Walter G. Sall, Chairman and Chief Executive Officer
Gateway Investment Advisers, L.P.
3805 Edwards Road, Suite 600
Cincinnati, Ohio 45209
800.354.6339 Fax 513.719.1199
Gateway Strategy:
Equity — Why Not?

Over The Long Term, Captures A Substantial
Portion Of The Equity Total Return

Over The Long Term, Limits The Volatility To
A Level Comparable To Bonds
1
Development Of Hedged Equity
Strategy At Gateway

Firm Established In 1977 And Developed Covered
Call Strategies

Strategy Evolves To Use Of Index Options – Both
Calls And Puts – In Mid 1980s

Use Of Puts Extremely Successful In Hedging
During Market Crash In October 1987

Manages Approximately $2 Billion As Of 9/30/03
2
Alternative View of Allocation:
Risk Allocation
January 1, 1988 – September 30, 2003
Based on Quarterly Data
Return
Annualized
1 4%
Gateway
Index/RA
1 2%
1 0% Lehman U.S.
8%
Low Risk
Investment-Grade Corporate
Bonds, Treasury Bonds
Lehman
U.S. Long
Gvt/Credit
Index
Intermediate
Gvt/Credit
Bond Index
Low Risk Plus Growth
Gateway Index/RA, Balanced Funds, Convertible
Bond Funds, High-Yield Bond Funds, Arbitrage
Hedge Funds, Fund of Hedge Funds
S&P 500
Index
Lehman U.S.
Corporate High
Yield Index
6%
Growth
Equity Funds
4%
Citigroup
One-Month
Treasury Bill
Index
2%
High Return
Venture Capital, Leveraged
Hedge Funds, Speculative
Investments
0%
0%
4%
8%
1 2%
1 6%
20%
Risk - Standard Dev iation
Past performance is not indicative of future returns.
See Disclosure on Page 13.
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Performance Comparison
January 1, 1988 – September 30, 2003
Based on Quarterly Data
Gateway
Index/RA
Citigroup
One-Month
Treasury Bill
Index
Lehman U.S.
Intermediate
Gvt/Credit
Bond Index
Lehman U.S.
Corporate
High Yield
Index
Lehman U.S.
Long
Gvt/Credit
Index
S&P 500
Index
Return
10.36%
4.61%
7.94%
8.73%
10.01%
11.86%
Risk
6.87%
0.89%
3.69%
8.88%
7.67%
15.48%
5%
1%
23%
0%
74%
R2
Past performance is not indicative of future returns.
See Disclosure on Page 13.
4
Investment Process
Purchase of index basket of stocks

Provides broad diversification

Balance and stability
Sell cash-settled index call options

Primary source of return

Continuously written

Provides seller with annualized cash
flow averaging an estimated 18% to
20% over last 16 years

Primary return supplied by accepting
upfront cash payment in exchange for
uncertain future appreciation
Purchase index put options
 Acts as “safety net” to mitigate the impact
of a significant market decline in a short
period of time
 Includes deductible feature of 6% to 10%
 Average estimated cost of 6% to 8% over
last 16 years
5
Analogy:
Don’t Speculate — Invest Like A Landlord
Apartment building is
the capital asset that
creates cash flow
from rental income.
Asset Value
Cash Flow From
Rental Income
Cash Flow From Call
Option Premiums
Minus
Minus
Cost of Operation
& Insurance
Cost of Puts
& Fees
Net Cash Flow
Net Cash Flow
Indexed portfolio of
stocks is capital asset that
creates cash flow from
call option premiums.
Asset Value
6
The Total Return Equation
The return available is a function of call premiums, put
premiums and costs, plus the impact of down markets.
REVENUES AFFECTING RETURNS
Call Option Premiums
Plus Dividends
COSTS AFFECTING RETURNS
Minus Put Option Premiums
Minus Fees/Commissions
Impact of Negative Quarters
REVENUES MINUS COSTS
EQUALS NET RETURN
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Gateway – Consistency and
Capital Preservation
January 1, 1988 – December 31, 2002
Gateway
Index/RA
High Volatility
Equity Bull Market
Lehman U.S.
Intermediate
Gvt/Credit
Bond Index
S&P 500
Index
1988
21.85%
6.68%
16.56%
1989
20.85%
12.77%
31.63%
1990
11.60%
9.17%
-3.11%
1991
19.01%
14.63%
30.40%
1992
6.25%
7.17%
7.61%
1993
8.44%
8.79%
10.06%
1994
6.27%
-1.93%
1.32%
1995
12.52%
15.33%
37.53%
1996
11.83%
4.05%
22.94%
1997
13.34%
7.87%
33.35%
1998
13.21%
8.44%
28.58%
1999
12.94%
0.39%
21.04%
2000
6.55%
10.12%
-9.10%
2001
-2.69%
8.96%
-11.88%
2002
-3.87%
9.83%
-22.09%
Past performance is not indicative of future returns.
See Disclosure on Page 13.
Low Volatility
Equity Bear Market
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Results Point To Success:
From January 1, 1988 To September 30, 2003,
Gateway Index/RA Has . . . .

Produced An Average Annual Return Of 10.36%
– From January 1988 – December 1999: 13.07%
– From January 2000 – December 2002: -0.11%

Outperformed Comparably Volatile Bonds

Limited Downside Loss In The Worst Bear Market
Since 1973-1974

Profited From Sharp Increases In Equity Market
Volatility
Past performance is not indicative of future returns.
See Disclosure on Page 13.
9
How Does Hedged Equity Improve
Asset Allocation?

Limits Open-Ended Risk Of Equities

Improved Reward To Risk Relative To Equities
(Sharpe Ratio)

Uncorrelated To Bond Returns But Similar
Volatility

Overall Impact – Improved Return Without
Taking Additional Risk
10
Distinguishing Features of Index Options
Features
 Trading Efficiencies
 Index Options Are Cash-Settled — Cash Is
Delivered To The Option Buyer, Not Stocks
Benefits
 Lower Transactional Costs
 Tax Efficient
11
If Hedging Works So Well,
Why Doesn’t Every Investor Use It?

Fiduciary Perception Of Unconventional Strategy

Options Are Speculative Investments

Frictional Costs Are High

Not Tax Efficient

Gives Up Too Much Upside
12
Disclosure
This material is restricted for use only on a one-on-one basis with prospective clients. Gateway Index/RA performance shown
in this illustration is an asset-weighted composite of all discretionary accounts under Gateway’s management which share the
same investment objectives and hedging strategies.
These results have been prepared and presented in compliance with the AIMR-PPS standards only for the period from
January 1, 1993 through September 30, 2003. Prior to January 1, 1993, not all fully discretionary portfolios were represented in
composites. Results shown for 1988 through 1992 are those of one representative account. The composite was created in
January 1993.
Gateway Index/RA performance results reflect the reinvestment of dividends and other earnings, but do not reflect the
deduction of investment advisory fees. A client’s return will be reduced by the advisory fees and other expenses the account
may incur. A more detailed description of Gateway’s fees is included in Form ADV, Part II.
To illustrate the effect of management fees on performance, consider a $5 million account with a total return of 12% per year.
Management fees are 0.85% per year on the first $5 million and 0.65% per year on assets between $5 million and $10 million,
deducted monthly. At the conclusion of a five-year period, the value of the account would be $8,464,065, and management fees
paid would total $264,887. Exclusive of management fees, the ending value of the account would have been $8,811,708.
If you have not already received the Annual Disclosure Presentation for the Gateway Index/RA composite, one is available upon
request by calling 800.354.6339 extension 432 or 443.
Data Source: Gateway Investment Advisers, L.P., Thomson Financial and Lehman Brothers Inc.
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