr., Milford, Ohio 45150. The predecessor to the Adviser was
Gateway Investment Advisers, Inc., which provided the same services to the Fund
prior to December 15, 1995. As of December 31, 1998, the Adviser had
approximately $800 million in assets under management, including approximately
$500 million in assets invested in all of the Gateway Trust's mutual fund
series. The Adviser provides the Fund with investment research and advice, as
well as administration, accounting, transfer agency, and shareholder services.
The fees paid to the Adviser are shown in the Expense Table on page X.

YEAR 2000

PORTFOLIO MANAGER PROFILE
J. Patrick Rogers, CFA
Portfolio Manager from 1994
MBA Xavier University 1994
BBA University of Notre Dame 1986
Age 35

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

6
<PAGE> 34

OTHER INFORMATION

HOW FUND SHARES ARE PRICED

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.

DIVIDENDS AND DISTRIBUTIONS

The Fund normally distributes its income and net capital gains at the end of
December. Shareholders may receive distributions either in cash or in additional
shares of the Fund at no charge. The capital gain distribution has varied
considerably from year to year.

TAX ISSUES

If you buy Fund shares just before a distribution, you will pay the full price
for the shares and then receive a portion of the price back as a taxable
distribution. The distribution paid to you would generally be included in your
gross income for tax purposes, whether or not you reinvested it. For this
reason, you should carefully consider the tax consequences of buying shares of
the Fund in late December.

7
<PAGE> 35

FINANCIAL HIGHLIGHTS

YEAR ENDED DECEMBER 31, FOR THE PERIOD FROM
------------------------------------------------------------ NOVEMBER 7, 1994 TO
1998 1997 1996 1995(3) DECEMBER 31, 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.98 $ 15.40 $ 13.12 $ 9.91 $ 10.00
Net investment income 0.06 0.07 0.02 0.04 0.03
Net gains (losses) on securities 2.20 4.39 2.60 3.46 (0.12)
------------- ------------ ------------ ------------ ------------

Total from investment operations 2.26 4.46 2.62 3.50 (0.09)
------------- ------------ ------------ ------------ ------------

Dividends from net investment income (0.06) (0.07) (0.02) (0.07) 0.00
Distributions from capital gains (0.34) (0.81) (0.32) (0.22) 0.00
------------- ------------ ------------ ------------ ------------
Total distributions (0.40) (0.88) (0.34) (0.29) 0.00

Net asset value, end of period $ 20.84 $ 18.98 $ 15.40 $ 13.12 $ 9.91
============= ============= ============ ============ ============

TOTAL RETURN 11.89% 28.98% 19.98% 35.31% -0.90%(2)

Net assets, end of period (thousands) $ 26,544 $ 17,527 $ 8,984 $ 5,877 $ 3,225
Ratio of expenses to average net assets (1) 1.37% 1.69% 2.00% 1.98% 1.96%
Ratio of net investment income to
average net assets 0.30% 0.50% 0.13% 0.46% 2.24%
Portfolio turnover rate 8% 17% 10% 9% 0%(2)

<FN>

(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.
</TABLE>

8
<PAGE> 36

INVESTING THROUGH A FINANCIAL PROFESSIONAL

INVESTING DIRECTLY

Gateway customer service representatives are available to assist you from Monday
through Friday, 9:00 AM to 5:00 PM Eastern Time, toll free at (800) 354-5525.

OPENING YOUR ACCOUNT

Cincinnati Fund is available for purchase by individuals in both taxable and IRA
accounts, as well as by corporations, trusts, and pension plans. After your
initial purchase and any subsequent transaction, you will receive a confirmation
statement showing the resulting value of your account.

Opening a Regular (Non-IRA) Account

To open a regular account in the Fund, please complete and sign a New Account
Application, which accompanies this Prospectus. The minimum investment is
$1,000.

Opening an IRA Account

To open an IRA account, please complete and sign an IRA Account Application. The
minimum investment for an IRA is $500. If you have not received an IRA Account
Application and an IRA Agreement and Disclosure Statement, please call Gateway
customer service. To transfer an existing IRA to Gateway, you need to complete
an IRA Transfer Form in addition to an IRA Account Application. To transfer or
roll over funds from an employer-sponsored plan such as a 401(k), please call
Gateway customer service at (800) 354-5525. You will find more detailed
information about transfers to and distributions from IRAs in the IRA Agreement
and Disclosure Statement.

By Mail

By Telephone

If you prefer to open your account by telephone, you must wire your initial
investment to The Gateway Trust. If you buy shares through a wire transfer,
Gateway will not charge you for the wire. Your financial institution may charge
you for this service. Please call Gateway customer service at (800) 354-5525 for
further instructions.

ADDITIONAL INVESTMENTS

You may add to your Cincinnati Fund investment at any time. The minimum amount
of an additional investment is $100.

9
<PAGE> 37

By Mail

By Telephone

To invest by telephone, you will need to wire your investment to the Fund.
Please call Gateway customer service at (800) 354-5525 for further information
or to place a purchase order. If money is wired without a purchase order, it
will be returned uninvested.

By Automatic Investment Program

Gateway's Automatic Investment Program is a convenient way to make regularly
scheduled investments in the Cincinnati Fund. 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. Your financial
institution may charge you for transfers from your bank account to a Gateway
fund through the Automatic Investment Program. Please call Gateway customer
service at (800) 354-5525 for further instructions.

By Exchange from Another Gateway Fund

You may purchase shares by exchanging from another Gateway Trust mutual fund.
Please call Gateway customer service at (800) 354-5525 for further instructions.

HOW TO REDEEM YOUR SHARES

You may redeem your Cincinnati Fund shares by choosing one of the following
options. The proceeds will be mailed or wired. Normally the proceeds will be
sent on the next 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. For information about redeeming shares from an
IRA, please call Gateway customer service at (800) 354-5525.

By Mail

10
<PAGE> 38

the account. An acceptable signature guarantee may be obtained from banks,
brokers, and certain other financial institutions. Notary publics cannot
guarantee your signature.

By Telephone

- - 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; or

The Gateway Trust will not be liable for any damages resulting from following
instructions received by telephone that it reasonably believes to be genuine.

Systematic Withdrawal Program

ADDITIONAL INFORMATION ABOUT PURCHASING AND REDEEMING SHARES

- - The Gateway Trust reserves the right to reject any investment at any time.

- - The Trust also reserves the right to redeem your shares under certain
circumstances. You will receive written notice at least 60 days prior to
the redemption of your shares by the Trust.

- - The Trust will redeem your shares 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.

- - Trustees of The Gateway Trust can terminate any series of the Trust upon
written notification to the shareholders of the applicable series.

- - The Trust also reserves the right to make a "redemption in kind" - payment
in portfolio securities rather than cash- if the amount you are redeeming
is large enough to affect fund operations.

- - 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.

11
<PAGE> 39

BACK COVER PAGE OF PROSPECTUS

More information on the Cincinnati Fund is available free upon request,
including the following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The Statement of Additional Information provides more details about the
Cincinnati Fund and its policies. A current SAI is on file with the Securities
and Exchange Commission (SEC) and is incorporated by reference (i.e. it is
legally a considered a part of this prospectus).

ANNUAL/SEMIANNUAL REPORT

The annual and semiannual reports describe the Cincinnati Fund's performance,
list portfolio holdings and contains a letter from the Fund's portfolio manager
discussing recent market conditions, economic trends and fund strategies that
significantly affected the Fund's performance during the last fiscal year.

TO OBTAIN INFORMATION:

By Telephone - call (800) 354-5525

By Mail - write to: The Gateway Trust
Shareholder Services
P.O. Box 5211
Cincinnati, OH 45201-5211

On the Internet - text only versions of the Cincinnati Fund documents can be
viewed online or downloaded from: SEC at http://www.sec.gov

The Cincinnati Fund is a series of The Gateway Trust, SEC file number:
811-02773.

12
<PAGE> 40

GATEWAY TRUST

The Gateway Fund
and
The Gateway Small Cap Index Fund

STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1999

This Statement is not a prospectus but should be read in conjunction
with the current prospectuses of The Gateway Trust for the Gateway Fund and the
Gateway Small Cap Index Fund dated May 1, 1999 and any supplement thereto. A
copy of these prospectuses may be obtained from the Trust by written or
telephone request directed to the Trust at the address or the telephone number
shown below.

The financial statements and independent auditors' report required to
be included in this SAI are incorporated herein by this reference to the annual
and semi-annual reports of the funds for the fiscal year ended December 31, 1998
and year-to-date ended June 30, 1998, respectively.

The prospectuses of the Gateway Fund and Gateway Small Cap Index Fund
dated May 1, 1999 are also incorporated herein by reference.

================================================================================
P. O. BOX 5211
CINCINNATI, OHIO 45201-5211
(800) 354-6339

================================================================================
<PAGE> 41

TABLE OF CONTENTS
-----------------

<S> <C>

Introduction....................................................................................................4
General Information About The Gateway Trust.............................................................4
Investment Objectives And Practices.............................................................................5
Gateway Fund............................................................................................5
Gateway Small Cap Index Fund............................................................................5
Option Transactions.............................................................................................5
Selling Covered Call Options............................................................................5
Selling Covered Put Options.............................................................................6
Purchase Of Put And Call Options........................................................................6
Options On Securities Indexes...........................................................................6
Covered Index Call Options Sold By The Gateway Fund.....................................................7
Investment Practices, Risks, And Restrictions...................................................................7
Other Investment Practices..............................................................................7
Certain Risks...........................................................................................8
Investment Restrictions.................................................................................8
Performance And Risk Information...............................................................................10
Performance Information................................................................................10
Total Return Calculations.......................................................................10
Historical Results..............................................................................12
Risk Information.......................................................................................12
Comparative Indexes.............................................................................12
Standard Deviation..............................................................................13
Beta............................................................................................14
Rankings And Comparative Performance Information.......................................................14
Shareholder Services...........................................................................................14
Open Account...........................................................................................14
Automatic Investment Program...........................................................................14
IRAs...................................................................................................15
Systematic Withdrawal Program..........................................................................16
Additional Purchase And Redemption Information.................................................................16
Investment Advisory And Other Services.........................................................................17
Gateway Investment Advisers, L.P.......................................................................17
Gateway Fund Management Agreement......................................................................17
Gateway Small Cap Index Fund Investment Advisory Contract..............................................18
Distribution Plan......................................................................................20
Custodian..............................................................................................21
Shareholder Servicing, Transfer, Dividend Disbursing, And Financial Servicing Agent....................21
</TABLE>

<PAGE> 42
<TABLE>
<S> <C>
Brokerage......................................................................................................21
Additional Tax Matters.........................................................................................23
Federal Tax Matters....................................................................................23
State And Local Tax Aspects............................................................................24
Trustees And Officers Of The Trust.............................................................................24
Independent Public Accountants And Financial Statements........................................................26
Principal Holders Of Fund Shares...............................................................................26
Gateway Fund...........................................................................................26
Small Cap Index Fund...................................................................................27
Shares Held By Adviser.................................................................................27
Schedule A.....................................................................................................28
Schedule B.....................................................................................................29
Schedule C.....................................................................................................31
</TABLE>

<PAGE> 43

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 1988; and as Gateway Option Income Fund, Inc. until May
1986. 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
two separate prospectuses. 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.

4
<PAGE> 44

INVESTMENT OBJECTIVES AND PRACTICES

GATEWAY FUND

The investment objective of the Gateway Fund is to capture the majority
of the higher returns associated with equity market investments, while exposing
investors to significantly less risk than other equity investments. 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
OBJECTIVES AND STRATEGIES" in the Fund's 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"). The Fund sells index call options on the S&P 100 Index, the S&P
500 Index and other stock indexes, and, when appropriate, the Fund enters into
closing purchase transactions with respect to such options. The Fund also
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.

The Gateway Fund is a diversified, open-end management investment
company.

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 OBJECTIVES AND STATEGIES" in the Fund's
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"). Because the 250 Index is comprised of 250 equity securities and the
Fund purchases such securities in round lots, the portfolio does not correlate
perfectly with the 250 Index. Although the Adviser monitors the Small Cap Index
Fund portfolio so that the percentage of assets invested in each stock in the
Small Cap Index Fund substantially corresponds to the composition of 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 median market
capitalization of the 250 companies is approximately $658 million.

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.

The Small Cap Index Fund is a diversified, open-end management
investment company.

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.

5
<PAGE> 45

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 Trust 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.

The Gateway Fund is the only Trust 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.

OPTIONS ON SECURITIES INDEXES

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. 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.

6
<PAGE> 46

COVERED INDEX CALL OPTIONS SOLD BY THE GATEWAY FUND

The Gateway Fund sells index call options 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). 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 an index call option, 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
Fund (or escrow receipts with respect to other acceptable securities). The
escrow agent releases the stocks from the escrow account when the call option
expires or the Fund enters into a closing purchase transaction. Until such
release, the underlying stocks cannot be sold by the Fund. The Fund may enter
into similar collateral arrangements with the counterparty when it sells
over-the-counter index call options.

When the Fund sells an index call option, 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 a portfolio of stocks substantially replicating the movement
of the index underlying the call option; (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.

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 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 index, the Fund would not be
able to close out its option positions.

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, either fund
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.

7
<PAGE> 47

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.

INVESTMENT RESTRICTIONS

The investment objectives and investment restrictions applicable to
each fund are designated as fundamental policies of the fund. The Trust has
adopted other fundamental policies with respect to each of the funds.
Fundamental policies may not be changed without 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.

8
<PAGE> 48

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 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
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.

9
<PAGE> 49

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.

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.

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
calculated 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.

10
<PAGE> 50

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.

11
<PAGE> 51

HISTORICAL RESULTS
The following table shows each fund's average annual and cumulative
total returns for the period ended December 31, 1998:

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

<S> <C> <C> <C> <C>
Gateway Fund 12.26% 10.32% 11.10% 10.51%
Gateway Small Cap Index Fund -3.40 9.33% N/A 9.61%

- -------------------------------------------- --------------- ---------------- --------------- ---------------------
<CAPTION>

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

<S> <C> <C> <C> <C>
Gateway Fund 12.26% 63.41% 186.44% 722.70%
Gateway Small Cap Index Fund -3.40 56.20% N/A 66.35%

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

The table below shows the redeemable value on December 31, 1998, for an
initial investment of $10,000 in the fund that was made at the beginning of the
one-, five-, and ten-year periods, or at the commencement of the fund's
operations. The table assumes all dividends and distributions have been
reinvested in additional fund shares.
<TABLE>
<CAPTION>

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

<S> <C> <C> <C> <C>
Gateway Fund $11,236 $16,341 $28,644 $87,270
Gateway Small Cap Index Fund $9,660 $15,620 N/A $16,635

- --------------------------------------------- --------------- -------------- ---------------- ---------------------
</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. The following is a description of some of the indices that
may be used:

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.

12
<PAGE> 52

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.

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.

13
<PAGE> 53

For example, as of December 31, 1998, the annual standard deviation for
the Gateway Fund over the past three years was 5.48% while the standard
deviation for the S&P 500 Index was 15.79%. 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 0.33 for the five-year
period ended December 31, 1998. 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.

PORTFOLIO HOLDINGS

Each fund may list their portfolio holdings from time to time.

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.

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

14
<PAGE> 54

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 Firstar Corporation. 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 Firstar
Corporation as custodian for the Gateway Traditional IRA. The distribution
should be wired to:

The Gateway Trust c/o Firstar Corporation
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

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 "Firstar Corporation, 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.

15
<PAGE> 55

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.

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

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.

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.

16
<PAGE> 56

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 Rule 18f-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 Incorporated ("ABII") is
a limited partner with a 15% 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 and a Trustee 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.

GATEWAY FUND MANAGEMENT AGREEMENT

The Trust has retained the Adviser under an investment advisory
contract (the "Management Agreement") to act as investment manager and in such
capacity supervise the investments of the Gateway Fund, subject to the policies
and control of the Trust's Board of Trustees. The Management Agreement for the
Gateway Fund became effective January 1, 1999. Services were provided by the
Adviser under an investment advisory contract beginning December 15, 1995, and
previously by GIA under a similar contract prior to December 15, 1995.

<PAGE> 57

Pursuant to the Management Agreement, the Adviser, at its sole expense,
provides the Fund with (i) investment recommendations regarding such fund's
investments; (ii) office space, telephones, and other office equipment; and
(iii) clerical and secretarial staff and the services, without additional
compensation, of all officers of the Trust. In addition, the Adviser has agreed
to bear (i) expenses incurred in connection with association membership dues,
except the annual dues of the Trust for its membership in the Investment Company
Institute, which shall be paid by the Trust; (ii) expenses of printing and
distributing all Fund registration statements, prospectuses and reports to
current Fund shareholders; (iii) costs of printing and transmitting reports to
governmental agencies; and (iv) printing and mailing costs. The Management
Agreement further provides 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 Management Agreement 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:

- expenses of continuing the Trust's existence;

- fees and expenses of trustees not employed by the Adviser;

- expenses incurred by the Fund pursuant to the Fund's Distribution
Plan;

- expenses of registering or qualifying the Trust or its shares under
federal and various state laws and maintaining and updating such
registrations and qualifications on a current basis;

- interest expenses, taxes, fees, and commissions of every kind;
expenses of issue, including cost of share certificates;

- repurchases and redemption of shares;

- charges and expenses of custodians, transfer agents, fund accountants,
shareholder servicing agents, dividend disbursing agents, and
registrars;

- expenses of valuing shares of each Fund;

- auditing, accounting, and legal expenses;

- expenses of shareholder meetings and proxy solicitations therefore;

- insurance expenses;

- membership fees of the Investment Company Institute;

- and all "extraordinary expenses" as may arise, including all losses
and liabilities in administrating the Trust; expenses 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 Management Agreement, the Gateway Fund pays the Adviser a management
fee (the "Management Fee") at (a) the annual rate of 0.925% of the average value
of the daily net assets of the Fund; minus (b) the amount of the Fund's expenses
incurred pursuant to its Distribution Plan. In addition, as long as the Adviser
is providing transfer agency, fund accounting, and other services pursuant to
the Services Agreement with the Trust dated January 1, 1998, the Adviser shall
receive no separate compensation for such services with respect to the Gateway
Fund during the term of the Management Agreement.

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 above described) exceed the
specified percentage of the Fund's average daily net asset value for such year,
the Management Agreement requires the Adviser to bear all such excess expenses
up to the amount of the Management Fee. The applicable expense limitation
percentage for the Fund is 1.50% of the Fund's average daily net asset value.
Each month the Management Fee is determined and the Fund's expenses are
projected. If the Fund's projected expenses are in excess of the above-stated
expense limitations, the Management 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 Management Fee paid by the Fund to the Adviser for the
year.

GATEWAY SMALL CAP INDEX FUND INVESTMENT ADVISORY CONTRACT

The Trust has retained the Adviser under an investment advisory
contract (the "Adviser Contract") to act as investment manager and in such
capacity supervise the investments of the Gateway Small Cap Index Fund, subject
to the policies and control of

<PAGE> 58

the Trust's Board of Trustees. The Adviser Contract for the Small Cap Index Fund
became effective 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 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 Contract further provides 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 Contract provides that all expenses not specifically
assumed by the Adviser which may be incurred in the operation of the Trust and
the offering of its shares will be borne by the Trust. Such expenses will be
allocated among the funds in the Trust by direction of the Board of Trustees,
most frequently on the basis of expenses incurred by each fund, but where that
is not practicable on such basis as the Trustees determine to be appropriate.
Expenses to be borne by the Trust include:

- fees and expenses of trustees not employed by the Adviser;

- expenses of printing and distributing 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 governmental 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.

In return for the services and facilities furnished by the Adviser
under the Adviser Contract, the Small Cap Index Fund 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.

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 above described) exceed the
specified percentage 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. The applicable expense limitation percentage for
the Fund is 2.00% of the Fund's average daily net asset value. 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 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 the Fund shall not exceed the aggregate
Advisory Fee paid by the Fund to the Adviser for such year.

19
<PAGE> 59

The following table shows the Advisory Fees earned by the Adviser (or
GIA) for providing services to the funds under the then-current investment
advisory contracts. It also shows the amount of the fees waived by the Adviser
for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>

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

<S> <C> <C>
1998 Fee Earned $2,382,457 $140,709
1998 Fee Waived 0 63,744
1998 Fee Paid $2,382,547 $76,965

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

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

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

The Management Agreement and the Adviser Contract 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
Management Agreement and the Adviser Contract contemplate that the Adviser may
act as an investment manager or adviser for others.

The Management Agreement and 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 Contracts, and by vote of the
shareholders of the applicable fund.

The Management Agreement and 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 applicable fund; or (iii)
by the Adviser. Both the Management Agreement and the Adviser Contract terminate
automatically in the event of assignment (as that term is defined in the
Investment Company Act of 1940) by the Adviser.

The Management Agreement continues in effect until December 31, 2000
and the Adviser Contract continues in effect until December 31, 1999, and
thereafter, provided that their 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 Management Agreement or
the Adviser Contract (other than as Trustees of the Trust) by votes cast in
person at a meeting specifically called for such purposes.

DISTRIBUTION PLAN
FOR THE GATEWAY FUND

A Distribution Plan pursuant to Rule 12b-1 under the Investment Company
Act (the "Plan") became effective on January 1, 1999 for the Gateway Fund. Under
the Plan, the Trust may, directly or indirectly, engage in any activities
related to the distribution of shares of the Fund, which activities may include,
but are not limited to, the following: (a) payments to securities dealers and
others that are engaged in the sale of shares, that may be advising shareholders
of the Fund regarding the Fund, that hold shares for shareholders in omnibus
accounts or as shareholders of record, or that provide shareholder support or
administrative services to the Fund and its shareholders; (b) expenses of
maintaining personnel who engage in or support distribution; (c) costs of
preparing, printing, and distributing prospectuses and statements of additional
information and reports of the Fund for recipients other than existing
shareholders of the Fund; (d) costs of formulating and implementing marketing
and promotional activities; and (e) costs of preparing, printing, and
distributing sales literature. The expenditures to be made by the Trust pursuant
to the Distribution Plan and the basis upon which payment of such expenditures
will be made is determined by the Trustees, but in no event may such
expenditures exceed in any fiscal year an amount calculated at the rate of 0.50%
of the average daily net asset value of the Fund. If the Distribution Plan had
been in effect during 1998, estimated expenses under the Plan would have
amounted to 0.26% of the average daily net asset value of the Fund.

20
<PAGE> 60

Any amendment that materially increases the amount of expenditures
permitted under the Plan must be approved by a vote of a majority of the
outstanding voting securities of the Gateway Fund. The Plan may be terminated at
any time by the vote of a majority of i) the Trustees who are not "interested
persons" of the Trust (as defined in the Investment Company Act) and who have no
direct or indirect financial interest in the operation of the Plan or ii) the
outstanding voting securities of the Gateway Fund. The Adviser, and Walter G.
Sall, J Patrick Rogers and the other officers of the Trust (because of their
respective associations with the Adviser), may indirectly benefit from any
payments made pursuant to the Plan. For a description of other material aspects
of the Plan, see the Supplement to the Prospectus.

It is anticipated that the Plan will significantly enhance the Fund's
ability to expand distribution which, in turn, will increase the overall assets
of the Fund, thus realizing further economies of scale which ultimately benefit
Fund shareholders.

CUSTODIAN

Firstar Corporation, 425 Walnut Street, Cincinnati, OH 45202, acts as
custodian of the Trust's assets (the "Custodian"). Under Custody Agreements with
the funds, the Custodian holds the funds' securities and keeps all necessary
accounts and records. 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 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.

The Small Cap Index Fund reimburses the Servicing Agent for printing,
mailing, and compliance expenses. The Gateway Fund reimburses the Servicing
Agent for compliance expenses. The Small Cap Index 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. Beginning January 1, 1999, pursuant to the Gateway Fund Management
Agreement, the Servicing Agent receives no compensation for its services to
Gateway Fund. For the year ended December 31, 1998, the Adviser earned $956,303
in its capacity as Servicing Agent to the three funds of the Trust.

BROKERAGE

21
<PAGE> 61

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, BT Alex. Brown Incorporated, or any of
its affiliates ("Alex. Brown"), in its capacity as a registered broker-dealer,
has, from time to time, have and will effect securities transactions which are
executed on a national securities exchange and over-the-counter transactions
conducted on an agency basis. Such transactions are 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.

22
<PAGE> 62

The Adviser has an agreement with Bridge Information Systems, Inc.
("Bridge") and an agreement with S&P Securities to direct brokerage transactions
to them in exchange for research services provided to the Adviser. For the
fiscal year ended December 31, 1998, the Trust paid brokerage commissions to
Bridge of $233,790 for effecting brokerage transactions totaling $164,566,719.
During the same period, the Trust paid brokerage commissions to S&P Securities
of $27,895 for effecting brokerage transactions totaling $36,010,709. 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 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, 1998, 1997 and 1996.
<TABLE>
<CAPTION>

- --------------------------- -------------------------- -------------------------- ---------------------------
NAME OF FUND 1998 COMMISSIONS 1997 COMMISSIONS 1996 COMMISSIONS
- --------------------------- -------------------------- -------------------------- ---------------------------

<S> <C> <C> <C>
Gateway Fund $1,052,719 $570,068 $274,816
Small Cap Index Fund $ 22,665 $ 24,496 $ 9,766

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

The increased level paid by the Gateway Fund from 1996 through 1998 is
attributable to an overall increase in total assets during those years. The
increased level paid by the Gateway Small Cap Index Fund from 1996 to 1997 is
attributable to an overall increase in total assets in the 1997 fiscal year.

The Gateway Fund paid a total of $258,373 of brokerage commissions to
BT Alex. Brown Incorporated for the year ended December 31, 1998 or 24.5% 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
$215,686,511, or 31% of the entire amount of transactions effected through all
brokers combined for this Fund. For the year ended December 31, 1997, the Fund
paid a total of $1,750 of brokerage commissions to BT Alex. Brown Incorporated
or 0.30% of the entire amount of commissions paid to all brokers for the Fund.
The aggregate amount of transactions involving the payment of these commissions
was $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 prospectuses 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.

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

23
<PAGE> 63

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 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 have
been elected by the shareholders, the Trustees must call a shareholder meeting
for the purpose of electing Trustees.

The Trustees and officers of the Trust, together with information as to
their positions with the Trust and its predecessor, Gateway Option Income Fund,
Inc. (the "Company") and their principal occupations during at least the past
five years, are listed below.
*WALTER GENE SALL, 400 TechneCenter Drive, Suite 220, Milford, 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 54.

*J. PATRICK ROGERS, 400 TechneCenter Drive, Suite 220, Milford, OH
45150; Trustee of the Trust since December 1998; 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 35.

24
<PAGE> 64

November 1996; Access Corporation (software distributor), Secretary from 1985 to
1996, Consultant from 1996 to 1997, and Director 1997 to 1998; Cincinnati Stock
Exchange, Trustee since 1978; River City Insurance Limited, Director since 1991.
Age 57.

STEFEN F. BRUECKNER, ProMutual Group, Inc., P. O. Box 9178, Boston, MA
02205; Trustee of the Trust since October 1992; President and Chief Executive
Officer, ProMutual Group (a professional liability insurance company) since
1998; Director, President, and Chief Executive Officer, Anthem Companies, Inc.
(health insurer) 1995 to 1998; Director and President of Community Mutual
Insurance Company (health insurer) from 1991 to 1995, and various management
positions from 1986 to 1991. Age 49.

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. Age 53.

BEVERLY J. FERTIG, 8591 Woodbriar 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 68.

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 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.

JAMES E. SCHWAB, XTEK, Inc., 11451 Reading Road, Cincinnati, OH
45241-2283; Trustee of the Trust since December 1998; President of XTEK, Inc. (a
manufacturing company), from November 1995 to present, Vice President of XTEK,
Inc. from October 1994 to November 1995; various executive positions with
American Financial Corporation and its affiliates from 1985 to 1994, including
Senior Vice President of General Cable Corporation from 1992 to 1994 and Senior
Vice President of the Penn Central Corporation (now called the American
Financial Group) from 1989 to 1992. Age 55.

*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 40.

*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 33.

*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 39.

*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 and Mr. Rogers are "interested persons" 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 and Mr. Rogers receive 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.

25
<PAGE> 65

The following table provides information about the compensation
received by each Trustee from the Trust for the year ended December 31, 1998.
<TABLE>
<CAPTION>

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

<S> <C>
James M. Anderson $ 5,500
Stefen F. Brueckner $ 6,400
Kenneth A. Drucker $ 14,500
Beverly J. Fertig $ 7,200
R. S. Harrison $ 7,800
Walter G. Sall $ 0
William H. Schneebeck $ 8,900

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

SHAREHOLDER MEETINGS AND VOTING
- -------------------------------

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

On any matter submitted to a vote of shareholders, shares are voted by
fund, unless an aggregate vote is required by the Investment Company Act of
1940. Shares are voted by fund with respect to the approval or amendment of such
fund's advisory contract. As of February 4, 1999, 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 February 4, 1999, 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 February 4, 1999, the shareholders of the Gateway Fund controlled
approximately 90.5% 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.

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 auditors' 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, 1998.

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

GATEWAY FUND

As of February 4, 1999, the Gateway Fund had 23,355,236.951 shares
outstanding. As of such date, each of the following persons or groups was known
by Trust management to be the record and/or beneficial owner (as defined below)
of the indicated amounts of the Fund's outstanding shares.
<TABLE>
<CAPTION>

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

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

<S> <C> <C>
BT Alex. Brown Inc. Mutual Funds Dept. 9,337,595 39.98%
P. O. Box 1346
Baltimore, MD 21203
</TABLE>

26
<PAGE> 66
<TABLE>
<S> <C> <C>
Charles Schwab and Company, Inc. 3,442,019 14.74%
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 228,936 Less than 1%

Adviser officers and directors as a group 62,046 Less than 1%

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

SMALL CAP INDEX FUND

As of February 4, 1999, the Small Cap Index Fund had 1,194,512.221
shares outstanding. As of such date, each of the following persons or groups was
known by Trust management to be the record and/or beneficial owner (as defined
below) of the indicated amounts of the Fund's outstanding shares.

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

<S> <C> <C>
Andrew Wyeth 170,078 14.24%
Chadds Ford, PA 19317

Up East, Inc. 128,587 10.76%
c/o Betsy J. Wyeth
P.O. Box 48
Chadds Ford, PA 19317

Betsy Wyeth 105,718 8.85%
Chadds Ford, PA 19317

BT Alex. Brown Inc. Mutual Funds Dept. 82,082 6.87%
P.O. Box 1346
Baltimore, MD 21203

Betsy Wyeth Growth 90,119 7.54%
Chadds Ford, PA 19317

Trustees and officers of the Trust as a group 31,494 2.64%

Adviser officers and directors as a group 6,180 Less than 1%

------------------------------------------------ ------------------------------------- --------------------------
</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 February 4,, 1999, 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 506,498 2.17%
Small Cap Index Fund 489,487 40.98%

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

27
<PAGE> 67

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> 68

THE GATEWAY TRUST

CINCINNATI FUND(R)

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999

This Statement is not a prospectus but should be read in conjunction
with the current Prospectus of the Cincinnati Fund dated May 1, 1999. 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.

The financial statements and independent auditors' report required to
be included in this SAI are incorporated herein by this reference to the annual
and semi-annual reports of the Cincinnati Fund for the fiscal year ended
December 31, 1998 and the year-to-date ended June 30, 1998, respectively.

The prospectus of the Cincinnati Fund dated May 1, 1999 is also
incorporated herein by reference.
P. O. BOX 5211
CINCINNATI, OHIO 45201-5211
(800) 354-5525

<PAGE> 69

TABLE OF CONTENTS
-----------------

<TABLE>

<S> <C>
INTRODUCTION......................................................................................................4

General Information About The Gateway Trust.....................................................................4

INVESTMENT PRACTICES AND RESTRICTIONS.............................................................................5

General.........................................................................................................5

Investment Restrictions.........................................................................................5

PERFORMANCE AND RISK INFORMATION..................................................................................7

Performance Information.........................................................................................7
Total Return Calculations...................................................................................7
Historical Results..........................................................................................8

Risk Information................................................................................................8
Comparative Indexes.........................................................................................8
Standard Deviation..........................................................................................8
Beta........................................................................................................9

Rankings And Comparative Performance Information................................................................9

SHAREHOLDER SERVICES..............................................................................................9

Open Account....................................................................................................9

Automatic Investment Program....................................................................................9

IRAs............................................................................................................9

Systematic Withdrawal Program..................................................................................10

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................................11

INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................12

Gateway Investment Advisers, L.P...............................................................................12

Investment Advisory Contract...................................................................................12

Custodian......................................................................................................14

Shareholder Servicing, Transfer, Dividend Disbursing, And Financial Servicing Agent............................14

BROKERAGE........................................................................................................14

Additional Tax Matters.........................................................................................15

Federal Tax Matters............................................................................................15

State And Local Tax Aspects....................................................................................16

TRUSTEES AND OFFICERS OF THE TRUST...............................................................................16

INDEPENDENT PUBLIC ACCOUNTANTS AND FINANCIAL STATEMENTS..........................................................18

PRINCIPAL HOLDERS OF CINCINNATI FUND SHARES......................................................................18

SCHEDULE A.......................................................................................................19
</TABLE>
<PAGE> 70

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
two separate prospectuses (the "Prospectuses"). 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.

4
<PAGE> 71

INVESTMENT PRACTICES AND RESTRICTIONS
-------------------------------------

GENERAL

The investment objective of the Cincinnati Fund (the "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"). The Cincinnati Fund is a diversified, open-end management
investment company.

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.

The Cincinnati 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.

5
<PAGE> 72

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

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

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

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.

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

6
<PAGE> 73

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.

PERFORMANCE AND RISK INFORMATION
--------------------------------

PERFORMANCE INFORMATION

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

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

<TABLE>
<S> <C> <C> <C>
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)
</TABLE>

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

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

7
<PAGE> 74

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, 1998:

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS LIFE OF FUND
-------- ---------- ------------
<S> <C> <C> <C>
Average Annual Total Return 11.89% n/a 22.81%
Cumulative Total Return 11.89% n/a %
</TABLE>

The table below shows the redeemable value on December 31, 1998, 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>
$ n/a $
</TABLE>

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.

8
<PAGE> 75

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.

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

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 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 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 Firstar Corporation. Investors can obtain forms
to establish a Gateway IRA by calling Shareholder Services at (800) 354-5525.

9
<PAGE> 76

for the appropriate Gateway IRA. Agreements and Disclosure Statements can be
obtained 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 Firstar
Corporation as custodian for a Gateway Traditional IRA. The distribution should
be wired to:

The Gateway Trust c/o Firstar Corporation,
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

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

The rules for contributing to, investing under, and distributing from
IRAs are complex, and any investor should consult with his or her own tax
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.

SYSTEMATIC WITHDRAWAL PROGRAM

10
<PAGE> 77

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

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.

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.

11
<PAGE> 78

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.

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
a limited partner with a 15% 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 and a Trustee 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.

- 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;

12
<PAGE> 79

- charges and expenses of custodians, transfer agents, dividend
disbursing agents, and registrars;
- expenses of valuing shares of each fund;
- printing and mailing costs other than those expressly assumed by
the Adviser;
- auditing, accounting, and legal expenses;
- expenses incurred in connection with the preparation of reports
to shareholders and governmental agencies;
- expenses of shareholder meetings and proxy solicitations;
- insurance expenses;
- 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
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, 1999, 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 (or
GIA) 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, 1998, 1997 and
1996.

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

<S> <C>
1998 Fee Earned $118,179
1998 Fee Waived 0
1998 Fee Paid $118,179

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
========
</TABLE>

13
<PAGE> 80

CUSTODIAN

Firstar Corporation, 425 Walnut Street, Cincinnati, OH 45202, acts as
custodian of the Trust's assets (the "Custodian"). Under a Custody Agreement
with the Fund, the Custodian holds the Fund's securities and keeps all necessary
accounts and records. 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.

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, 1998, the Servicing Agent earned $956,303 in its capacity as
Servicing Agent to the three 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:

14
<PAGE> 81

- 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 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, 1998, 1997 and 1996, the Fund paid
$11,635, $10,885, and $3,470, 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.

ADDITIONAL TAX MATTERS

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

FEDERAL TAX MATTERS

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

The Fund 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.

15
<PAGE> 82

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

*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 54.

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 (law firm), Partner from 1982 to
November 1996; Access Corporation (software distributor), Secretary from 1985 to
1996, Consultant from 1996 to 1997, and Director 1997 to 1998; Cincinnati Stock
Exchange, Trustee since 1978; River City Insurance Limited, Director since 1991.
Age 57.

16
<PAGE> 83

equipment) since November 1987. Age 53.

*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 and Mr. Rogers are "interested persons" of the Trust as defined
by the Investment Company Act of 1940.

Messrs. Sall, Rogers, Keenan, Stewart and Ms. Squeri each of whom is
employed by the Adviser, receive no remuneration from the Trust. Each Trustee of
the Trust other than Mr. Sall and Mr. Rogers receive 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 $ 5,500
Stefen F. Brueckner $ 6,400
Kenneth A. Drucker $ 14,500
Beverly J. Fertig $ 7,200
R. S. Harrison $ 7,800
Walter G. Sall $ 0
William H. Schneebeck $ 8,900
</TABLE>

17
<PAGE> 84

SHAREHOLDER MEETINGS AND VOTING

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.

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

As of February 4, 1999, the Fund had 1,243,992.118 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 Firstar Corporation 177,865 14.30%
Attention: Joyce Lucht
P. O. Box 640229
Cincinnati, OH 45264

Up East, Inc. 89,291 7.18%
c/o Betsy J. Wyeth
P.O. Box 48
Chadds Ford, PA 19317

Trustees and officers of the Trust as a group 38,013 3.06%

Adviser officers & directors as a group 10,364 Less than 1%
</TABLE>

As of February 4, 1999, the Adviser held in a fiduciary capacity 73,115
(5.88%) of the outstanding shares of the Fund. The Adviser has investment and
voting power over all shares held by it in a fiduciary capacity.

18
<PAGE> 85

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)x2 - ((SIGMA)x)2

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

19
<PAGE> 86
PART C: OTHER INFORMATION

ITEM 23. Exhibits:
- -------

(a) Articles of Incorporation

Registrant's Second Amended Agreement and Declaration of
Trust dated December 29, 1992 is incorporated by reference
to Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 30, 1998.

Amendment No. 1 to Registrant's Second Amended Agreement and
Declaration of Trust is incorporated by reference to
Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 30, 1998.

Amendment No. 2 to Registrant's Second Amended Agreement and
Declaration of Trust is incorporated by reference to
Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 30, 1998.

Amendment No. 3 to Registrant's Second Amended Agreement and
Declaration of Trust is incorporated by reference to
Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 30, 1998.

Amendment No. 4 to Registrant's Second Amended Agreement and
Declaration of Trust is incorporated by reference to
Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 30, 1998.

Amendment No. 5 to Registrant's Second Amended Agreement and
Declaration of Trust is incorporated by reference to
Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 30, 1998.

Amendment No. 6 to Registrant's Second Amended Agreement and
Declaration of Trust is incorporated by reference to
Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to

<PAGE> 87

Registration Statement No. 2-59895 filed with the Securities
and Exchange Commission on April 30, 1998.

Amendment No. 7 to Registrant's Second Amended Agreement and
Declaration of Trust is incorporated by reference to
Exhibits to Registrant's Post-Effective Amendment No. 31
(Investment Company Act No. 29) to Registration Statement
No. 2-59895 filed with the Securities and Exchange
Commission on April 30, 1998.

(b) Bylaws

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.

Amendment to Section 2.5 of Registrant's By-Laws, effective
September 24, 1998, is incorporated by reference to Exhibits
to Registrant's Post-Effective Amendment No. 32 (Investment
Company Act No 30) to Registration Statement No. 2-59859
filed with the Securities and Exchange Commission on
November 2, 1998.

None.

(d) Investment Advisory Contracts

Investment Advisory Contract between the Gateway Fund and
Gateway Investment Advisers, L.P. is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 33 (Investment Company Act No. 31) to
Registration Statement No. 2-59895 filed with the Securities
and Exchange Commission on March 2, 1999.

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

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.

<PAGE> 88

(e) Underwriting Contracts

None.

(g) Custodian Agreements

Custodian Contract between Registrant and The First National
Bank of Cincinnati, N.A. (now Firstar Corporation) with
respect to the Gateway Option Index Fund (now the Gateway
Fund) is incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 31 (Investment
Company Act No. 29) to Registration Statement No. 2-59895
filed with the Securities and Exchange Commission on April
30, 1998.

Custodian Contract between Registrant and Firstar
Corporation with respect to the Gateway Small Cap Index Fund
is incorporated by reference to Exhibits to Registrant's
Post-Effective Amendment No. 31 (Investment Company Act No.
29) to Registration Statement No. 2-59895 filed with the
Securities and Exchange Commission on April 30, 1998.

Custodian Contract between Registrant and Firstar
Corporation with respect to the Gateway Cincinnati Fund is
incorporated by reference to Exhibits to Registrant's
Post-Effective Amendment No. 31 (Investment Company Act No.
29) to Registration Statement No. 2-59895 filed with the
Securities and Exchange Commission on April 30, 1998.

(h) Other Material Contracts

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 incorporated by reference to Exhibits to
Registrant's Post-Effective Amendment No. 31 (Investment
Company Act No. 29) to Registration Statement No. 2-59895
filed with the Securities and Exchange Commission on April
30, 1998.

(i) Legal Opinion

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

Consent of Brown, Cummins & Brown Co., L.P.A. is attached
hereto.

<PAGE> 89

(j) Other Opinions

Consent of Arthur Andersen LLP is filed herewith.

(k) Omitted Financial Statements

None.

(l) Initial Capital Agreements

None.

(m) Rule 12b-1 Plan

The Gateway Fund's Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940 is incorporated by
reference to Exhibits to Registrant's Post-Effective
Amendment No. 33 (Investment Company Act No. 31) to
Registration Statement No. 2-59895 filed with the Securities
and Exchange Commission on March 2, 1999.

(n) Financial Data Schedule

None.

(o) Rule 18f-3 Plan

None.

ITEM 24. Persons Controlled by or Under Common Control with Registrant

None

ITEM 25. 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
<PAGE> 90

provisions designed to comply with requirements of the Investment
Company Act of 1940.

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

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

ITEM 26. 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.
One of the limited partners 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 27. Principal Underwriters

None.

ITEM 28. 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.

<PAGE> 91

ITEM 29. Management Services

None.

ITEM 30. Undertakings

None

<PAGE> 92

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under rule
485(b) under the Securities Act and 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, 1999.

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, 1999 /s/ Walter G. Sall
------------------
Walter G. Sall, Chairman

Dated: April 30, 1999 /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 Walter G. Sall, Attorney-in-Fact
Robert S. Harrison, Trustee Dated: April 30, 1999
J. Patrick Rogers, Trustee
Walter G. Sall, Trustee, Chairman and
Principal Executive Officer By: /s/ J. Patrick Rogers
---------------------
William H. Schneebeck, Trustee J. Patrick Rogers
James E. Schwab, Trustee Dated: April 30, 1999

<PAGE> 93

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. 34

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Post-Effective Amendment No. 32

THE GATEWAY TRUST

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

EXHIBITS

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

<PAGE> 94

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT EXHIBIT TAG
<S> <C> <C>
(i) Consent of Counsel EX-99.B10

(j) Consent of Arthur Andersen LLP Ex-99.B11

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

<PAGE> 1

BROWN, CUMMINS & BROWN CO., L.P.A.
ATTORNEYS AND COUNSELORS AT LAW
3500 CAREW TOWER
441 VINE STREET
CINCINNATI, OHIO 45202
TELEPHONE (513) 381-2121
TELECOPIER (513) 381-2125

J. W. BROWN (1911-1995) OF COUNSEL
JAMES R. CUMMINS
ROBERT S BROWN GILBERT BETTMAN
DONALD S. MENDELSOHN
LYNNE SKILKEN
AMY G. APPLEGATE
KATHRYN KNUE PRZYWARA
MELANIE S. CORWIN
JOANN M. STRASSER
PAMELA L. KOGUT

April 29, 1999

The Gateway Trust
400 TechneCenter Drive, Suite 220
Milford, Ohio 45150

Gentlemen:

A legal opinion that we prepared was filed with your Form 24F-2 for the
fiscal year ended December 31, 1996 (the "Legal Opinion"). We hereby give you
our consent to incorporate by reference the Legal Opinion into Post-Effective
Amendment No. 34 to your Registration Statement (the "Amendment"), and consent
to all references to us in the Amendment.

Very truly yours,

/s/

Brown, Cummins & Brown Co., L.P.A.

BCB/jlm

<PAGE> 1
Exhibit (j)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in this Post-Effective Amendment No. 34 of our audit
reports on the financial statements of the Gateway Fund, Gateway Small Cap Index
Fund and Cincinnati Fund of The Gateway Trust, dated January 19 1999, and to all
references to our Firm included in or made a part of this Post-Effective
Amendment No. 34.

/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP

Cincinnati, Ohio,

April 29, 1999

<PAGE> 1

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, 1999.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 27th
day of April, 1999.

/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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/s/ J. Patrick Rogers
-------------------------------
J. Patrick Rogers, 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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/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 April, 1999.

/s/ William H. Schneebeck
-------------------------------
William H. Schneebeck, Trustee

State of Ohio
County of Clermont

WITNESS my hand and official seal this 27th day of April, 1999.

/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 April, 1999.

/s/ James E. Schwab
-------------------------------
James E. Schwab, Trustee

State of Ohio
County of Clermont

WITNESS my hand and official seal this 27th day of April, 1999.

/s/ Donna M. Squeri
-------------------------------
Donna M. Squeri
Notary Public, State of Ohio
My commission has no expiration