SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
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14a-6(e)(2))
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[ ] Soliciting Material Pursuant to Section 240.14a-12
THE GATEWAY TRUST
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person (s) Filing Proxy Statement, if Other Than the Registrant)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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IMPORTANT NOTICE
TO GATEWAY FUND SHAREHOLDERS
OCTOBER 26, 2005
Although we recommend that you read the complete Proxy Statement, for your
convenience, the following is a brief overview of the proposal to be voted on.
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. You are receiving this Proxy Statement for two reasons. First, you are
being asked to approve a new investment management agreement between
Gateway Fund (the "Fund) and Gateway Investment Advisers, L.P. ("Gateway"
or "the Adviser"). In addition, you are being asked to ratify the selection
of Ernst & Young LLP as the independent registered public accounting firm
for The Gateway Trust (the "Trust") for the fiscal year ending December 31,
2005.
Q. WHY IS A VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT AGREEMENT REQUIRED?
A. Gateway has served as the Fund's investment adviser since the Fund's
inception. Gateway Investment Advisers, Inc. (the "General Partner") serves
as the general partner of, and thus controls Gateway. The General Partner
is owned by Walter G. Sall and J. Patrick Rogers. Mr. Sall founded Gateway
in 1977 and presently serves as its Chairman and Chief Executive Officer,
and as Chairman of the Board of the Trust. Mr. Rogers is Gateway's
President and Chief Investment Officer and serves as the portfolio manager
of the Fund, and as President and a Trustee of the Trust. Mr. Rogers has an
option to purchase a sufficient quantity of Mr. Sall's stock in the General
Partner such that, upon the exercise of his option, Mr. Rogers would own a
majority interest in the General Partner and would thus assume control of
Gateway. Mr. Rogers has notified Mr. Sall that he will exercise the option
on December 31, 2005. The exercise of Mr. Rogers' option (the "Exercise")
may be deemed to be an "assignment" of the current investment management
agreement between the Fund and Gateway, which would cause the agreement to
automatically terminate. As a result, shareholder approval of a new
investment management agreement is required in order to permit Gateway to
continue to serve as investment adviser to the Fund. Following the
Exercise, Mr. Sall will continue to serve as Chairman of Gateway and the
Trust, and Mr. Rogers will remain as the Fund's portfolio manager, and as
President of Gateway and a Trustee of the Trust. The enclosed Proxy
Statement gives you additional information on the proposed new investment
management agreement as well as certain other matters. Please refer to the
Proxy Statement for a detailed explanation of the proposal on which you are
being asked to vote.
Q. WHAT WILL HAPPEN IF SHAREHOLDERS DO NOT APPROVE THE NEW INVESTMENT
MANAGEMENT AGREEMENT?
A. If the new investment management agreement is not approved, the Board of
Trustees of the Trust (the "Board") will take such actions as it deems to
be in the best interests of the Fund and its shareholders.
Q HOW WILL THE EXERCISE AFFECT ME AS A FUND SHAREHOLDER?
A. Your investment in the Fund will not change as a result of the Exercise.
You will still own the same shares in the Fund, and the value of your
investment will not change as a result of the Exercise. The new investment
management agreement, if approved by shareholders, will still be with
Gateway and the terms of the new investment management agreement are
substantially identical to the terms of the current investment management
agreement. In addition, the portfolio manager of the Fund will not change
as a result of the new investment management agreement.
i
Q. WILL THE INVESTMENT MANAGEMENT FEE BE THE SAME UPON THE APPROVAL OF THE NEW
INVESTMENT MANAGEMENT AGREEMENT?
A. Yes, the investment management fee will remain the same.
Q. HOW DO THE BOARD MEMBERS SUGGEST THAT I VOTE IN CONNECTION WITH THE
PROPOSALS?
A. After careful consideration, the Board, including those Trustees who are
not affiliated with Gateway, unanimously recommends that you vote "FOR"
PROPOSAL 1 and PROPOSAL 2.
Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Your vote is needed to ensure that the proposals can be acted upon. All
shareholders are encouraged to participate in the governance of their Fund.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy card
and mailing it in the enclosed postage-paid envelope. Alternatively, you
may vote by telephone by calling the toll-free number provided on the proxy
card or by computer by going to the Internet address provided on the proxy
card and following the instructions, using your proxy card as a guide.
Q. WILL ANYONE CONTACT ME?
A. You may receive a call from our proxy solicitor, Computershare Fund
Services, to verify that you received your proxy materials, to answer any
questions you may have about the proposal and to encourage you to vote.
Q. WHO DO I CALL IF I HAVE QUESTIONS?
A. If you need any assistance, or have any questions regarding the proposals
or how to vote your shares, please call your financial advisor.
Alternatively, you may call Gateway at (800) 354-6339 weekdays from 9:00
A.M. to 5:00 P.M. Eastern time.
ii
THE GATEWAY TRUST
NOTICE OF SPECIAL MEETING OF
GATEWAY FUND
SHAREHOLDERS
December 15, 2005
3805 Edwards Road, Suite 600
Cincinnati, Ohio 45209
(800) 354-6339
TO THE SHAREHOLDERS OF THE GATEWAY FUND:
Notice is hereby given that a special meeting of shareholders (the "Meeting") of
the Gateway Fund (the "Fund"), a series of The Gateway Trust, an Ohio business
trust (the "Trust") will be held at the offices of Gateway Investment Advisers,
L.P., 3805 Edwards Road, Suite 600, in Cincinnati, Ohio, on Thursday, December
15, 2005 at 2:00 , Eastern time, for the following purposes and to transact such
other business, if any, as may properly come before the Meeting:
MATTERS TO BE VOTED ON BY SHAREHOLDERS:
1. To approve a new investment management agreement between the Fund and
Gateway Investment Advisers, L.P., the Fund's investment adviser.
2. To ratify the selection of Ernst & Young LLP as the independent
registered public accounting firm for the Trust for the fiscal year
ending December 31, 2005.
3. To transact such other business as may properly come before the
Meeting.
Only shareholders of record at the close of business on October 17, 2005 are
entitled to notice of and to vote at the Meeting.
By Order of the Board of Trustees
Donna M. Squeri
Secretary
October 26, 2005
YOUR VOTE IS IMPORTANT
IN ORDER TO AVOID DELAY AND ADDITIONAL EXPENSE, AND TO ASSURE THAT YOUR SHARES
ARE REPRESENTED, PLEASE VOTE AS PROMPTLY AS POSSIBLE, REGARDLESS OF WHETHER YOU
PLAN TO ATTEND THE MEETING. YOU MAY VOTE BY MAIL, TELEPHONE OR OVER THE
INTERNET. TO VOTE BY MAIL, PLEASE MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY
CARD. NO POSTAGE IS REQUIRED IF YOU USE THE ACCOMPANYING ENVELOPE TO MAIL THE
PROXY CARD IN THE UNITED STATES. TO VOTE BY TELEPHONE, PLEASE CALL THE TOLL-FREE
NUMBER LOCATED ON YOUR PROXY CARD AND FOLLOW THE RECORDED INSTRUCTIONS, USING
YOUR PROXY CARD AS A GUIDE. TO VOTE OVER THE INTERNET, GO TO THE INTERNET
ADDRESS PROVIDED ON YOUR PROXY CARD AND FOLLOW THE INSTRUCTIONS, USING YOUR
PROXY CARD AS A GUIDE.
THE GATEWAY TRUST
3805 EDWARDS ROAD, SUITE 600
CINCINNATI, OHIO 45209
PROXY STATEMENT
Special Meeting of
Shareholders of the Gateway Fund
to be held on
December 15, 2005
October 26, 2005
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Trustees (the "Board", each Trustee a "Board Member" and collectively,
the "Board Members") of The Gateway Trust, an Ohio business trust (the "Trust"),
of proxies to be voted at a special meeting of shareholders of the Gateway Fund
(the "Fund") to be held at the offices of Gateway Investment Advisers, L.P.
("Gateway" or the "Adviser"), 3805 Edwards Road, Suite 600, in Cincinnati, Ohio,
on Thursday, December 15, 2005 at 2:00 p.m., Eastern time, (the "Meeting"), and
at any and all adjournments thereof. This Proxy Statement is first being mailed
to shareholders on or about October 28, 2005.
The following proposals will be considered and acted upon at the Meeting:
1. To approve a new investment management agreement between the Fund and
Gateway Investment Advisers, L.P., the Fund's investment adviser.
2. To ratify the selection of Ernst & Young LLP as the independent
registered public accounting firm for the Trust for the fiscal year
ending December 31, 2005.
3. To transact such other business as may properly come before the
Meeting.
On the matters coming before the Meeting as to which a choice has been specified
by shareholders on the proxy, the shares will be voted accordingly. If a proxy
is returned and no choice is specified, the shares will be voted "FOR" approval
of the new investment management agreement. Shareholders who execute proxies may
revoke them at any time before they are voted by filing a written notice of
revocation with the Fund, by delivering a duly executed proxy bearing a later
date or by attending the Meeting and voting in person.
A quorum of shareholders is required to take action at the Meeting. The presence
in person or by proxy of 33% of the outstanding shares of the Fund entitled to
vote at the Meeting will constitute a quorum. Votes cast by proxy or in person
at the Meeting will be tabulated by the inspectors of election appointed for the
Meeting. The inspectors of election will determine whether or not a quorum is
present at the Meeting.
Only persons who were shareholders of record at the close of business on October
17, 2005 will be entitled to vote at the meeting. As of October 17, 2005,
104,547,234 shares of the Fund were issued and outstanding.
ANNUAL REPORTS WILL BE SENT TO SHAREHOLDERS OF RECORD OF THE FUND FOLLOWING THE
FUND'S FISCAL YEAR-END. THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF THE
FUND'S ANNUAL REPORT AND/OR SEMI-ANNUAL REPORT, AS AVAILABLE, UPON REQUEST. SUCH
WRITTEN OR ORAL REQUESTS SHOULD BE DIRECTED TO THE FUND AT 3805 EDWARDS ROAD,
SUITE 600, CINCINNATI, OHIO 45209 OR BY CALLING (800) 354-6339.
1
PROPOSAL 1
APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT
Under an investment management agreement between the Adviser and the Fund dated
December 9, 1998 (the "Current Investment Management Agreement"), Gateway has
served as the Fund's investment adviser and has been responsible for the Fund's
investment strategy and its implementation. The Current Investment Management
Agreement was last approved by shareholders on December 9, 1998 and was last
approved for continuance by the Board on October 12, 2005.
The Adviser is a Delaware limited partnership, 74.66% of which is owned by its
general partner, Gateway Investment Advisers, Inc. (the "General Partner"), an
Ohio Corporation. The management, policies and control of the Adviser are vested
exclusively in the General Partner. The General Partner is owned by Walter G.
Sall and J. Patrick Rogers. Mr. Sall founded the Adviser in 1977 and presently
serves as its Chairman and Chief Executive Officer. Mr. Sall is also Chairman of
the Board of the Trust. Mr. Rogers has been President and Chief Investment
Officer of the Adviser since 1995 and has served as the portfolio manager of the
Fund since 1994. Mr. Rogers is also President and a Trustee of the Trust. Mr.
Sall presently owns 67.06% of the General Partner and, therefore, controls the
Adviser. Mr. Rogers presently owns 32.94% of the General Partner. The Adviser
also has three limited partners (the "Limited Partners"), each of which is a
corporation owned by a senior executive officer of the Adviser other than Mr.
Sall and Mr. Rogers. The limited partners collectively own a 25.34% interest in
the Adviser.
In a series of transactions that occurred on March 31, 2004, and which were
unrelated to the Exercise (as defined below), the General Partner and the
Limited Partners purchased a 14.7% limited partnership interest in the Adviser
that had previously been held by Alex. Brown Investments Inc. for an aggregate
purchase price of $2,250,000. The General Partner's participation in these
transactions resulted in its acquisition of an additional 4.51% interest in the
Adviser thereby increasing its percentage interest in the Adviser from 70.15% to
its current 74.66%.
As part of a plan of succession that has been in place since 1995, Mr. Sall
granted Mr. Rogers an option to purchase a portion of Mr. Sall's stock in the
General Partner. Upon the exercise of this option, Mr. Rogers would own a
majority (54.25%) interest in the General Partner and would thus assume control
of the Adviser. Mr. Rogers' option becomes exercisable on December 31, 2005, and
Mr. Rogers has notified Mr. Sall that he will exercise his option at that time.
Upon the exercise of Mr. Rogers' option (the "Exercise") the investment
management agreement between the Fund and the Adviser may be deemed to be
terminated.
The Current Investment Management Agreement, as required by Section 15 of the
Investment Company Act of 1940, as amended (the "1940 Act"), provides for its
automatic termination in the event of its "assignment" (as defined in the 1940
Act). Any change in control of the Adviser may be deemed to be such an
assignment. The consummation of the Exercise may be deemed to be a change in
control of the Adviser resulting in the assignment and automatic termination of
the Current Investment Management Agreement, as required by the 1940 Act.
In anticipation of the Exercise, the Board met in person at a meeting on October
12, 2005 for purposes of, among other things, considering whether it would be in
the best interests of the Fund and its shareholders to approve a new investment
management agreement between the Fund and Gateway (the "New Investment
Management Agreement"). The 1940 Act requires that the New Investment Management
Agreement be approved by the Fund's shareholders in order for it to become
effective. At the Board meeting, and for the reasons discussed below (see "Board
Considerations in Approving New Investment Management Agreement" below), the
Board, including a majority of the Board Members who are not parties to the
Current Investment Management Agreement, or the New Investment Management
Agreement, and who are not "interested persons" of the Fund or the Adviser as
defined in the 1940 Act (the "Independent Trustees"), unanimously approved the
New Investment Management Agreement and unanimously recommended its approval by
shareholders in order to assure continuity of investment advisory services to
the Fund after the Exercise.
In the event shareholders of the Fund do not approve the New Investment
Management Agreement, the Board may take such action as it deems to be in the
best interests of the Fund and its shareholders. In order to afford the Fund
maximum flexibility, the Board approved an interim investment management
agreement (the "Interim Agreement") on October 12, 2005 that would take effect
only if the New Investment Management Agreement is not approved by shareholders
by December 31, 2005. The Interim Agreement is identical in all material
respects to the Current Investment Management Agreement, except that it would
remain in force for only up to 150 days from the consummation of the Exercise.
The Interim Agreement allows Gateway to continue to provide investment advice to
the Fund while the Board determines whether to resubmit the New Investment
2
Management Agreement to shareholders for approval. During the term of the
Interim Agreement, investment management fees will be placed in an escrow
account. If shareholders of the Fund do not approve the New Investment
Management Agreement by the end of the term of the Interim Agreement, Gateway
will be paid the lesser of the costs incurred in performing its services under
the Interim Agreement or the total amount in the escrow account, plus interest
earned.
COMPARISON OF THE CURRENT AND NEW INVESTMENT MANAGEMENT AGREEMENTS
The terms of the New Investment Management Agreement, including fees payable to
the Adviser by the Fund, are substantially identical to those of the Current
Investment Management Agreement, except for the date of effectiveness. If
approved by shareholders of the Fund, the New Investment Management Agreement
for the Fund will remain in force through December 31, 2007 and will continue in
effect from year to year thereafter if such continuance is approved for the Fund
at least annually in the manner required by the 1940 Act and the rules and
regulations thereunder. Below is a comparison of certain terms of the Current
Investment Management Agreement to the terms of the New Investment Management
Agreement. The form of the New Investment Management Agreement is attached
hereto as Appendix A.
INVESTMENT MANAGEMENT SERVICES. The investment management services to be
provided by the Adviser to the Fund under the New Investment Management
Agreement will be identical to those services currently provided by the Adviser
to the Fund under the Current Investment Management Agreement. Both the Current
Investment Management Agreement and New Investment Management Agreement provide
that the Adviser supervise the investment and reinvestment of the cash,
securities or other properties comprising the assets of the Fund, subject at all
times to the policies applicable to the Fund and to the control of the Board of
Trustees of the Trust. In addition, the investment management services will be
provided by the same Adviser personnel under the New Investment Management
Agreement as under the Current Investment Management Agreement. The Adviser does
not anticipate that the Exercise will have any adverse effect on the performance
of its obligations under the New Investment Management Agreement.
FEES. Under the Current Investment Management Agreement and New Investment
Management Agreement, the Fund pays the Adviser an investment management fee of
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 Current Investment Management Agreement and the New Investment Management
Agreement, the Adviser receives no separate fee for its administration, transfer
agency, fund accounting and other services to the Fund, and the Adviser pays the
Fund's expenses of reporting to shareholders. For fiscal year 2004, the Fund
paid the Adviser a fee equal to 0.57% of its average daily net assets, amounting
to aggregate fees of $9,929,000. The rate of the fees payable to the Adviser
under the New Investment Management Agreement is identical to the rate under the
Current Investment Management Agreement.
BROKERAGE. Both the Current Investment Management Agreement and New Investment
Management Agreement authorize the Adviser to select the brokers or dealers that
will execute the purchases and sales of portfolio securities for the Fund,
subject to its obligation to obtain best execution under the circumstances,
which may take account of the overall quality of brokerage and research services
provided.
PAYMENT OF EXPENSES. Under the Current Investment Management Agreement and the
New Investment Management Agreement, the Adviser provides the Trust with (i)
investment recommendations regarding the Fund's investments; (ii) office space,
including secretarial, clerical and other office help, telephones, securities
valuations and other office equipment; and (iii) the services of all officers of
the Trust. Also under the Current Investment Management Agreement and the New
Investment Management Agreement, the Adviser bears all (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. In addition, under both agreements, the Adviser receives no
compensation for administration, transfer agency, fund accounting and other
services provided by the Adviser to the Fund under a Services Agreement.
CONTINUANCE. The Current Investment Management Agreement was in effect for an
initial term of two years and could be continued thereafter for successive
one-year periods if such continuance was specifically approved at least annually
in the manner required by the 1940 Act and the rules and regulations thereunder.
If the shareholders of the Fund approve the New Investment Management Agreement,
the New Investment Management Agreement will remain in force through December
31, 2007 and may be continued for successive one-year periods if approved at
least annually in the manner required by the 1940 Act and the rules and
regulations thereunder.
3
TERMINATION. The Current Investment Management Agreement and New Investment
Management Agreement provide that the Agreement may be terminated at any time
without the payment of any penalty by the Fund or the Adviser on sixty (60) days
written notice to the other party. The Fund may effect termination by action of
the Board or by vote of a majority of the outstanding voting securities of the
Fund, accompanied by appropriate notice.
INFORMATION ABOUT THE ADVISER
Gateway is a registered investment adviser specializing in the management of
index-option-based strategies for managing risk in equity portfolios. Gateway
and its predecessor commenced operations in 1977. As of September 30, 2005,
Gateway managed approximately $5.8 billion in assets. Gateway also serves as the
administrator, fund accountant and transfer agent for the Fund. The names and
principal occupations of the principal executive officer and directors of
Gateway are set forth below:
NAME POSITION WITH GATEWAY AND PRINCIPAL OCCUPATION
---- ----------------------------------------------
Walter G. Sall Chairman, Chief Executive Officer and Director
J. Patrick Rogers President, Chief Investment Officer and Director
The business address of Gateway and each director and officer of Gateway is
Rookwood Tower, 3805 Edwards Road, Suite 600, Cincinnati, Ohio 45209.
Gateway may execute portfolio transactions through affiliated brokers. In the
fiscal year 2004, the Fund paid brokerage commissions of $127,745 to Deutsche
Bank Securities, Inc. (which was an affiliated broker until March 31, 2004, when
the limited partnership interest in the Adviser owned by Alex. Brown Investments
Inc. was sold). Those commissions represented 3.4% of the Fund's aggregate
brokerage commissions for the year. At the present time, no brokers are
affiliated with Gateway.
Gateway is a Delaware limited partnership. As discussed above, the General
Partner, which owns 74.66% of Gateway, is Gateway Investment Advisers, Inc.,
3805 Edwards Road, Suite 600, Cincinnati, Ohio 45209. The General Partner is
owned by Mr. Sall and Mr. Rogers. The remaining 25.34% of Gateway is owned by
three limited partners (the "Limited Partners"), each of which is a corporation
owned by a senior executive officer of the Adviser other than Mr. Sall and Mr.
Rogers.
The following Trustees and officers of the Fund also are officers, employees or
directors of Gateway:
NAME AND ADDRESS POSITION WITH THE FUND POSITION WITH GATEWAY
---------------- ---------------------- ---------------------
Walter G. Sall Chairman of the Board Chairman, Chief Executive Officer and
Director*
J. Patrick Rogers President and Trustee President, Chief Investment Officer and
Director*
Geoffrey Keenan Vice President Executive Vice President and Chief Operating
Officer**
Gary H. Goldschmidt Vice President and Treasurer Chief Financial Officer and Vice President
Donna M. Squeri Secretary General Counsel and Chief Compliance Officer
* Individual has an ownership interest in the general partner of the Adviser.
** Individual has an ownership interest as a limited partner to the Adviser.
In addition to serving as investment adviser to the Fund, Gateway serves as
sub-adviser to one other open-end mutual fund and three closed-end mutual funds
that invest in integrated equity index option strategies. The funds are listed
below, together with each fund's approximate net assets as of September 30,
2005, and the annual advisory fees payable by the fund to Gateway.
4
APPROXIMATE NET ASSETS SUB-ADVISORY
SIMILAR FUND(S) ($ MILLION) FEE RATE
--------------- ---------------------- --------------
TA IDEX Protected Principal Stock $ 49.1 0.400%
Nuveen Equity Premium Income Fund $ 715.9 0.311%
Nuveen Equity Premium Opportunity Fund $1,237.1 0.301%
Nuveen Equity Premium Advantage Fund $ 488.5 0.315%
BOARD CONSIDERATIONS IN APPROVING THE NEW INVESTMENT MANAGEMENT AGREEMENT
At a meeting held on October 12, 2005, the Board, including the Independent
Trustees, unanimously approved the New Investment Management Agreement between
the Fund and the Adviser, subject to approval by the shareholders at this
Meeting. To assist the Trustees in their evaluation of the New Investment
Management Agreement, the Board was supplied with a written proposal and
supporting information from the Adviser in advance of the meeting, as well as
presentations from members of the Adviser's investment management staff. In
addition to the foregoing materials, independent legal counsel to the
Independent Trustees provided, in advance, a memorandum outlining the duties of
the Trustees and factors to be considered by the Board with respect to approval
or renewal of investment advisory contracts. After a detailed presentation by
the Adviser during which the written materials were reviewed and questions from
the Board were answered, the Independent Trustees met in an executive session
with counsel to consider the contract approval. The following describes the
material factors and conclusions that formed the basis for the Board's approval
of the New Investment Management Agreement:
FUND AND ADVISER PERFORMANCE. The Trustees reviewed the performance returns of
the Fund as compared with various benchmarks for different time periods.
Specifically, they were presented with average annual total returns as of
September 30, 2005 for various time periods, as compared to the returns of the
S&P 500 Index and Lehman Brothers U.S. Intermediate Government/Credit Bond
Index. The Trustees also reviewed the Fund's risk (as measured by standard
deviation of returns) and returns compared to those of the S&P 500 Index and
various fixed income benchmarks covering the period from January 1, 1988 to
September 30, 2005. The Trustees specifically noted that the Fund's performance
compared favorably to relevant benchmarks on a consistent basis, with a standard
deviation of less than half that of the S&P 500 Index for the period. When
taking into account the Fund's investment objective, which 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,"
the Board concluded that the Fund's performance history made a compelling case
that the Adviser had consistently and successfully managed the Fund in
accordance with its stated objectives.
NATURE, QUALITY AND EXTENT OF SERVICES PROVIDED. When discussing the nature,
quality and extent of services that the Adviser provides the Fund, it was
pointed out that, in addition to managing the Fund's portfolio, essentially all
of the business of operating the Fund is conducted by the Adviser. Taking into
account that the Adviser has managed the Fund since its inception in 1977 and
the longevity and low turnover of the Adviser's staff, the Board noted the
strong and cohesive relationship it has had with the Adviser throughout the
Fund's history. Included in the material presented to the Board was a list of
recent articles from independent financial publications that favorably
recognized the Fund. The Board also recognized the Adviser's role in proposing
and successfully implementing a more active and demanding strategy for
management of the Fund's equity holdings. Also discussed was the increased
compliance burden taken on by the Adviser in its capacity as the Fund
administrator. Taking into account the personnel involved in servicing the Fund,
as well as the initiatives and resources extended by the Adviser as described
above, the Board concluded that the services provided to the Fund by the Adviser
were superior.
COMPARISON WITH OTHER CONTRACTS AND OTHER CLIENTS. The Trustees emphasized that
the unique fee structure of the Fund operates to the benefit of shareholders.
They noted that the Adviser's compensation is reduced by the Fund's expenses
under its Distribution Plan, such that the Adviser effectively bears the
economic burden of all increases in the Fund's distribution-related expenses.
The Trustees were presented with a comparative analysis of advisory fees and
expense ratios based on publicly available data and drawn from an extensive
range of mutual fund peers. Included in the comparison were funds with
substantially larger asset ranges as well as funds with similar rates of
distribution expenses. It was noted that the Adviser's fees under the Management
Agreement cover all but a very small fraction of the Fund's
non-distribution-related expenses. In spite of this fact, the Fund's management
fees were below average as compared to management fees for the funds included in
the comparisons. The Board also noted that the Fund's 0.95% current expense
ratio compared quite favorably to the average of 1.45% for all domestic stock
funds and 2.30% for a group of 59 funds (including the Fund) cited as using
hedge fund-like strategies, according
5
to a July 2005 article in Investment News. They emphasized that, despite being
included in a category with substantially higher expenses and management fees,
the Fund's total expenses were 0.50% below the average for domestic stock funds.
The Board also reviewed a presentation of fee rates charged to other clients of
the Adviser, and recognized the significant factors accounting for the
differences in fee rates. Having considered the comparative data as described
above, the Board concluded that the Fund's shareholders are paying below-market
management fees and total expenses.
COST OF SERVICES AND PROFIT TO BE REALIZED BY THE ADVISER. In considering the
profits realized by the Adviser, the Board reviewed the Adviser's most recent
audited financial statements and an estimate of its operating margin. After
comparing the Adviser's operating margin with a list of the operating margins of
publicly traded money management companies, the Trustees noted that the
Adviser's fiscal year 2004 profit margin and its 2005 year-to-date profit margin
were in line with others in the industry. The Board considered as favorable the
fact that the Adviser's revenues from Fund management fees continue to decrease
as a percentage of its overall revenues due to a substantial increase in assets
managed for other clients. Recognizing the lack of available information on
which to base a comparative analysis of the profitability of private investment
management firms, and the difficulty of isolating the profitability of the
Adviser's relationship with the Fund from its overall profitability, the Board
concluded that the Adviser's profits from its relationship with the Fund were
not unreasonable.
ECONOMIES OF SCALE. When presented with a chart that illustrated the Fund's
expenses at average net asset levels for each of the last seven years (the
period since the adoption of the current Management Agreement), the Trustees
noted that the Fund's total expense ratio has generally declined as net assets
have increased; that the rate of distribution expenses has generally risen as
assets have increased; and that the rate of the Adviser's management fee has
correspondingly declined. The Board emphasized that the Fund's unique fee
structure effectively had provided reductions in the rate of the Adviser's fees
as distribution expenses increased and that, as a result, the introduction of
asset-level breakpoints was unnecessary. Noting that Fund shareholders have
benefited from economies of scale as the Fund's net assets have grown, they
concluded that the Fund's fee structure is reasonable and that economies of
scale have been realized by shareholders despite the absence of asset-level
breakpoints in the fee structure.
OTHER BENEFITS. The Board considered other benefits to the Adviser as a result
of its relationship to the Fund. Aside from the management fee, the Board
considered the Adviser's receipt of research services in exchange for soft
dollar credit in connection with commissions on the Fund's equity transactions.
When presented with details regarding the commissions charged to the Fund by
various broker-dealers and the Adviser's pursuit of high quality execution of
the Fund's transactions, it was noted that the Fund pays commissions at or below
market level rates and receives quality executions, regardless of whether the
commissions are used to pay for research through soft dollar arrangements. It
was also indicated that no Adviser client pays lower commissions than the Fund.
The Board was presented with a detailed description of the research services
received by the Adviser in exchange for soft dollar credits resulting from Fund
commissions. The benefits of this research to the Fund were noted as well. After
taking into consideration the entire presentation on the Adviser's use of soft
dollars and brokerage allocation, the Board concluded that there was no
detrimental effect to the Fund as a result of the Adviser's soft dollar
arrangements and that the Fund benefited from the research received.
PLAN OF SUCCESSION. As noted, the exercise of the option held by Mr. Rogers,
which will result in a change in control of the Adviser, is a key element of a
plan of succession established by the Adviser in 1995. The Board fully supports
the Adviser's plan of succession and believes that implementation of the plan,
including the exercise of Mr. Rogers' option, is essential to assuring
continuity of management of the Fund. The Board concluded that such continuity
is in the best interests of the Fund and its shareholders. The Board does not
believe that the change in control of the Adviser will adversely affect the
nature or quality of services provided by the Adviser, nor that it will
adversely affect the organization or operations of the Adviser. Accordingly, the
Trustees determined that their analysis of the various factors regarding their
approval of the New Investment Management Agreement would continue to apply
after the change of control.
The Trustees did not identify any single factor discussed previously as
all-important or controlling in their determination to approve the New
Investment Management Agreement. The Trustees, including the Independent
Trustees, unanimously concluded that the terms of the New Investment Management
Agreement are fair and reasonable; that the Adviser's fees are reasonable in
light of the services provided to the Fund and the benefits received by the
Adviser; and that the New Investment Management Agreement should be approved and
recommended to shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE "FOR"
APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT.
6
PROPOSAL 2
RATIFICATION OF ERNST & YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE TRUST FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005.
At a meeting held on January 25, 2005, the Audit Committee and the Board,
including the Independent Trustees, unanimously approved the selection of Ernst
& Young LLP as the independent registered public accounting firm for the Trust
for the fiscal year ending December 31, 2005.
Ernst & Young LLP is registered with the Public Company Accounting Oversight
Board and has extensive experience in investment company accounting and
auditing. Ernst & Young, LLP has served as the independent registered public
accounting firm to the Trust since 2002. The financial statements included in
the Trust's Annual Report to shareholders have been examined by Ernst & Young,
LLP. It is not expected that a representative of Ernst & Young LLP will be
present at the meeting.
Ernst & Young LLP and its members do not have any direct or indirect material
financial interest in or connection with the Trust in any capacity other than as
independent registered public accountants.
AUDIT FEES
The table below discloses the aggregate fees billed for each of the last two
fiscal years for professional services rendered by Ernst & Young LLP for the
audit of the Trust's annual financial statements and in connection with
statutory and regulatory filings and engagements during those fiscal years.
FISCAL YEAR AGGREGATE FEES BILLED
- ----------- ---------------------
2004 $51,200
2003 $45,600
AUDIT-RELATED FEES
The table below discloses the aggregate fees billed for each of the last two
fiscal years for assurance and related services rendered by Ernst & Young LLP
that are reasonably related to the performance of the audit or review of the
Trust's financial statements and are not reported on the table above.
THE GATEWAY GATEWAY INVESTMENT
FISCAL YEAR TRUST ADVISERS, L.P.
- ----------- ----------- ------------------
2004 $0 $7,900
2003 $0 $7,300
These audit-related services involved the examination of the Adviser's internal
controls related to its transfer agent and registrar functions.
TAX FEES
The table below discloses the aggregate fees billed for each of the last two
fiscal years for professional services rendered by Ernst & Young LLP for tax
compliance, tax advice and tax planning.
THE GATEWAY GATEWAY INVESTMENT
FISCAL YEAR TRUST ADVISERS, L.P.
- ----------- ----------- ------------------
2004 $10,626 $0
2003 $ 4,100 $0
These tax services included monitoring tax compliance by the Trust and reviewing
the Trust's tax returns.
7
ALL OTHER FEES
The table below discloses the aggregate fees billed for each of the last two
fiscal years for products and services rendered by Ernst & Young LLP, other than
those listed in the tables above.
THE GATEWAY GATEWAY INVESTMENT
FISCAL YEAR TRUST ADVISERS, L.P.
- ----------- ----------- ------------------
2004 $0 $1,222
2003 $0 $ 0
These services are associated with an engagement to review a sales and use tax
refund. The fees were paid by the Adviser.
AUDIT COMMITTEE'S PRE-APPROVAL
Beginning with non-audit service contracts entered into on or after May 6, 2003,
the Trust's Audit Committee is required to pre-approve all audit services and,
when appropriate, any non-audit services (including audit-related, tax and all
other services) to be furnished to the Trust. The Audit Committee also is
required to pre-approve, when appropriate, any non-audit services (including
audit-related, tax and all other services) to be furnished to Gateway, or any
entity controlling, controlled by or under common control with Gateway, that
provides ongoing services to the Trust to the extent that such services are
determined to have a direct impact on the operations or financial reporting of
the Trust. The Audit Committee has established a policy of requiring specific
pre-approval of audit and non-audit services on an engagement-by-engagement
basis.
The last fiscal year, the Audit Committee approved the following percentage of
audit-related, tax and other services.
PERCENTAGE APPROVED BY
NATURE OF SERVICES AUDIT COMMITTEE
- ------------------ ----------------------
Audit-Related 100%
Tax 100%
All Other 100%
During the audit of Trust's financial statements for the most recent fiscal
year, less than 50% of the hours expended on Ernst & Young LLP's engagement were
attributed to work performed by persons other than Ernst & Young LLP's
full-time, permanent employees.
The aggregate non-audit fees billed by Ernst & Young LLP for services rendered
to the Trust and Gateway, and any entity controlling, controlled by, or under
common control with Gateway, that provides ongoing services to the Trust, were
as follows:
THE GATEWAY GATEWAY INVESTMENT
FISCAL YEAR TRUST ADVISERS, L.P.
- ----------- ----------- ------------------
2004 $10,626 $9,122
2003 $ 4,100 $7,300
The Audit Committee does not believe that the non-audit services rendered to
Gateway by Ernst & Young, LLP are incompatible with maintaining the independence
of Ernst & Young, LLP.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE "FOR"
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE TRUST
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005.
8
ADDITIONAL INFORMATION
QUORUM AND VOTING REQUIREMENTS
Only shareholders of record on the Record Date are entitled to vote at the
Meeting. Each shareholder is entitled to one (1) vote per share held, and
fractional votes for fractional shares held, on any matter submitted to a vote
at the Meeting. The presence, in person or by proxy, of the holders of at least
33% of the aggregate number of shares of the Fund entitled to vote is necessary
to constitute a quorum at the Meeting. Votes cast by proxy or in person at the
Meeting will be tabulated by the inspectors of election appointed for the
Meeting. The inspectors of election will determine whether or not a quorum is
present at the Meeting.
If a quorum is not present at the Meeting, or if a quorum is present at the
Meeting but sufficient votes to approve any of the proposals are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote FOR any such proposal in favor of such adjournment,
and will vote those proxies required to be voted AGAINST any such proposal
against such adjournment. A shareholder vote may be taken on one or more of the
proposals in this proxy statement prior to any such adjournment if sufficient
votes have been received and it is otherwise appropriate.
Approval of PROPOSAL 1 requires the vote of a "majority" (as defined in the 1940
Act) of the shares of the Fund outstanding on the Record Date. A "vote of a
majority of the outstanding voting securities" is defined in the 1940 Act as the
lesser of the vote of (i) 67% or more of the shares of the Fund entitled to vote
thereon present at the Meeting if the holders of more than 50% of such
outstanding shares are present in person or represented by proxy; or (ii) more
than 50% of such outstanding shares of the Fund entitled to vote thereon.
Approval of PROPOSAL 2 requires the vote of a majority of the shares of the Fund
represented at the Meeting in person or by proxy.
The inspectors of election will treat abstentions and "broker non-votes" (i.e.
shares held by brokers or nominees, typically in "street name," as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) of shares represented at the Meeting as
present for purposes of determining a quorum. In addition, under the rules of
the New York Stock Exchange, if a broker has not received instructions from
beneficial owners or persons entitled to vote and the proposal to be voted upon
may "affect substantially" a shareholder's rights or privileges, the broker may
not vote the shares as to that proposal even if it has discretionary voting
power. As a result, these shares also will be treated as broker non-votes for
purposes of proposals that may "affect substantially" a shareholder's rights or
privileges (but will not be treated as broker non-votes for other proposals,
including adjournment of the Meeting).
Abstentions and broker non-votes will be treated as shares voted against a
proposal. Treating broker non-votes as votes against a proposal can have the
effect of causing shareholders who choose not to participate in the proxy vote
to prevail over shareholders who cast votes or provide voting instructions to
their brokers or nominees. In order to prevent this result, the Trust may
request that selected brokers or nominees refrain from returning proxies on
behalf of shares for which voting instructions have not been received from
beneficial owners or persons entitled to vote. The Trust also may request that
selected brokers or nominees return proxies on behalf of shares for which voting
instructions have not been received if doing so is necessary to obtain a quorum.
SECURITY OWNERSHIP OF MANAGEMENT
As of October 17, 2005, no individual Trustee or officer beneficially owned more
than 1% of the outstanding shares of the Fund, and the Trustees and officers as
a group beneficially owned less than 1% of the outstanding shares of the Fund.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of October 17, 2005, the following shareholders may be deemed to beneficially
own (for the benefit of their customers) more than 5% of the shares of the Fund:
9
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
---------------- ---------------- ----------------
Charles Schwab and Company, Inc. 19,806,979.97 18.95%
Reinvest Account Special Custody
Account for Exclusive Benefit
of Customers
Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104
National Financial Services Corp. 9,203,386.41 8.80%
Exclusive Benefit of our Customer
Attn: Reconciliation
P. O. Box 3908 Church St. Station
New York, NY 10008
As of the Record Date, the Trust knows of no other person (including any "group"
as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) that beneficially owns more than 5% of the outstanding shares of a
Fund or the Trust as whole.
SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission, shareholder
proposals may, under certain conditions, be included in the Trust's proxy
statement and proxy card for a particular meeting. Under these rules, proposals
submitted for inclusion in the Trust's proxy materials must be received by the
Trust within a reasonable time before the solicitation is made. The fact that
the Trust receives a shareholder proposal in a timely manner does not assure its
inclusion in its proxy materials, because there are other requirements in the
proxy rules relating to such inclusion. You should be aware that annual meetings
of shareholders are not required as long as there is no particular requirement
under the 1940 Act that must be met by convening such a shareholder meeting. Any
shareholder proposal should be sent to Donna Squeri, Secretary, The Gateway
Trust, 3805 Edwards Road, Suite 600, Cincinnati, Ohio 45209. The Trust has not
received any shareholder proposals to be considered for presentation at the
Special Meeting.
PROXY SOLICITATION
Computershare Fund Services ("CFS") has been engaged to assist in the
solicitation of proxies pursuant to a Proxy Mailing, Solicitation and Tabulation
Services Agreement ("Solicitation Agreement"). The Solicitation Agreement, among
other things, provides for CFS to preserve the confidentiality of all material
non-public shareholder account information. The Solicitation Agreement also
provides for a cross indemnification by the Adviser and CFS where each will
indemnify and hold harmless the other against any third-party claims, except
where either party shall not be required to indemnify the other in the case of
gross negligence or intentional misconduct. The term of the Solicitation
Agreement will last for the duration of the solicitation.
As the Meeting date approaches, certain shareholders of the Fund may receive a
telephone call from a representative of CFS if their votes have not yet been
received. Proxies that are obtained telephonically will be recorded in
accordance with the procedures described below. The Trustees believe that these
procedures are reasonably designed to ensure that both the identity of the
shareholder casting the vote and the voting instructions of the shareholder are
accurately determined. In all cases where a telephonic proxy is solicited, the
CFS representative is required to ask for each shareholder's full name and
address, or the zip code or employer identification number, and to confirm that
the shareholder has received the proxy materials in the mail. If the shareholder
is a corporation or other entity, the CFS representative is required to ask for
the person's title and confirmation that the person is authorized to direct the
voting of the shares. If the information solicited agrees with the information
provided to CFS, then the CFS representative has the responsibility to explain
the process, read the Proposals listed on the proxy card and ask for the
shareholder's instructions on each Proposal. Although the CFS representative is
permitted to answer questions about the process, he or she is not permitted to
recommend to the shareholder how to vote, other than to read any recommendation
set forth in this Proxy Statement. CFS will record the shareholder's
instructions on the card. Within 72 hours, the shareholder will be sent a letter
or mailgram to confirm his or her vote and ask the shareholder to call CFS
immediately if his or her instructions are not correctly reflected in the
confirmation.
10
EXPENSE OF PROXY SOLICITATION
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with the
solicitation of proxies will be paid by the Adviser. The estimated cost for
these services is anticipated to be $50,000, plus expenses. Solicitation may be
made by letter or telephone by CFS, by officers or employees of the Adviser, or
by dealers and their representatives. In addition, the Trust will request that
banks, brokers and other custodial nominees and fiduciaries supply proxy
materials to beneficial owners of shares of the Fund of whom they have
knowledge, and Gateway will reimburse them for their expenses of so doing.
PROXY DELIVERY
Please note that only one proxy statement will be delivered to two or more
shareholders of the Fund who share an address, unless the Fund has received
instructions to the contrary. To request a separate copy of the proxy statement,
or for instructions as to how to request a separate copy of such document or as
to how to request a single copy if multiple copies of such document are
received, shareholders should contact the Trust at the address and phone number
set forth above.
GENERAL
Management does not intend to present and does not have reason to believe that
any other items of business will be presented at the Meeting. However, if other
matters are properly presented to the Meeting for a vote, the proxies will be
voted by the persons acting under the proxies upon such matters in accordance
with their judgment of the best interests of the Fund. A list of shareholders
entitled to be present and to vote at the Meeting will be available at the
office of the Trust, 3805 Edwards Road, Suite 600, Cincinnati, Ohio for
inspection by any shareholder during regular business hours beginning ten days
prior to the date of the Meeting. Failure of a quorum to be present at the
Meeting will necessitate adjournment. The persons named in the enclosed proxy
may also move for an adjournment of the Meeting to permit further solicitation
of proxies with respect to the proposal if they determine that adjournment and
further solicitation is reasonable and in the best interests of the
shareholders. Under the Trust's By-Laws, an adjournment of a meeting requires
the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting.
IF YOU CANNOT BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF YOU USE THE
ACCOMPANYING ENVELOPE TO MAIL THE PROXY CARD IN THE UNITED STATES.
Donna M. Squeri
Secretary
October 26, 2005
11
APPENDIX A
GATEWAY FUND
MANAGEMENT AGREEMENT
THIS AGREEMENT made as of the ____ day of ____________, 2005, by and
between THE GATEWAY TRUST, an Ohio business trust (the "Trust"), and GATEWAY
INVESTMENT ADVISERS, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"Act") the shares of beneficial interest (the "Shares") of which are registered
under the Securities Act of 1933; and
WHEREAS, the Trust is authorized to issue Shares in separate series with
each such series representing the interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Trust offers Shares in a series known as the Gateway Fund (the
"Fund"); and
WHEREAS, the Adviser is currently providing investment advisory and
management services to the Fund pursuant to an investment advisory contract
dated December 9, 1998; and
WHEREAS, the current investment advisory contract will automatically
terminate upon the exercise of an option to purchase certain shares of the
general partner of the Adviser; and
WHEREAS, the Trust and the Adviser desire to enter into a new investment
advisory contract to permit the Adviser to continue to serve the Fund as
investment adviser.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Adviser shall act as investment manager for the Fund and shall, in
such capacity, supervise the investment and reinvestment of the cash,
securities, or other properties comprising the assets of the Fund,
subject at all times to the policies applicable to the Fund and to the
control of the Board of Trustees of the Trust. The Adviser shall give
the Trust the benefit of its best judgment, efforts and facilities in
rendering its services as investment manager.
2. In carrying out its obligations under paragraph 1 hereof, the Adviser
shall:
(a) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the Fund or the
economy generally, and whether concerning the individual
companies whose securities or options therefore are included in
the Fund or the industries in which they engage, or with respect
to other securities or options therefore which the Adviser
considers desirable for inclusion in the Fund;
(b) determine what industries and companies shall be represented in
the Fund and regularly report them to the Board of Trustees of
the Trust;
(c) formulate and implement programs for the purchases and sales of
any securities or options and regularly report thereon to the
Board of Trustees of the Trust;
(d) place all orders for the purchase and sale of investments for the
Fund, including the purchase and/or sale of options and the
effecting of closing purchase transactions, for the Fund's
account with brokers or dealers selected by the Adviser. In the
selection of such brokers or dealers and the placing of such
orders, the Adviser shall always seek best execution, which is to
execute the Fund's transactions where the most favorable
combination of price and execution services in particular
transactions can be obtained or provided on a continuing basis or
with respect to individual transactions by a broker or dealer,
and to deal directly with a principal market maker in connection
with over-the-counter transactions, except when it is believed
that best execution is obtainable elsewhere. Subject to such
policies as the Board of Trustees may determine, the Adviser
shall not be deemed to have acted unlawfully or to have breached
any duty created by this Agreement, or otherwise, solely by
reason of its having either (i) dealt with an affiliate of the
Adviser, or (ii) caused the Fund to pay a broker or dealer that
provides brokerage, research and statistical services to the
Adviser an amount of commission for effecting a portfolio
investment transaction, including the sale of an option or a
closing purchase transaction, in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determines in good
faith and in the best interest of the Fund that (x) the
commission and other expenses of any such affiliate are
comparable to the commission and other expenses charged by
unaffiliated brokers and dealers, and (y) such amount of
commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or
its overall responsibilities with respect to the Fund and to any
other of its clients as to which it exercises investment
discretion;
(e) present a written report to the Board of Trustees of the Trust at
least quarterly indicating total brokerage expenses, actual or
imputed, as well as the services obtained in consideration for
such expenses; and
(f) take, on behalf of the Fund, all actions which appear to the
Adviser necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid.
3. Any investment program undertaken by the Adviser pursuant to this
Agreement, as well as any other activities undertaken by the Adviser
on behalf of the Fund pursuant thereto, shall at all times be subject
to any directives of the Board of Trustees of the Trust.
4. In carrying out its obligations under this Agreement, the Adviser
shall at all times conform to:
(a) all applicable provisions of the Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Agreement and Declaration of Trust of the
Trust, as amended from time to time;
(c) the provisions of the By-Laws of the Trust, as amended from time
to time;
(d) the provisions of the Registration Statements of the Trust under
the Securities Act of 1933 and the Act, as amended from time to
time; and
(e) any other applicable provision of state or federal law.
5. (a) The Adviser, at its sole expense, shall provide the Trust with
(i) investment recommendations regarding the Fund's investments;
(ii) office space, secretarial, clerical and other office help,
telephones, securities valuations and other office equipment; and
(iii) the services of all officers of the Trust.
(b) The Adviser shall bear all (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.
(c) Except as set forth above, the Trust has agreed to pay all its
operating expenses, including without limitation the expenses of
continuing the Trust's existence; the 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 parties
to this agreement (except as a trustee of the Trust), voting
separately, shall determine which expenses shall be characterized
as "extraordinary expenses." The expenses to be borne by the
Trust under this subparagraph shall be determined by the Board of
Trustees of the Trust.
(d) All ordinary business expenses of the Trust shall be borne by the
Trust unless subparagraph 5(a) or 5(b) hereof specifically
provides otherwise.
6. The Trust will pay the Adviser, as full compensation for services
rendered hereunder, a daily fee computed 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 Funds' expenses incurred pursuant to its
Distribution Plan. If 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
compensation for such services during the term of this Agreement.
7. If, for any fiscal year, the total of all expenses of the Fund
(including compensation paid to the Adviser but excluding taxes,
interest, brokerage commissions and "extraordinary expenses" as
determined in accordance with subparagraph 5(c) hereof) would exceed
1.5% of the average daily net asset value of the Fund, the Adviser
will bear any such excess expenses. Every month the investment
advisory fee with respect to the Fund will be determined and the
Fund's expenses projected. If the Fund's projected expenses are in
excess of the expense limitation set forth above, the investment
advisory fee with respect to the Fund paid to the Adviser will be
reduced by the amount of the excess expenses, subject to an annual
adjustment at the end of the Fund's fiscal year; provided, however,
that if such amount of reduction should exceed such monthly investment
advisory fee, the Adviser will repay to the Fund such portion of its
investment advisory fee previously received with respect to such
fiscal year as may be required to make up the deficiency.
Any reimbursement with respect to the Fund pursuant to the expense
limitations set forth in this paragraph 7 will be limited on an annual
basis to compensation received by the Adviser from the Fund pursuant
to this Agreement.
8. The Trust shall at all times keep the Adviser fully informed with
regard to the securities owned by the Fund, the funds available or to
become available to the Fund for investment, and generally as to the
condition of the Fund's affairs. It shall furnish the Adviser with a
copy of all financial statements certified by its financial officer,
and a signed copy of each financial statement audited by certified
public accountants with respect to it.
-2-
9. This contract shall become effective on January 1, 2006. It shall
remain in effect, subject to paragraph 10(a) hereof, for a period of
two years, 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 (as defined in Section 2(a)(42) of the
Act) of the Fund, and (ii) by vote of a majority of the trustees who
are not parties to this Agreement or interested persons of a party to
this Agreement (other than as trustees of the Trust), by votes cast in
person at a meeting specifically called for such purpose; provided,
however, that if the continuation of this Agreement is not approved
for the Fund, the Adviser may continue to serve in such capacity for
the Fund in the manner and to the extent permitted by the Act and the
rules and regulations thereunder.
10. (a) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Trustees of the Trust or
by vote of the holders of a majority of the outstanding voting
securities of the Fund, or by the Adviser, on sixty days' written
notice to the other party. The notice provided for herein may be
waived by either party.
(b) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be
subject to liability to the Trust or to any shareholder of the
Fund for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security or
other investment, except that nothing under this paragraph shall
be deemed to be a waiver of any rights of the Trust or of any
shareholder of the Fund that may exist under the federal
securities laws.
11. It is understood that the Adviser may perform investment advisory
services for various other clients, including investment companies.
The Adviser agrees to report to the Board of Trustees (at regular
quarterly meetings and at such other times as the Board of Trustees
reasonably shall request) (i) the financial condition and prospects of
the Adviser, (ii) the nature and amount of transactions affecting the
Fund that involve the Adviser and affiliates of the Adviser, (iii)
information regarding any potential conflicts of interest arising by
reason of its continuing provision of advisory services to the Fund
and to its other accounts, and (iv) such other information as the
Board of Trustees shall reasonably request regarding the Fund, the
Fund's performance, the services provided by the Adviser to the Fund
as compared to its other accounts, and the plans and capability of the
Adviser with respect to providing future services to the Fund and its
other accounts. At least annually, the Adviser shall report to the
Trustees the total number and type of such other accounts and the
approximate total asset value thereof (but not the identities of the
beneficial owners of such accounts). The Trust agrees that the Adviser
may give advice and take action with respect to any of its clients
which may differ from advice given or the timing or nature of the
action taken with respect to the Fund, so long as it is the Adviser's
policy, to the extent practicable, to allocate investment transactions
among the Fund and its other accounts, over a period of time, on a
fair and equitable basis. The Adviser agrees to submit to the Trust a
statement defining its policies with respect to the allocation of
business among the Fund and its other clients.
Broker-dealer affiliates of the Adviser may effect orders on national
securities exchanges for the Fund and may retain compensation in
connection with effecting such transactions, so long as the Adviser
furnishes the Board of Trustees, at least annually, with a statement
setting forth the total amount of all compensation retained by such
broker-dealer affiliates in connection with effecting such
transactions within the preceding year for the Trust.
12. This Agreement may be amended from time to time by agreement of the
parties hereto provided that such amendment shall be approved by the
vote of a majority of trustees of the Trust, including a majority of
trustees who are not parties to this Agreement or interested persons
of any such party to this Agreement (other than as trustees of the
Trust), cast in person at a meeting called for that purpose, and (if
required under current interpretations of the Act by the Securities
and Exchange Commission) by vote of the shareholders of the Fund.
13. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Act.
14. All parties hereto are expressly put on notice of (i) The Gateway
Trust Agreement and Declaration of Trust, as amended, which is on file
with the Secretary of the State of Ohio, and (ii) the limitation of
shareholder and trustee liability contained therein and in Chapter
1746 of the Ohio Revised Code. Notice is hereby given that the
obligations of this Agreement are not binding upon any of the
trustees, officers or shareholders of the Trust individually but are
binding upon only the assets and property of the Trust. With respect
to any claim by the Adviser for recovery of any portion of the
investment management fee (or any other liability of the Trust arising
hereunder), whether in accordance with the express terms hereof or
otherwise, the Adviser shall have recourse solely against the assets
of the Fund to satisfy such claim and shall have no recourse against
the assets of any other funds of the Trust for such purpose.
15. (a) This contract shall be construed in accordance with and governed
by applicable federal law and the laws of the State of Ohio.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a
term or provision of the Act shall be resolved by reference to
such term or provision of the Act and to interpretation thereof,
if any, by the United States courts or in the absence of any
controlling decision of any such court, by the Securities and
Exchange Commission or its staff. In addition, where the effect
of a requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation, order, or
interpretation of the Securities and Exchange Commission, such
provision shall be deemed to incorporate the effect of such rule,
regulation, order or interpretation.
-3-
16. Any notices under this Agreement shall be in writing addressed and
delivered or mailed postage paid to the other party at such address as
such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of
the Trust and that of the Adviser for this purpose shall be Rookwood
Tower, 3805 Edwards Road, Suite 600, Cincinnati OH, 45209.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate as of the day and year first above written.
THE GATEWAY TRUST
By:
------------------------------------
Walter G. Sall
Chairman
ATTEST:
By:
---------------------------------
Donna M. Squeri
Secretary
GATEWAY INVESTMENT ADVISERS, L.P.
BY GATEWAY INVESTMENT ADVISERS, INC.
GENERAL PARTNER
By:
------------------------------------
J. Patrick Rogers
President
ATTEST:
By:
------------------------------------
Donna M. Squeri
Secretary
-4-
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
Your Proxy Vote is important!
NOW YOU CAN VOTE YOUR PROXY ON
THE PHONE OR ON THE INTERNET.
JUST FOLLOW THESE SIMPLE STEPS:
1. READ YOUR PROXY STATEMENT AND
HAVE IT AT HAND.
2. CALL TOLL-FREE 1-866-241-6192 OR GO TO
WEBSITE: https://vote.proxy-direct.com
3. FOLLOW THE RECORDED OR ON-SCREEN
DIRECTIONS.
4. DO NOT MAIL YOUR PROXY CARD WHEN YOU
VOTE BY PHONE OR VIA THE INTERNET.
Please detach at perforation before mailing.
PROXY THE GATEWAY TRUST PROXY
THE GATEWAY FUND
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 15, 2005
The undersigned hereby instructs Geoffrey Keenan and Paul R. Stewart, and each
of them, attorneys and proxies for the undersigned, with full power of
substitution and revocation to represent the undersigned and to vote on behalf
of the undersigned all shares of the Gateway Fund (the "Fund") which the
undersigned is entitled to vote at a special meeting of shareholders of the Fund
to be held at 2:00 p.m., Eastern time, on December 15, 2005, at the offices of
Gateway Investment Advisers, L.P., 3805 Edwards Road, Suite 600, Cincinnati,
Ohio 45209 and at any adjournment thereof, as indicated on the reverse side. A
majority of the proxies present and acting at the meeting in person or by
substitute (or, if only one shall be so present, then that one) shall have and
may exercise all of the power of authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT, AS APPLICABLE, IS HEREBY ACKNOWLEDGED.
VOTE VIA THE INTERNET:
https://vote.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-866-241-6192
-----------------------------------------
999 9999 9999 999
-----------------------------------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR ON THIS CARD. When signing as
attorney, executor, administrator,
trustee, guardian or as custodian for a
minor please sign your name and give your
full title as such. If signing on behalf
of a corporation please sign the full
corporate name and your name and indicate
your title. If you are a partner signing
for a partnership, please sign the
partnership name, your name and indicate
your title. Joint owners should each sign
this card. Please sign, date and return.
-----------------------------------------
Signature and Title, if applicable
-----------------------------------------
Signature (if held jointly)
-----------------------------------, 2005
Date GTW_15778
UNLESS VOTING BY TELEPHONE OR THE INTERNET, PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE!
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
Please detach at perforation before mailing.
SHARES HELD ON BEHALF OF THE SHAREHOLDER WILL BE VOTED AS INDICATED BELOW OR FOR
ANY PROPOSAL FOR WHICH NO CHOICE IS INDICATED.
IF THIS PROXY CARD IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE, THE
PROXIES SHALL VOTE FOR THE PROPOSAL.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: [X]
1. To approve a new investment management agreement FOR AGAINST ABSTAIN
between the Fund and Gateway Investment Advisers,
L.P., the Fund's investment adviser. [ ] [ ] [ ]
2. To ratify the selection of Ernst & Young LLP as FOR AGAINST ABSTAIN
the independent registered public accounting [ ] [ ] [ ]
firm for the Trust for the fiscal year ending
December 31, 2005.
GTW_15778
IMPORTANT: PLEASE SIGN AND DATE ON THE REVERSE SIDE BEFORE MAILING